For decades, venture capital has run on an unwritten rule: take a firm's money, and that firm will not turn around and fund your direct competitor. TechCrunch reports that Benchmark — one of the most storied names in the business — now believes AI is eroding that pact.
The logic is not hard to follow. Building a serious AI company takes capital at a scale few firms can supply alone, so rounds are increasingly assembled from several large investors at once. The number of credible lead investors is small and the time pressure is severe: a firm that refuses to back a competitor may simply watch a rival take the position, the relationship and the information advantage.
The norm was never a legal constraint. Anti-collusion law forbids competitors from coordinating, and a venture firm's duty runs to its own limited partners, not to the exclusivity of its founders. The pact held because it was useful: founders could share strategy with their investors without handing it to a competitor, and investors could sit on conflicting boards without an obvious conflict of interest.
AI breaks the assumptions underneath that arrangement in three ways. First, the capital requirement is large enough that the same few firms appear in round after round across a sector. Second, the technical overlaps are deep — model labs, chip suppliers, inference providers and application startups compete in some places and depend on each other in others. Third, the market is moving fast enough that declining a deal is itself a competitive decision.
The practical consequence for founders is a set of terms that used to be assumed. Exclusivity is weaker than it was. Disclosure matters more: what goes into a board deck, who sees a cap table, and whether a rival's investor learns a roadmap through a shared director. Information firewalls and side agreements about what an investor may fund start to carry real weight in term sheets.
What Benchmark's position signals is a shift in bargaining power. When capital was scarce and deals competed for allocation, the no-rival rule was cheap to offer. When capital is abundant for the small club that can write large cheques, the rule becomes expensive — and firms begin to say out loud what the market has already been pricing.
