No conflict, no interest

“Conflict of Interest” is a ridiculous notion in venture investing.

I have conversations with other investors about this all the time — So many VCs are afraid to invest money from one fund into a successful portfolio company from another fund because of how it may be perceived.

The concern is that LPs will assume that the money from one fund is being used to prop up a struggling company in another fund.

There’s a really simple fix to this problem.

Don’t do that.

VCs should have the ability to invest in a successful portfolio company using any of their individual funds.

If it’s still a great investment, you should re-invest in that company, no matter which fund the capital comes from.

For example, in the early days of the dot-com boom, Sequoia Capital’s Mike Moritz was on the boards of both Google and Yahoo at the same time. Yes, these companies were competitors. But, the benefits of Sequoia’s capital and expertise outweighed any perceived “conflict of interest.”

Over the past several years, Founder’s Fund has also invested in SpaceX across every fund, simply because it was a great investment for all those funds.

The company received more funding, the firm got more ownership, and the LPs made more money — Everybody wins!

At the end of the day, that’s what matters, right?

It’s bad business to let potential optics prevent you from making more money for yourself, your portfolio companies, and your LPs.

We need more opportunists in the world who want to create more wealth for themselves and those around them.

As they say…

No conflict, no interest.