3.0
3.0 
2.7 
2.7 
3.0 Brand Means Little In Vc
TheFunded.com Open Letter
Posted by Anonymous on 2008-04-29
Over the last few months, a number of venture firms have failed, others are fading away, still others are "diversifying," funds are changing names, and partners are jumping around or retiring (IDG is now Flybridge, Pequot is FirstMark, Howard Hartenbaum is with August Capital, and the changes keep rolling in). Meanwhile, take a look at the Series A or Series B terms posted, and valuations are all over the map (Series A at $13 MM, $7.0, $6.8, $6.3, $5.0, and $1.2 pre-money).
So, here is a hypothetical that seems to be happening more and more to my fellow CEOs. You do all of this work to close a "world-class" branded fund, and the partner leaves right after the funds gets a new name… What am I left with? Money? Terms? Unknown Board Members? A disinterested investor?
Why in the world would I accept lesser terms to work with either a hot shot venture capitalist with limited job security or a well-known fund that my end up doing private equity? How much weight does the brand really carry? Yes, we have all heard the stories about how top funds help with recruiting, but so do great investment terms that allow new recruits to actually make money.
The days where brand means something in venture capital are over. Treat my executive team fairly, cut fair investment terms for the opportunity, and wire the money that I need to grow my business. In exchange, your firm gets limited control and a fair amount of equity. If you want to impress me with your brand, prove to me that your firm can support me in 5 years time and back that statement up with my own redemption rights to purchase your inactive preferred stock when you leave or become inactive.
