fiduciary + douchebag = fidouchebag

By David Cremin

I’ve always loved “sniglets,” which were popularized by comedian/actor Rich Hall during his tenure on the 1980s HBO comedy series Not Necessarily the News.  Hall described a sniglet as "any word that doesn't appear in the dictionary, but should.”  Examples can be found here.

I created a venture capital sniglet today.  Among the many things I’ve learned in venture capital, but likely the most important, is that you’re in it for the long hall and shouldn’t go around taking advantage of others along the way, because your reputation is your most important asset.  For example, when discussing a potential “down round” recapitalization of a troubled company over a decade ago, my co-investor Bill Draper (my partner Tim Draper’s dad) said to me, “David, friends don’t do that to friends!...we all invest together, we all make money together, and we lose money together.  But we do it together!”  Obvious, right?  Not to everyone…But his is the best summation I’ve heard.

I have participated in a few transactions recently where some larger co-investors, in the name of being a “fiduciary,” threw their weight around to the detriment of other shareholders.  This is actually the opposite of being a fiduciary, which requires looking out for everyone, as Bill said quite clearly.  There were suddenly new interpretations of contracts, agreements, etc., which conveniently supported the so-called fiduciary’s argument.  I’m not going to debate the interpretation here, but these investors simply wanted more for themselves, at the expense of other shareholders, and used any rationale they could to get it.  What they failed to realize (or perhaps they didn't care) is that the rest of the shareholders will choose not to work with them again. 

Based on what I heard loud and clear from Bill Draper: this simply makes you a douchebag.  Ok, while we’re all adults and know sometimes VCs can be pushy to get what they want, I’m going to call it out and move on.  My Frontier partnership will choose not to collaborate with a Fidouchebag!  And if the economy continues with its uncertainty, or if shorting NASDAQ at this time is smart, not insane, then I think there will be a lot of capitalization difficulties for venture-backed companies in the coming months - and the Fidouchebags will be out en masse again, as they were most recently in the last down cycle.