For many years, venture capital firms adhered to an unwritten rule of avoiding investments in directly competing startups. However, at TechCrunch Disrupt last week, Benchmark partners acknowledged that this convention is increasingly difficult to maintain amid rapid developments in AI. High-profile investors now frequently share stakes in rival AI companies, as illustrated by the overlap of backers in leading labs like OpenAI and Anthropic. Recent incidents, such as the Factory startup’s dismissal of board advisor Chris Degnan over alleged conflicts involving competitor Cognition, highlight the growing tensions and ethical challenges in this competitive landscape.

Benchmark, known for its long-term founder relationships, conceded that conflicts of interest are becoming unavoidable as portfolio companies evolve and pivot into overlapping markets. Eric Vishria explained that while Benchmark remains committed to confidentiality and early-stage exclusivity, the speed of change in AI means competing interests often arise out of necessity rather than preference. Chetan Puttagunta noted that as software creation costs plummet, founders are more ambitious and prone to expand into others’ domains, making conflicts more common. Peter Fenton described the balancing act between close partnerships with startups and the realities of investment diversification, emphasizing transparency as vital to maintaining trust.

The AI boom is reshaping how venture capitalists approach their investments, forcing a reconsideration of old norms about backing rivals. Although Benchmark has yet to experience direct, damaging conflicts like the Factory-Cognition case, their openness about the shifting rules signals broader industry changes. Founders, especially in fast-moving sectors like AI, may need to prepare for more complex relationships with investors who might fund competitors, even if unintentionally. This frankness from a top-tier firm invites questions about how other investors will manage similar challenges in the near future.

Ultimately, Benchmark is not declaring an end to the traditional venture pact but acknowledges its erosion amid technological acceleration. Their reflections suggest that early exclusivity remains valuable but growing overlap is now part of the new venture reality. As AI companies race to define markets and capabilities, investors and founders must navigate these new competitive dynamics with greater transparency and adaptability to sustain long-term partnerships. The evolution of venture capital strategies in AI will likely continue to impact how startups secure funding and manage investor conflicts going forward.