Monday, April 8, 2013

A Mechanism for VC Deal Transparency

[Edit: Greg Yardley has built a tool to implement this. I talk about it here.]

There was a bit of a brou-ha-ha last Friday over VCs not publicizing their investments. I was dubious: I've never met a VC who didn't want the world to know about every investment they make. It's a crowded market and letting entrepreneurs know you're making investments lets them know, well, that you're making investments. All of us investors need to let the world know we continue to exist because if we don't, we soon cease to exist. Publicity around deals is by far the easiest way to do that.

But over the past few days I was challenged by entrepreneurs to provide more information. "Through what mechanism?" I asked. There was no good answer. Crunchbase, great for what it is, is not a good mechanism. Perhaps the entrepreneurs don't realize this (or perhaps I'm doing it wrong) but even though CB is wiki-like, I can't edit the "Investments" section of my page; I think only CB admins can. Because I'm never sure what the process is, I have neglected it. But there should be a mechanism to update our portfolios and it needs to be Internet-y: simple, end-to-end, machine readable.

    In some sense, this already exists. It is the VC firm portfolio pages. That's why I built @VCdelta two years ago, to disseminate information that VCs are making public on their sites. It's been pretty successful. It's followed by many VCs, entrepreneurs, and journalists. And when I've had trouble scraping VC sites--because VCdelta is indeed a scraper--VCs have usually helped out. The reason I've needed their help is because VCdelta is a good citizen, it doesn't scrape sites that don't want to be scraped. It doesn't hide what it is--a python client--and it obeys robots.txt. Some sites were accidentally set up with defaults that exclude it.

    It's okay if a VC does not want to share information. Those that share information get more attention, more love from entrepreneurs, and better deal flow. At least that's what I believe. And I've had many VCs bring themselves to my attention so they can be added to VCdelta's scrape. I do what I can.

    But here's the rub: I don't like being a bottleneck. I'm providing a service and it's automated so it doesn't take much time*. But being a scraper, it breaks. And then some firms decide to use technologies that are more viewer friendly that VCdelta is not set up to handle, like AJAX or Flash. Some firms use images on their portfolio page that have no company name associated with them. I don't have time to make it better. And, in my own opinion, it pretty well sucks right now. Firms like Intel Capital have never been included. First Round Capital broke after they moved to an AJAX portfolio page. Etc. These are important firms, and I don't have time to get them back into the program.

    So I have a proposal. If investors want to publicize their deals in a usable way while not relying on a third-party gate-keeper, then we need some common language and setup to communicate. It should be simple, hosted on the VC website, and machine readable. Something like this, my investments**.

    It's a Javascript object. It's machine readable. E.g. in python:

    import urllib2, simplejson as json
    portfolio = json.loads(urllib2.urlopen("http://neuvc.com/investments.js").read())
    

    The object is formatted like this:

    [{"company":"companyname1",
     "url": "http://www.companyurl1.com",
     "rounds":[ {"Series": "Seed", "date":"06/2009"},
       {"Series": "A", "date":"04/2010"}, ...]},
    {"company":"companyname2",
     "rounds":[ {"Series": "Seed", "date":"08/2008"}, ...], 
     "events":[ {"event":"Sale to BigCo", "date":"10/2012"}, ...]},...] 

    My proposal is that investors put this type of file up on their homepage and keep it updated. If we roughly agree on a format and location third-parties can easily find out what we are doing. This is not my standard, it is a proposal for a community standard. I disclaim any ownership of it. If someone wants to publish a similar format for funds raised and fund personnel, please do. I'm a one-person, bootstrapped operation so don't feel my opinion is of much weight for those.

    If you decide to use it, let me know. I will have @VCdelta tweet any firms that adopt it.

    You may or may not believe that investors are being transparent enough, but some of our customers believe we are not. This is a mechanism to address that, if enough people choose to adopt it.

    -----
    * Normally I would publish the code, but it was built accretively so it's spaghetti and I'm embarrassed to have anyone else see it. I have had on my list to rebuild it from the ground up, but it's been on my list for 18 months.
    ** There is one investment not on the list because the entrepreneur has asked me not to disclose yet. The wishes of my entrepreneurs trump your need to know. Sorry.

    3 comments:

    Dominic Sayers said...

    Will an Event in the Events array always indicate an exit? If not how will we know which holdings are current?

    You could also consider a transactional view (buys and sells)

    On the whole this is a nice idea. I'll make it an option to publish something like this from Xenapto for investor users who choose to enable it. I'll also publish data in this format from http://public.xenapto.com from what I have gleaned from sources such as CrunchBase & VCDelta.

    Jerry Neumann said...

    Dominic,

    I figured "events" would be exits. But I'm sure that when a portfolio company fails it would quietly disappear from the portfolio list, as it does now from portfolio pages. Portfolio page disappearances are trackable of course (VCdelta generates them as exhaust now) but I don't see any reason to publicize fails in detail except for rubbernecking. For VC firms, fails=1-successes, so successes is enough of a metric.

    Jerry

    Joel Enquist said...

    This sounds great. I will make sure that we implement this on our site www.creandum.com during the next site update (about 1-2 months form now).