Precursor Ventures argues that venture capital's traditional rule against backing competing companies in the same category is breaking down. As funds grow larger, they need exposure to multiple winners in important categories, but the norm forces them to pick just one bet and stick with it.
Yeah. So my argument is, in the past a lot of firms were hesitant to do portfolio company conflicts for a bunch of reasons. One, you know, most multi stage funds take board seats and you can't have the same person on. We'll say, for example, you probably couldn't be on the Google board and be on the OpenAI board without it being a little awkward given how important AI is to both of those companies. So most venture firms had a policy, hey, we're only going to invest in one company in the category and once we have our bet, that's our bet. And it has this nice two sided property in that as the company receiving the money, you have some assurances that that investor is not going to go back your biggest competitor. And as a venture fund it forces you to be honest and say if we make this investment, we're foreclosing the right to make another investment in this category. So we better be sure that we're excited about this company before we say yes. And that's been a norm, not a rule, but a norm in most venture funds. And in my article I was like, well look, venture funds are so big now, this might not be a sustainable norm because the need to be in the biggest, best, most important companies is becoming existential. If you're a big multi billion dollar venture, you're not an anthropic or OpenAI, it's probably going to be tough on a relative basis to keep up with your peers and.
