D.C. National Bancorp and two partners have formed a venture capital company that will invest in small and medium-sized businesses in the Washington area, including in the inner city. The initial capitalization is $1.5 million.

JMW Investment Partnership, led by Julia Walsh, president of Julia Walsh and Sons, and Money Management Associates, led by Daniel O'Connor, chairman of the Fund for Government Investors, each will have a one-third ownership along with the bank holding company.

In exchange for putting up seed money, a venture capital company takes an equity position in a company in hopes of recouping its investment and making a profit if the company prospers.

Initial investments by the group will range from $100,000 to $500,000, according to the bank.

A spokesman said the company will be looking for people with proven management abilities and for those who have "an improved mousetrap."

The announcement was made at D.C. National Bancorp's annual meeting, along with a report of first-quarter earnings. Profits amounted to $933,000, up 23 percent over the $760,000 earned in the same period in 1984. Earnings per share were $1.06. Total bank assets rose by one-third to $348 million at the end of the first quarter from $261 million in the same period last year.