
RightSide Capital- New Seed Fund Will Make 100-200 Investments Per Year - jasonlbaptiste
http://www.mobilecrunch.com/2010/02/21/rightside-capital-announces-new-seed-fund-will-make-100-200-investments-per-year/
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patio11
I don't really care about funding that much but I wish them well. I want our
capital markets to look more like our mortgage markets: you get your history
read by a computer, numbers get crunched, and you get a take-it-or-leave-it
offer presented to you by a junior employee of the firm (whose main purpose is
to wear a suit to give you the impression that the piece of paper in your
hands really is worth $200,000) which you can review and consummate inside of
an afternoon.

If this happened, scaling would make "100 to 200 investments per year" look
like the financial equivalent of "Our website serves 100 users _per day_!
Bwahaha we're in the big leagues now!" Many, many local bank branches write
more mortgages than that every year, and if you haven't noticed bank branches
outnumber VC firms by, well, an awful lot.

~~~
drusenko
But mortgages have an underlying asset that's usually of some value, as do
cars, for instance. Getting loans for both is relatively easy, if you have
decent credit.

On the other hand, I'm skeptical about this for a few reasons:

\- If it was as easy and plugging your qualifications into a computer, why
aren't banks doing it already? There is obviously a high level of risk in a
startup, and most investors have many defenses in place to try to assess
higher quality startups, many of which are exceptionally frustrating to the
entrepreneur (although perhaps justifiably so).

\- As a follow-up point, how are they going to defend against a large number
of people who become good at "faking" a startup? If you're investing $20k,
what's to stop someone hungry for cash from outsourcing a prototype and
applying? Since they never meet in person, I'd think it would become
exceptionally difficult to distinguish between the legit companies and those
legitimately good at faking it.

\- As has been repeated many times, the most valuable part of YC isn't the
money, it's the mentoring. Without mentoring, it's "just money". If you're
just looking for money, family & friends of family are a pretty decent place
to start. It's easy to think that if you just had money, you'd be able to
bring the company to the next level, but oftentimes the reality is that you
need help to get there. This model would seem to encourage people to take the
money, lock themselves up, and plug away, which really isn't the right
approach.

~~~
marshallp
Those are moot points

What does mentoring mean? education that hasn't been formalized yet

People gaming the system by outsourcing prototypes? sounds like a good an
entrepreneur

Collateral requirements? most bank lending apart from mortgages is
uncollaterilized, even mortgages are not fully collaterized, you can default
and the bank wouldn't recoup their full loan amount by selling the house.

Banks routinely deal with huge amounts of risk - trading stocks and bonds.
Startups would just be a new asset class to exploit for them.

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jacoblyles
This fund, and Graham's Y-Combinator, both follow the advice that Nassim Taleb
gives for investing in an "extremistan" world of fat tails - many small
investments, instead of a few larger ones. He argues that the profit from the
few very successful investments will swamp the losses from the unsuccessful
ones.

See <http://www.econtalk.org/archives/2007/04/taleb_on_black.html>

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DenisM
Capital is one of the things that should have been democratized by computers
and the internet but was not. Online stock brokers democratized the other side
of it - investing, but nothing happened on the fund-raising part yet. This
seems to be about to change.

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webwright
Interesting. It's worked for Ron Conway, though maybe it only works when you
have very high quality deal flow.

I couldn't get any sense of the terms with a cursory glance. How much do they
invest? How much do they want for their investment?

