How AngelGate Affects You...Yes, You In an overcrowded world of mortal human beings, struggling with scarcity and inequities, networked technology can extend the reach and vision of any of us individually - beyond the wildest dreams of most of human history. The Internet is a great source of hope. Enter Angel Investors. They give money, usually their own from previous business successes, to early stage startup companies aiming to create the future of the Internet. This weekend tech blogger Michael Arrington reported on a secret dinner attended by a large number of Super Angel investors, some of the most prominent early-stage investors in consumer web technology. That's contrary to the interests of the inventor entrepreneurs that those Super Angels are charged with shepherding into the world. Why should you care? World leaders used to have to ride a horse for days to visit a library that held less information than we can all now access in moments with an inexpensive device we carry in our pockets. Photo by Joi Ito.
AngelGate dispute among Valley investors cracks wide open When TechCrunch editor Mike Arrington barged in on a secret meeting of super angels, the wealthy individuals who are taking an increasingly prominent role in startup investing, the facts were open to interpretation. Arrington alleged that he heard the meeting was about illegal collusion. That seemed so unlikely. But now an email sent by investor Ron Conway (right) shows that there is a real fracture in the angel group about whether there was an attempt at collusion, as Arrington alleged. Two days ago, Arrington wrote a post where he alleged that the secret meeting that he crashed was in fact an attempt by a group of super angels, or well-heeled investors with their own funds, to illegally collude by agreeing to hold down startup valuations. At the time, it seemed pretty implausible that such a well-known group of smart people would try to get away with such a hare-brained scheme. Dave McClure, head of 500 Startups, wrote a post that blasted Arrington’s credibililty.
In Europe? Here in Europe we’ve been fascinated by what has become known as AngelGate. But after talking all day to many contacts today across the tech scene in Europe, I’ve reluctantly come to the conclusion that I’m not about to blow the lid on anything similar in Europe. Leave aside the arguments about what happened at Bin 38, and taking on the hypothetical situation that “Super Angels” (and there are handful) might be colluding in Europe, I’m afraid there is no evidence for this (at least that I can find). Here’s why. There is clearly enough competition over deals in the US to lead some people to feel the need to organise a dinner to work all this out (as I say, leaving aside all the accusations about why and for what purpose). Would they ever collude to dampen down competition? As one source who has been both angel and entrepreneur said to me, “I don’t get a sense of people competing for deals.” Of course the situation has changed. Collusion? UPDATE: Robin Klein disagrees with me.
TechCrunch editor walks into meeting of “super angels” engaged in alleged collusion Mike Arrington, editor of TechCrunch, sure knows how to ruin a party. He evidently walked in on a meeting of prominent Silicon Valley investors and discovered they were allegedly colluding to keep a lid on startup valuations, cartel style. In a blog post, Arrington said that he was tipped off about a secret meeting of “super angels,” or well-heeled investors who are competing with the best venture capitalists to find early stage investments in hot companies in Silicon Valley. Arrington was told he was not welcome at the meeting at Bin 38, a restaurant and bar in San Francisco. He went anyway and strolled into the private room in the back. “I’ve never seen a more guilty-looking group of people,” Arrington wrote. Arrington said the topics included: Arrington said two of the people attending were extremely uneasy about the meeting and told him they were only there to gather information, not participate. We don’t know what’s true here.
VCs & Super Angels It’s a lot like the Cold War – most of the really interesting fights among startup investors – and there are lots of them – occur behind the scenes. Publicly everyone gets along just great. But declining returns, too much capital and the disruptive force of a new breed of angel investors has created enough tension in the system that some frustrations are beginning to boil over. And in some cases, the gloves are coming off. And entrepreneurs can and do get caught in the cross fire. Until very recently there was an established pecking order with venture capitalists. Today things are much more complicated. But the last several years have seen the rise of the cheap startup. An entire generation of entrepreneurs have stopped thinking about hitting up those top tier VCs as their first step in the startup process. And those angels aren’t shy about trashing the VCs. The VCs, for their part, fight back more quietly. And without those occasional but huge exits, the entire ecosystem can fail.
Super angel Dave McClure admits he was at secret dinner, denies collusion Dave McClure, a “super angel” and founder of the seed stage startup fund 500 Startups, has writtten a profanity-ladened post in which he admits he was at a secret dinner that Techcrunch editor Mike Arrington barged in on. But McClure denied Arrington’s allegations that there was any collusion among the angels to hold startup valuations down. “Unfortunately I probably have more balls than sense, but it drives me f****** [we cleaned up his language a little] insane to see some bull**** superangel conspiracy theory get whipped into a frenzy by people who weren’t there, have no idea what the hell was discussed, and are ready to believe anything when someone yells FIRE! McClure said he considered Arrington to be a friend, but he said Arrington was “dead f****** wrong” about the collusion which makes for “great red meat on Techmeme and Twitter, but it’s just so much horse****.” He said that Paul Graham and his Y Combinator incubator are doing great now in starting new companies.
The Future of Startup Funding August 2010 Two years ago I wrote about what I called " The opportunity is a lot less unexploited now. Investors have poured into this territory from both directions. VCs are much more likely to make angel-sized investments than they were a year ago. Though a lot of investors are entering this territory, there is still room for more. In fact, it may be good for angels that there are more people doing angel-sized deals, because if angel rounds become more legitimate, then startups may start to opt for angel rounds even when they could, if they wanted, raise series A rounds from VCs. Of course, prestige isn't the main reason to prefer a series A round. But while series A rounds aren't going away, I think VCs should be more worried about super-angels than vice versa. They would seem to have history on their side. On the other hand, startup investing is a very strange business. VCs Why don't VCs start doing smaller series A rounds? I'm not saying VCs don't help startups. Angels Sheep Traction
Fire in The Valley, Fire in My Belly... and Yes, Mike, I Have Stopped Beating My Wife So i've been debating whether to write this post all day. Unfortunately i probably have more balls than sense, but it drives me fucking insane to see some bullshit superangel conspiracy theory get whipped into a frenzy by people who weren't there, have no idea what the hell was discussed, and are ready to believe anything when someone yells FIRE! so here goes nothing... first a few clarifications: - mike arrington is a friend, an imposing figure, and a hard-nosed, hard-working journalist. that said, he's dead fucking wrong about there being some story around " collusion" (def'n). makes for great red meat on TechMeme & Twitter, but it's just so much horseshit. - startups & investors bitch & moan about price (aka valuation) all day long, but i don't really give a damn what other people think most of the time. buy or don't buy. negotiate or don't. This is America, This is Capitalism, and it's a Free Fucking Country. me? in short: if it Bleeds, it Leads... and Fuck. as for lil ol' me?
The Private Capital Markets AngelGate: Ron Conway Rips 'Despicable and Embarrassing' Super-Angel Investors Ron Conway, one of the most influential venture capitalists in technology, dropped a bombshell on Silicon Valley Thursday by accusing another group of prominent investors of "despicable and embarrassing" conduct surrounding hot startup investments. Conway's attack throws a barrel of gasoline on the rapidly escalating conflagration known as AngelGate -- an alleged conspiracy by a cartel of top early-stage, or "angel," investors to collude and fix price levels for hot tech investments. Techcrunch, which first reported the alleged scheme, obtained a copy of Conway's extraordinary email attack and posted it late Thursday. Earlier in the week, Techcrunch editor Michael Arrington, a former Silicon Valley lawyer, detailed what he described as a plot by angel investors "to keep other competitors out of the market, or to discuss ways to keep prices under control." "Total Disagreement with Your Values" Conway's email appears directed at the angel investors involved in the alleged scheme.
AngelGate Goes Nuclear, Startups Get the Fallout: Tech News « Just when you thought the AngelGate fuss — which Mike Arrington of TechCrunch touched off earlier this week with a blog post exposing a meeting of “super-angels” — couldn’t get any more emotionally fraught, legendary Silicon Valley investor Ron Conway upped the ante late Thursday with an email to some of the investors who were at the meeting, calling their discussions “despicable and embarrassing for the tech community.” Among other things, the long-time angel investor asked those at the meeting to remember who they are supposed to be working for, namely the founders of the startups they are investing in. This is a message we tried to get across in a recent post as well, and a point that several other prominent angels and investment funds such as True Ventures (see disclosure below) have also made in blog posts since the AngelGate affair first blew up. The best advice I’ve ever given a founder during a pitch is: Don’t take any outside investment from me or anybody else.
AngelGate: Who’s Thinking About the Startups?: Tech News « In a blog post that is already making waves in Silicon Valley and throughout the startup community, Mike Arrington says that he recently walked into a secret meeting of the Valley’s so-called “super-angels.” Those are the trendy, not-quite-VCs who invest smaller amounts of money in startups, and who like to make themselves out to be an entrepreneur’s best friend — the kind that knows what entrepreneurs are going through and share their pain by not charging huge fees, etc. Except, according to Arrington, things aren’t always what they seem. The point behind this meeting, the TechCrunch founder says, was to talk about how the super-angels (some of whom may appear on these lists) could consolidate their power within the Valley ecosystem and win more market share away from the traditional Sand Hill Road VC firms. And are they planning to do this by offering better service to the entrepreneurs whose pain they claim to share? If these reports are true, that doesn’t sound very super at all.
» Founders Come First Posted On Sep 22, 2010 | by Jon The last two weeks have seen incredible ink, time, and venom spread around the competitive dynamics in the super-angel and VC markets. First the “smackdown” news and chatter this week and now Angelgate. While this makes for great press and lots of page views, the voice of the Founder has been absent from virtually all of the discussion and postings. Super Angels and VCs are spending tons of time and energy arguing vehemently that one approach is better or best, all the while polarizing the discussion. A lot of our industry has lost it way in the current environment and on this debate. Moreover, in the words of a friend, startups are a “team sport.” I’d suggest our industry do ourselves a real favor and remember where the power and creativity comes from in our world: it’s not from Super Angels, nor from VCs, it’s from Founders.