VentureBeat

David Gong said:

Posters have to reveal their true names and allow others to “digg” their social reputation as well.

AVoice said:

Historically the VCs held the entrepreneurs by their throat. It was the norm that if an entrepreneur fell out with a VC and went public or legal about it their days as an entrepreneur in the Valley were numbered and put in a coffin by the VCs. It remains so today, although the presence of VentureBeat, TheFunded, and PEHub has put some fear into the VCs in how they handle differences and disagreements with entrepreneurs.

Yes, some entrepreneurs might abuse the system provided by TheFunded, VentureBeat, etc. Just as some (many?) VCs call one another about entrepreneurs/deals they don’t like and dissuade (however discreetly, and are you surprised this happens every day in the life of a VC!) their colleagues from working with those entrepreneurs. The former are public, the latter private, and here we are vexed about the former and impotent about the latter.

And about those positive comments about the VCs? Sure, there are good ones around and it’s likely they will get positive comments. Isn’t it more likely that those that are “over the top” about a VC are doing so for self-serving reasons? E.g., they are funded by him/her and expect more funding and can’t afford to remain silent, they are expecting to get funded, etc.

Here’s what would make such comments legit:
a) the entrepreneurs have a track record of success and have worked with different VCs and are willingto step up for the VC under the spotlight.
b) there is no self-serving interest at work.
c) most importantly, the positive comments come from the CEO/founders/executives of companies that failed. Isn’t that the most telling?
d) The positive comments come from CEOs/founders/execs that fell out (preferably in a public way) and over time, the two parties bridged their differences and the former felt the VC behaved in a way noble enough to justify stepping up for the VC.

AVoice said:

Matt, a VC has a working portfolio of companies under his belt and a stable of founders/CEOs/execs he can call on, directly or by implication, to write on his behalf. Obviously the latter have self-serving interests that must not, cannot be disregarded for their silence is most likely to result in a withdrawal of support from the VC.

Doesn’t that taint the positive comments that come from (the current stable of) entrepreneurs about their VCs?

Insist, demand that VCs have entrepreneurs from their investments that had an exit (positive or negative) speak on their behalf. The good ones will have several, the ok ones a few, and the bad ones will have zip. That will separate the wheat from the chaff, which is what you are trying to achieve.

Howard Hartenbaum said:

I think the real issue around TheFunded is that it points out the tension between VCs and entrepreneurs. I don’t feel any chasm separating me from entrepreneurs. I have been one myself and it is a very hard job. But when I was an entrepreneur, I sensed a big separation. Is it because the VCs had something that I needed? Is it because getting rejected is painful?

Giving rejection is painful too, and many VCs don’t do this directly because they don’t want to criticize the entrepreneurs whom they respect for pursuing their dreams.

VCs are service providers, not much different from a lawyer or an accountant, just the service provided is different. I think that most of the chasm is simply because entrepreneurs don’t understand how VCs work, that their job is to constantly meet people and make a determination of yes or no, and frankly, nobody likes to say “no” to anyone. Some people interpret the “no” as a personal attack, when in fact it is simply because the investor didn’t think it was the right fit (aka not the right chemistry).

Does an entrepreneur building enterprise software get upset at HP when HP doesn’t buy his software? No, he wonders, what do I need to do to change their mind, or make sure that when I pitch Dell, I don’t have the same reasons for rejection. Raising venture capital is a sales process and there are prospective buyers and sellers. If a company tries and tries to sell a product and can’t, well maybe the product isn’t a good fit for the market. If an entrepreneur can’t raise money after trying for many months, well maybe the company isn’t a good fit for the market. However, getting rejected along the way is a normal process of finding the right customer, with the right problem, need and willingness to take the risk.

Perhaps it is the way that VCs deliver the “no” message. And commonly, it is not a “no” but rather a vague “maybe” (which actually means “no”). When a young man likes a girl and asks her out, he would appreciate a simple “no, I don’t feel the chemistry from you” rather than, “let me consult with my friends, and if they like you, and if you already have another girl who is asking you out, then I might consider a date.”

The key word here is “chemistry.” Most entrepreneurs think that this is a science, and that if they tick all the boxes, then every VC will want to fund them. That is mostly true, but the hardest box to tick is that you don’t really need the money (i.e. sales/revenue are going great). But we all know that when young companies are looking for venture capital this is rarely the case. So this is an art, just like the art of selling. The best salesmen understand this and feel no chasm between themselves and their prospective customers. They figure out how the process works, and then target appropriate customers and eventually close the sale.

Entrepreneurs should discuss the “selling” process with seasoned sales people before starting the venture capital raising process and I am confident that the process will be much smoother and the chasm will vanish.

AVoice said:

Howard, I agree with you these bitter experiences are usually a result of misaligned expectations. The onus, I feel strongly, is on the VCs (who are expected to be more mature, senior, experienced, etc. than the entrepreneurs) to iron out those wrinkles. Won’t it help a lot if the VCs work on their taking the initiative in setting expectations right at the very outset (and continually thereafter) for the entrepreneurs? E.g., “I like the idea but have the following concerns…and even if we get past them, you must recognize my partners may not buy into them…and here are some things you can do that might help…such as getting someone else ready to work with you…and we will come in with them…”

The entrepeneurs are trying to breathe life into a dream and they will (often) only hear what they want to hear. The job of the VC is not to prolong the dream by continuing to give vague/ambiguous signals and be a partner in a dysfunctional dance but to inject reality into the process. If they can’t do it from the outset how are they going to do it later?

The good ones do it. The successful ones do it. They do it with diplomacy and/or candor. The rest avoid that, dance the dysfunctional dance and end up in the pickle souring things for everybody.

Gal Josefsberg said:

That’s great news. I really dislike these sites which let users rant and rave anonymously and then try to pass it off as useful information. It’s character assassination of the worst sort.

GJ
http://www.60in3.com

David Gong said:

Entrepreneurs ask VCs to bet on their dreams with money and many times take a strong NO as rejection of their passion and dream of getting the world changed. As Howard put it, “chemistry” is something you either feel it or you don’t. So if it does not work out, walk out. VCs might make huge mistakes by not funding ideas. It is still a business decision issue. But by bad mouthing someone because he/she does not want to fund the company and however deliver the message vague, then it becomes a character issue…

AVoice said:

Howard’s VC-as-service-provider analogy, while attractive, is only partially accurate. It’d be a blessing if all VCs saw themselves as service providers and the terms of their relationship, from behavior all the way to the fine print, reflect that attitude. Customers can change their services providers far more easily than they can their VCs. Service providers win by their service, not by wielding ratchet clauses, a history of washing out founders, etc. So please, enough of this “we VCs are service providers, trust us!” BS.

This issue really begs what I think is a more fundamental question: what VCs were consistent in setting expectations all along the way (through the initial courting and all the way through to the exit)? which ones were inconsistent, produced surprises (e.g., saying one day “everything is green light!” and the next day “sorry, we can’t do it!”) or even engaged in outright misrepresentation? It is likely the latter results in sour egos and the former, even if the VC said “No”, was acceptable to the entrepreneurs.

AVoice said:

This (also posted to PEHub where we have a corporate account) is in response to Gal Josefsbergs and others that are upset over anonymous postings.

When the printing press came about the powers that were protested the ability of the riff-raff to print what they can as it might dilute the powers of the entrenched. Yes, there were a few of the riff-raff that did that and continue to rant in ways childish, superficial, etc. but society and civilization progressed overall.

When magazines came about editors initially allowed for a variety of letters to be published in the letters to the editor pages. As corporations took control of the print media those letters came to reflect largely the interests of the media barons.

Interesting how many of those that protest about the anonymous comments are repeating the patterns of the past. Do they realize they are only defending their entrenched positions as opposed to debating the issues? Or is it because they can’t defend the indefensible and want to deprive the hitherto mute, preferring the status quo of the past when the world and technology have moved us past?

As investors we certainly encourage anonymous postings as we otherwise would miss the details behind the workings (and personalities)of those venture partnerships we invest in. The comments and debates we read in these forums helped us and several other firms from throwing good money after bad investments in firms like Crescendo and Worldview. So, here’s one big vote for keeping the comments anonymous.

BEC said:

AVOICE,

Great posts. Well articulated. Bottom line is that VCs are not kept in check. Why they should be different than other service providers for which any consumer can post a comment on a number of websites ? Whey they should be different than politician ? There has to be mechanisms to keep them in check.

There are enough direct or indirect mechanisms to keep entrepeneurs in check. This is a secretive and “inner circle” world of VCs. It needs more transparency..ofcourse, with a balance and fairness. And that needs to be an open platform

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