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The Venture Police: Reputation

Some entrepreneurs seem to wonder what keeps VCs honest. From their perspective VCs don’t have anyone keeping them in check. Ironically, this couldn’t be further from the truth; everyone is keeping them honest.

VC is a relationship business. If limited partners (those who invest in VC funds) or entrepreneurs think a VC is a scoundrel that person won’t see new deals and they won’t be able to raise another fund – their days as a VC will be limited. This is a very real and powerful pressure that impacts VCs.  While not every VC takes these pressures seriously enough - the good ones get it.

As a result, the best VCs do right by entrepreneurs and others. What this means is that they are pretty good about keeping their word and being honest.

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