
So A Blogger Walks Into A Bar…  - icey
http://techcrunch.com/2010/09/21/so-a-blogger-walks-into-a-bar/
======
grellas
I am late in joining this thread and will add only a few observations to
supplement the many good comments already here:

1\. Competitor collusion and express agreements to restrict the freedom of
each to compete (i.e., horizontal contractual dealings) do indeed expose the
colluding parties to potentially serious liabilities under the Sherman and FTC
Acts. If that is what is going on here, then Mr. Arrington has fired a major
warning shot to those involved asking, in effect, "are you insane to let
yourselves get caught up in this sort of activity?"

2\. The irony here is that competitors are completely free to have contacts
with one another, to discuss industry problems, and even to work on solutions
for how best to handle such problems, _provided_ that such contacts aren't
made for an anti-competitive purpose. This is how trade associations work,
among other things, and angel investors can and do meet all the time to
discuss common issues and problems. Such benign meetings and contacts are very
different from colluding to restrict their ability to compete freely in the
marketplace through agreements to suppress valuations, etc.

3\. Parallel action by competitors is in itself normally quite harmless and
does not subject them to liabilities (for example, the fact that angel
investors tend to use common sets of investment documents, tend as a group to
dislike convertible notes, etc.). Companies having nothing to complain about
legally from the fact that a particular angel investor happens to engage in
practices in common with others in the industry that founders happen not to
like. All this changes, though, if the competitors (i.e., the angel investors)
have engaged in suspicious activities such as secret meetings among themselves
to discuss overt ways to limit competition, etc.

4\. Nothing under the law stops any one of these angel investors from deciding
as a business matter to form a new fund along with others of such investors
and to engage through that fund as a competitor in the venture financing
industry. In such case, the investors are no longer competitors and have
simply combined forces to compete as a different entity in the industry. If,
however, the parties effectively remain competitors and simply form a jointly
controlled venture whose aim is to serve as a vehicle by which they might
collude in suppressing competition, that vehicle would be unlawful.

Putting all this together, the normal give and take among the myriad angel
investors in the Valley and elsewhere is lawful and beyond reproach, even when
they do meet to discuss problems. Meetings in a smoke-filled room as part of
concerted efforts to restrict normal competitive activities by the
participants, on the other hand, are almost blatantly illegal on the face of
it and especially so when the participants are among the most prominent
players in the industry.

It may well be that some or most of these participants hadn't really realized
that they were moving from the benign to the illegal in participating in such
meetings over time, and this is where it seems that Mr. Arrington is doing a
good turn for them by calling them out before they do something that is
irretrievably wrong. Just speculating on this last point but that is how the
tone of the piece strikes me.

~~~
EvanMiller
"3. Parallel action by competitors is in itself normally quite harmless and
does not subject them to liabilities."

Not sure what your sources are, but courts have ruled that parallel action can
be sufficient evidence of conspiracy under Section 2 of the Sherman Act. See
e.g. American Tobacco v. United States (1946), available here:

[http://supreme.vlex.com/vid/american-tobacco-v-united-
states...](http://supreme.vlex.com/vid/american-tobacco-v-united-
states-20015656)

The Supreme Court wrote:

"[The conspiracy's] existence was established, not through the presentation of
a formal written agreement, but through the evidence of widespread and
effective conduct on the part of petitioners in relation to their existing or
potential competitors."

If I remember correctly from my anti-trust class last year, the American
Tobacco precedent still stands. You don't need written or audio evidence to
get a conviction; anti-competitive behavior in the marketplace is sufficient.

~~~
brendonjason
I find this somewhat dubious; I wasn't there, but if I was one of those guys,
I'm not sure I'd continue the "evil meeting" after Michael stumbled in
uninvited. If he came after the meeting ended, why weren't they all "just
about to leave."

Having said that, I'm sorry if my confusion gives a way my ignorance of the
subject, but are these angels selling anything to a marketplace? I thought
angels invested their money. If that's the case, aren't they colluding to the
terms of their buying, as a group? Or at least to loosely manage the terms of
buying? If that is illegal, why does it apply to angel investing but not, say,
Groupon? What I don't understand is what is their "price" that they are
colluding to "fix"? I thought antitrust was for the collusion for the price
asked, not price willing to pay.

~~~
dandelany
Interesting questions... IANAL, but I imagine they're colluding to bring down
the valuations of startups, therefore essentially fixing the "price" of their
money, to be paid for in startup equity.

If I, and others, say your company is worth a million dollars, then I'm fixing
the price of my $500,000 at 50% of your company.

~~~
brendonjason
IANAL(E), but this scenario would seem to be more of a concern if startups in
Silicon valley got together over dinner to deny deals that didn't offer
similar terms and prices in dollars for securities of all startups represented
at said dinner simultaneously.

As for angels fixing the "price of their money" I don't understand how
antitrust applies to this anymore than it would to, say, how LIBOR is
determined.

If antitrust applies to colluding on the dollar amount to be paid OUT instead
of price asked for money coming in, then if I start a boycott of something
(colluding to pay $0) am I guilty of violating antitrust laws?

As I understand it (not much, I admit), antitrust applies to goods and
services, not cost of money. If antitrust applied to cost of money, the
Federal Reserve would not exist since it's basically an extension of the
member banks that make up its institutional board of directors (not board of
governers). All they do is get together and fix the price of money to be
printed and lent out to member banks.

Also, this whole "I stumbled in on a secret meeting of powerful men conspiring
to start a revolution" thing is somewhat suspect; throughout history this
gambit, if it actually happened that way, is usually either desperate grab at
15 minutes of fame (which seems unlikely given Michael's popularity), an
attempt to gain instant credibility on some esoteric but useful new subject
("I was the only outsider privvy to what happened there, so you can trust me")
or, unfortunately, a cynical move feigned by the men in the room to inspire
hasty and possibly faulty reactionary stances by the supposed target of their
"envy".

I could be wrong though. I just can't believe guys who are careful enough to
get to such a position in life would all simultaneously get so careless. On
the same day. In the same place.

~~~
jarin
I don't know if care has a lot to do with it. A lot of these folks got
successful by taking risks without deep consideration of the consequences (for
better or worse). That's why they pay lawyers to tell them when they're
pushing the boundaries too much, but in this case the lawyers obviously
weren't in on the proceedings.

------
tc
Congratulations to PG & company. When I first met Paul years ago, he was
musing about spam filters and the finer points of a well-designed lisp. Now he
apparently has the top 10 angels in Silicon Valley running scared of him.

~~~
jeromec
The interesting thing is unlike that group of Angels apparently in the bar
PG's interests are less about helping himself, and more about helping
entrepreneurs. From an essay by PG entitled "Why YC":

 _The real reason we started Y Combinator is one probably only a hacker would
understand. We did it because it seems such a great hack. There are thousands
of smart people who could start companies and don't, and with a relatively
small amount of force applied at just the right place, we can spring on the
world a stream of new startups that might otherwise not have existed.

In a way this is virtuous, because I think startups are a good thing. But
really what motivates us is the completely amoral desire that would motivate
any hacker who looked at some complex device and realized that with a tiny
tweak he could make it run more efficiently. In this case, the device is the
world's economy, which fortunately happens to be open source._

<http://paulgraham.com/whyyc.html>

~~~
wensing
YC's greatest hack is identifying founder material based on technical rather
than social proof (the YC app asks for an example of the coolest thing you've
ever built, not an example of a cool person that thinks you are cool). This
hack is possible thanks to a judges panel full of real nerds. How many super
angels or VC's can claim to have the same?

~~~
gruseom
I agree that YC are able to identify great hackers and great founders more
easily because they are these things themselves. What's little recognized is
how big a difference this is between YC and the other YC-like funds.

~~~
wensing
Yes. I had a colleague apply for TechStars and her takeaway from the interview
was "he was really focused on where the business was." Doesn't seem in line
with what I've heard about YC's primary interest (it's not the business
model).

~~~
gruseom
It seems kind of obvious that most successful startups don't succeed via the
business model they started with. And that great founders can change business
models more easily than great business models can change founders. These
things are so obvious that they're cliches, in fact, but that doesn't mean
that they're common practice.

------
gruseom
I find it fascinating how the very qualities that lead people to call Michael
Arrington an asshole are dramatically in evidence here. It takes a staggering
immunity to social mores to walk in on a meeting of rich and powerful friends,
friends who are connected to his own business in many ways (read: friends with
leverage) and behave the way MA says he did, let alone go home and write that
article. Very few people could do it. I'm not sure I could, to put it mildly.
I particularly doubt if many (any) of Arrington's competitors ever would. It
may take a character disorder to be able to act this way.

In an age when journalists grade themselves by which power-brokers deign to
have lunch with them (anybody see David Brooks prattling about this on Charlie
Rose the other night? lunch _and_ dinner, he said) it's impressive to see
anyone act like this. Especially if what he's saying is true and this really
is a matter of right and wrong.

~~~
mrtron
I have always felt MA had a certain...brashness, abrasiveness, assholish tone,
whatever you want to call it... about him. You could feel it in his articles.

I now feel it is not only helpful but entirely necessary for him to develop
that quality in his career path.

Kudos for pushing the boundaries Mr. Arrington. The evidence speaks for itself
- you don't see this type of journalism in any industry anymore.

------
mixmax
So a blogger gets a tip from a source, knows the people involved, acts on it
and smells a rat. He sticks around and talks to a few people he knows, makes a
few calls and gets a breaking story.

Sounds to me like bloggers are the new journalists and that traditional media
is in big big trouble.

~~~
vaksel
a breaking story would name names...him not naming names just means he can use
this as a hammer to get better terms for Techcrunch(either I get exclusive to
every deal you guys do...or your names will be posted)

~~~
metamemetics
I would argue it's more ethical to discourage and prevent crime from ever
happening in the first place. Seeking satisfaction from "catching the bad guy"
(naming names) is to setup a market dependent on the need for new crimes.

Arrington did the right thing. It's not about whether he caught a criminal,
it's about whether he prevented someone from becoming one.

~~~
eavc
Someone (maybe everyone) in that group knew what they were doing to be wrong.

I doubt that they will abandon their ethical choice; they'll find smarter ways
to do what they'd intended all along.

One thing that might work is if someone in the group has damning
correspondence, everyone will panic and promise to "never talk about that
summer again," genuinely preventing future problems.

------
jnoller
I do hope he's wrong, or that this a mistake of some sort. The rise of Angel
investors has seen a lot of ideas and entrepreneurs get needed money when they
might not have under the traditional VC model.

Something like this, if true, will cause the government to step in, and
probably regulate and change things for the worse for a great many people. It
won't just hurt these few super angels. It will take everyone with it.

~~~
j_baker
To be fair, this _is_ Michael Arrington. He's not above sensationalism to get
a few extra clicks.

~~~
mattmaroon
This goes well beyond sensationalism. I'm inclined to believe him for three
reasons:

1\. Mike's not known for boldly lying. He might publish rumors that Facebook
is building a phone too liberally, but I've not heard of him saying "I saw x
happen" and it wasn't true. Assuming the account of what he himself saw was
accurate it's hard to imagine collusion wouldn't be the purpose.

2\. This sounds like something that would happen. VCs do this crap all the
time, why not angels?

3\. Publishing this might be bad for him, and if it were untrue, it would
definitely be really bad for him.

~~~
swombat
Add to that that there is no convincing reasons why this group of angels would
manufacture this story to lead him on. Unlike with some other TC stories which
turned out to be manufactured to discredit TC, in this one, the sources
themselves would risk a lot by leaking this - true or false.

------
jexe
Well, at least one investor seems to have accidentally included himself in the
mess (from TC's comments)

<http://twitter.com/speechu/status/25083299594>

~~~
nostromo
I just put "forming a cartel" on my list of things not to tweet.

~~~
mattmaroon
Unless you're in Mexico. Then Tweeting is probably a good idea.

------
tptacek
In what sense do antitrust laws apply to investors? Why is it unlawful for
investors to band together to get better terms for themselves?

Wouldn't it be perfectly legal for these people to sit around a table an agree
to merge and start a fund? If that's the case, how could it be unlawful for
them to work on a joint venture? Just because I don't like the JV doesn't make
it unlawful!

~~~
nostromo
It sounds like price fixing, even though they are buying and not selling.
Check out Wikipedia for a good write-up:

"Price fixing is an agreement between participants on the same side in a
market to _buy_ or sell a product, service, or commodity only at a fixed
price, or maintain the market conditions such that the price is maintained at
a given level by controlling supply and demand. The group of market makers
involved in price fixing is sometimes referred to as a cartel.

The intent of price fixing may be to push the price of a product as high as
possible, leading to profits for all sellers, _but it may also have the goal
to fix, peg, discount, or stabilize prices_. The defining characteristic of
price fixing is any agreement regarding price, whether expressed or implied.

...

Colluding on price amongst competitors is viewed as a per se violation of the
Sherman Act regardless of the market impact."

~~~
tptacek
Would it still be price fixing if all of them got up from the table and
announced the formation of Super Angel Capital Partners? I can't see how;
there's tons of VC firms already. If that's not unlawful, how is a joint
venture among them unlawful?

Are we just stuck on the fact that they're "angel investors"? The law doesn't
recognize any such sector of the venture capital business.

~~~
InclinedPlane
If they create a single super angel corporation then they could run afoul of
anti-monopoly laws.

~~~
tptacek
What? No they don't. There's no such thing as a "monopoly of angel investors".
There are as many angel investors as there are people with extra money to
invest. In a lot of cases already, groups of powerful people with extra money
to invest have already formed very famous companies to do exactly what we're
talking about!

Shouldn't the DoJ be going after Kleiner and Sequoia first?

Don't hundreds of doctors and dentists already do stuff like this?

------
bhoung
As a former competition regulator, I have to say this blog post is a beauty,
in content. Making such a serious accusation, albeit one that is very
difficult to prove, especially when the accusation is towards your friends is
a gutsy/crazy move. This pretty supports PG's prediction that the power is
shifting towards founders and startups when raising capital from VCs.
Hopefully, this diffuses any further action on the part of the investors. It
may be time for a career change...

------
joshbuckley
Props to Arrington for the post. He definitely has integrity, and knows how to
write an interesting post.

~~~
siruva07
he also leaves just enough to the imagination. sure, everyone is assuming the
top 3-4 usual suspects, but it was a room full of people -- wondering who were
8,9,10

~~~
bl4k
Mike tends to push posts out as he develops the story (eg. the Scamville saga)
so expect this to be the first of many posts.

When he picks up a story like this, watch out - Scamville didn't end until
Offerpal lost their CEO, Zynga apologized and Facebook changed their policies.

------
dotBen
There's only half the story here because Arrington isn't naming names.

It was a meeting of a group of people in a semi-public place, I don't see why
he hasn't named who was there:

"So, I went into the restaurant to find Dave, Ron, Jeff, Mike, Josh, Chris,
..." _(I'm just naming, um, random first names here folks for the purpose of
illustration!)_

He's clearly running a power play around the identities...

~~~
AmericanOP
Because Dave, Ron, Jeff, Mike, Josh and Chris would have a defamation suit
filed by end-of-day. Clearly MA reached out to the attendees.. I wonder what
the other 8 or 9 had to say. That's the other half of the story.

~~~
dotBen
If Arrington lists a bunch of people were at a gathering, and they were, then
there is nothing to sue over there.

If he says _"they were talking about pricing deals and how to club together to
avoid convertable notes"_ , and they were, then there is nothing to sue over
even if he has named the people there.

I don't actually get your comment. If we DON'T believe this group were talking
about what Arrington is claiming then there is a bigger issue here regardless
of whether people were named or not.

~~~
bl4k
You go from lawsuit to settlement in a punctuation mark where in reality it is
months/years and millions of dollars.

Never give a person wealthier than you a reason to sue you - regardless of if
you are wrong or right.

~~~
dotBen
I spent the earlier part of my career working for independent and free media
and campaigning for free press.

Of course you should never publish anything libelous or incorrect but it
saddens me to no end to think that people wouldn't publish something that they
could stand by as true, right and accurate simply because they were scared
they might get sued.

And certainly someone as the proprietor of a publication of record like
TechCrunch (which while perhaps not the most whitest-of-white media outlet,
still has something to stand for) owes it to his readership to do what's
right.

I guess it all comes down to why you are publishing in the first place - to
communicate truth and facts or for power and ego _(which sure, is hard to tell
with TechCrunch at times)_

~~~
bl4k
It is a process of journalism. He is using the story as leverage to fill in
the remainder of the story. See how the Scamville story evolved.

I think Arrington has shown time and again that he places the story and public
interest above all else. To even suggest or insinuate that Arrington is only
publishing this story to fuel his own ego is completely wrong. He likely burnt
a lot of bridges with todays story and lost a lot of sources in order to give
the public a very rare view of what takes place behind closed doors.

------
tptacek
This thread officially needs a 'grellas bat-signal.

~~~
jon_dahl
Signal answered. <http://news.ycombinator.com/item?id=1714863>

------
danielnicollet
This is major. I worked with Michael Arrington years ago. He wouldn't say this
without being sure and there is no stopping him now. He went to Stanford Law
School and worked at one of the Valley's top law firms (wsgr.com). Mike, get
ready for the witness stand!

------
jasonshen
Arrington has got a lot of balls to call out so many big players at once. I
definitely want to see how this plays out.

~~~
jpeterson
Did he actually call anyone out? I thought this was post was extremely light
on substance, actually.

~~~
joshbuckley
He said "it included just about every major angel investor in Silicon Valley"
- which people can make easy assumptions about who it is.

~~~
guelo
I'm guessing the top 10 super angels would include Marc Andreessen, Chris
Dixon, Ron Conway and the PayPal guys Peter Thiel, Reid Hoffman, Max Levchin,
Keith Rabois

Who else?

~~~
Eliezer
The Quora list is very different from yours. And I think we should all be
really careful about guessing, considering how much damage you could do to
someone's reputation by guessing wrongly. There's at least one person on your
list above who I'd be surprised to see part of this.

Vide the cognitive psychology experiments which show that once you mention a
person's name, it gets connected in memory regardless of how doubtful the
source ought to be, etcetera.

~~~
khafra
Thiel seems like a clear thinker, but almost anybody can gradually drift in
the wrong direction--especially if, as grellas says above, it probably wasn't
quite illegal.

~~~
Eliezer
Well, he ain't on the Quora list and no one there has even suggested him yet,
so let's all be a little careful with our public guessing, shall we?

------
chaosmachine
There's a quote I can't quite remember. Goes something like: "When merchants
meet to discuss business, the public is rarely the beneficiary".

~~~
asr
Was it the Adam Smith quote "People of the same trade seldom meet together,
even for merriment and diversion, but the conversation ends in a conspiracy
against the public."

Why do I know that off the top of my head? Civ IV... who says games can't be
educational?

~~~
chaosmachine
That's the one, thanks. Good old Civ :)

------
jessep
There's a comment on Techcrunch that I found particularly interesting:
[http://techcrunch.com/2010/09/21/so-a-blogger-walks-into-
a-b...](http://techcrunch.com/2010/09/21/so-a-blogger-walks-into-a-
bar/#comment-79846761)

"This group does not have a monopoly position in early stage deals. So getting
together to discuss how they as individuals/small firms can better compete
against much larger VCs and incubators is not price fixing or collusion."

It continues on to expand nicely on the point.

~~~
_delirium
Is a monopoly even needed? In most fields I thought it was illegal even if
only a few businesses in a market get together, e.g. if a dozen gas station
owners in my area got together to discuss coordinating price strategy, that'd
be illegal, even though those 12 hardly own the whole market. Though there are
legal ways to do it if you aren't _actually_ discussing setting prices, e.g.
all the local bakers' shops can get together to discuss difficulties in the
current market for baked goods, how to better promote the sector, etc., so
long as they aren't working out how to collude in negotiating with their
suppliers, or agreeing to minimum prices for bread, or things of that sort.

------
joshu
From the comments:

> No self-respecting conspiracy uses a wiki (or even email).

I laughed.

~~~
mrshoe
Were you in the room?

~~~
qq66
I don't think that Joshua Schacter is a "super angel" as the TC post uses the
term.

~~~
joshu
I'm not even a medium angel.

~~~
bl4k
Here is something to consider. You have said yourself that as an angel you
prefer to follow deals, rather than set the terms. A lot of angel investors
are like that. The problem is that the guys who lead the rounds and set the
terms are fixing the market.

While there may be hundreds of angel investors out there, the reason why only
10 of them can rig the market in this way is because most of them, like
yourself, are followers.

How about the 90% of the other angels step out and actually lead some deals
and price them, so that we have a real investment market at the seed stage.

~~~
joshu
The trend lately is toward convertible notes issued by the startup itself.
This means that nobody is leading and nobody is pricing the deal.

There are plenty of other people (VCs, basically) that do lead, when there is
a leader. It's just much rarer right now. And the stronger deals, not the
weaker ones, tend to be lead; those are the deals where the entrepreneur has
the most leverage, not the weakest.

I don't get the impression that anyone is fixing the market, for what it's
worth.

But thanks for the outrage and accusations.

~~~
bl4k
I didn't mean to come across as outraged or to make accusations - it was a
genuine observation.

When I raised a note I set the price, but it was through talking to the
investors. That was a while ago though.

I think the core of what Arrington is saying is that they attempted to fix the
market. ie. got fed up with how things are atm and tried to fix it in their
own way. I know that some of these guys have been against notes for a while,
but end up doing them anyway.

------
siglesias
Game theory. 10 players make for a highly unstable equilibrium, especially
given the potential for absurdly high profits for deviating to fund one hot
company. One of them is even "highly uncomfortable." The key is to shop around
and negotiate intelligently.

~~~
SkyMarshal
There's also the game theory going on within the 10. The one uncomfortable
person could have gathered data and evidence on the scam while dragging their
feet in participating, then informed to the FBI, gotten their main competitors
shipped off to prison, and been the only Superangel left in the game with the
pick of the litter and their choice of valuations.

------
matt1
_But the conversation has evolved to the point where these super angels are
actually colluding (and I don’t use that word lightly) to solve a number of
problems, say multiple sources who are part of the group and were at the
dinner._

Given Arrington's allegations, why would someone in the group or at the dinner
admit to the collusion? These are smart guys talking to a prolific, ballsy
blogger--what do they expect will happen? What's in it for them?

 _At least two people attending were extremely uneasy about the meetings, and
have said that they are only there to gather information, not participate._

It also strikes me as odd how specific he is when mentioning figures. Why not
simply say, "Several people who attended the meeting..."? By specifically
saying that there were two, he will have everybody who was there guessing who
those two are. Also, if there was just one person, it would make sense for him
to specify that there were two to throw off the rest of the group, no?

~~~
BrandonM
> why would someone in the group or at the dinner admit to the collusion?

He mentioned that they were uneasy with the direction the talks had taken. I
could definitely understand a couple of them seeing this admission as a good
way to get out of a compromising situation while not leaving themselves at the
disadvantage of being an outsider.

------
lizzy
There is a Quora thread for tracking who was there: <http://qr.ae/EC7>

~~~
Devilboy
[http://www.quora.com/Who-are-the-Super-Angels-that-
Michael-A...](http://www.quora.com/Who-are-the-Super-Angels-that-Michael-
Arrington-is-talking-about-in-his-9-21-10-Techcrunch-post-So-a-Blogger-Walks-
into-a-Bar)

------
fdeth
Screwing over entrepreneurs on the seed stage is just evil. Gordon-Gekko-evil.

~~~
charlief
Impeccable timing, Wallstreet 2 comes out in 2 days

------
alanh
Can an admin re-title this link? “Arrington Alleges SF Angel Collusion” or
some such?

------
achalmers
I wouldn't be surprised if that's the last we hear of this story; very
unlikely Arrington will name drop in the future. However, if this story is
true, hopefully it scares off these Angels from forming an investment 'mafia.'

~~~
vessenes
I disagree -- I can't imagine that Arrington will hold those names back. He's
a journalist first, and increasingly, what seems to be a sort old school one
-- he's there for the story.

Right now, there's no need to drive traffic with names -- he's got today's
scoop. Give him time.

------
nchlswu
I don't understand how people like this (if the points I'm referring to are
truthful, of course) can not maintain some composure.

Guilty silence and a "oh no no" from somebody considered as a friend is a bit
ridiculous. I'm searching for the right words right now, but it's sort of
ridiculous that Angels like this who have undoubtedly relied on their
networking end up handling a situation like this.

A bit amateurish, no?

~~~
moe
_A bit amateurish, no?_

That scene could be straight from the script of a rather poor B-Movie...

I find it hard to imagine a group of grown up investors behave like that.

------
jwerlin
View from one entrepreneur's seat:

1\. Super Angels networking is expected, allegedly sharing deal terms
(convertible notes, etc.) and allegedly working together to try and lower
valuations is definitely not representative of a healthy 'free' market.

2\. Singling out a successful model and trying to replicate it and improve
upon it isn't horrible, but allegedly singling out one entity (YC) trying to
limit something inherently doing good by entrepreneurs is horrible.

3\. Good or bad / legal or illegal, if this episode results in any increase of
government regulation/oversight in any way for funding at this level then both
sides lose.

4\. This entire episode, for me, reinforces the need for start ups to go
bootstrap, achieve revenue and profitability and _then_ , if funding is proved
to be needed down the road, go in with a stronger hand when you sit across the
table from any funding source.

------
budu3
Why do Angels hate convertible notes so much?

~~~
tlb
Convertible notes allow founders to close angel deals one at a time with
varying valuations. It makes it much easier for small angels to compete with
big angels. The old practice of stock issuance required a big angel to make
the whole deal happen, and they could dictate terms. Now, big angels are
losing their advantage over small angels.

I understand why they're unhappy, but I encourage them to compete fairly on
their merits rather than anything anti-competitive.

------
brudgers
Major players in the industry are reshaping it.

One says "I'm uncomfortable."

Another says "I subscribe to Playboy for the articles."

So Arrington doesn't name names.

Fortunately, everyone is now shamed to ethical conduct.

------
bcroesch
Not saying that he's wrong, but does it seem odd to anyone else that a group
of people who are clearly very smart and successful would create a wiki to
document their illegal scheme of collusion and price fixing?

------
ThePlague
Issues of price fixing by a group of investors tease at the difference between
"mainstream conservative" and "libertarian". A "mainstream conservative" will
probably want to have laws in place against price-fixing schemes which can
hurt the small business owner/entrepreneur type person because small business
is integral to economic stability/growth for the mainstream conservative (like
a Jack Kemp, etc.). A hard-core libertarian (Ayn Rand, for instance) would be
opposed to any regulations even those against practices which could hurt the
entrepreneur. Because whereas in a "conservative ecosystem" the majority of
hiring, etc. comes from small business/"main street" or whatever, in a
"libertarian/John Galt ecosystem" most of the hiring is done by, you guessed
it, John Galt. My point is, a mainstream conservative (a more moderate type)
has an interest in preventing price-fixing and helping the small-time
businessman whereas the libertarian does not. Therefore, "pro-business" means
different things to different people. Pro-small-business (mainstream or
moderate conservatism) is different or not always the same at any rate from
being pro-big-business (libertarian/Objectivist). Thus, for example Gov.
Romney would probably want to keep a lid on price-fixing which hurts
mainstreet, while say Rand Paul would not. This is a great topic to tease out
the nuances between various so-called "pro-business" or "conservative"
viewpoints. Who's right? Who knows, but it is certainly instructive.

------
brisance
Someone please explain the finer nuances of the law; I can't see how this is
different from professional athletes forming their own association/union and
stipulating a "minimum fee" e.g. NBA.

~~~
bl4k
the NBA and other sporting leagues are exempt from anti-trust laws in the USA.
They get a free pass from the gov:

[http://www.thesportjournal.org/article/role-antitrust-
laws-p...](http://www.thesportjournal.org/article/role-antitrust-laws-
professional-sports-industry-financial-perspective)

~~~
ArturSoler
That makes it different as law is concercened, but one is as legit as the
other.

------
jiganti
It's too early to write this blog post.

Arrington tried to manufacture a happy medium between not saying anything and
outing every person at the meeting. Not outing everyone implies you're not
entirely sure. Not being entirely sure, yet talking about it anyway is a cheap
way to get a story.

Waiting until things are more clear cut would have earned him points in my
book- I suppose it's not worth it when the alternative is having everyone
follow the story on TC from now until its conclusion.

~~~
jexe
I'm assuming he's trying to both get a good scoop AND stop the damage these
angels can do to startups - the longer he waits, the more damage might be
done.

I think he's struck a pretty good balance here by saying what needs to be said
and no more, while still keeping it interesting.

------
marcamillion
This is so disappointing. Firstly, I am glad Mike called them out. Took a lot
of cajones to do it, and say what you will about TC and Mike...stumbling
across something like this and not shutting up takes major balls.

Secondly, here I was rooting for these 'Super Angels' to finally revolutionize
the VC industry and send the 'old guard' packing by better understanding the
founders (not just talking a good game). Turns out that they are all the same.

I would not be surprised if this further turns founders off of taking angel
money altogether and deciding to just get to profitability as quickly as
possible - further shifting the funding tide in the founders direction...which
weeds out a good amount of these 'Super Angels'.

Either way, I suspect there is a shake-out coming.

Thanks Mike.

------
herdrick
Michael Arrington is impressively gung-ho, and I admire him for it, but is
this big news? See point #16 here:
<http://www.paulgraham.com/guidetoinvestors.html>

------
AmericanOP
On the flip side, are valuations becoming over-inflated? I also think it's
entirely appropriate for this group to be discussing strategies to increase
their competitiveness versus YC, newcomers, and VCs. The real sinister claim
is that they were talking about "more mundane things, like agreeing as a group
not to accept convertible notes in deals." I wonder how that will pan out now.

~~~
iamwil
The way to combat over-inflation is to simply not buy. You don't need a secret
meeting for that. When investors aren't buying, that's a collective signal to
founders selling that their valuations are too high.

------
johnglasgow
The real scare for these angels is if entrepreneurs lose trust in them,
because then they will start losing out on the hottest deals.

------
MediaSquirrel
if true, this is huge...hugely bad.

------
seiji
I bet it's people leaking fake conspiratorial meetings just to screw with
Arrington.

We need more information though. Were there any, ahem, cons there? How about
any balding acebookfay employees? Were there fewer, greater than, or exactly
500 hats in attendance? Was there anybody there using saccharin? Did your spy
camera catch theone?

------
grandalf
It's important not to get too caught up in the legal technicalities. A strong
startup (ideas/execution) still has tons of market power, no matter what a
secret group of super-angels agree to do behind closed doors.

And, most importantly, bootstrapping is more feasible than ever and (as noted)
YC is coming on strong.

------
MediaSquirrel
@icey: can u change the title to something that explains the nature of the
post? Something like "Super-Angels Colluding to Keep Valuations Down."

I know u just kept the original headline, but it's confusing for people who
haven't read the post.

Just a request. 'Tis a VERY important thing for all to read in the community.

~~~
johns
Just a request. Can you spell your words out if you're over the age of 13?

~~~
brianlash
Tell him or her to spell words out. No need for the snark.

------
danielnicollet
Obviously, this came out an hour ago because Arrington (despite being a
trained lawyer himself) spent the day and maybe last night also (knowing him)
checking with lawyers about what to write, how to write it, when to release
it, etc. Good luck on the witness stand Michael!

------
staunch
I could have guessed that <http://paulgraham.com/future.html> would have
scared quite a few traditional VCs. I'm surprised that it scares the big
angels so much.

------
jacquesm
See <http://news.ycombinator.com/item?id=1715840> for Dave McClure's (one of
those present) response to these allegations.

------
SkyMarshal
Is Y-Combinator not considered a super-angel? Arrington says the superangels
at the meeting comprise almost 100% of early stage startup funding, but PG
wasn't there. What's YC then?

~~~
gruseom
The difference is that YC get in before these guys do.

Edit: I think there's another difference too: YC is significantly more
founder-friendly. Just like angels have traditionally been more founder-
friendly than VCs.

~~~
SkyMarshal
Thanks, from reading alot of the comments it sounds like Incubators like YC
take startups from nothing to working product/proof of concept, then Angels
step in and get them to the VC phase.

------
sahillavingia
There are times where the actions of Michael Arrington make me hate him. And
times where I forget all that and appreciate his integrity.

Posts like this keep TechCrunch afloat. Good job.

------
tav
Anyone know if anything similar is happening in London/UK?

Collusion is to be expected in all industries, but something of this scale —
if true — just blows the mind.

------
lefstathiou
It's moments like these that I deeply, humbly and profoundly love and
appreciate the internet and everything and everyone that makes it work.

------
paramendra
Mike Arrington is selling newspapers. <http://goo.gl/fb/PpyhK>

------
Uhhrrr
This is a terrible monopoly, because all "ten or so" angel investors are
involved.

------
potomac
ruh roh

------
points
Who cares?

TL;DR; Some investors meet up and discuss things.

------
madridorama
I'm not surprised by the accusation, but I have about as much trust in
TechCrunch as I do in a general soothsayer

------
3pt14159
Lets file a class action lawsuit naming the top ten (virtually 100% eh?) super
angels then call Michael as a witness. The case is simple: price fixing led to
lower sized deals and higher valuations.

I almost never advocate lawsuits, but in this case it is totally justifiable.
Just for the record, I'm actually not against collusion and price fixing as an
idea (I believe that eventually market forces will correct it), but I'm
against it if it is illegal because the market should be able to trust that
laws are enforced.

Sue the bastards for billions worth of equity.

