Zombie VCs
daniellemorrill.com
daniellemorrill.com
First, many funds don't do Series A's. That is their strategy. At the top of the spreadsheet are several funds that are mid, later, growth and private-equity stage firms (IVP, Warburg). Them not doing Series As has less to do with their Zombie status then them adhering to their strategy.
While there are other issues with the data as highlighted below, this issue of fund strategy is a critical one so wanted to highlight.
Also, picking short timeframes of 3 months or 1 month isn't a great test as funds have 7-10 year lifetimes. A couple of months doesn't make for a trend.
Again, we think there is value in highlighting this data as there tends to only be good news reported but just would caution against errant conclusions.
Notes: I'm one of the co-founders of CB Insights and our firm tracks this data. We actually help LPs (the investors in VC funds) identify VCs doing poorly or who appear to be the walking dead. But it's messy as hell.
More on that here for folks interested - http://www.cbinsights.com/team-blog/investor-analytics-zombi... (warning: part informational and promotional)
In terms of where it comes from: 80% of our data comes via software we've built to parse news, SEC, investor, corporate websites (we crawl about 12k of them daily).
About 20% of our data comes directly from investors. The biggest contingent is angel data which we get via a partnership we have with Silicon Valley Bank and the Angel Capital Association.
As someone running a biotech startup, this is rather relevant to me...
It occurs to me that the cutoff of 6 months since last round may be a bit short for the life science world, where funds tend to make fewer, bigger investments with lower frequency.
It's also interesting to note that a few strategic venture funds are listed (Novartis stuck out at me) and that these guys might not fit the same mod, given that they invest with eye on relevance to the mothership.
With those two caveats in mind, there are also some indicators to suggest that early stage investing in biotech/life-science startups has been slowing down over the last few years. There was a big of a boom prior to this, but it's fairly widely acknowledged that there haven't been good returns for the billions of dollars poured into early-stage biotech companies. There's now a bias toward larger series A's on slightly lower risk startups...
I respect what Danielle is doing and her post have been interesting lately(leads me to wondering what the pivot for referly is going to be) but I definitely would not solely get data from places like Crunch base. They have some competitors out there who curate their data MUCH better but they also happen to charge for access to it.
Thats one thing that bothers me in business, is the "social contract" of avoiding appearing abrasive or aloof, so everyone tells each other white lies to make everyone feel better. I'm not referring specifically to VCs (I have almost no experience with VCs). Contrast that with somebody like PG who has a reputation for being blunt, but also being constructive and generous with his time.
Accountability belongs on both sides of the table is for everyone's benefit, and Danielle is right to call attention to this.
No, it is not healthy, and imo it contributes significantly to the detriment of our mental health.
That happens everywhere in life.
Others have started Angel funds (Ron Conway) and no longer invest personally.
Why not try and come up with a more robust method than pouring over CrunchBase and appending "Na ni na ni boo boo VCs, if this data is wrong, contact me,"
When I make these posts suddenly people start returning my emails requesting data.
It also occurs to me that we have no problem judging and speculating about startups based on nothing more than a TechCrunch post with extremely limited public data. It's funny that it is so much less socially acceptable to do this with investors. Maybe I can change that.
Love it! Keep up the good work, dmor!
I have a list of everyone who has paid their credit card bills in the last several months (the list only covers people who live in my apartment.) You are not on it. Is it okay if I put up a public website calling you a deadbeat? If you don't want to be on it, just send me a copy of your bank statements.
My firm (Neu Venture Capital) is on the list, despite doing a Series A a few months ago, a Series B last month, and three seed deals in the last six months. O'Reilly Alphatech is on there, despite raising a $85 million Fund III six months ago. Quotidian is doing deals, Chris Sacca is doing deals, etc. Crunchbase data is incomplete. Saying people have done something based on it is relatively safe; saying people have not done something based on it is scurrilous.
[edit: the second paragraph is a hyperbolic analogy. I don't have such a list and I wouldn't use it that way if I did. That was my point, that it would be wrong to make that sort of implication based on data you know is incomplete.]
I understand your frustration, startups used to cringe at mentions in the press but have come to understand that the world is interested in how they work, what they do, who they are and whether or not they create value. Investors have had remarkably less written about them and if they are not publicly sharing the fact they are helping founders get Series A deals done I hardly see why I shouldn't point it out, and create an incentive for greater transparency.
I will work to investigate more deeply and create a more useful data set.
Is dmor asking for money, or trying to strong arm anyone into doing anything? No, dmor is just reporting based on the information she has available. That it might be incomplete or inaccurate is worthy of pointing out, but it's a HUGE stretch to invoke an analogy to extortion.
You are misdefining extortion.
Extortion (also called shakedown, outwresting, and exaction) is a criminal offence of unlawfully obtaining money, property, or services from a person, entity, or institution, through coercion. Refraining from doing harm is sometimes euphemistically called protection.
[1] http://en.wikipedia.org/wiki/Extortion, op cit.
Exaction refers not only to extortion or the unlawful demanding and obtaining of something through force,[1] but additionally, in its formal definition, means the infliction of something such as pain and suffering or making somebody endure something unpleasant.
So we've gone from talking about "extortion", a well known criminal offense with an everyday, commonplace meaning, to quibbling about an alternate definition of "exaction" which may sometimes be used synonymously with "extortion". If you meant to specifically talk about "exaction" then why not say so in the first place?
And in either case, I stand by my assertion that referring to dmor's article as such is a tremendous exercise in hyperbole.
EXTREMELY uncalled for, petty, and potentially libelous. If this was not just a 'random example' and doesn't relate to Danielle herself....then this is some bullshit.
I don't know you, nor know your fund, but as an entrepreneur reading this, I would never trust you in a million years. Personally, I would steer clear of you and your fund, for fear of you leaking personal information about me when you get pissed.
If this is indeed what you meant, and were specifically talking about Danielle...not cool. Not cool at all.
But...truthfully, I am glad that you did, because we all need to know which VCs to steer clear of. You just cemented yourself (and your fund) on that list, as far as I am concerned.
Edit 1: To be clear, I am not sure if you mean the list covers people in an apartment building you (or your fund) owns - or just your roommates that live with you. I assumed it was something like the former. If it was the latter, and you were just using it as an example, then I stand corrected. If it was the former...then what I said still applies.
That's a major relief, because I was a bit perturbed that someone could have drawn such an analogy.
Also -- it seems obvious that while the author has tools to crawl web sites and pull data into a CSV, it seems dubious that the author spent anytime in running a manual sanity check before presenting her findings. For example, "O'Reilly AlphaTech Ventures" and "OReilly Alpha Tech Ventures" are the same thing.
Perhaps, as others have pointed out, you should reconsider using Crunchbase as a reliable or up-to-date source of information. Or, at a minimum, do some supplemental fact-checking via Google.
> When I make these posts suddenly people start returning my emails requesting data.
Even as a causal observer of the VC market, I was able to spot a lot of false positives in that list.
While the data may not be 100% accurate, I think the author makes a lot of great points about finding out what series A deals a particular investor has done to know whether this is a good fit.
The post is manipulative because it defines zombie VC's as above. However, the data used to arrive at the list does not hold up to the above definition.
Call it "Minimum Viable Truthiness", if you'd like.
https://news.ycombinator.com/item?id=5491293
Where I'm guessing that refer.ly is trying to raise their own series a and possibly getting frustrated.
That said - entrepreneurs should be more concerned with growing a business than making friends with VCs, so more power to danielle if this is how she ends up making it work.
Refer.ly recently pivoted - in fact every stat about our business is on the front page of our site. We aren't raising Series A, we have ~18 months of runway left at our current burn.
There's nothing unprofessional about publishing interesting data. The framing around it is what makes it manipulative. I can see how putting such a list along with the preceding blog post could feel... wrong.
> Even as a causal observer of the VC market, I was able to spot a lot of false positives in that list.
A great point. If you're going to publish data make sure it's correct first.
Because of lists like this VCs might in near future keep their traction very public on angellist and crunchbase, allowing founders to make better decisions.
You're implying that information which may not be used wisely by the reader is unprofessional to publish.
Furthermore if those firms are healthy they have nothing to fear.
But I'm probably wrong, because I am a value investor.
Fred Wilson has publicly admitted himself that he hasn't led a deal all year. I don't think that affects his reputation. If anything, I think people applaud him for his transparent efforts.
Smoke and mirrors.
I'm going to guess that the author has never raised significant money (>$10M) from VCs. The quoted sentence fragment speaks volumes on a lack of understanding of the VC animal kingdom.
Associates play a key role at VCs, sourcing MANY investments, and serving as gatekeepers.
When I was a VC Associate, I sourced 6 investments, totaling over $50M invested. Those entrepreneurs are glad they met with the lowly Associate (I'm now good friends with many of them and have discussed the topic).
This idea of "don't talk to an Associate" is misguided from the real fact: the Partners are the decision-makers at the firm. If you can meet with a Partner instead of only an Associate - do it! At the very least, it decreases your cycle time. Don't have a connection to a Partner? Can't make schedules work? Meet the Associate. Hundreds of entrepreneurs get funded this way, every year.
For whatever it's worth, I'm only commenting because I thought the swipe at 'dmor upthread was unwarranted. Even if the idea of associates as wastes of time is totally unwarranted, it's a very common idea, including among people who have done very well with fundraising.
As a former investor, an entrepreneur that thinks he/she understands my business better than I do is a big red flag.
I can see how this information, were it in any way insightful, would be useful to a lot of people. However, not only are the criteria very arbitrary, the list is being built from admittedly incomplete and/or incorrect data, and the opt-out-of-my-public-shaming approach is disingenuous at best.
Funny you would say that, given the perceived typical information asymmetry between investors and entrepreneurs. It would be just as accurate to say:
As an entrepreneur, an investor that thinks he/she understands my business better than I do is a big red flag.
The data presented here may or may not be accurate or interesting, and the conclusions drawn from it may or may not be valid, but regardless, worrying more about the state of VC firms than your own company is a losing proposition.
This, a thousand times this. I know I've ranted about this a lot lately, but I think (some|many|most) entrepreneurs would be better served to focus on how to get customers and fund their companies through organic revenue growth, rather than climbing on the "funding merry-go-round" right away.
That, plus the fact that Crunchbase is incomplete to begin with, as others have pointed out.
With David Lee moving to LA and Ron Conway much more involved in politics, I'll be watching
dmor said:
> on a regular 1-2 Series A deal a month pattern before that
I think that's enough that it could lead some founders to look to SV Angel for Series A funding. It may be only a fraction of what they did, but it's still useful for people to be informed of this, because Ron Conway didn't announce his intentions in the matter.
I work at Quotidian, and I agree it's a bit amusing to see our name there, since we're almost exclusively an angel fund. (Perhaps flattering, to be mistaken for a larger firm!).
To give you an idea of how 'dead' we are, note that the spreadsheet lists the date of our most recent angel investment as this week!
The goal is noble - the spreadsheet should be taken as a starting point, not a finishing point.
As you suggest, another interesting post might be listing the truly inactive firms who have not made any investment at all in 6+ months
Understood, I just wanted to point out that there are legitimate reasons to go six months (or longer) without investing. The metric is helpful, but, like any isolated metric, not comprehensive.
Thanks for taking the time to put this together - very interesting data.
As Obama said, Sunshine is the best form of disinfectant. High time we get a complete glimpse into the state of VC. Who is bullshitting everybody and who is not. Who is earning their keep and who is living off the exhorbitant mgmt fees they charge LPs.
On behalf of all entrepreneuers, thanks for starting that process.
One thought: since many reg d filings are purposefully delayed by 1-2 months to control timing (and press) it might be more effective to analyze the time period of 9 mo ago to 3 mo ago.
May also be useful to add levels of caution (yellow is no deals in the 6 mo period, red is no deals in 12+).
Also, factoring in deviation from normal behavior would be a wonderful addition (and would remove some of the folks without much data represented)
Just do a search for VC firms and specify what date YOU want their last investment to be...everyone has different critera. If you think if it's been more than 6 months it's a "zombie VC" (I personally disagree, because without getting technical depends on age of the fund...a new 10-year fund invests most of its money in the first 2 years in a nutshell) then pick 6 months on PrivCo VC firm search for last investment. If you think it's 12 months search for 12 months. 18 months, search for that. Don't go by this nonsense list with arbitrary 13 month "cutoff", especially when many of these deals aren't announced - so they do have deals as evidenced from fellow HN crew discussion below missing, so the "no deal in 13 months" is wrong to begin with - you need a dedicated firm like PrivCo (or DowJones VentureSource) to diligently find those deals day after day. Just 1 missing VC deal for a firm throws off the entire "13 month zero deals" input there = output worthless.
Long way of saying search for venture capital firms in my humble opinion using PrivCo and the search criteria: last investment must be within X months, plus must have made investments in the precise sector you want, etc. Then you get the results, export to Excel, and it even has updated names and direct emails of the partners. It's a beauty. Might be others I haven't used too but this is what I personally use: http://www.privco.com/investors
Jake