Start-up Scam Watch: Paying to Pitch

Jason Calacanis has taken on a new cause, outing angel groups that charge entrepreneurs to pitch. I agree with Jason that any angel group that charges an entrepreneur to pitch should be avoided. It suggests to me that the group is more about making money on pitch fees than investing.

I've also seen "startup agents" out there that charge entrepreneurs upfront cash to make intros to potential investors. They should also be avoided. A basic rule of thumb for fundraising agents is that they must work on a success fee basis or you should not use them. Otherwise, they have no incentive to see you actually get funded.

Both the agent groups and startup agents that want to charge upfront cash make the argument that it is a quality filter. But that is nonsense. Some of the best startups I've ever seen were totally broke and living and working in a friend's apartment. And some of the worst were well off and working in fancy offices. The ability of a startup to pay has absolutely nothing with the quality of the team and the idea.

Like any other sector, the startup sector has its share of scams and scam artists. I think it is great that Jason is outing them.

Comments

[Buy and Hol...:]

I can't believe that people are falling for the scam. If you've got an idea that will make investors money, they should pay YOU to pitch it to them. If you don't, then they can weed you out. Or if there is something there but you are not the one to make it happen, they can help you find someone who is and both you and them make money.

But charging you to pitch to them? Give me a break.

Oct 11 11:59 PM