There have been many different approaches to ranking VC Firms over the years I’ve been an entrepreneur and a VC. Each approach I’ve seen has issues. Most are easily gamed or have statistical bias issues.
I got the following note from Roy Bahat at Bloomberg Beta a while ago about a new approach called Founder’s Choice.
We and a few other firms sponsored a “founders choice” version of the Midas List, with a legit (IMHO) rating methodology, built by two Penn students. No vitriol possible (unlike The Funded, etc.). We’ve wanted this to exist for a long time — NPS of us as a firm is too forgiving a metric, everyone scores well.
My first question was:
How are they dealing with sampling bias on this one? For example, we send to all our founders and say “please fill this out and give us high scores.” Mostly just curious on methodology.
Roy had a thoughtful answer that made me a believer after a few more questions.
You are literally the only one (and I’m relieved someone did) to ask on sampling bias. For context, the general way it works is founders auth with LinkedIn and then the product tosses away their identity (or, more accurately, only keeps a hash and disconnects it from their ratings). Then the founders get asked for pairwise comparisons of only the VC firms who have backed them (so this is about who founders like as investors, not who has sour grapes from a pitch). How (Read more…)