SANTA MONICA, Calif. – Palomar Ventures I, the freshman fund of Randy Lunn and Jim Gauer’s year-old venture firm, reached a first close in April on a little more than $50 million, Mr. Lunn said.
The Southern California-focused fund is targeting $75 million, and Mr. Lunn said he foresees no problem reaching that goal (VCJ, October 1998, page 17). Palomar Ventures expects to have one or two more closes before completing fund raising by mid-October.
Lead investor J.P. Morgan put up $20 million, followed by $5 million investments by BankAmerica Capital Corp., Mark IV Capital, Merrill Lynch’s Private Australia Ltd. and SunAmerica Inc. insurance company. A SunAmerica manager added another $5 million, and New York law firm Skadden, Arps, Slate, Meagher & Flom put in $2.3 million, Mr. Lunn said. Smaller groups supplied the remaining capital.
“We had a wonderful response, ” Mr. Lunn said, adding that the firm had turned away offers from others offering to be lead investors because the terms were not favorable. The offers also came from less prestigious groups, he said.
Mr. Lunn, formerly of TVM Techno Venture Management, and Mr. Gauer, formerly of Enterprise Partners, began raising their first fund in the summer of 1998. Although the firm predominantly focuses on investments in Southern California, it will consider deals elsewhere on the West Coast and perhaps in Denver. The two-partner firm does not want to pursue deals beyond a one-day round-trip commute from suburban Los Angeles, Mr. Lunn explained.
By press time, Palomar Ventures had invested $2 million in Efficient Networks of Dallas, a late-stage telecommunications company.
The firm is interviewing candidates to fill two positions either as partners or in subordinate positions on a partner track.