6 ms·

Why startups shouldn’t have to pay to pitch angel investors

85 points by AndrewWarner 17y ago

vaksel 17y ago
it's the old world meets the new world. Old world think that it's alright to pay for access, that it's alright to pay $300,000 to branding consults when you didn't even launch yet. The new world starts bitching when they are forced to pay $9.99/mo to use an app
sachinag 17y ago
These organizations thrive in those geographic areas where you don't have a critical mass of angel investors amongst whom you can syndicate a deal. It's really quite that simple. Here in Chicago, DePaul University puts on an annual event that cost $80 to attend to "Meet the Angels". Too bad none of these "angels" actually do any deals, so it's a total sham. I'm sure they're laughing all the way to the bank.
- thwarted 17y ago
  I read about those events in the "College of Computers and Digital Media" (or whatever they are calling the CS department now) newsletter/mailings a while ago (after I relocated to SF), and thought it sounded like too good to be true. I think the main goal of it is to be marketing for the CS department like "if you attend here, look at the kind of access you'll have".
petewarden 17y ago
I'm disappointed to see Keiretsu on there - I've known a couple of angels recommended by people I trust who are involved in that organization. Can anybody confirm Keiretsu does charge?
- Frocer 17y ago
  Yes, very expensive as well. All of these angel groups are pretty much a total joke. By the way, here is a very similar discussion on this topic a few months ago: http://news.ycombinator.com/item?id=782980 http://news.ycombinator.com/item?id=782980
kakooljay 17y ago
"PrivateEquityForums.com (stunnning $14,500 to $25,000 plus 3-5% of your raise to present!) We’ve received information that Mike Segal of Joshua Capital Partners runs this forum that is looking for up to $25,000 and/or 3-10% of how much you raise!" Kudos for outing these "epic bastards" - IF it's true.. certainly hard to believe anyone that gullible hasn't already sent his $$ to the widow of a recently ousted African minister...
hackernews 17y ago
I've watched a lot of Jason C. and one thing is true, he is a "_brilliant_" salesman (I swear he is branding that word). But for him to step out and take on the old establishment really means something. He could easily concentrate on Mahalo and and not reach back and motivate the people working on startups. It's so cliche, but he seems genuinely sincere in fighting for the the next generation of entrepreneurs. I'm behind him 100% on this, and can't wait to see where it goes.
- mahmud 17y ago
  He could easily concentrate on Mahalo and and not reach back and motivate the people working on startups. Or maybe he thinks Mahalo is not what it's cracked up to be and he is grooming himself to become an industry guru/consultant/visionary?
  - marknutter 17y ago
    Either way..
  - michaelneale 17y ago
    I doubt it - he seems to have an abundance of energy and Mahalo is probably run well day-to-day by the people he has around him.
  - rythie 17y ago
    I think he genuinely interested in helping startups and giving his knowledge away, also in being well known, so that is part of the visionary bit you mention. He sometimes talks about himself in the third person as if he thinks everyone thinks of him as this visionary already. I doubt he run Mahalo in long term, he will want to get it established and flip it in the next 5 years, if not sooner, and I've heard him mention on the show that he is envious of $100m buyouts for companies and he wants that for Mahalo. I think he building connections for his next ventures and company. He is aware of a lot early stage companies, he can invest at very favorable rates and then give the company a much better chance of success by introducing it to key VCs that he knows - which could make some very good investments for himself.
deleted 17y ago
[deleted]
hristov 17y ago
I think we already discussed that some time ago. Anyways, the biggest reason why you should not pay angels to let you pitch is that you want them to be thinking that if they do not make an investment, they are wasting their time. You can never force an angel to like you, but if you have an angel that does not get any money from your pitch, it means that the only way he/she will make anything is if he/she invests. So they will be itching to invest with someone. Again, this will not make them invest unless they like you, but at least you know they are looking to give their money to someone. If you start paying to pitch you may easily get into a situation where the "angels" are not really looking to invest at all.
staunch 17y ago
My opinion of Calacanis is very mixed, but on this I'm 100% with him. I really hope he does follow through. This has the potential to help far more startups than TC50 ever could.
covercash 17y ago
apparently one of the angel forums is suing him for this... http://twitter.com/Jason/status/4745489235 http://twitter.com/Jason/status/4745489235
ojbyrne 17y ago
I'm going to advance a counter-argument (just because I'm like that). Jason makes the argument that these people are getting pitches from individuals who don't have a quality product or connections. I'd argue that's its almost always connections. That's what I experienced at digg, which was in general a second rate idea (it was done before by kuro5hin and delicious mostly) but was advanced by the ultimate insider. This is just simply creating a market, Jason feels threatened because while he may have come from the bottom, he's no longer there, and this is a direct threat to his (and every other insider's) influence. I'm not a big fan of Ayn Rand, but there's a great passage in "Atlas Shrugged" about how once you destroy markets, it becomes all about influence and insiders and "who knows who." This is just a new market mechanism that subverts the insiderish nature of the angel community. It doesn't mean it will work, but it's a reaction to scarcity controlled by influence, and is just creating a market mechanism where one is needed.
- simonw 17y ago
  I don't see how digg is similar to kuro5hin or delicious - kuro5hin was about essays, delicious was primarily about serving personal needs (saving bookmarks) first. They seem very different to me. Digg also inspired a bunch of similar sites using the same mechanism (like Reddit and Hacker News) which suggests that digg had something genuinely new to offer.
  - rythie 17y ago
    I would note - if you didn't notice, that ojbyrne wrote the first version of Digg.
    - ojbyrne 17y ago
      And the second, and large parts of the third, going by our own versioning. It was 3 years of my life.
  - ojbyrne 17y ago
    Unless I'm mistaken, kuro5hin had a voting mechanism to determine what appeared on the front page. And delicious had it's "popular" page. Anyway my argument is: a. "connections" are a scarce commodity, and probably the primary thing that a startup needs. b. A market mechanism is replacing influencers. That's most likely a good thing. and an additional remark - the first people who do this are obviously going to price high. The prices will get driven down by the same supply/demand mechanism that created the market in the first place.
tlrobinson 17y ago
I think it's great Jason is working to eliminate this... but just to play devil's advocate here: TechCrunch50 essentially charged $3000 to present in the "DemoPit" by requiring purchase of a conference ticket... edit: make that $1500, they give applicants 50% off
- jv2222 17y ago
  Yes It seems so hypocritical that he's waging a war against people doing something very similar to what he does. I wonder if it makes him so angry because he recognises on a subconscious level that he's doing something quite similar.
- ivankirigin 17y ago
  I think that is different. A booth at a conference is marketing. It isn't fund raising. Getting in front pf a bunch of people interested in tech startups is about getting initial users and initial branding.
  - jv2222 17y ago
    I thought lots of people who don't have booths pay for a ticket with the express purpose of networking. I didn't think you could get in without paying $1.5-$3k for a ticket? Maybe I'm wrong but that was the impression I had.
    - michaelneale 17y ago
      How is paying to go to a conference where you can network (or present, if you are lucky) with the whos-who of tech, versus for the opportunity to pitch to 1 single angel group/firm ? Not even remotely connected - absurd to even think so. On top of that the amounts of money seem to differ by at least an order of magnitude.
    - deleted 17y ago
      [deleted]
    - jlees 17y ago
      If you're one of the '50' you don't pay, and that's the pitching part of the conference, so it isn't hypocritical. We were offered a free demopit ticket as the '51st' company as well.
jv2222 17y ago
I generally agree with Jason's sentiments. However, given how Jason feels that startups should NEVER have to pay to be in a room full of investors... then why charge $1500 per ticket for Techcrunch?! Surely all the budding entrepreneurs should get into Techcrunch for FREE!!! After all that $1500 could go along way toward their start-up right? but they chose to give it to Techcrunch in order to network (i.e, in the case of Techcrunch people see value in giving a large chunk of money to be in a room with lots of investors and well networked people)
- rythie 17y ago
  I think the key thing is that 'investors' shouldn't get any of that money. If you have to pay an 'investor' to turn up it's likely they don't want to be there. If you pay for TC50 you are paying for the conference room hire, network facilities, promotion and organizing which are expensive.
  - htsh 17y ago
    I'm not sure if they've ever claimed that its a not-for-profit event in the way you've described. Some of that money goes into the hands of the people organizing the event (who happen to be investors).
    - rythie 17y ago
      I'm not saying it's not for profit, it wouldn't exist if it was non-profit, and of course there is a risk that it could make a loss any given year. If you are referring to Mike and Jason as investors, then I don't think either invest heavily in companies and I don't think they invest in TC50 companies. There are, I assume, investors at the event and watching the streams who do not get paid to watch and probably even pay to be part of the event. Those people are genuinely interested in making investments on their own merits. An investor, as far as I am concerned, is interested in seeing the best companies and any barrier that stops them seeing companies, like paying, does not help. I note that, Y Combinator even pays expenses to companies that come to pitch to them - that is the way it should be done.
wehriam 17y ago
If you pay to pitch you're a chump.
- wehriam 17y ago
  And I'm trying to figure out some way in which I will be down voted for this.
  - Confusion 17y ago
    Because we really don't care about your bare opinion. It just raises the question: "Why do you think so?" and you should realize that and answer that question. If you have nothing to add to what has already been said on the subject, then don't say anything. Your comment is devoid of any value, with the possible exception of people that know you and value your opinion even without arguments. Which is questionable in itself. As far as I'm concerned, it deserves -4 to discourage such empty comments.
chris123 17y ago
Having to pay to pitch anyone is ridiculous. Why not VCs/angels have to pay to pitch us? Bottom line is, if you pay to pitch an investor, you are are identifying yourself as a desperate, naive, uninformed person, and possibly greedy person (read on). You will be fleeced, some might say you deserve to be fleeced. These "pay to pitch" scams work on the same kind of people as those Nigerian email scams (or other "get rich quick" scams). The reason both of them exist is because there are enough twits out there that click or pay or whatever. And, so, the rest have to hear about it and get spammed by it.
- swombat 17y ago
  Good parallel. After all, they are both "advance fee scams", i.e. "you give us some money and we'll give you more money later".
jasonmcalacanis 17y ago
Quick update: I've got a MAJOR smoking gunS from my investigation including a dozen or so folks who paid to present and who feel they were ripped off. I've also got someone from inside on of the angel groups who has defected and has told me flat out that these are money making scams. The Keiretsu Forum says they charge "only $1,500" but I'm told from insiders they make you pitch all four chapters... so it's really $6,000! The best way to stop this is to a) not pitch at them, b) spread the word and c) for angel investors to boycott them. I'm going to start an open angel forum if these guys don't drop their fees.
weblivz 17y ago
Jason seems to be one of the few established entrepreneurs reaching out to help startups. I think he only has positive ideas. I'd like to see more of this - if you've made it then help others starting out. Surely there's a load of that type out there!?
erdemozkan 17y ago
JC tells well that everything about start-up pitches aren't positive.
SWalker26 17y ago
As a corporate attorney representing entrepreneurs, I generally agree in principle with Jason’s position that it is "inappropriate and predatory" for angel groups to charge entrepreneurs fees to pitch them; however, I think it is important to distinguish among the different angel groups and their respective practices. Indeed, if (i) the fees are reasonable/de minimis and are adequately disclosed and (ii) the angel group is providing a legitimate service to entrepreneurs, there may be compelling reasons to support such a fee-based service. That’s why I have strongly recommended in a recent blog post (see http://bit.ly/hAYeu http://bit.ly/hAYeu) that Jason Calacanis and John Dilts (the founder and President of Maverick Angels, LLC and an attorney) meet face-to-face and have a live debate (in the great American tradition), which can be shown on the web to all interested parties via ustream. Many thanks.

85 points by AndrewWarner 17y ago

it's the old world meets the new world. Old world think that it's alright to pay for access, that it's alright to pay $300,000 to branding consults when you didn't even launch yet. The new world starts bitching when they are forced to pay $9.99/mo to use an app

sachinag 17y ago

These organizations thrive in those geographic areas where you don't have a critical mass of angel investors amongst whom you can syndicate a deal. It's really quite that simple. Here in Chicago, DePaul University puts on an annual event that cost $80 to attend to "Meet the Angels". Too bad none of these "angels" actually do any deals, so it's a total sham. I'm sure they're laughing all the way to the bank.

thwarted 17y ago
I read about those events in the "College of Computers and Digital Media" (or whatever they are calling the CS department now) newsletter/mailings a while ago (after I relocated to SF), and thought it sounded like too good to be true. I think the main goal of it is to be marketing for the CS department like "if you attend here, look at the kind of access you'll have".

petewarden 17y ago

I'm disappointed to see Keiretsu on there - I've known a couple of angels recommended by people I trust who are involved in that organization. Can anybody confirm Keiretsu does charge?

Frocer 17y ago
Yes, very expensive as well. All of these angel groups are pretty much a total joke. By the way, here is a very similar discussion on this topic a few months ago: http://news.ycombinator.com/item?id=782980 http://news.ycombinator.com/item?id=782980

kakooljay 17y ago

"PrivateEquityForums.com (stunnning $14,500 to $25,000 plus 3-5% of your raise to present!) We’ve received information that Mike Segal of Joshua Capital Partners runs this forum that is looking for up to $25,000 and/or 3-10% of how much you raise!" Kudos for outing these "epic bastards" - IF it's true.. certainly hard to believe anyone that gullible hasn't already sent his $$ to the widow of a recently ousted African minister...

hackernews 17y ago

I've watched a lot of Jason C. and one thing is true, he is a "_brilliant_" salesman (I swear he is branding that word). But for him to step out and take on the old establishment really means something. He could easily concentrate on Mahalo and and not reach back and motivate the people working on startups. It's so cliche, but he seems genuinely sincere in fighting for the the next generation of entrepreneurs. I'm behind him 100% on this, and can't wait to see where it goes.

mahmud 17y ago
He could easily concentrate on Mahalo and and not reach back and motivate the people working on startups. Or maybe he thinks Mahalo is not what it's cracked up to be and he is grooming himself to become an industry guru/consultant/visionary?
- marknutter 17y ago
  Either way..
- michaelneale 17y ago
  I doubt it - he seems to have an abundance of energy and Mahalo is probably run well day-to-day by the people he has around him.
- rythie 17y ago
  I think he genuinely interested in helping startups and giving his knowledge away, also in being well known, so that is part of the visionary bit you mention. He sometimes talks about himself in the third person as if he thinks everyone thinks of him as this visionary already. I doubt he run Mahalo in long term, he will want to get it established and flip it in the next 5 years, if not sooner, and I've heard him mention on the show that he is envious of $100m buyouts for companies and he wants that for Mahalo. I think he building connections for his next ventures and company. He is aware of a lot early stage companies, he can invest at very favorable rates and then give the company a much better chance of success by introducing it to key VCs that he knows - which could make some very good investments for himself.

deleted 17y ago

[deleted]

hristov 17y ago

I think we already discussed that some time ago. Anyways, the biggest reason why you should not pay angels to let you pitch is that you want them to be thinking that if they do not make an investment, they are wasting their time. You can never force an angel to like you, but if you have an angel that does not get any money from your pitch, it means that the only way he/she will make anything is if he/she invests. So they will be itching to invest with someone. Again, this will not make them invest unless they like you, but at least you know they are looking to give their money to someone. If you start paying to pitch you may easily get into a situation where the "angels" are not really looking to invest at all.

staunch 17y ago

My opinion of Calacanis is very mixed, but on this I'm 100% with him. I really hope he does follow through. This has the potential to help far more startups than TC50 ever could.

covercash 17y ago

apparently one of the angel forums is suing him for this... http://twitter.com/Jason/status/4745489235 http://twitter.com/Jason/status/4745489235

ojbyrne 17y ago

I'm going to advance a counter-argument (just because I'm like that). Jason makes the argument that these people are getting pitches from individuals who don't have a quality product or connections. I'd argue that's its almost always connections. That's what I experienced at digg, which was in general a second rate idea (it was done before by kuro5hin and delicious mostly) but was advanced by the ultimate insider. This is just simply creating a market, Jason feels threatened because while he may have come from the bottom, he's no longer there, and this is a direct threat to his (and every other insider's) influence. I'm not a big fan of Ayn Rand, but there's a great passage in "Atlas Shrugged" about how once you destroy markets, it becomes all about influence and insiders and "who knows who." This is just a new market mechanism that subverts the insiderish nature of the angel community. It doesn't mean it will work, but it's a reaction to scarcity controlled by influence, and is just creating a market mechanism where one is needed.

simonw 17y ago
I don't see how digg is similar to kuro5hin or delicious - kuro5hin was about essays, delicious was primarily about serving personal needs (saving bookmarks) first. They seem very different to me. Digg also inspired a bunch of similar sites using the same mechanism (like Reddit and Hacker News) which suggests that digg had something genuinely new to offer.
- rythie 17y ago
  I would note - if you didn't notice, that ojbyrne wrote the first version of Digg.
  - ojbyrne 17y ago
    And the second, and large parts of the third, going by our own versioning. It was 3 years of my life.
- ojbyrne 17y ago
  Unless I'm mistaken, kuro5hin had a voting mechanism to determine what appeared on the front page. And delicious had it's "popular" page. Anyway my argument is: a. "connections" are a scarce commodity, and probably the primary thing that a startup needs. b. A market mechanism is replacing influencers. That's most likely a good thing. and an additional remark - the first people who do this are obviously going to price high. The prices will get driven down by the same supply/demand mechanism that created the market in the first place.

tlrobinson 17y ago

I think it's great Jason is working to eliminate this... but just to play devil's advocate here: TechCrunch50 essentially charged $3000 to present in the "DemoPit" by requiring purchase of a conference ticket... edit: make that $1500, they give applicants 50% off

jv2222 17y ago
Yes It seems so hypocritical that he's waging a war against people doing something very similar to what he does. I wonder if it makes him so angry because he recognises on a subconscious level that he's doing something quite similar.
ivankirigin 17y ago
I think that is different. A booth at a conference is marketing. It isn't fund raising. Getting in front pf a bunch of people interested in tech startups is about getting initial users and initial branding.
- jv2222 17y ago
  I thought lots of people who don't have booths pay for a ticket with the express purpose of networking. I didn't think you could get in without paying $1.5-$3k for a ticket? Maybe I'm wrong but that was the impression I had.
  - michaelneale 17y ago
    How is paying to go to a conference where you can network (or present, if you are lucky) with the whos-who of tech, versus for the opportunity to pitch to 1 single angel group/firm ? Not even remotely connected - absurd to even think so. On top of that the amounts of money seem to differ by at least an order of magnitude.
  - deleted 17y ago
    [deleted]
  - jlees 17y ago
    If you're one of the '50' you don't pay, and that's the pitching part of the conference, so it isn't hypocritical. We were offered a free demopit ticket as the '51st' company as well.

jv2222 17y ago

I generally agree with Jason's sentiments. However, given how Jason feels that startups should NEVER have to pay to be in a room full of investors... then why charge $1500 per ticket for Techcrunch?! Surely all the budding entrepreneurs should get into Techcrunch for FREE!!! After all that $1500 could go along way toward their start-up right? but they chose to give it to Techcrunch in order to network (i.e, in the case of Techcrunch people see value in giving a large chunk of money to be in a room with lots of investors and well networked people)

rythie 17y ago
I think the key thing is that 'investors' shouldn't get any of that money. If you have to pay an 'investor' to turn up it's likely they don't want to be there. If you pay for TC50 you are paying for the conference room hire, network facilities, promotion and organizing which are expensive.
- htsh 17y ago
  I'm not sure if they've ever claimed that its a not-for-profit event in the way you've described. Some of that money goes into the hands of the people organizing the event (who happen to be investors).
  - rythie 17y ago
    I'm not saying it's not for profit, it wouldn't exist if it was non-profit, and of course there is a risk that it could make a loss any given year. If you are referring to Mike and Jason as investors, then I don't think either invest heavily in companies and I don't think they invest in TC50 companies. There are, I assume, investors at the event and watching the streams who do not get paid to watch and probably even pay to be part of the event. Those people are genuinely interested in making investments on their own merits. An investor, as far as I am concerned, is interested in seeing the best companies and any barrier that stops them seeing companies, like paying, does not help. I note that, Y Combinator even pays expenses to companies that come to pitch to them - that is the way it should be done.

wehriam 17y ago

If you pay to pitch you're a chump.

wehriam 17y ago
And I'm trying to figure out some way in which I will be down voted for this.
- Confusion 17y ago
  Because we really don't care about your bare opinion. It just raises the question: "Why do you think so?" and you should realize that and answer that question. If you have nothing to add to what has already been said on the subject, then don't say anything. Your comment is devoid of any value, with the possible exception of people that know you and value your opinion even without arguments. Which is questionable in itself. As far as I'm concerned, it deserves -4 to discourage such empty comments.

chris123 17y ago

Having to pay to pitch anyone is ridiculous. Why not VCs/angels have to pay to pitch us? Bottom line is, if you pay to pitch an investor, you are are identifying yourself as a desperate, naive, uninformed person, and possibly greedy person (read on). You will be fleeced, some might say you deserve to be fleeced. These "pay to pitch" scams work on the same kind of people as those Nigerian email scams (or other "get rich quick" scams). The reason both of them exist is because there are enough twits out there that click or pay or whatever. And, so, the rest have to hear about it and get spammed by it.

swombat 17y ago
Good parallel. After all, they are both "advance fee scams", i.e. "you give us some money and we'll give you more money later".

jasonmcalacanis 17y ago

Quick update: I've got a MAJOR smoking gunS from my investigation including a dozen or so folks who paid to present and who feel they were ripped off. I've also got someone from inside on of the angel groups who has defected and has told me flat out that these are money making scams. The Keiretsu Forum says they charge "only $1,500" but I'm told from insiders they make you pitch all four chapters... so it's really $6,000! The best way to stop this is to a) not pitch at them, b) spread the word and c) for angel investors to boycott them. I'm going to start an open angel forum if these guys don't drop their fees.

weblivz 17y ago

Jason seems to be one of the few established entrepreneurs reaching out to help startups. I think he only has positive ideas. I'd like to see more of this - if you've made it then help others starting out. Surely there's a load of that type out there!?

erdemozkan 17y ago

JC tells well that everything about start-up pitches aren't positive.

SWalker26 17y ago

As a corporate attorney representing entrepreneurs, I generally agree in principle with Jason’s position that it is "inappropriate and predatory" for angel groups to charge entrepreneurs fees to pitch them; however, I think it is important to distinguish among the different angel groups and their respective practices. Indeed, if (i) the fees are reasonable/de minimis and are adequately disclosed and (ii) the angel group is providing a legitimate service to entrepreneurs, there may be compelling reasons to support such a fee-based service. That’s why I have strongly recommended in a recent blog post (see http://bit.ly/hAYeu http://bit.ly/hAYeu) that Jason Calacanis and John Dilts (the founder and President of Maverick Angels, LLC and an attorney) meet face-to-face and have a live debate (in the great American tradition), which can be shown on the web to all interested parties via ustream. Many thanks.