5 Apr 2013, 10:41am
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Zombie VCs

This post uses publicly available data on Crunchbase and has elicited a strong response from the tech community in general. I am making corrections as I receive them and you can scroll to the bottom of the post to see a full list of my changes. The list has been updated to read in alphabetical order, and I have posted a follow up bug report on the data and methodology.

I am going to say what most investors and many savvy entrepreneurs in Silicon Valley know but aren’t saying: just as there are zombie startups, there are zombie VCs out there and they walk among us. These are partners at venture firms who are 3-5 years into investing their fund, don’t have very strong results so far, and are struggling to raise new funds. These investors are not doing new deals, opting instead to use their remaining capital to double-down in follow on rounds with their existing portfolio, but in some cases they’re taking meetings anyway.

How to Spot a Zombie VC When Raising Your Series A

In the same way at a VC will often send you to an associate because they’re “too nice” to say no, zombies will meet with you and make you feel like you’re making progress on the fundraising path, but can ultimately wind up being a huge waste of time. Since you don’t have your own associate to pass them off on, you need to watch for the warning signs yourself and ruthlessly protect your precious time. You’re here to raise money and get back to work, not make friends.

  • They haven’t made any series A investments in the past 6 months
  • They haven’t invested outside their existing portfolio in the past 3 months
  • They haven’t made ANY investment in the past 3 months (after a more regular pace in the past)
  • They tell you they’re re-focusing on later stage deals, or raising a new fund

Once you have identified that you may be meeting with a zombie it can be frustrating, but what you need to understand is that just like Bruce Willis in the 6th Sense zombies usually don’t realize they’re dead. Politely complete the meeting and update your spreadsheet accordingly when you get home. If they contact you to set up another meeting or request that you send over your deck it is appropriate to ask them how serious they are about doing new deals before you provide more information (decks get emailed around) or offer up more of your time.

If the investor seems angry with you for asking about their (lack of) recent Series A this is a red flag.

You have every right to do your due diligence on them. On to the next one.

Doing the Diligence

In my previous post, I listed the most active Series A investors, and my advice to entrepreneurs was to start by pitching investors you know are actually doing Series A.

This is a list of funds who may be doing deals, have participated in Series A in the past, but have not publicly done a Series A in 6 months or more. The data is sourced from Crunchbase and includes investors who have previously participated in a Series A investment which was publicly announced, but not in the past 6 months. It includes active institutional investors as far back as January 1, 2012 who have participating in lifetime total deals of $20,000,000 or more (to reduce inclusion of angel funds). The list is sorted by total deal participation size, to show the most well-known investors first. Some of these investors are late stage in general, so they’re probably not great to pitch for your first round of venture funding but that doesn’t mean they’re not doing well overall.

Investors, have you been included in this list in error? Please let me know about a Series A deal you’ve done in the past 6 months (I don’t need the details, just your word) so I can get you off this list and onto the active Series A investors list. My email is morrilldanielle (at) gmail.com

Editor’s Notes: Updated to clarify that the Crunchbase data set only includes publicly announced investments.

I’m updating the list as I learn more from the community, and many investors below have been moved to the active Series A investor list.

I would like to express my appreciation to O’Reilly AlphaTech Ventures, MMC Ventures, Lightbank, Kepha Partners, Paladin Capital Group, Mercury Fund, Neu Venture Capital, Shasta Ventures, Genesis Partners, Magma Venture Partners, Kima Ventures, Greylock Ventures Israel, Softbank Capital, Carmel Ventures and Emergence Capital Partners for reaching out to provide data and help me confirm they are currently actively doing Series A deals in recent months. I have also removed late stage investors who do not typically do Series A deals, seed funds that do not do Series A, and biotech focused investors as I identify them.

Big thank you also goes to Shira Abel, who has been reaching out to Israeli VCs to get them updated and on the active list.

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This doesn’t seem that accurate Danielle. A lot of these aren’t VCs, but rather, angel groups with policies to never do a Series A other than follow ons.

Other’s (like Ron Conway) have their own funds and don’t invest personally.

While these angel groups may not lead Series A deals, they certainly participate in them. I think it is beneficial for founders to know which ones have stopped doing Series A (following on) lately.

Also, Ron Conway does invest personally and my sources tell me that until very recently having him in your round could basically “make” your Series A.

awesome post, so glad someone finally had the courage to out the zombie vc’s – good on you!

Another way to use this (huge!) list is to look at when they -have- made seed investments. In the case of my startup, we’re looking for angel/seed only, so I’m planning to take advantage of your research for that purpose. So: thanks!

BTW, I do believe GoldenSeeds has made A-Round investments more recently than this shows, but they may not be public yet.

While I applaud the effort, the problem with the dataset off Crunchbase means there are several VC’s here that I can spot that have done Seed or A Rounds in the past 3 months that are being listed.

Danielle, this is awesome. Really great job.

I think it’s not true that no one is saying there are Zombie VCs. We hear that all the time. What hasn’t been done before is publishing a list of those, major kudos to you.

I know for a fact that a number of those listed aren’t Zombies just yet, but have a different pace and/or are more stealthy than others (eg. corporate VCs which have an annual budget, or foundry models (Sandbox Industries)), but I’d say it’s a very, very limited number, so it feels pretty accurate to me.

Well done, Danielle. I think that Matt’s correct – but that’s an easily solvable issue – simply update the list as public data is released.

Applause for shining the light on what a lot of us know is happening . . .

Some of these VC’s like Tiger Global are doing deals in emerging markets or outside of Silicon Valley/Crunchbase radar

Here you go : http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/9190749/Facebook-investor-Tiger-Global-takes-stake-in-Nollywood-film-distributor.html

There are a bunch of European and especially German funds in there that would in my opinion be a victim of selection bias: none of them use Crunchbase at all.

Examples:
Target
Eden
KFW
IBB
Creathor
Kima
Anthemis

But – overall I totally agree this is extremely important information and founders should be very aware of the situation. Asking the right questions during fundraising is crucial, and activity, engagement, and fund situation are the least of what an entrepreneur needs to know about.

Nice work @DanielleMorrill

5 Apr 2013, 5:42pm
by Still busy?

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when is the list actually going to be updated? Judging by twitter and HN, people have been sending you updates proving they’re not zombies for 4-5 hours.

Why no changes? How long does deleting a row take?

It is being update now, I just refreshed the cache and you should see the most recent

5 Apr 2013, 10:52pm
by Shira Abel

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Any chance the list could be in alphabetical order so it would be easier to scan?

Yes, this has been the #1 request. Also the dollar amount is meaningless since it has nothing to do with the total current fund size so I am removing it.

This is a serious problem for startup founders, and an excellent analysis.

The one huge flaw (which VCs should help correct rather than encourage) is that Crunchbase is an unreliable data pool of self-reporting PR and deals are often announced months after they happen. It is tragic that this is probably the best source of data available to the public.

Nice work.

Somehow Tech Coast Angels,, the largest angel investment organization in the U.S. founded in 1997 with 300 members in 5 regional Networks covering all of Southern California got missed.

Rather than try to provide a summary of our activity here, I would direct you to this link of press releases.

http://www.techcoastangels.com/pressreleases/all

[...] Morill’s post on Zombie VCs got a lot of attention Friday and generated a huge amount of comments on Twitter ad well as in [...]

I don’t disagree that there are ‘zombie VCs’ out there, but a) how you define them is definitely up for discussion/debate, and b) someone who posts a list like this publicly has an ethical responsibility to make sure the data by which you’re publicly defining them is solid.*

With all due respect to CrunchBase, at least some portions of the data there is publicly editable, and there’s definitely not a legal or strong 1:1 incentive for companies or VC firms to keep it up to date. This list is gross to the point of unclear or misleading utility. (Which may be why CrunchBase doesn’t publish this exact list.)

Danielle, I’m going to go out on a limb here, so please bear with me, as the criticism is meant in good conscience. By not doing due or accurate diligence before using this list publicly as THE definition of a zombie VC, you highly risk giving earnest young startups bad information (however well-intentioned), at least shallowly shaming the more quietly active firms that your list calls out, and/or just needlessly damaging your own public reputation as someone of rash judgement, who jumps the gun in ways that may not be in the best interests of your long-term investor relations.

Obviously you’ve tried to do some damage control: putting up a list of solid firms that have updated recently just a couple of hours later, adjusting the list with those who have taken the time to update you, completely cutting out the numbers since yesterday because they’re not worth much… But many may not even find this list worthwhile enough to answer. You may never ultimately never know how much damage this post ultimately does to you. Why? Because power players and people who actually understand this area may just decide that the list is presently crap, that you’re trying to capitalize on getting called a zombie startup in the WSJ (which I know was taken out of context around a pivot comment you had the guts to publicly announce) – or attention-whore even through your questionable judgement by suggesting they contact *you* for updates. Silence is not support.

Ok, deep breath. All that said, it could be an over-caffeinated mistake; we’ve all made mistakes, and learn, refine with feedback. Your drive and general urges aren’t bad ones: this can still ultimately start a dialogue about the amount of information out there on varyingly successful and active firms, how to evaluate it, what to do with the conclusions. But there are more and less informed ways to have that dialogue. And you’re more likely to bring key people to the table and _have a positive impact for honest/awesome startups and funders_ if you do it with well, with earnestness and considered care.

Danielle, I have my suspicions about how legitimate a purpose this list serves. (AKA, I’m calling linkbait.)

Certainly, any responsible entrepreneur is going to do at least as much qualification pre-pitch on a VC as you would, say, before a direct sales pitch at a customer location, no?

(If not, then the answer certainly is that entrepreneurs need to be appropriately firm about qualifying meetings, which takes a balance of politesse and directness.)

But this post is neither polite nor direct. It assumes that you can use some dubious free (“get what you pay for”) dataset to do a trivial filtering and come up with a meaningful blacklist. Using such unreliable data to make a strong statement about whether someone’s business is worth patronizing isn’t very polite. And, such a blacklist isn’t a meaningful tool for someone who actually bothers to qualify individual investors directly.

I say this having been on both sides of the table, having pitched and been pitched hundreds of times. Remember, VCs are just people whose job it is to manage money according to a particular structure. It’s probably karmically good to be as respectful to them as you would to other suppliers / vendors in your industry.

Danielle, great job on this monumental effort. I know this because I have been posting VC and other data online since 2003 on LinkSV. Using Carmel Ventures, now removed from your list, we have recorded 8 of their investments since 2005, with 3 of them made since August, 2011. These investments have been led by 5 different individuals within Carmel, meaning that they probably have a strong awareness of activities in the SV. They have co-invested with lots of other VC firms, but only in the case of Opus Capital and Benchmank Capital have they shared two common investments. We only track VC on companies in the SV. Posted by Bob Karr, CEO LinkSV. We have recorded 76 1st round fundings in the Silicon Valley in 2013 thru 4/5/2013.

First of all let me say that I applaud this initiative. We are all know that countless entrepreneurs waste countless hours with folks who cannot invest.

Directionally the analysis is correct; a quickscan of your zombie VC list and one nods head in recognition.

There a few fundamental flaws with the current method though, though I am still very happy someone is getting the ball rolling in driving transparency.

A/ You use absolute rules for what defines activity. Like any binary method it’s prone to fail, either because of inaccurate data OR discrete / unannounced deals.

Ideally you would recognize that data is inaccurate and instead of making an A and a B lis you would compute an index of activity and determine who’s “most likely a zombie” instead of exposing yourself like that (having Shasta Ventures in the zombie list = credibility bomb, given their new over-target fund was raised in late 2011).

Funds could be ranked according to their activity score or even better a holistic score that would take into account their own announced fundraising data combined with assumptions about investment period (few funds have more than a 5 year investment period).

B/ Seed data is extremely inaccurate and again looking at seed activity instead of a one off trigger would make more sense. You could use Angellist and Crunchbase combined.

Any zombie firm can make a few seed investments late in its life to maintain the semblance of activity. Conversely many highly respected firms like Benchmark indicate their strategy does not include doing seeds.

C/ I am not sure how you account for investment style and strategies here, but a bunch of firms will simply not do series A. How can Emergence Capital Partners appear in a blog post called Zombie Firms ?

The bottom line : I love the initiative but you “Rules for spotting a Zombie Firm” should more accurately be turned around to say “Likely Indicators that you are talking to an active Seed or Series A investor”. Doesn’t quite have the same ring to it of course :-)

[...] entrepreneur called Danielle Morrill just kicked up a bit of a shitstorm with a nicely titled "Zombie VC" post.   It's a nice pendant to her recent Zombie Startups post in which she deals with her own [...]

HI Danielle, you made a lot friends in the VC community. :) Also the LP community will probably marvel at your astute observations and courage.

Prelude to your raising your own VC firm. : ) or joining Kleiner Perkins. I SALUTE YOU.

Majority of the funds mentioned have negative sentiment in the community.

Glad this can now be circulated so startups don’t spend time with the wrong funds, either at seed stage, or funds that will have problems with follow-on investments.

Founders talk. This is a great start to what should be transparent information.

11 Apr 2013, 1:07pm
by Anonymous

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I’d just point out that several of the firms on your list are only seed VCs and they make that clear when you talk to them. It might be good to filter out those that never funded a series A.

Can definitely understand the frustration from a founder’s perspective trying to raise capital. Can be hard to tell whether an investor just wants to stay in the information flow or is really considering an investment. There’s an interesting parallel to certain capital markets activities, where investors have to do trades occasionally that they might lose on or break even in order to gain access to pricing information – why give away valuable information unless someone’s willing to pay to play?

13 Apr 2013, 4:35pm
by Lili Balfour

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“Please let me know about a Series A deal you’ve done in the past 6 months (I don’t need the details, just your word) so I can get you off this list.”

When VCs are in the process of raising a new fund, they begin looking for portfolio companies. Let’s say it is January 1st and a VC sets out to raise a new fund. The fund could spend the next 9 months getting to know entrepreneurs in their focus area. Keep in mind, investors like to get to know companies before they invest. They could also be reaching out to LPs during this time frame. It could take 9 months for the fund to close. So, in this example, a credible fund doesn’t need to make an investment within a 6 month time frame to be deemed credible.

I get what you are trying to do here, but I think you are missing some key background details on how the VC world operates.

btw – I just looked at the list. Allen & Company? You might want to look those “zombies” up…so not out of business.

[...] entered a phase where many of these retail funds have become Zombie VCs. Danielle Morill wrote a trenchant piece on Zombie VC funds, complete with warnings for startups and even a list of candidates for the [...]

[...] raise new funds.  Venture capital fundraising is tough regardless of your sector, and lots of “zombie” venture funds across all industries are out there that aren’t likely to raise new funds.  And it’s [...]

[...] waste time with funds that aren’t actively investing. Danielle Morrill blogs about this a bit (her list is not entirely accurate), but you should know that firms you meet [...]

[...] waste time with funds that aren’t actively investing. Danielle Morrill blogs about this a bit (her list is not entirely accurate), but you should know that firms you meet [...]

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