The larger the check, the less likely a VC will invest in a direct competitor.
If you are 500 Startups or Ycombinator, you kind of can’t help it. You invest so early, sometimes it’s not totally even clear what the company will really do.
By contrast, if you do Series D investing with $50m+-$100m+ checks, and put the whole fund at risk on that deal … it’s very rare you’d do a competitive investment.
In between, most VCs try not to do competitive deals on purpose. Founders don’t like it, it creates perceived (if not actual) confidentiality issues, and it creates “mental” conflict as the partners share details around their companies.
But, the reality is, things change and companies tilt. You can often end up with 2 semi-competitive companies this way.
And markets change. Sometimes VCs invest in companies that would have been competitive, but for time. A CRM today is not the same as CRM 5–10 years ago.