The dirty little secrets about VCs, at TheFunded

March 14, 2007 | Matt Marshall | Comments | |

funded.bmpTheFunded is a Web site that rates venture capitalists, giving entrepreneurs more information about whether or not to take money from a particular VC

This is a very useful service to have, because the venture process is still secretive, and there is little public and objective review information about venture capital firms and their partners.

TheFunded, which we first saw mentioned on Techcrunch, lets its “members” rate a venture firm (using a scale of 0 to 5) on each of the following criteria: its track record, operating competence, pitching efficiency, favorable deal terms, and execution assistance.

Notably, you have to become member to submit ratings and leave comments, and you can’t be a member if you are partner or an agent of a firm. Also, you can only become a member if you are invited by another member or somehow convince TheFunded that you should be a member.

It is early days: It only has 23 reviews by 45 members, meaning reviews are highly subjective because each firm will only have few people passing judgment. Another, related drawback is that an entrepreneur’s experience with a venture firm is highly subjective, precisely because the entrepreneur either had a good outcome or a bad outcome while pitching the company. If an entrepreneur is rejected by a firm, he has great incentive to write in a bad review, particularly if his identity is shielded. TheFunded could try to find a way of disclosing whether the entrepreneur was rejected by the firm — but this is tough because rejection itself is difficult to document (it is usually oral, and so a pissed-off entrepreneur would have the incentive to say he wasn’t rejected).

sequoiafunded.bmpSignificantly, TheFunded was started by an entrepreneur who says he was really “burned” by a VC firm.

Further, if someone has not gone through the pitching process with a firm, they will not know enough, which discounts them too.

While registering, you have to disclose what company you are with, and submit a bio page. These are good steps, because this acts as a filter to avoid flaming criticism without justification (presumably, TheFunded can step in and remove a useless, spiteful comment providing otherwise little information).

TheFunded has a profile page for each firm (see Sequoia’s here, for example), listing their ratings, key information about the firm such as size of its fund, partner names, and even contact information for these partners (again, you have to be a member to get this information). The site has 16,559 contacts from 3,529 firms.

If you’re not a member, you can see only the first few lines of the comments. To see the full comments, you need to become a member.

fundedscreenshot.bmp

We don’t know who is behind this, but we’re interested in finding out.

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Matt Marshall is editor and CEO of VentureBeat. Follow him on Twitter at @mmarshall, and follow VentureBeat on Twitter at @venturebeat.

  • Hey Matt- My advice to entrepreneurs is to always to pick the individual partner, not the firm that you want to work with. Rating firms is a bit silly in my mind. I was always told in college to pick classes based on the individual professor, and the same logic holds when working with investors. Chemistry is critical because the investor and the entrepreneur are going to go through lots of ups and downs together. Also, a given investor may be swamped with other board commitments and not add a ton of value to a new company. Also, a given investor may or may not have relevant domain expertise which will impact his/her ability to add value through business development introductions and key contacts. A fancy name brand won't buy you much except perhaps a little buzz for recruiting (and this only in some cases). Mind you, there are lots of terrific investors out there so I'm in no way diminishing "name brand" firms! I just think the premise of choosing a VC partner to join your board based on a monolithic firm rating isn't super helpful and may ultimately confuse the issue rather than provide entreprneurs with the clarity they're seeking. -Mike
  • Actually, I don't think that TheFunded should disqualify feedback from entrepreneurs whose plans were rejected by a venture firm. As venture investors, it's our jobs to consider each opportunity thoughtfully and respectfully. We don't always do that well, but when we do, the entrepreneurs whose proposals we decline usually come away from the interaction with some thoughtful feedback, and leads of various kinds.
  • Since there is no anonymity, most of the comments will be quite positive, not negative. Burning bridges with VCs in a public forum is tantamount to professional suicide for anyone in the tech sector.

    However, this isn't necessary a bad thing. It might be about reading between the lines. There are also other subtleties that entrepreneurs can pick up that might lead them in one direction versus another.

    What I'd love to see, even in a totally positive way, are comments about which markets a VC truly understands. This would be useful in all sorts of ways, even for the Fourth Estate.
  • David,
    I'm not suggesting disqualification. I'm suggesting that the fact be disclosed. Rejection by a VC is always going to color an entrepreneur's impression of the VC, unless the entrepreneur is unusually even-keeled and large-minded.
  • There are actually three problems that The Funded tries to solve: (1) what are insights to target funds that you want to pitch for a brand new start-up, (2) what is the real story behind funds that are approaching you as an established and successful start-up, and (3) what can you really expect from a fund when the deal is actually done. Even a seasoned entrepreneur does not have all of the facts, often times until it is too late... IMHO.
  • Our company has done quite a bit of research into use of review/rating/recommendation systems as they relate to B2B publishing. While it is unquestionably true that these "3R" systems tend to attract those with extreme opinions, at the same time there is growing evidence that where there is smoke, there is generally fire.

    Making rude comments about VC's who wouldn't fund your dream has clear therapeutic value to the entrepreneur, but I think there is also real value to VC's smart enough to use such commentary as a business diagnostic. I've been in the room at a number of these pitch sessions over the years on both sides of the table, and continue to find it shocking the number of VC's who are unwilling or unable to stay focused for even 30 minutes at a stretch, fumbling with BlackBerry's, late for their own meetings and often disappearing mid-meeting for extended periods of time, usually with no explanation when and if they return. Forget the lack of professionalism; it's also shockingly bad manners that leave a lasting impression ... yes VC's should consider the negative brand equity they create as well, and here's a feedback loop, albeit a sometimes harsh one.
  • TheFunded is an interesting site, and reminds me of the more general site SoWeSay.com. While TheFunded is focused on only venture capital firms, SoWeSay lets users create collaborative biographies (they call them Sayographies) about anyone.

    That site seems to directly address Matt's original point of "pick a person, not a fund". Also, it lets people make Sayographies about anyone, not just VCs.

    That said, I definitely think TheFunded is an interesting concept. VCs are notoriously clubby and old-boy-network-ish. I am not saying that's a fair assessment, just that it is a common perception. Sites like TheFunded and SoWeSay should help the community shed some more light into the darker corners of tight-knit groups like VCs.
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