Paying to pitch (part II)…

Last week I posted on pay-to-pitch venture forums, of which I’m not a fan.  But many angel groups also charge some modest fee to present/apply.  I am less bothered by that.  First, the fees are usually modest ($200 or so) and are used to offset other administrative costs that small angel groups must incur to operate.  Some angel groups say it demonstrates seriousness on the part of the entrepreneur, and it may steer away some.  But as long as the fee is modest I think it is legimate.

In fact, entrepreneurs complain a little too much about angel groups.  These groups have become much better at having consistent processes, working from standard and reasonable term sheet templates, and seeding companies that would otherwise never see the light of day.  With venture investors farther upstream, organized angel groups are an integral part of the funding life cycle.  These and state-supported gap funding entities like ours are the best path for entpreneurs seeking to raise significant capital.

Angel groups are increasingly organizing funds as well.  These funds consolidate early stage capital and also allow those with strong affinity for a deal to sidecar.  We have a great network of venture groups in Ohio that share information on diligence and have reasonably consistent processes.  They often co-invest and have been good partners on many of our investments.

So $200 is small price to pay for some feedback from a group of accredited investors who see a lot of deal flow.  Too few entrepreneurs think about that.  Very deep pockets exist, but they rarely invest in early stage technology alone unless they have a very high affinity for the deal.  And they typically only do a deal at a time.  So the odds of finding the right very deep pocket is pretty low.  Angel groups have a built-in syndication mechanism, have relationships with other angels, and will give you informed feedback on your deal.

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