RightSide plants many seeds

News broke this week that RightSide Capital Management is planning to overhaul seed-stage capital by funding 100-200 companies per year in a manner so efficient that it literally spawns new companies.  This is in direct contrast to investors who limit their investments to as few as a tenth of that number.  I don’t know which way is the right way to go, but my gut tells me that more activity and less bureaucracy is a good thing:

Partner Kevin Dick went on stage during a panel on alternative funding methods and laid out what he believes to be the future of funding. Quantity, not quality, is king in the seed stage. Entrepreneurs looking for funding won’t have to go the traditional route of begging for a meeting and then having a second meeting and then waiting 3 months for traction until finally closing a deal. Instead, they will fill out an application – similar to applying to College – and receive a response in 2 weeks.

Other aspects of the fund are equally revolutionary. The term sheets will be determined by a computer, and everyone will receive the same legal terms (the valuation and funding amount will vary based on the application). The fund will have a ranking method to rate applicants on a variety of categories such as experience/technical ability and systematically provide a pre-money valuation. They will also ask founders to put in their own money to ensure they have “skin in the game” and that they are invested in the future success of the company. The amount of money required will be determined based on financial documentation the founders are expected to provide.

This will certainly inject a bunch of people into the mix who don’t know how to run a business and will fail fast.  That’s not necessarily a bad thing, though.  Ideas have a way of transcending their authors.  Better news is that people who have good ideas and can run a business can get in more quickly, leaving their day jobs to do something that creates value, innovation, and more jobs.  That’s an empirically good thing.

As for the term sheets, I like that as well.  People have been attempting standard term sheets for some time, with little success.  I hope this move gets them closer to the goal of lowering the time and cost of raising capital.  For what it’s worth, I believe we should remove every possible barrier to starting businesses in this country.

That’s how you build a future.

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