The story broke on Tuesday on Michael Arrington’s TechCrunch blog. He described a top secret meeting of about a dozen Angel “Superinvestors,” who “together account for nearly 100 percent of early stage startup deals in Silicon Valley.” They had been meeting to resolve a number of problems that they face today, as more and more money is being poured into startups, in an attempt to find the next Facebook. Valuations are going up, and these investors want to keep them down. Arrington claims that the VCs are “colluding,” to lower these valuations and keep new and traditional investors out of the market.

He lists two problems with these meetings, noting that both are federal crimes. Collusion is an agreement between two or more persons to divide the market, set prices, or limit production. It aims at limit open competition, the cornerstone of a real free market, by deceiving, misleading, or defrauding others of their legal rights. He also charges them with “price fixing,” thereby inferring that the group is more of a cartel than a friendly gathering of the über-wealthy, sharing a few drinks.

Now Ron Conway, of Angel Investors LP has weighed in. The super-investor, who may have poured more money into Web 2.0 than any other investor, slammed the people attending the meeting, telling the participants in an email that, “Your motives are driven by self serving factors around ego satisfaction and ‘making a buck.’” In contrast, he described his own motivation as a passion for “helping entrepeneurs (sic) and watching them learn and succeed.” He claimed to be so disgusted with them that he expressed his intention to “disengage from any involvement with you.”

Dave McClure, who attended the meeting, said that Conway is misrepresenting what the meeting was about and throwing his colleagues “under the bus.” He called it “chickenshit,” and noted that Conway’s own partner, David Lee, attended that and other meetings. Conway responded that. “I regret David Lee was involved in the gatherings. I am sure he does too.”

It remains to be seen whether any official action will be taken the angels who participated in the meeting. What is certain, however, is that Arrington’s charges are serious and Conway seems to be backing them up. If the authorities do dive in, the consequences for Silicon Valley’s latest startups could be dire.
Read More at the Business Journal.