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By Rick Smith, Local Tech Wire editor

DURHAM, N.C. – Kip Frey, an entrepreneur turned venture capitalist, is returning to his corporate roots and leaving venture firm

Intersouth is announcing Friday $10.7 million in new funding for Raleigh-based At the same time, Frey, who joined Intersouth in 2000 after a successful career with two software startups, is stepping away as a VC partner to become Zenph’s chief executive officer.

“I was not looking to do anything but continue my work at Intersouth,” Frey told Local Tech Wire and “In evaluating the Zenph opportunity as a potential Intersouth investment, it seemed uniquely suited to my background and skill set.

“At the same time, Zenph founder John Q. Walker was making his own evaluation of what was in the best interests of the company,” Frey added. “We all kind of arrived at the decision together.”

Frey’s decision to join Zenph was a key factor in Intersouth’s decision to invest in the music software firm that was started by Walker, according to Intersouth’s Mitch Mumma and Katrin Burt who will join the Zenph board. Walker will be the company’s chief technology officer.

However, Frey will be missed at Intersouth.

“Kip is a great partner and we’re going to miss seeing him every day,” said Dennis Daugherty, the founder of Intersouth and the dean of VCs in the southeast. “But we are really excited about working with him as a CEO again. Intersouth is fortunate to have a partner with such a successful track record building startups into successful companies.”

Frey is especially intrigued with Zenph’s technology that enables the recreation of music as originally performed by artists.

Asked what exited him most about the opportunity, he replied:

“The chance to fundamentally alter an industry without requiring significant changes in consumer behavior. And the chance to work with really, really smart entrepreneurs.”

Asked why he would give up his role as a VC to return to the trenches of day-to-day company management, Frey said he enjoyed both challenges.

“The premise of the question seems to be that one is preferable to the other. I don’t see it that way,” he said. “I’ve really enjoyed the VC role, but running companies and innovating in the marketplace have a set of challenges and rewards that are just different from my VC experience. This decision is more about a specific opportunity that happens to map onto several areas of my past experience. It isn’t about liking one role better than the other. “

Over the past decade, Frey established himself as one of the most active and highest profile VCs in the Southeast. He launched his career as an intellectual property attorney and at one time worked for Turner Broadcasting.

He later bccame an executive and general counsel at Ventana Communications in Chapel Hill. Frey helped sell that firm in 1994 and in 1998 became president of software firm Accipiter. Intersouth was an Accipter investor. After Intersouth was sold to CMGI, Frey went on to become president and CEO of OpenSite, another Intersouth-backed software firm. It was acquired by Siebel.

At Intersouth, Frey led several investment efforts and served on several boards. Among his key efforts was helping SciQuest transition from a public company to private ownership with Intersouth as an investor.

Frey also has been actively involved in the entrepreneurial community, serving as chairman of the Council for Entrepreneurial Development and as a professor of entrepreneurial management and law at Duke University. He is a Duke Law School graduate.