Angel Notworks
July 12th, 2008 categories: Investment Networks, Venture Capital
A successful bachelor really never throws away his “little black book,” and neither does an Xvulture. From time to time we “water the plants” to ensure a blooming rose is always in season.
The Rosebuds in our world consist of “Venture Capable” friends and trusted institutional investors - relationships cemented over the years by successfully pulling the wings off start-up flies and emerging growth companies.
Our network of private and corporate cohorts are often mistaken by would-be entrepreneurs for “Angels,” “VCs,” and “Investment Bankers.” To us they are just that, but to the uniformed start-up, they might as well be an electric fence—which brings me to the point of this post:
INVESTMENT NETWORKS ARE BOGUS.
While there are a few partial exceptions (two of which I will discuss in a moment), typically these networks are nothing more than online marketing mills, engineered to fleece you with the promise of “exposure” and “connections” to “The Money” - yeah right!
Posting yourself up on one of these boards is akin to entering Shrek in the Miss America pageant. They’re blind dates through one way glass (guess which side you’re on). You’re in a lineup, and on the other side of the mirror are a handful of equally unqualified service providers posing as investors.
If you don’t believe me, go forth young Skywalker and experience the Dark Side. Here are some of the scenarios you’re likely to encounter in the Red Light District of investor networks:
PAY TO PLAY
The serpent whispers tall tales of a discreet capital market that secretly awaits you, if only you had the treasure map and an experienced guide. Of course, for a small fee, this Slytherin will offer you safe passage to the Promise Land. Should you really trust a snake?
PREP & REP
“If only you were packaged properly with the right introductions.” This ancient sales pitch can be traced back to the first guy who ever printed up fake business cards posing as a talent scout for Playboy. Expect to pay up to $1,000 a page for a completely useless re-write of your already lackluster business plan. While experienced service provides can be worth their weight in gold , few Prep & Rep outfits can actually deliver what they promise- BEWARE.
JOY RIDING
“Let me introduce you to my network of Angels.” This low-riding business broker is an aluminum siding salesmen turned pimp. The peril here is overexposure to the wrong people. Joy Riders pick you up for the purpose of serving as this month’s doorstop. They turn over deals like overstocked inventory and pimp you out to their outdated list of closed doors. Meaningless “Letters of Interest” precede the usual and customary follow-up call for a “refundable” fee. Use your imagination here, it almost always ends badly.
CHERRY PICKING
“You’re the one that I want—whoo hoo hoo, honey.” Cherry Picking deals may not be the same as prostitution, but in the end you’ll get paid very little to perform sordid acts and end up walking out the same door. You’re not Julia Roberts, so don’t count on being the next “Pretty Woman.” No one in “The Biz” is looking to be your savior. If you’re the unlucky 1% that gets picked up (pre-revenue), plan on getting a big shot of penicillin afterwards.
Now don’t get me wrong here - I’m not against Investment Networks. In fact, I believe they’re the future—just not in their current format. Here’s the problem: The two models to choose from are either bulletin boards that let anyone join, and as a result, have no credibility with real investors, or; they’re structured viewing cages that require you to lift your skirt too early, exposing you prematurely to seasoned Vultures that may eat you alive. Either way, you lose the most valuable commodity I know of—time.
As for the two exceptions I alluded to earlier, I like Go-Big Network for its intuitive GUI and “in your face” style. Wil Schroter doesn’t pull any punches and tells it like it is, and his network is a reflection of that spirit. I also like the way GoBig avoids the presumption of being an Investment Oligopoly, and remains a neutral platform for the controlled chaos we call entrepreneurship.
Genesis Exchange is the right concept for a normalized, score-based preview model- a sort of Facebook page for start-ups, where building the highest score will position you preferentially before their registered investors. I like the scoring model, which allows investors to screen out flops and midnight dreamers. The Genesis interface forces the focus company to build a consistent and uniform infrastructure for investment preview, allowing screeners to quickly summarize the core concept or dig deeper if they so choose. However, if you’re going to play this game, you’d better read some Buffet, because fundamentals count when you’re willing to reveal the results of your most recent colonoscopy.
So what’s the right format? Probably a mix of the two in a transparent platform with more communal exchange between buyers and sellers—a sort of Second Life for start-ups, where you can make a deal on the street with a bunch of friends, or knock on the big doors in private neighborhoods. I have some ideas, but I think I’ll keep them to myself for now 
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I was reading the blog and notices that you were talking about Genesis Exchange, My company has also paid this company to help my company get funding. After paying 25K to this company we did a video and was told that we have a conference call everyweek. But after the first call we never talked to Genesis again. Its go to the point that we have all there numbers and they still do not call us back.
sorry to hear that carlos, but your story is all too common, both with Genesis and throughout the industry. Let’s see if we can do something about changing things.
Does anyone out there know how company can get the fundig with out paid companies like Genesis Exchange?
Investors want to see an innovative product with some traction in an intriguing market. If you’ve simply got a good idea, you’d better have a great track record and excellent salesmanship (the latter can trump all else). If you can’t convince friends, family, and fools to invest you’re going to have a tough time with angels and you’re certainly not getting in the room with VC’s. There are a few places - Y Combinator, TechStars - who will look at applications from anybody doing anything, but again, you’d better have traction, a track record, and/or a compelling product. And they’ll typically invest $20K or less with heavy strings attached. The best option I’ve found for seed capital with no strings attached is The XBanker.