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In Venture Capital, Does It Pay To Be Nice?

It is always startling to see venture-capital firms implode because of personal conflicts among the partners.

Venture capital is a business where success depends on figuring out how to help entrepreneurs build companies. Yet there are firms where the partners can’t seem to stop themselves from trying to tear their firms apart.

At the latest example, Xfund, which was started to source deals out of Harvard University, a falling-out between two partners became so serious that in March, one filed a temporary restraining order against the other, who was terminated, according to court documents.

A corporate coach last year had apparently failed to help the pair improve their relationship. Limited partners are now figuring out what to do about the fund.

Good team players aren’t necessarily rewarded in venture capital, where investors compete hard to get into what are perceived to be the best deals.

Success can breed arrogance, and “there’s a subset of LPs who are willing to take that,” one limited partner said. “[They think], my job is to be with best people. I don’t have to like them.”

A couple of venture firms have created the role of chairman with the idea that a chairman could help their firms function better.

At New Enterprise Associates, the chairman is co-founder Dick Kramlich. He told The Wall Street Journal he created his role in 2013 because of the lack of continuity he observed among partners from one fund to the next. “It was pretty obvious that most people in our business lurch from partnership to partnership,” he said.

NEA is also an investor in the Xfund, but as of last week it had not responded to a request for comment.

In April, Kleiner Perkins Caufield & Byers also named a chairman—John Doerr. Conflicts among partners at that firm were put on public display last year after it was sued for gender discrimination by a former partner, Ellen Pao, whom Mr. Doerr had hired.

Mr. Doerr told The Wall Street Journal that he’s giving up his partner role to focus on recruiting and coaching the firm’s next generation of leaders.

Lest anyone think he’s being demoted, he added that being chairman at Kleiner Perkins doesn’t mean he’s going to be “kicked upstairs and that is an exit. One thing I hope is very clear is I’m going to spend more time on the people and the work I love because my daughters are off to college,” he said.

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