Call for Accountability: VC Conflict Aversion Leads to "Insufficient Consequences" for Bad Behavior

Yoni Rechtman, a Partner at Slow Ventures, recently sparked discussion within the venture capital community by asserting that VCs are "too nice and conflict averse," leading to a lack of accountability for misconduct. In a widely circulated social media post, Rechtman advocated for founders to maintain an "enemies list" and "blackball VCs who mistreat founders/act in bad faith." His statement underscores a growing sentiment regarding the power dynamics and ethical considerations in the founder-investor relationship.

Rechtman, known for his direct communication style and active presence on platforms like Substack, highlighted that founders often hesitate to speak out due to concerns about "closing off opportunities to 'work together soon'." This fear can perpetuate a cycle where investors act in bad faith without facing significant repercussions. The venture capitalist urged founders to prioritize "integrity in the present" over future optionality for partnerships.

The call for greater accountability resonates with ongoing industry discussions about investor conduct and transparency. Reports and analyses frequently point to a significant power imbalance, where founders, particularly those seeking early-stage funding, may feel vulnerable to mistreatment, including re-trading of term sheets or inappropriate behavior. Instances of VCs stringing along startups or pulling commitments without consequence have been documented, leaving founders in precarious financial situations.

Experts and founders have increasingly called for mechanisms to vet investors, akin to a "Better Business Bureau for investors," to provide transparency regarding professional backgrounds and past interactions. This initiative aims to address the information asymmetry that often favors VCs, who typically conduct extensive due diligence on founders while their own conduct remains largely unchecked. The sentiment expressed by Rechtman suggests a growing demand for collective action among founders to foster a more ethical and equitable investment landscape.