Posted by The Founding Member on 2007-09-17
In May, 2007, TheFunded.com launched an area for CEO's to post "Open Letters" to the venture community, telling venture capitalists what they feel needs to change about the fundraising process. Four months later, hundred of CEO's have voted on the letters, and there are five lessons for VC's from the Members of TheFunded.com:
(1) It's OK to say "No."
There are hundreds of posts by frustrated CEO's who have been strung along by venture firms unwilling to say "yes" and equally unwilling to "no." Meanwhile, every post where an entrepreneur gets a quick "no" tends to be positive. This should give the venture community a clear message: end the infamous "Soft Maybe" once and for all. As one CEO commented, tell the company what you don't like or what needs to change, rather than playing an elongated game of wait and see.
(2) My materials are confidential, please!
The title says it all. Many frustrated CEO's from around the world are upset by personal experiences where they either receive plans from competitors or have their plans shared by venture capitalists. Some are calling for NDA's to be signed before sensitive diligence is distributed to venture capitalists. Others are looking to "out" funds who engage in this practice on TheFunded.com, and a number of funds have already been identified. CEO Members are concerned about being "black balled" for outing the funds. TheFunded.com is considering writing a pledge for venture capitalists to sign that they will not engage in this practice.
(3) Tell me something, anything!
One of the most common complaints across TheFunded.com is the long time between pitch and follow-up. Seasoned entrepreneurs know that a financing takes months to close, but getting an email or a call to follow-up on a pitch meeting should not take months or even weeks. As one Member mentions, a venture capitalist should just write: "We didn't forget about you. We're still discussing your venture." If it's going to take a couple weeks for you to get back to entrepreneur, tell them.
(4) A little manners goes a long way...
There are hundreds of posts about the poor treatment of entrepreneurs in the pitching process, and it's time to change that. Imagine being on an airplane to meet a fund later that day, and they cancel the meeting and reject your deal in a two line email while you are in the air. Imagine being handed off to a junior associate, going through a detailed pitch, and then the partners that you were supposed to meet appear in full golf gear and ask you start again from scratch. The stories of poor treatment and lack of manners are too frequent.
(5) I am not a source of free research!
Numerous of posts complain that CEO's receive unsolicited calls by associates at venture funds expressing "interest" in their companies and wanting to learn more about the business. In many cases, the CEO's realize that the fund is considering an investment in a competitor. In other cases, funds are doing research on a market where they either have investments or are considering investments. None of these reported calls lead to an investment, and the Members agree that this practice needs to stop. If you need to do research, tell the CEO up-front and let them decide if they want to give you information. The false pretenses need to end.
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. Enjoy!