LOS ANGELES – Building on his strategic relationship with Palomar Ventures, James Montgomery of consulting firm Montgomery & Associates has formed Digital Coast Partners, a merchant bank in Southern California.
Digital Coast will provide the venture firm with expert advice, research and investment opportunities, in exchange for a small portion of Palomar’s standard 20% carry on all of its deals, Jim Gaver, a general partner at Palomar said.
Palomar Ventures typically invests in early-stage companies, and its investments will be augmented by financing from Digital Coast’s new $250 million fund, Digital Coast Ventures, which is expected to make an initial close sometime before the end of the year. The merchant bank will formulate business models, organize management teams and provide seed capital for seed-stage companies. It also provides follow-up rounds of financing to late-stage companies.
Both firms expect the alliance to succeed because they invest in the same types of businesses: information technology, e-commerce, broadband service, data communication and telecommunication companies.
Montgomery traditionally invested in seed-stage companies and then returned for later-stage investing. Palomar often followed the seed round with its own investment. Gotajob.com, an on-line service designed to match individuals seeking part-time, temporary or seasonal work with potential employers, was financed through this process.
Palomar is not obliged to have the merchant bank underwrite its deals, although Digital Coast Partners still would be entitled to a percentage of the carried interest.