It Takes Money To Make Money

TechCrunch50’s Jason Calacanis is circulating a long rant today against angel investors who charge entrepreneurs to hear their pitches.

Maybe it’s a slow Friday for Jason too, but he calls out five groups by name — the Keiretsu Forum, Maverick Angels,, the Tech Supper Club and Angels Den UK — and claims that if they don’t stop charging, they’ll be targeted for “elimination” with “competing, fee-free events directly opposite your events,” which investors will be encouraged to boycott.

Calacanis also writes that it’s “low-class, inappropriate and predatory for a rich person to ask an entrepreneur to PAY THEM for 15 minutes of their time,” and that entrepreneurs who do pay are either “less good” or less connected, because good ideas spread naturally. “If your only option is to pay to get in front of these folks you’ve probably got an idea that is weak or bad.”

I called these groups, and two of them got back to me. Their response was the same: Nonsense.

Events are not free, according to and the Tech Supper Club, and EVERYBODY charges, including TechCrunch — you can charge entrepreneurs, investors or sponsors, or some combination of the three.

Also, they argue, they’re selling a service because they get entrepreneurs in front of serious, qualified investors, which is hard for a lone entrepreneur to do — there are costs in marketing a startup no matter how an entrepreneur chooses to spend the money.

Most interesting was the Tech Supper Club’s Zahava Stroud’s take on the cultural differences between the Bay Area and Los Angeles, where the Tech Supper Club and its sister organization, iHollywood Forum, are located (and where I happen to be this week).

Investors in LA aren’t as well known or as visible as those in the Bay Area, she said. They don’t have access to the dealflow that Bay Area investors do because there aren’t as many entrepreneurs (although more people in Los Angeles are trying to start companies now because they’ve left their jobs).

However, LA investors also like their privacy, Stroud said, because if they do get known they’re inundated with pitches from people in the film industry, and some of those ideas are not very good. Stroud said she has a database of 1,000 angel investors who want their identities kept private that it’s taken her nearly seven years to build.

So how about it? Should entrepreneurs have to pay angels to play? Maybe peHUB will get another scandal to investigate.

UPDATE: Chris Gill of the non-profit SVASE (Silicon Valley Association of Startup Entrepreneurs) just called, and they also charge entrepreneurs a small fee to cover their costs. “When I first got involved with SVASE I had the same outrage that Jason had — how can you justify charging thousands of dollars like some of these angel groups do?” Gill said. “But after awhile I realized, this is their business model. They are a funding option, and entrepreneurs can make their own choice. It’s not up to me to police this — it’s up to the market.”


  • The fee Jason was ranting about isn’t the low hundreds that cover expenses, it is the kind that the Keiretsu Forum charges that run well into high 4 figures. For example, if a startup wants to pitch in the Seattle area, they charge at least $1500 per presentation. Considering the same guys in Seattle runs the Boise and Portland chapters, they lump those chapters together with the two local Seattle chapters as a package deal. All the sudden you are looking at $6,000 plus to pitch.

    I have no issues if the charges are to cover basic expenses and there is indeed value being brought to the table. But there is absolutely no guarantee they can even bring enough people to the pitch sessions. I have had the unfortunate experience to pitch less than a dozen people in one of the Seattle Keiretsu chapters meetings, and half of those are service providers. Jason absolute has a point here.

  • Seems like a great way to say the same NO to many many entrepreneurs after eating well at their expense!

  • It does seem odd why groups ostensibly concerned with maximizing their investment returns would charge fees which virtually guarantee them to have a lemons problem.

    If they were serious investors, they’d see the costs of setting up meetings as costs of doing business. If those costs seemed too high to an angel given his/her investment frequency and check size, s/he could either stop attending, or push to move to a lower-cost venue.

    Either way, by charging entrepreneurs high fees to pitch, these groups guarantee that they’ll see a flow of weak deals and/or entrepreneurs.

    One of my first questions for these groups would be… how much have they invested annually, and what is the realized return from those investments?

  • Jason has a good point. It’s one thing to charge to help entrepreneurs with their investor pitches, financials and other collateral. There can be real value there, and there are some good firms and consultants that can really improve a company’s chances of raising capital. It’s quite another when you charge the start-ups to, essentially, pitch you. This raises all sorts of moral hazard issues. Why would a conference turn any start-up away, no matter how unlikely they are to raise capital or how bad their business idea or team is? The simple answer would be that ‘every’ start-up is qualified to attend simply because they have $1,500 (or whatever the fee is.) Sounds like a bad structure (for companies and angels alike) and, actually, somewhat unethical, if you ask me.

  • SVB brought me once to an angel event that was free to entrepreneurs, and had 30+ people. Just as a service to clients. And yes, most of people who attend presentations are angel newbies. Overall, my general rule has been: anyone who charges a seller, not a buyer, is a quack. Be it recruiter, investment banker or angel group.

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