Angel Investors To Startups: Yes, We Charge

http://www.pehub.com/52616/angel-investors-to-startups-yes-we-charge/

by cwan • 17 years ago

20 35 17 years ago

pehub.com

marcusestes• 17 years ago

“We are not in this to make money.” Well that's a sentiment that doesn't entirely inspire confidence.

zaidf4• 17 years ago

They could have been talking about their returns on past investments.

malvosenior• 17 years ago

Have any of these groups ever funded anything of note? Top Valley angels not only don't charge but are insanely helpful for free even if they don't fund you (if you're not a jackass that is).

zaidf4• 17 years ago

Moreover, they are usually very transparent about their investments.

rokhayakebe2• 17 years ago

Frankly I do not see how charging entrepreneurs to pitch is different from charging entrepreneurs for the TC50 demopit.

How?

Nwallins• 17 years ago

FTFA

> The Keiretsu Forum, meanwhile, said that while TechCrunch50 charges all but the entrepreneur to attend ...

rokhayakebe2• 17 years ago

Attend? Pitch?

zaidf4• 17 years ago

I thought about this too and what it boiled down to is who is getting the money?

If the fee is going to investors, I think it's bad.

If the fee is going to organizers for logistical expenses or heck even profit, I think it's usually fine.

1. In TechCrunch50's case, it is going to organizers.

2. I don't think TC50 makes most of its money from entrepreneurs looking for funding. They make a lot of money from rich execs and VCs. Contrast the angel groups and they make almost 100% of the money from entrepreneurs. This is a huge differentiator for me.

simonk• 17 years ago

Its not even that though, the entrepreneurs presenting (the 50) of them go for free. The DemoPit is more like expo space.

netsp8• 17 years ago

I don't think it matters who gets the money or who is charged. There is nothing wrong with the service at face value. Startups want to pitch. Here is a service to help them do this.

The problem with with the incentive structure it creates. If you are paying investors directly, its like paying someone to listen to a sales pitch. You will not get the same result as you normally do with your sales pitch. If you are paying organizers, you have to think about how the incentives work too. It may not take much to get investors into a room. Dinner, networking. You may be simply paying them indirectly. A startup has no real way of knowing if they got a bang for their buck.

If investors were paying, they would know. They won't be visiting very often at a high price tag if the pitches aren't good and if the chances of closing a deal aren't good.

nobody_nowhere• 17 years ago

They can say whatever they want, but it still sounds like paying your salesguy a salary instead of a commission. Coffee is for closers.

Harj• 17 years ago

They said some entrepreneurs have “a sense of entitlement” and believe that whatever they do is worth a hearing.

this sounds like something an unenthused teacher would say about an enthusiastic student

trapper5• 17 years ago

They are right. I've met ton's of "entrepreneurs" who knew nothing about business or even technology, but think the world owes them something for their magical idea. Regardless of how cool the idea really is, it must be very hard to work with these people without first teaching them the basics.

Obviously this doesn't apply to anyone who follows a relatively "lean startup" mentality [like those here], but there are orders of magnitude more people who do it the old fashioned way.

netsp8• 17 years ago

What exactly are you saying? They should be ripped off to teach them a lesson?

netsp8• 17 years ago

Where exactly is the argument? What I read was this:

The charge: Angel groups charging entrepreneurs to pitch are ripping them off. The incentives are all wrong. You are not getting your moneys worth. It is a scam fuelled by founders desperate to pitch, not a business connecting capital to opportunities. It is similar to modelling/acting agent-ing scams. You can tell it is a scam by the level of secrecy.

The defence: (1) Two of the named companies defend their practices. (2)entrepreneurs have “a sense of entitlement” (3)TechCrunch50 conference makes a lot more money off startups than they do (4)who are chosen to move forward get weeks of free coaching and mentorship on their pitches before they’re asked to pay. Also, entrepreneurs don’t have to pay — they can drop out if they want. (5)“We are not in this to make money,” a (unidentified) spokesman said.

1,2 & 5 do not actually say anything. 3 is neither here not there. No one ever said that startups are a no profit allowed world. That leave only 4, a relatively vague claim that these groups add some sort of value to the process.

Dilpil• 17 years ago

This author seems to be trying to make the point "We are legit and we charge". But he never gets around to the "We are legit" part.

wglb• 17 years ago

I am certainly curious what PG's and YC's take on this discussion is.

swombat• 17 years ago

Well, 4 years ago pg said, in one of his articles:

"Some angel groups charge you money to pitch your idea to them. Needless to say, you should never do this."

from http://www.paulgraham.com/startupfunding.html

So there you go.

wdavis• 17 years ago

One of the lessons I've learned in the few years I've been in business is this: sometimes you do everybody a favor by charging them. While I'm not necessarily in favor of this practice for angel investors, I'm not going to condemn it either. If I was going to "pay-to-pitch" I would make sure 1) the concept is marketable (investigate competitors, keep my ear to street, etc) 2) that I had a damn good pitch. Unfortunately, some startups don't take the time to due these things or even think about the investors time. The fact is they do feel entitled. By charging a fee you eliminate the half-hearted and at least ensure that the start-ups pitching understand the importance of the situation. The companies named apparently provide a service that these entrepreneurs can not provide for themselves. They bring in the money. Therefore, they should get paid. Does anyone know if the angel investors get any of this money? Look if it's a scam it should be stopped, but if it's bad business it will stop itself.

anamax• 17 years ago

> The companies named apparently provide a service that these entrepreneurs can not provide for themselves.

Do they? What have they funded? What success has followed their coaching?

> They bring in the money.

Do they? Again - what have they funded?

And even if they do, lots of folks have money. If they're admitting that they're dumb money....

ct4ul4u• 17 years ago

For the most part, the only thing angel investors have is cash. They have nothing you should pay them for. Fred Wilson's support for Jason Calcanis' position is particularly telling, given that Union Square provides a great deal more than cash (I've seen them in action). If you have to pay to get a potential investor to listen to your plan, you either need a new plan or a new investor.

Paying angel investors for access is only one step removed from wiring money to Nigeria in a 419 scam.

veteran• 17 years ago

I don't understand why publicly lynch some company? why not market let work out its dynamics -- if it is not worthwhile people won't buy it. I am saying this because I have attended Keiretsu forum meetings and these are very nice people.. they maintain office/staff/provide food at events and put in lot of efforts to promote startups..If you have not attended meeting then please do so..They seem to be not making profits by charging startups but covering operational costs (I don't know financial details but this is my guess). Now question is who pays for the services - I feel it is not at all outrageous for companies to pay here because the companies they select are generally already revenue generating companies, many of the companies are not in related field to a particular angel..as a matter of fact they advice you not to invest for quite a few deals when you start so you learn ins and outs..If they start charging more to angel members then the number of angels who engage in the process might drop ..may be you will say those are not right kind of investors who you want but be careful what you wish for. There are number of people in the group who are rich enough to sponsor whole thing but again, that's another model..sponsorship has its own strings attached. Coming back to my first point - just having different operational model does not equate to scam and people without getting facts falling for propaganda is no good

jasonmcalacanis• 17 years ago

oh yeah.... here are some smoking guns (or “part two of angels that charge”) http://bit.ly/URKMR

:-)

Angel Investors To Startups: Yes, We Charge

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