Yesterday, I attended the Keiretsu Forum (“K4″) East Bay monthly meeting. Keiretsu is an angel investor network founded by Randy Williams with 17 chapters and counting. Some folks in Fresno are interested in starting a chapter here, and Keiretsu brought its show to town last fall. So, in turn, five of us Fresno State folks went up to San Ramon to see the East Bay show yesterday, through the auspices of the Lyles Center for Innovation and Entrepreneurship and the Coleman Foundation.
We saw five great companies present. They go at it for ten minutes, then ten minutes of questions. The questions come fast, delivered with courtesy but a suitably hard edge. All the entrepreneurs acquitted themselves nicely, though some better than others. Randy Williams ran the meeting. Randy is a personable no-nonsense guy, and even with an agenda full of presentations, questions, updates, committee business, introductions, etc., he somehow kept us on schedule. Randy managed to move people — members and entrepreneurs alike — to the point without talking over or cutting anyone off. We started on time at 8am and ended on time at 11:45am. The agenda went off as scheduled, almost to the minute. It really was a masterful performance.
The highlight of the morning was the presentations themselves, and the companies ranged from medical devices to dotcoms. These guys (the presenters were all men) hang themselves out there for 20 minutes for things in which they have much invested and lots riding. They all pulled off some degree of success and they received a cordial, professional hearing.
The meeting ends with the Mindshare. The members go back over each company, with mandatory positive comments followed by criticism. Members sometimes debated fine points of technology and current trends on the relevant sectors. My perception of the presentations shifted as more information came out from those with sectoral insight.
All of this reminded me of something I saw last fall around the time the K4 came to Fresno. That’s when I saw the following comment on The Funded, a site that evaluates and rates funding sources:
We were approached by this forum for pitching.
However, when we inquired more about their model, we were explicitly told that we must have: (a) our product ready and (b) at least one customer waiting to buy it. If a company gets to this stage, then why should it approach this bunch of clowns for a fee” Do they know what is meant by angels” Aren’t VCs around if you have come up so far on your own or with friend & family or with some other mode of help”
But, hey….you will see a lot of angelers (service providers) at their meeting! Nice business model. After you collect so much free money from cash-strapped start-ups, anybody can be a investor!
Is it ethical”
“Angels” …..Hell NO!
You can search “Keiretsu” on The Funded site yourself. There are some neutral-to-positive comments. Of the critical comments, the one above is among the more charitable. Many comments revolve around the $3000 fee entrepreneurs pay to pitch to K4. Randy Williams noted yesterday that 49% of firms that pitch to K4 receive some funding. Assuming these investments are for more than $3000, K4 seems like a good gamble.
The Funded recently released its latest list of blacklisted VCs.
TheAnthroGeek
anthroguy
Felicia Salcido
6 comments
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March 28, 2009 at 1:37 pm
John Matthesen
Dear Anthroguys:
You selected some particularly snarky comments about K4 from The Funded site.
To be sure, there has always been lots of debate about whether an angel group should charge a fee to presenters or not. Ideally presentations would be free at all groups, but consider – the efficiency of getting in front of several hundred angel investors all at one time.
If you’ve ever tried talking to potential investors one at a time, it can take a verrrry loooong time. Just reaching people by phone or email is tough. To actually present to even 20 people can take several weeks of attempted scheduling. So in perspective, if you spend say $3,000 and you can raise $300,000, that’s a 1% commission. Very inexpensive if you think about your time alone. How many entrepreneurs have weeks and weeks to spend making presentations?
Meanwhile, the cost of gathering lots of angels into a single location requires staff, screening of applicants, renting large rooms or auditoriums, and many other details not seen, but essential to the process. Who should bear that cost? I leave it to the reader to decide, but be certain that the costs are not zero. They get paid by someone.
The other comment about expecting VC’s to fund a company once they have customers shows a lack of understanding of the VC world, and of investing in general. I often meet entrepreneurs who are surprised, even angry, when investors are reluctant to jump at their deals. Certainly many investors can ask a lot of annoying questions. And if you think angels are tough, spend time these days with VC’s. Trust me, they aren’t there to toss money at you, even if you do have a customer or two.
As an entrepreneur, you have to understand what it’s like to be an angel investor. You are asking someone who has enough money to take a chance, but typically not enough money that they really want to lose it. Sure, everyone says don’t invest if you aren’t prepared to lose the money, but in reality, very few of us will ever be talking to investors who have so much money they can afford to lose it. Those days disappeared with the dotcom boom.
As both an entrepreneur and an angel investor, I encourage everyone to keep perspective. Investors need to look for ways to help their selected entrepreneurs be successful, and entrepreneurs need to remember that they are asking somebody to enable their dream with very little chance of return.
Lastly, regarding sites like The Funded, take a look at the message that pops up on their site this week:
Conclusion: Investors are Great
“On Friday, March 27th, TheFunded, Incorporated (‘TheFunded’ or ‘we’ or ‘the Company’), in conjunction with counsel has concluded that venture financing and the purchase of preferred equity, herein referred to as ‘investing’ or ‘investment’ or ‘investors’, is both broadly and generally good for companies worldwide.
TheFunded will officially cease reviews on April 2nd, 2009, which, from time to time, reflect negatively on the many innumerable benefits of investors or investment or investing. We encourage companies to consider seriously taking investment, and we apologize for the following statement made in haste:
“investing is predatory”, “over 75% of investors are bad”, “avoid banned investors.”
The Company further apologizes for making any other statements and causing questions to be raised regarding the ethics and the good reputation of investors. Further updates are forthcoming Wednesday, and we encourage every Member to take an investment and then post feedback on the positive and rewarding experiences in Open Letters. Thank you.”
March 28, 2009 at 3:03 pm
anthroguy
Thanks for the comments, John. The Funded is a pretty cranky site in general. But, there are some calm, balanced and positive comments about K4 on The Funded. I agree that gathering a bunch of people together is a great service and as I said at the end of my post, the pitch fee strikes me as a good investment.
May 13, 2009 at 12:42 am
SeanC
It might be expensive, but it is also worth it to pay the price to “put yourself our there” for others to discover you. Even if you have a product and at least one buyer does not mean you will succeed. If you go through a program like K4 you have an opportunity to learn about your product and how others will view it. It is also good to practice selling or pitching or idea with great feedback. Things do not get better or you do not get better at something without any type of feedback. I have participated in something similar but instead of pitching a business, research (thesis) was being pitched. It was almost the same format where you get a certain amount of time to present and the questions afterwards. This gives a chance for a person to defend their research and also gathers ideas that might have not crossed their mind that will help further their research. Main point is get the feedback, it will help better yourself or your product.
May 13, 2009 at 8:14 am
BrookeM
K4 seems like an excellent program. The initial fee might seem like a lot, but it can defer ridiculous, unserious people from pitching their idea to investors. It is just like other fees that we all must pay if you are honestly serious about the end result. This field is all about taking risks and believing in your product. The entrepreneurs put their heart and soul into the product in order for it to be a success. This process is very interesting to observe because the habits and processes that some people morph into shows in every aspect of their life. They might changed their family dynamic and overall environment in order to try to launch their product.
May 13, 2009 at 11:44 pm
JamieA
I think that K4 is meant to weed out those who are not committed and might be wasting the time of others in a sense. I think that any business must invest its own money to advertise and before it begins to grow so the fee process does not necessarily bother me. If they are willing to pay to pitch their idea then they are more than confident enough that they will receive positive outcomes. It was interesting to hear that only ten minutes was given to pitch and then another ten to answer questions and concerns. Plus, the time limit was strict and this helps to ensure that everyone gets a fair shot at promoting their own ideas and products.
November 4, 2009 at 3:59 pm
Ashley Tom
It is bizarre how much people will pay to pitch their product. Although, it does tell you a few things about the product if they are willing to pay that much for 20 minutes to sell it. First, it tells you that they are confident in the product like JamieA said. Second, it sets the tone that it must really work. Third, the guy that is representing the product better know what he is doing, how the product works inside and out, and how to think on his feet. I think that having such a high fee makes it impossible for the everyday geniuses that come up with amazing products in their workroom. Not everyone has the connections and investors to invest in their ideas and inventions, which makes the market so tuff and almost impossible for “John Doe” to succeed. Most people spend every dime they have just in creating the product.