There's No Crying in Venture Fund Raising

VentureBeat alerts us to a developing situation between The Funded - a site that lets entrepreneurs post anonymous reviews of Venture Capital firms - and Hercules Technology - a Silicon Valley venture debt financing firm.

Apparently, an anonymous poster left a pretty aggressive post about Hercules detailing an unpleasant fund raising experience.

In response, Hercules has threatened legal action against The Funded unless they remove the post.

As the founder and CEO of a consumer review site, I find Hercules' behavior thuggish and ignorant.  They're on a fast track towards making enemies of the TechCrunch 50K, which is probably a bad idea if things like deal flow are important to them.  They also appear to be on the wrong side of the law, not to mention history.  You just can't put the social media genie back in the bottle.

But pursuing legal action is their choice, and hopefully they'll learn a bit about the futility of trying to silence unhappy customers in an age when everybody is a publisher.

But that's not what I want to write about.

When I read the excerpt of the entrepreneur's review of Hercules, my immediate reaction is that the post reeks of sour grapes.  Without knowing the details, it would seem that this guy had gotten his hopes up about a round of financing, and when it didn't come through, he lashed out.   I recognize these feelings, as I've been there.

Way back in January of 1999, when my friends and I had first written the business plan for RateItAll, we somehow got a meeting with Allen & Company - the super high end NYC boutique investment firm.   These guys were - and are - heavyweights.

We were in no way prepared for the meeting.  It was our first VC pitch,  and we knew almost nothing about the industry.  We were four MBAs with identical backgrounds, with little entrepreneurial experience, and at the time, no technologists on the team.  We had a bound, 75 page business plan.  We didn't know it, but we didn't have a chance in hell to raise money at that point.

Allen & Company treated us respectfully, and politely declined on the opportunity within a week.  Several months later, we learned that they had backed Pete Blackshaw's PlanetFeedback.com - a similar, but not identical site.  PlanetFeedback would later receive more funding from Flatiron Partners, where Fred Wilson was a managing director.

Because we didn't know any better, we took Allen & Co's decision to fund an indirect competitor as a slap in the face.  I fired off an angry email to the Allen & Company partner who met with us, suggesting that he had passed our business plan to PlanetFeedback.  If The Funded had existed, I would have let Allen & Company have it publicly.  We were green, naive, and really pissed off because we thought that nobody else could have possibly come up with our excellent idea on their own.

The Allen & Company partner was nice enough to take the time to try to explain that he had not passed our business plan on - but he could if he wanted to.  That this was just sort of the way it went in the world of venture capital.  You give your best pitch, no NDAs are signed, and the VC is under no obligation to offer a term sheet, and you are under no obligation to accept one.  If the meeting was arranged by the VC just as a due diligence check on another investment, that's just the way it goes sometimes.

So when I read the post excerpt from the disgruntled entrepreneur on The Funded, I can relate entirely.  Good entrepreneurs tend to take negative feedback on their businesses very personally.  We have chips on our shoulders, and screw you if you don't see the value in what we're doing - you just don't get it. 

I don't know what happened between the entrepreneur and Hercules.  Judging from Hercules' litigious and hamfisted reaction to the post on The Funded, they could very well be clowns.

But I do know this - there's no crying in VC fund raising.  You take your best shot, and if it doesn't work out, you take what feedback you can and move on. 

Comments

[gaic]

Hello,

Interesting article. I heard some similar stories myself.

I try to build an Entrepreneurs Investors community. Our idea is to bring to entrepreneurs advice that will help t hem in the growth process. They can post their needs. Most entrepreneurs are too isolated and just don’t know what to do. They also do not have all the financial resources to ask for advice. We will be honored if you can participate to our community.

I leave you the decision to publish the address of the website (thestreetmarket.com).

Thanks and good work!

[gaic]

Hello,

Interesting article. I heard some similar stories myself.

I try to build an Entrepreneurs Investors community. Our idea is to bring to entrepreneurs advice that will help t hem in the growth process. They can post their needs. Most entrepreneurs are too isolated and just don’t know what to do. They also do not have all the financial resources to ask for advice. We will be honored if you can participate to our community.

I leave you the decision to publish the address of the website (thestreetmarket.com).

Thanks and good work!

[Adrian]

Nice site.

http://getsatisfaction.com is probably representative of http://www.planetfeedback.com evolved.

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