What To Make Of The Funded
I got a call from Adeo Ressi yesterday. I hadn't talked to Adeo since he started The Funded so it was nice to hear from him. We talked a bit about The Funded and he was surprised that our firm Union Square Ventures hadn't created a "certified profile" on the The Funded. Honestly I didn't know what one was. Now I do.
I've been watching The Funded since it started and have linked to it a number of times. I have a knee jerk reaction to like anything that makes the venture capital business more transparent. Rate your VC is certainly a step toward transparency.
But I am also troubled by sample bias. Last month, The Funded selected me as the number one VC. Come on. That cannot be true. I am flattered by it to some degree. But it bothers me. I didn't see Mike Moritz on the list. I didn't see any partners from Accel, Benchmark, Kleiner Perkins, Sequoia, Matrix, Greylock, Venrock, etc, etc. What I saw was a list of really terrific VCs, some of whom will be the superstars of VC someday.
I am also troubled by the list of top firms (that's the list on the right). We are on that list. Again, I am flattered. But let's step back and look at that list. There isn't one brand name venture capital firm on that list. There are several that we invest with regularly and that I personally think are great firms, but there isn't a limited partner in the world who would rate these eight firms as the best venture capital firms in the business.
And then let's look at the number of votes that makes up each firm's ranking. The top two firms, Kepha and Mangrove, have 14 and 11 votes respectively. Our firm has 22. Is that enough votes to determine anything? What if I asked my entire portfolio to go vote at The Funded? We'd have 16 votes and they all be super high votes (at least I hope so).
And who exactly is voting and what do they know about these firms? Do any limited partners vote? They would be the best ones to vote on track record.
Do portfolio company CEOs vote? They would be the best ones to talk about operating competence and execution assistance.
From looking at the comments, it seems that quite a few of the people using this site are entrepreneurs looking for money. It's good to hear from them. If we are doing a bad job responding to opportunities that come in, if we are being obnoxious (as someone recently called me), then we need to hear that.
But if The Funded is going to be a resource we can rely on, it needs to have a much bigger sample size, it needs to be fairly balanced, and it needs to have some relationship to what we all know to be the truth. I have this gut instinct that it isn't there yet.
So it begs the question, does The Funded have any traffic? Here's an Alexa chart comparing The Funded to this blog.
I am very proud of this blog and work on it to make it the best it can be. But the truth is that it only has about 100,000 monthly uniques and about 150,000 page views per month. According to Alexa, The Funded has a third to half of that. And we have no idea how many of those monthly uniques take the time to vote, but using standard ratios, it's certainly less than 10% of them and probably close to 1% of them.
So what to make of The Funded? Well its a good idea to bring some transparency to the VC business. But I am not sure The Funded is bringing transparency just yet. It's bringing opinion but that opinion may not be a valid opinion. Yahoo stock message boards bring opinion to the world of stock investing. But does anyone rely on them? I sure hope not. The Funded is way better than Yahoo stock message boards, but it suffers from some of the same problems.
Here's what Adeo needs to do to fix them
1) Have two tiers of voters. Certified and regular. Certified voters are people with real knowledge of the venture capital business. Included in that group would be long time limited partners in the venture capital business, entrepreneurs who have started three or more companies, all of which have been venture backed, and VC's themselves. Get the certified voters to vote actively and regularly and weight their votes higher than regular voters.
2) Categorize the commenters. If someone has been funded by XYZ Ventures and they slam them, that's more meaningful than someone slamming XYZ Ventures because they didn't like the way they behaved in a pitch meeting. Make it easy for an entrepreneur to filter the comments in any way they want to.
3) Get a lot more traffic and a lot more comments and a lot more votes. I think a firm should have to have at least 100 votes, with a significant number of them coming from portfolio company CEOs and limited partners, to be able to be on the list. The Funded needs to work hard to get more people who actually know something about the venture business to participate on the site.
I hope The Funded can become a reliable resource for entrepreneurs. Last week, one of our portfolio companies who is going out for a second round of funding, sent me an email about one of the VC firms he is talking to. He said, "they have a strong rating on The Funded". I replied, "so what". I hope that someday soon, I can say something different.