Disaster on Sand Hill Road: AngelGate Gathering Steam

currently having a super secret meeting with myselfWed Sep 22 20:18:35 via TweetDeck

Brad Feld

Early this week, TechCrunch’s Michael Arrington posted about a secret meeting at San Francisco restaurant Bin 38 attended by “ten or so of the highest profile angel investors in Silicon Valley.” This precipitated what has become known as AngelGate. Arrington claimed that these angel investors have been colluding in secret to ensure that deal valuations are kept low. Also discussed were how to arrest the growing power of Y Combinator, how to keep new angel investors out of Silicon Valley; and the possibility of a group agreement not to accept convertible notes in deals. Now people are saying the FBI is looking into it.

At least one attendee disputed this account. “At the dinner, there was a fair amount of kvetching about convertible notes, capped or not, hi/lo valuation, optimal structure of term sheets, where the industry was headed, who was innovating and who wasn’t, and 10 million other things of which 3 were kind of interesting and 9,999,997 weren’t unless you like arguing about 409a stock option pricing,” wrote Dave McClure of 500 Startups. Who then went on to quote, in full, the lyrics of Jill Scott’s “Hate on Me.”

All this would be explosive and bizarre enough on its own, but it was followed by the leaking of an extraordinary private email from prominent angel investor (Foursquare, Buzzfeed, Twitter, Digg) Ron Conway, addressed to the meeting’s attendees. It is rare enough in our day to see a rich man declaring his ethics, in public or in private. It is rarer still to see one who is willing even in private to denounce the pure self-interest and materialism of his colleagues on principle.

His email included this:

The world of startups would be a better place if you spent less time complaining about deal structures, terms, vc’s, and valuations etc and the cars you drive, and just helped entrepenuers [sic] build their companies.

The Free Enterprise system is very efficient …..why not let the marketplace demands decide on these issues, its worked for many many years. These startups are binary …they succeed or fail so why waste time on deal structures, terms, vc’s, and valuations etc and just help entrepenuers [sic] build their companies.

In my opinion your motives are driven by self serving factors around ego satisfaction and “making a buck”.

My motives and values are very different.

They are so different I want to be up front with you and recognize this and disengage from any involvement with you.

It makes sense such anxiety is expressing itself in this way now. “It’s no secret that a big part of what led to the secret meeting of super-angels — where the topics of discussion (allegedly) were things like how to push startup valuations down — is the current bubble-like atmosphere around startups and seed investing in Silicon Valley” is one way to put it.

Still, I would find this hard to believe if I hadn’t seen it myself many times, but it is literally true that VCs and angel investors very commonly and very openly brag about their own greed and self-interest; it’s merely a matter of course to them that all anyone is or could ever be interested in is money, specifically the acquisition of more and more thereof. The idea that there could be other motives literally doesn’t compute with a large proportion of them. If Mr. Conway’s ideas succeed in penetrating at least some of those adamantine skulls, it will benefit no small number of people.

Maria Bustillos is the author of Dorkismo: The Macho of the Dork and

Act Like a Gentleman, Think Like a Woman.