It sounds like you're defending a particular scenario that I'm not understanding.
Do you agree that there exist hypothetical situations in which a company and a VC firm investing in said company might have differing interests? Doesn't it follow that someone with responsibilities to both parties has a conflict of interest situation?
This conflict is nothing new and is inherent to the model of organized private investors picking companies to invest in. The exact same problem emerges when an investor decides to invest in a portfolio competitor, or invests in a company that pivots to that role. It's why startups are antsy about who they allow to hold board seats.
> This conflict is nothing new and is inherent to the model of organized private investors picking companies to invest in.
We're in agreement here.
Because this comes up in practice there are a slew of reasonable ways to deal with these sorts of scenarios. I think the original article's "what do we do about it" section falls nicely into this discussion.
I think the extent of my position here is that VC firms are at a heightened risk of dealing with this type of conflict of interest problem, and would be well served by having clear policies on how they resolve them.
Every VC firm has different interests from the firms that it invests in. That's the major pitfall of accepting investor money, their goals and your goals will never be perfectly aligned and sometimes are very much not aligned.
Beware of who you accept money from, especially if that money comes with strings attached (board seats, various preferences and so on).
If I understand correctly you agree that there are potential conflict of interest considerations. (This may be tempered by a belief that in practice these potential conflicts are not a problem for various reasons.)
This is the distinction my initial comment sought to clarify -- in bootstrapping (as I understand it) a company is funding itself so there is only one party and hence no conflict of interest. When a VC firm funds one of the partners, there might be. Given the particular circumstances this may or may not be problematic.
Would you agree further that it might be wise for VC firms to have clear conflict of interest policies in the same ways it is wise for VC firms and companies in general to have clear HR policies?
What makes you think VCs do not have clear conflict of interest policies? That you're not aware of any implies that you're not a partner or capital supplier to some fund because in that case you'd be in a position to either demand such clarification if they want you to supply your money or you could pass in case they don't. This concerns the capital suppliers and the partners, it definitely does not concern the seekers of investment.
Let me clarify several things. I have no stake in this game. I am neither an entrepreneur nor a VC. I am not seeking money. I have no vested interest in this question and it will not affect my life. I am not trying to advocate a change in policy.
I have no particular knowledge of the frequency with which VC firms have sensible conflict of interest policies, but my naive assumption would be that this is again similar to having good HR policies. (Which is to say I am not particularly suprised when a company gets into public trouble in this regard.)
It seems perfectly reasonable, however, for the article author or anyone else to opine on how they'd prefer to see the VC industry run. For comparison, though I am not a resident of Texas it's perfectly reasonable for me to have an opinion about Texas's education policy, especially when the secondary effects impact the entire country.
I am somewhat frustrated and dismayed by (what I perceive as) an inability on your part to respond to my points or questions and a tendency to assign to me ideas I don't hold. As such, I'm tapping out of this discussion here.
Do you agree that there exist hypothetical situations in which a company and a VC firm investing in said company might have differing interests? Doesn't it follow that someone with responsibilities to both parties has a conflict of interest situation?