Investment innovation – new fund to invest in 100-200 startups annually

May 18th, 20108:31 am @ Jacek Grebski

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Crowd-financing is a great tool to get your project off the ground, but it takes a lot of work and can often keep you from what you should need to, or are working on – the actual business.

There are of course other forms of crowd-financing, such as crowd financed managed seed/investment funds – but the legalities, specifically from the fund management side can get a bit tricky. That aside, company founders have a plethora of other options when it comes to raising capital – however often times these choices are only available to larger firms with positive income streams.

So what’s an entrepreneur to do in this world? Well the good news is that there has recently been some innovation on the field, and it’s a concept that fundamentally crowd-sources start-ups and invests in 100-200 of them per year, so at a minimum, you’re seeing 2investments per week. Compare that to your traditional model of 5-10 annually and you’ll see why this is financially innovative.

So who’s ballsy enough to lead the way on this – it’s a group out of California called Right Side Capital Management. And if you think about it, it makes a lot of sense.

You’re basically taking the roulette table approach, if you spread your money across the table, one will eventually hit, the difference here is, that in this start-up version of the popular Vegas classis, more than one may hit, in fact 2-3-4 may hit, and one of those will hit big – and then there’s your flip.

While there may be problems involved in startup corporate governance, and especially with the way they’ve got their logistics set up, the concept as a whole is absolutely brilliant when it comes to getting money out to those companies that need it.

But how do you go about making investments into 100+ companies, clearly aside from having to increase your deal flow by a substantial amount, you need to employ a very different project valuation methodology rather than the traditional VC model.

From the RSCM website, and specifically the application page, it seems that they are very heavily focusing on the team makeup, and those individuals cash position or personal financial health. Meaning, good credit, probably some money saved up in the bank, or similar – so that you as an entrepreneur can maintain yourself while developing said product and going to market.

After all, an entrepreneur that has no money is one that isn’t going to devote his/her full time to the project. So if we’re right, I bet the assessment criteria would be 1. Team 2. Project 3. Progress.

Any thoughts on this? Let us know.