Wednesday 22 September 2010

Temptations of power

There is a story today on Techcrunch, probably a "breaking" story about a bunch of super angels trying to find a way to block off others from their turf (the Valley), or at least to control the prices. As Michael Arrington points out, if true, it's at least illegal, amongst other things. However, it illuminates an interesting phenomena that happens in every market where there is a huge difference between buying (investors) and selling(entrepreneurs) power.

Entrepreneurs, particularly the first timers are the weakest party here. During their fundraising process they get bombarded by new concepts, new names, new environments.  I guess it's cruel, but natural. You're lost, and at the end you cling to one thing that you can at least related to: the brand. That's why well known investors get the upper hand, they bring brand, experience and network. And that's why you're after. 

I've raised funds from a couple of top investors (like Fred Wilson and Saul Klein) that brought me and Zemanta incredible advantage and experience, by actively working with us. Price was almost never under discussion! But it was fair. We might get a better price from somebody else, but it would never brought us the non-monetary advantages we had.

If I put aside the legal side of the argument, and if  the super angels are really trying to arrange the environment in their own favour, it's a shortsighted attempt. Money that's invested it's always invested in business and they can much better leverage their investment by working with the entrepreneurs and actively help them. At the end of the day, they call themselves angels, aren't they?

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