The Wall Street Journal reports this morning that venture-capital investors are bidding up the values of Internet startups to bubble-era levels and that “Some investors worry the lofty numbers signal that froth has returned to the Web sector.”

Last night, TechCrunch’s Michael Arrington reported that venture-capital investors are colluding to stop bidding up values of Internet startups to bubble-era levels.

Arrington published the important piece, as Felix Salmon aptly describes it, reporting that he popped in on a meeting two days ago of some of the top venture capitalists in Silicon Valley colluding to drive down prices of Internet startups. “I’ve never seen a more guilty looking group of people,” he says.

Me: Hey!

Person who was talking: oh, oh no.

Me: Hi. I heard you guys were here and I wanted to stop by and say hi.

Them: dead silence.

Me: so….

Them: Deafening silence.

Me: This is usually where you guys say “sit down, have a drink.”

Them: not one sound

Me: This is awkward. I guess I’ll be leaving now.

He reported it out later:

According to these souces, the ongoing agenda includes:

* Complaints about Y Combinator’s growing power, and how to counteract competitiveness in Y Combinator deals

* Complaints about rising deal valuations and they can act as a group to reduce those valuations

* How the group can act together to keep traditional venture capitalists out of deals entirely

* How the group can act together to keep out new angel investors invading the market and driving up valuations.

* More mundane things, like agreeing as a group not to accept convertible notes in deals (an entrepreneur-friendly type of deal).

* One source has also said that there is a wiki of some sort that the group has that explicitly talks about how the group should act as one to keep deal valuations down.

He doesn’t mention press campaigns. More importantly, and unfortunately, Arrington doesn’t name names:

I’m not going to say who was at the meeting since at least a couple of the attendees are saying they were extremely uncomfortable with the direction the conversation was going. But like I said, it included just about every major angel investor in Silicon Valley.

Read the Journal’s piece, which provides the backdrop for why these people might be colluding to fix prices and puts a spotlight on some bubble-like activity.

I’d like to see the paper and others to report out Arrington’s story, which has been rained on a bit by people you’d expect to rain on it.


Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.