Q&A with Jeff Pomeranz, Right Side Capital Management
Managing Director
Principal Series:
Right Side Capital Management (“RSCM”), based in San Francisco, is the most active pre-VC stage investment firm in North America. Our team has worked together for 11 years and has invested in 1,100+ technology startups across 4 venture funds 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.
We use a quantitative, data-driven, selection process to identify optimal investments and build massively diversified portfolios. The result is funds that can systematically and repeatably harvest high returns with much less risk than traditional VC funds.
A Private Family Office Insights Webinar Featuring Pre-VC Fund Right Side Capital
February 24th at 2:15-3:15pm EST
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Investors Only Please
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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 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).
How is your track record?
We have a great track record. The goal of RSCM funds is to consistently deliver 3 - 5x net return multiples to our investors. Our Fund I is on track for a 4x – 5x net return, 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.
Why is now the right time to invest in early tech startups?
The best macroeconomic cycle for our funds is getting to invest during and just after, an economic downturn like what we have today. Recession and post-recession years have historically always been great years for startup & early VC investing. A distressed ecology means investing at lower valuations and it is a better operating environment for startups as they can do more with less money. Overall, volatility is good for young startups. Disruption shakes up the competition, creates opportunity, and small companies can adapt and pivot more quickly than larger competitors.
Jeff Pomeranz, Right Side Capital Management
Jeff Pomeranz is a Managing Director of Right Side Capital Management, LLC. Jeff 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. He provided marketing & fundraising services and business development advisory for venture capital funds and other alternative investment asset managers. 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. In addition to providing senior leadership to the firm, Mr. Pomeranz built and managed sales teams for institutional research, wealth management and corporate services divisions. He also directed operations, compliance, legal and trading departments. Early in his career, Mr. Pomeranz was a Private Client Financial Consultant for Smith Barney providing wealth management services.
Mr. Pomeranz received his Bachelor’s degree from the University of Colorado. Contact Jeff:
jeff@rightsidecapital.com