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TechCrunch just published an interesting post, "Rating the Venture Capitalists," which rates the top VCs, based not on LP returns, but instead, based on how successful their portfolio companies are in raising the next round of funding. Not a perfect measure, to be sure, but something that adds to the conversation (anything that adds more data/transparency is a good thing).

The piece rates a number of top venture capitalists and angels highly, including the following as their top ten:
  1. Foundation Capital
  2. InterWest Partners
  3. Flybridge Capital
  4. Marc Andreesen
  5. Naval Ravikant
  6. Atlas Venture
  7. Flagship Ventures
  8. Jeff Clavier
  9. Andreesen Horowitz
  10. Foundry Group

My response to the post is generally positive. Any data that brings transparency to evaluating VC performance (from an entrepreneur's perspective, not LP) is a great thing. Too often, the only metrics used to evaluate investors are returns, which is at best loosely correlated with founder-friendliness and at worst orthogonal to it (i.e. if they make their returns "buying low" or getting 40% of your company). A couple of challenges I see with the author's analysis:

(1) Series A/B is not standard b/w VCs. Some VCs are making it a practice to cherry pick earlier Series A deals as a matter of survival/competitive advantage. I.e., betting on the company to "grow into" a $15m Pre, let's say vs. investing at a time other VCs would agree to that valuation (I bet some of your Top 10 VCs above fall in that category.

(2) Series A/B bar is a moving target. Since Series A is fast becoming the new Series B, what you really need to compare is 2 years ago Series A with this year's Seed rounds etc. Obviously not possible/ lots of conflating factors, but something to think about.

(3) Less hyped investors can be better value. My personal learning (from successfully raising a seed round for BrightFunnel) is that just as with candidates, or anything else, finding unheralded jewels-in-the-rough is the way to go. I like value, not overhyped brands. So why not find that super value added newer fund, or that up-and-coming hungry Principal, vs. buying last decade's track record. Sure it's work, but it's probably worth it. So many of the 100k-twitter-follower investors are all fluff, no substance. Or they have substance, but they're scaling their investing by spending very little time with angel/seed investments. In other words, by getting a greater Share of Time from an investor, you are essentially getting more value, but they are almost certainly getting worse returns, because they can place fewer bets. 
But with the best angels, and some VCs, that's ok, because they're acting like quasi-founders: believing in the vision, wanting to create something new, vs. just looking to return more money and raise a bigger fund, and get rich off the management fee. 


10/14/2013 05:12:34

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