Finding angel investors become increasingly easy

Jun 17, 2010 Posted by brindils on Jun 17, 2010 in Business | 0 comments

Finding angel investors become increasingly easy

Start-ups hungry for cash are usually expected to spend a fee to pitch to angel traders. But some free service are cropping up to counter the so-called pay-to-pitch model.

Earlier this year, Internet entrepreneur and blogger Jason Calacanis started Open Angel Forum, which holds no cost pitch events in several cities where internet marketers chosen from a pool of applicants can pitch to about 20 to 30 angel traders. At Available Angel’s first event in Boulder, Co., in February, three of six businesses discovered new investors.

Yet another free service, AngelList, started out in February by angels Naval Ravikant and Babak Nivi, vets dozens of deals before highlighting the very best ones in emails every week sent totally free to a group of 200 investors.

Messrs. Ravikant and Nivi—who also run Venture Hacks, a for-profit site that supplies guidance to start-ups—say they have received pitches from a lot more than 1,000 start-ups, mostly consumer Internet companies. With the 48 corporations featured so far on AngelList, about half have obtained funding, they say.

Marco Zappacosta, founder of Thumbtack Inc., a website that lets folks book providers like tutors and dog walkers, won 3 commitments from angels following pitching his corporation in March at an Open Angel Forum occasion in San Francisco. He then turned to AngelList and obtained three a lot more commitments to close a funding round at $1.2 million in June. The services, he claims, “Is beneficial at acquiring worthy start-ups into the inbox of investors.”

The free services come from the wake of recent criticism from the pay-to-pitch model, which some angel investors have argued is justified simply because they offer assistance and must be paid for their time. Mr. Calacanis, an outspoken figure from the tech business, final fall publicly admonished angel investment groups for charging bootstrapped business owners hundreds, if not thousands, of dollars to pitch to them.

Last month, Chris Hurley shut down his Revolutionary Angels program that proposed to charge entrepreneurs $4,995 for advisory companies and entry into a business-plan competition that would award $250,000 towards the winner. Immediately after soliciting submissions in October, Revolutionary Angels obtained only 20 entries, far short of its goal of 60 participants.

In retrospect, “$5,000 is a great deal of cash for early-stage business owners,” stated Mr. Hurley.

But the new free services aren’t entirely altruistic. Both AngelList and Open Angel give their founders inside access to firms in which they may possibly be interested in investing, and Messrs. Ravikant and Nivi can use AngelList to indirectly market Venture Hacks’ start-up guides.

“We’re just trying to available up the way internet marketers and angels connect,” mentioned Mr. Ravikant, a serial entrepreneur who has founded corporations for instance Epinions Inc.

Not all entrepreneurs have won investments. Jen Lilienstein, one of six internet marketers selected to pitch last month at an Open Angel forum in Los Angeles, hasn’t raised any cash for her start-up, Kidzmet.com, which helps parents enroll their kids in extracurricular activities.

But Ms. Lilienstein says the event was helpful due to the fact angels stuck around for hours to proffer suggestions. Ms. Lilienstein claims she is now in “a dating phase” with traders and continuing conversations.

Some pay-to-pitch solutions have changed their organization models amid the criticism. In September, FundingUniverse LLC stopped charging a $125 charge for entrepreneurs to pitch at its events, attended by angels and loan providers like banks. The winners of its events receive several thousand dollars in in-kind companies, and at times, investments.

FundingUniverse does, even so, sell goods by means of its web page, just like a $99 online “diagnostic tool” that analyzes a business’s funding prospects. “We think the providers we do charge for are perfectly acceptable,” says Alexander Lawrence, a partner at the company.