LIVE from TechCrunch Disrupt: Super Angels Vs. Super VCs

The upcoming panel at the TechCrunch Disrupt conference in San Francisco this week suddenly became the flashpoint for the show last week when TechCrunch editor Mike Arrington wrote a blog post on how he crashed a dinner of angel investors and accused them of collusion. A maelstrom of charges, leaked emails, and countercharges ensued. Now some of the principals in this controversy are onstage together with Arrington: Dave McClure of 500 Startups, Ron Conway of SV Angel, Chris Sacca of Lowercase Capital, Chris Dixon of Founder Collective, Roelof Botha of Sequoia Capital, and Mark Suster of GRP. Oh, and Yossi Vardi has crashed the panel. Here we go:

Arrington asks: Anything else you guys want to add on Angelgate? McClure: No. Sacca: Not really. We have to thank Ron for starting this industry. It seems worth getting past. This whole thing is a total waste of time. Conway: nothing more to say. OK, I guess enough of that.

Arrington: How are super angels different from VCs? McClure: Bigger funds can’t invest a small enough amount to do startups.

Arrington: Do you take money off the table when entrepreneurs do (pre-IPO)? McClure: Yes, but only if the founders cash out some. Botha: No. McClure: Of course he doesn’t, because they’re going for the big score when there’s an IPO. Conway: The rank and file engineer has a right to get liquidity at the same time as the investors and the founder. McClure: True.  Suster: Founders should be able to take “feed the family” money off the table. But if and only if you’ve achieved something in the business. McClure: VCs will get squeezed out of deals if they don’t offer founder liquidity.

Arrington: Valuations are going up. What are you doing to counter that? (Laughter throughout the room, as it’s obvious this is a backdoor into Angelgate.) McClure: We’d have to have dinner on that. (More laughs.) Dixon: None of the last 15 investments we’ve done has been larger than $5 million pre.

Arrington: Why should the entrepreneur care? McClure: Because more startups need to be ready for small exits. You have a higher probability of a $50 million to $100 million exits. If you get too high a valuation or too high a round, you have to go for the fences, and that may not be appropriate (paraphrasing).

Arrington: Is it really best to think small, to go for a $25 million company? Conway: We invest, and two years later the entrepreneur decides if they want to sell or keep going for something more. A great entrepreneur does not talk about the liquidity event when he’s talking to us. Sacca: People get rich on $20 million exits. That’s real money. No one in the audience would sneeze at $4 million (apiece for, say, five founders). (Amen.)

Arrington: There’s a cult of personality developing in the angel community that isn’t good. We need $1 billion-$2 billion-$10 billion IPOs and exits. Sacca: They may not be magazine cover stories. But $20 million-exit companies are not “dipshit companies,” as Arrington called them.

And it’s over, with people on the panel more angry with each other than when they started.

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