VentureBeat

Venture capitalists were already upset by The Funded, a site that lets entrepreneurs rate venture capital firms. Entrepreneurs have left nasty remarks on the the site about firms, which distressed some VCs so much that at least a few have threatened lawsuits to try to muzzle critical remarks.

Now The Funded is going a step further. It’s created numeric ratings of individual partners. This brings much more public scrutiny to the secretive VC world than ever before — and is going to make individual partners performing below their firm’s average sweat profusely.

Take, for example, ratings on the site for Sequoia Capital, which is arguably the most respected venture capital firm in Silicon Valley. Until now, all you could see publicly was its rating of 3.9 for the firm as a whole.

The Funded now lets you see much more, for example, that Sequoia partner Michael Moritz, widely considered one of the most successful partners there — he was a backer of Yahoo and Google — enjoys a rating of 4.4 out of 5 based on seven reviews.

That’s very high, and higher than the firm’s overall rating. Other partners scoring high are Roelof Botha (backer of YouTube and Meebo), who has a rating of 4.1, and Greg McAdoo (Loopt, Rockyou), who has a perfect 5. Keep in mind that The Funded launched the ability for members to rate VC partners last summer, but hadn’t opened the feature up to public viewing until now. So it hasn’t gotten as much attention and there are fewer reviews of individuals than there are for firms. McAdoo’s perfect rating, for example, is based on only two reviews. That compares to 65 reviews submitted for Sequoia as a whole.

Meanwhile, partner Sameer Gandhi doesn’t fair too well. He gets a mere 1.8, based on six reviews. The general public — people who are not members — can see this basic rating. But members get to see even more. For example, they’ll see that at least one reviewer suggests you avoid Gandhi if possible.

The Funded has profiles for 17,000 partners being profiled. They include partners, associates, chief financial officers and other professionals employed by VC firms. The Funded founder Adeo Ressi says there are some people missing, and there’s a chance a partner may still be listed at one firm when he or she has moved to another. But he says the site is about “90 percent” accurate and comprehensive.

Ressi says the partner ratings are the fastest growing part of the site.

He also noted that some venture capitalists may only invest in 15 to 20 firms during their entire career, which means there aren’t a lot of entrepreneurs available to rate them. Indeed, VCs say “no” to a lot more entrepreneurs who request backing than they say “yes” to, which suggests the ratio of critical reviewers to positive reviews will be quite high.

You can be assured that a lot of VCs will be checking their profile pages with dread over the next few days.

[Disclosure: VentureBeat has a business relationship with TheFunded, which includes linking to each other's sites.]

(updated with response from Hercules)
Hercules Technology, a Silicon Valley debt firm, has sent The Funded, a site that lets CEOs comment on their investors, with a “cease and desist” letter.

The letter cites a posting on The Funded that says Hercules is “horrible” and recommends that other CEOs should “avoid it like the plague.” Hercules misrepresented its investment review process and failed to understand basic math, the commenter continued.

Hercules’ letter to The Funded said the comment violates the California Business and Professions Code, that it’s false and defamatory and constitutes trade libel. Hercules said the comment is causing Hercules “severe and irreparable harm.”

The letter is the first C&D received by The Funded since the site started ruffling the feathers of the venture capital community several months ago — when it first opened up its site for CEOs to comment anonymously. See our coverage of the controversial site here.

We’ve pasted below a copy of the Hercules letter, which was forwarded to us by The Funded.

Adeo Ressi, chief executive of The Funded, told VentureBeat he believes the request by Hercules is itself a violation of the Communications Decency Act.

He said he has had no dealings with Hercules and had nothing to do with the comment, and that the Communications Decency Act protects operators of web sites from liability for remarks made by others in comments.

[Update: Hercules' chief executive Manuel Henriquez responded as follows to our request for comment: "Unfortunately we do not comment on pending legal action or on anonymous disparaging or slanderous posting which chose to hide behind anonymous attribution. We find such actions to be careless and site (sic) should fact check the facts to confirm if there is any evidence to support such claims or at a minimum provide attribution for comment postings."]

Ressi said he’d counsel Hercules to follow the reverse strategy: “I would listen to the criticism, respond and encourage the next batch of CEOs that they work with that have a good experience, and have them post about that, rather than attack the innocent operator that provides a forum for CEOs to provide their views.”

Ressi only two weeks ago unveiled his identity at an event in Palo Alto. Ressi said the legal action was inevitable, now that upset investors had a place to mail their complaints to.

Hercules said it will take legal action if the comment isn’t taken down by the tomorrow. Ressi said he isn’t taking it down, so this should get interesting.

Has The Funded crossed the line? Is the single anonymous review about the firm, expressing mainly opinion and few solid facts, but aggressively negative nonetheless, enough to cause “irreparable” harm? We’re not taking sides, but what do you think?

[Disclosure: VentureBeat has a relationship with The Funded, which includes cross-linking to each other’s sites]

Here’s the full offending comment: