Angel Investor Groups Charging Startup’s to Present

Recently I was invited to present to the selection committee of an Angel Group. The role of the selection committee is to assess companies and approve/dissapprove them to present in front of their members.

The presentation went well, enthousiasm and excitement was generated amongst my audience and I successfully passed the test – our company has been invited to present to the Angel Groups members. Good oh!!!! Then comes the paperwork for me to fill out: company name (no problem), company description (easy), credit card details……. huh, for what?

Scroll down the form and read “The fee to present at each of its locations/chapters is $1,500 USD per location/chapter…..” What the hell?

The thought that a cash-strapped company has to pay to pitch to rich individuals just doesn’t sit well with me. Quite frankly I think it stinks. But am I alone on this? Apparently not. I did some research on the topic and found some interesting reports on the subject.

Starting with the disclaimer “written with boiling blood”, Jason Calacanis writes a very passionate article addressing the subject and calls for all Angel Groups charging startups to pitch to change their ways or be crushed. Have a read of Jason’s article Why startups shouldn’t have to pay to pitch angel investors and join the movement.

One of my favorite VC’s Brad Feld agrees that Angel Groups should not be charging startups to pitch. In his post An Angel Investor Group Move that Makes me Vomit Feld says that “the cost of this should be born by the angel investors that are members of the group, not by the entrepreneurs….It’s just completely backwards in my opinion.”

There are many more opinions out there and across the board most agree that Angel Groups should not charge startups to pitch. If these groups feel the need to cover costs for catering, room high and AV equipment rental I would probably wear a nominal fee of $300 or less, but any more would see me walk away from the group. The Angel Capital Association (an association that assists Angel Groups with events, education and resources) has released Guidelines on Charging Entrepreneurs Fees for Applications and Presentations and recommends that Angel Groups fees should be no more than a few hundred dollars for applications and no more than $500 for presentations. Sadly, a high number of Angel Groups ignore these recommendations and charge startups upward of $5,000 to pitch.

Angel Groups excuse for charging this pitching fee come in many forms. Some of the popular excuses are a) to weed out the not-so-serious companies and b) cover the costs of doing business.

My thought on the first excuse are that companies with great ideas or products will walk away from groups that charge to pitch. Great ideas attract investors and smart entrepreneurs know that with patience the money will come. That said, Angel Groups that charge to pitch will only attract poor ideas or naive entrepreneurs, both of which will be poor investments for Angel Groups. You therefore have to ask yourself what quality of investor is attracted to Angel Groups that charge startups to pitch?

To the second excuse I ask “Isn’t the cost of doing business factored into the large returns you receive?” Sensible angel groups have enough trouble finding good prospects, and members pay for the chance to access those prospects. Are fees paid by members insufficient to cover the cost of doing business? If so, maybe those groups charging entrepreneurs fees need to revisit their business model.

Not all Angel Groups disclose their fees upfront (that was the case with the group I presented to last week), so before you agree to progress with the Angel Group ask the question “do you charge companies to pitch?”.