Fund: Sierra Ventures
Posted by jagrmeister721 on 2008-04-18
First, let me say that my earlier post- I was coaxed by Sierra to write a positive review for them on this site. I regret doing so, and later realized this was against the site's policy. Now that I have gone through the full process with Sierra, let me share my experience and in particular with a partner by the name of Jeff Loomans.
Our company had a promising consumer Internet product and received two offers for investment for a Series A financing- one from another venture firm that has about $2B under management and one from Sierra. The interested partner of the other firm was the Managing Director, and had two decades of VC experience. In contrast, Jeff was one of two junior Partners at Sierra, while the company has six Managing Directors. In other words, Jeff is low on the totem pole, and a new partner. We made what turned out to be a fatal decision by deciding to go with Loomans- he proved incapable of giving sensible advice, was a constant distraction to our operational plan, was too junior to help us close the second round of financing, and ultimately proved to be fundamentally dishonest and worked against our interests.
My background is that I have been involved with start-ups for over ten years, and have raised money from angels as well as venture capital. Never have I had a worse experience than working with Jeff. Let me explain why.
The most egregious aspect of working with Jeff/Sierra was simply our inability to trust them. Once we took Sierra' financing, I worked with Jeff to draw up a Milestones plan- in it, there are five metrics that had to do with the site's performance and audience. We spent a few weeks drafting this and turned into a formal document from Sierra to our company- that if we were to deliver on these metrics, Sierra would participate in the Series B. For the next year, we operated with these goals in mind, and without a doubt, delivered on every one of them. I would be glad to post this document online- there is no way one could read this and not recognize that we had reached these objectives, they are all measurable. So after a year of recruiting the right team, drawing up plans, delivering on objectives, and spending the Series A capital to get this far and getting Jeff's buy-off on EACH one of these milestones, what was the response"" Loomans' response to this was to manufacture NEW metrics that were not part of the document upon and claim we didn't "measure up" to these fabricated metrics. It was surreal. I have never dealt with such intellectual dishonesty. We could not believe it, but we had been strung out so long, that we didn't have enough in reserve to recover.
Besides giving us a metrics plan, swearing by it, and then disowning it at the last moment, Loomans repeatedly distracted the operational team by making imperious demands at board meetings, and between meetings, often adding "you're not going to get funded" if you don't do such and such. These were always unrelated to our Milestones plan. And it would change 180 degrees every time we spoke. In one case, we built a feature to handle a certain kind of customer request (I don't want to get into details of our solution or our company) in part because Jeff believe it was important that we do so, since it was a common request. Then, between Board Meetings, because Jeff hears some negative word from a single venture capitalist, he demands we completely re-write the feature, in defiance of all common sense and user testing, and even claims that he will write the code himself, supposedly to show off his tech credentials, I don't know.
We had counted on Sierra's second round of financing. We had run the company for the last year based on a mutually agreed upon set of metrics. Loomans waited till the very last moment to pull the rug from under our feet. Additionally, Jeff signed an agreement with me that would have the company issuing a loan to cover a cost related to acquiring common shares. At the last minute, he reneged on this deal. I couldn't believe it; but it seemed, he could care less. We got this sense that he didn't put a lot of stock in honoring his word. Further, as we scrambled to deal with Jeff's reneging on the second round of financing, Loomans actively worked to undercut our efforts to shore up confidence with a bank that we had taken a loan for. Behind our back, he told the bank that he didn't have confidence in our exit plan. Nevermind, he never tried to work with us constructively on such a plan. And this despite the fact that we were trying to salvage the value in the company, both for ourselves and Sierra. He later explained that because we didn't agree to his every demand on how to dispose of the assets, that he felt justified doing so.
The guy is fundamentally callous. We were wary of taking his investment since our first interaction with him; he was on a panel with other VCs and was constantly interrupting them, and otherwise being rude. As we tried to turn things around this spring, he rarely answered our call or responded to our email, except to obstruct any productive efforts we tried to make to salvage the value in the IP of what we had developed. His way of being "helpful" was to not respond to a suggestion we made to sell the technology, and then after we had put two weeks into making the deal happen (and not hearing a word from him), he threatened to legally block the deal.
Dealing with Jeff Loomans, his dishonesty and malicious behavior for a year and a half has been a headache. In some ways, I am glad to part ways because I have never dealt with someone who seemed to relish petty power-plays and lying on a systematic basis as much as he obviously did. I would NEVER do a deal with this individual again; I can't speak for all of Sierra's partners- Mark Fernandes and David Schwab- seem like decent guys, but I can't say since I didn't work with them directly. I take no pleasure in writing this post-mortem. Every entrepreneur has dreams of what they want to accomplish, and all of us make mistakes. Every venture is a learning experience, and some decisions I would make differently. We learned the hard way that choosing the wrong venture partner can be suicide -- its something that you can't put enough time into, reference-checking, and making sure you're getting into the right relationship. Be forewarned.PRIVATE: Members Only (183 Characters)