TheFunded.com and Aretha Franklin
There’s a new VC-entrepreneur newsletter that has been getting a lot of attention lately called TheFunded.com. The Wall Street Journal had a profile of it last week and I find more and more entrepreneurs and VCs talking about it.
The concept is quite simple. It’s a bit like what TripAdvisor is to travelers – entrepreneurs go online and report on their impressions of working with this VC or that one and the reviews are broadly posted to the community.Why is this gossip column cum feedback site so popular? With a nod to Aretha Franklin, I think it simply comes down to one word. RESPECT. Entrepreneurs want to be treated with respect. As the holders of the money and, often, power, VCs are often labeled as arrogant know-it-alls – one of the most consistent criticisms you hear in the industry and see from the posts. TheFunded.com provides an open counter-balance, requiring VCs to be on their best behavior, else they are “called to carpet” in a semi-public forum by entrepreneurs. Can anyone say: VC accountability?
Why are VCs often arrogant? Is that what they teach us at VC breeding schools? I think some of it is just the nature of the business. As I mentioned in my post “Dr. Seuss and The Land of No”, VCs have the job of saying “no” hundreds of times for every “yes” that they fund. To be efficient, they are trained to say “no” quickly and not waste time on projects they simply don’t like or don’t believe in. Whether you believe in a project or not is such a subjective standard, that it can always be open for debate and argument. But VCs can’t afford to have debates and arguments about projects they don’t like, they must quickly, unemotionally move on to the next one.
Entrepreneurs, on the other hand, are emotionally attached to their projects and wired to believe that what they are working on is the absolute best thing going on – after all, they chose to work on it at the expense of every other new start-up or job they could have pursued. Thus, it is hard for them to contain their natural enthusiasm over why what they’re doing absolutely deserves to get funded. And nothing is more frustrating for a “walk through walls” entrepreneur than to be dismissed by a VC, no matter how graciously.
Many VCs find it particularly hard to provide the follow-up “no” (should I call? Leave a voice mail? Send an email? How to make it more personalized? But if I spend all day explaining to entrepreneurs why I’m saying “no”, I’ll never have the time to get to “yes”). On the other hand, entrepreneurs take particular offense if the follow-up “no” is curt and impersonal. It’s a bit of a joke on both sides of the fence. “Dear X, thank you for your time, but we are not going to pursue the investment opportunity at this time. Best of luck and keep in touch. When you are worth billions, we will post you on our 'missed deals' website”.
All joking aside, the tension between the two world views of the skeptical VCs and the optimistic entrepreneurs is inevitable. You see this tension playing out in board rooms and pitch meetings every day. To be clear, though, it’s a healthy tension. If it weren’t for the walk-through-walls optimistic entrepreneurs, companies would never get started. And if it weren’t for the cynical, blasé VCs, a lot of precious capital would be inefficiently wasted on tilting at windmills.
The trick, therefore, is for VCs to simply treat entrepreneurs with R-E-S-P-E-C-T. That’s all entrepreneurs are askin’ for. Just because a VC may not like the idea, or even the person hawking the idea, doesn’t mean they shouldn’t treat them with decency and respect. On the flip side, the entrepreneurs should remember that it’s the VCs job to sift through hundreds of opportunities and spend time only on very few. If it’s not a good fit for them, move on. That’s why TheFunded has struck a chord.