Tuesday, February 23, 2010

Angel Investor Groups, Still Here, Still Helpful, Still Free

As someone who has had the rare opportunity to know personally many of the leading Angel Investors active today, I have been distressed by some of the comments I’ve read lately disparaging angels. To be fair, many are also disparaging VCs. And many of the irritating posts are on blogs and tweets, not widely read, but some of this nonsense has even made its way into the NY Times.

The catalyzing issue lies in charging large fees to entrepreneurs.

To start, you might look at a post this Monday by Dan Primak in his widely respected and circulated newsletter, PEHub.

Says Primak: “Last week, a Silicon Valley investor named Hugh Sloan III came across a startup that had received a minor award from Microsoft. He emailed the company founders, saying he had “3 ex Google angels and two Tier 1 venture funds who would be looking at this opportunity with me.”

“Sounds great, except there was a giant catch: Sloan wanted $7,500 up-front, in order to set up the meetings. No refunds if the investors didn’t offer term sheets.”

You can find Dan Primak’s article, plus comments including replies from Hugh Sloan III, right here.

Primak is following up on an earlier post by Jason Mendelson, “Watch Out Boston, A Rip-Off is Coming to Town”. Jason is concerned by the following event:

• Name: Young Startup Ventures
• Date and Location: April 21st, at the Microsoft New England Research & Development Center in Boston, MA.
• Cost: $4,500.

Quoth Mendelson: “Now unlike some other events like this, there are a list of credible VCs attending and it is being held at Microsoft. This makes it all the more worse. I bet that some are unaware of the payment mechanism.” Read the comments on this post also. 

So what’s my gripe? I think Primak and Mendelson, as well as Jason Calacanis, who has been leading the charge against these practices for some time, are doing a good job both for us for us and for the entrepreneurs. The problem is that some reports take these isolated instances and turn them into a trend. Should you doubt me on this, read “Angel Investors Become Less Available” from the NY Times.

To check what’s really going on, I  contacted some of the active and respected Angel Groups here in the Northeast. My findings: fees to entrepreneurs are rare or de minimus.

The four oldest active Angel Groups in the Northeast do not charge. These are: The Breakfast Club, Common Angels, eCoast Angels, and Walnut Group. Others with no charge include River Valley, Angel Investor Forum, Boynton Angels, Hub Angels, Cherrystone, Beacon Angels, Launchpad, ECS Angels, Maine Angels, Rochester Angel Network,  Race Point Capital, Bay Angels, Granite State Angels, and North Country Angels. One group, Golden Seeds, charges $100 to apply.

I also received a note from Marianne Hudson, Executive Director of the Angel Capital Association, who writes “basically ACA is in favor of no or very small fees, as well as transparency to the entrepreneur if there are fees.”

If I can determine this in a day, imagine what the NY Times could have done to encourage entrepreneurs to seek out ethical angel groups if they had spent some time researching this topic.

If you want to contact any of the groups mentioned in this post, most are listed in the ACA Directory, along with many other groups throughout North America.

My conclusion: reputable and established Angel Groups are not charging entrepreneurs any significant amount to apply or to present to the group. This means a lot of experienced and successful people are contributing their time as well as their capital to launch new companies and build our economy.

Why do they do it? I’ll quote my friend Mort Goulder, now deceased, co-founder of The Breakfast Club, one of the first and foremost Angel Investment Groups in the World. “Here’s why I do it. I figure this system we have, this start-up economy, has been really good to some of us, like you and me. I feel in return we have the obligation to see that the other guy gets his chance too.”

Conflict alert: I am co-founder of the eCoast Angels Investment Network, an achievement of which I am particularly proud. With special thanks for prompt responses to James Geshwiler, Paul Silva, Charles Cameron, Liddy Karter, Chris Golden, Peter Dorsey, Joe DeMartino, Lucinda Linde, Bill Swiggart, Ham Lord, Charles Sidman, Ralph Wagner, Marianne Hudson, Jean Hammond, Christopher Mirabile,  Jim Senall, Fred Wainwright, Corey Silva, and Robert Lamkin.


  1. Spot-on George! Just think of the leverage that $4,500 would have for an early stage company.....and then they might have to pony up for each meet-up? That strikes me as a mighty expensive way to kiss frogs as you look for the prince!
    Full Disclosure - like George, I am a co-founder of the eCoast Angel Network and, obviously, we shared many views when we set up the group.

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