risk capital the industry is based on signals. Major investors help close rounds, prorated royalties show a company’s promise, and the title of partner validates people within companies looking to close deals.
Reverea new bet that the ex-executive of AngelList is building eric woo and family office operator Chris Shen, is playing with these features. The startup, launched publicly today, is building a ratings system for the venture capital industry. The goal is to create a more standardized way of tracking information about emerging fund managers so that institutional investors know how to navigate the changing landscape.
“There’s just too much influence on a small number of people, where if Keith Rabois or Elon Musk just tweets something, everyone just jumps on the bandwagon,” Woo said. “In the emerging manager space, usually that signal comes from big anchor LPs.”
How does it work
RevereThe tone of is that a broader audience wants to be involved in backing venture capitalists; they just need the signal on where to go and how to measure (since the test of constant returns is not necessarily a reality thanks to the entire 10-year horizon).
Using data provided by an emerging venture company, Revere uses 20 categories to verify, aggregate and research company quality in 5 areas: sourcing, team, value added, history and company management. It then creates a heat map, using the same dataset provided, that shows, at a quick glance, a company’s strengths and weaknesses in those categories. The research reports include everything from details of fund formation, management structure, strategy and service providers when evaluating the company. It’s doing its 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 says it does it cheaper, faster and with emerging fund managers as a key focus. For example, Revere doesn’t charge fund managers for reports; instead, charge LP per rating or a monthly subscription fee to access all reports. The 11-person startup currently takes around two weeks to prepare a report. Over time, if the demand increases, it will be more difficult to deliver the reports in that same period of time.
As Revere collects more data, it sees an opportunity to create more performance benchmarks for the asset class, something PitchBook and Cambridge Associates have not done well, according to Woo. “The minute we can stand up and say these are the benchmarks, and we’ll show you why funds that are smaller, at an earlier stage, outperform, then we think it’s going to be literally a sea change in terms of risk perception”, by LP.
The startup currently has more than 100 funds on its platform. Revere declined to share the names of the clients, but said one of his first clients was a major investment consultant. The company does not see itself as becoming a marketplace that helps transact between verified companies and interested LPs; however, he did confirm that millions in funds have been invested as a result of his reporting.
While Revere cannot widely disseminate a report with actual fund manager data, the format, tone, and structure of the sample data in the template report below provides a good idea of what subscribers are seeing.
But who rates the ratings?
Ratings are a touchy subject at the company, only reinforced by some of the reactions I got from investors when I told them about this ratings platform. VC rating sites have popped up in the past, largely run by and for founders, but have always struggled with negative selection bias and the difficulty of verifying individual accounts. back channel, currently accepting beta users on its Testflight, it 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).
Still, Revere could find himself falling into the same trap others have. The subjectivity in some of the qualitative reporting of venture startups could raise questions. The company doesn’t use hard science or artificial intelligence to draw conclusions about a company, which means bias could easily creep in. Would Woo feel stronger if a former AngelList executive raised a new fund, or would Shen especially seek out people who understand the depths of the family office world? The difficulty is getting people to lean on data, rather than brands, when it comes to supporting startups.
Woo and Shen believe that Revere’s job is not necessarily to approve or disapprove whether a particular hedge fund or person is a good idea, but rather to provide a complete picture of what an entity is offering at a current time. on time. That said, in a mockup of a report, Revere showed that it rates companies using categories like “excellent” and “best in class,” a nomenclature reserved for “complete performers who rate well in multiple categories.” Each year, the company ranks a few companies as Best in Class, Rising Stars, or Verified.
“Part of the reason people love to invest in venture capital is because of the intangibles, right? If they just wanted returns and kind of good risk-adjusted returns, there are other asset classes,” Woo said.
So far, Revere has raised $5.62 million since its launch, including a May 2021 pre-seed round of $1.35 million from investors including AngelList, Twitch co-founder Kevin Lin, and Blue Future Partners. It also raised a $4.27 million round 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 check 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 discontinued, PDF style.