I am in IB, but my friend is a VC analyst. He receives many pitches on a daily basis. We are in the beginning stages of a developing a startup on the side. There is 2 other direct competitors in the space currently, and they are both startups as well. My friend decided to give them a call and dig more into their operations (no NDAs involved). One sent over there business plan and projections. Is it unethical for him to use this information to help write our business plan? His firm is not investing with them and they didn't go any further after the inital chat.
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Unethical? Depends on your ethical standards. Most likely though, yes. Illegal? Most likely not.
Since they have the potential to be a direct competitor, this has the potential to backfire depending on the VC firm currently backing their startup.
If it was our large VC-backer (think KPCB, Sequoia Cap, Accel Partners..) and I was sending business plans/financial projections to another firm, without the approval of a pre-Series funding evaluation, the Board would probably fire me and sue whoever commercialized our business plan, given the provisions of concrete proof tied to the business plan documentation.
This is highly unethical. Most reputable VCs have a blanket policy of not engaging with any company that's a direct competitor with an existing portfolio company. That being said, if we don't already have a bet in a sector we will talk to a number of companies in the space, but always in the context of a potential investment. We will never lie to a company simply to steal their business plan. But unfortunately many VCs still do this.
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