Seed Money Model Aligning with Local Angel Groups

RightSide Capital Management, based in San Francisco, California, created an investment model for providing rapid response to companies seeking seed money. The system developed by RightSide uses standardized applications for automated submission and due diligence review.

Recently, the Angel Capital Group of Nashville, Tennessee, has adopted RightSide’s seed money model. Angel Capital Group has created a subsidiary—ACG Funding, LLC—to collaborate with RightSide in order to provide a new investment avenue for Nashville angel investors.

Angel Capital Group normally requires its participating investor partners to provide $5,000,000 of capital. Now, these same angel investors can partner with ACG Funding, LLC for an investment of only $100,000. ACG Funding is then investing with RightSide’s fund.

The alliance with RightSide is one in a series of expansion steps taken in 2010 by Angel Capital Group. New principals have been added to the team at Angel Capital Group and this permits the operation to wield a presence in Chattanooga, Knoxville, and the Tri-Cities areas of Tennessee.

A spokesman for Angel Capital Group stated that its member angel investors have expressed strong interest in ACG Funding. A managing partner of RightSide stated his firm’s aim of benefiting from additional funds of Angel Capital Group plus expertise of the group’s members about financing seed money stages.

Although the number of member partners in Angel Capital Group’s fund is unknown, the firm notes that it also has access to joint funding arrangements with another angel network in North Carolina. This provides another potential inroad for national reach by RightSide.

Entrepreneurs who apply online with RightSide are promised a funding commitment or rejection within two weeks of application. Approved deals receive a term sheet that requires a 10-day response. After entrepreneur acceptance, funding is completed within 3 to 6 weeks. All of RightSide’s angel investments are in exchange for preferred equity. No investor principals are required for inclusion on a board of directors of funded companies.

RightSide requires the companies it funds to have founders with substantial personal investment in their ventures. In addition, compensation to management of funded companies cannot exceed 50 percent of the market rate for similar jobs. Despite RightSide’s automated evaluation system, the firm states that its due diligence places strong emphasis on the track records of management teams at the companies it finances.

When RightSide invests it invites local angels to participate. Hence, its plans include more alliances such as the one in Nashville.