If you have been bootstrapping and think you are ready for investors, you need to learn how investors think. First, please study our free Bootstrapping course and the Investor Introductions page. Then, start looking for entrepreneur – investor fit. Today, I introduce you to David Lambert of Right Side Capital Management.
David Lambert is Managing Director at Right Side Capital Management, a firm that invests small chunks of capital in capital efficient ventures. The firm is very much in line with the Bootstrapping to Exit philosophy we’ve been discussing. You can listen to a podcast of our conversation here or watch the roundtable video below:
Sramana Mitra: Tell us about yourself. Tell us about Right Side. Let’s get acquainted.
David Lambert: I have predominantly been a career entrepreneur before starting Right Side Capital. I came out to the San Francisco Bay Area to go to Stanford in the late 80’s. A month after I graduated, I started my first company.
Over the next 17 years, I founded and ran two different companies. One was a computer hardware company and the other a traditional dot-com software company. At the beginning of 2008, I started talking about the seedling idea of Right Side Capital with one of my partners. We ended up going live and started investing in 2012.
There’re three of us now. All of us are career entrepreneurs with a lot of operational experience. We’re basically a quantitative, data-driven, pre-seed stage investment firm. I can give you some pretty good ideas of what we invest in.
For the most part, we’re looking to invest in companies that are looking to raise relatively small rounds of funding – anywhere between $100,000 to $500,000 total round size. We’re usually a pretty small check between $50,000 and $200,000. Typically, $100,000 is the most common check size. We’re generally looking for companies that are pretty capital efficient and have capital-efficient business models.
Most of the companies we’ve invested in have either been bootstrapped or have raised relatively small amounts of capital by the time we invest in them. We generally look for companies that already have a live product and are generating a little revenue. Most of what we invest in has about $5,000 a month or higher.
We are not necessarily looking for companies that are looking to go down the venture capital channel. We’re fine if you want to go down the venture capital path. I would say that probably three out of four of the companies we invest in, it’s a reasonable assumption that they can get to cash flow positive with $2 million to $3 million raised over the life of the company and do not necessarily need to go on the high-cash burn side.
We invest a round or two earlier than what you would think as traditional seed investors, usually earlier than most pre-seed investors. Our typical round might be a company that’s raising just $200,000.
We’re based in the Bay Area but we predominantly invest outside of the San Francisco Bay Area and outside of New York City. I would say San Francisco and New York makes up 25% of our portfolio combined. The rest is in geographies outside of those two cities.