In a post-NDA world, does transparency help founders identify conflicts of interest?

Once upon a time, fintech founders could pitch 10 investors before closing a round in a relatively hushed way. Entrepreneurs could even ask VCs to sign nondisclosure agreements (NDAs) to keep their information confidential. Today, everyone is a fintech investor and no one signs NDAs.

This changed dynamic puts founders in a difficult position.

Nabeel Alamgir, CEO and founder of Lunchbox, struggled to raise his first institutional check for his restaurant tech startup. After searching for more than a year, Alamgir found an investor who understood his vision. Better yet, the investor had connections to restaurants in New York City that Alamgir wanted to land. So, Alamgir shared everything about Lunchbox, from the financials, to the product integration road map and go-to-market strategy.

After a month of due diligence, the investor ghosted Alamgir. Four months later, that same investor’s portfolio company launched a product mimicking Lunchbox.

“I did not do due diligence on them as they were doing on me,” he said. “And I forgot all my rules. Most rules go out the window as cash is running out.”

Alamgir’s experience is a classic case of back-channeling, a sometimes unfortunate yet uncommon occurrence for founders in Silicon Valley. It’s not a secret that investors share intel with each other as a competitive advantage; but as venture capital grows as an asset class and more investors break into the industry, the way information disseminates will become even more elusive and broad.

Alamgir advises early-stage founders who are looking to raise their first check to “contain excitement.”