Posted by The Founding Member on 2008-03-13
Many members have asked TheFunded.com to develop a template for investment terms, and complaints about both the whole state of venture legal are common throughout the site. TheFunded.com wants to help founders and entrepreneurs organize and advocate for better terms and improvements to corporate structures that support their interests. More valuable common stock, additional founder or CEO role protections, simplified legal processes, and straightforward investment terms are shared goals among the nearly 6,500 Members.
So, here are some things that the Members can do to kick start improving venture legal:
(1) Members, if you support this initiative, AGREE with this post. It would be great to see over 100 Members in support of the initiate. Just login and click the to do so.
(2) Members, please add recommendations about proposed changes to the terms or legal structures in the Feedback to this post. Any specific ideas that you have are helpful.
(3) If you have a passion for improving venture legal, apply to join the venture legal action committee by using the feedback form here with Legal Action Committee in the body.
(4) Lastly, help to improve the state of venture legal by adding a summary of your received term sheet to the new Terms Section, helping both you and other entrepreneurs navigate term sheet negotiation.
Enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2009-03-20
In response to overwhelming Member demand, TheFunded.com has introduced a list of banned investors and added functionality for Members to ban funds. Any banned investor will have their organization and team members removed from all leaderboards on TheFunded.com, though information on the investor will still be available by search with a warning message posted to any readers. Offending investors have already been deleted from this week's top rated VC list.
Investors are added to this 'blacklist' for one of three reasons (1) suspicious review activity, (2) not making new investments, or (3) threatening Members or TheFunded.com with litigation. Funds with suspicious reviews, normally resulting from CEOs being pressured to write positive remarks, will be automatically cleared from the blacklist after 90 to 120 days. Funds marked as not making new investments can be cleared from the list by sending proof of a completed investment in a new portfolio company within the last four weeks. Lastly, any fund threatening legal action will be cleared from the list within 90 to 120 days of the last threat or the lawsuit being dropped.
In these difficult economic times, the stakes are higher for everyone. It is critical to have accurate information available to all parties, from limited partners to entrepreneurs. TheFunded.com asks all 10,786 Members to eliminate investors that do not warrant a place on the leaderboards. Share the information that you have today, and let us really know who is good, who has money, and who has the right intentions. Enjoy!
Members, read the Private section for some simple banning instructions.PRIVATE: Members Only (852 Characters)
Posted by Admin on 2009-07-14
TheFunded.com is testing out a new service to highlight relevant news on the venture capital industry from across the Internet to help entrepreneurs understand the investor mindset.
VC Optimism Growing: Venture capitalists see the crisis abating and innovation continuing in Q2 '09, according to a quarterly study by Mark V. Cannice, Ph.D., at the University of San Francisco.
Amid Anemic VC Resources: Just 25 funds raised capital in Q2 '09, the lowest number since 1996. The $1.7 Billion committed to these funds was the lowest amount since 2003. These data points are courtesy of the NVCA.
-- "The current funding drought exacerbates troubles for the valley's startup economy. Without that money, seed funding to launch new companies will be harder to come by, and existing companies will have more difficulty securing "later-stage" funding to build their businesses." - Mercury News
-- "Many venture capitalists may be waiting until 2010 or beyond to reach out to investors, the association added." - Reuters
-- “There will be firms that will not be able to raise a follow-on fund and our industry is positioned to contract over the next five years through this type of attrition” - SF Business Times
-- "For startups with proven traction there is still money out there. For instance, Pandora just raised a massive $35 million round last week and we tracked $6.4 billion in venture money going into companies last quarter, a 25 percent drop from the year before but still a healthy rate of investment." - TechCrunch
Yet One VC Envisions Change: Dixon Doll tells The Deal that growth will return to venture fundraising: "We are going through a period of contraction right now, but based on my years of experience in the industry, I don't expect this current trend to become a permanent phenomenon. Venture capital has grown with the U.S. economy, and I think it will continue to do so."
With Some IPO Excitement Returning: The Wall Street Journal Blogs reports on bankers being "smitten" with small IPOs, after six venture backed IPOs have occurred in 2009.
But, It's Hard to be an LP: Roger Conrad published a concise overview of what is like to be a limited partner in a venture fund, in case you were wondering.
Do Members appreciate this type of trend reporting? If so, AGREE with this post. Otherwise, DISAGREE. Feedback is welcomed below on the format.PRIVATE: Members Only
Posted by The Founding Member on 2008-08-13
In the quest to build opportunity from a vision, entrepreneurs worldwide face many challenges. They are lied to. Value is stolen, and they are taken advantage of. TheFunded has a set of five guiding principles, developed in response to the difficulties faced by entrepreneurs.
1. TheFunded is and always will be free for entrepreneurs in response to the many people that charge new companies at every available opportunity.
2. TheFunded makes all efforts to be an honest forum despite the need of entrepreneurs to manage information and appearances.
3. TheFunded is vigilant about protecting the anonymity of the Membership as a shield for entrepreneurs to openly discuss challenges.
4. TheFunded does not delete or change the submitted opinions of entrepreneurs. (we may fix a typo, though)
5. TheFunded provides courteous and free assistance to any entrepreneur in need.
Enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2009-08-24
TheFunded Founder Institute has just released a new "Plain Preferred" term sheet with support of the blogosphere.
An established entrepreneur, Chris Dixon, posted about an ideal term sheet for first round funding, which started an blogosphere discussion about terms. Fred Wilson, a partner at Union Square Ventures, came out in support of this simplified term sheet, so TheFunded Founder Institute has engaged WSGR to author the exact template agreed on by various entrepreneurs and investors for anyone to use:
The new "Plain Preferred" term sheet compliments the founder-friendly incorporation documents already developed by the Institute, which are being used by approximately 50 start-ups both within and outside of the Institute. TheFunded.com Terms section submission form lists nearly 100 different terms that are in common use by venture capitalists. Fred Wilson, Chris Dixon, and others in the debate agree to a dramatically simplified term sheet with some significant changes against the norm:
- - The elimination of participation, which has become a common request since the Internet bubble burst. "Participation" means that investors "double dip" by getting both their liquidation preference and their equity allocation.
- A 1x liquidation preference, versus a 1x to 3x range in recent deals reported on TheFunded.com. A "1x liquidation preference" without participation means that investors choose to either (a) get their money back or (b) convert to equity and get the equity value only. This is a downside protection term.
- Single trigger vesting, which allows founders to vest all of their equity and make money in an exit. Many investors require "double trigger vesting," which means that the company needs to sell and the founder needs to be terminated for his or her shares to vest.
New and complex terms, such as "Super Pro Rata" investment rights, are removed from the Plain Preferred template, since they add marginal value to investors while adding significant complexity to deals. Legal costs are rising while venture returns are shrinking. The average Series A investment costs $50,000 in legal fees to close. Meanwhile, the founders themselves are being squeezed with more and more terms that lock up exit value, creating a misalignment of incentives.
The Plain Preferred term sheet aligns the investor and the entrepreneur incentives. This is a rare example of a term sheet where the percentage ownership of participants will correlate closely to returns generated in an exit.
Enjoy!PRIVATE: Members Only
Posted by Admin on 2009-07-15
The relationship between venture capitalists and the United States government has gained a lot of attention over the last couple of days. Here's the roundup:
The Government Complains About Paying VC Fees: In a Churchill Club interview, the California State Controller tells Mike Mortiz of Sequoia Capital that venture capitalists are not deserving of the standard "2 and 20" fee structure. This comment was ignored by Moritz. - Partial Clip (watch at minute 2:00) and Full Interview
Especially Considering VCs Aren't Paying Full Taxes: Venture capital bonuses generated from carried interest is taxed at a capital gains rate of 15%. Should billions in bonuses for managing other people's money be considered ordinary income or not? VCs think that they are special, despite other money managers saying the battle for capital gains treatment “is 90 percent of the way to lost.” - New York Times
And Also Considering VCs Aren't Regulated: The current financial reforms proposed by the Obama Administration require that VCs register with the SEC, despite heavy lobbying otherwise by the NVCA: "We think it is the wrong time to burden U.S. venture investors, and thus capital flow to innovative entrepreneurs, with regulation that is not needed nor desired by investors in VC funds." - Here and Here and FinancialStability.gov
And New State Cash is Being Tapped, Too: Tennessee enters "fund of funds" business with an $84 MM commitment. - Here
Do Members appreciate this type of trend reporting? If so, AGREE with this post. Otherwise, DISAGREE. Feedback is welcomed on the "roundup" format below.PRIVATE: Members Only
Posted by The Founding Member on 2009-09-29
TheFunded has produced founder-friendly versions of every legal document necessary to launch a new startup. These documents were carefully written from scratch to keep founders in control of the companies that they create.
-- Certificate of Incorporation
-- Initial Stockholder Consent
-- Invention Assignment Agreement
-- Restricted Stock Purchase Agreement
-- Indemnification Agreement
-- Initial Board Consent
-- Action by Incorporator
-- Plain Preferred Term Sheet
Please help by sharing these documents with anyone that you know who is launching a startup, and borrow some of the founder protections for your own company from the Certificate of Incorporation.
Enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2007-10-10
TheFunded.com is starting to build a review system for partners in venture funds. TheFunded.com has reviewed all of the advice on how to accomplish partner reviews, and there is a plan below. Before the plan is implemented, please add any additional and final Feedback to this post. There are four parts to the new review system: a quick review, partner specialty, a detailed review, and, as usual, commentary.
(1) Quick Review: This will be a quick button click next to the partner's name, operating similar to the Agree / Disagree feature with four options:
--- Avoid, Thumbs Down, Thumbs Up, Recommend
(2) Partner Specialty: Members will be able to edit a comma separated list of industries and markets that the partners specialize in, allowing for further industry searching.
(3) Detailed Review: For Members that want to provide more information on a partner, they can choose to rate the partner on the traditional 1-5 scale across five categories:
--- Accessible / Responsive: Does the partner respond quickly in good times and in bad"
--- Trustworthy / Fair: Is the partner honest and fair in company dealings and term negotiations"
--- Operational / Helpful: Does the partner proactively and positively contribute to the day-to-day running of the business"
--- Connected: Does the partner have good connections that are leveraged for the company"
--- Seniority: Is the partner senior enough to make and push fund decisions"
(4) Commentary: Like usual, Members will be able to add commentary on the partners.
A lot of Members have requested a partner review system, and it will be the backbone to searching for funds by industry and specialization. Let us know your ideas in the Feedback.
Enjoy!PRIVATE: Members Only
Posted by Adeo Ressi on 2012-12-24
Over the past few years, Founders and investors alike have flocked to convertible debt, loaning billions of dollars per year to insolvent startups. The great irony is that nobody expects this debt to be repaid, and the debt comes with a lot of unwanted consequences.
Does ballooning debts, unsophisticated lenders and no ability to repay sound familiar? How did this happen and what are we going to do about it?
Let's start with some history. After the dotcom crash in 2000, hundreds of venture- funded companies took "bridge loans" to raise capital from existing investors while they fought unfavorable market conditions to raise a new round. These convertible debt bridge loans became fairly common in venture capital. I personally did at least four during this period. Investors, Founders and lawyers became comfortable with loans.
By the middle of 2010, the bridge loan had made a jump from successful venture-funded companies to the most promising new startups, and, by the beginning of 2011, most new startup fundings were being done as loans or convertible debt. The loans caught on because they were fast and cheap, and startups could borrow as much money as they could get investors to commit. Seasoned angel investors started to push back, in some cases demanding equity versus debt, but the inertia kept the debt coming and coming and coming nonetheless.
Now entering Q4 of 2012, there is tens of billions of dollars of debt held by tens of thousand of startups, and many of the debt deals are starting to hit their maturity dates, when the money needs to be repaid. Of course, the startups have no intention of repaying the debt, so most of the notes will be extended. The larger question is: why are we issuing debt in the first place? Frankly, it's marketplace stupidity.
So, I started working on this problem about nine months ago with Yokum Taku of WSGR. We batted around a few ideas about changing debt terms when I saw some deals being done with the involvement of Sequoia Capital called "capital contribution" rounds. These deals are equity investments in the present with the valuation set at a future round, much like convertible debt. That was my "ah ha" moment - Why don't we just take the "debt" out of convertible debt? And so was born "Convertible Equity".
Convertible Equity has all of the benefits of convertible debt. It's fast. It's cheap. It's flexible on the amount raised. Convertible Equity can have a discount, a price cap, forced conversion events and all of the other popular terms of convertible debt. It actually has less terms, since you don't have to think about repayment or an artificial interest rate mandated by the IRS.
Investors in Convertible Equity will likely get a lower capital gains rate by having their investments treated as "qualified small business stock." And, investors don't worry about chasing down insolvent companies to repay their debts by "repossessing the furniture". Instead, they can shoot for the big ideas where more favorable capital gains tax rates really matter.
Companies that take Convertible Equity will not be burdened with debt on their books that they have to renegotiate every 12 to 18 months. They don't have to worry about a lone disgruntled or struggling investor calling in a note and bankrupting the business. They can get a line of credit for equipment, or share their balance sheet with big partners without appearing insolvent.
It's ridiculous that the primary way to "invest" in startups is to straddle them with debt through short-term loans. We are bankrupting the future out of the gate, and it's time that we change this.
Here are free Convertible Equity documents to use in your next angel round.
PRIVATE: Members Only
Posted by The Founding Member on 2008-11-27
I would like to thank all of the 9,902 CEOs that took the time to become Members, all of the Members who contribute content, all of the venture firms that built a profile, all of the venture capitalists who changed their behavior, all of the sponsors that contribute to operations, and the various part-time resources who keep the site running. Together, we have built something to be proud of and changed the course of raising capital for the better.
This is just the beginning. There is a long list of enhancements underway, and releases are expected weekly for the foreseeable future. Enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2008-06-15
Members, I am proud to announce the release of a free service for Members-only, TheFunded Connect. Fundraising companies can now post a pitch and a list of target investors under the new 'connect' tab on TheFunded.com. Then, Members can introduce the fundraising companies they like to the investors they know.
Investors traditionally respond more favorably to referrals from existing portfolio companies, but it's often difficult and time-consuming to organize high quality introductions. TheFunded Connect is designed to properly introduce a company raising capital to as many as 30 investors in less than a month. In initial testing, Sequoia Capital, Draper Fisher Jurvetson, Clearstone Venture Partners, and Altos Ventures all set up meetings within 6 hours of being introduced to a company using the new technology. The process is simple:
1. Fundraising companies post a Pitch on TheFunded Connect.
2. Members comment on the pitch to refine the message.
3. Members recommend appropriate investors for the business.
4. Members introduce the fundraising CEO to investors.
Just 12 months ago, raising money for a start-up was a lot harder than it is today. Thanks to your contributions, TheFunded.com has improved this vital form of financing, but this is only the beginning. With your continued help, we can give the next generation of companies a different and positive experience raising capital.
Thank you, and we hope you take the time to introduce another company to investors under 'connect.' Enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2008-09-03
Moments ago, a Member of TheFunded.com allowed a venture capitalist to use their login credentials and post this Open Letter on TheFunded.com. Such unauthorized access is considered a serious violation of the terms of service, so the Member account in question has been suspended. The specific terms violated are:
- Members agree not to share their username and password with anyone. Any employee, member, partner, director in a venture capital fund or other sources of capital for companies is strictly forbidden under these Terms and Conditions from entering TheFunded.com with a username and password or viewing Member-only "Private" information from the TheFunded, and any violation is considered extremely damaging to TheFunded.com, making said party liable for any damages that face TheFunded.com in any matter under the fullest extent of the law in any applicable jurisdiction.
TheFunded.com takes extensive measures to (1) screen all Membership applications to ensure that every Member is qualified as NOT working in venture capital or as a full-time investor and (2) protect the anonymity of the Membership to ensure that each Member can speak freely. This is a commitment that TheFunded.com makes to the Membership, and the hope is that each Member understands and respects the importance of anonymity and secure access.
Nonetheless, with over 9,000 Members, there have been documented cases where Members have copied and pasted feedback and snippets of Private comments in emails to venture capitalists. There have also been documented cases of Member CEOs becoming EIRs (see the feedback on this post).
In response, TheFunded.com has just introduced the ability for any Member that may be in violation of the terms of service to WITHDRAW their Membership account. After you login as a Member, there is now a WITHDRAW option next to the LOGOUT option. We ask that any Member who has (1) shared their login credentials, (2) works as a full-time investor, or (3) started working or works in venture capital immediately WITHDRAW their Membership account.
Based on the reasonable nature of the post in question, TheFunded.com will introduce functionality to allow venture capitalists and full-time investors to post Discussion items for Membership commentary. Obtaining the login credentials of a portfolio CEO is not the way to accomplish this goal. Any further ideas are welcomed by submitting feedback or by adding feedback to this post below. Thank you, and enjoy!
[UPDATE at 4:00 PM PST] TheFunded.com has introduced functionality that now allows any professional investor with a Certified Profile to post an Open Letter under the "Letters" section and see all replies in the Feedback by the Membership. The original post has been designated as a public sample to see how this new openness works.PRIVATE: Members Only (253 Characters)
Posted by The Founding Member on 2008-06-03
A number of entrepreneurs and Members have asked for a copy of the slides used in a keynote today at TheNextWeb event in Amsterdam. Here is a good synopsis of the talk, and a copy of the slides is posted below.
The purpose of my talk is to give a brief synopsis of views expressed by the Members of ThFunded.com after reading approximately 10,000 posts, extensive discussion, and nearly 100 added term sheets over the last 45 days. Since the 6,500+ CEOs that comprise the Membership can agree or disagree with posts, the job of sorting relevant points to make in a talk is simplified. Ultimately, there is no formula to close a financing, but the goal is to help outline some "rules of the game" and "wisdom of the masses" in a concise format. Enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2007-11-26
TheFunded.com is hard at work. Read the Private section for details of a new service in the making, and your Feedback is welcomed.PRIVATE: Members Only (933 Characters)
Posted by The Founding Member on 2007-05-23
We listened to the Members and adjusted how ratings are displayed. So, in the fund list to the right, dark blue rating numbers are listed first and represent funds with at least 3 separate Members rating the fund. Light blue rating numbers are displayed afterwards, representing less than three Members rating the fund. This change is designed to help visitors and Members discern more qualified ratings from less qualified ratings. Both dark and light blue rating numbers are ordered from highest to lowest. In addition, we have added the count of individual Members that have rated the fund on the fund detail page, where it now says "Rated x.x by y" with y being the number of Members.
The average fund rating displayed is calculated by taking the average of each category and then averaging all five categories where a numerical rating is available. We have chosen not to do the alternative, which would be to take a combined average of all ratings in all categories. We do not feel that this combined average represents the fund properly, as it weights a category where the fund may be strong and have a lot of positive ratings. Also, TheFunded does not display perfect 5.0 ratings in the fund list to the right, though these ratings are displayed when you click on the actual fund. The reason is that every example of a 5.0 rated fund has 1 Member contribution in less than five categories, which we do not feel is representative.
Members, please take the time to both write a review and contribute a numerical rating. Both pieces of information are invaluable to the many entrepreneurs seeking funding through TheFunded. Thank you, and enjoy!PRIVATE: Members Only
Posted by Adeo Ressi on 2012-04-11
At the close of 2011, there was a lot of uncertainty for startups. Stock market fluctuations, underwhelming talent acquisitions ("acqui-hires"), and structural investment problems threatened the prospects for startups.
But what a difference a few weeks can make. The passage of crowdfunding legislation in the US, coupled with the $1 BN acquisition offer of Instragram, signals the beginning of a full startup boom. In preparation for the good times, Venture Capitalists have started to raise new fund money at their pre-crash highs.
Two and a half years ago, Mint.com was acquired for $170 MM, and everyone thought that was an amazing deal following the great recession. Now, a fledgling company with a small team gets acquired for $1 billion.
My best guess is that it is about to get crazy. And, only fools sit on the sidelines.
Many strong and older entrepreneurs that I know are wealthy today because they made intelligent decisions during the dot com bubble of the late 90's. Success was not easy then, and it will not be easy now, either. But, the likelihood of a great outcome is much higher in a boom.
There are a lot of newly minted entrepreneurs that pursue their dream company in a half-hearted way. You may tinker with your idea while toiling at a day job. You may refuse to put in the work required to recruit the best talent. You might be afraid of launching an imperfect product. Or, you may put a mediocre effort into fundraising.
However, if you want to take advantage of a boom cycle and reap the rewards, you need to slide all of your chips on to the table. You need to go all in. And, you need to play smart. Every move that you take and every bet that you make needs to have the best odds of success.
You can't enter the game too late, either. If what I predict happens, very soon you will start to read about more and more crazy deals. When "crazy" becomes the new normal, the opportunity will have already passed you by.
So, let me get really specific. As an entrepreneur, you have a decision to make. Ask yourself, "is this my boom?" If your answer is "yes," then you have a lot of work to do.
Look around you. If everyone that you deal with is not top-notch, from cofounders to vendors, fire them immediately and bring on the best. Now. Right now. Seriously. Now. To really win during a boom, you need to play at the top level, and the winners in every boom always have the best talent. Always.
Is it your time? Is this your boom?
Posted by The Founding Member on 2008-05-23
On April 3rd, 2008, the Founding Member of TheFunded.com gave a half hour talk in Europe on how to "Get Funded for Your Dream." The talk provides specific advice and step-by-step tactics from TheFunded.com to help entrepreneurs efficiently secure financing in four months. A number of new and seasoned entrepreneurs found the talk helpful, so a well-produced video of the talk is embedded below.
Please feel free to share the video with others if you feel that it will be helpful to entrepreneurs. Enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2008-01-16
TheFunded.com has just completed a form for Members to share specific details of the financing term sheets that they receive. Member feedback over the last few months and work by the recently-formed Strategic Committee made the creation of this form possible. Before we launch this "Term Sheet Submission Form" for use in the new "Terms" section, we wanted to let everyone take a look at it and add comments. In just a few more days, Members will be able to share terms that they receive, so please take a moment to contribute feedback now.
The Term Sheet Submission Form is available HERE FOR PREVIEW. Please add any Feedback to this post if you are a Member or post comments through the feedback form if you are not a Member. Thank you, and enjoy!PRIVATE: Members Only
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!
Posted by The Founding Member on 2009-05-06
TheFunded Founder Institute is a new founder-centric incubator that trains new and seasoned entrepreneurs alike to lead the next generation of innovative companies. The unique 4-month program offers the industry's most founder-friendly startup environment, mentorship from renowned CEOs, fundraising opportunities at fair market value, and shared equity upside for all participants. Passionate founders are invited to apply today at http://www.FounderInstitute.com.
We can use your help to spread the word: mention the Institute on your blog, send out a Twitter message, or contact a journalist.
Why is the Institute special?
- The Institute protects founders from exploitive practices with a founder-centric offering,
- Offers founders upside from pooled equity in participating companies,
- Secures heavily discounted products, tools, and services, and
- Attracts fair market investment from top-rated investors.
To celebrate the Institute launch, TheFunded.com has created startup agreements for any company to use, giving founders unprecedented levels of control and protections. The agreements create a new class of common stock for founders, "Class F." The stock offers founders a suite of protective provisions, 2:1 Board votes per Founder versus normal Board Members, and 10:1 share votes as compared to normal common. Participating Class F shares vest monthly without a cliff to act as compensation for founding teams, and "single trigger acceleration" allows one Founder to leave without hurting co-founders. Class F holders get acceleration on change in control and approval rights on new investments, liquidity events, Board size, and dividends.
Class F stock is a major advance in the rights offered to founders. For years, investors have padded preferred rights agreements with increasingly complex terms that severely diminish the rights and protections of common stockholders. TheFunded.com and the Founder Institute are fighting back. The Class F documents are freely available, and every founder is encouraged to use them in their companies:
Form of Incorporation
Form of Stock Purchase Agreement
Posted by The Founding Member on 2008-01-26
TheFunded.com announces the ability for entrepreneurs to post, review, and share terms issues by fundraising sources. The new "Terms" section has been launched for Members-only, available in the top navigation of the site after logging in with the following features:
(1) Members can preview Summary Terms submitted, including pre-money valuation, investment amount, and liquidation preference, on the main page.
(2) Terms can be filtered by Industry, Geography, and Series to help Members find relevant deal comparables quickly.
(3) Members can easily post Terms received after January 1, 2006, until present by filling out a form consisting mainly of drop-down menus. With a real term sheet in hand, the form takes approximately 10 minutes to complete.
(4) A Member must post terms before being able to able to view the terms posted by others in a strict "post to view" policy. The goal is to build a comprehensive database of terms, and knowing about specific terms received by others is most useful when you have your own terms in hand.
(5) No username is requested or displayed. No company name is requested. No investor name is requested. The data is completely anonymous.
We ask all Members to please take 10 minutes and anonymously post terms received over the next few days.
Countless entrepreneurs around the world can be helped by understanding the real economic market for stock in their company. The new Terms section already has a couple submissions in less than 24 hours, and we hope to see more over the next few days. Enjoy!
Posted by The Founding Member on 2008-01-22
TheFunded.com just broke 5,000 Members, another significant growth milestone in the 10 month history of the site. At the beginning of 2008, TheFunded.com analyzed 1,000 Member Applications to determine the following statistics:
MEMBERSHIP APPLICATION STATISTICS:
- 60% are Founders / CEOs
- 25% are Senior Executives (President / CxO)
- 8% are Limited Partners and Advisors
- 5% are Academics / Students
- 2% are Venture Capitalists
Venture Capitalists are not allowed to be Members, yet there are still some applications received. About 1/4 of all Membership Applications are approved after a careful screening process. Over 95% of the approved applications are CEOs, and 78% of the CEOs are, in fact, funded.
CEO MEMBER STATISTICS:
- 22% are not funded or on their first company
- 34% are funded looking for a later stage round
- 32% are experienced in funded companies with multiple previous companies
- 12% are recognizable CEO's that run both funded and well-known companies
In the last two weeks, TheFunded.com has received over 200 Membership Applications per day on average, and there is a backlog of approximately 300 Applications waiting to processed right now. There are also approximately 700 invitations that have not been claimed by approved Members, which arrive by email.
The goals of TheFunded.com are to (1) dramatically simplify the fundraising process and (2) encourage a greater breadth of companies being financed. Welcome, and enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2008-01-14
- Video Preview: Over 70% of the content on TheFunded.com is reserved for Members only. If you are interested in applying for Membership or if you are a new Member, please review the various features at your disposal in this video as well as in the Help section.
We are currently receiving as many as five Membership applications per minute, so it may take up to 48 hours to review your application. New Members, read the Private section for some pointers. Enjoy!PRIVATE: Members Only (1690 Characters)
Posted by The Founding Member on 2007-08-22
TheFunded.com passed 3,000 reviews at a record growth rate this week, marking a major growth milestone. We continue to receive strong support emails from CEO's, many of whom wish the site existed earlier and others who are interested in supporting the service. We want to thank every CEO who joins the service and contributes to the site.
UPDATE: It looks like TheFunded.com is being profiled in Entrepreneur Magazine this month.
TheFunded.com has streamlined Membership application review, which now takes less than 24 hours, and the volume of daily applications remains at an all time high. The site still has a backlog of approximately 70 Certified Profiles submitted by venture funds that will be reviewed and launched the week of August 27th.
It is safe to assume that most start-up CEO's and active venture capitalists are reading TheFunded.com, even if just occasionally. Members, please consider the quality, usefulness, and character of your written reviews, as your content is read widely. For example, does the use of superlatives ("the best") and exclamation points ("the best!!!") convey your message effectively"
Also, consider the accuracy of your numerical reviews. Save the one and the five ratings for funds that really deserve them. If Members rate funds in an objective manner, the rating system becomes incredibly valuable to entrepreneurs and may prove to be an early indicator of a fund's success.
TheFunded.com is changing the venture capital fundraising process. Thank you for your contributions, and Enjoy!PRIVATE: Members Only
Posted by The Founding Member on 2007-07-10
Another set of big milestones was hit today, breaking 1,900 reviews and 1,400 Members. Now is a good time to reflect on the growth. "Johnny 57" and "fundedagain" recently discussed a series of positive reviews appearing to be "shills," referencing the fact that VC's are asking entrepreneurs to rate them on TheFunded.com, which, in the opinion of Johnny 57 "is a form of steering." A few facts should be noted. First, back-to-back groups of reviews on one fund are a common phenomenon, as reviewed funds get promotion on the homepage, which, in turn, leads to more reviews. Second, every Member is carefully screened to be a credible entrepreneur. Third, TheFunded.com checks to ensure that incoming groups of reviews are indeed written by separate Members.
The main problem with the reviews in question is usefulness of the review content. Calling someone "great" does not help your fellow entrepreneur get a term sheet and close a financing. So, we have responded by providing new guidance for the Public and Private reviews, currently seen by Members when posting.
Public Commentary: Use the Public section for insightful general analysis of the pro's and con's of the fund from your direct experience. Example: "The have a solid background in healthcare, but the closing process is long and drawn out. Overall, they are worth pitching to see if they engage."
Private Commentary: Use the Private section to explain your relationship with the fund in any detail that you are comfortable with, to provide specific advice on dealing with the fund in the pitching process, and to highlight any issues of partner competency or terms that are relevant to closing a financing from your experience. Example: "I pitched the fund, got terms, but turned them down for another offer. Show up to meetings early with all the data on hand, as this matters to them. Make sure to identify your lead partner in the first face-to-face meeting. John Doe is the deal guy. Jane Doe is late, so beware."PRIVATE: Members Only (422 Characters)