Can a venture firm invest in directly competing companies?

Chris Dixon · Mar 27, 2024

Founder Collective does very little seed investing because it takes conflicts seriously and invests in one company per category, focusing on true Series A and collaborating with seed funds

If you go too early, that early check becomes your single bet in the whole category, so you commit before you know enough

Scope: speaking only for his own vertical at a16z; depends on taking category conflicts seriously

40:53 20VC: a16z's Chris Dixon on Who Will Win the Next Generation of Venture, The Two Ways to Make Great Venture Investments and Find the Best Entrepreneurs & Why AI Will Strengthen the Position of the Incumbents Moving Forward

David Frankel · Oct 14, 2024

Rules of loyalty and partnership are unbreakable in a way financial rules are not, even when honoring them costs you a deal like Pinterest.

His name is on the door, so conflicts with existing portfolio relationships can't be violated regardless of the outcome forgone.

9:18 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective

David George · Dec 15, 2025

a16z does not invest in direct competitors and does not use separate funds as a workaround for conflicts

They try to avoid conflicts especially where they hold board seats; in practice companies diverge more often than they converge, so anticipated future conflicts often never materialize

Scope: admits they don't always get it right; calls it the trickiest part of their scale

47:49 20VC: a16z's David George on How $BN Funds Can 5×, Do Margins & Revenue Matter in AI & the Most Controversial Bet at a16z

Anish Acharya · Feb 9, 2026

A firm organized like a16z cannot run its business by investing in directly competing companies

Because they actually do services work for portfolio companies, competing investments would contend for the same resources, the same Fortune 500 buyers and the same engineering hires

16:54 Services heavy firms cannot back competitors

Lucas Swisher · Feb 23, 2026

Owning directly competing Series B companies is a mistake, but at the platform/growth stage holding competing positions is acceptable because it resembles owning two public stocks

At Series B you are making a bet against your own bet, whereas scaled platform companies are pseudo public stocks and often grew into competition rather than starting there

22:47 Acceptable at platform stage not at series b

Lucas Swisher · Feb 23, 2026

If you invest in large markets you will inevitably end up holding competing assets, because companies naturally expand their TAMs into each other

Snowflake and Databricks started in completely different areas — Databricks had no data warehouse, Snowflake did little ELT — and grew into competition over time

23:41 Large market tam expansion makes overlap inevitable

Martin Casado · Jul 28, 2025

Staying free of portfolio conflicts is extremely hard, and conflicts are one of the top reasons a16z passes on companies

Especially with the shift to AI, companies pivot constantly after you invest, and even a roadmap overlap at an existing portfolio company is enough to block a new investment

51:38 Ai era pivots make conflicts hard to avoid and a common reason to pass

Harry Stebbings · Jul 28, 2025

A founder should not get to veto an investor's deal unless the competing product is actually on their roadmap

Absent real roadmap overlap, the founder is telling the investor how to do their job

52:04 Founder veto should be limited to actual roadmap overlap

Martin Casado · Jul 28, 2025

The right conflict rule with founders is that each founder gets exactly one 'mortal enemy' the investor will refuse to back — not an unlimited veto over adjacent companies

It gives the founder real commitment where it matters while keeping the firm able to invest in a market where companies pivot into each other all the time

52:13 One mortal enemy rule balances founder commitment with firm flexibility

Bucky Moore · May 5, 2025

Investing across multiple competing foundation model companies is a rational strategy so long as you have entrepreneur buy-in

These model providers have enormous capital demand from big firms, and nobody can say how the space plays out, so investors need diversification too; the risk is only in ruining the founder relationship

12:08 Investing across competing foundation model labs is rational with founder buy in

Harry Stebbings · Oct 14, 2024

Today, not many funds observe the rule of not investing in competitive companies.

9:54 Most funds no longer observe the no competitor rule