Q&A with Jeff Pomeranz of Right Side Capital Management
Managing Director
Principal Series:
Right Side Capital Management (‘RSCM’), based in San Francisco, is one of the most active early stage venture capital firms in North America, having invested in 2,000+ technology startups since 2012.
RSCM invests in capital-efficient technology companies that are raising smaller round sizes, and at earlier stages, than what most professionally managed funds will invest in. The firm believes this focus provides several distinct competitive advantages for investors:
1. Very Early Stage technology returns have the ability to produce higher returns than later stages of the VC market.
2. There is very little professional competition because the amount of capital sought by companies at this stage (usually less than $500k) is generally too small for traditional VC’s to address. This allows for better entry pricing, enhancing outcomes for investors.
3. The federal government and most states offer amazing tax incentives for very early-stage investors. Most RSCM fund gains are expected to be QSBS-qualified, which are free from federal taxes and in 45/50 states.
Join us for a private Family Office Insights Webinar featuring Jeff Pomeranz and Curt Pabst of Right Side Capital Management, a pioneer in pre-VC stage technology investing. Jeff and his partners have worked together for over 14 years and have invested in over 1,900 startups. Right Side Capital has a proven track record of producing outsized returns with exceptionally low taxes.
September 25, 2024 at 2:15pm-3:15pm EST
Recording Here
Investor Only Please!
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How is your track record?
The goal of RSCM funds is to consistently deliver a 3 - 5x+ net return multiple to our investors, regardless of macro environment. Our first fund, RSCM Fund I, is currently at 7.6x net multiple, 6.1x of which has been distributed, and has a 27% net IRR. All RSCM funds have handily beaten the Cambridge VC Index and are top quartile funds.
What are the tax benefits to investors in RSCM Funds?
Our strategy is optimized for tax efficiency. We expect our funds 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 impactful, but often overlooked, tax incentives available to very early investors. The first is IRS Rule 1202, the Qualified Small Business Stock (QSBS) rule. QSBS qualified gains are free from federal taxes, as well as in 45 of 50 states. 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).
Is now a good time to invest in early tech startups?
Yes. Historically the best time to invest in technology startups is after a technology recession, like the one the technology sector has recently experienced. The best macroeconomic cycle for venture funds is getting to invest during and just after, an economic downturn. Recession and post-recession years have historically always been great years for startup investing.
Jeff Pomeranz of Right Side Capital Management
Jeff Pomeranz is a Managing Director of Right Side Capital Management, LLC and has 30+ years of experience in the financial services industry. Prior to co-founding Right Side Capital in 2012, Jeff served for seven 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 eight years as a founder and President of Hotovec, Pomeranz & Co. LLC, a boutique technology research, investment bank & wealth management firm. Early in his career, Mr. Pomeranz was a Financial Consultant for Smith Barney providing wealth management services.
Contact Jeff: jeff@rightsidecapital.com