The Perils of the Informational Meeting

As VC investing falls, so riseth the requests for meetings with VCs that good startups receive. At least once every few weeks, one of my clients calls to let me know that "X from Y VC cold called me and want to talk about our business and our market." It's always flattering to receive an unsolicited request for a meeting. But there are perils in strategic meetings with VCs, as this recent article from a Boston publication illustrates.

According to Boston.com, in 2006 the founders of Sittercity, a Chicago-area website agreed to a meeting with an entrepreneur-in-residence for Boston's Matrix Partners. No investment from Matrix was forthcoming, and 3 months later, the EIR formed a competing business that attracted more than $16 million in investment from VCs that included Matrix.

No wrongdoing appears to be alleged by either side. Rather, the story paints this as a cautionary tale about what can happen when you fail to understand the agenda of a VC meeting. You could end up disclosing far more than you otherwise would to a potential rival, for one thing, and spending disporportionate amounts of time providing follow-up feedback and details.

Strategic meetings that are requested to get to know your business may well be useful, collaborative events, but the kind of information you provide should be adjusted accordingly.