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Folks, I realize that Jason and Matt have set me up to take the fall here as some kind of epitome of evil, and I certainly understand that people don't think it makes sense for us to charge any application fees. I've explained our reasoning for why we charge the $150 fee (not the $15,000 fees that were the subject of Jason's original jihad), and I completely agree that (a) it is imperfect, and (b) the subject is a valid one for rational discussion. But before everyone gets out their pitchforks and torches, I'd appreciate it if we could all work from the same set of facts, which are as follows: 1) New York Angels is not a scam. We have invested over $40 million into 60 startup ventures over the past six years, all from our own personal pockets and not from other people's money. 2) New York Angels is not a venture fund. Unlike VCs, who receive 2% of their entire fund every year to pay their salaries and cover their expenses, none of us get paid a penny, and we pay for our own expenses. 3) New York Angels is not a money-making entity. Think about it for a minute. We each pay $3,500 out of our own pockets each year to fund our operations, and not one of us gets one penny from anything any entrepreneur pays. How on earth can this be a "money making operation", Jason?? 4) New York Angels is not a bunch of Wall Street people. It is made up mostly of leading tech entrepreneurs in New York. Our current and former members include the entrepreneur/founders of companies such as About.com, Register.com, Mimeo, PC Forum, Gartner Group, Gilder Lehrman Group, LinkShare, MovieFone, Afternic, 24/7 Media, Technology Solutions, IGN.com, Unwired Technologies, Half.com, Core Software, Research Board, IdeaLab NY, TACODA, MNP, and TargetSpot. 5) New York Angels is not a bunch of tire kickers. Every one of our members commits to investing at least $50,000 each year into companies that present to the group. Unlike many other 'groups' that are full of, and funded by, service providers, 100% of the people you present to are accredited investors who are committed to writing checks. 6) New York Angels is not private club for only well-connected, insider entrepreneurs. Unlike many angel groups, VCs and individual angels, we accept (and read) applications from anyone who applies to us. We don't (yet) require that you know someone, or have connections. 7) New York Angels is not lazy. Every month our angel members meet personally with 10-15 companies looking for funding, of whom 3-5 are asked to come back a second time to present their pitch to the whole group. Before their presentation they are provided extensive personal coaching, and after their presentation they typically have at least one two hour in-depth session with interested investors. 8) New York Angels is not clueless. We've had exits to companies such as CBS and Kodak with returns of up to 12x, and co-invest regularly with half a dozen top-ranked venture funds. We recently ran an analysis of our current portfolio, and while it wasn't as impressive as that of FRC or KPCB, it came in as being roughly in the second quartile from the top relative to the returns of most US venture funds over the past five years. So, here I am, ready to discuss the question of application fees calmly, but it's really hard to do that when quite a few of the anonymous posters seem to want to blindly hurl personal attacks that simply aren't true. David S. Rose
Chairman, New York Angels
Personal investor in over 75 startups |
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I certainly understand that you are not some kind of epitome of evil. And I respect that with $150 and a realistic business plan that you would take my application for funding seriously.
However, there are lots of people with unrealistic dreams about businesses. They have no idea what kinds of businesses actually get funded. They don't have referrals. These people are tough to filter; I'm sure money doesn't filter all of them.
It seems a little unfair to the peasants when you take $150 from some sincerely earnest entrepreneur with realistic dreams of success. While being a not-for-profit does make your motivations sincere from a legal standpoint and you do provide a valuable service to people, mostly for free, you're nearly the very definition of for-profit enterprise from a utilitarian standpoint. Most people don't understand your valuable service and they just see you keeping money.
Are you willing to consider alternatives to application fees? You could charge $25 like Jason suggested. You refund the money for people that get rejected. Or as pg proposed, you could donate the money to the charity of your choice.
Maybe you could take that $150,000 and let public high schools have a pitch competition. That will probably get you a positive return over time.
Another alternative: keep the existing application available, possibly with a fee reduction. However, you read all applications sent via Twitter for free. If you want, I will reject Twitter applications for you for only $75 an hour.
Another alternative: do it like other successful angel groups that don't charge for reading applications. Reject people that apply without reading the application criteria. It's not hard to reject people. Maybe you could get people on Mechanical Turk to do those rejections for you.