“OpenVC”…Really?

Bo-Knows-Sports-Dad-Hub

I really like VCs. The good ones are worth their weight in gold, which they collect with my whole-hearted applause.

But the idea that the industry is “open”? Laughable. Which is why it’s wonderful that Bo Peabody of Greycroft authored an “OpenVC” thoughtpiece in TechCrunch, bringing up how everyone benefits from entrepreneurs knowing more about the VCs they approach. In my mind, however, his list is just table stakes. I can think of many more ways the industry can help promote the openness that will truly make for better matches, less wasted time, and better returns for the industry.

Let’s throw down the gauntlet. Here is what I feel is the bare bones for the public release of data and opinions.

In the spirit (but not the grammar), of Danielle Morrill’s “#IfIwasaVC” tweets, here’s my version. If I were a VC,

*I would list all investments and firm involvements, including:

-lead partner on the investment, and whether or not a board seat is taken

-other team members (e.g., associates) actively involved in the account

-which rounds you invested in (so entrepreneurs can calculate follow-on

percentages)

*I would list all returns from all funds, including open funds using latest marks-to-market

Most radically,

*All of my quarterly marks-to-market would be shared with an industry utility (NVCA?), which would collect all such marks from other “open” investors in the syndicate, then re-share a scatterplot of these marks with the entrepreneurs, the other members of the syndicate, and other interested parties. I would further pledge to adjust my mark to the median price, if lower than my own, for the calculation of any performance used either in promoting track records for raising funds or for calculating fees. I would subsequently allow my marks and their place in the scatter diagram available to various data providers and to my LPs.

*I would show a gauge on my website, showing the amount of dry gunpowder in each fund, and whether new investments were being considered for that fund or only reserves for follow-ons. (Note—Pitchbook and others are already making estimates of this: might as well show the real numbers.)

*My website would show a timeline showing each investment and its size, highlighting first time investments.

*Concurrent with the announcement of each new investment, I would publish a blogpost “Why I invested in XYZ”. I additionally to pledge to keep it up, even if the investment goes bad.

*I would clearly state my market theses, giving real granularity to the types of businesses the firm wants to consider.

This post definitely gets my juices going, and I’m going to followup later this week with Part II.

But meanwhile, anyone want to take the pledge? VCs, don’t just talk transparency, BE transparent. The most transparent will be the ones who generate the greatest goodwill and inbound traffic. Bo Knows.


5 thoughts on ““OpenVC”…Really?

  1. thank you for this post.

    i’d like to see investors list each of the companies where they’ve declined to invest, perhaps after a one-year period. bessemer does this selectively with their anti-portfolio, but a comprehensive list would be more helpful.

    1. Agreed. However, since most companies turn down dozens of firms for every one they invest in, the list would be huge. I’m happy just to see the “unicorns”–the big ones that got away–rather than a comprehensive list. I believe most sophisticated investors believe that a great anti-portfolio, such as what BVP publishes, is evidence that they are important enough to have a quality deal flow. (And companies that went through YC or were on AngelList need not bother being listed, either, we all could have had those…)

      1. “However, since most companies turn down dozens of firms for every one they invest in, the list would be huge.”

        certainly the list would be lengthy, but the patterns and insights resulting from the data would be fascinating to read.

  2. This is a problem not just of VCs, but of most institutional investors. Why not ask for the same of PE funds? And hedge funds? And day traders? Why not tie up every single SEC filing for a new fund with returns numbers? Investors only publish what makes them look good, just like startups only pitch what is best. If you show your flaws, it’ll impair your ability to fundraise and survive. And you may actually get what you deserve. I’m not advocating, just pointing it out.

    1. Agreed that this is not a regulatory matter–but for good firms, it is good evidence, and publishing this information will be a self-selecting sign of quality. For those not publishing, you can only ask, why not? As for PE funds, I’d love to see how much leverage was employed, and compare that to a similar leveraged investment in the S&P 500. Now you’ll NEVER see that.

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