You're investing in competing startups within your portfolio. How do you navigate conflicts that arise?

It is generally unlikely for VCs to invest into startups competing in identical segments - why do so when dry powder can be allocated to other verticals or for doubling down on the company you've already invested in? We do so when we see companies targeting different segments and markets, and we can add value to the strategy. The business challenges can be vastly different. Transparency in the companies you have invested in is something we do so with prospective companies and they appreciate the deep experience we have in related verticals. Professionalism and clear internal guidelines in dealing make it possible for us to invest in similar segments, but again, not identical.

Confidentiality agreements when fund raising? Many VCs, especially in the US would not sign NDAs at all. Of course shareholders agreements ( SHA ) would have confidentiality clauses. Would you need anything else? So before you send your deck to a VC for new funding, you have to do your own due diligence on the VCs portfolio companies ( past and present ) to ensure that there is no conflict of interest. That is your job. But you do have the risk that the VC is looking at several companies in your sector at the same time as they are looking at your deck. Let's be careful out there.

Many VCs avoid investing in competing startups offering the same services due to conflicts of interest, especially if they hold board positions. Despite confidentiality agreements, such investments can create biases & tension between founders & firms. VCs facilitate crucial introductions for subsequent financing rounds & introducing two similar companies to a large investor is challenging. However, VCs might invest in similar companies targeting different audiences and market segments, complementing their portfolio. This strategy allows their portfolio companies to collaborate & dominate the market with a stronger value proposition. Also, these solutions may merge, creating a powerful entity capable of capturing a significant market share.

Conflicts can arise for example when two portfolio companies are competing in the same market, or when the interests of one portfolio company directly contradict those of another. In order to manage these conflicts effectively, I employ several strategies. Managing conflicts between different portfolio companies is a complex task for all investors. By establishing clear guidelines, promoting transparent communication, adhering to ethical considerations, implementing non-disclosure agreements, separating management teams, having independent board representation, mitigating competition, and carefully planning exits, I can effectively navigate conflicts and prioritize the success of each portfolio company.

My strong recommendation is: do not invest in directly competing companies. Indirect competition is different but depends case by case, sometimes indirect competitors can be also best partners.

Conflicts of interest can arise in venture investing but it's important to follow a set of rules to reduce the impact: 1) If at the time of assessing a new investment, you believe there is a conflict of interest between two companies, have the founders speak to one another and sort this out before investing. 2) If the conflict arises after an investment due to a startup pivot, have a frank conversation with both companies and ensure that you create walls so that there are separate board members and that information isn't leaked.

Here's how to navigate conflicts with competing startups in your portfolio: Transparency: Disclose conflicts to both startups. Open communication builds trust and avoids misunderstandings. Information Barriers: Limit information sharing between competing ventures. Each team should focus on their strategy. This compartmentalization keeps things fair and protects your investment thesis.

In the Bible, Daniel refused to defile himself with the royal food and wine, setting clear ethical boundaries and trusting in God's provision. Emulate Daniel by establishing strict confidentiality agreements and internal firewalls, protecting each startup’s sensitive information within your portfolio. This Godly dedication to integrity ensures fair treatment, upholds innovation, and builds trust, showing that Divine principles guide your business practices. #divineintervention #gabenfreude #MentalHealthAwarenessMonth

Conflicts of interest policies, assigning independent teams to each integration, and open communication are among the strategies to consider.Your legal agreements must clearly outline terms and conditions, including non-competes, if necessary.

It's quite possible for Venture Capital firms to initially invest in startups that have focused on two different areas but later on converge towards one common problem targeting the same markets. This can happen for several reasons due to external or internal circumstances. Strategic compartmentalization offers a wonderful solution for this conundrum. This would usually involve creating clear guidelines for how you want to manage the relationship and any future re-investment into both the startups. The principal or partner from each team would also need to have a clear line of communication to the founders. This can help the founders to stay updated and get clarity on how the firm plans to navigate the conflict of interest.

It's ever so important to balance this with a holistic view of your portfolio. While complete isolation can mitigate short-term conflicts, it might hinder the potential for cross-pollination and synergies. It's crucial to foster a collaborative environment among portfolio companies, albeit with clear boundaries. For instance, organising industry-specific meet-ups or knowledge-sharing sessions can facilitate cross-fertilisation without compromising competitive advantage.

In the Bible, Moses delegated responsibilities among the Israelites, assigning leaders to manage different groups to maintain order and efficiency. Similarly, implement strategic compartmentalization by assigning distinct teams to each startup, ensuring no personnel crossover to protect competitive insights. This Godly strategy of independent operation under strict confidentiality guidelines mirrors Divine wisdom, safeguarding each company's growth and innovation. #divineintervention #gabenfreude #MentalHealthAwarenessMonth

Conflicts of interest policies, assigning independent teams to each integration, and open communication are among the strategies to consider.Your legal agreements must clearly outline terms and conditions, including non-competes, if necessary.

In the Bible, Paul maintained open communication with the early churches through his letters, addressing concerns and providing guidance. As a venture capitalist, establish regular check-ins with each startup to address their concerns and update them on your involvement with others in their space. This Godly commitment to transparency and active listening ensures all parties feel valued and reassured, preventing misunderstandings and fostering a supportive environment. #divineintervention #gabenfreude #MentalHealthAwarenessMonth

In the Bible, King Solomon resolved a dispute between two women claiming to be the mother of the same baby, using wisdom to ensure justice. Similarly, when conflicts arise between competing startups, implement a robust conflict resolution process involving impartial mediation to address issues fairly. This Godly approach ensures all voices are heard and interests respected, de-escalating tensions and preserving your integrity and relationships as an investor. #divineintervention #gabenfreude #MentalHealthAwarenessMonth

God has not made any lock that does not have a key. There is a solution to every conflict. All one needs to do is to find the missing link. If you cannot hire somebody who is an expert.

If your client companies are competing, then they have synergies. Instead of focusing on the conflicts, focus on the synergies. A good strategic alliance can reduce the risks of doing business to both businesses and increase their profits--all fulfilling your mission and purpose while strengthening theirs.

We use what we call a "situation room" or "deal collaboration room" where an update cadence is ahered to, all have been added for visibility, and people are encouraged to participate - show up as leaders to the fund.