Wow. I was quite shocked when I read about this.
Reading this angry blog post by Jason Calcanis – The founder of Mahalo (A human search engine) about angel investors charging hefty sums to hear start ups pitch their ideas completely blew me away. It is plain wrong! And I completely agree with him and his war-cry against them
I agree that angel investors might have to bear through tons of pitches a day, but charging ridiculous amounts of fees ~$5000 is just wrong.
A friend of mine pointed out that, they should charge (a nominal fee -$100 or so) to sift through people who are interested in pitching their ideas. Which I still think is wrong. Consider a similar analogy: What if recruiters start charging for accepting resumes from candidates who are looking for job? They start charging $10 per job. According to my friend,
“As the recruiter, you have your limitations in the number of resumes you can see and review. But if you go chronologically or alphabetically, there’s a very real chance that you might miss out on some great resumes because of time constraints… so to make sure that the guys who are serious about getting this job get their due review, you charge them a token amount to bring their resume on the top of the pile. This helps in making sure that those who are REALLY looking for a job get reviewed before lots of guys who’re “just trying their luck”"
Firstly if you are looking for a job, you want to cut corners as much as possible. Similar is the case with startups. If money was in abundance, then there wouldn’t be any issue.
Secondly, I still feel this is not justified because it is the recruiter’s job to sift through the resumes and choose the right candidate, and this is what he has become adept at after all the years of hard work in the industry. It takes a recruiter 10 seconds to sort through resume that are worth another look. So, by charging $10, he is possibly blowing away his chances of a potentially worthy candidate not opting for his service. Also, the recruiter earns his due share by taking a premium off the client he is working for.
Imagine a scenario where someone who got laid off from a company and is seeking an opportunity. He will be sending his resume to atleast 15-20 recruiters with absolutely no guarantee that his resume will be shortlisted. What if companies start charging for applying requisitions on their website? A student who is looking for a job, who on an average applies to atleast 100+ companies, would be bankrupt by the end of his job hunt!
Similarly is the case with angel investors. If you don’t get funded after 8-9-10 pitches .. your startup is $2,000 in debt for no reason whatsoever. It’ll be fun to see blogosphere’s reaction to Jason’s post.
