Q&A with Jeff Pomeranz of Right Side Capital Management
Right Side Capital Management (‘RSCM’), based in San Francisco, is one of the most active pre-VC stage investment firm in North America, having invested in 1,200+ technology startups since 2012.
We invest in capital-efficient technology companies that are raising smaller round sizes, and at earlier stages, than what most professionally managed funds are able to invest in. We focus on this segment of the startup ecosystem because it is much higher returning than the traditional VC market. We also have virtually no professional competition because the amount of capital sought by companies at this stage is generally too small for traditional VC’s to address.
RSCM funds are designed to consistently and repeatably produce a 3 – 5x+ net return to investors with exceptionally low tax impact.
Join us to meet Jeff Pomeranz, Managing Director of Right Side Capital Management, a pioneer in pre-VC stage technology investing. Jeff and his partners have worked together for over 11 years and have invested in over 1,200 startups across their 6 venture funds. Right Side Capital has a proven track record of producing outsized returns with exceptionally low taxes.
November 18, 2021 at 2:15pm – 3:15pmEST
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How is your track record?
We have a great track record. The goal of RSCM funds is to consistently deliver a 3 - 5x+ net return multiples to our investors. Our first fund, RSCM Fund I, is currently at a 6.2x net multiple with a 26% net IRR, and our Funds II & III are trending ahead of where Fund I was at the same point in their lifecycles. All RSCM funds are outperforming the VC industry benchmarks while taking substantially less risk than traditional VC funds.
What are the tax benefits to investors in RSCM Funds?
Our strategy is optimized for tax efficiency. Under current tax rules, our funds are expected to produce close to zero federal tax liability (and in 45 of 50 states) over the life of the funds by taking advantage of two very impactful, but often overlooked, tax incentives available to very early investors. The first is IRS Rule 1202, which allows the potential for tax free gains for investors in Qualified Small Business Stock (QSBS). The second is Rule 1244, which provides more favorable tax treatment on losses for extremely early investors in QSBS stock. We expect the vast majority of our funds’ gains to qualify for the QSBS exemption (section 1202), and most losses count as ordinary losses instead of capital losses (Section 1244).
Why invest in tech startups at the pre-VC stage?
The first reason is for the high returns. Returns in the tech sector are always higher the earlier you go. The second reason is the lack of competition. We invest at an earlier stage than other professional investors, even earlier than seed and pre-seed VC firms. As a result, we don’t have to compete with other professional investors for deals. We have an almost unlimited number of deals to choose from because check sizes at this stage are too small for the traditional VC industry to address.
Jeff Pomeranz of Right Side Capital Management
Jeff Pomeranz is a Managing Director of Right Side Capital Management, LLC and has 28 years of experience in the financial services industry. Prior to the Right Side Capital, Jeff served for 7 years as Head of Alternative Investments for Legend Merchant Group, Inc., a financial services firm offering investment banking, brokerage & asset management services. Mr. Pomeranz previously spent 8 years as a founder and President of Hotovec, Pomeranz & Co. LLC, a boutique technology research, investment bank & wealth management firm. The firm specialized in providing highly differentiated research on technology companies. Early in his career, Mr. Pomeranz was a Financial Consultant for Smith Barney providing wealth management services.
Mr. Pomeranz received his Bachelor’s degree from the University of Colorado. Contact Jeff: email@example.com