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.

- yesterday i was invited to a dinner with some well-known startup investors to discuss the latest & greatest in tech & startups. the agenda was drinks, good food, & shooting the breeze... it wasn't to collude, to price fix, to put out a hit on Paul Graham, or generally bust a cap in any founder's ass (ok maybe Zuck & Jobs have it coming, but people might notice if we shoved them furtively into Davy Jones' Locker). Yes: it was a private affair, and No: mike wasn't invited. neither was Barack Obama, your mom, nor any of 500 other friggin' awesome people in silicon valley or around the world.  meh... whatever -- i don't get to go to every cool kid party in the valley either.  sorry, mike... but if you want, i'll knock one back with you before we go onstage Monday morning at Disrupt.

- 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? i like convertible notes just fine, albeit usually with some kind of cap. sometimes a deal is "too expensive", sometimes entrepreneurs really are "awesome". usually, we're all W-W-W-WRONG about 10 different reasons why shit is gonna fail anyway.  you still in?  yeah, me too... so ante up, mofo. you're here in Silicon Valley because you're trying to change the world, or at least build a better mouse trap. either way, odds are against us. deal with it.

- from an entrepreneur's perspective, Paul Graham & YCombinator are killing it right now... and bully for them.  sometimes you got leverage, sometime you don't. regardless, PG should be commended for innovating on the venture model, and for encouraging startups to push the envelope -- on both product, and price.  still, people should realize the wheel comes around for everyone, and it's a small valley.  people on both sides shouldn't get too comfortable, and shouldn't try to fuck with each other too much.  Personally i prefer to leave a little more on the table for the other person, and focus more on building a long-term relationship and less on the tactical zero-sum crap. 

regardless: haters gonna hate, players gonna play.  just focus on the important stuff (build product, solve problems, get customers, make money... and don't be evil... much ;)

- my fund 500 Startups is investing in 7 or 8 YC startups out of the recent batch, and they are some very smart young entrepreneurs with some great business opportunities.  most of them will fail, but that won't stop them from starting, or me from investing.  and sure, the pre-money is definitely on the high side compared to rest of market / previous years.  so be it.  Mercedes Benz ain't cheap either.... but that shit is SHINY.  if you don't like it, don't buy it.

- innovation & investing is not about price.  it's about finding great entrepreneurs to build solid companies, and solve customer problems.  price matters, but innovation & execution matter a helluva lot more. find good people, bet on them, help them succeed. try to improve the ecosystem, and try not to be a dick (that last one is actually hard... it's sort of easy to be an asshole as an investor).

- 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. 

however, in addition to pricing & valuation, some of the more interesting things discussed were:
 1) how can we increase access to startup capital (new geographies, new investors, Second Market, etc)
 2) how can we increase M&A for startups & increase awareness of startups for non-tech acquirers
 3) how can we increase startup innovation (more smart entrepreneurs, cool new platforms, better techniques for mentoring / entrepreneurship)

of course, none of that shit is nearly as sexy or exciting as how we're going to screw over some n00b startup founder at YC, beat the crap out of some clueless old dinosaur VCs whose IRR sucks ass, or hide our secret tinfoil cabal / conspiracy at Bin 38 from the Valiant Fourth Estate. 

in short: if it Bleeds, it Leads... and Fuck. That. Noise. about Fair & Balanced, right?

on the other hand -- some folks really are trying to innovate in venture capital, support & invest in thousands of entrepreneurs, that employ millions of people, who create billions of dollars in value, for customers and shareholders around the world. we ain't trying to kill the Man in the Arena, mike... we're rooting for him (or her).

naah, screw that shit & lets get back to Collusion cuz that sells newspapers.

and like Gordon said: Greed is Good... even if we're counting page views instead of dollars.

as for lil ol' me?

i'm here to Disrupt, motherfucker.  so go right ahead & Hate On Me.

If I could give you the world
On a silver platter
Would it even matter?
You’d still be mad at me

If I could find in all this
A dozen roses
Which I would give to you
You’d still be miserable

In reality, I’m gonna be who I be
And I don’t feel no faults
For all the lies that you bought
You can try as you may
Break me down but I say
That it ain’t up to you
Gone and do what you do

(Chorus)
Hate on me, hater
Now or later
‘Coz I’m gonna do me
You’ll be mad, baby
Go ‘head and hate
Go ‘head and hate on me, hate on
‘Coz I’m not afraid of it
What I got I paid for
You can hate on me

Ooh, if I gave you peaches
Out of my own garden
And I made you a peach pie
Would you slap me high

What if I gave you diamonds
Out of my own womb
Would you feel the love in that,
Or ask “why not the moon”?

If I gave you sanity
For the whole of humanity,
Had all the solutions
For the pain and pollution

No matter where I live,
Despite the things I give,
You’ll always be this way
So go ‘head and….

You cannot hate on me
‘Cuz my mind is free
Feel my destiny
So shall it be

"Hate On Me" – Jill Scott

Comments

[NUtom06]

well said (including profanity). entrepreneurs - stay focused on building whatever drives you, and investors - help them change the world or just do something cool. haters gon' hate.

[Cdnpal]

Why do you have to be a dick about everything?

[Nanodome]

For those who equate ranting with passion, doubtless this post 'rocks da house'.

But given this was posted in response to an no-smoke-without-fire debate, the angriness comes over more as smoke-and-mirrors.

Dave, until now I've always enjoyed reading your posts, but this one comes over like you're using your considerable verbal gymnastic skills to backflip your way out of the Issue Of Doom... "was meeting up at Bin 38 such a good idea?"

Sure, ultimately "collusion" is probably too strong a word... but only by a whisker. Given that angels are more 'herdy' than 'nerdy', meetings like this one do have a genuine capacity to change mindsets in an anticompetitive way.

Rightly or wrongly, the vast bulk of non-stellar angels look to thought leaders for informed angles on issues of valuation, term sheets, etc... Hence, the existence of #angelgate makes it look a lot like the funding dice are being loaded, however sub-par the execution may have been this time.

[Nathan Beckord]

Dave, let's talk about M&A for startups: http://bit.ly/dnmrLH

In fact, let's do it Dec. 9th, I'm putting on an event in SF; want to do a panel?

We've got innovation in early stage funding (YC, SAs etc.); we need corresponding innovation in startup exits or the entire house of cards will fall.

Plus Aydin's kicking your butt: 16 exits to your 5-ish?

C'mon, man! ;-> Nathan

[Ken Feldman]

Am I the only one on the planet who knows how valuations are generally determined? Come on people!

Most investors have a basic feel for the percentage ownership in a company they like to own in a round of investment. Might be 10%-15%, might be 25% - 35%, whatever. Let's assume it's 25% If you're a start-up and say you need $250K, guess what? Your pre-money valuation is now $750K, give or take. Need $1M? You're pre-money is $3M.

Wow, that was tough, huh? It doesn't always work that way, but more often then not it does.

And now, for my next trick, I shall explain how to get the economy restarted!

[H A]

I met Dave 3 times so far and I found him to be a nice, helpful, and soft spoken guy! It was surprising to me because his blog writing/online persona does not lend itself to soft spoken! He gave me valuable feedback when he nothing to gain from at the time. The "arrogant/full of himself" claim is so overboard its not even funny.

[Andrewlsteele]

Dave - you've done yourself a huge disservice with your misguided, arrogant and completely unempathetic rant. I'd expect that from a career VC who has never known anything but the Ivory Tower on Sand Hill Road, but as a former working stiff and (kind of) entrepreneur yourself, I'm frankly shocked.

Heres the 411 from the trenches Dave - whether it's true or not, Arrington's post scares the shit out of entrepreneurs like me. We all dutifully line up, hoping for the honor to be bent over, lubed up ( if we're lucky) and given the 'business' for the priviledge of giving away a huge chunk of our company in exchange for a bit of your walking around money to help pay the bills and hopefully build something meaningful. I suppose none of us should be entirely shocked that investors may actually be doing everything to stack the deck in their favor - it is called capitalism after all - but the thought of this sort of collusion, which I interpret as nothing less than extortion from people who already have little more to give (if we did, why would we need your money in the first place) is truly disheartening.

It's easy to be flippant when you have enough money to throw around, but when I lay awake most nights worrying about paying the mortgage, taxes, car payments and my kids tuition on a startup salary, the LAST thing I want to have to worry about is that I'm also getting anally devastated (well, more than is customary...) by investors I thought were on my side.

I hope you're right. I hope Arrington is completely off base. But c'mon Dave, act like a grown up. Respond to this very serious accusation like a professional, not a 14 year old girl who just overheard someone say her ass was fat. Frankly, your response has done absolutely nothing to reassure me (and probably a lot of other entrepreneurs like me) that you're on the right side of this. You're not an investor in my company, and frankly I'm not so sure that's not a good thing.

You (or someone else in a position to do so) needs to set the record straight. Convince us entrepreneurs that Arrington is full of it. But Dave, you've done exactly the opposite here - you've convinced me that you're infinitely more concerned about your rep as a valley celeb, and if I may...'playa'... Than someone who is legitimately and sincerely interested in helping carry on the great startup legacy in the Valley.

Makes me more sad than anything else. Maybe I should just go get a 'real' job.

Nah...

[JustinDavidson]

Let's face it, if you took out Dave McClure's ability to spout profanity the rest really is disruptive. By disruptive I mean putting cash on the table. If he can drop the profanity and just get up in people's faces to make them move I will be able to listen without cringing when he speaks at a large professional event like MIT’s Forum. I really did not to hear more about what all of the panelists had to say vs. just one. I liked when Dave really got down to the real material after promoting his image. I think the f-bombs draw attention away from the funding bombs message. Keep funding!

[SCSI_drive]

Mr. McClure, you're a fool and full of yourself. Your industry needs a shakeup. You create nothing and ride the talent of others for money that is not yours. Big kudos to Arrington for blowing the lid off your group of self inflated puffer fish. Your arrogance will haunt you, as you and your jolly group of intermediary overlords go down at Disrupt.

[Nmwando]

Thanks to all this boolahoo with this secret meeting - i found your website and damnit man im loving you already.

It seems you are absolutely killing it - and you know what.. do it for you, your family and entrepreneurs..

Cheers.
Nick
http://www.ipodtouch4cases.org

[Account Deleted]

Mike is also correct in opening up something done in secret-(You are not beyond reproach in this matter) Your venting is Arrogance, and the root of arrogance is both ignorance and fear. Accept the confrontation- LISTEN to not one- but several sources that are telling you. Quit drinking your own Kool Aide! This is a BLESSING! So these type of meetings continue-and such deals with the devil start to manifest... Be beyond reproach- Accept and Embrace confrontation- Major Major Arrogance here.

[Joe Dev]

This post would be much more worthwhile if Dave would simply had gone on record to categorically confirm that the group did not discuss:

* How to act as a group to reduce valuations,
* how to act together to keep traditional venture capitalists out of deals, or
* agreeing as a group not to accept convertible notes in deals.

[SCSI_drive]

Dave, you're a self absorbed fool, and your rant shows it. Once people like you start calling themselves -- superangels, that's the type of delusion that will be the catalyst to your own demise. Enjoy the thrill of arrogance. The term 'angel investor' is a silly misnomer. You're a predator. Sadly, this industry and its big brother VCs are characterized by indentured servitude, overlords, and the whoring of young entrepreneurs who are too stupid to realize they're being ridden and dumped like donkeys. Kudos to reporters like Mike Arrington who are blowing the lid off these self inflated puffer fish that prey on young talent. This industry is due for shakeup, big time.

[Wtgilroy]

Only in Silicon Valley could a rich white guy write something in this style and have people think its cool and not hilariously nerdy. Bust a cap? Haters / players? It sounds like an Onion article circa 1999. Comic genius.

[Sue Marks]

As a Midwest Entrepreneur and Angel Investor, I'd like to give props to Dave for starting the dialogue (for whatever reason) and point out there's a hellova lot of testosterone dripping off these posts :) Good deals become great deals when good people with the right intentions come together to make things enough people want and will pay for. Let's focus on that.

PS. Thanks for posting the Jill Scott song ... it's awesome!

[Mbarbarelli]

To those of you put off by the profanity here: I submit that this was only a choice of style; it does not betray some kind of underlying , sophomoric disorder. McClure is perfectly capable of articulate and thoughtful discourse. Check out his audio interviews.

[Mbarbarelli]

It was rude of Michael to show up without an invitation. Unfortunately, unless you can explain why you didn't finally concede and ask him to sit down once he did arrive, Mike's argument has legs.

[Mark89574g]

Your rant is vulgar, which denotes you feel guilty. Angels are dead.

[Luis Roa]

I don't know Mr McClure to make complete sense of the rant. Maybe I'm a bit old-fashioned, but this was too "ghetto" for me. It is quite interesting that most find this humorous, well written, etc. It seems that the lowest denominator continues to be the direction we are headed.

This trend manifests itself also in the quality of the more recent crop of startups. Instead of solving hard, worthwhile, technical problems, most are about minor variations of a theme, which can be coded in a weekend... Only network effects and luck results in being a winner. This will lead to sooo many disillusioned young engineers, as their dreams evaporate in failed startups... the field and the country will suffer, while the VCs, playing the odds, will still laugh their way to the bank...

It is irritating to see rants like this and one can't but think: what a lucky bastard! (...I read his bio)

I guess this makes me a hater... oh, well..

[Account Deleted]

I can't tell you how many times I have thrown bits and pieces of information and advise to startups and they take it without feeling they owe anyone anything. Yet when we try to explain that we have to be accountable to some poor teacher's pension fund, they draw a blank and say we are trying to steal from them.

[Djabatt]

RIght on! Love the passion.

[Chris Kelly]

Dave--Fun watching the comments. Can Silicon Valley angels agree as a group on anything, even where to have secret meetings? If a super-angel gets a reputation for fileting founders, they'll probably get shut out of the best deals and end up investing on "Shark Tank." It only takes one adventurous angel to open a round to convertible debt or raise a valuation, and if the others think this is the next Facebook, they'll have to join in or miss out.

[Mbellows]

It sounds like if you had just invited him in for a drink or two, none of this would have happened...

[Benrombaoa]

All this hate! "Can't we all just...get along."

Well put Dave.

[Xtreme M]

Potty mouth tsk, tsk ...

[Martin Edic]

Geez, I stop reading blogs for day and the world explodes. I think I'm probably the only person in the entire world who read about this horrifying scandal via this post instead of TC.
the sky is falling, the sky is falling...

Keep yelling Dave!

[Reagan Gibbs]

what do you think collusion is? Legally, perhaps you have a point. But what you described as happening in that meeting is where it starts. First its a few people talking, having drinks. A few folks put their money together... convince the other folks in the room to go along... It just happens to be all the major player... Is anyone going to say to his friends, uh--stop making money, we might be playing this wrong? How disingenuous. I can honestly say i agree (in spirit, if not detail) with nearly everything you wrote in a discrete manner, while completely disagreeing with your conclusion. You're smarter than this post and you should have let it percolate a little longer.

[Shooteyeout]

In bad economic times secret societies proliferate I am told by anthropologists. There are many more societies/groups today than in the 1970s for example.

Privacy exists in a different way than in 1978 also.

Syndicates, groups, etc are competing for less economic pie than 10 years ago. They are more competitive and less open as a result.

Never underestimate what you do not know or overestimate what you think is true and real because you happen to believe that it is.

[Nabeel Hyatt]

Snackroyd - How the fuck does posting the list of attendees make it the intentions more transparent? Whether Rabois, Clavier or Ghandi was there doesn't make a lick of difference -- what they talked about is what matters. And either you believe what McClure says or you don't.

But this isn't congress, it isn't like they should be taping this for public access VSPAN or something.

[Eric Rice]

Heh, whether AngelGate is true or not, we live in a Goldman Sachs/BP world. The cynic in me believes that hey, maybe people are doing illegal things because it's more cost effective than doing the legit ones.

And we haven't even touched on the political climate in the US, where more people than not have lost their collective minds.

Price fixing and collusion? Sheeeit, that's something our kids would be doing for fun on the weekends.

Big girl panties don't phase the jaded.

[Andy Beard]

So... An Angel Walks Into A Starbucks

Sees a wolfpack of tech bloggers

... and orders a takeout.

That said I know another online industry where a group of people just organized themselves a little better, set up a nice editorial calendar for cross promotion & cooperation, and are currently being raped by a lawyer because it resulted in people being stiffed because of the way it affected market dynamics.

[Elliott Dahan]

Dave -

If you are sincere about - "1) how can we increase access to startup capital (new geographies, new investors, Second Market, etc)
2) how can we increase M&A for startups & increase awareness of startups for non-tech acquirers
3) how can we increase startup innovation (more smart entrepreneurs, cool new platforms, better techniques for mentoring / entrepreneurship)"

look at the static demo - www.earlystagemarketplace.com

Then contact me - Elliott Dahan

[WebbROI]

That was awesome. Informative and very inspired unlike most of the blogs with people pussy footing all over the place. Thanks for this.

[Snackroyd]

Dave:

If the meeting is so innocent, post the full list of attendees. Otherwise it looks like you are blowing smoke.

[Rohi81]

This is an awesome reply to a time bomb of an issue (as it seemed yesterday from Mike's post). Funny part is people trying to hide this, other angels in meeting should come out openly and tell your part of the story.

[IC]

Knew it. Mike Arrington found a pirates head in his bed wearing wearing 500hats.

[www.facebook.com/profile.php?id=621599484]

Mike is selling newspapers. http://goo.gl/fb/PpyhK

[Jordan Mitchell]

You're absolutely right, Dave -- you do have more balls than sense.

This is all just horseshit drama, and the more people keep stirring it around the more distractions there are from advancing the startup ecosystem we're all trying to build here. Whether you said anything or not, the only thing that matters is market innovation, smart entrepreneurs, and the proper support behind them.

As my Dad used to say, don't sweat the petty things, just pet the sweaty things.

Oh, and one more thing -- startups collude too.

[VictusFate]

My hunch was deal flow, and how to improve it. The answer, getting out of the building (valley), and I referenced GoaP as a perfect example. Show us how it's done, help deal flow and save the world.

[Raheeln]

dear friends and enemies - direct from the sausage factory

[Daveschappell]

Full Disclosure -- Dave's an investor and Board member in my company (TeachStreet), and a very good friend.

Dave -- I thought Mike's article was interesting -- I'll assume that he got the 'facts' from SOMEONE (3) who was in the room, as those people interpreted them. They could have been less active Super Angels (that term's preposterous, by the way -- you really wanted to be called 'Super'? Short bus anyone? I'd be running from it -- if we were in middle school I'd have a shorter word to describe it).

First -- I'd think you'd already spend too much time with the majority of those people. You're all sort of big shits at this point, and you'd be the first to howl if you happened upon similar gatherings, as 'Streich' highlighted (if it impacted your going-concern-ness or any of your investments/friends). I don't think you'd ever wade into collusion. But, how'd you feel about a group of VCs gathering before the next round?

Second -- my hunch is that the story DOES have something to do with PR, as all of the echo-chamber-ness of the Valley. Timing with Disrupt is a tad coincidental.

To dismiss it all as totally out of hand is a little odd, especially when the group hasn't gone on record regarding who was/wasn't there, especially given the Foursquare/Gowalla-ness of the majority of these folks -- why is this the one (of 900) places they didn't check in to during that 7 hour timespan? That's odd.

Don't play me, playa :-)

Dave

P.S. Dude -- come on -- Typepad Comments? Eat some of your own web 2.0 dogfood and help a playa out -- you ever hear of Disqus or InstantDebate?

P.P.S. See you in Seattle in 30 hours -- we'll get some prominent Sub-Angels together to collude on wayward Seattle startup pricing.

[Joe Preston]

If Arrington is right and the group @ dinner funds "nearly 100% of early stage startup deals" and your dinner club discussed how "they can act as a group to reduce those valuations." then you are colluding to fix prices. As you said, it's hard to avoid being a dick, but I'm not any more convinced it was innocent just because you say motherfucker as much as I do.

Arringotn is leveling a serious charge here, I think it's probably not helpful to your case to respond with "hey, it's capitalism!"

[Sportsblognet]

Great Post. Probably laughed out loud about 10 times. "Greed is Good" actually came to mind after reading Arrington's article but it actually makes sense in reverse if Arrington is just making this shit up.

All you super angels should form a circle around Arrington on stage at Disrupt and start tearing into him. That would be great entertainment. I thought it was pretty interesting that Michael decided to write about this right before disrupt. I am sure he has a plan on how he is going to work this angle there to make the event even bigger then it already is.

[Durjoy Bhattacharjya]

Dave- disappointed that there was no conspiracy. Would have made your life movie rights more valuable. Now this just seems like a PR stunt for Wall Street 2.

[Streich]

It seems rather naive of your group of very smart people to gather privately in one place and not expect there to be doubts about your intentions.

If the heads of all the major oil companies gathered for a private dinner, you can bet there would be repercussions.

You're not little boys meeting in the tree house club. Like it or not, M.A. put you on notice that your actions will be watched from now on.

[Ken Berger]

c'mon Dave, u think we is idjuts? You and Mike are *colluding* on this whole story just to get pageviews! You must be peppering your new fund's IRR via ad$sen$e ! (knee slap)

[Patrick]

When are people going to realize that Michael Arrington is Michael Scott. He writes like a little girl not invited to a birthday party for a girl he hardly knows. Why anybody reads or listens to anything he says has confused me for the past 2 or 3 years.

[Gfreishtat]

Sounds about right to me.....I wish we had enough Angels in Atlanta to fill a big oval table to start with.

[DaveWBaldwin]

Well written. Even if there were the big secret meeting that involved collusion...holding hostage some great, world changing device so the peasantry could not gain...there is always some David that will take on that Goliath.

[Dave Taylor]

Thanks for calling it as it is, Dave. I read Mike's post and all I could think was "Dude, you weren't f'ing invited. What gave you the right to show up in the first place?" Seemed a lot more like sour grapes from the kid looking in the window at the party than anything else.

[Paul Francis]

Wow, reading that was like sitting in a car wash with the roof down whilst those giant roller brushes bash up and down on your face.

All I can say is .. Amen!

[Tara Brown]

And I was worried that I would be bored learning about the world of investing.

[twitter.com/chrisyeh]

Well done, Dave, well done. If you need anyone to testify about the things you say at angel-only events, I'm happy to back you up.

[Vidluther]

Dave,
I understand that Arrington is a friend of yours, but you hit it right on the head. Sometimes TC devolves into a gossip website competing with valleywag.

[Jon Asher]

Thanks for going on the record on behalf of the conspirators. You're one damn legit concierge.

[Itamarl]

As usual: awesome, hilarious and to the point.
More seriously, we better start booking tables at Bin38 right now, this place is getting some serious advertising. Is food any good?

[Mtupper]

Dude! You rock!
Always enjoyable reading.
See you in Chile Q1'11 for GOAP!!

[Stephenrandall]

Best post I've ever read! Dripping with passion, conviction, experience, humor.... makes any entrepreneur who hasn't met you want to correct that immediately.

[Hdemott.wordpress.com]

We're going to have to get the Gregory Brothers to turn this into one of their songs!

http://www.youtube.com/watch?v=hMtZfW2z9dw

Serious Question: I agree on the VC model - too much money to generate any meaningful IRR's unless they hit the next Google - so how much capital do you think you can invest and still generate good IRR's? Where's the limit? $30M $70M $100M?

[RELTVlive]

Wow! How do you feel after that rant? Your right about the VC dinosaurs. They have to get current, creative and flexible. That's what it's all about now a days. Everything is moving too quickly to be stuck going in the same circle. Because you move and change they fear you, your innovations and shout "collusion".
I have approached the dinosaur VC about funding my project and felt like I was being bent over.