Having the perspective of an investor, I know 99% of the time, their job is simply to say “No” to entrepreneurs, because, at the end of the day, only a few startups get funded. I also realize there is only so much you can do as an investor to avoid some entrepreneurs from getting offended in the likely case you decline the investment opportunity.
However, some investors manage this process a lot better than others. The VCs who are truely Entrepreneur-Friendly give some constructive feedback, and if they invest, they keep the entrepreneurs’ interests in mind to avoid a heavy dilution, they are productive board members and most importantly every interaction is highly professional.
Other investors are quite the opposite, and in certain cases act in a disrespectful, non-professional manner. To paint a more vivid picture, I can describe a few experiences I witnessed myself, such as investors showing up with flip flops, eating or even sleeping during a pitch. This culture continues to draconian term-sheets, counter-productive board behavior, and more.
I also realise that on the other side of this coin there are VCs who encounter disrespectful and sometimes delusional entrepreneurs; however, these entrepreneurs will likely not get funded anyway.
So why is this happening?
Going back to our main topic, why do funds focus their attention on being Entrepreneur-Friendly or Fund by entrepreneurs, for entrepreneurs and many other similar slogans? Why is this becoming a value worth promoting in the key messaging of the fund? I believe the reason is, that we are witnessing a power shift.
Today, more so than before, there is an abundance of investors and funds, who are fighting for good deal flow. Therefore good and even reasonable entrepreneurs today, can have the luxury of choosing an investor.
Where is this going?
The way I envision this trend continuing, is that the VC indsutry will go the same way as many other industries have evolved – and that is that VCs will also transition to a Review-Based Economy.
We see the same thing happening with restaurants, hotels, software, service providers and more. I believe that in this democratised, review-based economy, VCs who wish to create demand with good entrepreneurs will have to show positive reviews from their portfolio companies as well as from entrepreneurs they encountered along the way.
Introducing The List
I’m taking the lead on this front, by creating THE LIST, an Investor ranking platform which takes into account not only the fund’s activities but also the reviews from entrepreneurs. Choosing the positive path, we will focus on actively promoting funds with good reviews rather than showcasing bad reviews in public. The new platform will help entrepreneurs find relevant, highly-recommended and active investors on a global basis, while also providing investors with a platform on which to showcase their activities and their positive reviews.