Are The West Coast ‘Super Angels’ A Cartel?

Mike Arrington of Techcrunch accuses an unnamed group of leading angel investors of acting as an illegal cartel, colluding to block competition around promising deals, to collectively act in concert to get better valuations, and to structure deals in ways that benefit early investors and not founders or later VCs.

Apparently, Arrington was tipped off to a not-so-secret meeting at Bin 38 in San Drancisco, and he barged in. The dialogue he relates is unenlightening, so I will spare you. But the leaked list of ‘ongoing agenda’ items is damning:

Mike Arrington, So A Blogger Walks Into A Bar…

[..]

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
• Complaints about rising deal valuations and they can act as a group to reduce those valuations
• How the group can act together to keep traditional venture capitalists out of deals entirely
• How the group can act together to keep out new angel investors invading the market and driving up valuations.
• More mundane things, like agreeing as a group not to accept convertible notes in deals (an entrepreneur-friendly type of deal).
• One source has also said that there is a wiki of some sort that the group has that explicitly talks about how the group should act as one to keep deal valuations down.

I wonder if the California Attorney General, the F.B.I. or the S.E.C. are subscribers to Techcrunch?

Obviously, no one is surprised that these investors are a clubby bunch. But it is one thing to swap anecdotes about some hot deal that is making the rounds and another thing entirely to conspire to get into that deal at an attractive price for the angels and at a disadvantage for the founders.

[Update 6:18am: A Quora exchange on this post leads to Twitter and other geolocational analysis, leading to possible whos-who list and pinning tails on donkeys. And your thought Foursquare was dangerous because of burglary?]