Posted in: avvo, thefunded, venture capital

TheFunded and Avvo – Calling Plays from the Same Playbook

After reading about the class action lawsuit against Avvo, the lawyer rating site, and Matt Marshall’s post on TheFunded earlier today, it feels to me like both of these companies are calling plays from the same playbook by creating review properties focused on service providers in industries where reputation is paramount in generating new opportunities. In thinking through both of these businesses, it seems to me that they’re both taking advantage of the same 3 observations:

  1. In both cases you have a constituency (attorneys in the case of Avvo and VCs in the case of TheFunded) who probably prefer that a lot of the information available on these site were not made public. The fact that some of this information is not verified or validated only increases the desire to control what’s printed.
  2. In both industries, professional reputation (whether it’s based on fact or fiction) is really important when sourcing new opportunities. As such, maintaining a good professional reputation, both online and offline, is a good use of time.
  3. If either of these sites become popular, it’s probably worth investing the time to “play defense” and make sure your reputation online is as accurate as possible.

By providing a forum where people can comment on VCs without allowing VCs to respond initially, TheFunded basically created a strong incentive to have VCs care about the site. If it had been balanced from the beginning, it probably wouldn’t have been as interesting or newsworthy. The growing volume of negative to less-than-favorable commentary is what makes the site relevant to its audience. The nature of the way that the VC business works means that there is a high likelihood that disappointed (and potentially unhappy) people will vastly outnumber the ones who get funding. Take the following quick example:

  • Assume that an “average” VC sees 400 plans per year and funds 1% of those (4 deals per year). That leaves 396 people who did not get funded.
  • If even 5% of those people walk away feeling that they were treated unfairly, the chorus of negative feedback will drown out the positive feedback by a wide margin (5 to 1). Unhappy people are much more likely to talk and look for venues to vent than happy people are.

I think there are two classes of individuals who do not need to worry very much about these kinds of sites:

  • Well known individuals – Industry leaders who are really well known and have great track records as investors or attorneys are less likely to have this kind of content influence their ability to do business.
  • Individuals with strong web presences – People with a strong web presence will have a lot of countervailing evidence to offset whatever these sites say. People who maintain professional reputations in other places (LinkedIn, offline, etc) will have other public information on the web to offset what’s said in these venues.

Truly bad actors, people who aren’t well known, and people who don’t have a well-developed online presence are potentially more vulnerable to sites like the ones mentioned in this piece.

On a final note, if all of the firms and individuals on these services have bad ratings, the feedback and information provided isn’t that helpful at the end of the day. Presumably the value of using such a service is to find a good firm or attorney with which to work. If all of the service providers are rated poorly, it doesn’t really help the consumer.

Like a lot of folks out there, I have mixed feelings about these services. Surfacing accurate data about service providers so the uninitiated can get some sense for how they rank on key attributes is useful. But that information has to be both accurate and trustworthy to be of value – creating forums to slam or discredit people isn’t that useful. I’ll be interested to see how these sites manage the balance — I can see how using the antagonist approach is a way to generate interest and engagement in the early days.

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