TheFunded inspires lawsuit from VC firm

A site for entrepreneurs to rate--and rant about--venture capitalists has touched off its first legal action.

TheFunded, based in Palo Alto, Calif., received a subpoena late Tuesday to disclose the identity of a member who posted unfavorable comments about the venture firm EDF Ventures, according to TheFunded's founding member Adeo Ressi.

EDF Ventures filed a lawsuit in a Michigan state court on May 30 against a John Doe who said on the review site that after working with EDF several times, the firm is "to be avoided unless you're desperate." The lawsuit alleges that the commenter made false and defamatory statements about EDF's members, insinuating that they're dishonest.

VentureBeat first reported the story.

TheFunded has been given until August 27 to send over records on the member, but Ressi said that he does not have identifying information. TheFunded, he said, does not store any personally identifiable data on members, including IP addresses.

"I'm confident that his or her identity will be maintained in this instance," he said.

Since it launched last fall, TheFunded has drawn the ire of more than one VC for unfavorable ratings. Debt firm Hercules sent a cease-and-desist letter to TheFunded over negative comments posted to its site shortly after the site was introduced. But Ressi said that Hercules eventually dropped its request. He said that while many venture capitalists have disliked comments made by entrepreneurs, this is the first lawsuit filed in a court against an anonymous poster.

Despite the hubbub from venture capitalists, Ressi said that as much as 60 percent of the comments and ratings on the site are positive. For those reviews that are not, he wants to ensure that members feel that they can maintain their anonymity without repercussion.

"We make a commitment to protect the anonymity of members, if I can test that in a court all the better," he said.