A look at the ethical minefield of VCs making personal startup bets ahead of follow-up investments from their VC firms, like at GV, BlackRock, DST, and others
Bloomberg : Tweets: @ivanlevingston , @technology , @ivanlevingston , @ivanlevingston , @ivanlevingston , and @ivanlevingston Tweets: Ivan Levingston / @ivanlevingston : As VC hits records this year, the question over whether the practice should be allowed is as relevant as ever. Some firms ask partners to sell back their stake at cost if they do a deal where one of their investors has a stake (5/6) @technology : Personal bets are popular in the clubby world of VC, but controversial https://www.bloomberg.com/... by @IvanLevingston @turnergs @mcbridesg Ivan Levingston / @ivanlevingston : On the other side though, some say it raises issues such as the potential for conflicts of interest when the firm evaluates the investment, and even the significant time commitment outside the portfolio (3/6) Ivan Levingston / @ivanlevingston : On the one hand, it is seen as a way to get in early with startups at an earlier stage than the fund might invest. It can lay groundwork for future firm deals (2/6) Ivan Levingston / @ivanlevingston : Either way the practice is both common and lucrative. When a VC invests with a firm the firm takes 20% of gains. When it's a personal bet, the VC keeps it all. (4/6) Ivan Levingston / @ivanlevingston : 🧵 VCs and personal investing: There is a healthy debate over venture capitalists making individual investments in startups. Excited our story @turnergs @mcbridesg @vandermey is out today on the issue (1/6) https://www.bloomberg.com/...
Context & Ripple Effects
Bloomberg's report lands at the peak of a funding cycle: non-VC money had already reached a record share of deals and H1 2021 US startup funding hit $150B on pace to double 2020 (H1 '21's $150B funding surge), so the stakes riding on any single follow-on decision have never been higher.
The practice also sits inside a longer blurring of personal and institutional investing — the rise of solo capitalists and micro-funds normalized individuals writing large checks alongside funds — while earlier coverage warned that operators should vet investors for bad-actor behavior. The question Bloomberg raises is whether partners' own wallets are the next conflict LPs must police.
First-order effects
- Partners at GV, BlackRock, and DST who hold personal stakes ahead of their firms' follow-on rounds are directly exposed: some firms force a sell-back at cost when an investor of the fund has a stake, converting a potential windfall into a flat exit.
- LPs in these funds now face a disclosed conflict they must underwrite — a partner can personally capture upside on the very deals the firm later validates with institutional capital.
Second-order effects
- Firms without a sell-back policy come under pressure to adopt one, since LP diligence will increasingly compare conflict-handling rules across GV, BlackRock, DST, and peers before re-upping.
- Founders gain a new signal to read: a partner's personal check ahead of a round telegraphs internal conviction, shifting information advantage toward insiders and complicating how syndicates price follow-ons.
Third-order effects
- If the pattern holds, personal-bet disclosure and forced sell-backs harden into standard fund terms, adding a governance layer to limited partnership agreements much like fee and carry terms became standardized.
- As more capital chases fewer breakout deals, the line between individual wealth-building and fiduciary duty becomes a structural fault line in venture — one that regulators or LP associations may eventually codify if firms don't.
The trend: Venture's record-scale capital cycle is forcing the industry to formalize partner-conflict governance, turning ad-hoc ethics norms into contractual LP protections.