April 27, 2005
Posted by Gordon Smith

Fred Wilson is discussing the many conflicts inherent in venture investing. Some of these conflicts are merely uncomfortable -- "if you've been working with serial entrepreneurs for years, you find your friends starting competitve businesses" -- but others pose potential legal problems. For example, he says this about confidentiality:

When we identify an area we are interested in investing in, we try to meet with every entrpreneur working in that market.  We collect a lot of information that way.  We must and do keep that information confidential or else nobody would talk to us.  But that information has a way of coming togeter in our brains and informing how we think about markets, business models, leverage points, market entry plans, etc. And it is incredibly hard to keep all that expertise locked up inside our firm.  So we are constantly asking ourselves what is the line we cannot cross in educating others.  Very tricky stuff to say the least.

This is precisely the reason most venture capitalists do not sign confidentiality agreements.

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