The Fort - Jonathon Perrelli Fortify VC

Jonathon Perrelli Fortify VC Part 2

Jonathon Perrelli and Fortify VC Part 2 (see part 1)

It was April 23rd and I had just posted an article about questionable startup investors titled, Pretangel Alert – Beware Fake VCs And Angels. That post was a warning for founders to be on the lookout for faux investors that pretend to be interested in investing with the true intention of garnering paid consulting engagements. In this post I non-derogatorily mentioned a couple of Investment Funds, including Fortify that were in a Zombie state…. meaning not making new investments in new companies. Not a bad thing… just a stage that happens to funds when a fund is winding down.

Five hours later Jonathon Perrelli (JP), of Fortify, responded,

“Fortify Ventures has made investments in existing portfolio companies every year since 2011. Most recently in 2016, we exercised our rights to invest in Social Tables (again). While we have only invested in the existing portfolio since 2014, we ain’t no zombie.”

In my experience Zombies don’t know they are Zombies. How many times has a Zombie on The Walking Dead said, “holy crap! I’m an undead, brain eating, rotting corpse.” So it didn’t surprise me that JP didn’t know he had turned Zombie. What he just described, a fund that makes no new investments is the very definition of a zombie see: Zombie VCs by Danielle Morrill

I found it interesting that JP was publically sharing portfolio information because many of his Limited Partner (LP) Investors in Fortify have no idea what is happening with the fund. They had not received a meaningful Annual Report or Portfolio analysis in years. I figured that JPs vague response, “exercised our rights to invest in Social Tables (again),” was news. Could I get more? So I replied,

“Wow, have you sent a report to the LP’s because you seem to be the only person who knows that?”

…and JP replied obtusely and included an fortify annual reportimage of an Annual Report, with the date cropped out.

“Glen, we have sent updates to LP’s and are due for another one. Fortify Ventures Fund 1 had a very limited amount of capital to invest (less than most Series A rounds) but we certainly got a lot done with the very small investments that we made and the effort that we put in to supporting the ecosystem. If any LP’s in Fortify Fund 1 are unhappy and would like to sell their interests, they should let me know. As always, thank you Glen.”

Well you’re welcome JP, but you know that picture you posted? Why is there no date on it? Why do 4 LPs tell me they hadn’t received anything like that in years? The 2016 Annual report I saw was woefully short of the Limited Partnership Agreement. The annual report I have is a 505 word email that was basically 3 lists of companies with little details. This post seemed like pure BS to me and that’s when I started asking questions.

It’s okay to say, “hey guys, we ran out of money. I didn’t raise enough. We don’t have the funding to pay auditors or produce a glossy report. Sorry guys.” Just please don’t pretend you’re killing it, not when everyone who invested in you knows it’s barely breathing… or in the words of Monty Python and the Holy Grail, “I’m not dead yet.” I know I’m not that smart… I just don’t like being treated like I’m stupid. I started asking questions.


Questions LPs Are Asking

  1. Hinge Distribution – In March 2012, according to Crunchbase, Jonathon Perrelli (aka JP) and Fortify.VC invested $100 thousand in the form of a convertible note in Hinge (another source reported it as  $25,000). Some time in a later funding round that note was converted. According to the CEO of Hinge Fortify did not exercise their option to purchase shares when the note converted and therefore the funds from the original note were paid-off and sent back to Fortify. Normally when a VC receives cash back from an investment the Limited Partners receive their pro-rata share of the distribution. JP’s LPs tell me that didn’t happen. So on May 16th, I sent JP an email and asked what happened to the distribution… I’m still waiting for an answer. If I get one, I’ll post it here.In JPs defense the terms of the Fortify Partnership Agreement didn’t require a distribution. I asked a prominent and successful local VC about his standard practice around distributions and he told me that normally they distribute the pro-rata share of any investment returns and yet over the last 10 years there were only a  limited number of times they held on and reinvested the funds. When funds were reinvested and not returned to LPs, this VC reported the event on his audited annual report. Which brings me to question #2.
  2. Reporting and Transparency – The Fortify Limited Partnership Agreement clearly outlines the reporting requirements. LPs say that Fortify is not meeting its reporting obligations which state:
    • 11.3 Quarterly Reporting: The General Partner shall transmit to the Limited Partners within seventy five (75) days after the close of each of the first three quarters of each fiscal year, unaudited quarterly financial statements, a summary of acquisitions and dispositions of investments made by the Partnership during such quarter, and a list of investments then held, together with an estimate of the value of such investments.
    • 11.4 Annual Reporting: The General Partner shall transmit to the Limited Partners within ninety (90) days after the close of the Partnership’s fiscal year audited financial statements of the Partnership prepared in accordance with the terms of this Agreement and otherwise in accordance with generally accepted accounting principles, including an income statement for the year then ended and balance sheet as of the end of such year, a statement of changes in the Partners’ Capital Accounts, and a list of investments then held. The financial statements shall be accompanied by a report from the General Partner to the Limited Partners, which shall include a status report on investments then held, a summary of acquisitions and dispositions of investments made by the Partnership during the preceding quarter, a valuation of each such investment and a brief statement on the affairs of the Partnership during the fiscal year then ended.
  3.  Conflicts of Interest  What mechanisms are in place to protect against conflicts of interest? For instance:
    • Handpressions – According to Crunchbase Fortify invested in Handpressions in January of 2014. Handpressions was founded and run by a woman who at times is JPs Girlfriend and in addition she was a former Fortify general partner. How was this not a conflict of interest?
    • LifeFuels –  A company founded by Fortify.VC’s Managing Director, Jonathon Perrelli. Who negotiated the price? JP or JP?
  4. Independent Oversight – There does not appear to be an independent oversight committee to review investments for conflict, no independent valuation of portfolio companies, and no independently audited Annual Report.

Portfolio Review

What’s happened to the Fortify Portfolio? According to the 2016 “annual report,” (a 500 word, including company names) email.

Fortify ranks the companies in 3 categories: 1) Going Concern, 2) Acquired, 3) Cease Operations

Going Concerns – I’ve assembled a panel of six serial entrepreneurs and angel investors to rank the 22 companies that are still in play in the portfolio (including the 19 companies listed in the email, plus Handpressions which was not listed for some reason and the 2 companies obtained via acquisition). Fortify reportedly no longer has a stake in Hinge. Companies were ranked 1 to 5 with 5 being the highest chance of a significant exit and 1 being the highest chance of being a write off. I then ranked these companies by total score from highest to lowest.

  1. Social Tables – Invested: July 2013 (Note: Mr Cranky invested in May 2012 and July 2013)
  2. Aquicore – Invested: Jan 2014
  3. Venga – Invested: March 2012
  4. Hinge – March: 2012 (Hinge Reports Fortify no longer has stock in Hinge)
  5. – ??? (not clear if Fortify has a stake in
  6. TalkLocal – Invested: November 2011 (Note: Mr Cranky is an Investor)
  7. SnobSwap – Invested: June 2013
  8. The Trip Tribe – Invested: October 2014 (estimated)
  9. Onevest (via acquisition)
  10. 410Labs – Invested: July 2011
  11. ArmorText (via acquisition)
  12. IntroHive – Invested: January 2012
  13. RidePost – Invested: June 2013
  14. Cont3nt -Invested: September 2012
  15. Emprego Ligado – Invested: November 2012
  16. LegCyte – Invested: June 2013
  17. StarShooter – Invested: November 2011
  18. Synapsify – Invested: February 2013
  19. Handpressions – Invested: January 2014 (was not listed on 2016 “annual report” but is listed in Crunchbase and on the Website. Company founded by Fortify General Partner, Carla Valdes)
  20. LifeFuels – ??? (Company Founded by Fortify Managing Director, Jonathon Perrelli)
  21. Feastie – Invested: March 2012
  22. FID3 – Invested: March 2012

Color Key – Fair Chance of Positive Exit, Likely Sideways, Struggling, Likely Failure

Exited – 4 companies that existed although according to the “annual report” only 2 of them have a chance of producing any return.

  • Acquired with no benefit to Fortify – 2 Companies
    • Speek – Invested January 2013 – “Acquired” by Jive Communications. Fortify reports they have no stake in the acquiring company.
    • Fleksy- Invested October 2012 – Acquihired by Pinterest. Fortify has no stake in the acquiring company.
  • Acquired and Fortify maintains a stock position in acquiring companies
    • Uppidy- Invested: March 2012 – Acquired by ArmorText (Formerly Gryphon)
    • Cofounders Lab – Invested: March 2012 – Acquired by OneVest

Cease to Operate

  • CampEasy – Invested: August 2013
  • FastCustomer – Invested: September 2011
  • Hallway – Invested: September 2012
  • HugeFan – Invested December: 2012 (Note: Mr Cranky is an Investor)
  • Kahnoodle – Invested October 2012
  • Lemur – Invested: March 2012
  • MonthsofMe – Invested: June 2011
  • NextGame – Invested: March 2012
  • Saylo – Invested: March 2012
  • TistaGames – Invested: October 2012
  • TrendPo – Invested: January 2013

Open Questions

Just in case we do have a working press or if there are tipsters I’d be curious to find answer to the following?

  1. How much did the fund raise and how much did it ultimately invest?
  2. Does Fortify have any remaining stake in Hinge? If not, why is it reported in the annual report?
  3. Why did founding General Partner, Adam Fazackerley leave within 6 months of founding the fund? Adam says he wasn’t on salary and the business he started with his wife, Lay-N-Go was doing so well that it required more of his time. Others close to the situation say, Adam was highly frustrated with JP and Carla.
  4. Why did Dave Sandrowitz join and leave the firm in 6 months?
  5. Was any LP money from Fortify used to fund StartupLand?
  6. Who set the price of the investment in Handpressions? How was it negotiated? What method was used to insure the investment was in the best interest of the LPs?
  7. When Jonathon invested in his own company LifeFuels did Jonathon set the price or did Jonathon set the price? How much LP money was invested in LifeFuels?
  8. Is Fortify meeting the commitments of its partnership agreement, including: Quarterly Reports, Annual Audited Reports? If not, when will the LPs receive a legitimate Annual Report.
  9. Now that the fund has no staff, no facility and all the General Partners have full time jobs (some of them in portfolio companies) is the company still taking its management fee?
  10. When will Fortify supply audited financials to its LPs?
  11. JP stated, “If any LP’s in Fortify Fund 1 are unhappy and would like to sell their interests.” What’s your offer price JP? Are you offering 2X, 1X .5X or .1X?


That is the tale of JP and Fortify as I see it. Fortify was an exciting force with much potential. Unfortunately as far as many of the LPs are concerned the fund did not live up to the hype. I’m pretty sure JP’s ego believed he’d realize his hyperbolic vision. Unfortunately his ego wrote checks his abilities could not deliver.

There are some founders who complain about promised investments and checks that were never written. One CEO of a successfully exited company complained that JP forced him to shake on a deal in front of an audience but then JP balked at an investment because of the valuation agreed to by other investors.. That was a missed opportunity, this company paid off in a good exit.

There was another case of a company in which I invested where the CEO relayed to me that weeks after the closing, JP had not yet met his committed payment. He was promising to come up with a check soon. I urged the CEO to cut him off as it wasn’t fair to the rest of us investors who made the deadline. Alas, the CEO allowed JP to provide the funds weeks late.

Make no mistake, JP and Fortify have their share of supporters. For instance, Sam Pollaro, CEO of Venga, one of Fortify’s stronger portfolio company’s commented to me that, “Venga probably wouldn’t be in existence today without JP and the Fort.” That’s an endorsement for sure. There are many entrepreneurs who will speak up for him and his tireless efforts to support entrepreneurship in DC.

Has JP and Fortify done some good? Yes…. Would great companies like Social Tables be great companies without the Fort… as the first person to invest in that company, I’d argue yes. But maybe not. There are some companies like Venga that may not have survived without a Fortify and Venga-like companies are good for the ecosystem.

Perhaps the biggest damage is the amatuer investors who invested in the American Startup Dream. How can any investor not feel burned due to the lack of positive returns, the conflicts in investments and personal decisions, mismanagement and lack of reporting. Those investors and our ecosystem would have been better served investing in a New Atlantic Ventures or a GroTech. Those investors will never dip their toes back in the water and that money is lost to the ecosystem forever. The damage has ripple effects as others will hear about the bonehead investment people made in a new VC and they’ll stay away.

A batter steps up to the plate and strikes out.  If that batter lived a healthy life, worked out regularly, stepped up clear-eyed to the plate and made an honest effort to the best of  his ability… shit happens. Every fund has the potential to deliver negative returns. I invested in FBR II, wich returned $7,000 for my $93,000 investment. The fund was well managed and transparent. They get another at bat.

But if the batter never works out, is drunk when he steps up to the plate and strikes out; that batter should be barred from the game. To raise money, JP boasted about millions that he had raised from investors that never materialized, he hired and promoted an unqualified girlfriend as a General Partner, made conflicted investments, and kept his investors in the dark. That’s four drunken strikes.

The biggest problem that DC has as a Startup Ecosystem is its lack of risk capital. Every failure, be it a failure of malice or of incompetence makes the chances of a Venture Capital Renaissance in DC less likely.

No one is a saint, few people are pure evil. JP is neither angel or Devil.  I welcome and will gladly publish any response from JP or any of his supporters. Just please do me a favor, don’t bother telling me I’m an ass hat, I already know that. Don’t just tell me about all the favors and the good things JP has done for you. That is not the point of this post. Tell me why you know that what I have reported is not accurate. Why it shouldn’t be shared. Why there is no value in this cautionary tale.

Jonathon Perrelli Part 1

Jonathon Perrelli Part 3