A few thoughts:
- First, conflicts are somewhat fluid and even subjective and not AS big of a deal as some make it out to be. I know this is perhaps a different perspective from most, but are you really so sure you are competitive with another startup? Will you still be in 5 years? Will a start-up that doesn’t seem competitive today evolve into a competitor in the years to come? Who knows. Also, some folks are going to share your information no matter what, especially after a fundraising process.
- Your information isn’t really so confidential, at least not most of it. Your revenue? I can guess. Your burn rate? I can back into it. Your problems? I can just go interview someone you fired. Especially these days where companies and people are more transparent than ever, a lot less is confidential than you think.
- Different funds often are run partially seperately. If the VC says a fund in a different geography is run very differently and there is a wall between the funds, that may only be 80% true, but maybe it’s good enough. Especially if you want / need the money.
This is not to say there are no issues. I invested in a very successful SaaS startup where there quickly became a large conflict, and the VC had to pick one or the other. They ceased doing pro-rata rights, getting detailed board packs, etc. in the one they didn’t “pick”. And the picking had to do with a senior partner vs. junior partner dynamic.
So be wary of conflicts, but don’t assume a VC that says she can invest … cannot. She probably can.
And which conflicts aren’t great, at the end of the day, if you only have 1 good investment offer, and the VC partner says it isn’t a conflict for her … I’d take that 1 good offer.