AngelGate: Ron Conway Rips 'Despicable and Embarrassing' Investors

Ron Conway, one of the most influential venture capitalists in technology, dropped a bombshell on Silicon Valley Thursday by accusing another group of prominent investors of "despicable and embarrassing" conduct surrounding hot startup investments.

Conway's attack throws a barrel of gasoline on the rapidly escalating conflagration known as AngelGate -- an alleged conspiracy by a cartel of top early-stage, or "angel," investors to collude and fix price levels for hot tech investments.

Techcrunch, which first reported the alleged scheme, obtained a copy of Conway's extraordinary email attack and posted it late Thursday. Conway confirmed the authenticity of the email to DailyFinance Thursday night, but declined to comment further.

Earlier in the week, Techcrunch editor Michael Arrington, a former Silicon Valley lawyer, detailed what he described as a plot by angel investors "to keep other competitors out of the market, or to discuss ways to keep prices under control." On Wednesday, Conway told DailyFinance that he had not attended the meetings.

"Total Disagreement with Your Values"

Conway's email appears directed at the angel investors involved in the alleged scheme.

"I want to clarify once and for all my total disagreement with your values and motives for being investors," Conway wrote. "In my opinion your motives are driven by self serving factors around ego satisfaction and 'making a buck.'"

"My motives and values are very different," Conway wrote. "They are so different I want to be up front with you and recognize this and disengage from any involvement with you. I will not be a hypocrite. I think you have a different value set and lets agree to disagree and not have to even engage in any idle chit chat or discussion of any sort....ever."

What began as a family squabble among the insular, elite echelons of Silicon Valley's angel investment community has now exploded into public view. The allegations are serious, involving collusion, in which two or more parties team up to stifle competition in the market illegally, and price-fixing, in which two or more parties agree to set prices -- or in this case, valuations, for tech startups (although whether such price-fixing is even possible in today's Silicon Valley is open to question).

One of the meetings' attendees, well-known Valley investor Dave McLure, responded to the collusion allegation with a profanity-laden tirade in which he he called the charges "bullshit" and accused Arrington of sensationalism. Another Valley investor, Bryce Roberts, admitted attending, but disputed Arrington's portrayal.

The other participants in the alleged scheme have yet to be confirmed, although the names are flying around Silicon Valley.

Silicon Squabble Explodes Into Public View

Conway, founder of the SV Angel funds, is one of Silicon Valley's most influential tech investors, with a track record that includes early-stage investments in Google (GOOG), Twitter, PayPal and others. A veteran -- or survivor -- of the first Internet bubble, Conway is a respected figure in Silicon Valley credited with helping many fledgling entrepreneurs.

In a now-deleted Twitter post that appears to have been meant as a direct message, McClure wrote: "Ron is throwing us under a bus. and it's chickenshit that he writes that after David Lee comes to both meetings."

Lee is one of Conway's partners at SV Angel. "I regret David Lee was involved in the gatherings," Conway wrote. "I am sure he does too."

Conway castigated the investors for "complaining about deal structures, terms, vc's, and valuations etc and the cars you drive." McClure responded: "For the record: i drive 2003 Toyota Highlander. the brakes squeak, & it needs a carwash. what car u drive Ron?"

Although Conway does not repeat the charges of collusion and price-fixing, he does make some cryptic comments in the email that are open to interpretation. For example: "The Free Enterprise system is very efficient .....why not let the marketplace demands decide on these issues, its worked for many many years."

Is Conway suggesting that some force other than market demand has been deciding "on these issues"? If so, he doesn't say.

"Despicable and Embarrassing"

Conway continued: "I wish the Angel community could have the same integrity and values of the entreprenuer community, but unfortunately I now believe that is hopeless and your actions prove that."

"What do you think the entrepreneurs you have funded are thinking right now," he added. "This is despicable and embarrassing for the tech community in my opinion."

In his parting shot, Conway writes: "Dave McCLure...pls try not to blog about this and cause Silicon Valley more embarrassment with your unprofessional classless writings."

Ron Conway's full email: