Startups Should Never Pay to Pitch

Several times a week my startup is solicited to participate in pay-to-pitch events at which we are promised access to a smorgasbord of wealthy, capable investors who are just chomping at the bit to invest in companies like mine. Sounds too good to be true, right? Well, it is.

This has been covered by many other posts, such as from this startup lawyer and from this angel investor but here is my $0.02 to add as well.

These pay-to-pitch scams start off innocently enough. There is often no mention of a fee up front. Then, if you “apply” (a classic sales/manipulation trick: making YOU apply to THEM so that you want them to take your money in order for you not to feel rejected), you make it to the “next round,” and then they casually drop the bomb that, oh by the way, there will be a fee of several thousand dollars to present.

If you object, it is often glossed over as, “We have to charge the fee to filter out the startups that aren’t serious.” I see, because the “application process” I’ve been going through doesn’t help you filter any startups out? What exactly is the application process for then? Oh, right, see the above note about the sales technique!

Imagine that: the hoards of rich investors want the cash-poor startups to pay substantial fees just for the right to talk to them – makes sense, right?? Seriously, no investor worth his/her salt needs a forum of curated startup presentations to get access to dealflow. Likewise, no entrepreneur worth his salt needs to pay to have access to a group of such C-list [non-]investors. Or put another way: if investors don’t even see enough value in the event to fund it completely, how likely do you think they will be to invest in the presenting companies? The result is an event consisting of lackluster startups, lackluster investors, and very, very little actual investment activity.

Think about it: how many successful startups do you know whose story starts with, “Well we had this game changing idea and a great team but we were so unresourceful that we had to pay just to get access to some potential investors?” Google? Facebook? Paypal? Nest? Exactly.

The practice of charging entrepreneurs to present is, at best, naive on the parts of the angel groups and, at worst, straight up predatory. I have to admit that, when I first started Smart OES and was raising capital for the first time in my life, I fell prey to one of these events. Fortunately it was a relatively small fee and the damage was minimal.

Of the nearly $1M of angel capital my startup has raised, not a dime of it has come from events like that. It has come from hustling and networking, which are key entrepreneurial skillsets. My advice to entrepreneurs: forget the pay-to-pitch scams. If you’re having a hard time raising money, get out and start networking or, though it may be challenging, take a look in the mirror and evaluate why the people you are pitching aren’t buying in.

Published by Bryan Guido Hassin

These are the musings of a global cleantech entrepreneur. This blog began as a way to document my experience during the IMD MBA in Switzerland and now is the place where I publish eclectic thoughts on business, politics, fitness, entertainment, travel, wine, sports, and . . . whatever else is top of mind.

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