This and That

The Funded - Do I care?

There is a new web site for our micro community, The Funded - the Venture Fund rating site for entrepreneurs. Estimating the size of the community  could be a McKinsey interview question. I will try to do the math but undoubtedly it would be imperfect:

I estimate a constituency of ~350,000 people at most - not bad

10,000 Card carrying venture guys (a small portion of the overall number) 1,000 active venture firms in our space over a period of 10 years with varying stage focuses 10 people per firm (includes everyone that has contact with potential founders, partners, associates, venture partners, EIRs) 300,000 entrepreneurs 15 companies per fund
4 funds per venture firm (10 years, 2+ years investing cycle) 60,000 companies
4 venture firms on average per company => 25% overlap ratio
15,000 unique companies (I should be able to find this number from venture source)
20 people that is or will become an entrepreneur at each company

40,000 Fudge Factor (people I did not account for - just because)

Here is the Alexa comparison for 3 venture related sites. Given my back of the envelope numbers (although not a very educated guess) and the traffic chart in Alexa (not known for its reliability), I would be very surprised if The Funded has currently more than 20,000 registered users.

So do I care? Of course I do, I like to check up on all the public reviews of our fund and all other funds and people I know. I love the ballot stuffing (which I suspect is the most traffic this site gets, I am guilty of it too), the genuine positive comments and the pissed off entrepreneurs. It is all good fun.

We see over a thousand companies every a year but invest in only about 10. There is really no clear reason why we say yes or no to a qualified investment. Most of the time a number of deals we pass, get investments from other very respectable funds. Sometimes we fund companies that a lot of other investors have said no to.

The reasons we usually invest are (1) chemistry (we may have worked with the team in the past and like them), (2) conviction (we really like the market the company is going after), (3) timing (as an investor we are ready to take on another project) but most of the time a combination of these 3 and other factors.

We are not always very graceful at saying no and we always have an opinion. If I did not foolishly think I knew everything and would be right most of the time, I could not be in this business. It is hard to be often wrong - historically only 1 or 2 in 10 companies provide meaningful returns - and live with it. If everybody were to like me, I’d be a rare human being and I suspect there would be something very wrong with me.

So the advice I’d give to an entrepreneur is as follows:

(1) if the investor / syndicate is the only source of capital you could find, check out The Funded after you get the money in the bank. You have dealt with much worse before, you just went through fund raising! You can deal with your new investor(s).

(2) if you do have a choice, do what we do - ask for personal references and track record. Call around as many founders/CEO’s you can that have worked with the particular investor you are considering. Make up your own mind. We can not escape our past!

Good luck…  

Tags: venture, technology, thefunded, spark

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