The reason we charge a fee is because we're between a rock and a hard place. The unfortunate but accurate fact is that 90% of all companies requesting funding are simply not fundable, by anyone, anywhere…no matter how earnest the entrepreneur might be. The larger VC funds get upwards of 10,000 plans each year, but that's ok for them because they either completely ignore over-the-transom submissions, or have them read by a paid associate.

Since all of us are volunteers with day jobs who are doing this in our spare time out of love (and bit of masochism), we simply can't process that kind of deal flow. So our choice is either to take the route that many VCs and quite a number of other angel groups do, and ONLY accept deals as referrals, or else TRY to have some kind of system which will at least dampen the flow of deals that should never have applied in the first place.

Charging $150 is a pretty poor way of making sure that an entrepreneur at least stops and takes the time to read our criteria before applying, but as Churchill said about democracy, "it's the worst form of government there is…except for all the others." I plead guilty to having contributed to making the problem worse by developing Angelsoft, which is now used by virtually all of the world's angel groups to handle their deal flow. Since it functions much like the CommonApp for colleges, it is now very easy to apply to multiple angel groups for funding, whether you really should or not. The current flow through Angelsoft is around 40,000 applications annually. Should I have not done that, but instead gone out of my way to make it harder to apply?

With regard to Nate's comment, he's not quite correct. There are several ways to get to present before New York Angels, but the 'free' one is what we call our "EZPass" system: if one of our members is *already* committed to investing in a company, and there is a completed term sheet that other investors can sign on to, that member can bring the opportunity directly to the monthly meeting without a charge (because, if you think about it, this is exactly the kind of deal most likely to be fundable by other angels.) So absolutely, we will all tell you that by FAR the best way to get funded by NYA is for you to network your way to one of our 75 members, get them enthusiastic enough that they agree to invest individually, and then have them present you to the whole group. However, by offering an alternative, open-door policy that allows 'un-connected' entrepreneurs to at least apply, we thought we were being helpful, not harmful.

But at this point we have taken so much criticism that I'm beginning to think it's just not worth trying to be good guys any longer. So we're currently thinking about simply dropping the fee entirely, but also dropping people's ability to directly apply to us. In that way, we'd function like many (most?) of the "savvy" investors you mention: no charge, but also don't bother applying directly. Just use your entrepreneurial mojo to convince someone we know to recommend you to us…otherwise, if you can't figure out how to do that, we probably shouldn't be funding you in the first place.

Would that be rational? Yeah it would. But I think that ultimately the ecosystem would be poorer for it.


Got this comment earlier today from David S. Rose, the Chairman of the New York Angels. Very thoughtful and well-reasoned. Gotta say the man is winning me over a little bit. Still ruminating…

This is a response that came from the comments on my previous post: Is NY Angels a Pay-to-Play Scheme?