Oh my. The subprime Venture Capital maelstrom continues at an even more rapid pace with the popularization of the AngelList, the angels’ most recent answer to the collusion in VC. Read the TechCrunch article referenced below, to get a feel of the price-fixing and collusion in innovation arbitrage.
The biggest problem I have with AngelList is that it further commoditizes the investment thesis (responsible for negative 10-year returns in Venture to begin with) and creates a socialistic investment society, quite the opposite of the anarchy that is needed to deploy unique risk that can produce meaningful returns. The answer to the deplorable performance of a subprime VC industry is not to deploy more subprime risk but to do the opposite, deploy prime risk. But the skills to deploy prime risk responsibly are not as plentiful as dumb money.
The one thing certain angels had going for them is their ability to spot unique risk, and now with those participating in AngelList that risk will be ironed out. So, off goes the financial industry again, sliding further into subprime Venture Capital desperation. And with the average performance of Angels worse than VC, expect more of its self-induced demise soon as we won’t have to wait for fund vintages to mature to see the outcome of this futile exercise.
You have to wonder why financial merit is not held to the same rigor as the merit of production, for the sake of our competitiveness as a nation.
[Links: AngelList, subprime VC, TechCrunch: Angels collude]
