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

from the streisand-effect-at-work dept

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.

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