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Reputation Management & Legal Threats

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When a company’s reputation comes under attack, it can be tempting to bring in the company attorney and fire off a "cease and desist" letter. Unless you’re responding to something that is clearly libelous, trying to cover up your mess by threatening the messenger usually backfires–in a big way.

Hercules Technology Growth Capital is learning that lesson the hard way after sending a c&d to The Funded–a site that lets companies anonymously share thoughts about VC firms. VentureBeat has a copy of the letter sent and TechDirt points out why Hercules’ effort will likely backfire.

This seems like a bad idea for a huge number of reasons — all of which Hercules and its lawyers probably should have realized before sending the C&D. First off, as it seems we have to repeat almost weekly around here, section 230 of the Communications Decency Act very, very clearly states that a site is not liable for content its users post, and any law firm should know that. Second, and more importantly…Prior to this, not a whole lot of people would see the review of Hercules. Now, however, many, many, many more entrepreneurs will not only see and remember the negative review, they’ll see how Hercules responded to it, which may be even more damaging to the firm’s reputation.

It’s understandable that Hercules Technology had a knee-jerk reaction–who wants something negative posted about them? But, as they’ll learn, taking such a heavy-handed approach will now leave potential start-ups questioning whether they should take funding from a company that "releases the dogs" first and asks questions later.

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