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Political donations and VCs

How many of us receive fundraising letters from suppliers, industry colleagues, clients or benefactors? This L.A. Times story details what may be the deathnell for VCs soliciting political donations from portfolio companies see link. According to The Times, Limited Partners such as Harvard Univ. and the State pension funds of California, Colorado and New Mexico pulled US$120MM of funding (about half of the firm’s entire pool of capital) from VC firm ITU after learning that ITU had solicited their start-up portfolio companies for donations to the campaign of a particular state legislator (California Controller Steve Westly). US$68k was raised from these firms in total.

Although the start-ups said the donations weren’t coerced, no one seemed to care as the story spun into orbit.

This poses an interesting question for all of us in the principal investing business: is every day-to-day request we make of a portfolio company going to be seen through the this lens? That any request — whether it be political fundraising, charity auction or “information interview” for your son or daughter — will be viewed by LPs as potentially taking advantage of the investor/investee relationship?

What about suppliers? Don’t we have a similar relationship there?

This may well be the thin edge of the wedge. Those of us with interests in not-for-profit work and/or politics often find the best use of our time is to fundraise, rather than stuff envelopes or paint sets on a stage. Charities and a robust political system will suffer as a result, if this instance turns into a trend.


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