Open Angel Forum to Slay Chimera, June 18

The Open Angel Forum is coming to Boston on June 18, and they will be very welcome. I do wish, however, that they would either change the way they present themselves or that our local journalists would do a better job of providing perspective so as not to undermine the very values the OAF claims to promote.

For example, Scott Kirsner, one of the most vigorous and talented journalists covering the technology scene, writes in his blog: "Peeved about events that charge entrepreneurs an entry fee to present their businesses to angel investors, Jason Calacanis decided to create Open Angel Forum earlier this year. The series of events, held so far in places like San Francisco, New York, and Los Angeles, is 'dedicated to providing entrepreneurs with free and open access to the angel investors that they need,' according to the Web site."

I cannot understand how local entrepreneurs, particularly inexperienced ones, can read that description without inferring that they do not currently have "free and open access" to our local Angels and Angel groups, while in fact we have the world's longest continuous tradition of open access. And I hate to think that even one prospective entrepreneur would be discouraged from applying to our local groups because he has been warned off by assertions of "high charges."

In this isolated case of misreporting, Kirsner doesn't stand alone, as similar notices have appeared in Xconomy, Mass. High Tech, Boston Business Journal, and will undoubtedly be repeated many times in the next few weeks. Here is what Mass High Tech has to say: "Calacanis launched the Open Angel Forum in December out of anger over so-called “pay to play” angel groups, which charge startups a fee to present their pitches."

And while I applaud the attempt to make Angel capital more accessible to entrepreneurs, I feel a need to point out that in not charging presenters the Forum is not innovating, but is just following the tradition of most existing angel groups.

New England has a long tradition of Angel Investing without charging fees to entrepreneurs. To my own knowledge, the first of our regional Angel Groups was the Breakfast Club, formed in 1976 by Mort Goulder, Dick Morley, George Schwenk, and Doug Drane. Still operating, The Breakfast Club reviewed about two business deals a week, investing in about four companies a year. Morley and Schwenk estimate that the club has boosted more than 100 startups. To many, the face of the breakfast club was the late Mort Goulder. “He was a great inspiration to a lot of companies,” Schwenk said. “It’s interesting how many e-mails have been written about him in the last two years. I didn’t know techies could write so well.”

One well known startup that benefited from The Breakfast Club was Carbonite, a Boston firm that provides back-up systems to computers. “Mort is just one of these guys who just makes things happen,” said David Friend, president of Carbonite. “He was just busy, busy, busy. For a guy his age to be running around like that was amazing.” The Common Angels was another seed round investor.

Another example is VKernel of Andover, a joint project of the Breakfast Club and the eCoast Angels."Mort was both a mentor and friend. A true inspiration to the high tech entrepreneurial spirit of New Hampshire," founder Alex Bakman said recently.

Some angels who learned from the Breakfast Club and went on to form other Angel groups include Jean Hammond, a founder of Golden Seeds , and myself, co-founder of the eCoast Angels.

Angels tend to invest locally, so the first thing an entrepreneur should do is check group listings on the Angel Capital Association (ACA) web site. The ACA, under the leadership of Common Angels Managing Director James Geshwiler, began discouraging members from charging presentation fees and continues to do so today. On the ACA site, a local entrepreneur will find 16 New England Based Angel groups. Polling these groups earlier this year, I found only one, Golden Seeds, charged, and that the charge was minimal, $100.

Many groups of Angels, such as The Breakfast Club, are not members of the ACA. In New Hampshire alone, I know there are such groups in Nashua, Hanover, Keene, and in the Mt. Washington Valley. Additionally, not all Angels are in groups. The number of active Angel Investors in 2009 was 259,480 individuals, according to the best source available, the Center for Venture Research at UNH. Collectively, these Angels invested $17.6 billion last year, spread over a total of 57,225 entrepreneurial ventures. Expressed as a round number, I estimate that the number of these Angels who charged presentation fees is zero.

Finding these unaffiliated groups and individuals can be more difficult for the entrepreneur, but it is relatively easy for anyone who is wired into her local technical and business community. Ask other entrepreneurs, as well as attorneys, accountants, and bankers. They'll know.

Talking recently with Jeff Sohl, Director of the Center for Venture Research, we discussed two actual problems limiting the growth of Angel investment. The first is encouraging more people to become Angels. There are lots of individuals with sufficient resources to be Angels, but they never see any deals, have no clear idea how to find and evaluate them, and are thus in the bleachers rather than on the field. The other real problem is what Jeff calls "latent Angels." Latent Angels join a group or attend investment presentations, but they can never quite bring themselves to actually make an investment, thus relegating themselves to the dugout.

Perhaps Jason Calacanis' Open Angel Forum, leaving the slaying of the Chimera to Bellerophon, could use its magnificent publicity machine to get more Angels onto the field and into the game.