Why I Don’t Call People Out By Name

Yesterday’s post titled The Silliness Of Recapping Seed Rounds generated a robust discussion. It also inspired Joanne Wilson to write a post titled Recapping a round?? which is a description of a different situation and a different company, but generated a similar negative response from Joanne. In her case, the new investor insisted that the cap on the notes (for money that had already been spent) be raised so the seed investors would get less ownership than they’d signed up for, regardless of the investment the new investor is making.

I’ll just let Joanne, who works harder than almost anyone I know, and certainly adds more value to her angel investments than many VCs do, simply speak for herself.

“How do I feel about this? I am furious. I feel like I got hosed. I took a big risk by putting money in early on and now a VC with power behind them comes in and says here is the deal or we won’t let you in to our fold. What should have the investors done? Revolt? What is the point of that? Then we all lose. So I did what I believe in first and foremost and that is supporting the entrepreneur. The one caveat I made with the entrepreneur (which is purely blowing air) is that if this VC doesn’t secure a killer Series A for you then I will personally come out to SF and make this all public and have a showdown. If you are going to screw me and all the investors who came in around me then you better make it something we can all feel good about in the long run because right now I am just holding my nose.”

In my comment thread, and in Joanne’s, a number of folks asked us to call out the various players (especially the investors and the company) by name. I have no interest in doing that and I’ve said so. I’ve gotten a number of private emails asking me about the players. Same response – I’m not interested in calling people out by name.

Someone eventually asked me why and I thought it was worth a response.

I don’t write things like this blog to attack people. I don’t do it because I need to vent when I get upset. My motivation isn’t to create public fights. It’s also not to use this blog as a bully pulpit to negotiate, as someone suggested.

Instead, I do it for the same reason that Jason Mendelson and I wrote around 30 blog posts about the term sheet in 2004 and 2005 and then followed it up with our book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. We started writing stuff like this to demystify the process for entrepreneurs.

I think stories and examples are often the best way for people to learn things, including me. By writing down my thoughts about situations, I process them. I put them out there for anyone who wants to learn from them, explore them, or match them against their own experience. I try to do it in a way that contrasts all the rah rah bullshit that goes around with the resistance, hesitation, or inability for people to talk clearly and directly about the challenging stuff. And it’s especially pertinent as time passes, as things continuously change.

Not everything I write ends up being correct. I miss nuances. I don’t understand all the pieces. I learn by putting my thoughts out there and engaging with people in their reactions to what I write.

As a result, there are many cases like this where there is no value in naming names. The actual participants are just part of the story, but not the central theme. It’s my interpretation of what happened. Whomever else is involved with this situation (the investors and entrepreneurs) can decide whether it matters to them, or not, and act accordingly.

But I’m not a reporter. I’m just trying to teach. And learn. And observe. And hopefully help a few more entrepreneurs as they continue through an endlessly challenging, complex, and stressful journey.

  • Matt Kruza

    Brad appreciate the post, and very fair reasoning. Only disagreement is the power imbalance is so great (between especially big VCs and entrepreneurs) it is nice to feel like “internal corruption” will be on notice that there are consequences more broadly if they try pretty ridiculous stuff. But, I suppose when in 3-10 years I am a household name that will be my put up or shut up time to do so.. until then 🙂

  • Bravo. Beautifully put.

  • Agreed.

  • Quantella Owens

    I am continually amazed by “VCs”, “Silicon Valley” and the whole circus. I suppose that makes me seem stupid and that’s fine, but the numbers which come out of the industry (is: success rates, fail rates, bad deals etcetera) make me question why anyone would gamble in this way in the first place. Then we see VCs who we presume are doing things properly getting scammed yet the circus continues. I agree that naming names is the wrong place to put the emphasis. Instead more VCs who care about their industry, assuming that some still do, should be focusing on educating the general public and their investors. Unfortunately, no one seems interested in owning their part of the situation and building something. It would seem like an association approach would be best. Along time ago, if I am remembering correctly, the SBA had a VC focused site which mainly dealt with education and maintaining a list of VC groups around the US for seed capital purposes. It was shut down and since then there has not been a centrally managed hub for people to learn the correct way to interact without huge fees. Perhaps if more VCs experience unpleasant interactions someone will be motivated to create something useful.

  • Brad – I agree with and respect your decision.

    However I am mindful of :

    “When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle.”

    by Burke

    This leads to the question – What in your opinion is the right forum for entrepreneurs and investors to “associate” for the common good?

    Aside { By the way took your sage advice on exclusivity a month or so back and emerged with a stronger deal – thanks very much ! }

    • I don’t know the answer to this.

      I’ve observed that historical approaches, like thefunded, end up with weird issues.

      I never paid any attention to thefunded and never logged in, since I had been warned strongly that any VC interaction with their account would be frowned upon. So I just stayed away and let it evolved however it would. I know this was the same for my other three partners. Six months or so ago a friend emailed me that we had ended up on the banned list ( http://thefunded.com/funds/banned).

      I took a look and tried to understand why. The suspicious review warning follows: TheFunded.com algorithm or a Member has detected highly suspicious review activity by the following organization(s). In the majority of cases, the organization in question has pressured CEOs to write favorable remarks and contribute favorable ratings. Readers are advised to interpret the reviews with caution. This warning will expire on April 15, 2011.

      I know we’ve never “pressured CEOs to write favorable remarks and contribute favorable ratings” and the warning, which was supposed to expire four years ago, is still in place.

      Ok – whatever. So I emailed the only person I knew who was involved in thefunded (Adeo) a note that said the following:

      “I’m curious if you know what the bad behavior on our part was to get us on this banned list. I checked with my partners and asked if anyone had ever sent out anything about TheFunded to anyone asking for them to do anything here. No one was aware of anything. I don’t know if you are still in charge of this list. If you aren’t and you feel like forwarding this on to whomever is, that’s great. Regardless, I hope you are doing well.”

      I never heard back.

      I then heard, from someone in Founders Institute, that Adeo manually bans certain VCs when ratings get to high. Again – ok – whatever, but that certainly introduces a very severe bias (Adeo’s) if that’s the case, undermining the notion of a community rating system.

      We see this problem EVERYWHERE – not just reputationally with VCs. Some day the computers will really help us, like in Accelerando, to create a real reputation system.

      • Thanks for transparent response.

        I had not heard of theFunded and on the basis of what I just read (and a quick look call it undue diligence) I have really missed nothing !

        Any useful reputational system needs either an entirely transparent methodology, or rigorous data sourcing – It is quite clear that theFunded has neither.

        For the record, when we do get over to the US, if we need funding and despite your *shameful Ban* 😉

        I will trust my own judgement and give you a call !

  • I completely agree. It is not about calling out people by name but bringing things to light with the hope that others will learn from it.

    • Hi @Gotham Gal:disqus – Please see my response to Brad below and question about where the right forum to out bad behaviour is, in his opinion – I would ask you the same.

  • Eric Woods

    Brad, thanks for the follow up post. I admire and respect your rationale for declining to “name names”. That said, it does pose a question: It seems that you & Joanne were dealing with the same VC on different transactions. If this person/firm believes they can act so brazenly, isn’t it the responsibility of respected early stage investors to, at some point, publicly call them on it?

  • conorop

    I’ll admit that I was a bit curious about who the parties involved were, but you are right, it doesn’t affect my learning from the example.

    Only negative reactions can come from calling someone out specifically. Sometimes it is warranted, but most times, it is ineffective. If the parties involved read the post, they know who they are and are more apt to change their behavior.

  • I agree it’s your prerogative, but I must admit reading the post, I did want to associate names (especially the VC – maybe worth watching out for..)

    Stirring the pot rarely ever helps, but you have brought light to an issue and it’s clear what public opinion is on what happened. So in that sense every active entrepreneur following has been duly warned… for which I can say thanks.

  • SS

    Those that share their stories helps others understand theirs.

  • Mark

    Brad, I understand and applaud the high road but as a LP, I sure would like to avoid committing to VCs like this, particularly if its bad behavior has adverse future consequences with respect to deal flow, etc.

    • I am always completely open with any LP of ours, or any LP who calls me, about my opinion and experience in working with other VCs. I’m very direct – both the good and the bad experiences that I’ve had – in these one on one conversations.

      • Mark

        Now I just have to get access to FG… 🙂

        • Well – email me anytime. You might not have access to our funds but happy to go back and forth as a colleague if useful.

  • I wonder if there might be some value to a community like “The Funded” but targeted at Angels and VCs. An anonymous or semi-anonymous place where we can rate each other and exchange feedback. I’d love it in theory but I suspect it would end up as a dumping ground for innuendo, gossip and vitriol.

    • kevrmoore

      There is a brand new app for anonymous enterprise chat intra-company, as well as anonymous conversation w/ like professionals – BetterCompany. It is heavily moderated for productive conversation w/ built-in abuse regulators. However, I love the idea of an angel/seed rating system. Since the crowd has come, the noise to signal ratio is brutal for me as angel, and I imagine it may even be worse for a newbie founder. AL has also transitioned from a collaboration platform for angels and founders to a crowdfunding platform. I totally agree that there are some tantalizing startup opportunities in this space for better transparency and noise reduction.

  • “I think stories and examples are often the best way for people to learn things…” 2nd that. I’ve learned more about startups from your blog over the years than any other resource besides real life experience. I still point every aspiring entrepreneur trying to raise capital to Venture Deals and your and Jason’s series of blog posts. Thank you for being so candid in sharing your journey, and not pretending to be a reporter. Your stories and examples go a long way and make such a difference to the entrepreneurial community.

  • It’s really sad that this happened. Here is my only question though. The note holders didn’t sign anything agreeing to this new valuation I assume, perhaps there was no floor, but an attorney might argue that this was bad faith and that the entrepreneur had and broke a fiduciary duty.. A lawsuit is silly to even discuss because there is nothing to sue over, the company has nothing to take.

    My entire thought process here is a relatively uninformed opinion based on a few blog posts but…

    If this startup dies or goes zombie, then really the emotional hurt is the main result as well as the burned bridges and everybody loses the money they would have lost if this VC hadn’t come in at all.

    HOWEVER…. If this startup becomes a big company, I have a hard time believing that all of the note holders wouldn’t get together and file suit just to hold up an acquisition or IPO and force the now wildly successful company or acquirer to make them whole and then some. Am I wrong?

    • I signed the financing docs. My primary focus on this is to be supportive of the entrepreneur. I don’t have to like it, or respect it, but if that’s the deal, then I’m going to support it and disengage as gracefully as I can.

  • I think back to when you asked me what VCs I had worked with in the past and I didn’t want to name them on this forum. We think similarly on this point.

    My purpose in spending time commenting here is to provide a counterbalance in some sense to your VC view of things with my basically entrepreneur only view of things. I think your attempts to educate entrepreneurs on the process is laudable, for a VC 😉 However, the existence of venture capital in its current form in our economy in general is IMHO something that begs abusive relationships. While I really do think you understand that and I’ve almost come to the point where I think you are really trying not to be that, I still see bits of evidence of it and I’ve called you out on some of it.

    VCs have lots of money to spread around and there are lots and lots of entrepreneurs that want that money. Those with the money are going to need to act with respect and treat entrepreneurs with appropriate interactions. My experience is that that doesn’t happen as it should. I haven’t seen you treat anybody with anything other than respect but his forum reaches lots of other VCs and entrepreneurs and they don’t always do that and they need to.

    • And that’s why I appreciate your comments! And – call me out anytime on anything that seems wrong or inconsistent with my stated values.

      • Rick

        I’m wondering if what happened to you, Brad, is just the start. I hear people say there is lots of investment dollars to be had. I don’t ever see any of that money come my way but I hear about it. In fact, in my infinite optimism, I just looked around to get some money to do a co-working space. But didn’t find any.
        .
        But if money is easily had by others that would mean they don’t care if they piss people off because as you just saw they have ways to get more money when the need it.
        .
        I know VCs talk amongst themselves, you mostly talk about me, but really if you think about it if a tide comes in you can’t stop it. Is this the start of no loyalty to VCs.

  • aledalgrande

    I agree with not wanting to be whiny or to start Internet fights. On another note, it would be useful to know who has nasty behaviors in the community. I guess this still depends on the network you have and it’s still not as transparent as many would like.

  • Brad, you ended with a potentially unintended resonating point that is completely separate from this story. You said “I’m just trying to teach. And learn. And observe.” I believe that you can’t teach without learning, and the best way to learn is to teach/coach/mentor/etc. When someone thanks me for something I helped with, I counter-thank them for the additional experience and what I learned helping them. Teaching/coaching/mentoring has always had a multiple return on investment for me.

  • James Mitchell

    I think you should name the jerks. Do that a few times and a future potential might say to himself, “Hmm, if I do that, some prominent blogger like Brad Feld might call me out, maybe I shouldn’t do that.”

  • As this has happened to our fund and partners in a different deal I cant wait to name names…. you are a bigger man than me !

  • “Not everything I write ends up being correct. I miss nuances. I don’t understand all the pieces. I learn by putting my thoughts out there and engaging with people in their reactions to what I write.”
    This is how I like to approach writing as well 🙂

  • David Fox

    If omitting the names enables me to gain more of the useful insight you provide then I’m fine with that. I agree, naming names requires (well…at least to my way of thinking/values system) a significantly higher level of background research and multi-party confirmation. And still even full time journalists can get it wrong. More great posts, fewer “celebrity” takedowns. I’m fine with that…I have many other places to go when I want poorly fact-checked, sensationalist gossip (or is that “goose-ip”)

  • Joy Kennelly

    I enjoy reading what you write Brad because I learn something every time. I’m a blogger too and realize I often will use my blog to vent, but also educate people because I feel there’s issues people aren’t aware are happening that if they knew, then they might appreciate knowing about. I agree about not naming names because it could make you liable in this day and age. However, there are ways to mention things without directly mentioning things to allow people to be warned about doing business with certain entities. I like how honest and frank Joanne is and think I might enjoy speaking to her because I’m pretty frank myself.:) Happy Friday!

  • I haven’t named names either–it’s not helpful to anyone. But there comes a point when investors have to take action, and the legal avenues are intrinsically public.

  • p-air

    I’m super late to this party, so understand if this comment gets missed. My concern with the whole story is that like everything, there’s more than one side. Brad, you’ve written eloquently about the issue from your perspective, and knowing you and having read so much of what you write, you’ve made a clear case for the inappropriateness off the move by the new investor. But if I start with the premise that investors aren’t inherently trying to be assholes (some just end up in the asshole zone ;), then what I’m wondering is whether they had some sort of logic supporting their approach. In other words, the deal just wasn’t worth it to them if they couldn’t extract the terms they needed here, even if this was at the expense of previous investors. Ultimately, there’s nothing really wrong with putting forth a tough deal, its up to the entrepreneur to “do the right thing” for their biz. If they can’t raise money on better terms then it’s up to them to close up shop or take the shitty deal *even* if all previous investors dislike this, feel ripped off, etc. All the previous investors could do something about this by offering up a better round and better terms…and if they can’t, then that’s not the new investor’s fault.

    With that said, naming names doesn’t make a ton of sense, but it would be nice to have a case study approach where we could see the various perspectives on such financings. A deal post mortem of sorts. Not sure how this happens, but the real teaching would come from seeing the multiple perspectives, not by just getting one side of the debate that everyone rallies around like it’s the only one that matters.