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Terk
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April 24, 2013, 08:42:41 PM |
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I am new to bitcoin community, but I've been in the web business for 15+ years and I've been involved in seed stage funding on both sides, as a co-founder of funded startups and as an investment manager of a fund (though not in SV, I'm in different part of the world), so I thought I'll throw my 0.02 BTC.
1) Paying for being able to pitch is wrong. An angel or VC invests on average in one project per 100-200 pitched to them. It means that if I paid $1,000 every time I pitch, I should expect spending $100,000 - $200,000 for pitching alone to find an investor. I will never pitch to anyone who calls himself an investor and requires to be paid for ten minutes of his time of doing his job (hearing pitches is investor/angel's job).
2) $1,000 payment won't protect you from scams. The only thing you can be sure after that payment is that the scam will be huge enough for the scammer to be worth the risk. Additionally, your vigilance will be lowered, you'll feel falsely safe and will be more prone for scams because of that.
3) $1,000 will be a barrier for many people and you'll simply miss so many opportunities. You really want to hear as many pitches as you can, and it's your judgement what should let you filter the serious and good ones. If you doubt your skills in this department, then you shouldn't even start investing. I repeat: you want to hear as many pitches as possible. Not only from established companies but from the “garage kids” with great ideas and skills to execute them.
4) $5,000 signup fee will be a barrier for most people wanting to invest. It will effectively create a millionaires club. Let me calculate what any reasonable person should calculate. To pay $5,000 to join the club, I would need to have at least $250,000 budget for angel investing - and that would mean that I literally spent 2% of my fund just to join some forum, not investing in anything yet and not having any guarantee that it'll lead me to good investments. There's no way I'd spend more than 2% of my fund on joining the club. And even at 2%, I would join only if I would strongly believe that it will significantly improve my position and investment opportunities - and you need to have some convincing success stories for that. But keep in mind, knowing that the club provides barriers for startups, like paid pitches, isn't that much promising. But even if I'm convinced and want to join: to have $250,000 gambling money, I would probably need to have at least ~$1M of liquid assets. Angel investing is very high-risk and you should only put your play money here. So that's the minimum reasonable level which should allow reasonable people to even think about joining your club - and that's still with many doubts and ifs about the $5k fee.
5) You should want to earn money with your angels and with startups, not on them. All these fees don't make that clear.
6) I'm not sure what kind of projects you keep in mind, but we're in an online area where barrier of entry has been significantly lowered in recent years. Smart people can do great things having as little as $20,000. The $20,000 - $100,000 per project is a very common range in web industry for seed/angel round and clubs like this usually invest collectively. That means three-six angels per project and that means $5,000 - $30,000 angel commitment in a project. Let's assume $15,000 on average. So to spend $250,000 fund, an angel would need to invest in 16 projects. Assuming 20 angels that is 64 funded projects, which is really huge. This again tells me that $5,000 signup fee isn't worth paying.
7) As for spending $5,000 per angel on hosting and domain name, so possibly $100,000 from 20 angels - I'll leave that with no comments. Or... I might have just the perfect domain name for you and it's only $75,000. PM me if you're interested ;-)
(but seriously, I do have a perfect domain for that).
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What I think you should change:
1) Pitching is free. Everyone can pitch you by some web form and that automatically creates a thread in an “inbox” section of your angels forum. Every angel has access and can view the pitches. Some angels will be heavily involved in that, other won't. If any angel thinks that the pitch is promising, he moves the thread to “discussion” section to start discussion about the project. This will be your initial filter of incoming pitches and it can be done collectively by angels. The rest is as you've described - you discuss the project and if angels decide to move it to the next level, you invite the founder to a newly created thread.
2) Signup fee should be small enough to allow angels with $100,000 gambling money to jump in. That is no more than $2,000 signup fee and preferably $1,000. The $100,000 fund should allow the angel to invest in four-five projects on average (assuming three-six angels per project). Keep in mind that being involved in more projects takes time and if someone doesn't want to be a full-time investor, he might want to limit their commitments. Angel investing is not fire&forget style of investment. Also, $1,000 fee should be significant enough to make only serious people to join.
3) If you specifically want to create an exclusive club and need to charge $5,000 signup fee per angel, you should spend that money on hiring a professional to manage your portfolio. Someone to work with funded startups on a daily basis, to keep track of their progress, to consult things, to help them if necessary with their business model or simply by connecting them to the right people and opening doors. This is a fulltime job and if the club provides that, it would create a great added value for angels, which actually might be worth that signup fee.
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I hope at least some of these comments are helpful. There are various styles of investing and you might have something different in mind than I do, so my assumptions might be wrong. Perhaps you think about investing in established companies with working products - of course that requires millions to invest and investors who aren't scared of $5,000 signup. But that's not seed investing and I was relating to seed stage.
Besides my comments, I think it's a great idea. Bitcoin insiders / early adopters are the right people to invest in bitcoin startups, as they can provide so much more than money. But smart investing in people isn't that easy, especially if you don't have experience in that. It's always easier and safer to do it in a structured way and in a group, where people like you can discuss things together and use their collective wisdom. That's why I like your investment club idea.
That said, you shouldn't be crazy to try to invest in everything bitcoin-related and leave no space to SV. Having Silicon Valley invested will help bitcoin get recognition, get involvement of some serious “outside” money, be even more talked about and be harder to fight once governments decide they need to fight it. If we keep everything in our own circle, well... we'll keep it in here. And we want bitcoin to spread to the world. Having SV as evangelists always helps. So please don't invest in everything that's viable and leave some space for them ;-)
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