Archives for the month of: September, 2010

I’m taking a few minutes away from studying for my GB110 Legal and Ethical Business quiz to talk a little bit about this whole collusion thing going on in the “angel ecosystem”. If you missed it: Arrington’s post.

After reading Fred Wilson’s response about collusion and his rejection that collusion is actually happening in the venture capital space, I put together some of the things he said, namely: venture capital deals typically don’t have as many subscribers in a syndicate as syndicated angel deals, venture capital collusion isn’t really happening, angels have welcomed his firm into their own deals, and the like.

The question is: if collusion is an actual threat, is it really that big of a deal? Collusion itself is, yes, a pretty big problem. Price fixing (well, valuation fixing) with the cooperation of the interested parties is both untrustworthy and unethical. However, the angel and seed-stage world is large enough that collusion in a small group such as that described by Arrington is not going to make a huge dent (even if it includes the ‘top ten angels.’)

Whereas a startup raising money through venture capital runs the risk of collusion in their syndicate of two or three VCs (which, as Fred says, isn’t really a risk as collusion isn’t really happening much in the VC space), an angel syndicate has less of a chance.

With the help of services that promote transparency in the angel world such as Venture Hacks’ AngelList, the chances of being able to pull off price/valuation fixing with these angels, a large number of which seem like ethical folks, is pretty minimal.

The problem comes in when super angels, as they’re called (and as Fred dislikes to call them), start to block off the angel group and section off to their own space in the middle of angels and VCs. I don’t think that will happen. Even given what Arrington heard during the meeting. They have more to lose than gain by doing so, and that’ll be a clear signal of something strange happening behind the scenes.

Interesting post on Hacker News today: What’s the big deal with startups anyways…

Why do we continue to preach the greatness, the undisputed manifesto of startups and entrepreneurship in general.

Why are there half-a-million blog posts by some 28-year old on how having your own startup will result in you losing weight and gaining muscle, eating better, dating supermodels with PhDs while the startup simultaneously mows the lawn and cooks breakfast every morning for you.

Why, even when we know that 9 in 10 of us are doomed.

I want to know: Why the hype?

I responded in the comments.

Hacker News is a community of people who have what Dharmesh Shah calls a “genetic defect” that makes them crazy enough to start a startup. It’s true. A subset of the people in the world are crazy enough to do something this high-risk high-yield, and that’s us.

We preach the greatness of startups because we’ve put a lot of things on the line. The opportunity cost of doing a startup is great; the major aspect of this opportunity cost is time. With this time, we could do some consulting, or learn a new language, or go on dates. Instead, we’re fixated on the idea of creating amazing products that change the landscape. We’re attached to the concept of being the ones that enable the software your dad uses to trade mutual funds. We’re enamored with the ideology of being an active contributor rather than a passive consumer of the world we call ours today.

I’ve questioned the strangeness of this enchantment of startups being the road to various levels of success in the past as well. Losing weight and all that stuff is all about discipline, and is an element of really any profession you can think of. At the bottom of it is just who we are and what we want to do: entrepreneurs and to create meaning, respectively.