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!
So A Blogger Walks Into A Bar…
81–90 of 258 posts
Re: So A Blogger Walks Into A Bar…
#82Earlier quoted context omitted.
If they create a single super angel corporation then they could run afoul of anti-monopoly laws.
Hah, this made me laugh. As if they owe anybody anything! They're the ones taking the risks with their own money; if they want to be better informed through information sharing, more power to them.
"As if they owe anybody anything! They're the ones taking the risks with their own money;"
Right. And I'm sure they're all doing it out of the kindness of their hearts. They're definitely not intending to make money off of the deal.
Regardless, Arrington accuses them of discussing:
* 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.
This is definitely sounds anti-competitive to me (assuming it's true of course).
Re: So A Blogger Walks Into A Bar…
#83Earlier quoted context omitted.
They are a group of people supposedly conspiring to generate the worst possible terms for the people they are providing money to, while trying to force out or marginalize competition. IANAL though - even if not illegal, it's still pretty stinky, and a big part of me hopes it's not illegal. If it's not illegal, I hope they're outed and shamed if this is true. If it is illegal, it give the government reason to step in…
Or, this is a group of people collaborating to generate the best possible outcome for their own business. Every joint venture can be framed in anticompetitive terms. But in this case, what possible undue market influence can they have? The market will find other people to take these deals.
This is a group of people, comprising the top angel investors in a given area, investing lots of money, into a lot of companies, supposedly discussing - in private - how to "divide the market" and "set prices" and "exclude/marginalize competition". Angel investors, despite being individuals, still have regulations and laws to follow.
Frankly, I think the feds would jump at the chance to have an excuse to jump in and more tightly regulate/tax/etc the entire system, including angel investors.
You could very well be right; admittedly, I'm not the smartest tool in the shed when it comes to understanding FTC and government investment regulations, as well as the legal status of angel investors.
Heck, I really hope this is all wrong, because the last thing I want is the feds meddling in this industry even more. I make my living on startups; the last thing I want is the federal government to make it wither and die.
Re: So A Blogger Walks Into A Bar…
#84In 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!
Why would VC firms meeting and agreeing to change terms for their clients in lock-step not be collusion whereas if the brick and mortar banks did, it would be? (and was: http://redtape.msnbc.com/2008/04/did-banks-collu.html )
It turns out that banks are exempt from antitrust laws: http://en.wikipedia.org/wiki/United_States_antitrust_law#Exe...
Re: So A Blogger Walks Into A Bar…
#85From the comments:
> No self-respecting conspiracy uses a wiki (or even email).
I laughed.
Re: So A Blogger Walks Into A Bar…
#86There'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...
er, because he wants to maintain relationships with his friends who were around the table?
One of the major nono's of journalism is becoming too close to your sources.
Re: So A Blogger Walks Into A Bar…
#87I 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…
Arrington is smart, a lawyer himself, and already know he is headed straight to the witness stand. Thanks for blowing this whistle Mike. That's the TC we like.
Re: So A Blogger Walks Into A Bar…
#88Earlier quoted context omitted.
That's an unrealistically high standard and I can't think of any recent case which would meet it. Why didn't the market find a solution to Microsoft in the 90's or Intel in 2000's and, more importantly, why did the Feds feel the need to intervene?
Microsoft owned the entire personal computing platform and was using it to put new companies in marginally related markets out of business. Are you suggesting that 10 angel investors have control over all the money? Is one of them Lex Luthor?
I'm not suggesting it, Arrington flat out said it. He was there and knows the VC players better than anyone.
Re: So A Blogger Walks Into A Bar…
#89Earlier quoted context omitted.
If the FTC determines that the joint venture would form a monopoly, they could in fact block it on antitrust grounds. The FTC blocks mergers all the time. Explicit cooperation in restraint of trade is always illegal, though.
According to Wikipedia [1], there were over 250,000 angel investors active in 2007. If 10 of those investors were to get together to form a "super-group", I'm not sure it would match up with the definition of a monopoly. I don't know anything about the collusion arguments though. [1] http://en.wikipedia.org/wiki/Angel_investor
I agree. Not saying they're a monopoly. The merger-blocking issue is the only reason I can think of for a joint venture being illegal.
The difference is that explicit collusion is ALWAYS illegal. Otherwise innocuous activities that may have an anticompetitive effect (e.g. forming a joint venture) are sometimes legal, depending on what the FTC thinks.
Re: So A Blogger Walks Into A Bar…
#90Earlier quoted context omitted.
To be fair, this is Michael Arrington. He's not above sensationalism to get a few extra clicks.
In Arrington's defense his claims are laid out clearly without any weasel words. Either this is happening or it isn't. So while I'm pretty meh about TC as a whole, I'm giving him the benefit of the doubt on this one.
He didn't name a single name. If he really believed this was so certain, he could have. Unless he's trying to make them do something, the only reason to keep names out of it is because he thinks this might be libel.