You won’t find an angel in a dragon’s den.
Competitive pitch events can be bad for your health.
Angel investors are great - we have a couple at YunoJuno, and we love them. They’re not ‘professional investors’ - they’re decent guys who’ve been lucky (and talented & hard-working) enough to make some money along the way, and generous enough to want to invest in something new. It’s a plain truth that we wouldn’t be where we are today without angel investment.
There is another class of angel investor, however, who we’ve met along the way, and these ones should come with a health warning. They hang around in large groups and are eager to introduce you to their friends if you happen to meet them alone.They are the angel investor ‘clubs’, and their inspiration is TV’s Dragons’ Den.
The biggest problem with investment clubs is the significance given to ‘the pitch’, which is often delivered in a competitive environment. We have a pitch deck, which we’ve refined over time, and have probably been through it 100 times over the last six months. But it’s not the be-all-and-end-all of our idea - it’s the hors d’oeuvre**. If you’re serious about investing in us, we don’t want you to make a decision based on the pitch, we want you to get to know us. That means meeting in person, regularly, over a period of time. The entrepreneur-investor relationship is just that - a relationship, and should be treated as such.
(As a side note, founders should always remember that their idea, and more importantly their ability to execute on that idea, is every bit as valuable as the money an investor brings; money is the ultimate commodity, and simply having some of it does not an angel make. This is a partnership of equals - and if all you’re getting from a prospective investor is their money, you may as well get a loan from the bank.)
The group pitch is an horrendous event, as amply demonstrated by Dragons’ Den. Your ability to cope under pressure when faced with a team of people, all of whom have their own personal agenda, and none of whom have spent any time with you, is not relevant to the future success of your idea.
“I have not invested in anyone based on a pitch.”
@johnolilly, Partner at Greylock
Once the pitch is done, you then have the competitive Q&A, in which the assembled angels fire off questions that demonstrate their own understanding of “business” to their peers, but do little to aid their understanding of your idea.(“Why haven’t you offshored development of your product to India - it’s cheaper there” being a particular favourite in our case; “What’s your EBITDA” generally comes from the MBA at the back of the room who’s just woken up.)
And at the bottom of the pile - there are the investment clubs who charge startups money to pitch to them. Jason Calcanis publicly spoke out about this practice in 2009, but I know clubs still working the same racket today.
When I heard this, my blood started to boil immediately. So, I did what any maniacal, self-absorbed CEO from Brooklyn would do: I started a jihad against this dispicable form of payola and the people doing it.
It’s on people … it’s on like a Donkey Kong.
@jason, Jason Calcanis
Pitching to an investment club to find an angel is like speed-dating to find a partner - it sounds like a great idea at the time (how else are you going to meet 30 single women in one night), but it’s not a great way to start a relationship.
^hrb
** Whoever invented the term ‘elevator pitch’ should be strung up. And as for the person who recently tweeted “If you can’t reduce your pitch to an adwords ad, you need to work on it”…
