Rate My Investor Seeks To Turn The Tables On Venture Capital Funding

Rate My Investor Seeks To Turn The Tables On Venture Capital Funding
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Serial entrepreneur Austin Stofer has the battle scars that can come from being squeezed and stretched through what can seem like a venture capital torture chamber. He knows first-hand how draining it can be to focus the limited resources on pitching investors, having been promised money only to be “ghosted,” not hearing from the investors after the marathon dance ended. “We got burned, and we aren’t alone,” he said. It is perhaps for this reason that Stofer is seeking to level the playing field by turning the tables on the VC investor.

Entrepreneurs can’t waste time focusing all their attention on raising VC money when those efforts aren’t likely to reap rewards or, even worse, damage the company’s prospects.

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Stofer witnessed this first-hand, which was part of his impetus for founding “RateMyInvestor.com,” which allows those seeking capital to review the capital source.

“While working on one of our earlier startups we met a group of Investors at our local Demo day,” said Stofer, who established his first business at age 8. “They instantly loved what we were building and invited us to come into their office that same week to pitch to the rest of the partners. After burning multiple all-nighters and getting everything prepared for the pitch, the big day finally came. Everyone loved the pitch and they made it pretty obvious that they were going to invest.”

The seed capital necessary for Stofer to achieve his growth dreams seemed at hand, but there was one catch. They had to lock down a few necessary partnerships, rework financials, and redesign a few platform components.

“After months of hard work and what seemed like thousands of dollars in wining and dining, we had locked down all of the partners,” said an excited Stofer, whose firm had hit all the benchmarks. “We proudly walked back into the VC's office and let them know that we had accomplished everything they asked of us. We should have known something was a little off when they looked just as shocked as we were that all of the partners had agreed to work with us at such an early stage. They congratulated us and said that we would have a term sheet in our inbox by the end of the week.

They waited. And waited. And waited, following up but never hearing a word from this investor again, illustrating one pitfall of pitching to the wrong investor.

But it is not just wasting time and resources. While Stofer has heard a horde of war stories, perhaps most draining was that of a fellow entrepreneur who was asked to pitch by a VC who also had invested in a competitor. After the pitch, the VC gave the reworked trade secrets to the competition in which they had invested.

To help entrepreneurs gain details about the investors with whom they are pitching, the website has more than 1,000 reviews. With emotions running high after losing a pitch, Stofer says that vetting negative comments that have a basis, in fact, is a key reason why the site’s content has a high degree of validity. “We have to hold these reviews to very high standards and vet them very carefully,” he says. “This is not a revenge platform, but a place where founders and funders can come together to break down the fundraising barrier.”

The goal is “to reward investors who practice ethically by featuring those with great ratings,” he said, which could complement the business model which allows VCs to pay a premium for spotlight positioning. “Putting these investors in the limelight will promote their practices and increase their deal flow. This also allows new founders to find the right investors for them.”

As for RateMyInvestor.com, the website does not currently have venture funding but plans on reaching out to early-stage investors the second quarter of 2019.

This article first appeared on ValueWalk Premium

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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