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Last month, one of the Bay Area\u2019s better-known early-stage venture capital firms, Uncork Capital<\/a>, marked its 20th anniversary with a party in a renovated church in San Francisco\u2019s SoMa neighborhood, where 420 guests showed up to help the firm to celebrate, trade tips, and share war stories.<\/p>\n There\u2019s no question the venture scene has changed meaningfully since Uncork got its start. When firm founder Jeff Clavier launched the firm, he was mostly using his savings to write six-figure checks to founders. Now Clavier and his contemporaries, including Josh Kopelman of First Round Capital and Aydin Senkut of Felicis, collectively oversee billions of dollars in assets. Zooming out, the whole industry has gotten a whole lot bigger. In 2004, venture firms plugged roughly $20 billion into startups. In 2021, that amount reached a comparatively jaw-dropping $350 billion.<\/p>\n As the industry\u2019s scale has changed, numerous rules of the road have changed, too \u2014 some for better, some for worse, and some because the original rules didn\u2019t make a lot of sense in the first place. On the eve of Uncork\u2019s anniversary, we talked with Clavier and his managing partner of many years, Andy McLoughlin, about some of those shifts.<\/p>\n At some point, it became completely acceptable for full-time VCs to publicly invest their own money in startups. Previously, institutions funding venture firms wanted partners to focus solely on investing for the firm. Do you recall when things changed?<\/strong><\/p>\n JC:<\/strong> Firms typically have policies to let partners invest in things that aren\u2019t competitive or that overlap with the firm\u2019s strategy. Let\u2019s say you have a friend who starts a company and needs cash; if ever the firm decides to invest in future rounds, then two things: there is a disclosure necessary to [the firm\u2019s limited partner advisory committee] saying \u2018FYI, I was an investor in this company, I\u2019m not the lead, I did not price the deal, there is no funny business where I\u2019m marking myself up here.\u2019 Also, some firms may [force] you to sell investment into the round, so you don\u2019t have a conflict of interest.<\/p>\n Okay then, when did it become acceptable to back competing companies? I realize this still isn\u2019t widely<\/em> accepted, but it\u2019s more okay<\/a> than it once was. I talked this week with an investor that has led later-stage deals in pretty direct HR competitors. Both companies say it\u2019s fine, but I can\u2019t help thinking there\u2019s something wrong with this picture.<\/strong><\/p>\n AM: <\/strong>They\u2019re probably acting like it\u2019s fine and they\u2019ll continue to act that way until it\u2019s not, and then it\u2019s going to be a big problem. This is something we take very seriously. If we feel like there\u2019s any potential conflict, we want to get ahead of it. We\u2019ll typically say to our own portfolio company, \u2018Hey, look, we\u2019re looking at this thing. Do you see this as competitive?\u2019 We actually had this come up this week. We think it\u2019s actually [a] very different [type of company], but we wanted to go through the steps and make everybody feel very comfortable.\u00a0<\/p>\n Frankly, too, if we had a company going out to raise their Series A, I would never have them chat with a firm that has a competing investment. I just think the risk of information leakage is too great.<\/p>\n Maybe this particular situation speaks to how little control founders have right now. Maybe VCs can get away with backing competing investments right now, whereas at another moment in time, they couldn\u2019t.<\/strong><\/p>\n AM: <\/strong>There\u2019s not a lot of late-stage deals getting done, so it could just be that the founder had to swallow it because the deal was too good to pass up. There are always so many dynamics at play, it\u2019s hard to know what\u2019s going on behind the scenes, but it\u2019s the kind of thing that makes me personally very uncomfortable.<\/p>\n Another change centers on board seats, which were long viewed as a way to underscore a firm\u2019s value \u2013 or investment \u2013 in a startup. But some VCs have become very vocal advocates of not taking them<\/a>, arguing that investors can gain better visibility into companies in between the board meetings.\u00a0<\/strong><\/p>\n JC:<\/strong> It\u2019s your fiduciary duty to actually pay attention and help, so I find that statement ridiculous. I\u2019m sorry. That is our job, to help companies. If you have a large stake in the business, it\u2019s your job and your responsibility [to be active on the board].<\/p>\n AM:<\/strong> A bad board member can be a dead weight on the business. But we\u2019ve been lucky enough to work with really amazing board members who joined at the Series A and B and C, and we just see the incredible impact they can have. For us, if we create a board at the seed stage, we\u2019ll take the board seat if needed and we\u2019ll be on through Series B and we\u2019ll roll off at that point to give our seat to somebody else, because the value we can provide provide upfront from that\u00a0 zero-to-one phase is very different from what a company needs when it\u2019s going to $10 million to $50 million to $100 million [in annual revenue]. We like to still be in the room as an observer; we want to stay very close to the companies. But ultimately, in the same way as a CEO should be thinking about upgrading their exec team as the company matures, the same is true of the company board. For companies that need the guidance, board seats are still really important.<\/p>\n With the exit market somewhat stuck, are you finding you\u2019re on boards longer, and does that limit your ability to get involved in other companies?<\/strong><\/p>\n AM:<\/strong> It\u2019s probably less to do with the exits and just more to do with later-stage rounds. If the companies aren\u2019t raising Series Bs and Cs, then yeah, we\u2019re gonna be on those boards for longer. It\u2019s a consequence of the funding markets being what they are, but we are seeing things to begin to pick up again.<\/p>\n The other thing that happened was during the crazy times [of recent years], we\u2019d find these late-stage crossover funds would be leading a Series B or maybe even a Series A, but they\u2019d say, \u2018Look, we don\u2019t take board seats.\u2019 So as the seed investor, we were having to stay on longer. Now that those same firms aren\u2019t doing those deals and more traditional firms are backing Series A and B rounds, they\u2019re taking those seats again.<\/p>\n