No Respect for “Most Respected VCs” List — UPDATED

The great thing – and the bad thing – about the Internet is that we have all sorts of newfangled tools to measure things. But, as Albert Einstein once said, “Not everything that counts can be measured. Not everything that can be measured counts.”

Which brings us to the latest list making the rounds: the “30 Most Respected Venture Capitalists,” which was created by Mark Fidelman of the blog SeekOmega.com and ran on Business Insider.

Fidelman says he created the list “using state of the art sentiment analysis technology from Lithium (formerly Scout labs), confidential reviews from entrepreneurs on TheFunded.com, and four surveys that I issued across four different social platforms.  I also looked for mentions of individual VC’s on Quora to gain additional insight.”

What I cannot fathom is how someone can put together a list of the “most respected” VCs without looking at their successes and/or failures as investors.

The simple fact is we don’t respect losers. We respect winners. Falling back on the old sports analogy, do we respect baseball, football or basketball teams that have never won championships? We may like (even love) losing teams (Cubs, anyone?), but we certainly don’t respect them more than the teams that have actually won championships.

If I’m an entrepreneur, do I want to have the support of VCs with a long record of backing successful startups or VCs without much of a track record but who blog and tweet like crazy and were careful not to piss off members of The Funded?

A list of respected VCs should correlate very closely with a list of VCs who have had the most success. The Midas List is no longer around, so we can’t compare Fidelman’s list to it. But, strictly from an anecdotal standpoint, I can think of a host of very successful VCs and/or angel investors who didn’t make the cut. And that brings Fidelman’s whole list into question.

(Update: I heard from Nicole Perlroth, deputy editor of Forbes, and she tells me that the magazine is bringing back the Midas List this April. Forbes didn’t produce the list last year. Perlroth has been working on the project for the past few months and says, “We already have a good idea of who falls where and I think the results will come as a shock to many.” Can’t wait to see what Forbes comes up with.)

Off the top of my head, here are 10 successful investors that didn’t make it onto the top 30, in no particular order, along with some of their hits:

Danny Rimer of Index Ventures (Skype, Playfish, Last.fm, Lovefilm, MySQL).

Aydin Senkut, angel investor (Mint, Mixer Labs, Mochi Media, Powerset).

Peter Thiel of the Founders Fund (Facebook, LinkedIn, Yelp, Powerset)

Ron Conway, angel investor (Google, Paypal, Good Technology, Opsware, Foursquare, Twitter).

Peter Fenton of Benchmark Capital (FriendFeed, JBoss, SpringSource, Wily Technology).

Kevin Efrusy of Accel Partners (Facebook, Xensource, SpringSource, BBN Technologies). (Heck, Accel’s Jim Breyer sits on Facebook’s board and has a lengthy list of hits himself, including Marvel Entertainment, RedBack Networks and Hyperion Solutions.)

Ram Shriram of Sherpalo Ventures (Google, Mint, Plaxo, Tellme).

Reid Hoffman of Greylock Partners (Facebook, Flickr, Last.fm, IronPort, Zynga). (We’re also told in Venture Capital Journal’s November cover story that Hoffman is one of the nicest guys you’d ever want to meet or do business with.)

Naval Ravikant, angel investor (Twitter, FourSquare, Mixer Labs, Jambool, DocVerse).

Deepak Kamra of Canaan Partners (DoubleClick, Match.com, Acme Packet, SuccessFactors).

I should note that both Fenton and Conway were on Fidelman’s “narrowly missed” list, but how the heck did they not make it onto the top 30 list?

I’m quite certain there are many more who belong on the top 30, but who were not listed. Who would you add?

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6 Comments

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  • Yeah, this most respected VC list is kind of like a photo sharing site where those who like a photograph is in no correlation to those who buy it. Transactional transparency is an economic principle and the only merit that counts in evaluating VCs. Specifically where the end point in that measurement should be those VCs who consistently produced Social Economic Value the public can trust.

    Even great LP returns that don’t produce public trust merely extracts value from the equation, and leaves mistrust and lack of IPOs behind. So, yes, this most respected list is a misguided effort to portray a transparency in Venture Capital to all marketplace participants that because Venture Capital is not a free-market system simply does not exist. And faking transparency is worse than no transparency.

    Best,

    Georges

  • Interesting post, but I think the concept of “respect” with regards to evaluating a VC goes beyond how much money they have made on past deals. In the same way that you dismissed the notion that a popular VC with The Funded’s crowd should be highly respected because of that singular quality, likewise simply because a VC has had a significant amount of success in their business does not justify , on that quality alone, earning my respect.

    A VC might significantly increase the returns to their limited partners by imposing excessive terms on their portfolio companies, taking advantage of circumstances (which they can often create due to their position), or manipulating the actions of the board. While these types of behavior might inccrease returns, they certainly don’t merit earning respect in my book, and I don;t think they should in yours.

    Respect is something that is earned by showing skills and qualities across a broad spectrum.

  • For any institutional investor considering a commitment to a venture capital fund the gating factor is “points on the board” and whether or not the partners are likely to repeat their successes. Successful venture capitalists create an ecosystem around them that attracts both new entrepreneurs and strong syndicate partners. Their opinions are sought out and their firms benefit by seeing the best deal flow. You can be highly respected as a venture capitalist, but lacking a strong track record you’ll also be a one and done fund manager.

  • Good points, Mike. To be clear, I didn’t say that VCs should be rated solely on their performance. I said that Fidelman erred by not including performance as one of his metrics. His list would have far different had he done so.

    To your point about a VC increasing returns to LPs by imposing excessive terms on his or her portfolio companies, I honestly don’t think a VC could produce strong returns year after year with that sort of behavior. Entrepreneurs just have too many options these days; why would they take money from a “jerk” offering terrible terms when they could get the cash from another VC or an angel — or maybe even bootstrap their company (particularly a low-cost Web startup)?

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