Be Careful What You Subpoena. It May Turn Up More Than You'd Like People To Know

from the oops dept

Remember the VC firm, EDF Ventures, which brought a lot more attention to a negative review on the website TheFunded.com by sending a subpoena to find out who wrote the negative review? Well, it turns out the decision keeps getting worse and worse. VentureBeat has the details that were turned up by the subpoena -- and the result is more details of the criticism, but no identifying information of the poster. Since TheFunded allows parts of comments to be public, with other parts designated as "members only," the subpoena has now made the "members only" content public, and it trashes the deal terms offered by the firm and criticizes a partner who has no operating experience. Also, the details suggest that this wasn't a spurned entrepreneur, but an adviser or partner in some manner. Either way, beyond drawing more attention to a negative review, now the firm has made public even more critical info.

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Trying To Sue Someone Who Criticizes You Isn't The Best Way To Boost Your Reputation

from the apparently-the-streisand-effect-isn't-known-in-the-michigan-vc-community dept

And here we go again. Less than a year after a venture capital firm tried to sue the VC ratings site, TheFunded.com, another VC firm, EDF Ventures in Ann Arbor, Michigan, has sent a subpoena to the site to try to identify a critical commenter.

This is, of course, the exact wrong response.

First off, TheFunded doesn't keep records of who its anonymous commenters are, so the subpoena won't help much. But, much more importantly, in filing the subpoena, EDF has now broadcast to the world this anonymous review on TheFunded.com:

Worked with these people on several deals and they are to be avoided unless you are desparate. Beaus Laskey, the only honest straightforward person in the bunch, has left the firm.

That's pretty clearly the opinion of one anonymous commenter, and most readers of TheFunded.com would take it as such -- an anonymous ranting from someone who had a bad experience. Look at the listings on TheFunded.com and you'll see that almost every VC firm has a few such comments from an angry entrepreneur. People looking over the site understand that and take that into account. It's hard to see what's actually libelous about the statement, as it's pretty clearly just this guy's opinion.

But, of course, beyond drawing a LOT more attention to this one silly angry post than it ever would have received otherwise, EDF has also shown the world how it handles a little bit of criticism. If entrepreneurs didn't have a reason to avoid the firm before (even after reading the reviews on TheFunded.com), I'd imagined this thin-skinned guaranteed-to-backfire response that shows little understanding of how to respond to internet criticism will probably convince many other entrepreneurs to stay away. Which, of course, is exactly the opposite of what the firm probably wants.

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How Not To Improve Your Reputation: Sue A Site That Has A Negative Review Of Your Firm

from the streisand-effect-at-work dept

TheFunded.com is a popular website here in Silicon Valley for venture capitalists and entrepreneurs alike. The site allows entrepreneurs to post comments and ratings about various VC firms and their partners. Considering how big a role a venture capitalist takes in the life of a startup having more information from those who have dealt with them in the past is tremendously valuable. At the same time, venture capitalists rarely get much feedback on how entrepreneurs feel about them, meaning that some can go on treating entrepreneurs terribly for years -- perhaps without realizing it. TheFunded has helped change that dynamic somewhat, both giving entrepreneurs a way to get more information (and share more information) about the VCs they've dealt with and for VCs themselves to get more feedback. Of course, some of the VCs who are criticized aren't happy about it. Most, however, seem to grudgingly accept the constructive feedback (while also begging their portfolio CEOs to write nice things about them). Earlier this month, the sites previously anonymous founder outed himself in a Wired article, making some wonder what the reaction from the VC community would be.

In at least one case, it appears that the reaction is to reach for the lawyers. As VentureBeat notes, Hercules Technology Growth Capital, which is actually a pretty large venture debt firm (more than venture capital), has sent a cease and desist letter to theFunded after a negative review of Hercules appeared on the site. This seems like a bad idea for a huge number of reasons -- all of which Hercules and its lawyers probably should have realized before sending the C&D. First off, as it seems we have to repeat almost weekly around here, section 230 of the Communications Decency Act very, very clearly states that a site is not liable for content its users post, and any law firm should know that. Second, and more importantly, as you would expect, the Streisand Effect kicks in. Prior to this, not a whole lot of people would see the review of Hercules. Now, however, many, many, many more entrepreneurs will not only see and remember the negative review, they'll see how Hercules responded to it, which may be even more damaging to the firm's reputation.

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