venture capital the industry is built on signals. Lead investors help close rounds, pro-rated rights show a company’s promise, and partner status lends validity to people within companies looking to close deals.
Revere, a new bet being built by former AngelList executive Eric Woo and family office operator Chris Shen, plays on these characteristics. The startup, launched publicly today, is building a rating system for the venture capital industry. The goal is to create a more standardized way to track emerging fund manager information, so institutional investors know how to navigate the changing landscape.
“There’s just too much influence in a small number of people, where if Keith Rabois or Elon Musk tweets something, everyone jumps on the bandwagon.” Woo said. “In the emerging manager space, that signal typically comes from big anchor LPs.”
How it works
Revereis that a wider audience wants to participate in supporting venture capitalists; they just need the signal on where to go and how to value (since evidence of consistent returns isn’t necessarily a reality through the whole 10-year horizon).
Using data provided by an emerging venture capital firm, Revere uses 20 categories to verify, aggregate and research company quality in 5 areas: sourcing, team, value, track record and company management . It then creates a heatmap, using the same dataset provided, which shows, at a quick glance, a company’s strengths and weaknesses in said categories. Research reports include everything from fund formation details, management structure, strategy and service providers, to company valuation. He does his due diligence and to date Revere has written over 80 reports.
The strategy is reminiscent of what Cambridge Associates has been doing for years, but the startup claims to do it cheaper, faster and with emerging fund managers as a key target. For example, Revere does not charge fund managers for reports; instead, it charges LPs on a rating basis or monthly subscription for access to all reports. The 11-person startup is currently taking about two weeks to prepare a report. Over time, if demand increases, it will become more difficult to produce reports within the same time frame.
As Revere collects more data, it sees an opportunity to create more performance benchmarks for the asset class, which Pitchbook and Cambridge Analytics have not done well, according to Woo. “The moment we’re able to stand up and say here’s the benchmarks, and we show you why funds that are smaller, early stage, are outperforming, then we think that’s going to literally change dramatically in terms of perception of risk”, on the LP side.
The startup currently has more than 100 funds on its platform. Revere declined to share the names of his clients, but said one of his first clients was a prominent investment consultant. The company does not see itself becoming a marketplace that helps transact between verified companies and interested LPs; but confirmed that millions have been invested in funds following his reports.
Although Revere is unable to widely distribute a report containing actual fund manager data, the format, tone, and structure of the sample data in the report template below give a good idea of what see subscribers.
REVERE Ratings – Lantern Ve… by TechCrunch
But who writes the notes?
Ratings are a hot topic in venture capital, reinforced by some of the reactions I’ve received from investors when talking to them about this ratings platform. VC rating sites have sprung up in the past, driven largely by and for founders, but have always struggled with the selection of negative biases and the difficulty of verifying individual accounts. Backchannel, which is currently accepting beta users on its Testflight, wants to be a private subreddit for founders and LPs. Revere will have to convince investors that this isn’t a ranking of who’s hot and who’s not, but rather research-based recommendations aimed at LPs (not tech twitter).
Yet Revere could fall into the same trap as the others. The subjectivity of some of the qualitative reports of new ventures could raise questions. The company doesn’t use hard science or artificial intelligence to draw conclusions about a business, which means bias could easily creep in. depths of the family office world? The challenge is getting people to rely on data, rather than brands, when it comes to supporting new businesses.
Woo and Shen think Revere’s job isn’t necessarily to give a thumbs up or a thumbs down if a certain VC fund or person is a good idea, but rather to offer the full picture. of what an entity offers at a given time. . That said, in a mock-up of a report, Revere showed that it rates companies using categories like “excellent” and “best-in-class,” a nomenclature reserved for “all-round players who rank well across multiple categories”. Each year, the company ranks a few companies as best-in-class, rising or verified stars.
“Part of the reason people like to invest in venture capital is for the intangibles, isn’t it? If they just wanted returns, and kind of good risk-adjusted returns, there’s has other asset classes,” Woo said.
So far, Revere has raised $5.62 million since launch; including a $1.35 million May 2021 pre-seed round from investors including AngelList, Twitch co-founder Kevin Lin, and Blue Future Partners. He has also raised $4.27 million from Cherubic Ventures, Overlay Capital, Benhamou Global Ventures, Oyster Ventures, MDSV and others.
Instead of trying to get rid of investors’ need to match patterns and tick specific boxes, Revere wants to disrupt the industry through standardization. Let’s see if the market is ready to ask for help; and if the standard is tired enough to be disturbed, the PDF style.