New VC’s Raising New Funds – What should they disclose?
This is a bit more serious but has come about following a discussion with Ben Austin (I’ll do your profile soon :) ) and Paul Smith at Ignite.
There are lots of tech VC funds appearing in the UK and that is great for the eco systems, but only great if they make a return for their investors or the investor community will become disillusioned with the sector and run away. This issue has been mulling in my head for weeks and I did not know why? Are people selling snake oil?
If an established fund is raising more funds then they have to produce full reports for their past funds performance. But if you are raising a new fund how do you produce a compelling set of documents to get people to believe in your investment strategy and your fund, when you have never actually invested “like a VC” before?
This got me thinking there are only 3 ways to do this:
1. disclose everything that you can think is relevant about your life, either good or bad.
2. be open and everything you list on the fund documents disclose as much data as you can, either good or bad. Thus allow investors to make their decisions based on YOU and the DATA.
3. be limited with the truth and only show the “good” things you have done and the successes.
I morally sit with number 1, but I understand this is not realistic or fair. But if I was investing in a new VC fund ( which I have done twice ) I would like to investigate things that may fall into option 1 and ask the people running the fund to explain anything I found. This is me just trying to understand where the morals of the person were at.
Realistically I think number 2 is fair, but my concern is I am seeing many new VC’s trying to raise using number 3, intentionally or not. My concern is that option 3 is a slippy slope and the snake oil people will appear.
Am I alone in this thinking?
Doug