My Con Law I professor (and Con Law II also) told me a truism that I find bulletproof: It's always all about WHO DECIDES.
That sums up really everything in law and business - and I think in personal affairs also.
The only thing that ultimately matters is WHO DECIDES. Laws and rules are always ambiguous, open to interpretation, can be disregarded, subject to being overridden by exigent circumstances, etc.
So if you realize that it's all about WHO DECIDES, it becomes clear that you should only invest in enterprises run by people who you have faith and trust in - and that should be based on their track records and/or leverage you have over them.
One often sees in Silicon Valley that certain VCs will only go into deala with other VCs they've worked with in the past or better yet currently are in some deals with. Everybody needs to have a firm grip on the others' balls. If Bob and Jean are in another deal and both sit on the board of XYZ Tech, they are much more comfortable funding ZYX Corp. where they or their firms have board seats. Sometimes only one needs a board seat and Bob will rely on Jean's advice and board seat to represent him.
And the way Bob and Jean cement their relationship is to constantly swap inside information - feding each other good deals, tips, setting up mutually beneficial transactions/acquisitions between the portfolio companies of Jean's and Bob's VC firms. One hand washes the other.
And this is how Silicon Valley works and why it won't move. VC generally hate to travel for board meetings. They are often in board meetings (regular or impromptu) several times a week for their portfolio companies. They need to be local. There is often bicoastalism - between the Pacific coast and Boston, NYC, Research Triangle. Butt most of their life is local - within 40 minute drives of Sand Hill Road.
There is a mini-SV in north San Diego county and in Seattle. There is nott much interchange between those areas. Seattle relies mostly on Seattle area VC. Sandy Eggo relies mostly on local VC. The Bay Area has its own group. There is some bleed over between SV and SD, less so with Seattle. Few West Coast VC sit on boards of East Coast tech companies, butt a fair amount of East Coast VC do take board seats on SV companies. I suspect that it's better to fly from Boston to SiliValley in January than vice versa - a bit more attractive weather.
And, in my experiences, Japanese and European VC do get board seats, butt they rarely have power and are nott usually "in" with the US-based VC and they know it. Like non-VC institutional funds and retail investors, they are largely just along for the ride and know they are always going to be at an information and power disadvantage to the US VC. They will never be in the innermost insider circle. Sorry, that's the price for playing.
It's really fascinating stuff. Someday, I should write a book about it. It would have to be fictionalized furshirley.There are so many war stories to tell.
The board meetings where during the breaks the board members go outside to call their partners or others and spill the beans from the ongoing BOD meeting to others - disclosing highly sensitive and confidential information - and overheard by anyone who wanders outside and listens to them yak on their mobiles - or now texting to live-cover the board meeting for their chums. The politics whereby a CFO and a VP conspire to gett the board to overthrow the CEO, install the VP as the new CEO with the tacit promise between the VP and the CFO that once the VP becomes CEO he will push for the CFO to be named President, then once he's CEO he backstabs the CFO, goes to the board with a story blaming the CFO and getting him nott only NOT elevated to President, butt canned.
Seriously, there are like 100 good hour-long episodes that could be written. The tiers (or circles inside circles) of insiders. The way VC will burn one of their portfolio companies to make it up in spades elsewhere (many ways this is done) for themselves and their funds.
How VC running many funds with different end dates juggle their investments to benefit one fund over another - even though they have equal fiduciary duty to all the funds they are running - to score points within their VC firm because one fund has a powerful partner in it and thus benefiting that fund at the expense of another buys a favor from the powerful partner. Or to postpone taking losses by shoving a losing position in a non-public start-up into a longer maturity fund that won't realize the loss for years - so the VC can gett a bigger bonus this year (or keep their yobb). Or stealing money from a long-term fund for cash to invest in a losing company to keep it alive so the VC doesn't have to realize the loss now and can postpone the day of reckoning for them personally.
The treachery. The dealing. The wheedling. The information trading. The traps.
Honestly, way more interesting than the pennyscam world because these folks are all smart, ambitious, and sophisticated.
Little has changed since Machiavelli. It is ALWAYS ALL ABOUT WHO DECIDES.
