By JP Mangalindan
March 24, 2011

If you’re not already acquainted with TheFunded, think of it as Yelp for entrepreneurs who rate venture capitalists. But there’s a twist — a throwback to the web’s woolier days: TheFunded shields users’ identities, encouraging them to don a cloak of anonymity. That means the reviews of venture capital firms and individual investors on the site can range from benign to scathing.

“Still a complete pompous ass,” is how one poster commented about a particular investor. “We never met him, but he back-stabbed our start-up/founder and created many problems to us,” goes the line about another.

Users don’t care a whit about making statements like these because anonymity is on their side — an increasingly rare luxury when even sites like Techcrunch have switched over to verified-identity systems, like Facebook’s plugin comments system. It’s also why maligned venture capitalists continually threaten litigation against the site, at a pace of one or two nasty lawyer letters per week.

All that — save maybe the litigation headaches — was exactly what founder Adeo Ressi was hoping for when he started the site. Ressi — who now also runs The Founder’s Institute, a start-up incubator — concocted TheFunded after running into problems of his own with venture capital firms. Identified on TheFunded as “Ted” back then, he built a forum that better armed entrepreneurs like himself with more knowledge of how to deal with VCs and fueled media speculation about his real identity, from Digg founder Kevin Rose and Gawker titan Nick Denton to entrepreneur Jason Calacanis.

Three years and one economic crash later, Ressi has long since “come out,” as TheFunded’s founder, some would say to the disappointment of the VC world. The mystery of Ressi’s identity alone largely fueled TheFunded’s hype machine, and it’s fair to say TheFunded has never attained the same level of fame since.

Upon reflection, he feels the site has leveled the playing field, or if not leveled it, at least made it more of a fair fight. The site claims 16,101 registered CEOs or founder members, over 25,000 ratings and reviews, over 24,000 users comments, and still takes in between 50 and 100 CEOs a day.

“Back then, only the most savvy and the most frequent pitching CEOs even had a modicum of the knowledge that an investor would have,” he says. “Now, a good CEO who reads TheFunded and reads some other resources out there is on a similar playing field as most investors.”

The site eventually introduced the “Banned VCs” area, a list of organizations and individuals who aren’t eligible for the site’s “leaderboards” because of suspicious ratings-inflating reviews, a lack of new investment activity, or because they threatened litigation against the TheFunded. The unhappy VCs apparently remain numerous.

“I get threats all the time to this day,” Ressi claims. “I’ve had a partner tell me that they discussed assassinating me at a partner meeting. He didn’t say that they decided to do it, because I’m still alive, right? But I was literally out one night and there was this drunk VC there, and he literally said to me we discussed having you assassinated in our partner meeting — he wasn’t kidding.”

While he’s likely exaggerating, given how nasty reviews can get, the idea’s certainly not impossible. Ressi could also be trying to rustle up free publicity. According to Compete, site traffic has declined consistently since last August and as far back as early 2010 if you allow for the occasional traffic spike, while revenues are roughly half of what they once were. Ressi attributes it to the fact that there are significantly fewer VCs in the game these days, but given that entrepreneurship is on the up and up — $21.8 billion invested in 3,277 companies during 2010, a 12% increase over last year — that might not be the whole story.

No, if Ressi is to be believed, TheFunded played a major role in transforming the start-up investment landscape, and if so, maybe the fact it did its job means it’s no longer necessary. Thanks to it, VCs as a whole are more approachable than ever, and logically, “the next big thing” is the even more transparent and probably more useful AngelList, a non-profit entrepreneur-investor matchmaking service Ressi admits is “amazing.”

That’s, of course, assuming you’re willing to give Rossi and TheFunded credit where it may or may not be due, which depends on where you fall — empowered entrepreneur or scorned VC?

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