Some venture capitalists are known for making speedy decisions, communicating clearly, treating portfolio companies fairly, and guiding their startups to a win for all stakeholders.
Others, not so much. Some even lob the odd (friendly) jab or two at bloggers.
A new site called TheFunded hopes to even the odds a little by getting the information out about how VCs treat entrepreneurs. They have a good database of venture firms (6,559 contacts from 3,529 funds), and invite members to rate and review funds after dealing with them first hand.
Others can agree or disagree with these comments, and/or leave their own. The end result is a list of happy and horror stories, as well as an overall 1-5 rating for each fund, on five different categories.
There isn’t much feedback yet, as the site is still under the radar with just 39 members. An example of feedback – Menlo Ventures has an overall rating of 2.8/5. There are two comments, one positive and one negative (the positive comment came from someone who was turned down).
You have to apply to be a member, which allows you to leave your own reviews and ratings, and read much of the feedback (only some reviews are made public). In the future they will only allow people who’ve been invited by other members. They also go to some length to make you prove who you say you are. VCs are not allowed in as members, and applicants have to say what company they are with and point to a bio page about themselves.
While I think this is a great service, I have a couple of problems with TheFunded.
First, since most startups are turned down for funding, there will be a tendency for people to leave negative comments, and readers need to take that into account. How well a fund treats the many entrepreneurs they turn away, of course, matters too, and that feedback is valuable. I think a good addition to the feedback form is a simple box to check if you were funded or rejected to help give readers context. Also, the face that this is a bit of a private club, and non-anonymous, should help mitigate many of the issues we mentioned with another feedback site, Gorb.
A bigger problem I have with TheFunded is that they distribute contact information about VCs, including email addresses and telephone numbers. This brings back memories of the repugnant, privacy-destroying Jigsaw, and it should be removed or at least made available only to members.
In this funding environment, where money is flowing, good ideas often have a number of venture capitalists to choose from. For entrepreneurs, this can be one of many data sources in determining who to accept funding from.
This says bounds about the strength of the US/Californian tech sector capital market.
Although we are improving here in the UK, we have a long way to go to match the confidence and willingness-to-do-business that you have in the valley.
Its a nice concept but the problems laid out in the post are pretty serious. I just hope it doesnt turn out to be another site where rejected entrepreneurs start bashing VCs.
MA you have reported on VCs acting up when you have seen fit. The last issue I recall was a 50/50 case where it was not so clear who was the boogie ma, the VC or the piss artistist they were funding who you had already delegated to the deadpool btw. Nevertheless it was a bold move and a little feedback here and there goes a long long way.
Who were they funded by?
Every VC I have spoken to says that almost all if not 100% of the ’situations’ they fund have come through someone they already know. So the value of a ‘rate-my-VC’ website to a company or entrepreneur is pretty low if they are already two degrees from the VC that would invest in their company – they can more easily pick up the phone and find out if there might be a good fit.
VC are just real people and they have some real people limitations:
- They can’t invest in 1,000 companies, because they simply can not have that many meetings with portfolio companies
- If they are successful, they are rewarded for this success by being given more to invest from their own funders (trusts, Pensions, endowments). If they have a bigger fund then each of the 7-10 companies that will be part of this fund’s portfolio will have to be a bigger investment.
- It is no longer worth most of their time to invest $1M in a startup because funds have grown over the years, this is why new disruptive forces are creeping up from below to fill in this gap (Y Combinator, Angels, successful Entrepreneurs)
Interesting site.
This type of service is a great idea, although the model could use tweaking. If anyone wants to do a better site with one of my domains: RateMyVC.com, RateYourVC.com or VCfeedback.com, give me a buzz. Cheers, chrisco
They need fucking funding just to get a designer…………..hahaha
I think this is great. Sure, there will be a large amount of bashing… they aren’t called ‘vulture capitalists’ for nothing. But I think something may be said when the overwhelming response to a VC is negative. Same if it’s positive.
Great website; I think having to link to a Bio of yourself before you can review a VC is a great Idea –
– Also with a few filters, they could expell members who abuse the system
-Richard Bowles
So this is what Josh meant when he warns that too many Web 2.0 entrepreneurs are targeting an audience of 53,651 people (the number of then-current subscribers to TechCrunch)…
Well its probably no surprise that I find TheFunded a pretty cool site as well. I would however like it if they would have categorized the funds (technology, social media, etc) for further browse / discoverability options.
The suggestions are great! More suggestions are welcome.
We already took down the private contact information for regular visitors, leaving vCards, telephone numbers, and email addresses for …members only…
Some better research tools, including storing searches and downloading target lists are on the way.
All we want to do is help entrepreneurs get the funding that they need from good funding sources. The Private commentary gives entrepreneurs some real insights on how to pitch and deal with specific funds.
Mike it looks like they listened to your thoughts.
You can no longer see e-mail addresses nore phone numbers for the partners unless you are a member.
Abe
At first blush this idea makes sense, sort of like rating restaurants. The difference is that with a restaurant, if I like it I want to brag about it because I want the restaurant to do well.
Getting investment is often compared to dating and marriage. If you are in a good marriage, you don’t want your spouse dating lots of new people, so you aren’t going to go on the internet and rave. If the thing goes south, you might want to go complain publicly. That’s why I, too, worry that TheFunded will skew too much to the negative.
It will be interesting to watch and see what happens, I hope I’m wrong!
I think adding some transparency to the funding process is a good thing. The registration process, as Mike said, is relatively (compared to other “Web 2.0″ sites) rigorous, which will hopefully limit the amount of reputation-destroying trolls. More on it at my blog http://foroobar...od-thing-in-vc/
I don’t think that there “has to be” a tendency to leave negative comments. Like in baseball where batters are expected to be fail 7 out of 10 at bats, if people understand that VC rejection is the most likely outcome, then it becomes a matter of putting a positive spin on that rejection.
I’d like to see these VC firms (especially the ones awash in money) send rejected Bplans links or additional resources – even if it’s just a template response. For any plan that makes it past the dumb checker, they could provide a few suggestions. Hearing something is better than nothing.
I think entrepreneurs would come to appreciate such helpful rejections and reflect their thoughts on sites like the Funded.
http://www.leveragingideas.com
Michael – I totally agree with you. Those who are turned down (the majority) will become “bashers” and the voices of the successful few will be drowned out.
I disagree that the turned-down guys will automatically become bashers.
I’ve been turned down a lot and wouldn’t say bad about any of them. On the other hand, there are a bunch of VCs that I’ve actually worked directly with who are plain idiots.
Rather I see the inverse problem. By being public with your identity, the reviews are going to be uselessly positive.
Even when you’ve had a bad experience with a firm or individual, to publicly call them out on it is really harsh. And burns bridges. In private, I’ll tell you the guys who I wouldn’t ever do business with in the future. But I could never bring myself to plaster a negative review for ever over the web.
I have some funny stories too.
This site completely fails the trust models that make Silicon Valley work. It presumes that there is an antagonistic relationship between entrepreneurs — that I would prefer to share information laterally with other entrepreneurs over sharing vertically with a VC — when in fact there is a complex interplay between vertical and horizontal information swapping in the Valley, almost all of it based on deep relationships.
Secondly, I don’t know the people who started this company, and I have no interest in entrusting them (and their permanent database, which eventually will get sold or hacked) with my attributable, deepest, darkest (or happiest) thoughts about venture capitalists. On a rotating basis, VCs are my past, present and future bosses — do I really want to dish dirt on them to a service that *I* don’t know and trust?
Clarification: That second sentence should read “It presumes that there is an antagonistic relationship between entrepreneurs and VCs“
If Don Dodge’s recent calculations are correct the VCs are treating their entrepreneur peeps far too well. His little mini-study of investments and buyouts suggested VCs may be losing money on average, which means effectively subsidizing … bad ideas.
I would be quite shocked if someone publicly bashed a VC firm (or an individual investor) using their own person profile/name etc. They’d be shooting themselves in the foot for any potential future projects by labeling themselves as ungrateful, difficult to work with, bitter, etc. No investor would want to give that person millions of dollars. So wouldn’t most of the reviews be (uselessly) positive and butt-kissing in the often desperate hope of the entrepreneur getting money?
in all honesty…
there really should be a lot more transparency regarding the VC process. however, the VC industry will for the most part strongly resist any attempt to really change the way it operates.
a few years ago, a couple of reformed minded individuals attempted to try to get more insight into the various invesments, and investment strategies of a few VCs, by arguing that the VCs had solicited/taken funds from public institutions (colleges). the VCs screamed that this would be a violation of their overall policies. if i recall, the VCs essentially gave the money back.
it would be great to know which VCs have minority partners/associates, which VCs have funded minority/female companies, which VCs have programs to reach out into these less represented areas…
but this is just my $0.02 worth…
peace…
When are we going to see a site that allows VCs to rate entrepreneurs?
Thats the next logical step.
Chandra, they already do. They sign the check or they don’t.
Many VCs are involved (of their own free time) to participate in endless panels, pitch sessions, “gong-shows” and the like where companies can come, pratice pitch, get feedback. Some are very strutured, some are very casual. Entrpreneuers can pay for some very structured ones that work with them to prepare them etc.
Ah finally, a site targeted towards VC’s and entrepreneurs. I think The Funded is just the beginning and we will see many more sites targeted towards this demographic sooner rather then later.
Amy wrote: I would be quite surprised….
This link below takes you to a great story. The CEO/Founder of this company not only publicly bashed his VC’s but also sued and won.
http://webseitz...rsDigitaLawsuit
999 of 1000 bad deals stay below the radar. The VC’s point fingers at the business model for failure. The CEO/Founders point the finger at the VC controlled board saying they have no clue about their business and that market dynamics are changing while the VC approach stays static.
On a personal level we’ve taken VC money from a few groups. All I’ll say is going with a VC who REALLY understands your business is key. Having a fancy Stanford MBA with two years operational experience as employee #76 of a start up is not the key to success
It’s an interesting idea but a lot of posters have already pointed out some obvious flaws. If I read a restaurant review and the restaurant sounds good, assuming I can afford a meal there’s nothing stopping me from going to the restaurant. In this case, if I read a positive review about a VC and want to take my startup to that VC, I may not be able to do it with any chance at success.
Raising VC is a complicated process. BOTH parties are evaluating each other and scrutinizing every detail (or should be). It is just like dating and there are a lot of factors, tangible and intangible, that go into whether or not a startup and VC end up consumating a relationship. I think the rating system for something like VC firms is just too simple to really have any significant usefulness, especially because certain information is likely not going to be shared due to privacy concerns. Due diligence when raising VC goes far beyond what you can get from TheFunded. If you’re looking to raise VC, you can probably make an educated decision about a firm by:
- Looking at their history and track record (when were they formed, by whom, how much money they have under management, big hits, big losses, etc.).
- Checking out the bios of their partners and how diverse their team is. How experienced are they? Do they have entrepreneurs who have actually built successful companies before or do they have a bunch of 20 and 30 something MBAs who spent a few years working at a startup or a consulting firm like McKinsey?
- Evaluating their current portfolio companies and how they’re doing.
- Talking with founders, management and/or employees at current and past portfolio companies. If you are in serious discussions with a VC, that VC should be willing to put you in touch with somebody at one of their portfolio companies who would be willing to answer your questions about what the experience has been like.
- Connecting with or retaining an advisor/consultant who knows the VC world and can give you “insider” information about the firm that you may not be able to get if talking with somebody who doesn’t consider you a trusted associate.
- Looking at which other VC firms they have invested alongside.
- Asking them tough questions (i.e. “Give me an example of a recent investment that failed, why you think it failed and what you would do differently.”)
Could TheFunded be a useful tool? Possibly, if it gets critical mass, but there’s a whole lot more due diligence that every startup should be doing anyway that will paint a much better picture. Taking VC, and who you take it from, is one of the most important decisions a startup can make and it can change the entire path and outcome for the company. That said, it’s always wise to remember that VCs are in business to make money and regardless of how great a relationship you have with a VC, if the business goes south, expect that the VC firm will do what’s in its best interest first. That doesn’t necessarily mean that they’re going to screw you, but it doesn’t necessarily mean they’re going to give you a great deal either. I think TheFunded should be required to post a warning label: “Venture capital may be hazardous to your business and should be used in moderation only when absolutely necessary. This service should be used only by those who have exhausted all other funding options.”
there should be a way to update the descriptive info about the VC firms (and partners) on the site. Some of it is just plain wrong.
John, nice article, I’d not seen that. I know horror stories from many bay area entrepreneurs, but most of them would never post them publicly if they “ever wanted to work in this town again.” It’s interesting that someone did. There was another one TechCrunch mentioned a while back too (he was in the process of getting funding etc.). I’m sure many VCs have horror stories about entrepreneurs too
A better website would be to track every VC’s investment, and gauge real percentages of successful exists, and blow ups—
VC’s will be extinct soon anyway—private equity, bigger angels coming in heavier, and hedge funds coming in with more favorable terms–not the ‘goodfella’ money VC’s have come to enjoy. Corporations are making investments as well–just look at SAP and IBM’s plans for web-based, consumer facing technologies. Institutions who give money to VC’s are finding they can do it on their own as well—see BT’s institutional investment division fro startups….VC’s beat down a startups value and over value their ‘priceless experience’ and advise–
Bottm line, the Top 100 VC’s ddin’t beat the Russell 2000 over the last 3 years—85% of their investments go to crap, and they hope to high heaven the other 15% is a home run—fewer IPO’s make exists difficult—
Time for the Havaad, Cal-Geekly, Stunford, U of Pee MBA’s who can’t get work on Wall Street to find ‘real jobs’—
This site will enter dead pool before Mike can room for it.
The concept is flawed:
– the successful entrepreneurs will not trash VC’s .. even if they had a bad experience.
- The unfunded folks opinion is of little value because 99% of the VC value is AFTER the funding
- Requirements for proving who you are means no one with any credibility will help a useful idea
Total pool of “potential” contributors is less than this blog’s readership.
I’m working on a project that also has this feature of rating vc’s and startups.
the development is contracted by some one in india and the project is slated to be launched on startups.vc later this year.
I think it is a nebulus of a good idea. Will the company tht just got sold out put up a review of their vc’s?
Some responses:
There are dozens of great little funds that get overlooked in the average fundraising process, and there are big funds that get too much credit. Sequoia, for example, started out with a 4.8 rating, dropping to 3.9 based on feedback from entrepreneurs that have dealt with specific partners there (now at 4.1). Sequoia is a well-known and great fund with an excellent track record, but they may not be the easiest to deal with as an entrepreneur.
As a backer of The Funded, I get weekly unsolicited funding interest in my venture-backed business. Who is good? Who is bad? Who should I ignore? Without some research, there is simply no way to know. As the example of Sequoia above shows, sometimes an obvious track record may not be an accurate reflection the day-to-day relationship that I want with my financial partner.
I hope that everyone will review VC’s honestly at every stage to make The Funded a great resource. More than half of the reviews are positive so far, which is a good indication with respect to the selective membership approach. It is NOT designed to be a platform for either evangelization or slander, and obvious incidents will be scrubbed and members banned.
There is no revenue model for The Funded. The site is funded by successful entrepreneurs who want to help others in their shoes, so we will not die or “enter the deadpool.” This I promise, as a funder of The Funded.
All IMHO.
I applied to be a member of the Funded and was accepted.
I think having all this information about vcs aggregated into a site with feedback from those who have walked the same path will be of significant value.
Every industry has its stand-up participants and also those participants whose manner of dealing is not wholly positive. If others are willing to share their experiences with me its more likely that I will have signals about the character of specific firms.
I especially appreciate the founders supporting this venture with the intent of helping others…maybe I can pass on my help to others one day too…
This is useful information. We are looking for a VC.
This site has a lot of outdated information for the listed funds. Not sure where they got their data, but it hurts the credibility.
The data came from various sources, so some of it will definitely be out of date and/or incorrect. Still, the vast majority of data on nearly 3,600 funds is correct. Any Member has the access to and is encouraged to update incorrect data.