Why startups shouldn’t have to pay to pitch angel investors | Hacker News Reader

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

calacanis.com

85 pointsAndrewWarner45 comments

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.

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.

Somewhat off-topic, but what's with the username? "hackernews"? Really? Is that who you are?

C'mon, be serious. Get yourself a better account name.

Well, are you a wombat? :D

Of course not!

I'm a swombat!

The best pitch is the one you don't see coming. I should have known better than to click on this axe grinding rant, but since I did here's my take:

- The guy grinds axes. Is he right? Is he wrong? It doesn't matter, he's going to be as loud and obnoxious as possible.

- He likes to talk about himself. I really don't need paragraphs about how he grew up in a loud, opinionated environment. (I was able to discern this on my own pretty quickly).

- He's an opportunist. I mean, the bar is really low here: should startups pay for ear time? Of course not. This is even less debatable than the brouhaha last week regarding Revolutionary Angel's competition [ http://news.ycombinator.com/item?id=861767 ].

My impression is the slimy feeling you get when someone goes "out of their way" to help you, only to screw you later. I don't know how or when that might happen in this circumstance, but the whole post feels self-serving. (Maybe its an east coast spidey sense)

It might have something to do with this:

  d) We are demanding that angel groups waive all fees starting today
  e) We are going to crush any group that doesn’t comply with our demands
  f) There is no negotiation

Apparently Calacanis is setting himself up as the VC police? This looks like a power grab for leverage over VC's via defamation. Last time I checked, Calacanis wasn't a newspaper or other journalistic organization beholden to the facts, or with clear separation of interests.

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?

Actually, we're going to hit profitability in a couple of months and we're at 12M uniques/#176 on quantcast (verified): http://www.quantcast.com/mahalo.com

Mahalo 2.0 which came out in June gave us a major boost because we started giving ~40% of the revenue from topic pages to our page managers. This resulted in a LOT more page being created.

Mahalo 3.0 will be out on December 1st and it will do a better job of explaining what Mahalo is. We got a little drunk on the Korean Web design of www.naver.com and it confused folks. That was my bad... M3 will be MUCH more obvious as to what we're about (search, content and Q&A all on one page).

Best jason

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.

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

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.

Either way..

Salesman or marketer? A lot of technical folk confuse the two. I think he can close deals, for sure, but really he is a talented marketer.

A lot of really good sales people don't make it obvious they are selling, Jason seems to make it a bit obvious in an un-ashamed way (which make me think he is more interested in getting the word out then pushing things on people).

His enthusiasm is infectious though, its really cool assuming he is sincere (and I am pretty sure he is).

"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...

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.

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.

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".

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

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.

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.

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.

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.

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.

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?

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

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

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.

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.

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.

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

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

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.

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

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!?

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.

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".

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.

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

If you pay to pitch you're a chump.

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

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.

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)

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.

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).

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.

Reply on news.ycombinator.com