[Scroll down for the Q&A - or sit back and enjoy.]
If you are an entrepreneur and unfamiliar with TheFunded.com, shame on you! Visit the site and sign up, you’ll be glad you did, it will give you an insight into one of the most important aspects of growing a company.
TheFunded.com bills itself simply as a Resource for Entrepreneurs, but it’s so much more. In fact:
TheFunded.com is a community of 2,832 technology, life science, security, and sustainability CEO’s. Each CEO Member of TheFunded.com can research, rate, and review over 3,600 funds worldwide and over 16,700 investment professionals. The open nature of the 3,680 reviews posted on the site has attracted a steady readership from venture capitalists, limited partners, and executives worldwide in the six months since its launch.
If you are a venture capitalist, chances are that you are very well familiar with the site: a mesmerizing, jaw-dropping, insightful and no-holds-barred community that gives entrepreneurs a chance to share their experiences in the much dreaded financing process.
At a time when Web 2.0 companies with misspelled URLs and questionable business models are starting to fizzle, TheFunded.com is an example of everything that is great about the Web in general and why the trends and opportunities underlying the so-called 2.0 craze in particular are indeed powerful and oh-so promising.
Of course, critics of TheFunded.com would be quick to point out that the service does eschew all that is wrong with the Web, too: hollow and bitter commentary by flustered entrepreneurs who take solace in the anonymity of the service to inflict a vengeance onto otherwise well-meaning and unassuming investors, who’s reputation has been sullied due to a few bad apples.
Who’s right? Well, like most of the fine questions in life, both sides are, of course.
In fact, TheFunded.com, it should be stated, is not all about exposing bad apples, it’s also to showcase the better ones too, who sometimes don’t get much respect amongst their more rock-star reputation toting peers.
After all, the truth is, for all we know, TheFunded.com could very well be run by a VC who is trying to really get the inside scoop on investors at competing firms, though I don’t really believe that… Inc.com’s Max Chafkin recently tried to unveil the identity of Ted, the operator of the site. The magazine narrowed it down to a few of the usual suspects:
Suspect No. 1: Kevin Rose
Founder of Digg, Pownce, and Revision3
He’s young enough to do something semi- crazy; plus, The Funded feels like a Digg for business.Suspect No. 2: Evan Williams
Founder of Twitter, Odeo, and Blogger
This blogging pioneer once returned funds that his company had raised rather than deal with his VCs.Suspect No. 3: Jason Calacanis
Founder of Mahalo and Weblogs
An über networker prone to public squabbling, he recently raised VC money for his search start-up.Suspect No. 4: Nick Denton
Founder of Gawker Media
The gossip king’s Valley Wag blog has been oddly silent on The Funded. Why is he holding back?
I don’t think it’s any one of those, though I did think Nick Denton was Fake Steve Jobs. I don’t think it’s any one of those guys, mainly because it always turns out to be someone that we don’t expect, and largely, don’t know.
Arguably, the anonymity of the founder of the site adds to the intrigue, much like Fake Steve Jobs’ appeal was guessing who could be behind the site. Of course, given venture capital’s enormous reach, the stakes are much higher than they ever were with Fake Steve. Inc.com relates:
As a successful venture capitalist, Howard Hartenbaum had grown accustomed to some measure of deference from the entrepreneurs who pitched him. So when one particularly brash CEO called him a “nut case” and then said that a meeting with him “made me want to vomit,” Hartenbaum was livid.
Hartenbaum, a partner at Draper Richards in San Francisco and an early backer of the online phone service Skype, stumbled upon those comments, posted by an anonymous entrepreneur, on a website called TheFunded.com. Incensed, Hartenbaum fired off a series of e-mails, threatening litigation and demanding to know who ran the site. He also expressed interest in investing.
If this reaction seems a tad schizophrenic, it reflects the mix of indignation and curiosity that The Funded has sparked in the world of venture-backed companies. The site, which was launched in March, is at once a Zagat guide to VCs and a place for disgruntled entrepreneurs to gather. More than 350 funds have been ranked and reviewed, with the juiciest postings sending BlackBerrys buzzing throughout Silicon Valley. Although the site is ostensibly off-limits to all but the founders of fast-growing companies, they’re not its only readers. “We all have friends who have passwords,” says David Stern, a partner with Clearstone, a venture firm in Santa Monica, California.
Complaining about VCs is a practice nearly as old as venture capital investing itself, of course. But the VC world is small and entrepreneurs have had to keep their complaints under wraps if they hoped to attract future rounds of funding. Now the 1,500 company founders who have signed up for The Funded feel liberated enough to share opinions (most often anonymously) that range from balanced to harsh.
Ted agreed to sit down with us, in a darkened room, our eyes covered, to chat about his background, where he dreamt up the concept and his plans for TheFunded.com
1. What’s your background and are you alone in running the property?
I am a venture funded CEO with 5 start-ups under my belt (maybe 6 with TheFunded.com). I built, designed, and programmed the entire site, and I currently run it alone, reviewing between 25 and 200 CEO applications per day currently. Thankfully, I was wise enough to build a lot of easy-to-use administration tools early on, otherwise I would be completely overwhelmed, which still happens on days where Membership applications exceed 500 CEOs. Unfortunately, the majority of applications get rejected because they are improperly completed.
2. Where did you get the idea and why did you decide to launch TheFunded?
The fundraising process has traditionally been extremely difficult to navigate with little insight into funds that you pitch. Reputation and quality are not heavily correlated, and there is almost no way to do background checks on your investment prospects without cold calling other CEO’s from their portfolio. How many funds reveal their failures for you to do research on? Facing the prospect of raising more capital, I wanted to know the inside story on funds that I would be pitching. I tried to solve the problem of transparency in this oblique market with enlightened self interest in mind.
3. Did you have any bad experiences with VCs?
Yes, of course. I think that bad experiences are par for the course in fundraising. This does not mean that every experience is bad, but I have had my fair share of the bad.
4. Surely there are good and bad apples, but a critic of the site would point out that the likelihood of negative comments is much higher, because someone who is bitter or offended that a VC passed is more likely to write something than someone who has something good to say. Any comments on that statement?
There are 3,000 CEO’s writing comments and feedback on TheFunded.com from all around the world in many different industries. The majority of the reviews, approximately 60%, are both constructive and positive. If you read the site, you will see that the above statement is incorrect. Venture capitalists are not used to criticism, so, in some cases, they are reacting badly to hearing criticism for the first time. This leads to false statements like the one above. Furthermore, even the most negative criticisms on the site have the rationale explained in detail, usually within the Private Member-only areas. I have seen badly phrased reviews, but I have never seen a review that was not justified in one way or another. Remember, we are talking about reviewers comprised mainly of CEO’s, over 80% of which have built at least one previous venture funded business.
5. How often does a VC email in and complain about something that is written?
Not very often, maybe once or twice every couple of weeks.
6. Any qualms or regrets about the fact that some of the statements could seriously hurt a VC’s career?
I see this question differently. TheFunded.com helps venture capitalists improve their performance by providing vital and lacking feedback that, in most cases, they have never heard before. For example, I have never been asked by any financier to evaluate their performance after a pitch meeting or liquidity event. How can you do better if you never ask about your performance?
7. You’re preaching to the choir, I did just pen 10 Mistakes VCs Make. Have you thought of raising VC and building out TheFunded even more?
TheFunded.com was not designed to be a commercial entity, though it has been making revenue, strangely enough. I have no plans or desire to raise venture capital for the site. The site provides a pretty clear roadmap on how to be a great venture capitalist if you read it diligently, and it has been a real education for me. And, no, I have no plans to become a venture capitalist either.
8. All right, what are some site metrics: uniques, pageviews, subscribers and revenue figures?
TheFunded.com is about 7 months old and has been growing quickly with about 45,000 unique visitors per month. The readership is limited to CEO’s, venture capitalists, and investors in venture funds. Keeping this focused readership in mind, TheFunded.com has captured somewhere in the range of 50% of the target audience today, maybe more.
9. What is the plan with TheFunded. In other words, is what you see what you get or are there expansion plans?
The expansion plans are simple: grow distribution and add really cool features that everyone will love.
On the distribution side, TheFunded.com just released an alpha of the Fundalizer. This allows every web site that writes about venture funds to pull up contextual information on a specific fund in a JavaScript pop-up window. I would expect that this will have gradual adoption, but lead to further traffic growth over time. I thought it was a cool idea, and it works great.
In terms of the features, there are three things in the works: advanced fundraising research, individual partner ratings at venture funds, and the “Elevator Pitch.” The last is pretty interesting. Imagine if you could post your brief elevator pitch on TheFunded.com, have thousands of CEO’s help you refine it, and then have these same CEO’s help you get introductions to the most applicable venture funds for the idea. Qualified introductions make a big difference in closing rounds. By keeping it to the level of an “Elevator Pitch,” you have a lot less worries about other CEO’s “borrowing” the idea. As a Member, you get to see Member contributed feedback to posts, and the Member CEO’s have forged a community where they are helping one another. This has been the best positive surprise to date.
10. Seeing all of the comments etc., what advice do you have for VCs to improve their game? For entrepreneurs?
Members have already told VC’s what they want, there are five things:
(1) It’s OK to say “No.”
(2) My materials are confidential, please!
(3) Tell me something, anything!
(4) A little manners goes a long way…
(5) I am not a source of free research!
For more on each point, click here.
11. Don’t forget #6 - VC’s track record, as a whole, is so shoddy that I’d lose the swagger, but I digress… Tell me, what is the biggest misconception about VCs?
Right now, I think entrepreneurs do not appreciate how hard it is to be a VC and how hard most quality VCs are working to keep pace with the changes in the market. This does not excuse some of the bad behavior, but it is often overlooked.
12. Agree, a good VCs adds quite a lot to the business… the challenge is being able to draw those to your company, which takes me to the main question I have: how much of your desire to build and maintain TheFunded is about ego / power trip?
I am anonymous. TheFunded.com is about the Membership and not me, which is why my identity is not important.
13. True, fair enough. Have you had any payoff proposals to make the site disappear?
No. But, for the right eight figure sum in cash, I may accidently hit the delete key. 
14. You just opened a Pandora’s box; I’ve seen some damning reviews, trust me, those eight-figure offers are on the way. Jokes aside, are you worried about libel and / or defamation lawsuits?
Yes. However, TheFunded.com carefully complies with Communications Decency Act (CDA). I do not editorialize on posts, nor delete posts, nor edit posts, which means that TheFunded.com is not liable for what is said by the Membership under the CDA. To elaborate, in the history of the site, I have deleted one legitimate review by an entrepreneur that was an investor in the fund that he reviewed, admitting it in the review. Many Members requested that this post be removed for fairness reasons. I have also deleted duplicate posts, one misquote, and some advice posted about adding features to the site after the features requested have been released.
15. What has been the biggest surprise?
The success of TheFunded.com has been surprising across the board. My focus is to make the site better, more useful, and “cooler.” The best part of the site is the Membership. Once accepted as a Member, everything is COMPLETELY anonymous. No names are logged. No emails are logged. No IP addresses are logged. However, I can say that most CEO’s of note have applied and are Members.
All right, that tap on my shoulder means my time is up. Thanks Ted, your identity is safe with us… you provide a great service to entrepreneurs, and VCs… keep it up.
Related on HipMojo.com:
- 10 Mistakes VCs Make
- Next Wave of Interest from VCs
- Biggest Mistake Entrepreneurs and VCs Make?
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WatchMojo NewsletterThere is a fundamental, philosophical problem with music and technology. It’s just that simple. I don’t think music will be “all that it can be” because the change that is made possible by technology is not being embraced by the record labels. I actually respect that copyright-holders want to remain in control of their own destiny, in particular when you consider that “music labels make no money on touring, radio, or merchandise, which leaves the company particularly exposed to the negative effects of file-sharing”, but it does not help when this is the starting point of negotiations and discussions, via Ars Technica:
Testimony today in Capitol Records, et al v. Jammie Thomas quickly and inadvertently turned to the topic of fair use when Jennifer Pariser, the head of litigation for Sony BMG, was called to the stand to testify. Pariser said that file-sharing is extremely damaging to the music industry and that record labels are particularly affected. In doing so, she advocated a view of copyright that would turn many honest people into thieves.
Pariser noted that music labels make no money on touring, radio, or merchandise, which leaves the company particularly exposed to the negative effects of file-sharing. “It’s my personal belief that Sony BMG is half the size now as it was in 2000,” she said, thanks to piracy. In Pariser’s view, “when people steal, when they take music without compensation, we are harmed.”
Pariser has a very broad definition of “stealing.” When questioned by Richard Gabriel, lead counsel for the record labels, Pariser suggested that what millions of music fans do is actually theft. The dirty deed? Ripping your own CDs or downloading songs you already own.
Gabriel asked if it was wrong for consumers to make copies of music which they have purchased, even just one copy. Pariser replied, “When an individual makes a copy of a song for himself, I suppose we can say he stole a song.” Making “a copy” of a purchased song is just “a nice way of saying ’steals just one copy’,” she said.
Wow. Really? Doesn’t that make the wide majority of music consumers thieves, then? I have not bought a record in years, and hearing that only makes me more likely to never buy one in the future…
More importantly, if that is the baseline for discussion, man, why bother talking about things, don’t bother wasting your breath and remain a criminal! Let me explain what happens when you don’t think closed but in fact open up. Here’s a graph of our daily video streams, since we went viral and allowed users to embed clips anywhere online:
Not bad hey?
