Coming Storms: Three Reasons That VC Firms May Start Overlooking “We’re Conflicted” and Make Competing Investments

There was a time when far less written about — or by — venture capitalists. But I seem to recall “we won’t invest in two competing companies” was an oft-stated principle even in these more opaque days. To me, it seemed sensible, even from just a strategic framework, let alone ethical. Part of being an insider meant you needed to be trusted by entrepreneurs with early looks at their businesses. And if your reputation’s present value was the sum total of all future startups brought to you, well, putting that dealflow at risk was an expensive proposition.

While these “sorry, we’re conflicted out” decisions often didn’t get headlines — who writes about the deals they didn’t do? — there was a great 2012 blog post by a16z’s Ben Horowitz providing inside baseball on why they didn’t double down on Instagram after making an early investment in the now hugely successful app. At its root was they didn’t want to violate a commitment they’d made to another CEO in the portfolio. I didn’t know Ben at the time — and we’ve really only met casually a few times since — but it was one of those moments of operational clarity that gave him evergreen cred in my mind. Maybe for some VCs the “competitive conflict” issue was more about virtue signaling than actual virtue, but I…