L.A. has a new venture firm in March Capital Partners, a $240 million fund that has a few tricks up its sleeve. For starters, though it invests in both Southern and Northern California, it considers itself a global investor and has already made bets in India (in online payments company BillDesk) and Germany (Dojo Madness, which makes a digital coaching app for gamers).
It also writes Series B and Series C checks, which can’t be said of many other L.A.-based venture firms. And March Capital, which is primarily focused on business-to-business enterprises, has ties to three other enterprises that help with its deal flow. It’s a cofounder and an investor in two Bay Area accelerators that keep it abreast of new trends: The Fabric and Hive. More, one of its founding partners is Jamie Montgomery, a renowned investment banker who in recent years has launched an annual summit that introduces privately held companies to hundreds of investors and this year featured former Cisco CEO John Chambers, Atom Factory’s CEO Troy Carter, and designer Yves Béhar among others.
Montgomery isn’t the only familiar face at March, either. Others of March’s founding partners include longtime VCs Jim Armstrong, Sumant Mandal — both formerly of Clearstone Venture Partners — and Gregory Milken, a serial entrepreneur and board member of the Milken Institute.
We talked yesterday with Montgomery and Mandal about their new firm, which they quietly formed 20 months ago. (They spent the last 18 months fundraising.)
TC: Sumant, you and Jim spent much of your careers at Clearstone. Is it shutting down?
SM: It’s still around. It still has an active fund. But I don’t think we’ll raise another fund.
TC: At March, you’re investing in A through C rounds. What size checks are you writing?
SM: From $1 million to $20 million.
TC: You’ve been investing during your fundraising process. How many companies have you backed so far?
SM: We have sixteen companies in our portfolio, one of which has exited already. Deep Forest Media, acquired by Rakuten [for undisclosed terms]
TC: You have a global mandate, but are you investing primarily in Southern California, given that you’re based in Santa Monica?
JM: About a third of our investments are in Southern California. About 80 percent are in California. But Sumant has a lot of experience in India, and we all have established relationships in Silicon Valley, which we visit pretty much once a week.
TC: I’ve often heard founders in L.A. lament the fact that there isn’t much later-stage capital there. Was that your pitch to LPs, that you’d help fill that gap?
JM: That’s part of it. There are a number of smaller, seed funds here, and one or two larger funds that are more digital-media focused than we are. I wouldn’t say we don’t do digital media, but we major in B2B and minor in that area. But also, while there are many more world-class entrepreneurs in the Bay Area, we don’t want to pass up those in our backyard, either. We’ve very bullish on Southern California. We’re seeing more entrepreneurs move down here. Snapchat, [the mobile entertainment startup] Scopely and other companies have attracted a lot of talent to the area. USC and Caltech are graduating about 10,000 engineers a year down here. So we like the long-term trends we see.
TC: Except for successful serial entrepreneurs, valuations seem to softening up here in San Francisco a little bit. Or else, VCs say they at least have more time to produce a term sheet. What’s happening in L.A.?
SM: The same applies in L.A. People are getting more realistic about valuations, though I think it’ll be another six months before it’s normalized.
JM: Yes, seed deals got ahead of themselves and Series A rounds have had to sometimes reset valuations. Series C and D [deals] down here were pretty frothy, as well, though probably at a 15 to 20 percent discount to what you were seeing in the Bay Area.
We lost a number of deals where we were 30 to 50 percent lower than other bidders, but we’re fairly confident that valuations will normalize over time as Sumant said. It takes a while. People are right now extending that last round, or putting in 2x preferences on additional capital without changing [a company’s] valuation. There’s still a lot of liquidity in the market, so there’s a lot of stalling going on right now. No one is sure of what the right terms are anymore.
(Photo courtesy of March Capital Partners. From left to right: Gregory Milken, Jim Armstrong, Jamie Montgomery, Sumant Mandal)