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Thursday, Jun 30, 2022

For VC Firm March Capital, Patience Pays Big Dividends

Santa Monica-based March Capital Partners has closed a new $450 million venture capital fund. It’s the firm’s third fund and largest yet, beating out the $300 million Fund II, which closed a year ago.

Like the majority of March’s investments, the new fund will focus on enterprise software companies. According to the company, the fund will span a range of sub-sectors, such as industrial technology, cybersecurity, fintech, cloud computing infrastructure and artificial intelligence.

The high-growth and relatively stable enterprise software space has proven to be resilient during the Covid-19 pandemic. Many venture firms are looking to invest in the sector as businesses increase spending on critical areas such as communication and cybersecurity. 

March sets itself apart as an investor in this space, according to Co-Managing Partner Jamie Montgomery, through its patient and hands-on approach.

“We will look at a company sometimes for a few years before we invest,” Montgomery said in an interview. “We really want to understand the management team and how they operate.”

According to Montgomery, March tends to build positions in companies gradually over time. Although the venture firm often begins by making smaller investments, 
Montgomery said his firm’s goal is to have at least $15 million to $25 million invested in any one company.

“We are looking for a lot of ball control,” Montgomery said. “It requires us to have a lot of focus and conviction. If you are putting all your eggs in a couple of baskets, you had better be right.”

Montgomery said March’s relationship with artificial intelligence-powered customer service platform Asapp Inc. epitomized this strategy. His firm began by investing roughly $2 million in Asapp. This was followed by incremental investments over the next year and a half, eventually netting March a $47 million position in the company.

“Most people aren’t willing to do that,” he said. “They want instant gratification. I think instant gratification often leads to instantaneous disappointment.”

Montgomery also brought on Asapp’s chief operations officer and chief financial officer, Tim Stone — a former CFO of Ford Motor Co. and Santa Monica-based Snap Inc.

A portion of the capital from March’s latest fund will be reserved for follow-on investments in the firm’s existing portfolio companies. In addition to Asapp, the firm has investments in high-profile enterprise software businesses such as cybersecurity company CrowdStrike Inc., ecommerce fraud detection company Forter Inc., advance payday payments platform ActiveHours Inc. (which does business as Earnin) and Indian online vehicle marketplace MXC Solutions India Pvt. Ltd. (which does business as CarTrade).

March said it has earned more than $1 billion in profit from investments in these and other technology companies since its 2014 founding.

Last year, in anticipation of new and expanded investments under its third fund, March brought on seven new staff members. “We hired them in May and June at the lull in the market,” Montgomery said, referring to a period of Covid-driven uncertainty in the venture space. “We got the best talent then because it was kind of a buyer’s market.”

Five of these seven new employees were women, which Montgomery said helped reinforce March’s place as one of the most diverse venture firms in Silicon Beach.

Concurrent with the third fund close, March also announced the creation of the “March Capital Foundation,” a philanthropic initiative helping fund organizations with a positive impact on at-risk communities in Southern California. The initiative’s main focus areas are “inner-city youth,” homelessness and community health.

According to Montgomery, March is already a regular donor to a number of local nonprofits in these areas such as the People Concern, Venice Family Clinic, Los Angeles Metropolitan Debate League and Coalition for Responsible Community Development.

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