
Ask HN: Has anyone ever gotten funding from this website? - andrewljohnson
http://angelsoft.net/
======
amobilebiz
Angelsoft has two business models. One is where they charge entreprenuers to
essentially pitch their angel members. The second is they provide a platform
for angels and even some VCs to automate their application process. With this
model the process is free to the entreprenuer and the angel or VC covers the
cost.

While I believe the first model is useless money spent, I do believe the
second model is much better and entreprenuers should not avoid filling out an
angel groups investment application based solely on the fact they use
Angelsoft to process the application. I have utilized the process myself and
while I did not get funding from (I did get face-to-face meetings though) the
angel groups I submitted to I found the application process easy and
organized. I am familiar with several groups that utilize the Angelsoft
platform and all are very reputable.

Long story short, blindly sending your business plan to just about ANY
investment group (excluding YC and similar models) is not going to get you
anywhere. Introductions and networking are the only true way of having a
chance at any investment. I can think of other things to spend the $250 on
than a membership with Angelsoft. On the other hand, if you have interest in a
specific angel group or VC and they point you to Angelsoft to submit your
business plan, etc... know that (a) it is free for you; and (b) that Angelsoft
is a legitimate platform for submitting your application.

Note that I have no affiliation with Angelsoft other than I have utilized
their platform to submit to several VCs.

~~~
drstarcat
As the COO of Angelsoft and the creator of the Open Deals/The Investor
Community, I can shed some statistical light on this question.

First let me clarify that since 2004 Angelsoft has been building tools that
help Startups and Investors communicate more effectively. That's what we talk
about every day. That's what keeps me up at night. Open Deals is one of those
tools.

We originally released Open Deals as a way for Angel Groups to post deals that
they wanted to do, but didn't have enough cash to do alone (This is a
surprisingly common problem for these groups).

As Open Deals gained traction with our groups, we thought we could use it to
solve another problem: Unknown entrepreneurs applying to groups and getting
rejected because they were unknown. Most guys who are unknown are unknown for
a reason, but obviously if you can never get an investment unless you've been
successful before, we've got a problem.

We figured we'd encourage these new entrepreneurs to apply to Open Deals, let
the investors crowd source them, and if a guy was legit, he'd get voted up and
referred into some groups. Since he was referred, we figured the group might
pay attention to him.

So has it been successful?

1\. First, our marketing around it has sucked (and still does). We're more of
software company and marketing hasn't come naturally to us. We're working on a
complete site redesign coming out early in March we think will fix this.

2\. Since we began we've had 243 companies referred from Open Deals to groups.
That's about 25% who applied.

3\. Companies that are referred from Open Deals are 225% more likely to get a
meeting with a group than a direct submission to that group.

In short, Open Deals is doing okay. You guys are smart enough to figure out if
it's worth $250 for you, but I can say, that for most entrepreneurs its more
than worth the money. And I'm not talking about those that get meetings. A lot
of entrepreneurs get dinged or ignored when they apply. We take some heat for
that, but the truth is, these guys paid $250 to find out they're not ready for
prime-time. And speaking as an entrepreneur who has spent thousands of dollars
and years of his life pursuing ideas that were not ready, I can say that $250
is a bargain.

~~~
andrewljohnson
I think a cheaper way to figure out how ready you are for primetime is to
submit your site to Hacker News. It doesn't cost a penny.

I appreciate and agree with most of your comments, but saying that $250 is a
cheap price to learn the ropes seems wrong and somewhat predatory to me. I
think you should spend time polishing your value prop if you have to fall back
on this sort of rhetoric.

I think I'll follow pg's advice.

~~~
ecommercematt
Submitting your site to Hacker News can yield insightful comments, new users,
and potentially result in an investor taking some notice. That isn't the same
as deliberately pitching investors, though. I don't see how charging a
specific fee for a specific service in an up-front fashion like this is
predatory. A barrier to entry such as the fee charged probably makes the
quality of applications and applicants better. That being said, at this point,
I can't imagine myself paying for such a service. I prefer to network the old-
fashioned way.

------
andrewljohnson
This site charges $250 to put you in front of a bunch of angels. They claim 5%
get funded. Has anyone ever gotten funding through this outfit?

I'm considering applying for my company - www.trailbehind.com, after we launch
our new version next week.

~~~
pg
There are several angel groups that charge money to present to them. I would
not recommend doing this.

Angel groups generally are worthless (out of 102 YC-funded startups prior to
this cycle, zero got money from angel groups), and the ones that charge you to
present seem particularly dubious. If they had good deal flow, they wouldn't
have to charge you to pay their operating expenses; angels would pay _them_
for access to it. Plus the best angels tend not to be members of these groups;
they don't need to. Which means this is a world where lame startups present to
lame investors.

~~~
davidsrose
Paul, with all due respect, I have to disagree. As both the Chairman of New
York Angels, and the CEO of Angelsoft (which grew out of our perceived need
for a comprehensive deal management platform), I think it's both inaccurate
and unfair to state that angel groups are "generally worthless" and "the best
angels are not members".

Taking our own group as an example, we have directly funded over $35 million
into 54 companies during the past five years, have had successful exits in
sales to companies like CBS and Kodak, and have a membership that includes 75
active, participating angels such as Esther Dyson, Scott Kurnit, Chris
Anderson, Roger Ehrenberg, Brian Cohen, Charlie Federman, Lewis Gersh, David
Hirsch and many others, all of whom commit to investing at least $100,000
annually. This year we funded about $4 million into 22 companies. How far off
are those stats from yours at yC? For my own part, I have personally invested
in over 70 startups and serve on half a dozen early stage boards. If that
means I'm a "lame investor", I'm a little confused.

Angelsoft was founded to bring to the world of angel investing the type of
infrastructure, tools and communications that venture funds and commercial
organizations like yCombinator already have. Since angels are, by definition,
part-time investors for whom this is not a primary occupation, it has always
been a pretty chaotic and haphazard way to put to work the $25 billion
annually that angels in the US invest (which is just about the same amount as
all VCs put together.) Now that something like 90% of the angel groups in the
world, with 15,000+ accredited investors in 43 countries, have all
standardized on a single platform, we're finally beginning to bring some order
to the chaos.

The Investor Community on Angelsoft was designed, as Ryan Janssen pointed out,
to enable groups to syndicate deals with each other. At New York Angels, we
have worked together with groups from Boston, California, Washington, Florida,
Texas, Nevada, Missouri and Connecticut to fund cool startups...something that
would have been logistically impractical prior to the advent of a single,
standardized platform.

Now that we've opened it up to direct submissions by entrepreneurs, we seem to
be on our way to solving the biggest challenge of angel investing: "I want to
increase my deal flow, but I don't want to be spammed by having to respond to
every company asking for funding". Instead of having entrepreneurs apply
directly to one group for which they may well not be appropriate, the Investor
Community allows angels to browse a much wider array of deals, and then
affirmatively bring to their group only deals in which they have an interest.
As Ryan noted in an early response here, companies that posted to the Investor
Community and then were referred into groups by the angels themselves were
over 200% more likely to get funded.

Paul, we both know how tough the funding environment is for startups, and we
both know that your small investments and support into 102 companies, and our
larger investments and support into 54 companies, are only drops in the bucket
when one considers that there are over 600,000 companies started each year in
the US. But angels and angel groups really ARE a legitimate part of the
ecosystem, and I don't think you're doing a service to your readers by
disputing that.

yCombinator was a brilliant idea with which you are doing a superb job of
execution, and your results speak for themselves. You don't need to promote yC
by slinging mud at others who are equally active and supportive of
entrepreneurs.

~~~
mnemonicsloth
Dude, you've got every right to stand up for your reputation and your business
model, but your post is completely inappropriate in this setting.

It sounds like the script a telemarketer reads you after interrupting your
dinner. Like PR and Legal tweaked the language to make it optimally appealing,
synergistic, and defensible.

Boilerplate gets no respect in this community. How can you not know this after
being a member yourself for the last two years?

~~~
davidsrose
ROFL! mnemonicscloth, you've made my day! It took me an hour and a half to
write that post in direct response to Paul's, and it's certainly not
boilerplate (feel free to Google any chunk of it you'd like, and I'd be
surprised if you'd find even a single sentence written anywhere previously).
But if the result was "optimally appealing, synergistic and defensible", the
90 minutes was absolutely worth it [grin].

Seriously, I'm a big fan of Paul's, and he knows it (and we know each other).
I was simply responding to an overly broad-brush, inaccurate indictment (that
he likely tossed off quickly) with a calm, factual response clarifying what
the real story is. I believe it is _completely_ appropriate for this forum,
and I'm happy to continue the discussion either here, on my own blog
(rose.vc/angelnotes) or by email (david AT angelsoft.net).

For those who would like to delve further into the role of Angels-Other-Than-
Paul, there's a good book that has recently been published titled "Fool's
Gold?: The Truth Behind Angel Investing in America" by Scott Shane. While I
happen to personally disagree with the tone (and some of the conclusions) of
the author, there's no question but that he is a serious researcher in the
field, and that his underlying facts are essentially correct.

Thanks again for your comments, and feel free to email directly if you'd like
to continue taking me to task :-).

-David

Disclaimer: "No Boilerplate, PR, or Legal Personnel were harmed (or used) the
making of this post or the previous one."

------
alain94040
As much as I like the creator of AngelSoft, I think the $250 offer is wrong.
AngelSoft provides good value by unifying the application process to many
legitimate groups out there (angel forum for instance). One thing I hate is
when each web site has a slightly different format to ask me about my
business. TechCrunch has a template. YC has one. It goes on and on.

So AngelSoft is successful in that regard, with the hundreds of groups using
them. The fact that they tried to monetize it by charging rookie
entrepreneurs, well... it depreciates their brand.

~~~
davidsrose
Alain, as much as I appreciate your kind words [grin], I disagree with your
premise. If the alternative is to NOT open the platform to entrepreneurs, how
does that help anyone? Even in a world of Web 2.0 and fast-track development,
creating, maintaining and operating a site like Angelsoft is very non-trivial.
Since the company is not a charity, there needs to be a business model
somewhere through which we provide enough value (both real and perceived) that
someone(s) is willing to pay for it.

After spending five years of time, effort and a 20 person team developing a
single platform that now powers a large majority of the world's organized
angel investing, we've finally got something which entrepreneurs [correctly,
in my view] believe is worth paying $250 for: powerful tools for managing
their fundraising process, combined with access to over 15,000 legitimate
investors who use the other side of the platform as their own deal processing
tool.

In contrast, there are probably two dozen sites on the web which purport to be
'matching services' for entrepreneurs and investors, but the unfortunate dark
secret is that while those sites often charge much, much more (in some cases,
thousands of dollars), they have NO investors at all. With Angelsoft, we have
created (for the first time anywhere) and provide (completely for free) a
single, searchable directory of just about every angel group around. Together
with a free "common app" for funding (as you noted), and the ability to apply
to multiple groups at no charge through the site with a single click, I think
it is fair to say that Angelsoft has done more to help entrepreneurs navigate
the often-confusing world of angel investing than anyone else, ever. That's
why we're the official software platform of the non-profit national and
international associations of angels and angel groups in the US, Canada,
Europe, Australia, the Middle East and elsewhere.

I think the best way to look at Angelsoft is in the context of something like
LinkedIn, for both investors and entrepreneurs. As with LinkedIn, basic use of
the system is free to all, which enabled them (and enables us) to establish a
meaningful universe of participants who gain real value from the basic
services. With the platform then in place, they (and we) can now layer on
additional, value-added services which may (or may not) be worth the cost to
any given participant.

Do you think less of LinkedIn because they charge for job postings? How about
receiving InMail, for which privilege the sender pays? If you don't want to
receive InMail, you simply uncheck a box. If the sender doesn't feel that the
ability to send messages is worth $25-$400/month, he or she doesn't pay it.
But without the existence of the underlying site, value-added features like
InMail and job postings wouldn't be possible in the first place.

With Angelsoft, we are always trying to navigate carefully among the needs of
our three constituencies: angel investors, entrepreneurs...and ourselves as a
for-profit company. Investors would love it if they only got one deal a month,
and it was a guaranteed 30x return that was available only to them, for free.
Entrepreneurs would love it if they could have free and unfettered access to
the personal emails of 15,000 check-writing investors. I would love it if both
of the forgoing paid Angelsoft hundreds of millions of dollars annually :-).
Unfortunately, all of the above desires are mutually exclusive.

We think that we've done a pretty good job at creating a compromise platform
that supports all three constituencies (well, at least the first two; we're
not quite breakeven at Angelsoft yet :-), but we welcome any constructive
comments or suggestions as to how we can improve our value proposition to
everyone.

-David S. Rose, CEO, Angelsoft

~~~
alain94040
David,

Thanks again for the detailed counterpoint. I'll reiterate that I'm a big fan.

My only objection is the upfront payment by entrepreneurs. How do you
reconcile this with advice found on thefunded and other places, that tells
entrepreneurs to never pay to pitch?

If you charged $1,000 on contingency, or a percentage of funds raised, then
I'd be your best supporter.

Maybe I'm showing my bias, since I believe in helping entrepreneurs get
started with no upfront cash. You probably think that anything contingent may
be hard to enforce. That's certainly true. But think of it this way: if my
startup has an agreement with AngelSoft that says I owe you something, when
big VCs come in for due diligence, they'll flag the issue and force me to
resolve it. So you have some protection!

If you don't like contingent payment because you are worried that the sucess
rate is too low, then you have a major problem. You'd better be selling a
service that works. By accepting contingencies, you signal to me, the
entrepreneur, that you believe in the quality of your product. I'll have no
problem paying fees way higher than $250.

There is a minor issue of filtering the quality of the deal flow, but $250 is
probably not the right filter.

\- Alain, CEO, FairSoftware.net :-)

~~~
davidsrose
Alain,

That's a good question, which I'd answer as follows: (a) just because someone
says something on TheFunded doesn't make it gospel [grin], but (b) IN GENERAL,
and taken as a rule of thumb, the advice is pretty good.

Where it breaks down is in the details, which is why the Angel Capital
Association convened a panel to consider this very question, and ultimately
came out with a specific, detailed statement on it, which is available online
at
[http://www.angelcapitalassociation.org/dir_resources/entrepr...](http://www.angelcapitalassociation.org/dir_resources/entrepreneur_fees.aspx).

Angelsoft's corporate (and my personal) philosophy is as follows: the primary
determinant as to whether it is appropriate to charge a fee of any kind to an
entrepreneur to pitch, is the answer to the following question: "If you
represent yourself to be an investor (or group of investors), is your business
model based in any way on the fees you charge entrepreneurs?"

There are a number of 'venture summits', and 'angel groups' and others who
represent themselves as investors and charge large fees (often several
thousand dollars, for application, appearance, 'training', presentation,
diligence, etc.) to companies, because that's how they make their money,
regardless of whether or not the company receives an investment (which it
rarely does.) In those cases, the whole point of the business is to make money
from the entrepreneur fees.

On the other hand, take as an example New York Angels, my own local angel
group. We charge a $150 application fee to submit a plan. Is that any part of
our business model, and do our members make any money from that fee?
ABSOLUTELY NOT! Quite the opposite: while we charge entrepreneurs the $150, we
charge OURSELVES $3500 per person per year to allow us to maintain a non-
profit organization that enables us to coordinate investments in the first
place! So in the case of the 37% of legitimate angel groups that have a
similar policy, I/we (obviously) have no problem with the practice.

That said, there are two significant problems with your suggestion for
contingency-only fees, one legal and one practical:

Legally, anyone who charges any type of contingent fee relating to equity
financing MUST be a registered broker/dealer with the SEC. There are no
exceptions to this, and no wiggle room. Since by definition no legitimate
angel group is a Broker/Dealer, adopting this policy would immediately end
organized angel investing in the US, and you'd be back to having to find
angels at your local country club, or by paying an investment banker (who IS a
B/D) to introduce you.

The practical problem is the perhaps-unfortunate-but-nonetheless-true fact of
the Golden Rule of financing: "S/he with the gold makes the rules." If YOU
believe that anyone should be able to send you their business plan and expect
you to read it, and then invest in them, then by all means YOU should go forth
and do it! But if the only people who are willing to make these risky
investments are only willing to do so if you follow the procedures they have
set up (for reasons which seem sensible to them), then either (a) it's worth
it to you to do so, and you will, or (b) it's not worth it and you won't. But
there's no percentage in telling such an investor that he or she should do it
your way because YOU think it makes sense for THEM.

Just to put things in perspective, and show you how things look from the
angels' side, Angelsoft currently processes over three thousand (3,000!!)
funding applications every month. By investing unholy amounts of time, energy
and money, we have now made the process so easy that the temptation is
overwhelming for virtually every entrepreneur in the world to want to hit
virtually every potential investor in the world with his/her plan. While this
is understandable from the entrepreneurial side, it should be apparent that it
is completely unworkable from the angel side, particularly considering that
angel investing is a part-time activity which (given the risk, effort, et al)
is a tenuous practice in the first place.

On top of that, another fact that needs to be considered is that the quality
of funding applications varies widely (to put it mildly). YOUR plan for
FairSoftware.net may be brilliant, incisive, carefully reasoned, and a logical
investment for any rational investor...but that would be the exception rather
than the rule [grin]. Looked at another way, if angels invest in somewhere
between 1% and 5% of deals seeking funding, that means they are in effect (and
in aggregate) making a series of value judgments, and rank ordering all 100%
of the deals so they can choose those which, in their opinions, are the top
1-5 deals. A fair argument could be made that they make mistakes, aren't
perceptive, have poor vision, etc. etc., and that in reality (as with college
admissions), EVERY one of the top 10% should be funded.

You could further say that the NEXT 10% down should, in an ideal world, be
fundable if we could only match the specific deal to the specific investor
under certain specific circumstances. And then, since we are entrepreneurs
ourselves with faith in our ilk, let us say that the NEXT 5% we should fund
because, even though the plan doesn't make sense and the financials are
unrealistic, this might be a really good potential entrepreneur who could
break the mold and defy all of our investing experience to date.

OK.

But...that still leaves a full 75%(!) of aspiring entrepreneurs seeking
funding for ideas which are clearly and unequivocally inappropriate for an
outside angel investment. In my experience, #26 might be the kind of deal for
which I'd conceivably take a meeting, but know within the first minute or two
that it simply wasn't fundable; #50 might be a deal which might make sense in
theory, but not in practice ("I want to start a new, generic online social
network"); #75 is a deal that should never have even been put to paper ("I've
got a website that will obviously put Google, Yahoo and Microsoft out of
business in six months!"); and #100 is from someone who is not necessarily
playing with a full deck ("Send me $100 million to publish my book which will
instantly result in world peace.")

So, Alain, if you would like to volunteer to read through 3,000 business plans
a month and give me a quick write-up on each of them (at your own expense, of
course), I would be delighted (and I'm stating this here in public) to give
you (subject to appropriate legal structure, etc, etc. etc.) a 1% contingent
interest in any investment I end up making in any such deal you send me.

You see the problem. :-)

So therefore, how can we establish a system, given our free-market, capitalist
economy, to try to get smart money into good deals? Having been doing this for
nearly a decade, I can attest to the fact that it's not easy. Angelsoft is (I
believe) the best approach to date, and we are constantly iterating it to
maximize the aggregate return to the entire system, which will in turn help
entrepreneurs and investors, and make money for Angelsoft as a commercial
entity.

But, as with everything else in a free market economy, each player has to make
a decision for him or herself as to whether doing something is economically
(or otherwise) justifiable. At Angelsoft (unlike ANY other site, service,
company or institution) we freely publish our full, live statistics online (at
www.angelsoft.net/industry) so that we can be as transparent as possible. We
also make our Group Finder (without close second the most comprehensive on the
planet) available for free, and we make it trivially easy to apply for free to
as many groups as you want. And if, after reviewing our Investor Community
posting opportunity, an entrepreneur determines that it makes sense to post
his or her plan there for 30 days for $250, then we welcome them. If not, we
completely understand, and invite them to continue to use the rest of our
tools for free.

I apologize for the length of this post, but you were kind enough to ask, so I
figured you deserved a full [perhaps too full?] reply.

-David S. Rose, CEO, Angelsoft

------
matthias
The live activity monitor is pretty nifty.

------
Cunard2
Thank you. I had the same question.

------
point
If you're dumb enough to pay money for this, you're dumb enough that your site
will never make any money. The only ones who will get rich from this are the
owners of the site - they are selling you a dream, and you are paying for it.

Spend the money on some proper SEO services instead, it will do you more good.

And let me give it to you square - your site will NEVER get funding. It's not
hot, it has little potential of becoming huge. It's the type of site that can
make solid money, but only by targeting the users directly. When you are
making good money, the angels will come to you.

If you are trying to raise funding for your site, you are in the business of
dreams, not reality.

~~~
andrewljohnson
Our site already got funding, thanks. And an fbFund grant.

Of course, we'll need more in 2010, hence my constant quest for more money.

~~~
point
So you have no plan to make money for the entire year of 2009? Are you running
a business or a charity?

~~~
andrewljohnson
We have a plan to make money this year. But then again, so did the last start-
up I worked at, and it took us a while longer than a year to post revenues of
any kind.

For TrailBehind, we think we can start bringing in revenues this summer (or a
large enough audience for institutional funding), but our fallback is to seek
additional angel funding. And Plan C is to accept some consulting gigs. We're
also going to apply to YC, but that's more for the intangibles than the money.

This month, I brought on our first employee (besides the two founders, who are
hackers), to execute our sales and marketing plan. We have multiple paths to
revenue that he is charged with exploring, along with seeking out additional
funding.

Because our website is devoted to the outdoors, the market is cyclical, and I
have determined what that cycle is using Google Analytics. So, we have been
developing for a few months, and we'll have a major go-to-market push in the
late spring as the hiking season revs up. We're also using the next few months
to begin laying seeds with potential partners and additional investors.

