Beware of Asshole VCs | Hacker News Reader

Beware of Asshole VCs

sethlevine.com

92 pointsjoshfraser34 comments

Can anyone guess who the VCs were in this case? (Create a throwaway account to answer if you need to.)

I'm just as interested to know who the lawyers were.

Agree, lawyers have the resposability to represent their clients regardless of their own interest, its actually unethical and illegal to do otherwise. VC were just asshole, lawyers committed malpractice.

Considering how little we know of the facts, and that it's a "very well-known Valley firm", it's a bit premature to conclude that the lawyers committed malpractice.

It would be more useful to me to know who they aren't. I know there are bad VCs and bad lawyers; I just care that mine aren't :)

cool that you encourage people to speak up on the internet, not only in private talks

Something that really bothers me about the startup V.C. ecosystem is that I never read things like this from founders. There are lots of blog posts of horror stories about investors, usually from the point of view of other investors' (or people like Steve Blank).

I've heard Fred Wilson say that V.C.'s can't afford to be assholes anymore because it would end up on twitter and their deal flow would dry up overnight. Well... where are they? Where are the scorned founders? Do they not know how to blog? When they get fired unfairly and screwed out of their stock (which does not appear to be that rare) are they banished from the internet? Is there something in their contracts that says they can't talk about being fired or they would have to give up what little scraps of compensation they are left with?

As an outsider, the lack of anything but glowing recommendations of investors from founders makes me think not all is as it seems. Is there an implicit fear of being black listed if you speak up, ending your career as an entrepreneur? Does hackernews, techcrunch, etc all suffer survivorship bias (and not waste a single digital word on the losers)?

Where are they?

They're not unheard of. Check out this classic of the genre from Philip Greenspun:

http://waxy.org/random/arsdigita/

You can find this type of candid commentary here: http://www.thefunded.com/

You hear the horror stories in personal conversations. No one wants to blog it because people are so interconnected. That VC who screwed you is probably still good friends with lots of other people who you don't want to risk alienating. That said, reputations matter. Entrepreneurs talk. The stories get out eventually.

No actionable information in this rant. Why not either skip the name calling and give us a factual account of what happened naming names; or tell us what to look for to spot an asshole VC ahead of time.

People are always too afraid to air dirty laundry in public, because it might get them blackballed -- "you'll never raise money in this town again!", "you'll never get a job at a VC-backed firm", "we'll never do a deal with you again!", etc.

I can only think of one case off the top of my head where all the nasty details were revealed and all the names were named - the mid-2000s lawsuit by the epinions founders against Benchmark and August Capital, for similar 'let's wipe out the common' hijinks.

When the lawsuit became public, there was a ton of talk about how the lawsuit would ruin their careers, and they would never raise money again. But Naval Ravikant, one of the plaintiffs, seems to have done just fine. Mike Speiser, another one of the plaintiffs, also did pretty well for himself. Don't know what happened to the rest, but I'd be willing to bet they're still quite comfortably in startup land.

The consequences of naming names aren't as dire as you think they are. For the love of pete, if someone really shouldn't be funding entrepreneurs, tell us who it is.

My guess: It's not about "never raising a dime in this town again". It's about the bottomless pit of money and pain that is a defamation lawsuit.

I'm guessing this isn't really a message for HN; it's a message for ASSHOLE VC -- "I saw what you did, and you won't be in any of my deals in the future."

Or alternatively, it's a message for founders -- "I'm the kind of guy who doesn't do deals with folks like ASSHOLE VC."

I read it like one of the commenters in the article - "get lawyers that work for you".

As a founder you should question the relationship between the VCs and any counsel you hire.

That was the big lesson I took away too. For many of us who are relatively young, it's valuable to be reminded that often we're surrounded by other players whose relationships go back much further than ours do. I've found that loyalties are often a lot stronger and less obvious than you may think.

The lawyers in this situation had a clearly defined client whom they had an ethical obligation to represent zealously. I don't know any of the particulars, but let's assume their official client was the corporation, and the board, stacked with the VCs, duly voted on this course of action. The lawyers were then just doing their job properly, under this assumption, and serving their actual client, not making a calculated betrayal. The only ones responsible for the VCs' decision are the VCs.

Of course founders could and probably should have their own lawyers advise them in deals with outside investors.

A well known Palo Alto law firm I talked to last year made this point abundantly clear in early discussions re engaging them. They wouldn't represent the founders, they would represent the company. Even in those early talks they mentioned there would sometimes be conflicts of interest where it would be best the founders seek their own legal advice.

That's exactly right, and they're also doing their job right to recommend the founders get their own separate counsel. I have seen some really surprising conflicts of interest arise between founders and investors and even between founders before the corporation exists to become the official client. Everyone wants to be awesome buddies and not think about the chance of not always getting along.

that's what thefunded.com is for

Well, that might be what it's for, but that's not how it works. The Funded doesn't have the data. It's full of random meaningless flattery ("Great firm!") or random complaints ("Partners were fiddling with their blackberries during my pitch.") It has very little useful data and this is an industry where nobody wants to burn what could turn out to be an important bridge.

I must admit that I have not used it for a long time - since just after it launched. I remember there was some decent feedback on there, especially with regard to separating out the better partners from the also-rans (I used some of the advice wrt angel funds). There was also a lot of gossip. The star rating system seemed about right.

Based on what you are saying, it is very different now - which is a shame. It can only be as good as the data entered, and you would hope that entrepreneurs would not be afraid to post criticism, especially since you can remove finer details and remain anonymous.

The trouble is, you can't remain anonymous. You just had a meeting with partner X. During that meeting, he kept getting up to go to the bathroom to do lines of coke. You write, "Met with X. He kept getting up to do coke. Avoid." Guess what? Now he knows who you are.

On the other hand, if the partner has been doing lines of coke during his last few dozen meetings with startups, he's screwed...

Picking a lawyer that only serves start-ups, and not VCs, seems wise. Hacker News favorite Grellas (also my lawyer) does it that way.

It's better when lawyers know both sides of the game well. I would think a lawyer who starts out on the VC side, makes a pile, then goes to work for the startup side would be better.

Always retain your own counsel. Regardless of your equity position or if the business has counsel giving you advice.

If you have the ability to make material discussions ( vote yes or not ) this should be one rule you never break or even slightly bend for that matter.

[EDIT]

Furthermore, if you are under the impression that your employment / involvement with the company is to result in some form of equity compensation spend the $750 for an hour of a solid business / securities attorney's time to confirm this fact. These agreements are getting more complicated by the day.

Wherever money's involved, there will be people willing to screw you. Too bad he didn't out them - it's an unhealthy situation when assholes aren't named and can continue their assholeish ways without any retaliation

Seth and the Foundry guys are so awesome and helpful. I think there is a direct correlation to how accessible and helpful a firm is even if they don't invest and how well their fund is doing. I believe the former gets them the deal flow they need for the latter.

I've never heard anything negative about Foundry or True Ventures. Every big VC, even the best, seems to have someone eith a tale of woe, but not those guys.

You'll likely get a lower valuation from Foundry than you would from valley or NY firms. But they're worth it. Hope to have them invest in one of my companies someday. Those guys are awesome.

The simple way around that - if you still want Foundry - is to get multiple term sheets and play them off each other. VC firms are like the Blue Angels - they'll follow each other into the ground if one of them leads them that way.

Even better: Beware of assholes. They're everywhere, and you can't always detect them.

Eh, to be more specific, it's the amount of shit they carry that is undetectable. ;)

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