
AngelGate: Chris Sacca Responds To Ron Conway - davidedicillo
http://techcrunch.com/2010/09/26/angelgate-chris-sacca-responds-to-ron-conway/
======
ramanujan
Mark my words: all of Silicon Valley will regret it if the federal government
gets involved in angel financing, "collusion" or no colllusion. It is not easy
to build a Silicon Valley, but choking off deal flow with red tape could well
destroy it.

When the government enters an area on the basis of negative press coverage, it
does not have an informed opinion or a light touch. Think about it: years
later, we are _still_ taking off our shoes and surrendering our liquids at the
airport. Policies written in haste after a media event are almost never
revisited or changed, no matter how much economic damage they do.

I don't want to paint a mental picture by giving too many details, but you can
imagine what any government assault on angels would do to the financing
environment. This is exactly the kind of premise that a broke California (or
federal) government can use to impose new taxes, just like police officers are
ordered to increase ticketing when the city needs revenue.

Bottom line: the cure would be far, far, FAR worse than the disease.

~~~
adrianwaj
For me, minimum capital requirements to be an accredited investor is already
far worse than the disease.

I'd prefer to see certification programs that people raising money must apply-
for, and have that be the basis of whether an investment is valid for the
market, rather than placing a capital requirement on potential investors as
the way to determine if an investor is smart enough to reject scams, and thus
save the government from complaints and minimize lawsuits than what would
happen if joe public and his granny could invest their savings.

Perhaps there could be a certification program too for people wanting to
invest.

This I think would free up capital and opportunity, ie real micro finance.

~~~
lzw
I cannot meet those "accredited investor" requirements, which if you think
about it, are really meant to cut off dealflow for anyone who isn't already
rich.

Meanwhile, I have easily lost an angel investment's sized amount of money in
equities and derivatives I've controlled. (and made many times that in
positive returns... but it is the losses the government pretends like they are
protecting me from.)

I could have been putting $15k-$20k into several startups a year, for the past
15 years, up to one a month in recent years, if the government would let me.

Think about that-- it would have been ILLEGAL for me to invest in these
companies (or for them to take my money)... while at the same time I've
incurred complete losses of the same size in the public markets, and could
blow all of it and more at any casino on the country in a weekend.

~~~
joshu
<http://en.wikipedia.org/wiki/Accredited_investors>

If you could put 15-20k a month into startups, how are you not meeting the
accreditation reqs?

I think the requirements are to cut off companies from taking investments from
little old ladies. It's the startup that would get in trouble, not you.

You considered talking to a lawyer?

~~~
lzw
I could put that amount in at the end of the period, not the beginning, and
accredation requires either a higher salary than i have, or a net worth over a
million, which I don't have.

If preventing little old ladies was all that was needed, then it could be
accomplished with a wavier.

~~~
joshu
The other issue that for angel investing is that you really ought to be doing
10+ investments a year to actually even out the risks so that you can get a
return. That's a fairly high watermark.

I've done approx 45 investments. One has returned (a small amount) of money in
five years, so far.

------
gkoberger
My summary (I did my best to represent the gist of what Sacca was saying):

Chris Sacca considers Ron Conway a mentor and greatly respects him. However,
he was "hurt" by Conways email. Sacca was at the first meeting, not the
second. He wishes Conway had been there, since they would have liked his input
on the things they talked about: standard docs for financing, pro-rata rights
("early investors continuing to stay involved"), futility of VCs blocking
company sales, giving more liquidity to founders.

He said they are all pro entrepreneurs, they coach entrepreneurs along the
way, and they 'bleed' just as much as founders do. Sacca's first deal was paid
with a credit card check, which was stupid but he wanted to help.

Because of Twitter and search, they can't "fuck" entrepreneurs, since it would
be forever attached to their names. Sacca is upset at Conways "rush judgement"
of his (Conways) friends (Conway allegedly privately referred to them as
'dirtbags' to Sacca).

He wants Conway to ask entrepreneurs how working with the Angels in question
is, and hopes Conway realizes how hard they work.

------
ghshephard
After careful reading of Sacca, Conway, and Arrington, I've come to the
conclusion that they might all be correct in their representation.

We know there were at least two meetings of the "Super Angels" - It's possible
(likely) that the first meeting that Sacca attend was an aboveboard engagement
in which all of the positive conversations that took place were as Sacca
described it. Indeed, I read Sacca's email as a shout-out to Conway saying
"Hey - the meeting I attended, was above board - don't paint me with the
second meeting brush"

It sounds like in the second meeting, the conversation departed from "How do
we help entrepreneurs" and started sliding into "How do we increase value for
angels". Maybe not full out (actionable) collusion in which any agreements
were made (and the concept of agreement is pretty important in collusion) -
but skirting dangerously close.

David Lee was at that second meeting (and, for all we know, was one of
Arrington's sources - He had Three), likely gave conway the briefing, and
conway, being savvy, realized he needed to immediately separate himself,
particularly as all this email floating around is discoverable.

Nobody should, for a second, think that Ron Conway is writing email with the
belief that it won't be seen in the public light.

Talking as a group about things like holding down valuations, dealing with YC
leverage, and the impact of convertible notes on the Angel's cut of deals is
all pretty dangerous territory. Sacca wasn't at the second meeting, so his
email has to be taken in that context.

All in all I think Arrington has done a great service with some excellent
blogging, not only to the startup/entrepreneur scene, but also, ironically, to
the Super Angels themselves. By surfacing these conversations early on, I'm of
the belief that he may have actually given them a wakeup call before they
started doing (illegal?) things like agreeing as a group not to accept
convertible notes.

This is hard hitting reporting that harkens back to a day of serious reporting
- ironically done not by a "mainstream" news outlet like the WSJ, or NYT - but
by a "mere" blogger.

kudos.

~~~
davemc500hats
both meetings were aboveboard... period. the discussions at the second dinner
meeting were similar in nature to the first, altho Chris wasn't at the 2nd
dinner.

we also discussed ways to reduce legal costs, increase exit opportunities by
using services like Second Market, how other services like Angel List were
innovating & bringing access to more investors / entrepreneurs, how
convertible notes were becoming more popular (which i use most of the time,
and both PG & Mark Suster have written about lately), and a number of related
topics -- again, many of which i mentioned on my blog post in response to
Arrington's initial post.

altho some folks were bitching about startup valuations being higher lately,
THERE WERE NO conversations about "price-fixing" or other BS mike reported...
which is why i got so pissed when mike made such accusations, even though he
wasn't there for any conversation & only reported based on anonymous sources.

while some people might suggest Mike's reporting as "hard-hitting", i'd
characterize it as more inflammatory and not very well sourced. if he'd
bothered to talk in more detail with any of us who were there before rushing
to print, he might have gotten a lot more information about the discussions,
instead of just printing one anonymous source's perspective... and perhaps
less criticism from those who think he's just creating controversy to drive
attention prior to the Disrupt conference.

mike has a right to report what he thinks is news, but that doesn't mean it's
ok to go to print with only anonymous sources perspectives on that matter,
particularly when others (like me) are willing to publicly state otherwise.

in any case, i guess we'll hear more about this in the morning on the panel.
i'm tired and i'm going to bed.

believe what you will.

~~~
bl4k
This should have been your blog post

~~~
robk
this is much more readable font-wise :)

------
mattmaroon
Wow. I've dealt with Chris a little (and know people whose companies he has
invested in, whose companies have gone both ways) and was always impressed but
now am even more so. I obviously knew nothing about his financial situation
but can admire anyone who'd put that much on the line when they smelled good
gambles.

------
thedjpetersen
I don't think I would like it if I knew a e-mail intended to be personal ended
up on techcrunch. I don't think the leaking of these personal e-mails is very
polite.

~~~
ghshephard
Rule number 1: write every email As though it will appear on the front page of
the New York Times. If you aren't comfortable with that, then make a phone
call or talk in person.

------
pointillistic
Someone, a person who was at the meeting informed Arrington about the negative
purpose of the conversations. So either that person was lying to Arrington and
Arrignton to the readers or Sacca is telling half truths. Even as he wasn't at
the second meeting anyway.

It's rather obvious that for Sacca his relationship with Conway is more
valuable than anything he does for the startups or his freaking charities. The
purpose of his long, very long essay is the damage control of the relationship
with Conway, nothing else.

~~~
jeromec
_Someone, a person who was at the meeting informed Arrington about the
negative purpose of the conversations. So either that person was lying to
Arrington and Arrignton to the readers or Sacca is telling half truths._

Look at the first reporting on AngelGate. Michael Arrington says he got the
content of the meetings from _multiple sources:_

 _> This group of investors, which together account for nearly 100% of early
stage startup deals in Silicon Valley, have been meeting regularly to compare
notes. Early on it was mostly to complain about a variety of things. 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.
According to these souces, the ongoing agenda includes:

Complaints about Y Combinator’s growing power, and how to counteract
competitiveness in Y Combinator deals_

etc...

~~~
lzw
Of course, he "claims" that, but it sure reads like a rant from a guy who got
snubbed when he wanted to be buddy-buddy with potential sources of
information.

I think this is really all about Mike ego not being stroked enough.

And no, I don't think it is outlandish to posit that Mike made the whole set
of allegations up.

------
irahul
I don't get it. These mails from Ron Conway and Chris Sacca sounds like
founders are babies in their diapers who won't even find the way to the toilet
without their angel's "coaching" them. They are taking the "angel" thing too
seriously.

And why does these mails have to sound like charity or some great cause? These
angles aren't donating to charity - it would be good if it doesn't sound like
that. This "how much we do for founders" is overdone. From where I see, the
introductions and exposure that comes along with the Angels can help you get,
well more introduction and exposure and may be, funding which you already
have.

How does a company's success depend on these charitable deeds? It won't result
in more paying customers or buyout. I don't like the tone of the mails where
it makes it sound like founder are a bunch of ignorant chumps and they owe it
to these Angles for the hard work and guidance. First, doesn't matter who the
investor is, if founders and team aren't competent, the company would succumb.
Second, the work angels are doing aren't for the founders - it's towards ROI.

~~~
ghshephard
"Second, the work angels are doing aren't for the founders - it's towards
ROI."

Some Angels are focused on that. Others have a different take, from Ron
Conway's Email:

"I want to clarify once and for all my total disagreement with your values and
motives for being investors.

I have stated consistently for year that I invest because I love helping
entrepenuers and watching them learn and succeed."

And, as someone who's been through several startups, and seen those run by
seasoned 'serial entrepreneurs' (who've learned the hard way, and could be
angels in their own right (and later have done so), and some run by first
timers (who haven't even heard of the phrase "term sheet", let alone know how
to negotiate one) - I'd suggest that there is a certain class of founder, an
entrepreneur out to build a great product for the first time, that while not a
'baby in a diaper', is a 'babe in the woods' - and having someone who is
working for _them_, rather than 'ROI' can quite often make all the difference
between success and failure.

VCs (at least the three or four I've had exposure to at my low level) are
focused on returns. Great angels are focused on helping entrepreneurs succeed.
A VC will pursue a strategy that results in complete and utter failure for
some of their investments, if it means overall greater returns for their
aggregate portfolio of companies. That's just not in the DNA of the few angels
I know.

I'd be cautious in trying to understand what the motivator is for these angels
- for some of them, their mission is even more important than charity - it's a
higher calling in which they are trying to help entrepreneurs succeed, rather
than simply chase the almighty dollar. The money is important insofar as it is
an indicator of their success, and as a tool to continue their mission - but
not necessarily the objective.

~~~
irahul
Then we must agree to disagree.

For analogies sake, let's talk about Google. Google hires the best geeks,
provides free food, doesn't hire PHBs, have a large impact on the world in
some ways etc etc. Its hiring best geeks works as a magnet pulling other
geeks. Not hiring PHBs means programmers are comfortable working here. Work
being done at Google having a large impact gives people a sense of
accomplishment and validation. Working with like-minded people lowers the
stress level compared to working with idiots who accidentally became
programmers and who have no respect for the trade.

In comparison, a bodyshop doesn't do any of it and still does fine
financially(I know; I worked for one). Both Google and bodyshop have the same
motives with different paths. It's all fine but that doesn't mean Google can
claim "We don't want money. We do it for the programmers. See how much we do
for them. Checkout the bodyshop which doesn't do anything for the employees
and makes a ton of money. Since we do a lot more compared to the bodyshop, it
proves we aren't after money and we are working towards higher calling."

Ron Conway is doing just that. Substitute Google with Ron Conway and bodyshop
with traditional VCs above.

By claiming he isn't there for money but is just helping people, he is being a
hypocrite. Compared to traditional VCs, he might be working more towards the
welfare of founders but that doesn't change the fact that it's business and he
too is working towards ROI. There is no higher calling; it's just simple,
plain business.

~~~
ghshephard
I don't recall anyone ever claiming Google was ever "doing it for the
programmers" - it's well understood that the perks and environment are there
to attract talent and increase their profitability. Also, free gourmet food is
increasingly a (relatively inexpensive) standard perk in the valley, so it no
longer really sets Google apart as much as it used to.

And note, I never said Ron Conway wasn't there for the money, I just that it
wasn't the objective. The objective is to help great entrepreneurs succeed.
The money is a (not unexpected) side-effect of succeeding at that objective.

At this stage in the game, and with his network, I'm sure Ron Conway could
take much higher ROI approaches if that were really his primary goal. He just
isn't wired that way.

------
evilthinker
Why are people still discussing this? Start-ups don't grow on trees. If there
is something to be investigated it will, if there are any problems with angel
financing they'll be known, meanwhile all this speculation is a waste of
precious time.

------
points
BORING. How much longer will this go on? I don't come to HN to read infinite
responses to the boring news that investors meet and chat. Who the hell cares?

~~~
dannyr
Apparently, you do since you care enough to reply.

~~~
points
I care enough about hacking to try and keep HN a useful place. Unfortunately
it seems most people here are just interested in gossip and giving Techcrunch
pageviews.

------
lzw
I don't know Chris Sacca and I've never met Mike Arrington, but reading this
email and the original article Mike wrote, Chris has a lot more credibility
than Mike to my eyes. OF course, Mike wasn't actually there so his allegations
are pretty much by definition unsubstantiated.

I think it is a shame that Mike gets the attention he does, and that his
website gets the traffic it does. This is not the first time he has impeached
his credibility.

------
barnaby
Sounds too good to be true.

~~~
barnaby
Would the downvoters explain this one? Do you think anyone sincerely cares
about your best interest the way this guy claims in his email? Because this
sounds incredibly charitable.

------
Tycho
tl;dr: Ron, Where Is The Love?

------
sown
I wonder if people will start using public-key encryption or something to
encrypt mails so that only certain recipients can read them.

~~~
aaronsw
Do you really think these emails are being intercepted by third parties?
Surely the recipients are leaking them and no encryption scheme can prevent
that.

~~~
nkurz
True, encryption probably wouldn't help, but you could probably come up with a
scheme to watermark the messages. You could make it look like the same thing
was sent a large CC list, but be able to determine the source of the leak by a
changed word or two. Makes you wonder if some of these smart people are
already doing it.

~~~
inerte
This technique has been used for a while, and it's widely known. It's "easy"
to defeat, you need to ask someone else for a copy, and match its
contents/changes with the copy from the original leaker.

I don't mean to say it's a bad idea, and it's standard practice in enterprise
environments, but it's no silver bullet either.

Plus, to align with parent messages, it won't prevent leaking, it just helps
to identify the person.

