One of the most vocal critics of the pay-to-pitch angel model has been Jason Calacanis, internet entrepreneur and co-founder of the TechCrunch conferences. Last fall he declared a “jihad” against all groups, events and programs that charged entrepreneurs, and ultimately launched his own angel event called the Open Angel Forum. Jason has a “Nation” of followers from his various media activities, and he stirred up a mighty rabble among the disaffected entrepreneurial crowd. The first Open Angel Forum event is set to launch tonight (1/14/10) in Los Angeles, and I wish them the best.
The format of the event is pretty common — a dinner followed by presentations — but has one key twist: sponsors will underwrite the cost of the event to the tune of $1500 apiece (max 5). While the investors are committing to cover the tab if enough sponsors don’t kick in, the goal is for the event to be free to both entrepreneurs and the money people. In return, the sponsors get… what? Logos everywhere, I assume.
Side note: as I reviewed all this again, I kept having flashes of another leader of a nation, swaggering and yelling, brandishing an automatic weapon, while surrounded by the logos of his corporate sponsors. Where was that?? Oh yeah…
Well, I’m sure it won’t be like that.
The two main criticisms I hear about dinner investor events are inclusiveness and focus. The first revolves around how the entrepreneurs participate in the overall event: are they peers, meeting and mingling with the investors; or are they the evening entertainment? No doubt the former is usually intended, but too often devolves into the latter. More than once I have seen these settings turn into circuses where the entrepreneurs take a beating, and no one likes being treated like the court jester. At one point there was a promise that the entrepreneurs presenting to the Open Angel Forum would get a free meal out of the gig, but that seems to be missing in the info online. No doubt they’ll have some little tables set up in a hallway next to the kitchen for the entrepreneurs, while the investors dine on…
…”steaks and fine wine!” Which brings up the second problem: focus. There’s nothing like pounding down some cow and chugging a few bottles of expensive Bordeaux to get ready to CHANGE THE WORLD. Or take a nap. Whatever. Neither of these issues can’t be overcome — they’re just issues to police.
For this first event, five presenters were chosen from fifty “qualified” applicants — an impressive weeding process. Fifteen über-investors will be in attendance this first time, and they’ll be assessing interest individually. As a result, there isn’t a sense of cooperation among the investors throughout the process.
Overall, my biggest concerns are scalability and sustainability. The goal is to use this event as a springboard for quarterly events in Los Angeles, and to replicate the event in additional geographies as a franchise of sorts. For this first time, the companies and investors were hand-picked by Jason as “chapter head,” and apparently that will be the approach going forward. (“Open”, it seems, has some obscure definitions…) Granted, Jason has been transparent that he has a five-year goal to become “the most sought-after, and value-added, angel investor in the world,” and maybe building a network like this is a way to get there. However, I believe the series will quickly encounter pushback from their sponsors unless the format changes; and that may require new thinking about the financial model. Finally, the net new number of companies getting in front of investors is pretty small, so the overall impact on the investment ecosystem is nominal.
Final verdict: while there may be some initial flaws in the business model, and a fair amount of unrepentant self-interest, the core principles are solid and let’s hope it benefits some new companies.
[Update 1/15/2010: The inaugural event being called a grand success. Entrepreneurs happy, investors happy, a new Colorado chapter announced, and apparently minimal machine-gun fire. Congrats to all – keep it going!]