I am a fervent proponent of transparency in the Venture Capital business, even before The Funded (a website that rates Venture Capitalist firms) existed. And I admit that I peruse the site on occasion to see how well my network of VCs stacks up against individual entrepreneurs’ interpretations.
But apart from the publicity prank they pulled for April Fools Day, I am as much against any system (subprime investing) that maltreats entrepreneurs as I am against a system that mistreats VCs. The latter, in my view, is what The Funded represents, and here is why:
1/ Lack of transparency
The premium market model that describes the VC community accurately (supply side) is inverted at The Funded, and only the demand-side of the fundraising equation has an opportunity to vent their opinion. That can never yield to an objective view of venture behavior and economics. Similarly, just the opinions of VCs cannot.
2/ Lack of trust
Who are these entrepreneurs, are they disgruntled copycats of investment waves that have just passed them by? I don’t know, but I do not recommend blindly trusting people’s opinions we don’t know. I would not recommend eating at Zagat rated restaurants for the same reason. Simply put: if the source’s trust cannot be established, the trust of the opinion cannot be established.
3/ Statistically irrelevant
Something in the order of less than 1% of the business plans get funded, and therefore is the representation on The Funded really relevant? It is human nature to emphasize the dismay rather than the success of a fundraising experience (which may only prove to be really successful years later at exit time).
The Funded should be a marketplace as outlined in our marketplace rules and definitions, representing the VC and entrepreneur side with equal opportunity. And since it does not, the site contents are highly questionable and provide an additional distraction, both in terms of false positives and false negatives, to an already in-transparent fundraising process.
