When a VC is Untrustworthy

What happens when a VC turns out to be untrustworthy?

My start-up recently held extended discussions with a reputable VC firm. Although we did not proceed with an investment, we felt we liked the VC and we agreed that we'd remain in touch.

As part of the process we of course introduced the VC to our team. The lead partner was particularly impressed with one role we had created and the person in the role. The VC partner told me he had encouraged another of his portfolio companies to create a similar role.

So guess what? About two weeks after the conversation ended, our team member received an email from the private address of the founder of one of the VC's portfolio companies. The same VC partner is on their board. The founder did not name his company, but said he had heard of this team member through "the grapevine," and said they were looking for someone like this person to fill a similar role at his "well-funded start-up."

It did not take Sherlock Holmes to figure out this person's company, or his connection to the VC. Since our team member does not circulate much in the sector, nor in the geographic area where this company is located, it seems pretty clear that the lead came from the VC himself.

Maybe I'm naive, but I thought we could assume some level of integrity from the VCs with whom we speak -- or is all fair in love and business? Obviously it would not be helpful to the VC firm's deal flow if they were to be seen as likely to poach from companies in which they do not invest (presumably this is why they clumsily decided to cover their tracks with an email from the founder's personal address rather than the company itself).

You can bet we won't be talking to this VC again in the future -- or do they all behave this way? Is this surprisingly underhanded? Or commonplace?

Comments

[Phillipe de Wilde]

I don't think this is unusual, athough it's one of the least subtle attempts that I have heard. The Japanese say that business is war, presumably therefore all's fair...

It's one of the reasons that many investee/target companies hold back the full names of critical employees until as late in the due diigence process as possible (particularly true if the purchaser is in the same industry). This sometimes includes "blacklining" names on distribution lists before disclosing documents, and not passing across business cards with email addresses and mobile numbers, which gives you a little protection.

Also worth pointing out that here is a VC proactively looking to help one of its portfolio companies - too often they are criticised for doing next to nothing except count their pennies. Small comfort for you, I know, but would be the kind of support I would want from my VC.