I was reading the TechCrunch story filed by Michael Arrington – FilmLoop betrayed by investors and came away with some serious doubts on VC process.
Filmloop raised $7 million from ComVentures in May of last year. Nine months later, with $3 million reportedly still in the bank, investors shut it down. Apparently, it appears the ComVentures did it when forced by its Limited Partners ( investors in the VC Fund ) to clean up their act and get rid of loss making investments. The worst part is that the sale was forced to another portfolio company of ComVentures ( Fabrik ) for much less than a song. Now there could be two versions of the story here – one from the founders and other from the VCs.
But some questions need answers.
a) If VCs are clueless about what technology and/or idea will be successful, why would they recommend investments at all ? Is it because it’s not their own money ( it’s the Limited Partners’ ) and they are assured of their $ 500 k ++ salaries anyway ?
b) We hear VCs often say, only one out of 10 investments that we make succeed. Now that talks a lot about how good their selection process is and if so are they not just a bunch of pampered kids ? Even FilmLoop appears to be a clone of YouTube and was ranked # 98 by Alexa.
c) VCs are pulling out of a company and they think they are smart because of that?? That is the most ridiculous thing I’ve heard.. Who gives money to VCs who act like that? Do they disclose their practices to their investors?
d) VC’s are trying to portray the idea that there is a ‘magic bullet’ when it comes to a new idea or a start-up. Is there one ? I don’t buy that. I still believe in cause and effect. However, playing with other people’s money, blood and sweat is so easy.. that’s why they can only turn 10% (if that!) into winners.
There is one major problem here.. Some VC’s really have people with little or no experience, no vision – just kids (a lot of times, out school!), basically, posing God because they have access to someone else’s checkbook..
Come to think of it – you had a 10% success rate at what you do, where would you be ?
And to think that the VCs are saying that so easily.. I’d fire those guys in a sec just for saying it. So, if the VC tells you that THEIR success rate is 10% – just RUN away from them as fast as you can.