Jamie Montgomery — March Capital

Posted on Wednesday, February 10, 2021

Fantastic chance to get to know Jamie Montgomery.  Jamie shares how he’s built such strong relationships, delivered outsized returns for March Capital, his approach to philanthropy and his high school fire extinguisher business.

For more, tune in March 3rd and 4th to the 18th annual Montgomery Summit.

View Transcript

Jamie Montgomery is a co-founder and managing partner of March capital. Earlier this year, March announced a $450 million Fund III, congratulations. Prior to March, Jamie was the founder and CEO of Montgomery and co a well-known LA based investment bank. And of course he is the host of the Montgomery summit, which will be in its 18th year this year.

Jamie, thanks for coming on the show today.

Well, thank you.   

I feel like a lot of people in the venture world, the startup world know you as  the host of the Montgomery summit, but I would love to start with  the snapshot of Jamie Montgomery as a teenager.

For us as investors, we always want to have our entrepreneurs tell their story and it’s and you learn a lot about their motivations and interests.  My father was a Caltech PhD, a true rocket scientist, who was a executive in the aerospace industry and spent time in the Kennedy administration in charge of all the strategic nuclear weapons, came to Los Angeles as a young teenager as he joined a startup down here in the aerospace industry in the seventies. 

So I went to Palisades high school and which was a great change of pace from growing up in Seattle and, uh , Uh, stayed here through, um , uh, university of California, San Diego. Um, and you know, through that period of time, I was always interested in, in, in business and, um , um, interested in technology and that they, the aerospace defense industry was the large tech sector here.

Um , And, and, you know, interest in entrepreneurship. I always was a journalist. I always edited the paper, no matter what school I was at start a couple of businesses and high school. Century city just been built and this friend’s father came home and says, you know, they had this new law, California. It requires you to have a. fire extinguisher in your office.  Or houses before they sold, had to have a smoke detectors put in. So there was a wide open opportunity after this California legislation in 1976 or so.  To go in the fire systems business, . So we made a boatload of money one year and I still doing this. But what I didn’t realize is, or. The fire extinguishers need to be recharged after about six months or a year. And so of course I gave out my home phone number. So all these people were calling my mom asking her where’s Jamie 

and I had a living room warehouse full of fire extinguishers. I had this long tail maintenance issue where I guess everybody makes some money off of it, but I would. Go over once a week to East LA to Granger warehouse and pick these things up and go deliver them in century city. And, it was a heck of a business. Uh,

And this is when you were in high school still.

yeah, maybe something to write about it. My college apps, you know, I mean, I was always had to be busy playing sports and even the paper or doing this or that, Oh, it was fun though.  

Sounds like great fun so you went from selling fire extinguishers to starting an investment bank or a, or.

I went to university of California, San Diego graduated 1981. I spoke this year at graduation and I, I commented those. I was honored 40 years after being on academic probation to be there. Um, graduation speech. Sure. That’s fair.

Everyone thought that was just funny, but , uh, you know,  was a, it was a row, there was a real world, you know, it was a bell curve and grading. You did well. You did well.

You didn’t do well. You didn’t do well. You

Well, why are you? I’m on academic probation. If I may ask

You know, I started off being a physics major and it was sort of an unnatural act, you know? 

. But after four years there, I had the opportunity to go to Cambridge in the UK for graduate school.  You know , uh, then I finished graduate school at a young age of 23 and went in-house in the Pentagon. And that was an eye opener. And when I was there, I was given us one assignment that was see if a Naval operation says, ah, Jamie, it’s the Navy’s turn to host the , um, the joint chiefs, long range planning conference , um, w like it organize it? Yeah, yeah. Come up with a plan for it and come back and a week and give me your thoughts. I said, okay. So I go down to the Pentagon library and look at the proceedings of the previous several sessions. They just seem really boring, you know, they all talk about how they would plan and and all this nonsense.

 So I said, look, I got an idea of where to host it at Annapolis. and we’ll pick a common theme  and then we’ll use that as a basis for workshops and breakout sessions 

Well, it sounds interesting, you know, so what’s the theme is, I don’t know. I think of something and I’ll say. Come on. Give me another week. So anyway, I had a free ticket to go anywhere I wanted. And do you see basically working for him? So I owe the white house. Oh, the CIA. What? Wait, what do you got? And I really didn’t have much in eyes.

So president Reagan was president. I went to see national security council members. Huh? Yeah. Hi, something interesting. So I wonder, so I went over to NSA and we drive in and we go to see the.

Tenant general is three-star at the time. Now it’s a four-star bill head of NSA. And I go in and, you know, so w what do you got? You know, he’s expecting something a little more formal, you know, tell me what I got, you know, I got the collapse and fall of the Soviet union. I said, Oh , that’s, that’s good. Yeah.

? So he was pretty sure the study, he was going to fall his premise and laid it out. This is 1980, 83.  Know, not many people would have that point of view. He had it, the president at the time, Reagan felt that way and very few others did.

And so , uh, that became the premise of the morning session. and, you know, led to some real kind of discussion about what should your forest structure look like in a post-Soviet world? .

but that led to some very interesting discussions and that led to elevation of exposure of me. And then I ended up in the deputy secretary defense’s office and it turned out he was leaving to go run a merchant bank.

And , you thought, you know, the analysis is really interesting. And if I was right like that in the private sector, you can make a lot of money. , um, and I, I was trying to figure out a way to get out and go work on wall street anyway. So I thought , well, this sounds great. 

So.  And that firm became a predecessor to Carlisle group, and I got this, you know, Great opportunity in merchant banking and , uh, did that for like three years.

And then by that time, I was 26 years old, moved back to Los Angeles and I wanted to work in technology and finance and there’s really nowhere to work. So I started up my own firm. 

LA in 1986, you know, , largely aerospace and defense  trying to move out of aerospace defense and into consumer. I remember And then once the cold war was over , How do you want 92?

We, I said, no, I kind of done with all the defense stuff closed that chapter and which sorta close. You never quite leave that world entirely, but we move on and just focus on what we thought would be next, which was communications, which became the internet . And then we started to scale up the organization I eventually ended that Ron and sold off the banking. I kept the investment side of that and then use that and combined with some aunt and some others to form March capital and take that capital base that we had there.

But really I had 25 years of working with entrepreneurs to help them. Scale their businesses and, and, you know, know, be capitalized properly to look at their strategic options 

Do you think there are a lot of differences between the venture world and the investment banking world or do you think there’s a lot that the ventures should learn  

 I think 25 years ago, being on the , uh, sell side, being a banker , uh, doing deals, we just had incredible talent. You know, we’d go recruit up against, you know, the top firms.

You know, and now someone coming out of school wants to go work at a Google or an Amazon or something. And those days, you know, we were able to get the top grades and, and w we really had an information advantage, the internet, really level the playing field with data, you know, lots of data everywhere. 

, sometimes bankers will. often, and we were very careful not to do this, but really just sort of bend, their view of things to get a deal done and in compromise and, and and they’re, they’re focused on getting a deal done you know, and if you’re out on the principal’s side, people obviously have to put money to work, but yeah, that’s not really our first priority. Our first priority is , is, is to, is to , um, really just find the right opportunity and just be more selective. Both are very demanding. I think , um, there was incredible discipline in banking and how we looked at risk.

Um, And we’d always look at any opportunity and understand the risk associated with it and what the probability was around various outcomes. You know, a good bank  um, You’re always competing for capital allocation and a bank, and you really have to understand what the return on capital is from an activity.

And I think oftentimes a number of the , uh, the venture investors, particularly, you know, the later stage, what’s more important to growth investors. Don’t really have as much discipline there and capital allocation and, and , and, and that training of, of risk. And that’s something that we really focused on at March capital was that we’ll look at Annie investment and we’ll look at a risk curve around, you know, three different outcomes, you know,  know, the management case, the downside case and the upside case, and what would influence that and what our return profiles and assigned risks parameters around that. 

And you just made a bunch of hires do you look for that investment banking background when you were 

I hired seven individuals this last fall and 300 at the vice president level. And one was a young gentleman from New York who was a venture capital investor for several years, young partner at affirm.

Second one, she’s a lady who was just finishing up HBS. And I spent a couple of years working for a venture fund fund funds back East, doing directs and fund investments and been an entrepreneur before that. And the third was a gentleman who worked for me at Montgomery and then spent the last six years at Allen and co who was an incredible analysts and very personable.

And how do you think about what you want to keep for yourself versus handoff? When you’re calling your existing portfolio companies or or meeting new companies. 

I think those calls always have somebody with me. So they’re learning, they’re watching, you know, so you have, you have a half hour. You know, there’s a couple of minutes of personal check-in and , uh, you know, That always surprises my team. And I know the individuals well enough to ask about one of their kids or something that’s important to them 

 you know, somebody is on the board of a museum. You go look and see what the latest exhibit is on there and compliment them on it. And then you ask about their daughter and how’s her job going. And then. And by that time, they just they’ll do anything for you.

He was like, you can leave at a hard meeting, really easy. Right.

 I I’m, we’re doing it portfolio review right now and it’s very intense process and , uh,  know, you know, I was complimenting the team offices, you know, it looks great.

Um, and , uh, you know, I’m so happy that, you know, I’m not going to spend any time on it this weekend, you know, and it’s a very important thing for us to do, but they they’ve got a nail. They’ve got it. And so I think it’s a question of, you know, spending that time upfront. I spent two months onboarding our team has fall 

 It’s interesting. I talked to some of the younger team and, you know, yeah. A certain age group, they’re used to having a lot of feedback, weekly, three sixties affirmation.

And I said to him, look, you know, affirmation is what I. Give you something to do,

because I trust you, affirmations might take you to an important meeting because I trust you. Affirmation is when I  know, give you a responsibility.  And that’s affirmation. Right? Cause you’re, you’re giving them responsibility.

And, and I think once they figured that out, they’re like, wow, okay. That’s more powerful than some participation trophy. Right. I mean, it’s like the real thing. And, . And I think it’s important to step back and say, okay, this is what we’re trying to accomplish.

And probably over-communicate on the front end. some people just are too busy to be organized and I’m not that person.

I, I call time out a lot. I , Heather, we’re not going about this. Right. So let’s just figure out really how we want to do this, and then we can go do it. Let’s say, I don’t want to get in the butter churning competition here. Yeah. So, and that’s hard, right? 

The concept of calling time out is great. I like, I’m just saying, I need to apply that to my life a lot more 

Yeah. It’s hard. ,  the pandemic has cut down on our travel, right? Obviously, and it creates more challenges and more opportunities. And one of the opportunities that we should all look at is time management and how we spend our time.

You know, we have everyone, everyone has time and money, and some people spend far too much time thinking about their money and not enough time, thinking about their time. Right. Yeah. I, you know, how am I going to be worth X? And I’m like , well, whatever I want to figure out , how, how can I  you know, go play golf on Friday afternoon.

Yeah. Sometimes I don’t have time to go surfing. Why did you start

I had a lot of unfinished business at Montgomery and co we , uh, built a big firm and by Oh seven Oh eight and we had over a hundred people or. Incredibly, you know, fast growing and profitable, you know, like very profitable and one of the highest paying banks on wall street , uh, prestigious and we just got hammered.

Oh , Oh, Oh eight , well, late Oh eight Oh nine. And I think our business dropped by 85%. And it’s really hard to maintain a business that fall. It was that much,  I mean, it’s just really hard, right? It’s, it’s almost like this pandemic. Um, you know, and it was hard to reinvent ourselves and we, we sort of made it through and landed the ship,  but I really thought about it and said, you know, if I do this again, which I did is I want to.

Really invest in a platform that’s sustainable and, and , uh, that we can scale up that has a recurring revenue stream So we really turned March capital into real, a profit machine and,  um, that, can continue to scale and grow over time. And you know,

So, but , but, but that’s March, which is different than Montgomery, I mean, or do you see it as a little, I mean, continuing some of the work, like you’re still investing capital 

Capitol, we’re helping build these innovation economy.  you know, we probably think out three to five years of things we want to accomplish, but maybe execute on a plan over an 18 month period of time, and which is kind of a normal fund cycle. And  in our biggest constraint, like any other startup that we work with is leadership.

And so how do we develop that next cadre of leadership and.  Where you just feel like.  Well, Well, it’s just, we’ve got so many good people that, you know, there’s no way we’re not going to win.

Right. And that’s kind of what we’re at right now. Wait, we’re not going win. Right. I mean, if I was competing with us, I’d be scared. I was shit. I’d, you know, be going for second place, third place. Yeah. And that’s what we were at Montgomery at our peak. And that’s where we are now. We just got this momentum and it’s, but you had to build that over time.

Yeah. 

Sure. Sharing and. Let me make sure i just have the basics of march you’re investing 10, 20 million into the series. A B. 

Yeah, we’ll probably put in 20 to 25 and to a company on average.  The first fund we , , we vested $240 million and 30 companies. so the average was obviously 8 million. The median was probably quite a bit higher, but if you looked at what worked the early stage stuff didn’t really work.

And I mean, it works for some people. What , weren’t really great at that.  , uh, what worked were we’re helping companies that had a product market fit scale. And we had some really big returns. That’s probably a ,  three and a half  you know, X fund, which has been great.

We returned two times a fond already. And the final close was in 2016. So it’s not that long ago. Right? 

yeah, the headline was something like, how did March capital get a billion dollar return on one investment?

yeah , yeah, yeah. So that’s a good headline and it’s true. And,  and then, so the second fund, we invested $300 million in   a little under 20 companies. 

So we really put in most of 300 million into 14, 15 companies, about 20 each fund. Three we’ve either invested or committed to invest about 160 million in eight companies.

. I think fun, fun too is, is really exceptional. And we had CrowdStrike in there as well as , uh, by far our biggest investment.

We have at least probably seven or eight big winners in that fund. And

And can i pause and just ask about crowdstrike and when did you invest why did you invest how did you get into the round 

I went and visited , George Kurtz in the early nineties, uh , uh, down orange County, he had a company called Foundstone and most of them at our summit got to know him. Um,

This is the CEO of

yeah. Yeah. And then he sold it to McAfee, spent a few years there after McAfee.

He started a company and , um, Warburg wrote a check for him. Twenty-five million dollars for half the company upfront, you know, And try not to be the best investment Warburg ever made. They’ve made $7 billion. It was an investment. And then Excel led the M B. Right. And about that time we got in business in March Capitol.

So I went down to see George and I was preparing to lead the C round. And at that time it was , uh, you know, life intervened. Um, my wife was diagnosed with a cancer at that time. It was pretty serious. And so I said to George, George, look , um, I want to lead the round, but Annabel’s,  is sick and , uh, you know, I got to spend the next six months focused on getting her well and get her through this.

And, you know , so, you know, I’ll put a little bit of money in, but likely your next round, he said, fine. And I was sitting right in the desk where I’m sitting now and we had this conversation spring of 2015. , you know, after the round, I, every quarter I’d sit down with him and then he gets ready to do the.

D round, Google led that round. And, I put some money in, it turned out really well that round, but the next round was actually risk adjusted even better. So I talked to George and I said, you know,   You want to raise a hundred million. So I sent him a term sheet. I said, I’ll put it in 25 to lead it.

And he said, fine, we agreed on it. And that was the D round. And I showed it to Excel. Samira says , well, this is a great deal. You know , I, I want to lead this. I go, Samir, look, you take My amount, my terms, you know, everything you down here, you can lead it. You know? I mean, wow. I don’t care. Excel let it.

Right.  

Well, I really, what do I care? Right. Right. You know , and, and ,  so then the, he round comes around, you know, it’s Samira. And I go, let’s do this one together. And, Rounds coming together and well, you know, progress and a lot of interest in it.

So I wasn’t quite sure what was going on. And so I said, all right, George, you know, w w what do you want? And so I wrote it out in one piece of paper amount, you know, it was like $200 million at a 3.2 billion pre. 1% equity, 3% equity pool increase something or other it’s like four paragraphs, really simple Samira does the same thing.

And he’s so easy to work with Samir, I think world. And so that looks good. All right. So I smear, this is what he wants to do. He says, yeah. I said about, you know, you and I probably shouldn’t lead it. Good. We need someone new. Right. And so we sent it to GA and , uh, they put it on their letter and send it in and we did the deal monitoring IVP, and we brought them in as well.

Now everyone says GA let in. Right. VP said they let it. I don’t know. I’m pretty sure I wrote the email,

please.

a billion, a billion dollar return is billion dollar

Exactly. And everyone was like worrying about who led it, who did this or that? I , we, we have incredible relationships with firms that were not on the board of that we didn’t lead around and I find it. You just have to get to the point in life where people return your phone call and want to spend time with you and know you’re not, you know, you’re adding value.

And if that’s the case, you can. No, I think we got 17 times our pro-rata on that series E you know , and, and you get that because of the relationship. And then we did, we invested in the IPL on top of it, you know? I mean, so it’s like, it’s a complete parade, this one, I mean, it’s fantastic. And you know, we love it.

Right. And we bought 6.8 million shares for about $70 million. And, you know, those are worth about 1.5 billion today. So we really made much more than a billion dollars on this investment. Yeah.

that’s great.

There you go,

who cares? Who let it right. But I think the thing is, is George is extraordinary entrepreneur and, you know, he deserves all the credit.

He’s got an incredible team around him. There’s a half dozen members of his team who could all run public companies and , uh, it’s a great culture and he’s great. And it’s been an absolute pleasure to work with them. And, you know, I really just love, love George and the team there.  , and look, the thing is if, Any of these individuals at this firm or other firms have a, an issue or family problem or something, you know, I’ll drop everything I’m doing to go help them out. And they know that, and we’ve done , uh, many times and that’s much more important than anything else.

And know we have those sort of relationships. That’s what leads to these outsized returns, you know?  

Yeah.

and I, I hear you giving George full credit , um, for what he built, but you talk about working with your portfolio companies to help them scale up or there’s certain tactics, or there’s certain ways you lean in to help them scale?

Well, the first thing  you gotta do is, you know , is understand their style and cadence. You’re not getting in their way. and you know, we certainly are very careful about that, but I think the other day you know, there’s some advice that we can give them lessons learned. oftentimes it’s about building their organization, it’s coaching and mentoring, uh, helping with direct sales going on sales calls with them. I love going on sales calls with them. Right? Whenever we go visit cities, let’s go on sales calls. And yeah, that was fun. I mean, we just go see a, pick a city, go there, let’s go call some CEO’s and I mean, not many VCs do that right now, George, we’re going to be out.

So let’s go see some co I’ll meet you there. We’ll go see some people, you know, London or New York, or, you know, Wichita. I mean, you know, Atlanta, I mean, it was, we’d have fun, I mean , and, and , uh, sales calls. So it led to a lot of customers for them, you know, cause we have a big Rolodex and might as well use it.

, you know, being a sounding board, you know,  it is something that has to be taken care of.

George would call me up and ask for something and say, I need some help on this. And I’d say, alright, George, I got it. All right. I put it on a phone. I have no idea how I’m going to do this. Pour myself a drink, think about it for an hour. And then I go find out how to do it. I got it done. I mean, they were like amazing things.

Right. You know? And I said, George had got it, you know? Right. I got it.

Yeah. 

I mean, I don’t know how the hell I’m going to do it, but I got it. and, and you gotta do what you gotta do to help these companies and, your ego has to be subverted to there. Cause  ,  no one might ever know that we did it.

 And it’s not a lot of hot air, you know, people drop it, they enjoyed doing their shit. I was like, okay, very surgical, boom.

   So you’re kind of, you know, behind the scenes on some of this stuff. And yet the Montgomery summit is this huge stage and super important in the LA ecosystem. Um, maybe we could just talk a little bit about what’s coming up March 3rd and fourth this year.

And so the summit was really an opportunity for us at Montgomery, to convene our clients who are CEOs of companies with investors and corporate events, sex and things, you know, would come out later financings or M and a. 

Yeah. Yeah. You know, look, it’s , uh, it’s unfortunate, you know, I’d love, love having you at admitted but you know, it is what it is right now. And so we’re trying to figure out how to do it virtually in a way that is impactful 

and so we’ve come up with a revised format and the content should just be stellar. . And so whether you’ve got Eric. You know, from zoom, founder, zoom is going to have a conversation with John Chambers about, you know, why he had to leave Cisco to do this. And, you know, what were the key, Trade offs he had to make as he built the company. I mean, it should be a great conversation.

 Bill McDermott, who’s the third, well really the fourth after the founder CEO of service now, which is  one of the world’s most important technology companies . Just confirm CEO of Honeywell. Who’s probably the world’s leading industrial software company. Darrius Adam check. Who’s a friend as well.

I love that question for eric about why he had to leave cisco to start zoom uh are there any other really good questions you hope to ask this lineup of

of great  

, I’ve asked Carmen Desippio, who’s the CEO of E Y global business to interview bill sometimes. A peer to peer conversation goes a lot better.  , ,  I think you gotta find something that’s interesting and appealing to them. I think, for example, with. Honeywell is industrial world has been very slow to adopt technology, the OT world and the it role is really haven’t converged.

There’s been a lot of hope that would happen, but not much really has happened and kind of why is that? And,  and I think Daria is , well, give us some insights into that. I think if we go back in the tech world to the seventies, there was a closed stack. You had data general, IBM weighing . And, and they were closed systems.

And when you had a , um, onset of Oracle and open data, And then you can start building a tech stack with best of breeds. It kind of blew it all open and created this tremendous innovation and interoperability. I think you’re starting to have standards now in the OT role, the industrial world operation technology world that will enable that to happen.

So, yeah. You know, you’re kind of sitting there saying, God, you know what, this might’ve been a false positive, trying to work in the industrial world. It’s, you know, 30% of the GDP in many countries and still walking around with clipboards, you know? Or is it, Hey, are we on the Dawn of a big industrial 5.0 finally and, and enabled by AI and 5g.

And it’s really going to take off, or is it. Is it a head fake I mean, so I think you’ve got to have an authentic conversation, you know, why hasn’t it happened yet? You know what I mean? A lot of us have spent tens of millions of dollars trying to build industrial software company.

Isn’t it? I mean, to show for it, you know, and . And then 5g with Christiana. He wants me to interview him. I’m honored. I’m also shit. I let somebody else, I got to prepare for it, right? No , but, but it’s like, you know , what, what does 5g for the average person, you know , well, what does it mean for you corporation and, you know, w what am I going to do differently than I can’t do now?

and , uh, you know, what we’ve heard of sweat from China, how real is that? And, it’s a real conversation around that. Yeah.  So anyway, so we’ve got all the incredible lineup of top CEOs, and then we have like 20 companies that are kind of worth over a billion.

are they’re kind of pre IPO track. And then we have 16 tracks by sector, then we were doing a program on geographies with Silicon Valley bank, and then we have a growth track of companies that are looking to for expansion capital, another 15 companies there. I mean, so it’s quite a rich program.   

Yeah. Sounds like it’s going to be a great summit. Uh let me switch gears a little and talk more about being part of the community and building community i know philanthropy is important to you do you think that business has an obligation to do more

Yeah, no, I think it does absolutely , Canada should and must play a role and , uh, increasing the envelope of participation in the innovation economy and you know, people think that the government’s going to solve the problem, but in effect, the government is the problem.

you know, it’s blocking a lot of the reforms in the financial world. , you know, if you want to build low income housing in LA and the government gets in your way. I mean, so it’s not like. Yeah. I mean, it’s not like the government’s miss intended or anything. It’s just, it’s just doesn’t have the.

The flexibility and the competency to do it. Um,  and so, you know, we sort of pick and choose where we get involved, where we think we can get that right. Bridge 

 you know, or there’s my personal philanthropy, which is significant and there’s stuff we do at Marsh capital  ,  You know, the stuff we’re doing in March capital’s is very focused on community building, whether it’s, you know, Venice clinic or , uh, the people concerned addressing homelessness, community health , Yeah, that’s a then youth programs, youth training programs.

And I knew her personally. No, I have some other things that we do that might include, you know, youth programs , um, programs for women, a big they’re, their women’s health, just kind of woman in general, women’s health and women’s wellbeing.

And then. Faith-based organizations  ,  but it’s, it’s about finding a good entrepreneur in the,  the philanthropic world who approaches it the same way. you know, an entrepreneur mind in the, in,  the business world, an opportunity or a challenge, and they feel like they have a unique skillset and they can put together a service, offering a product to address that and that and the best ones are great storytellers too.

And they can rally people, 

Jamie you are a great storyteller  and i could ask you questions for hours but i imagine you have things to do and a summit to get ready for so let me just thank you so much for coming on the pod today 

Yeah, well, it’s a thank you for your time and good luck and, you know, I hope we can find ways to work together and thank you, Minnie.