Deal Terms
Clubbing
When multiple VC firms co-invest in a round by splitting the allocation rather than competing, reducing competitive pressure on terms.
Clubbing occurs when venture capital firms agree to invest together in a deal rather than competing against each other, effectively forming an investment club. This practice reduces competitive pressure on valuations and terms, as the firms coordinate rather than bid against each other. While this can result in better deal terms for investors, it can disadvantage founders by limiting their negotiating leverage.
In Practice
Three top-tier VCs clubbed together on the Series B, each taking a $15M allocation in the $45M round. The coordinated approach meant the founder faced one set of terms rather than competing offers, resulting in a 20% lower valuation than an auction process might have produced.
Why It Matters
Clubbing is a contested practice that sits in a legal gray area. While it can provide founders with strong investor syndicates, it can also suppress valuations and limit founder choice. Understanding the dynamics helps founders recognize and respond to clubbing.
VC Beast Take
The line between legitimate co-investing and anticompetitive clubbing is thin. Some founders welcome syndicated rounds with multiple strong investors; others see it as collusion that limits their options. The key differentiator is whether the founder has true alternatives.
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