There's a bit of a hoo-haa right now about the impact of thefunded.com. See here.
I would claim I am in a pretty unique position to comment on this story. For 5 years I worked with a series of start ups with, amongst others things, the job of raising VC for them (Glasses Direct, Reevoo, Rawflow, Zeus, OmniPerception). I negotiated with numerous VCs and sat in hundreds of pitches. Literally.
I have seen the good the bad and the ugly of VCs. Nowadays, on the other side of the fence I see the good, bad and ugly of entrepreneurs.
Adeo Ressi (CEO of thefunded) claims to have two main aims: To make the funding process easier “entrepreneurs should pitch to 10 firms at once, closing in 2 months, having reasonable economic terms. none are true now” (I think this is factually incorrect). Secondly he aims to get a wider breadth of firms funded.
Lofty ideals indeed. Let’s analyze the two things he’s doing:
1) Giving presentations advising entrepreneurs on how to raise funding
2) Running thefunded.com
Giving useful advice to entrepreneurs is great. Especially if it is sage advice from people who’ve done it before. Even better if its fresh from the current market.
• Lots of what Adeo presents is fundraising 101. It is a useful footnote to the great stuff from the likes of Guy Kawasaki .
• Some of what Adeo presents is good: Stuff like “its OK to walk away from a VC offer you don’t like, run fundraising discussions in parallel not in series, try and get multiple offers” etc.
• Some of what Adeo presents is plain wrong. For example the stuff about VCs deliberately trashing companies they want to invest in, or a rule on only ever pitching to general partners.
• Some of what Adeo presents is dangerous. For example “always go for a 20% option pool” or “ never give two board seats”. All companies are different and this “advice” is woeful.
So my advice to entrepreneurs when listening to Adeo’s current presentation on the conference circuit is to listen with interest, don’t take it as gospel, and get some advice from someone who really knows what they are doing.
This is a vibrant community that aims to help entrepreneurs raise money. That’s a great aim. I also like the way its bringing more transparency & visibility to the VC industry which despite all the efforts from VCs (most notably Saul Klein) remains a tough world to get your head round.
My central problem with thefunded is that it doesn’t actually help entrepreneurs that much. At best it’s something to use after you have made a long list of people to go and talk to. At worst it’s a stack of incredibly subjective views that are plain wrong.
Why isn't much use? Accuracy. The wisdom of crowds needs a crowd. The US VC market isn't massive. By comparison, Europe is small.
I will save the long essay till another day, so here are some bullets:
• Some VCs can be very difficult in meetings. This ranges from mild arrogance through to yawning, falling asleep or being proactively obnoxious. Some VCs need to pull their socks up and thefunded.com helps with this.
• However, some VCs see aggressive questioning as part of their selection criteria. Its not my style but I know some VCs, who have helped their entrepreneurs make a lot of money, who aren’t the easiest of people to deal with.
• Just because a VC is rude in first meeting, doesn't mean they won't add lots of value when on your board. Being a VC requires a range of skill sets: analyzing strategy, negotiating contracts, making intros, running acquisitions, leveraging brand. The funded.com doesn’t give much insight into this.
• One meeting wonders. The problem with thefunded.com is that it gives poor execs who crash after one meeting a disproportionately louder voice than those who have had 2 years of experience. For example, I doubt that the Skype guys have written on the site?
• VCs say “no” more than “yes”. Some people simply don’t like to be told “no”. To quote venturebeat; “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.”
• There’s a theory in VC land that the noisiest entrepreneurs who complain most about investors “not getting it” are only those who didn’t get funded. I wonder if there’s a link there….?
So this post has been inspired by a question from Mike Butcher on twitter musing if thefunded would kill the European VC scene.
My response is that there is not a cat in hell’s chance.
It’s a useful tool in that it gives a bit more visibility to a sometimes impenetrable industry. It’s also nice to see a bit more power with the execs.
But it scares me that entrepreneurs will read the funded .com and either believe it to be truly representative or treat it as proper advice. This is very far away from the wisdom of crowds.
Right. I’m off to try and persuade some investee CEOs to stop focusing on executing the business plan and instead write reviews of VCs on thefunded.com (ahem)