The NY Times is reporting today on the question of entrepreneurs paying to pitch their companies to prospective investors – “Should Start-Ups Pay to Pitch?”. Highlighted in the piece is a Boston-based group – Revolutionary Angels – that charges companies $4,995 to enter their “business plan competition” (the winner of the competition receives an investment from the group). To be clear on my view of this:
THERE IS NO CIRCUMSTANCE IN WHICH ENTREPRENEURS SHOULD PAY TO PITCH THEIR BUSINESS TO PROSPECTIVE INVESTORS.
PERIOD. END OF STORY.
This kind of activity makes me absolutely sick. And the fact that Revolutionary Angels calls their scheme a “business plan competition” is reprehensible.
In the Revolutionary Angels setup they are asking 100 companies to each pay $4,995 to pitch to their group, after which they’ll select one to invest in (with the proceeds from the losers) with a runner up company getting the consolation prize of a smaller investment (and Revolutionary Angels pocketing the remainder of the cash? – it’s not completely clear). You can see who is involved in the group here. The reason there’s no actual venture capitalists on the list is because no respectable venture capitalist would ever be involved with such an underhanded hustle. I really don’t understand what would drive an entrepreneur to participate in such a scheme nor how the people associated with Revolutionary Angels can justify their involvement or the fees they are charging entrepreneurs. Because they give feedback on the plans? Because participating in a competition gives entrepreneurs access to the Revolutionary Angels? Pathetic. And the fact that more than 100% of their investment dollars come from the entrepreneurs they are supposedly helping out makes it even more pathetic.
My view of angel groups is simple. If you’re not rich enough to screen your own potential investments then you’re not rich enough to be an angel investor.
I’ve given the “don’t pay to pitch” advice to countless entrepreneurs over the years, but felt it was time to come out publically and take a stand on this. Kudos to Jason Calacanis for leading the charge against such practices. We need more credible investors to back him up (see Fred Wilson’s thoughts on the subject here; Brad Feld’s here for example).
And if you’re looking for “access”, try emailing me, signing up for my community hours (or my partners Brad or Jason’s community hours, or any number of other credible VCs that are increasingly more open with their time).
And if you’re thinking of entering the Revolutionary Angels business plan competition, save your money.