How Not To Improve Your Reputation: Sue A Site That Has A Negative Review Of Your Firm

from the streisand-effect-at-work dept

Fri, Nov 30th 2007 3:46pm — Mike Masnick

TheFunded.com is a popular website here in Silicon Valley for venture capitalists and entrepreneurs alike. The site allows entrepreneurs to post comments and ratings about various VC firms and their partners. Considering how big a role a venture capitalist takes in the life of a startup having more information from those who have dealt with them in the past is tremendously valuable. At the same time, venture capitalists rarely get much feedback on how entrepreneurs feel about them, meaning that some can go on treating entrepreneurs terribly for years -- perhaps without realizing it. TheFunded has helped change that dynamic somewhat, both giving entrepreneurs a way to get more information (and share more information) about the VCs they've dealt with and for VCs themselves to get more feedback. Of course, some of the VCs who are criticized aren't happy about it. Most, however, seem to grudgingly accept the constructive feedback (while also begging their portfolio CEOs to write nice things about them). Earlier this month, the sites previously anonymous founder outed himself in a Wired article, making some wonder what the reaction from the VC community would be.

In at least one case, it appears that the reaction is to reach for the lawyers. As VentureBeat notes, Hercules Technology Growth Capital, which is actually a pretty large venture debt firm (more than venture capital), has sent a cease and desist letter to theFunded after a negative review of Hercules appeared on the site. This seems like a bad idea for a huge number of reasons -- all of which Hercules and its lawyers probably should have realized before sending the C&D. First off, as it seems we have to repeat almost weekly around here, section 230 of the Communications Decency Act very, very clearly states that a site is not liable for content its users post, and any law firm should know that. Second, and more importantly, as you would expect, the Streisand Effect kicks in. Prior to this, not a whole lot of people would see the review of Hercules. Now, however, many, many, many more entrepreneurs will not only see and remember the negative review, they'll see how Hercules responded to it, which may be even more damaging to the firm's reputation.

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Filed Under: defamation, liability, reviews, section 230, venture capital
Companies: hercules, thefunded

11 Comments

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LBD, 30 Nov 2007 @ 4:06pm

Points and laughs
The smart and strong settle dissagreements by solving the problem.

The dumb and strong, smart and weak, or dumb and weak (nothing is wrong with being weak, just with being dumb) reach for lawyers.

We are allowed to laugh at the dumb
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Shun, 30 Nov 2007 @ 5:04pm

Wow! that such sites existed
OK, now I'm enlightened. To think such wonders such as venture beat existed. Now I know what VC's do with their time. While I'm off at slashdot and techdirt, they read valleywag and venturebeat. Hmm...am I clueless, or are they?

Anyway, this could be the Achilles' Heel of Hercules (too obvious?) They should think about changing their name.

Also, there's some commentary on venturebeat, and the original wired story to the effect that tails nicely with your conclusion.

I'm putting this in my sig:

Hercules Technology Growth Capital -- the company you've never heard of but nevertheless love to hate
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Anonymous Coward, 1 Dec 2007 @ 3:32am

Lawyers and clients
section 230 of the Communications Decency Act very, very clearly states that a site is not liable for content its users post, and any law firm should know that.
They probably do and probably told their client. However, some clients just won't listen and are willing to spend a lot of money to file suit and have a court tell them the same thing again.
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Max Powers, 1 Dec 2007 @ 6:07pm

Scare Tactics
I think they also might see some value of possibly scaring the website owner just by sending the lawsuit paperwork. They feel they have to attempt to do something, they feel so powerless.
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Anonymous Coward, 1 Dec 2007 @ 6:35pm

More information means better decisions
Some ask: "Why do you want to sell to the smart?"
The answer is that they will see the cleverness of your idea, product etc.

The problem with trying to sell to the dumb is that they may not see that your idea is clever and good

OR they may have already spent (or in the case of VCs, invested) their money foolishly.

Hercules may be proving what sort of firm they are - they spend their money on lawyers.

They might be better off concentrating on picking the best ideas.

There is information for Hercules in the criticism.

As one who reads both negative and positive comments on products/books/VCs I am interested in - a negative review may simply point out a 'feature' to me, which some view as a 'bug'.

So trying to stamp out negative comments is trying to remove valuable information.

My motto is:

"More information helps make a better decision"
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Anonymous Coward, 1 Dec 2007 @ 8:29pm

Morons...
When will these folks figure out that they keep trying to put out the fire with gasoline?
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Iron Chef, 2 Dec 2007 @ 5:56pm

Ranting... Get the right people in the right posit
This is another case of misunderstanding. Apparently many companies have not read Wikinomics by Don Tapscott yet. Those who have are reaping handsome rewards. Before you discount me, Albert Einstein once said "Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will spend its whole life thinking it is stupid."

Consider "Five Minds for the Future" by Howard Gartner.

The new Web (or Web 2.0) brings with it a culture of breaking the rules. C-Levels know that we need to compete with India and China, who are not accustomed to life, laws, or semantics in the USA. People of the Web 2.0 Generation aren't looking at the balance sheet, but looking at earned value. They are looking at "What Can We Do."

Many of the Web 2.0 generation here stateside, some working alongside you and I, are finding the proverbial "Loose Brick" before overseas interests do*. Sadly, the challenge of authority brings on a political war in nature. It's a culture change. Some decide to fall in line with rules of the old, others find opportunity elsewhere.

Many in the Web 2.0 crowd have ideals of that of an older generation- like that of Ingvar Kamprad.

Some companies that understand the Web 2.0 Generation is Microsoft and Google. They have become more user-centric as a result: For example, Microsoft performed over 1,000,000,000 user sessions (yes that's a billion) before RTM of Office 2007.

Point is- only after initial talks with customers did they understand that people don't want to be thrown into a process. And they successfully redesigned parts of Office 2007 to provide interactive feedback. BTW- It's Office 2007 fantastic. Get a demo.

In trying to understand the current world I live in, I've come to believe that Microsoft is best positioned. They have already started executing on it. In fact, their most recent ad campaign (link below).... Isn't about selling the software, but seems to be a cry to the US to BE BETTER. This is stellar execution on MSFT's behalf.

At the same time, Microsoft is also interested in bringing in good talent, but as of late, have had to reach outside of the boundaries of the US to do so.

http://www.youtube.com/watch?v=5OCLeU4M1_0

Now that Ray Ozzie took Bill's place, I truly believe that the company will be one of the most user-centric organizations out there.

I know this sounds like an advertisement, I've been there, and know that they have a lot going for them. Our education system doesn't support the creative guys.

Read what Bill and Melinda plan to do at http://www.gatesfoundation.org

*Ref the book: "Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition" by Ming Zeng and Peter J. Williamson)
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FrankLucas, 2 Dec 2007 @ 6:19pm

Hercules-more dirt to come
Hercules has a reputation for simply being a terrible firm to work with. They should focus on changing that reputation, not suing the people who point that out.
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Anonymous Coward, 2 Dec 2007 @ 6:28pm

Once Hercules loses it's case it should probably sue the law firm for giving it bad legal advice.
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Anthony Kuhn, 3 Dec 2007 @ 5:09pm

Cease-and-desist
I like it! The Streisand Effect. Maybe they'll make a movie about it some day. Until then, I'll just have to chuckle at the totally amateur efforts of Hercules and Co. to put Pandora back in the box.

Here's to due diligence! Or lack thereof...

Anthony Kuhn
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FrankLucas, 3 Dec 2007 @ 6:05pm

Hercules getting slammed in the media
I've seen multiple articles about these guys sending the theFunded the C&D in the trade press. Wow. I also noticed more negative reviews in their profile on TheFunded. They're bringing folks out of the woodwork.
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