(Repeats Sept. 22 story with no changes to the text)
* Influential blogger: investors plotted to fix prices
* Report comes as start-up valuations soar
(Paragraph 10 contains language that may offend readers)
By Alexei Oreskovic
SAN FRANCISCO, Sept 22 A secret meeting in a
restaurant back-room, high-powered financiers and a plot to
squeeze out rivals.
It sounds like the makings of a Hollywood mobster epic. But
it is the premise of a controversy surrounding Silicon Valley's
tight-knit investing community following a widely read report
by an influential technology industry blogger.
Michael Arrington's post said a cabal of "Super Angels" --
deep-pocketed entrepreneurs who invest in promising Internet
start-ups -- conspired to devise ways to drive down valuations
of companies and lock out other investors, has set off
speculation and strong-worded denials across the Web.
Right or wrong, it cast a harsh spotlight on the sometimes
opaque, cosy financial system that plays a crucial role in
nurturing the industry's next generation of companies.
"I don't believe in a conspiracy," said Hans Swildens, the
founder of San Francisco's Industry Ventures, which invests in
venture capital and super angel funds, as well as start-up
"I'm sure that people are trying to get better prices in
the market, because that's what everyone tries to do when they
buy things. But I don't believe in deliberately colluding and
forcing a market price down for angel investments," he said.
Lightspeed Venture Partners' Jeremy Liew, who was an
investor in social gaming company Playdom, said he found the
report's allegations very surprising, and noted they were at
odds with his experience working with Super Angel investors.
According to the report, which appeared on TechCrunch on
Tuesday, an unnamed group of Super Angel investors, who
together account for "nearly 100 percent of early stage
start-up deals in Silicon Valley," secretly convened at San
Francisco's Bin 38 wine bar recently.
Seated around an oval table in a private room, the
attendees discussed how to reduce rising start-up valuations as
well as how to keep new angel investors and traditional venture
capitalists out of deals, according to anonymous sources cited
Dave McClure, the founding partner of the 500 Startups
fund, fired back in a lengthy and profanity-laced blog post on
Wednesday calling TechCrunch's report a "bullshit superangel
McClure said he attended the dinner, but said the purpose
was to discuss trends in technology and start-up companies.
The identity of the other attendees remains a matter of
speculation, with online commentators analyzing Twitter posts
and other clues to divine who might have been at the table.
The online dust-up comes as a new crop of start-ups
focusing on social networking and mobile computing is drawing
attention from investors looking to get in early on the next
Facebook or Google.
"The valuations are twice as high now as they were 12
months ago for these angel deals," said Swildens.
Meanwhile, organizations like Y-Combinator, which hold
events to showcase startups to swathes of investors, have
increased the competition among investors.
Paul Buchheit, a former Google Inc (GOOG.O) engineer who
has made angel investments in numerous companies including
finance website Mint, said it would not be surprising for angel
investors to gather to talk shop and exchange notes.
Because angels invest smaller sums of money into startups,
it is common for them to band together in order to raise a
larger amount to invest, he said.
But he thought it unlikely that price collusion would be
effective in that world, since investors -- if found out --
would be shunned by start-ups and shut out of future deals.
"The way you win is not at getting the lowest prices, but
in being able to get in on the best companies," Buchheit said.
(Editing by Edwin Chan)