Bad Behavior Costs VCs Less Than It Used To

VCs used to work together a lot more than we do now. I miss it, which is strange, because the old way was worse for founders.

When I started investing you’d just call people. “We’re looking at this company, what did you think?” Or “Is that a good partner on the cap table?” There was a known scuttlebutt in the industry and you could generally find out what people thought.

It’s not that the calls stopped. There are still plenty of VC to VC calls, they’ve just taken a different form, more macro discussion than specific opportunities. The business got too big. Too competitive. I’m thirteen years in and often there is no overlap with the investor I’m being asked about.

The part I miss isn’t really the gossip. It’s that there was more commonality, particularly here in NYC where it felt like we were building the ecosystem together. I remember a really fun dinner years ago with VC friends and spouses. That feels long ago now, socializing has gotten more “corporate.”

I’ve often said the investing job is to avoid groupthink, to not get pulled into someone else’s FOMO or someone else’s strategy, and I still believe that. Collegiality isn’t the same thing as consensus.

Where it shows up is when a founder asks me something simple: what’s it actually like to work with so-and-so? I have very little context. There are so many investors, and I usually have one or two data points, or none at all. I’ve seen investors I like lose their crap, and investors I don’t much like behave beautifully, and mostly I’m seeing them in board meetings, which isn’t much data. Founders see the day to day.

Founders grading VCs is the obvious fix, and it’s been tried. Adeo Ressi built TheFunded back in 2007, anonymous founder reviews of investors, tens of thousands of them at its peak. It never really stuck. Anonymity doesn’t hold up in a business this small, everyone eventually figures out who wrote what. And the person with the real information is the person who still has to raise money again.

To be clear, the trade is good for founders. The old system gatekept.

The loss is ours. The business has almost no reputational memory now, so behavior costs less than it used to.

Maybe I’m nostalgic and anachronistic? But there was something about VCs being that “small cottage industry” that no longer feels apt.