In a little over a year, the site TheFunded.com has become the black sheep of the venture capitalist community. Imagine a site that lets entrepreneurs anonymously rank, review and comment about venture capital firms and partners, as well as share the so secretive "deal terms". TheFunded has now become one of the topic of conversation during Monday morning's partners meeting at VC firms up and down Sand Hill Road!

At the Red Herring conference, I caught up with TheFunded.com creator, Adeo Ressi, who shared with me some of his horror stories: the cease and desist letters at his personal home requesting to bring the site down just after he revealed his identity, the litigations against entrepreneurs that dared signed their names on a negative review of a VC or the nightmare of raising capital for his previous start-up.

Here are the main complaints from members of TheFunded:

- Confidential information shared with investors is often sent to competing companies and appears in those companies' presentations
- VCs are not honest with the CEOs about the prospects of funding
- It takes excessive amounts of time to raise money
- Beware of arcane terms as there are about 150 important terms that VCs may ask for during an investment
- And there are no correlation between ownership percentage and value achieved in case of a successful exit/acquisition

Any alternatives?

Not really. If you're looking at raising a small amount of money, it's worth looking government/military grants/funds, bank loans or angels. But VCs are the only way to go for an investment ranging from $2 to $20 million.

"It's the VCs suitespot".

Tectonic shift coming to the Venture Capital world

According to Ressi, a lot of the 3,800 VC firms worldwide are inactive i.e. not making new investments. Successful firms will be able to raise larger and larger amounts of money, like KPCB's recent $1.2 billion infusion, the others will just die.