Investors and Conflicting Investments

As more startups emerge around today’s popular trends (e.g. social media, big data, sales technologies, etc) it’s inevitable that investors will start seeing startups that are competitors of existing investments (some loosely competitive and some that are direct competitors). Just this past week I talked to two different investors that mentioned they looked at one of the Atlanta Tech Village companies raising money and had to pass because it was close to being competitive with an existing investment.

Here are a few thoughts on investors and conflicting investments:

  • Entrepreneurs pitching at large venture conferences should share enough information to get investors interested in a private meeting, and expect that everything that’s shared publicly will get back to their competitors
  • Venture investors don’t sign NDAs since they hear so many entrepreneur pitches, it’s difficult to keep track of who said what and what information is public vs confidential
  • Occasionally investors will have an existing portfolio company pivot and become a direct competitor to another portfolio company, making for a difficult situation
  • Some venture firms have multiple groups within their firm (e.g. an early stage team and a growth stage team) such that they agree to not share information (a Chinese wall) if they’re evaluating competing companies at the same time (usually different stage companies in the same industry — we experienced this at Pardot)

Investors and conflicting investments are a standard part of the startup world. Entrepreneurs would do well to research the investor’s portfolio in advance of pitching as well as find the right balance between sharing too little or too much information.

What else? What are some other thoughts on investors and conflicting investments?

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