Valleywag, Monitor110 and Telling it Straight
Aug 08, 2008

Few things irk me more than shoddy journalism, lousy research and bad intentions, and these three neatly came together in a piece by Nicholas CarlsonValleywag. The thesis: Monitor110 wasn't brought down by the issues I raised in my post-mortem, but because our lead VC failed to live up to a financing commitment. This was the story-line Mr. Carlson was hell-bent on writing about, and that he did. He reached out to me, people that know me and people that might know me concerning the lead he had gotten from somebody, and received a "no comment" from everyone I know that he touched. Somehow my "no comment" was twisted into a "he did not deny (the "facts" of his article)." Nice inference, Nick. But that didn't stop him. A paucity of facts and understanding of the situation together with a total lack of knowledge of early-stage operations made for a most forgettable article. But I can't forget it. Because words have power, even in the tabloids, be they off-line or online in nature. And using that power irresponsibly pisses me off. published today in

Here is a total cut-and-paste of the article that ran today:

Why did investor-news aggregator Monitor110 go under, taking $20 million in funding with it? Read early investor Roger Ehrenberg's surprisingly humble and informative blog post about the ordeal, titled "Monitor110: A Post Mortem," and it sounds like the startup fell prey to the usual pratfalls — too much PR, weak leadership, and a confused product vision. Probably all that's true. But what's also true, a source tells us, is that Monitor110's own investors, specifically Draper Fisher Jurvetson, which invested most of that $20 million, ensured Monitor110's failure during its final months.

A source familiar with the venture capitalists tell us that after Monitor110's last funding round, the company began to burn through cash faster than expected. Fortunately for Monitor110 CEO Brennan Carley, the company's primary investors at DFJ were very understanding. They promised — "truly promised," our source tells us — Monitor110 a bridge loan to get the startup through until its next funding round. Monitor110 went ahead and spent the money, "with DFW's "assurance the bridge was coming," our source says. But it never came.

Instead, DFJ killed the bridge loan and — as is being reported today — funded Monitor110's direct competitor Skygrid instead, leaving Monitor110's other investors, like Ehrenberg, with nothing better to do than write humble postmortems. Ehrenberg, reached for comments, did not deny any of the particulars of this story.

The real lesson of Monitor110, then, is this: Never trust a venture capitalist. Why isn't Ehrenberg telling us this story? He wouldn't say, but the most likely explanation is that he knows he might do business with Draper Fisher Jurvetson again, and he doesn't want to be blackballed. Far easier to play the humble martyr, and gain popularity by licking his wounds and sharing anodyne lessons learned.

Here are the real facts:

• Monitor110 was burning cash more quickly than expected, not due to cost overruns but due to revenues falling short of projections.

• We did have a disagreement with our VCs about a bridge. The contingencies they thought were baked into the commitment were different than those we perceived. Did this suck? Yes, it certainly did from management's side of things. But did it cause Monitor110's ultimate demise? No. Poor execution did. And I'm not sure simply adding more capital would have enabled us to grow out of our deeply-seated problems.

• If the company had generated revenues within spitting distance of our revised projections, the issue of a misunderstanding concerning the bridge would have been moot because our VCs would have gladly come up with the money required. They're not stupid; they invested to make money, not drop millions on a neat idea that couldn't be successfully commercialized.

• The new CEO, Brennan Carley, came into a very difficult situation and played the hand he was dealt the best he could. His was the role of rationalizing the business, increasing efficiency and reducing costs in order to provide some extra runway for achievement of revenue milestones. He did a great job; it was just too little, too late.

• Skygrid is a fine company and Kevin Pomplun is a smart young guy doing some interesting stuff. I have sought to provide him input and counsel as a member of the same community, facing similar challenges and possessing similar interests over the past 18 months. I hope he has better results than we did, and I trust my input has and will be helpful in this regard. I begrudge both him and his investors nothing and wish them only success.

• I don't need DFJ to do my next deal or any other deal and the issue of being "blackballed" is beyond a red herring. It's moronic. I have money. I have access to lots of money. I have access to plenty of non-VC money. If someone (such as myself or any of those at Monitor110 with whom I've worked) is smart, ethical and acts with honesty and integrity then the "blackballing" of which Mr. Carlson speaks is a non-issue.

• I am not "playing" the role of martyr or anything else, and the popularity issue is almost hilarious. Nobody was more shocked than me at the response to my earlier post. The fact that many found it helpful was terrific, surprising and fulfilling. And if Mr. Carlson had ever read my blog, he'd know that the post-mortem was completely in-character and consistent with both the intent and ethos of my writing over the past two years.

• I am an angel investor with a portfolio of 25 investments, several of which are undeniably successful, some of which have achieved successful exists, and precisely one of which was a total write-off: Monitor110. Am I really licking my wounds, Nick? Is that really what I'm doing?

Why should I care what a muckraking reporter wants to print? Because words have power. And with that power comes responsibility, at least as far as I'm concerned. Mr. Carlson chose a single issue in a much larger, more complicated situation as a vehicle for both damning our VCs and implying that my post-mortem was something less than ingenuous. It's writing like this that gives Internet journalism a bad name. Issues of reputation and relevance are paramount in separating the good from the crap (and this is an area I know pretty well), and it's hard enough separating the good from the really good than having to deal with the lousy masquerading as good. My post will do absolutely nothing to stop the tabloid-style journalism that seems so popular today, but if you are shooting for lots of clicks then at least get the facts straight, ok? And if you lack the facts may I suggest a three-step process: stop; breathe; and think. Either get more facts or don't write the story. This is what real journalists do.