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.
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).
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.
I know the sort of person he's talking about. If you don't explain up front what you want from them, they'll assume you were put on earth to help them in their glorious venture and complain endlessly about how you don't appreciate their genius, are only interested in money, etc. This is the sort of entrepreneur who budgets a fat salary for themselves from day 1. I've had people like that bellyache about how they can't afford to pay me more than peanuts despite the fact that they own 7 cars or a 40 ft yacht (actual examples from real life).
Edit: I have no opinions about the angel firms or their charging methods. I just got Trapper's point above.
When you say you got his point, did you mean you get how his point is related to charging people to pitch? I am completely willing to grant that such people exist and are unpleasant, but what relevance does that have here?
No, the point about how some entrepreneurs have a sense of entitlement. I think people reacted poorly to that here because they interpreted it as 'how dare you ask angels for investment', which would be offensive considering how many people struggle just to become ramen profitable, often for a long time before cashing in, if ever. Then there are other people who want to be compensated on the basis of projections rather than receipts. It's a blurry line since we know some companies where the founders make $$$ long before reaching positive cash flow.
As far as the 'pay to pitch angels' go, maybe they'd be better off describing themselves as a capital sourcing service or enterprise microcredit bureau or something, since people take 'angel' to mean someone willing to help when you've got nothing. I empathise with the tedium of dealing with self-promoters who think they're god's gift to business despite having money; on the other hand surely the payoff of being an angel is having founding capital in the one project out of 50 or 100 that hits the jackpot and eventually goes public.
This is not what it says on the box. What it says on the box is pay to pitch. Pay for a chance to be funded. If it said "getting an idea to market" training and people bought it, no one would be complaining.
"those 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."
Your claim is that they should be paying for the education they are getting.
My claim is that they are not paying the angels or forum organisers to 'teach them the basics,' regardless of what they get. The proposition moving money from one wallet to another is the "you can get funded this way" proposition. If that proposition is effectively fraudulent, the original blog posts sentiment is correct. Being able to opt out doesn't negate the claim that this is fraud.
BTW, I have also quoted and addressed the same sentence you accused me of skipping. I considered it and I was not convinced.
Founders are not paying for education. maybe you think they should. But they don't. Charging them to pitch and giving them education instead on the grounds that they need it is not ok. Entitled or not.
I see we take different things from this. I personally don't think that there is anything fraudulent going on, and don't want to be accusing anyone of anything. And, I don't care in the slightest either way really so let's stop indenting a nicely formatted article :)
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.
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
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.
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.
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.
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.
That's my point. Most investors have to pay a couple grand to attend TechCrunch50.
That is OK. Investors can't be conned very easily. They can tell if they got value from the event. The existence of a chance of being funded is more opaque.
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.