“We Don’t Consider This a Conflicting Investment”

VCs With Multiple Stage-Specific Funds Are Likely To Rewrite The Existing Etiquette. And What This Means For Founders.

Let’s start out by admitting that the question of ‘competitive conflict’ has always been more of a situational dynamic than industry standard. In some ways it’s ALWAYS to an investor’s benefit to suggest a potential new investment wouldn’t be competitive to an existing portfolio company, and it’s ALWAYS to the current portfolio company’s benefit to suggest it might be.

While a norm of ‘we don’t invest in directly competitive companies’ is likely the median response if you asked a bunch of investors, in truth there’s always an asterisk. Sometimes this applies only to lead investors, and if they consider the investment ‘active’ (eg on the board, still doing their pro rata, etc). Or they’ll give a portfolio startup a window of exclusivity of a few years before considering more companies in the vertical. Maybe restrict the conflict to what a company is currently doing now, not what the founder says is on their roadmap five years down the road. And of course there’s the “unless we’re going to make a lot of money [on the conflicting investment]” asterisk. But in the years since we started Homebrew, I’ve observed the breadth of investor positions…