2) How does this make it any better? What you're essentially saying here is instead of investors paying themselves cash they're just shuffling shares of stock from one investment vehicle to another... if this is true then in some cases investors are actually increasing their share in AngelList simply by, in your own words ("1x isn't making anybody happy"), making a failed investment. That doesn't seem above board to me.
3) If you're honestly trying to compare late 90's era Google with ProductHunt then I think that proves my point more than anything I can say myself
Anecdote time: I've personally seen a few startups that were failing attempt to sell themselves to the startup I was somewhat senior in. I interviewed and chatted with founders of the startups that were trying to get acquired. My meetings were not interfered with by the VCs or the angels or anybody else. They are far far too busy to care about every minute detail of what goes on at their portfolio companies. Had we ever gone through with one of the acquisitions (which we never did when I was there), my guess is the board would have tried very hard to convince us not to do it, as an acquisition has a much higher chance of going wrong than going well and can be a huge distraction.
Its seems to me that convincing a bunch of people to part with their money for your idea and then relentlessly trying to execute on it (as PH's founder seems to have done) is very meritorious.
Some investments are clearly made to friends, but you aren't convincing any investor to NOT invest in their friends who they think are great, personally. Now if only there was a process to democratise this discovery more....
P.S: I was referring to AngelList in the end there.
For Google, I don't think it was certain at all that they would succeed and there was a real chance they could have failed. Their first business model was selling their search engine to enterprises via hardware boxes, which grew very haltingly.
In fact it wasn't until Google came across Overture's idea of selling advertising tied to web search results that they found the success they now have, and which they appropriated despite Overture's patent because they were so desperate to find a working business model.
Overture(later acquired by Yahoo) sued Google, and Google had to pay in stock worth hundreds of millions in 2004 (tens of billions now had Yahoo kept them).
So how does this relate to ProductHunt? Google had a real product, knew who their users were and put their experience first. ProductHunt has polluted their site with junk and allowed their voting process to be distorted, making it practically useless to anyone who came there to find great products.
See here: http://www.nytimes.com/2004/08/10/business/technology-google...
2) AngelList isn't giving PH investors/employees $28M cash, or $20M cash, or whatever the figure is reported as. They are very likely giving them mostly stock, stock in a private company with an unknown valuation. Probably only enough cash to cover the taxes (10-20%). The 20M figure is pulled out of thin air based on whatever AL thinks their valuation is. How much stock do you think they'd have to give out to hire 20 people? How much stock are they giving out to acquire a company with 20 employees?
3) People said Google had no hope of ever making money, they were just a search engine and those don't make any money. Sitting on the sidelines and saying every investment is stupid is really easy when 95% of them fail.