Skip to main content

"Be wary how much you reveal to VCs" has an article warning entrepreneurs not to reveal too much about their business plans to VCs, who might wind up passing on your ideas to competing firms.

The article provides the example of Brian Barth, co-founder of online travel technology firm, SideStep, who had a series of meetings with partners at VC firm General Catalyst.

In 2003 and 2004, Barth had a series of more than 10 meetings and phone conversations with partners at General Catalyst, a Cambridge venture capital firm. (Barth remembers three meetings with Joel Cutler, a founder of General Catalyst, and three with Terry Jones, a partner at the firm who was formerly the chief executive of

Barth says that Cutler and Jones never told him they were working on a travel idea of their own, even when he asked them directly about a rumor he'd heard through the grapevine. (In their version of the story, Cutler and Jones were simply meeting with Barth to explore the possibility of investing in SideStep, or possibly buying the company.) A month after the last conversation Barth had with Jones, in March 2004, General Catalyst announced it was investing $6 million in a company that it had helped to form,, to help travelers search many travel sites simultaneously. ( wasn't an idea brought to General Catalyst by an outside entrepreneur.) Jones would be chairman, and Steve Hafner, a cofounder of Orbitz, would be the chief executive.

It brings up a question that's constantly on the mind of an entrepreneur: How much do you reveal about your business plan, and to whom? How much entrepreneurial paranoia is healthy -- and at what point does coyness and secrecy start to make you look like a nutcase with a PowerPoint deck?

There are plenty of things for entrepreneurs to worry about. A venture capital firm might decide not to invest, and either develop a company of its own or fund one of your competitors. An important prospective business partner, like IBM or Oracle, could decide to develop a product just like yours after lengthy discussions. In one case that involved a local company, Thomson Financial, which was an investor and had two seats on the board of Boston-based CCBN, decided to start a competing business, and allegedly used information from CCBN board meetings to compete against it

UPDATE: This is what Paul Graham, co-founder of ViaWeb (acquired by Yahoo), has to say on this topic:
You may wonder how much to tell VCs. And you should, because some of them may one day be funding your competitors. I think the best plan is not to be overtly secretive, but not to tell them everything either. After all, as most VCs say, they're more interested in the people than the ideas. The main reason they want to talk about your idea is to judge you, not the idea. So as long as you seem like you know what you're doing, you can probably keep a few things back from them.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Popular posts from this blog

How I Raised Funding - Priyanka Agarwal, Wishberry

You have to be confident and shameless while crowdfunding. Priyanka Agarwal, Wishberry shares on how to succeed in crowd funding with Venture Intelligence in this  interview. Priyanka also candidly shares how the team built Wishberry, raised funding from top angel investors like Rajan Anandan, on pivoting, and difficulties in raising capital for entrepreneurs operating in niche spaces not chased by VCs. Q: What does Wishberry do?Priyanka Agarwal: In its latest avatar, Wishberry has pivoted into crowd financing of low budget films (INR 1-5 Cr). We are essentially trying to create an internet platform for investment opportunities for HNIs in films including Marathi, Tamil, Kannada, or films targeting the global diaspora.

L-R: Co-founders Anshulika Dubey & Priyanka Agarwal, Wishberry Given that you are building a marketplace, how did Wishberry solve the Chicken and Egg problem? Beyond the “all or nothing” model what did Wishberry do to pull in more artistes and investors? First, you…

Interview with One97's Vijay Shekhar Sharma

Venture Intelligence featured an interview with Vijay Shekhar Sharma, Founder & Managing Director of One97 Communications as part of the July issue of the US-IVCA / Venture IntelligenceIndia VC report. One97 is one of the pioneering start-ups in the Indian Mobile VAS space and recently raised its first round of funding led by SAIF Partners.

Some extracts from the interview:

VI: How were you funding the company until now?
VSS: We were the first company to put a revenue sharing model in place with operators. That gave us recurring revenue and made the company cash positive.

VI: What were your challenges in fund raising?
VSS: Two challenges: first, deciding on the network the fund could provide and second, the kind of size commitment they can make for future investments. A third factor was the comfort with the VC: what kind of team it was, the chemistry between team members, the kind of person who will come onto our board. The VC on the board becomes your everyday business partner.


Poor Son to Rich Son - A Sales Story

Hat tip: I originally saw this in the reply to a message posted by a friend of a friend on Google+ and then lost the thread in the circles of Google+. Apologies!

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. Click Here to learn about Venture Intelligence products that help entrepreneurs reach out effectively to the investing community.