Angel Investors Charging Fees to Entrepreneurs

This argument has been ongoing for sometime, but I thought I would put my two cents in.  The practice of angel investor groups – organized groups of wealthy individuals who want to invest in startups – of charging entrepreneurs presentation fees shows a fundamental misunderstanding of entrepreneurship and cannot possibly lead to the best outcome for investors or startups.  Two groups I have interacted with are among the worst abusers – Keiretsu Forum and Maverick Angels.

Keiretsu Forum is well-known and back in 2009 I was invited by a friend to attend one of their meetings near Menlo Park, CA.  I was excited by the opportunity to see the pitches and to network with the members of this lauded investment group.  I was a little disappointed to find that the quality of the companies presenting was pretty low, and most of the “investors” are attorneys and accountants that are there not there to invest but to pitch their services to the entrepreneurs in attendance.  After exchanging lots of business cards I was inundated with calls from people wanting to help me craft my investment documents or do my taxes.   Still, the statistics published on their website for the percentage of presenting companies that get funded was impressive, so I thought it could not hurt to pitch, so I began the application process.  I was shocked to learn that it would cost me $1500 to present.  Not only that, but I would be required to present to all three of their Bay Area chapters in Oakland, San Francisco and Silicon Valley and I would have to pay the fee for all three!  That’s $4500 just to present!  I had already been invited to pitch many other investors who are both more prestigious and free.  Why would I pay to pitch to this angel group? I swiftly declined.

I also applied to present to Maverick Angels, a Los Angeles based group.  They not only wanted a $1000 presentation fee, but they wanted $400 for me to attend a lecture given by them to learn how to do an investor presentation.  I informed them that a) I have already given very many of these presentations, b) I have an MBA in entrepreneurship from Babson where I got extensive training in this area and c) I lived in Reno at the time and flying to LA just to listen to this lecture seemed unreasonable.  They told me that they require all entrepreneurs, regardless of experience, to undergo this “training” and if I could not travel to LA for it, I could watch their online video and this convenience would still only cost me $400!

I strongly objected to both groups and both of them informed me that their members’ time is extremely valuable and I should be willing to pay for that.  This shows a fundamental misunderstanding of the mutual value that must be shared between a potential investor and a potential investment.  It demonstrates their disdain for the value that the entrepreneur brings to the table.  The presence of an investor at a pitch meeting is valuable, but the presence of the entrepreneur is just as valuable.  If this mutual value leads to investment, it should lead to a win-win arrangement where both parties gain.  If one party cannot see the value in the other before the meeting, then the meeting simply should not happen.

Another argument they use is they need to cover their meeting expenses – which consist of a room donated for free by one of their members, bad coffee and bagels.  They also claim they need to charge to cover the salaries of their staff who ensure that the members do not actually have to do anything themselves.  Three arguments here:  First, the investors are the ones with the money that need an opportunity.  The entrepreneurs are the ones with the opportunity that need money.  If there are any minimal expenses to be born, they should be born by the ones with the money.  Second, often the entrepreneurs have their own expenses just to prepare for and travel to the meeting.  Why do these expenses not count?  Third, if the investments they make do not return enough money as to make these expenses non-material, then they should find a different hobby.

These groups are closer to scam artists than investors.  They have no real understanding of the entrepreneurial process or what it takes to make a startup successful and I believe most are in it just because they think it is glamorous to be able to call themselves angel investors at cocktail parties.  Stay away!


7 thoughts on “Angel Investors Charging Fees to Entrepreneurs

  1. All too common here in Canada. I imagine the guilty parties argue that significant charges screen out those who aren’t properly serious. But wouldn’t it be better that the investors do THEIR homework by asking for a draft presentation in advance, and even use a ‘phone to size up potential presenters. Isn’t that what used to happen?

  2. Unlike some of the other Angel investment groups you’ve spoken about on your post, I know that the Birmingham Angel Network (serving the Southeast region) doesn’t charge a fee to hear an entrepreneur’s pitch. They do charge a membership fee, but this is only for qualified investors and sponsors, not entrepreneurs seeking angel capital. If you’re an entrepreneur and intimidated by the concerns laid out in this article, you should take a look at

  3. Yes my friends, if is looks like a “duck”, smells like a “duck”, quacks like a “duck” , then I recommend to “duck & run” away. A good angel investor is hard to find, but will not “squeeze” the entrepreneur in the beginning over what amounts to nothing more than a “nickle & dime” technique to grab quick cash and offer no “real” investment vehicle. After starting, running, selling and consulting (what I like to call) 10’x10′ companies – you know, the little companies on the peripheral of the trade show floor – I can tell you that there are hundreds of “deal fakers” out there and very few “deal makers” . . . the ones who really know how to “make” an investment/entrepreneur relationship that “works”. But when you find one, you will know it. Run away from the ones that “want money” and don’t offer any guaranteed value or results. Great article!!!!!

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