The recent board fight for a digital health unicorn is reminding entrepreneurs that it’s important to set boundaries even between the frenzy and speed of this summer’s deal. After these board members invested in a competitive startup, I published a scoop on how Besama Venture Partners replaced a board member at Hing Health. Daniel Perez, co-founder of Hinz Health, complained that board members did not inform him before they started leading any rounds in the early stages of the same sector.
The situation gives a rare and arrogant peek into the competitive tensions in the startups world. Founders expect certain values of behavior from investors, where they inform them about investing directly at the beginning of the competition; investors may feel more pressure to make quick decisions to clash with their already supported founders, when they have different definitions of competition, their portfolio.
In a post-NDA world, the rules on how to conduct these conversations need to be rewritten. I’m not sure if there’s a solution to everyone’s plight – but I think transparency between the founders and the investors can’t be harmed. It’s not just for the founders. Investors, who return to their LP, do not want to be in a situation where they cannot invest in a bright sector because they have another investment in this sector. The situation is endless:
- Is it okay to make competitive investments in the same company as long as different partners sit on the board?
- Can a Sequoia India support a company that is in direct competition with a Sequoia India company?
- What if a portfolio company’s future roadmap includes a go-to strategy that conflicts with a potential investment?
- What happens in a different market than when a startup sells its investors and suddenly becomes competitive with a portfolio company?
Based on my DM, Hinz Health is not alone in dealing with competitors who support current investors. It adds a star to the barrage of the fund round. Welcome to the hardworking summer because of the heat, my idea? For the rest of this newsletter, we’ll go over Dulingo S-1, an exclusive interview with Creator Economy Rebrand and top startup marketers. As always, you can find me on Twitter at @Nmasc_ – send me tips or notes about any competitive excitement you’ve dealt with.