I’m For Free Pitches to Investors for FreezeCrowd
One thing all entrepreneurs go through is pitching, and what pitching entails is not just pitching investors, but pitching everyone, the consumer, the users of your product, and the people you encounter on a daily basis, including your friends, and family. You even have to pitch yourself when you come up with an idea and think about it, and then you convince yourself to believe in it, and then you live out the dream, and in my case it’s FreezeCrowd. If you can’t pitch yourself in the mirror, and believe in this dream, then you shouldn’t be taking on the role as an entrepreneur, the visionary, the founder, or whatever name you might call yourself. Pitching yourself is important, because you will wake up every day, living, sleeping (sometimes not sleeping), thinking about, and doing what you can to make your dream come to life. Even if you can’t do everything yourself, which most entrepreneurs cannot, you will have to pay for it in some shape or form. You don’t pay to pitch yourself, so why should you pay to pitch others?
A well known entrepreneur and activist against paying to pitch Jason Calacanis, the CEO of Mahalo has written an excellent blog post here on why startups shouldn’t have to pay angel investors or anyone for that matter to invest in their company. I agree with Jason on this (even though I admit being a victim). He’s 100% right on with this, believe in his cause. After reading his blog, I believe there should be an activist organization called the EAPP Entrepreneurs Against Paid Pitching. Others who agree with his belief include Fred Wilson of Union Square Ventures and Robert Scoble of Building 43, and has a blog post on Scobleizer. I’m sure there are countless entrepreneurs and investors who would stand for this cause, and I don’t doubt the ones charging entrepreneurs might even feel the same, but I believe they are possibly driven by greed and weed (that’s weeding out the pitches) from them. However, there is no reason for this, as a large percentage of times these angel investors are not even investing in the companies that pitch them. What does that tell you? It tells you that someone is profiting on the ones who are pitching to them, and it’s not the entrepreneur. It’s supposed to be the other way around, the investor is supposed to be profiting on picking the right entrepreneur, and working with them to make sure their vision is a success.
As much as I don’t like to call it this, I sense a scam alert here, and know because I’ve been a victim of this. After a few times of paying angel investors and companies to be listed in directories for pitching my big idea, I have realized that no real investors have ever came from any of these services or angel pitches that charged. These wealthy investors are only getting wealthier, while the poor entrepreneur with a big dream, and big hopes is being looked at by this group of angel investors or “angel predators” who probably decided before the entrepreneur even pitched them that this entrepreneur is just going to be one of our “payers” and we just have to sit there and listen or not even care to listen to the entrepreneur’s pitch.
Why is this wrong? It’s simply unethical. These people are supposed to be “angels” in a sense, guiding lights, helpers, believers in a dream, and those who are out to help an entrepreneur live the dream that they were fortunate to have in their lives as successful entrepreneurs. An angel in the sense that they are not out to be controlling of the company, yet more so giving to the entrepreneur in hopes they will receive a return on investment. The best angels are ones who give more to the entrepreneur who has been through trials and tribulations, yet also realize that the entrepreneur has put a lot of time, thought, belief, sweat and tears into making their dream come to fruition. You are lending your hand, now just to hear their pitch for a few minutes you are charging them
As Jason Calacanis shouted, “None of them have ever charged me a dime for doing so.Why? BECAUSE THEY ARE RICH!” You heard it, and it’s kind of the rich are getting rich and the poor entrepreneurs are not just spending their money, they are spending their time to pitch you. It even costs us entrepreneurs to print out slide shows, get dressed in a suit and tie to sit in front of you. It should be a privilege for an angel investor to be pitched. Calling yourself an angel investor or joining an angel investor group means “you’ve made it” and you feel comfortable helping others make it. If you are trying to make more, or charge more to a poor entrepreneur, then you shouldn’t be an angel investor, or shouldn’t be involved with the angel group that is doing the charging. Your job, and your reward should be to find the best entrepreneurs, work with your favorite ones, the ones who have great ideas and big dreams, and facilitate with making their dream come true, or their vision a reality. When the entrepreneur succeeds, that’s when an angel investor or VC investor should make their coin.
Over the years I’ve encountered some pretty out of the ordinary people, nasty people who pray on entrepreneurs (have done this to more than one entrepreneur), interesting people who claim to be good at their trade and don’t come through, and people who are out to hinder an entrepreneur, yet they act like they are out to help them, when in reality they have ulterior motives, they aren’t really out to help, they are out to hurt an entrepreneur, prolong their dream, and in the short term gain, then leave the entrepreneur aside. In the short term these people might make a few bucks, but in the long term they are destined to hurt. I truly believe these people will get their payback, and they will suffer later on. This is not that I wish bad on anyone, or that I have a pessimistic viewpoint, it’s just terrible that there are people who profit off someone’s dream, and then leave them in pain, frustration, or precarious situation. These people (or scammers) come in all shapes and sizes, and more interesting is that the worst ones are not talked about publicly, or not even heard about as sometimes the entrepreneur feels embarrassed that they have been cheated or malignantly treated by these people. Sometimes I wish I could simply put them all here, and leave them to rot on my blog. Some entrepreneurs wish they could get back at these people. I believe the entrepreneur should be able to get recourse, but this is not always the case.
Now, I don’t think I should mention any names, even though in confidence I emailed Jason a list of companies that have charged entrepreneurs, I don’t always feel comfortable posting them like Jason has on his blog. What I will do is talk about “types” of people or “companies” who are out there who have scammed entrepreneurs or provided shady or expensive services that charge entrepreneurs to pitch investors or get investors, yet these investors never came through, or they were not always a good fit, or their services were not qualified to get an investor etc. At the end of the day, the broker, the intermediary, or the consultant makes a few bucks, leaving the visionary or entrepreneur out of change. Yeah, some may say the entrepreneur should be able to do all this themselves, but that’s not always the case.
Buyer Beware of Angel Groups in General:
I’ve seen angel or seed groups charging a hundred, a few hundred, to a thousand dollars or more to entrepreneurs to pitch there idea or business. I’m a little skeptical about this, even if they teach you “how to” pitch, they are just doing that. Are these investors going to invest after that? The investors might even make it more challenging to pitch after you’ve been taught how to do it. Sometimes entrepreneurs aren’t good at pitching, but they are good at other things. Just be careful of these groups, or better yet, just don’t pay them! It’s entrepreneurs that are paying them that make them survive.
Buyer Beware of Elite Club Angel Groups:
There are angel groups or organizations that claim to elite groups. If you are not yet a member of their ”elite club” or an alumni of the particular university they typically invest in, then you have to pay a $150 fee to pitch them up to $1,000 or even more. If they are charging you a fee to pitch them, because you are not in their club already, it might mean that they never were looking for you to pitch them in the first place. They might just weed you out, and make you pay them.
Buyer Beware of The Site Where You Pitch Investors and They Charge You To See The Investor:
I went on one of these sites before, and it’s “free to pitch” an investor. They emailed me saying, “an investor has read your investment proposal” and has $50,000 to $5 million to invest. How exciting to get this email. I was flattered. So, the entrepreneur thinks they should pay the $150 fee to this company, as they pre-screen the investors here. Be careful, they’ve told you absolutely nothing about the investor here. All they’ve done is say the investor has something to invest. Once you pay the fee, they have you call the investor, and then you realize that this is not an investor you have on the phone, but a “loan officer” saying, “if you pay me $30,000 up front” then I will provide you a loan. This is not a real investor here.
Buyer Beware of The Site that claims to be a Startup Network and Someone on there contacts you:
Yes there are plenty of sites out there that are selling funding, and they charge you to post, kind of like an online dating service for investors and entrepreneurs. Some of these sites are $100 to $250 to post up front. The people who run these sites are not investors, they just want the naive entrepreneur to pay them in hopes they will find an investor. You know the the ones who claim that you post and the investors will come find you. Be careful of those who contact you, as there are scammers out there who contact entrepreneurs on these sites, even though they say they are not. I’ve had people contact me on these sites who are not investors. There are those who are broker dealers who are looking to charge you a “marketing fee” of $2,500 to those who are angel investors who are charging $250 to $1000 plus to pitch them, and claim they invest in everything under the sun, when in reality they are hiding every company in their portfolio, or they have no companies in their portfolio, no investor bio, no blog, etc. If they were so great, then they would be able to disclose something, but they don’t.
Buyer Beware of The Site that claims to be an Entrepreneur Social Networking Site or Online Community for Entrepreneurs and Charges You To Find Investors:
Now, this sounds completely fair at first, but in reality, they lead the entrepreneur in like they are helping the entrepreneur, and the only way they will help is if the entrepreneur pays them, and in reality they may not help at all once you pay them a fee to send out a pitch to investors. So, essentially you’re paying to pitch investors again here. If the site is mostly filled with entrepreneurs, then why would all the investors be hanging out there as well? The investors would be overwhelmed if all the entrepreneurs were paying this fee. If you are paying for this, the investors might see you as desperate. Just be careful here.
Buyer Beware of the company who says they have a company that finds investors or has hundreds of investors in their investor network:
If this person really has them in their network, then even if they sell you their list of contacts, the investors aren’t really going to feel warmly introduced. This can go either way, if you are introduced to hundreds of investors, how many of them do you really need to talk to? Are they really in this company network?
Buyer Beware of The Site Charging To Send Your Business Plan to Hundreds of Investors:
Yes, these sites exist, they will claim they will get your business plan out to many investors. Where do these business plans end up? They are probably in the junk mailbox of the investors, or the slush pile. This is tantamount to the mass resume distribution service possibly. Investors get too many business plans as it is, why are they going to read this one that is sent out to hundreds of others. What will make yours stand out from the rest? I’m pretty sure there are a lot of entrepreneurs out there who have used these online services. They are questionable, but then again why are they charging hundreds of dollars for a service like this? Does it really cost them that much? Are the investors paying for leads, and if they are well known investors in a certain industry or sector, the odds are they do not need to pay for this kind of service as the entrepreneurs will find them.
Buyer Beware of High Priced Business Planning Consultants:
There are those who seem legitimate, but are pricey or questionable. They charge a high fee for “consulting” services, those who might claim to write your business plan, or improve your business plan to make it “investor ready” are sometimes out to get you. Sure, you might get a flashy business plan, yet at the end of the day if the investor doesn’t feel the chemistry or connection with you, then they will not invest in your idea, product, or service. This can go either way, but to pay $25,000 for someone to write a business plan for you, and then claim you have a proven VC pitch, you might be a little naive to believe this. I don’t believe anyone should be spending this kind of money just to pitch an angel investor or VC. It’s more important to innovate your product or service, then to put this kind of effort into a business plan. Now, there might be exceptions, but have you heard of anyone spending this kind of money, and they got a term sheet right after? If anything, a longer business plan might make the investor a little nauseous. Buyer beware! Don’t pay them! See the example of a scam letter I got below, this consultant was requesting a fee of $2,500 (they are congratulating me for, what, giving them money?:
Dear Eric
“Thank you for your quick response. Please be advised that we require the Marketing Fee (Good Faith Refundable DEPOSIT) to be paid in order to start the any funding process. The investors like to see that the client has a vested interest in the project.(ie like a car company or mortgage company likes to see a down payment on a loan). Some investors cover this and some require the client to cover it.
Also, please advised that the desposit is refundable if you are not funded. The funding process begins immediately upon receipt of the Funding Agreement and Marketing Fee.
If you have any additional questions, please feel free to contact me.
Again, CONGRATULATIONS! I look forward to doing business with you. Please find attached some information regarding the company”
—-
Another questionable email letter, they never even tried calling me on the phone.
Hello Entrepreneur,
Since we were not able to easily touch base on the phone I have
included a 50% off special link to help you make the wise decision to
join our service. This link is available to keep our overhead down and
not invest heavily in high commissioned salespeople but rather spend
our resources towards providing the highest levels of service and
results of any company of our kind. It is the reason we are the
longest standing and largest business credit building service online
or anywhere. Honest value and straight talk about what we can really
do to build business credit for you and your company. I also attached
some more info about the program.
The link itself will expire in 48 hours from receipt of this e-mail so
I hope you can get a chance to visit our FAQ’s, and if you have any
questions not addressed please e-mail us right away. Try and be as
specific as possible and we should have your reply within 2 hours. We
look forward to helping you and your company!
FAQ’s
Link
50% off Link
Link
————
Another questionable email letter from a high priced consultant:
Dear Eric,
I just tried to reach you. I am a Director here at (Name of Company) and am here to assist you in learning more about (Name of Company) services.
We have two main practice areas within our firm: Business Consulting and Investment Banking. In our Investment Banking division, we do raise capital for start-up ventures, however, we are very selective with engagements we take on in this capacity. The fee structure for Investment Banking transactions is a hybrid with upfront fees being paid dependent upon the level of work we need to get the project into an investor credible state; the majority of our income is derived in the form of success fees, which are paid upon a successful capital raise.
Please don’t hesitate to contact me directly at 555-555-5555 to discuss your venture in greater depth. If I am unavailable, I would refer you to my partner here at the firm.
————-
Another one, this company no longer exists. Their video never existed either to my knowledge…They were asking for $250 to pitch them over the phone!
(Angel Forum)
You don’t have to wait any longer to find Investors/Lenders who are serious about providing funding for your business. We use Private Capital to Fund Businesses!
I would like to introduce to you the (Angel Forum), which was created by our Private Investors to provide an opportunity for you to immediately see & speak directly to our Investors/Lenders.
Click here… See Your Video Welcome Message From Our Investors
Call us directly at 555-555-5555 to arrange a time to speak to our Investors/Lenders! Awaiting Your Response,
——————————————-
Buyer Beware of High Priced Technology Consultants With Full Time Jobs Who Suck Telling They Will Help You Get Funding:
These people will tell an entrepreneur they believe in their dream, their vision, will help them raise funding etc. They will then charge you too much, provide no guarantee, and not get anything done, and they never help you get funding as they promised. They will promise you the world, and not be able to perform for you. They basically lied! They already have a full time job, so they don’t need you, but they tell you they will leave their full-time job once you get funding. These people are not good, if they aren’t ready to leave now, then they aren’t the right people. They are only working for the money, not the belief in the project. As soon as you stop paying them, they stop working, and they couldn’t care if your project succeeds or fails. They will even quit on you after you paid them a lot. These consultants are no good. They are out to get an entrepreneur with a dream and some money. If they really believed, they wouldn’t be working the full time job, and would work with you on your project. They can’t possibly get as much done on nights and weekends as they say they do. They talk to you like they are super humans, and they say they can do anything. When they get challenged, they then tell you to hire someone else to compliment them etc. Give me a break! If you couldn’t do it the first place, why are you selling your services? Be careful here, but nobody works a 50 hour week and then works nights and weekends as much as they say they do. It’s just not possible!
