Angel Financing and Pitch Fees

Jason Calacanis has been on a crusade lately, one which I can fully back. Frankly, this was something of a surprise, since I’m generally debating unfollowing Calacanis on Twitter, and his voice grates on my ears from too many episodes of This Week in Tech where I grew to tire of his elitist attitude. While I acknowledge and respect his success, I’m generally far less sure about him being right than he is.

That said, I really like Calacanis’ focus on helping startups. He’s been involved with TechCrunch50 in the past, and lately he’s begun a crusade against Angel Investors who actually charge startups to pitch, including a followup where he discusses that one of the firms is threatening to sue him for telling the truth and expressing an opinion in an ugly fashion, something I can certianly relate to.

Why is it so unreasonable to charge investors to present? Simply because these angel investors (a term I consider to be somewhat dishonest) are usually given a pretty significant share in a company in exchange for their investment. I’m not saying this isn’t a deserved share, this is after all an investment, but these investors are looking to make money, plain and simple, and startups happens to be a pretty good way to potentially turn a good profit. Sure, there is more risk, but when a startup pays out, it pays out big, generally.

Anyway, enough complaining about the term ‘Angel’. The fact is these investors occupy a really import market segment. Of course, reading some of these rebuttals, it seems that the people charging are firms that represent investors, not the investors themselves, which says to me that they simply have a flawed business model.

Ultimately, what’s coming out of Calacanis’ post is simple: If you’re a startup, looking for venture capital, don’t pitch to any organization which requires fees to pitch, or put you in contact with investors. Investors want to invest their money in startups they believe in. Sure, finding investors can be difficult, but starting with people like Jason Calacanis, who know a lot of VCs, or any of the investors on the panels at TechCrunch50.

When you’re chasing a dream, make sure you don’t get screwed in the process.