The Angel Empire Strikes Back – Why pay-to-pitch works

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This is a guest post by Chris Padfield, Investment Manager with London Business Angels and London Seed Capital. In it he reacts to our latest post from LondonVC, our VC columnist, who argues against startups attending pay-to-pitch events, which are often run by Angel networks.

There has been a lot of discussion on the web over the last week regarding the business angel network business model and in particular “pay to pitch”. While there are certainly elements of truth in some of these complaints, there is also a lot of misinformation and confusion over our actual role and business model.

Why should you care what I say? My background, while at University and despite an Economics degree and my friends heading off to the City, was as a boot strapped entrepreneur launching and more recently so I know the challenges entrepreneurs face. I now spend the majority of my time as the Investment Manager for London Business Angels but also assist on the £5m venture capital fund London Seed Capital. I share an office with a £30m Enterprise Capital Fund and a £50m Regional Venture Capital Fund (both of whom we have co-invested with). Our parent group has £330m of early stage venture capital (sub £8m) under management, making us one of the largest early stage investors in the UK. I believe these set of experiences have given me a reasonable perspective across the early stage funding landscape.

LondonVC’s implicit argument appears to be that angel networks promise to introduce you to Venture Capital funds. [Editor’s Note: I think most would disagree – the main argument was mainly that VCs don’t usually source dealflow from Angel networks, and not from pay-to-pitch events].

In my experience this is not the case. I know of no angel network (we certainly don’t) that promises to introduce you to venture capitalists although perhaps others do. There is a reason we are called angel networks and not VC networks. Saying that, we regularly co-invest with early stage VCs; I did a quick review and these are some we have co-invested with in the past: Catapult Ventures, Create Ventures, GEIF, IQ Capital, Rainbow Seed Fund, AITUA, Creative Capital Fund, Seraphim Capital, Oxford ECF, South East Growth Fund, Octopus Ventures, NESTA, Bridges Ventures, IP Venture Fund, Esperante Ventures, Nova Capital and The Capital Fund – there are certainly more. It is important to remember that angels are generally investing in companies at stages that large VCs are rarely interested so of course the likes of Index, Balderton, DFJ, Accel are not going to be at angel network events; and if they are – it’s to see what might be coming to them in 12-24 months time. Chris Dixon has a great article on why entrepreneurs should be wary of taking seed money from big VCs ; in fact we get deal flow from some big VCs who like a company but it’s too early for them to invest into.

Moving on from “angel networks promise to introduce you to VCs but don’t” tangent to what I believe is the more pertinent issue, the “pay to pitch” issue as brought up by Jason Calacanis. There are a number of reasons why most Angel Networks charge to pitch as opposed to only taking success fees (which is where the majority of revenue comes from). Firstly though, there is an important distinction between an angel club and angel network. An angel club is one where all the members know each other and they setup the club themselves. They generally share the task of reviewing business plans or often will independently bring companies from their networks to the group. It is inappropriate for angel clubs of groups to charge companies anything. An angel network is a different beast. The members don’t know each other before they join, the network will generally have a professional, pay rolled “gatekeeper” and support staff, operate from an office, have a brand and marketing strategy and actively seek out new investors. They are very different types of organisations with very different cost structures. So, why do angel networks charge to pitch?

1. They provide more than simply a pitch:

We charge £850 (not £1250, as LondonVC wrote) for companies to present to our investor network; but included in this is a significant amount of work. We run a half day and full day training session, a day’s support from a pitching coach, a legal seminar, over a week’s worth of support reworking and editing executive summaries and the powerpoint presentation (and trust me they change an awful lot) and share a significant amount of IP developed over 25 years running the network. The cost of this, let alone the actual event itself costs us more than £850 x 6 companies that present and is a sunk cost.

2. To get the entrepreneur’s commitment

While we can argue on the level a company should pay to pitch; having it zero is very risky for angel networks. When you have 70+ investors all taking an afternoon/evening off to see 6 companies – you have a significant problem if one of the companies decides that something urgent has come up (and as every entrepreneur knows there are a lot of urgent things) and cancels. What if a VC/major client/potential employee says the only time they can meet is the same time you were meant to be presenting to an angel network; not an easy call for an entrepreneur. Having a sunk cost really does ensure entrepreneurs take the process as seriously as the angel network (and the network’s investors) do. I’ve seen a number of angel networks cancel events at the last minute because of problems here; and your angel network will not last long when this happens.

3. We can’t control entrepreneurs

We can put a lot of work into preparing a company for investment (sunk cost) but the deal might not happen for reasons the network manager can’t control. A typical example is an entrepreneur doubling their pre-agreed pre-money valuation. Some companies don’t put as much work into raising money from a network (it’s never easy I’m afraid) or follow up appropriately. We do our best to align both entrepreneurs and investors however we can’t force deals to happen. Can you think of any other professional industry with significant sunk costs that works on success fees only where the facilitator has limited control over the process of any deal which is heavily dependent on personalities?

4. Investors are loathe to pay fees

The obvious solution to the problem is to charge investors high memberships to cover costs. We charge our investors £295/year and are very strict on this. Most angel networks I know struggle to charge this or anything at all. It is unfortunately the case that a precedent has been set in the UK that investors won’t pay more substantial fees – but our experience is they simply don’t. The US is more fortunate in this regards where investors are prepared to pay higher fees – but this is the current reality we are faced with in the UK.

5. Cashflow

Angel networks don’t have the relatively comfortable management fees that venture capitalists do. If a VC does not do any deals for a year their LPs might get annoyed – but the employees are still going to get paid. Angel networks rely for the majority of their income on success fees – but having some guaranteed income (member subs, pitching fees, sponsors) ensures that they can at least function for a while – no angel network can sustain itself without actually doing deals unless it has public support (we don’t). Let’s be clear on this, no one has got rich on running an angel network, most are run as not for profits to comply with FSMA regulation. Being a VC is a significantly more comfortable existence and certainly more lucrative.

Given all the above, I think charging to pitch is appropriate and likely to stay – however there is certainly a lot of scope for the level of charging to be reviewed. Since I have started working at London Business Angels I have been able to bring the fee down from £1,250 to £850. This was largely due to bringing on two more sponsors, UKTI and Speechley Bircham – who join our other long standing supporters: Larks, RBS, NESTA, McDermott Will & Emery and Kingston Smith. Without them, the fees would have to be higher. If we were to find another sponsor – we will use that money to lower the fee because it solves problem #5.

We are also working on a number of other initiatives to make it easier (and less costly) for our entrepreneurs to raise money. We are raising our own mini co-investment EIS fund. My aim is that in a year or two, the pre-committed capital that goes into this fund will solve problem #5 so that we can price at a level that satisfies only reason #2/#3. I agree that we should charge as little to companies as possible.

It’s also worth saying that most angel networks don’t focus solely on web/tech/media and the types of companies talked about on Techcrunch. There are a few high profile web/media investors in the UK (of course they together are not capable of investing the £1bn of angel funding annually) but we also raise money for companies in other industries. Med-tech (medical tech) has been particularly popular this year; our largest £2m investment was into a clean-tech company.

I hope that explains my position on “pay to pitch”. I want to make it clear that, as with every industry, angel networks differ by quality. This is not however objective – I regularly hear from entrepreneurs who disliked one network and then the next day hear from one that had a great success with it; I am sure the situation is the same with us; although I believe the majority of companies (and even the ones that did not raise money) have felt our process was good value I have to accept that it is always going to be disappointing for those that don’t; but we are regularly told by companies that even if they don’t raise money they felt the intense education was worth the cost. All I can say is that we do our best to make deals happen.

I have explained our model in full here – and most networks are similar; however there are certainly other models all with different benefits/costs associated with them. I recently met the two entrepreneurs who have setup who are trying to help young student entrepreneurs raise small amounts of finance and have a really interesting model. New and innovative approaches are great for the industry – so if you think the model is broken – get up and fix it. Jason threatened angel networks by running free events – I truly welcome the challenge – the more people helping enabling this type of investment, the better.

  • Simone Brummelhuis

    Great explanation and write up, thanks for the insights. We charge for our Funding & Pitching events on the basis of your 5 points, and I thought always, and know now for sure, far too little, because of your arguments and knowing the contacts that we see coming from these events.

    As to your point 4, it is true, investors with their better cash flow than entrepreneurs should not be so difficult in paying to attend these events, as for them it is also a great way of improving their network, organized efficiently by someone else, and they know it.

  • Robert Loch

    Hi Chris, thanks for the article. A few points:

    1. Angel networks often state how many angels they have in their networks. The reality is that the vast number of these angels have never made an investment in an early stage company. They may have money, but you are not an angel until you have made an investment. Angel networks use these false numbers to attract entrepreneurs to pay them money. You state that you have 130 angels, which appears to suggest that you have a strong filter. What is it? What’s your take on angel networks that claim to have over 1,000 angels in their networks?

    2. Angel networks often state the number of deals that they have done. They use this number to attract entrepreneurs to pay them money. Is there any regulation that covers this and are they audited? If I claimed that I had helped over 100 entrepreneurs raise money, and asked entrepreneurs to pay to join my network, and I hadn’t in fact done so, then I would be conning entrepreneurs. Which UK angel network has done the most deals over the last 2 1/2 years? Has any network done over 150 and what would your opinion be if one had claimed to have done so? You state that you did 18 deals, from 42 companies who presented last year, from 750 who sent in their business plan. That seems a very good hit rate from presenting to securing funding. Am I right that it is only the 42 companies who present, who pay?

    I think that the model should be reversed – all entrepreneurs, good or bad, are at least entrepreneurs and their companies can be judged.

    Angels, on the other hand, are often not angels, but high worth individuals who like the idea of being angels.

    A better approach would be for angel networks to filter their angels and spend their time sourcing good investment opportunities, and get the angels to pay to see these opportunities. If I understand you correctly, 42 companies paid to pitch making you only £35,700. Surely it would be easier to get that amount from your angels? It doesn’t seem unreasonable to charge £1,000 per year to see filtered opportunities.

    • Chris Padfield

      Hi Robert,

      Thank you for the great questions on this. As I am sure you can understand, I can only comment on our own network. As for our numbers, our principle filter is that our investors pay to be members. As mentioned in the post, this is a pretty high filter – most networks don’t charge. We are also particularly careful about the intentions of people joining – we have had the odd “consultant” try to join who is looking for work – but we remove them instantly; there is no benefit to being a member of LBA and paying – unless you are actively looking to invest.

      We do not however check to see if the investors have invested before; anything but in fact. A lot of the people that have joined the network made their first angel investment through us – and have gone on todo many more. Some of them have done deals in other places that went very badly and join us because they want to have the support we aim to provide investors – doing a bad investment is really no qualification for being an angel investor. We do however naturally talk to members, find out what they are interested in – it becomes clear very quickly what they are looking for.

      Our deals are typically syndicated with somewhere between 5 and 10 investors. Generally these deals will be lead by an experienced investor and then the newer investors will invest alongside. We used to have an active fund called London Seed Capital which made it that much easier to help lead this process ourselves – we hope the EIS fund we are raising will replace this. I would actually say that what our network can always do with more of is lead angel investors – they are the ones that often determine if a deal will happen. Finding the money to go alongside a credible lead angel, it less difficult.

      Your other questions both really concern transparency. This is something that is really lacking in the industry in the UK – and there are various reasons (mostly bad) behind that. On deals, we post public press releases on our sites for deals that our members have invested in. I would like to get to the point where we post profiles of our actual members and this is something I am working towards. We now have a (private) linkedin group as well as an internal networking tool – and the next step will be approaching investors about public profiles (most likely linked to the EIS fund we are launching). Most of our investors are private people – they have no interest in generating PR about themselves and the last thing they want is people finding them and directly sending business plans – so while I hope we can get some of the investors profiles on the site; it will take some time.

      As per £1,000 – we did try this in the past; and it did not work. I have been at the network 18 months; and hope that we can increase the value to members where they are prepared to pay this (or more likely pre-committ an investment into the fund) – however with a lot of competiting angel networks funded by the public purse, this is not particularly easy. If we did this now – we would loose lots of investors and do less deals – so it would be counter productive.

      • Robert Loch

        Chris thank you for taking the time to respond in such detail and I hope that these comments are of some value to you. I’ve run over 100 dinners and events for the web startup community and I’ve generally adviced entrepreneurs to steer clear of angel networks. That’s partly because I think that you are far more likely to get smart money in the web space, that generic angel money, but also because no one has persuaded me that they are particularly effective. That said I think that you are doing your organisation a service buy engaging in this way.

        It is interesting what you say about angels making their first investment through you, particularly the part that they often do so by following an experienced investor. Maybe there is a new model around that.

        My concern remains though, that many so called angels, have very little intention of investing – that has certainly been the case historically. I think that all networks need to do more to filter the real from the fantasy investors, as access to angels is a big part of what you are selling and what entrepreneurs are buying.

        In regard to transparency, I certainly don’t expect the angels to name themselves, but I do expect there to be some mechanism by which the networks have to prove the number of deals that they claim to have done, or not be allowed to claim that they have done them. Again, entrepreneurs are buying access to the potential to do a deal, so they should be given proof that the networks have done the deals that they claim to have done.

      • Chris Padfield

        I understand your point; I think from our perspective if someone does not invest in the first year – they leave – so there are probably a few investors at any one point like this – but we generally find the new investors are the ones that want to invest as quickly as possible (which is why they joined). We invite potential investors along as guests for the first event – so they know up front what they are getting into – there is really no benefit for them to join (and pay) if they have no intention of investing. While the amount if not huge (because they refuse to pay that) it’s high enough to act as a good barrier.

        But I do understand your point, and I’ll see what we can do about calculating numbers based on those that have invested.

        It is worth noting that people have different investment strategies – some invest £10k into maybe 10 deals a year. Others do £100k investments into maybe 1 or 2 and wait for the deal they particularly love. It makes “active investor” stats rather more complicated to generate than it would appear at first glance.

      • Robert Loch

        Mike (Butcher) in a comment in this story

        about Angels Den, you made the following comment:

        ‘Anyway, to cut through all this, we’re offering Bill Morrow the opportunity to sit down in a face to face interview with me to get to the bottom of the Angels Den model and what it can offer startups.’

        That was back in July. Did the interview ever happen? I can’t find it. Angels Den brought on Paul Walsh to target the web and digital sector, surely this would be a great opportunity for them to showcase their service and explain why digital entrepreneurs should use it. Mike, what happened?

  • Henry Yates

    Hi Chris,
    You should watch Jason Calcanis on his TWIST show at the bottom this post:


  • Robert Loch

    Chris, one specific example, from a previous article on Techcrunch – Bill Morrow from Angels Den is quoted as saying –

    “We have 2,800 registered Angels and just over 10,000 entrepreneurs looking for money. We’ve completed 157 deals, with an average deal size of £170k which equates to nearly £25m of funding.”

    My first question on this is – what do they consider an angel to be? Is it someone who could invest £250K, or is an angel someone who has previously invested in early stage startups. Maybe it is someone who is actively looking to invest. My experience is that it is rarely worth talking to anyone who hasn’t previously provided funding. I think that it is really misleading to claim to have x angels in your network without a really detailed definition of what you consider an angel to be. This is emperors new clothes stuff, selling something that doesn’t really exist.

    I’d also state that their claim of having done 157 deals, should require some verification from an industry body. It is ridiculous that any network can claim to have don’t any number of deals, without being forced to prove those figures. If you claim to have done x deals, and haven’t, again you are selling emperors new clothes.

    I would advice all entrepreneurs to stay clear of any network who doesn’t:

    1. provide audited proof of the number of deals that they claim to have done.
    2. provide a very specific description of what they consider to be an angel – answering 1 main question – has the person made any previous investments in startups?

  • AndreaF

    I appreciate you are trying to defend your category and that there are around some networks bringing real value to entrepreneurs regardless of whether they charge money or not.
    I just don’t buy the arguments. Your job is to facilitate deals with angels, VCs or whoever is interested to invest. That is your cost of business.
    If you are worried about a company not showing up (I think this is a very legitimate concern), just get a deposit from the start ups. If they show up you give them the money back; if they don’t they lose the money. That is a good enough filter for any serious bootstrapped entrepreneur.

    • Abhishek

      He has a point here

    • Chris Padfield


      This is an excellent point and goes a long way to answering #2. I think #3 still leaves a strong reason why we would want a company to cover at least some of the individual sunk costs we spend per company – but I agree on your argument. In my mind, the target would be approx £250 per company but with a clause – as you suggest – of paying the full £850 or £1250 should they let us down. That’s the sort of level I am aiming the network for.

      Thanks for the comment.


  • Loopy


    If you truly believe you are an entrepreneur with a great idea/product you will walk the earth to raise funding to push it forward. I totally disagree with paying an organisation to get the funding. If you need the tuition to present your idea and to make your business plan, you are too early to meet investors.

    I rank this type of business [paying for Angels] just one notch above Dragons Den, which IMHO is sordid.

    BTW I am an entrepreneur, I have made two successful exits and invested [Angel] in some companies, but never in the fashion of a network that charged the entrepreneur or the investor.

    If you have a great idea/product/company, get out there and network. Speak to the bloggers with an audience, be creative. Do not pay money. Business is about making money, not spending it to raise capital.

    That’s my rant for the day, feel better now.

    • Chris Padfield


      I do understand where you are coming from – and of course lots of companies will get their funding from networking (although be careful not to break the law here!). I think the easiest way to answer your point – is that there is an opportunity cost to this. For a lot of our companies, £850 is not a considerable amount of money to both prepare them for investment and then put them in front of a group of real investors. Yes they could go to lots of events and try and meet people – but this might well cost them considerably more in time – if nothing else.

      Also worth noting that companies continue to pay for these types of services; I’d be surprised if Google’s investment bank that took them to an IPO worked on commission only. Perhaps they did – but most won’t. If you compare the fees we charge and effort we put in and compare that with what a corporate advisor might charge on a £10m transaction and the work they put in – you might start to think we are pretty good value.

  • Abhishek

    Is Jason reading this?

  • Nick

    Any Angel should have the decency to buy you a coffee for first meeting (if they decide to meet you). Why does every startup need to pay? Surely some startups are more investable/interesting to certain angels than others? What is the % of companies that get funded? Don’t you Angels realise that time + money spent going down a dead end path can be detrimental to a young startup? Rather give them a reality check and give them realistic feedback rather than give false hopes.

    • Chris Padfield


      We get 1,000+ business plans a year at LBA. I interview about 150-200 of those and then put forward from that the best 42. We don’t go out there trying to find as many companies as possible to charge – but the best 42 in a year. I try and give as much advice and help to those that I meet that I decide not to proceed with – and regularly get emails thanking them that someone actually told them the truth.

      Of course my opinion is an opinion – companies I have not put forward have been funded elsewhere – in the same way companies that have presented to our network but unfortunately not raised money have raised it elsewhere (and vice versa).

      It’s worth noting that it is not easy raising money in the UK. I think there is sometimes a feeling on techcrunch that raising seed money is a simple thing to do. This is rarely the case.

      And yes, there is always coffee for everyone I meet :)

      • Nick

        Chris, you sound fairer than Angel’s Den guys and US “investment” forums. Jason Calacanis had some anonymous insiders from some of these investment vehicles spilling the beans about how this was a recruitment vehicle to setup franchisees and grow some of these forums. A multi-level marketing scheme. Perhaps we haven’t heard all sides of the story and I think some more in-depth journalism is required here rather than opposing voices putting forward arguments on techcrunch as guest editors (mike and other independent techcrunch editors?).

        Also would be good if we got some people coming forward with praise or complaints about some of these Angel groups. We might be tainting every Angel group with the same brush which would not be fair.

  • Geoffrey McCaleb

    Appreciate there are avenues for funding available in the UK, but the hardest pill for me (and many others) to swallow is that groups that charge for pitching seem to be in such a zero-risk position.

    In your case Chris, you charge a submission fee, a percentage of equity, plus a management fee. Personally speaking I have no issue with paying fees to access capital, but not all of the above. To be fair, not picking on Chris per-se, just the environment in this country in general. In the US Angel Groups generally charge the investor, and have stringent attendance requirements which means people are motivated to come out and hear your pitch in the first place. I still have fond memories of pitching my business at one such event at the LBS (thankfully, was free because I was the first to sign up). Afterwords I realized half the so-called “angels” were small restaurant/news agent owners, and the other half were there for the free drinks.

    The unfortunate truth is, no matter where you are in life you don’t respect something that is free. If the angels don’t have to pay to be a member of a group, then they certainly have no concrete obligation to show up to pitch meetings and take part.

    • Chris Padfield


      It’s not the case that it is a zero risk proposition. If we didn’t do deals, we would go bust. We don’t make nearly enough money for the fees charged companies and investors to cover our costs.

      I agree the US model of charging investors more and entrepreneurs less/none is better – we have tried this and it did not work. Our aim is to move towards that, and I have explained how. As I have mentioned a few times – lots of networks charge investors nothing – however much better you are; it’s hard to compete charging anything when the alternatives are free.

      In our opinion your last paragraph applies equally to entrepreneurs.

      • Chris Padfield

        Apologies Geoffrey this was a response to you and not Robert.

      • Geoffrey McCaleb

        No problem Chris.

        Don’t get me wrong, I don’t feel that LBA is in the same boat as hope merchants like Angels Den, there is definitely a slippery slope once you start asking people to pay to join+pay to pitch+pay upon success+pay to breathe etc, but ultimately we need to be in a situation where an angel wants/needs to come to a pitch.

        I do strongly disagree that an entrepreneur not paying to pitch is the same as an angel not paying to join a network. As an angel, if I join an Angel Network and I have no real financial obligations, then there is no pressure to come to a pitch. As an entrepreneur, I have to get funding so I have to pitch, and more than likely your network is not going to be the only one I pitch to.

    • Norman Pappous

      “In the US Angel Groups generally charge the investor, and have stringent attendance requirements which means people are motivated to come out and hear your pitch in the first place.”

      Absolutely correct. We have been offered the ability to pitch many times for a fee. When we ask for the network to supply detailed references on the angels that will attend… they always come up short.

      Angel investors that are worth your time focus on the exit – Angel investors that are involved in fee-based schemes usually have motivations that do not include your best interests.

  • Robert Loch

    Sorry this comment ended up in the wrong place.

    I’d also like to add that I will be the first person to shout Angels Den’s name from the roof tops, if they prove that they have done the deals that they claim to have done. It would be an amazing story – the biggest success story in European angel investing. I want it to be true. However, if there numbers aren’t true then that should be highlighted also.

    Mike (Butcher) in a comment in this story

    about Angels Den, you made the following comment:

    ‘Anyway, to cut through all this, we’re offering Bill Morrow the opportunity to sit down in a face to face interview with me to get to the bottom of the Angels Den model and what it can offer startups.’

    That was back in July. Did the interview ever happen? I can’t find it. Angels Den brought on Paul Walsh to target the web and digital sector, surely this would be a great opportunity for them to showcase their service and explain why digital entrepreneurs should use it. Mike, what happened?

  • Justin

    I have previously “paid to present” with London Seed Capital, though to be fair it was over two years ago before Chris was with them.

    My experience? Dreadful. LSC had no interest whatsoever in us and our success, it was all about receiving the presentation fee. As for the “training”? It took as long as Chris mentioned in his article however it was terrible. It was inadequate, insufficient and largely irrelevant. As for providing over a week of support reworking and editing exec summaries and powerpoint presentations, that wasn’t my experience – more like here are our comments now make changes and that was it.

    As a side note, I didn’t read anything about success fees – these are paid on top of your fee to present. These organisations aren’t charities and these fees are an income stream for them. It’s a win-win situation for these angel networks – they get paid regardless.

    Based on my experience, I would advise all start-ups to avoid paying to present.

  • Chris Padfield


    Hard to know who you are with an anonymous comment – so unclear if you actually did present or not.

    However, giving you the benefit of the doubt that you did, you seem to be confusing two very different things. London Business Angels is the angel network we run. London Seed Capital is a £5m, government funded angel co-investment fund. That fund would invest in 4 or 5 of the deals per year that were presented through London Business Angels. That the fund did not choose to invest in you suggests the fund manager (probably Jason Ball who now works for Qualcom Ventures) did not feel your business fit the fund’s criteria. The fund also relied a lot on angel co-investment; so if – for whatever reason – the company was not popular with angels the fund would not have been able to consider you anyway.

    As for success fees; I mentioned them 4 times in my post – so either you didn’t read it or you read it a little too quickly.

    I’ll add that the training process has been significantly updated since I joined – however the existing one was still very good and was in operation in 2007 our record year for investment. There is of couse, always scope for improvement.

    • Geoffrey McCaleb

      I engaged with LBA during the same timeframe, and while I am still very against “pay to pitch” I can honestly say the chap I worked with (Jason) was absolutely amazing and gave me a lot of support. While the pay side was discussed, it was by no means forced. Once it became clear I couldn’t afford that route, we simply moved on and he did his absolute best to find me funding via other means.

      Was everyone there like that? No idea. But I certainly came away thinking very highly of the LBA/LSC.

  • Mike

    Chris, I understand your comments, but What a bunch of Horse Hockey!

    Lets examine the word “angel.” An angel, in the traditional sense, is a wealthy person who has the capital, acumen, time and desire to help out the next generation of would be entrepreneurs. He/she gives his time and insights freely, his rolodex prudently, and his capital in modest doses. Return on his investment is of secondary concern, building karma is primary. An angel can afford to lose his angel investments, and a return really won’t move the needle.

    Chris, your firm is not a network of angels, it is a business borne on the back of struggling entrepreneurs. No aspect of it is angel-like. Your angels are really wanna be VCs. If they need a return on your investment of time, they are not an angel. Period.

    Your business model is a bastardization of the angel concept.

    And are you really complaining about the flakey entrepreneur who holds up investors for a higher valuation, or never comes back to close a deal? Seriously? How many times are entrepreneurs left out in the cold after extensively negotiating with and educating investors. Dude, that is part of the game. An entrepreneur who goes elsewhere for his capital is prudent – he clearly found a better deal.

    Chris, you are not alone in this gambit. But lets face it, your business is not angel-y in the least.

    You should call your firm a for-profit business that charges for prepping entrepreneurs, makes introductions to moderately wealthy people (most of whom should not be making these types of investments), and takes a success fee if these folks invest. In the States, that would be a “broker dealer” and would require a registration with FINRA, the regulatory body.

    But angel network? Hardly.

  • Mike


    I am not going to go back into our business model – that has been done to death.

    What I will take issue with is your description of Angel Investment. This is exactly the approach we are trying to educate people is completly wrong. Angel investment is a £1 billion / year investment class in the UK. It is not, as some people still seem to believe, a few rich people giving out money to young entrepreneurs because they think it’s all a bit of fun – have so much money they don’t care if they loose it – or have so little to do that working with some young people is fun.

    The average angel is not a billionaire with a private jet and 16 houses. They often have full time jobs in other companies or their own company. The invest principally for the financial return but also will often only invest in companies they find interesting, they feel they can add value and sometimes because the company has some social purpose. The average age of the entrepreneur getting funding is not 20 as some people on techcrunch seem to believer, but closer to 40.

    This is the reality of angel investment. The term itself came from investors into London theatre. Perhaps we need a new term for the investment class – it’s not entrepreneur charity but an asset class that should be taken seriously. Returns for the class are essential to bring more money into it – which is what trully benefits entrepreneurs.

  • Mike

    Chris, we can argue about what an angel is or should be, but there are a few truths that you ignore:

    1) your firm charges to package presentations to investors. That is a service fee at best – not an angel function. An angel would do that for free.

    2) Your firm charges a success fee. That is a broker relationship, and at bests skirts legality, and at worst is acting as an unregistered broker.

    3) Your firm, and many like it, entice investors for whom these investments are inappropriate, based on their experience, net worth, and portfolio asset allocation. Almost no investor should have more than 15% of his portfolio in alternative assets, which would include real estate, commodities, private equity and venture capital. Further, he should be diversified across these sectors.

    I would posit that most of your angels invest with you because they do not have the wealth to invest in top tier private equity or venture capital firms, and certainly are not able to diversify among several PE/VC funds. These are precisely the people that should not be doing your deals.

    As you suggest, an angel needn’t be a billionare but if they cannot afford to lose their investment they are an idiot, not an angel.

    4) By charging, you create a conflict of interest. Are presenters the best qualified, or are they the most willing to pay you a fee? You should be presenting the best companies and ideas irrespective of their ability or willingness to pay you a fee, otherwise you are doing your investors a disservice.

    If your business model requires charging fees from entrepreneurs then your business model is broken. Like any entrepreneur, you need to examine it and adjust accordingly.

    This insightful and forceful article sums it up well:

    I understand your need to defend your business, but it is wrongheaded. Evaluate and adapt as any entrepreneur should.

  • Chris

    1) Yes, I have no disagreement here. I have explained why this is charged. Yes an angel would do this for free (made clear again in my post – did you actually read it?). We are not an angel, but an organisation that facilitates angel investment.

    2) I disagree on there being any legality issues – numerous law firms have confirmed this for the 100 or so angel networks that operate in a similiar way and have for over a decade. You are the first that seems to have a problem with the charging of a success fee.

    3) You make some big claims without any knowledge of what you are talking about. All anglels are fully educated on what they are getting themselves into, and most are only investing a small part of their wealth as angel investors. They don’t invest in funds (well some do as well) because they want to make their own investment decisions. There are plenty of VC funds that will take £10k investments – so the wealth of the investor has nothing to do with it – you are simply wrong here. About the only thing I agree with you is that you should only invest if you can afford to loose your investment; I am just intrigued why you think any of our investors would not know this.

    4) Best qualified that pay the fee. I have lost the odd company I have interviewed and wanted to put forward but for whatever reason did not pay the fee. As mentioned already, the fee has been lowered 1/3 since I came on board and I am aiming to lower it further – but in my experience it is not a disincentive to many entrepreneurs. Most of the best companies come from referalls of people who have experienced our network in one way or the other – and they understand the economics of it).

    5) There are certainly ways our business model can be improved (again see my original post) but a fundamental change is not necessary. If you think the angel investment model is broken – then again as I said in the original post – come along and do better. But you have yet to give any suggestions on actually improving anything that we do. It’s pretty easy to tell any business “everything you do should be free” – but that is rarely any help.

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