Jonathon Perrelli Fortify VC Part 1
Meet Jonathon Perrelli Fortify VC
I first met Jonathon Perrelli (commonly referred to as JP) in late 2011 at a Founders Institute (FI) graduation. Twelve companies graduated and pitched that day. After many of the pitches, JP provided, what seemed to me at the time, expert commentary. He was electrifying, funny, talked about all the big things he had done in the past — his friendship with Sean Parker (as in — you know what’s really cool, a billion dollars — played by Justin Timberlake in the Social Network Sean Parker… that guy), his connections with 500 Startups and other big Silicon Valley icons.
So I approached JP, introduced myself, and talked for a while. I was impressed. He told me about his fund, Fortify.VC and why it was like bringing Silicon Valley to DC. We both liked one of the companies that pitched, HugeFan. In my excitement to do a deal with this guy (who I mistakenly assumed was a sophisticated investor)…. I decided to place a bet on HugeFan and that I’d rely on this “professional” to do the due diligence. JP went on to invest in two of the companies presenting that day, HugeFan and Feastie. I put $25,000 and co-invested in HugeFan. We were the only two investors to ever invest in that Huge(Pile of Crap that Hit the)Fan. Later I started whispering to myself… why didn’t anyone else invest? Isn’t there wisdom in crowds… is two a crowd?
The lesson learned? Not everyone plays the long game. Confidence does not translate into competence. Out of all of the bad investments in my life… Huge Fan was the stupidest. But it would take me over a year to figure out that JPs ego was writing checks his intellect could not cash. I bought into his confidence and patter 100%. I was an irrational fanboy! I didn’t do enough research. I didn’t ask tough questions.
The Rise Of Jonathon Perrelli And Fortify VC
Months later JP talked to me about his next-big-idea…. it sounded yuuuuuuge… he was going to create a Silicon Valley-ish, 500 Startups-like accelerator right here in DC (echos of con man Harold Hill in The Music Man see video “there’s trouble right here in River City”). He was planning a new kind of DC Pitch Event… Distilled Intelligence. A public contest where he would pick the companies that would be the first cohort in The Fort. I was writing for Tech Cocktail at the time (now Tech.co. Yes I’m embarrassed to admit I was once a “journalist” with quotation marks for Tech.co before moving on to become a cranky commentator. But more on that another day.) and I offered to help him promote the event via a Tech Cocktail article.
When I made the offer of what I thought was a favor to write an article for JP, his response surprised me. He came back at me with a proposal… if Tech Cocktail wanted to write about his Distilled Intelligence… Tech Cocktail was going to have to help sponsor the event. Wow, I thought. This guy is tough and confident. Later I found out this was part of his transactional nature. He was like Tom Sawyer getting others to pay him to paint his fence. But there goes stupid Mr Cranky, I introduced JP to Jen Consalvo, they negotiated a sponsorship deal, and I wrote a stupid article drooling all over Fortify — The Fort and Distilled Intelligence. I made an introduction, wrote an article and all I got was a stupid Distilled Intelligence t-shirt.
JP quickly became a major force in DCTech. By promising the sun and the moon he garnered a grant from the DC Government to stand-up “The Fort” in a building on K Street in DC. Looking back, I don’t know if those tax dollars returned much better than an investment in HugeFan did. All those tax dollars and DC didn’t even get a T-shirt.
The local tech press was fawning all over him. He began raising money in very small chunks from local angel investors. He was a superstar on the DCTech speaker circuit. It is said that it’s good to be the king and for a brief moment, JP was the king of DC Startups.
Time progressed and JP approached me to ask if I’d like to be a mentor at The Fort. I was of course flattered and I told him that I’d be happy to donate my time and work with some of the companies in The Fort. Not so fast JP said, as he let me know mentoring required more than just a time donation. I would have to invest in the fund to be a mentor. Huh? Look I know I’m not the brightest bulb in the lamp but I’ve been in a startup or two or twenty and I’ve been part of an IPO and several multi-million “real” (like for cash) acquisitions. I’d spent 10 years being employed by VCs to run poor performing companies. But the only thing that would qualify me to be a mentor at The Fort was for me to be so dumb that I’d pay someone who was as bad at picking stocks as me, to pick stocks for me. Hey I can pick bad stocks for me for free!
JP wasn’t looking for mentors, he was looking to sell mentorships… this was about becoming a Limited Partner investor in Fortify and somehow I was to consider donating my time to be a perk.
No thanks, I don’t pay to paint fences. I already had enough mentoring gigs. I was a paid business coach, I was rated as a Global 100 mentor, ranked top 100 out of 3,500 mentors at the Founder Institute (FI). Maintaining my Global 100 rank gave me the privilege of paid travel to FI sites all over the globe. I wasn’t going to “invest” to be a mentor.
That was another signal… a sign of JPs transactional nature. Hey if I was a portfolio company working at The Fort, I’d want the best possible mentors I could get. I wouldn’t want a mentor who was so dumb he’d pay to paint a fence. I was still a fanboy though, just a little more jaded fanboy.
JP was seemingly always surrounded by startup luminaries. In March of 2012 I bumped into him SXSW where he told me he was on his way to meet Sean Parker. Later I drank with him at a bar with Paul Singh. I remember a DC Tech person saying to me, “I was at this great party with Leonardo DiCaprio, Toby McGuire, great high-end sushi and JP.” JP was reaching DiCaprio status!
Back in DC JP introduced me to Minh Nguyen…. who JP told me was the founder of early social networking company Plaxo. Plaxo was LinkedIn before LinkedIn was LinkedIn. I was a Plaxo user back in 1999. I believed him and I was impressed. Minh became a mentor at the Fort without needing to donate his time and was a close advisor to Fortify companies, Speek, NextGame and Kahnoodle. Later the Nguyen story turned sour as the Plaxo founding was totally debunked after investigations into a tragic murder (see crunch base article). I was seduced by JPs glitterati stardom. Looking back I was seduced by bullshit.
The Fort continued on. JP was telling anyone who would listen that he was on his way to raising $20 million. Meanwhile, the big fishes never materialized and he kept badgering small-time investors like me into investing in his fund. He seemed increasingly desperate to raise money, yet bombastically boasting how well it was going. Others were whispering that he wasn’t doing what it took to raise a real fund. He wasn’t traveling to real money towns. He wasn’t reaching out past his network. He wasn’t making any headway with institutional investors. He was talking but he wasn’t hustling.
There was a second Distilled Intelligence Event… bigger and better than the first. A new cohort of companies were added to the portfolio. The target of a $20 million fund dropped to $10 million and the actual money raised sounds like it wound up slightly south of $5 million.
The Rise Of Carla Valdes
That first day I met JP at FI, he was accompanied by a young woman. I wasn’t introduced to her. I figured she was his assistant or his wife. I later found out that she was an Associate at Fortify. At that event, she was quiet and stayed in the background.
At some point, JP promoted Carla to General Partner. Carla’s a nice lady. Yet not ready for the role that JP ultimately envisioned for her. JP pushed her out there too early and ill-prepared for the world of Venture Capital and Startups. With no background in Private Equity, she was thrust in a position of tremendous responsibility. JP was certainly not prepared to mentor her and she struggled to earn the respect of founders and funders alike. The promotion of Carla from Associate to General Partner was a major WTF moment.
Carla did a credible job of organizing the complex Distilled Intelligence events and providing logistical support to the portfolio companies. But she was not considered a strategist or finance whiz who could be helpful to portfolio companies. With zero startup experience, she wasn’t someone that founders could rely on for mentoring or advice. Yet even though she made no investment in the fund, with little if any past relevant experience or training she sat at the table as a General Partner drawing a salary paid by Limited Partners (note: none of the other General Partners were drawing a salary).
For some unexplained reason, JP embarked on a quixotic mission to anoint Carla as the most Powerful Woman Venture Capitalist in DC. He’d pitch stories to the tech rags, for instance, a post by Serious Startups said this about Carla,
On the outside, it looks like Carla Valdes has a life any woman would want. Husband, kids, interesting job. She’s beautiful and pulled-together, and it definitely seems like she “has it all.”
JP was quoted in the same,
Carla Valdes is the hardest working unsung hero I’ve ever had the opportunity and pleasure to work with. Her enthusiasm for entrepreneurship is contagious and she has a passion for startups that is second only to her passion for her children. Carla’s impact goes well beyond the Fortify portfolio and Washington, DC region. She is a firecracker whose strong heart and sharp mind are fantastic assets and having her as a partner has been a blessing.
While JP praised her energy and passion, it was woefully clear that Carla’s lack of experience in Venture Capital and Startups was showing. People began talking, asking out loud, why Carla why now? JP continued to extol her virtues to anyone who would listen. According to JP Carla Valdes was a superstar VC.
Outwardly she played the part of Venture Capital partner. In private moments she would confide to people her nervousness and trepidation about public speaking engagements. Yet to JPs detriment and great cost to his credibility he continued to push her out there center stage.
The DCTech ecosystem was talking, Fortify LPs began asking what have they gotten into. Portfolio companies scratched their heads.
Folks around the Fort began speculating regarding the nature of the JP and Carla relationship. The explanation could have been as simple as Carla was good fodder for the Perrelli hype machine… she was a good story that helped him promote the fund and nobody is better at promotion than JP. Jonathon just kept on… continued with the canonization of Carla at the cost to his credibility.
As the Fort wound down, Carla left Fortify to start a company, Handpressions, a company listed as a Fortify portfolio company. Carla divorced her husband. Eventually, JP and Carla began quietly dating.
I hope for Carla that her Fortify experience made her wiser and doesn’t damage her chance at another bite at the apple. She deserves that.
The End Of The Fort
In December of 2013, after two years of operations, the Washington Business Journal reported that JP was closing The Fort and raising a second fund. Whether intentionally or as a symptom of ADD, JP was already pointing to the next shiny object, his second fund which never materialized. These next shiny objects are where the local tech press drops the ball. The Tech Press is easily distracted by the next-big-thing and at the cost of failing to ask tough questions about the bodies left behind from the last big thing.
Here’s the danger of a next-shiny-object guy who is not held accountable by the next-shiny-object-story tech press. What happens to the LPs who were left behind on the Fortify bus… the old rusty thing? Who has their backs? What lessons can be learned that could prevent a repeat?
To this day JP claims Fortify fund is a thriving vibrant victory. Many of his LPs are not counting on anything but a tax write off in the fund. JP vehemently denies that Fortify VC is a Zombie fund. As recently in April 2017, in response to one of my posts, Pretangel Alert, JP commented,
“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.”
Coincidently, Jonathon’s denial of a Zombie fund embodies the very definition of a Zombie fund. According to an article by Danielle Morrill, Zombie VCs,
venture firms who are 3-5 years into investing their fund, don’t have very strong results so far, and are struggling to raise new funds. These investors are not doing new deals, opting instead to use their remaining capital to double-down in follow on rounds with their existing portfolio
The Aftermath Of The Fort
Distributions…. to date there have been none. Transparency and reporting… woefully inadequate. Fortify is not meeting the reporting standards set forth in the partnership docs. Next Week’s Edition of the Wolves of Startup Land will try and provide some transparency to the hype and opaqueness of the Fortify Story as we look at the Fortify portfolio and judge investment decisions, investment conflicts and irregularities in reporting.
The lessons here is even a Cranky old cynical fart can be taken in by first impressions. Charisma and energy are powerful tools in influencing people. JP, he’s not a bad guy… he’s just not the guy I had mistakenly believed him to be.