
Why startups shouldn’t have to pay to pitch angel investors - AndrewWarner
http://calacanis.com/2009/10/09/why-startups-shouldnt-have-to-pay-to-pitch-angel-investors/
======
hristov
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.

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hackernews
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
_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?

~~~
rythie
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.

~~~
jasonmcalacanis
actually, our goal is to get into the top 100 sites in the next year and the
top 50 two years from now.

If we do that we'll have a really nice business, and to be honest I'm not
interested in flipping this one. Like Evan Williams with Twitter, I'm long on
this startup after having sold my last one quickly.

No regrets selling Weblogs, Inc. after only 18 months. In fact, it was an
amazing deal that set me up to raise $20M to build something on the scale of
About.com (top 20 site), eHow (top 30), Yahoo Answers (top 20) or perhaps even
Wikipedia (top 10!).

I think we have a good chance to grow as large as About.com or eHow... getting
to Wikipedia level, well, that's a little out of my control, but I'm going to
try really hard.

In terms of being a VC I've thought about it, but for now I'm just going to do
2-4 small invetments (25-50k) a year. So far I've done two this year:
www.challengepost.com and www.gdgt.com. Both of which are really great ideas
with big potential. I love the entrepreneurs behind each of these... hopefully
I can find a couple of these a year.

all the best, @jason

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kakooljay
"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...

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jasonmcalacanis
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.

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sachinag
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
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".

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tlrobinson
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_

~~~
ivankirigin
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
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.

~~~
jlees
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.

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petewarden
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
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>

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

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ojbyrne
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
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
I would note - if you didn't notice, that ojbyrne wrote the first version of
Digg.

~~~
ojbyrne
And the second, and large parts of the third, going by our own versioning. It
was 3 years of my life.

------
staunch
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.

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vaksel
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

------
weblivz
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!?

------
chris123
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
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".

------
SWalker26
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>) 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.

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

------
wehriam
If you pay to pitch you're a chump.

~~~
wehriam
And I'm trying to figure out some way in which I will be down voted for this.

~~~
Confusion
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.

------
jv2222
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
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
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
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.

