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David Rose: Why NY Angels Charges Entrepreneurs
Matt Mireles just wrote up a post quoting David Rose the "The Father of Angel Investing in NY" on why he charges entrepreneurs. Wondering what everyone here thinks about his response?
- MediaSquirrel 17y agoI've been getting a lot of shit for calling them out on this. Curious what others think of this.
- rms 17y agoIt's because they are legitimately better than most angel groups that charge. $150 is an incredibly reasonable fee in the scheme of angel groups.
- kevinholesh 17y agoWonder what Mr. Calacanis thinks of these logical reasons... http://calacanis.com/2009/10/09/why-startups-shouldnt-have-to-pay-to-pitch-angel-investors/ http://calacanis.com/2009/10/09/why-startups-shouldnt-have-t...
- Cmccann7 17y agoSurprisingly Jason has kept quiet on this specific case even after a couple entreprenuers have pointed this out. hmm....
- hristov 17y agoI think that a smaller fee like $150 would not really be a problem. This may be viewed as an administrative fee to have a paid person review each application. When the fees go up to $1000 and over, then it becomes problematic, because then the application fees are obviously a source of profit. And if the angels or the entrepreneur forum or whatever make money from the application process they have little incentive to actually make investments.
- Cmccann7 17y agoTotally agree that a smaller fee isn't such a bad thing and could be reasonable. But then I think that an entrepreneur is paying $150 or less for the opportunity to meet investors who might or might not ever invest in the company (actually they are prob more likely to not invest in terms of odds). So its paying for something that has a negative value, just a chance that they might be interested. Also on the other side the investors should be cashed out entrepreneurs who have enough money to sustain themselves and are looking at companies to invest in and profit off of. Only seems fair that the investors should be footing that bill (even if its just administrative) and others like Chris Dixon agrees http://twitter.com/cdixon/status/9727260471 http://twitter.com/cdixon/status/9727260471 Hard to justify when the fee is such a small amount but it still feels wrong to charge entrepreneurs anything for an opportunity to pitch an investor group.
- ojbyrne 17y agoI don't see how a chance of a positive outcome has a negative value.
- pg 17y agoIf the money is really just to test applicants' seriousness, they should donate it to charity.
- MediaSquirrel 17y agohe claims that they are a charity, says NY Angels is a non-profit: http://www.metamorphblog.com/2010/02/is-ny-angels-a-paytoplay-scheme.html#comment-6a010536ffd655970b01310f41423a970c http://www.metamorphblog.com/2010/02/is-ny-angels-a-paytopla...
- bravura 17y agoNo, he doesn't claim they are a charity. He claims they are a not-for-profit, which is different than a non-profit.
- dantheman 17y agoWhat is the difference between a not-for-profit and a non-profit. I tried to determine if there was a difference in the past and came away with them having the same meaning.
- davidsrose 17y agoNew York Angels is a not-for-profit membership organization, which means that the organization itself, unlike a startup company, is not designed to produce a profit. Since it has no shareholders, there is no one to whom any profit (excess of revenue over expenses) would be distributed. Instead, the large bulk of our operating expenses are covered by annual dues of $3500 to $7000 from our investor members. In terms of nomenclature, "not-for-profit" and "non-profit" are colloquially used to mean the same thing (although technically the former signifies intention, and the latter what actually happens :-). However, you can be a legal not-for-profit organization (such as New York Angels) but NOT also be a public charity (which is what people typically think of when they say "not for profit"; that would mean that you register with the IRS under section 501(c)3 and can take in tax deductible contributions.)
- jasonmcalacanis 17y agoWe get over 100 folks applying to each event in the Open Angel Forum. As an angel investor I sort through this AS PART OF MY JOB. I don't need $150 to filter out the bad ones--I can tell in two minutes if something is really bad. TechCrunch50 doesn't charge either and we get 1,000 folks to apply for that. Again, IT IS OUR JOB to sort through these. We don't need to charge the startups. This is a really lame excuse in my mind. If you're not willing to sort through applications--which take minutes to process--why be an angel investor or run an angel group? Open Angel Forum is now in four cities and we are coming to New York City in April. We should be in 15-20 cities two years from now and I think we can do enough by having the lawyers, accountants and headhunters pay to attended/sponsor to cover any costs. David is a nice guy, but he's lazy I think.
- htsh 17y agoCan we at least agree that the $150 is very reasonable relative to what the worst offenders of this practice charge? If you get 100 applications and can only take 5 in an OAF event, there are still 95 other candidates of which some might find $150 to be a nominal cost to avoid this sort of scrum. Its admirable that folks are protecting startups from obvious scams but its dangerous to get overprotective when the end result is that you remove a reasonable option from the table. For $150 you get a sit-down with smart people and will at the very least get practice pitching under pressure and good feedback. And at $150, we're talking picking up the tab for a nice steak dinner, which is something you've advised numerous times. If these dudes have invested in companies they met through this type of forum, all the better. And there's a certain amount of due diligence an entrepreneur should be expected to do -- no need for the rest of us to protect people from their own stupidity.
- gridspy 17y agoYCombinator pays entrepreneurs up to $600 in travel charges to have the chance for YC to interview them. What does that tell you about the value of lowering the barrier to pitch?
- jasonmcalacanis 17y ago
- petewarden 17y agoHow about $175 just to get in the door for an afternoon of schmoozing with VCs? http://petewarden.typepad.com/searchbrowser/2010/02/vcs-ill-be-avoiding.html http://petewarden.typepad.com/searchbrowser/2010/02/vcs-ill-...
- aswanson 17y agoClassic scam, seen it before in charging starving musicians $150 a piece for "auditions" with so-called A & R's associated with record labels. One of the lowest forms of bloodsucking on the planet.
- starkfist 17y agoThis truly is a classic scam. Same thing happens in modeling, acting, even "boiler room" type trading outfits. The big win for this "angel" group is that they got anyone, including other VCs to talk about them as though they were legitimate...
- gyardley 17y agoThe membership of the New York Angels includes a handful of VCs, along with a lot of entrepreneurs. While the fee's distasteful, David and his angel group are legit.
- aswanson 17y agoCmon man you got college students living off ramen and meal cards trying to get something started out here. The last thing they need coming after their few coins is this scam shit. Call a leech a leech.
- MediaSquirrel 17y agoRemember, this is $150 doesn't actually give you the chance to pitch. No you pay $150 for the CHANCE to pitch.
- bravura 17y agoI think you meant to say: Remember, this is $150 doesn't actually give you the chance to pitch. No you pay $150 for the CHANCE to have the chance to pitch.
- matthewer 17y agoAs a New Yorker, I can honestly say I don't think I have ever heard anyone actually pitch NYA. David Rose frequently gives how to get funding talks, and they all sound the same. NYA's portfolio of companies is simply un-compelling: http://newyorkangels.com/portfolio/default.html http://newyorkangels.com/portfolio/default.html How can an organization like this compete against innovative forms of funding like Betaworks and Founder's Collective?
- rms 17y agoOne recorded talk of his is available here: David S. Rose on pitching to VCs http://www.ted.com/index.php/talks/david_s_rose_on_pitching_to_vcs.html http://www.ted.com/index.php/talks/david_s_rose_on_pitching_...
- rmorrison 17y agoSeems to me that it's against their best interest to limit the pool of of available business plans, which is what the $150 application fee does. If I were an angel investor, I would ideally want to receive every business plan ever created in hopes that I at least have the option to invest in the next GOOG or APPL. Then it'd be up to me to quickly sort out the junky ones.
- aaronblohowiak 17y agothey are part-timers and created this policy to weed out the tire-kickers.
- SapphireSun 17y agoWhat is a tire kicker? I keep seeing that phrase and I don't know what it means.
- aaronbrethorst 17y agoGoogle is your friend. http://www.google.com/search?q=tire+kicker http://www.google.com/search?q=tire+kicker
- davidsrose 17y agoFolks, I realize that Jason and Matt have set me up to take the fall here as some kind of epitome of evil, and I certainly understand that people don't think it makes sense for us to charge any application fees. I've explained our reasoning for why we charge the $150 fee (not the $15,000 fees that were the subject of Jason's original jihad), and I completely agree that (a) it is imperfect, and (b) the subject is a valid one for rational discussion. But before everyone gets out their pitchforks and torches, I'd appreciate it if we could all work from the same set of facts, which are as follows: 1) New York Angels is not a scam. We have invested over $40 million into 60 startup ventures over the past six years, all from our own personal pockets and not from other people's money. 2) New York Angels is not a venture fund. Unlike VCs, who receive 2% of their entire fund every year to pay their salaries and cover their expenses, none of us get paid a penny, and we pay for our own expenses. 3) New York Angels is not a money-making entity. Think about it for a minute. We each pay $3,500 out of our own pockets each year to fund our operations, and not one of us gets one penny from anything any entrepreneur pays. How on earth can this be a "money making operation", Jason?? 4) New York Angels is not a bunch of Wall Street people. It is made up mostly of leading tech entrepreneurs in New York. Our current and former members include the entrepreneur/founders of companies such as About.com, Register.com, Mimeo, PC Forum, Gartner Group, Gilder Lehrman Group, LinkShare, MovieFone, Afternic, 24/7 Media, Technology Solutions, IGN.com, Unwired Technologies, Half.com, Core Software, Research Board, IdeaLab NY, TACODA, MNP, and TargetSpot. 5) New York Angels is not a bunch of tire kickers. Every one of our members commits to investing at least $50,000 each year into companies that present to the group. Unlike many other 'groups' that are full of, and funded by, service providers, 100% of the people you present to are accredited investors who are committed to writing checks. 6) New York Angels is not private club for only well-connected, insider entrepreneurs. Unlike many angel groups, VCs and individual angels, we accept (and read) applications from anyone who applies to us. We don't (yet) require that you know someone, or have connections. 7) New York Angels is not lazy. Every month our angel members meet personally with 10-15 companies looking for funding, of whom 3-5 are asked to come back a second time to present their pitch to the whole group. Before their presentation they are provided extensive personal coaching, and after their presentation they typically have at least one two hour in-depth session with interested investors. 8) New York Angels is not clueless. We've had exits to companies such as CBS and Kodak with returns of up to 12x, and co-invest regularly with half a dozen top-ranked venture funds. We recently ran an analysis of our current portfolio, and while it wasn't as impressive as that of FRC or KPCB, it came in as being roughly in the second quartile from the top relative to the returns of most US venture funds over the past five years. So, here I am, ready to discuss the question of application fees calmly, but it's really hard to do that when quite a few of the anonymous posters seem to want to blindly hurl personal attacks that simply aren't true. David S. Rose Chairman, New York Angels Personal investor in over 75 startups