Angelsoft has two business models. One is where they charge entreprenuers to essentially pitch their angel members. The second is they provide a platform for angels and even some VCs to automate their application process. With this model the process is free to the entreprenuer and the angel or VC covers the cost.
While I believe the first model is useless money spent, I do believe the second model is much better and entreprenuers should not avoid filling out an angel groups investment application based solely on the fact they use Angelsoft to process the application. I have utilized the process myself and while I did not get funding from (I did get face-to-face meetings though) the angel groups I submitted to I found the application process easy and organized. I am familiar with several groups that utilize the Angelsoft platform and all are very reputable.
Long story short, blindly sending your business plan to just about ANY investment group (excluding YC and similar models) is not going to get you anywhere. Introductions and networking are the only true way of having a chance at any investment. I can think of other things to spend the $250 on than a membership with Angelsoft. On the other hand, if you have interest in a specific angel group or VC and they point you to Angelsoft to submit your business plan, etc... know that (a) it is free for you; and (b) that Angelsoft is a legitimate platform for submitting your application.
Note that I have no affiliation with Angelsoft other than I have utilized their platform to submit to several VCs.
As the COO of Angelsoft and the creator of the Open Deals/The Investor Community, I can shed some statistical light on this question.
First let me clarify that since 2004 Angelsoft has been building tools that help Startups and Investors communicate more effectively. That's what we talk about every day. That's what keeps me up at night. Open Deals is one of those tools.
We originally released Open Deals as a way for Angel Groups to post deals that they wanted to do, but didn't have enough cash to do alone (This is a surprisingly common problem for these groups).
As Open Deals gained traction with our groups, we thought we could use it to solve another problem: Unknown entrepreneurs applying to groups and getting rejected because they were unknown. Most guys who are unknown are unknown for a reason, but obviously if you can never get an investment unless you've been successful before, we've got a problem.
We figured we'd encourage these new entrepreneurs to apply to Open Deals, let the investors crowd source them, and if a guy was legit, he'd get voted up and referred into some groups. Since he was referred, we figured the group might pay attention to him.
So has it been successful?
1. First, our marketing around it has sucked (and still does). We're more of software company and marketing hasn't come naturally to us. We're working on a complete site redesign coming out early in March we think will fix this.
2. Since we began we've had 243 companies referred from Open Deals to groups. That's about 25% who applied.
3. Companies that are referred from Open Deals are 225% more likely to get a meeting with a group than a direct submission to that group.
In short, Open Deals is doing okay. You guys are smart enough to figure out if it's worth $250 for you, but I can say, that for most entrepreneurs its more than worth the money. And I'm not talking about those that get meetings. A lot of entrepreneurs get dinged or ignored when they apply. We take some heat for that, but the truth is, these guys paid $250 to find out they're not ready for prime-time. And speaking as an entrepreneur who has spent thousands of dollars and years of his life pursuing ideas that were not ready, I can say that $250 is a bargain.
There are several angel groups that charge money to present to them. I would not recommend doing this.
Angel groups generally are worthless (out of 102 YC-funded startups prior to this cycle, zero got money from angel groups), and the ones that charge you to present seem particularly dubious. If they had good deal flow, they wouldn't have to charge you to pay their operating expenses; angels would pay them for access to it. Plus the best angels tend not to be members of these groups; they don't need to. Which means this is a world where lame startups present to lame investors.
As much as I like the creator of AngelSoft, I think the $250 offer is wrong. AngelSoft provides good value by unifying the application process to many legitimate groups out there (angel forum for instance). One thing I hate is when each web site has a slightly different format to ask me about my business. TechCrunch has a template. YC has one. It goes on and on.
So AngelSoft is successful in that regard, with the hundreds of groups using them. The fact that they tried to monetize it by charging rookie entrepreneurs, well... it depreciates their brand.
Alain, as much as I appreciate your kind words [grin], I disagree with your premise. If the alternative is to NOT open the platform to entrepreneurs, how does that help anyone? Even in a world of Web 2.0 and fast-track development, creating, maintaining and operating a site like Angelsoft is very non-trivial. Since the company is not a charity, there needs to be a business model somewhere through which we provide enough value (both real and perceived) that someone(s) is willing to pay for it.
After spending five years of time, effort and a 20 person team developing a single platform that now powers a large majority of the world's organized angel investing, we've finally got something which entrepreneurs [correctly, in my view] believe is worth paying $250 for: powerful tools for managing their fundraising process, combined with access to over 15,000 legitimate investors who use the other side of the platform as their own deal processing tool.
In contrast, there are probably two dozen sites on the web which purport to be 'matching services' for entrepreneurs and investors, but the unfortunate dark secret is that while those sites often charge much, much more (in some cases, thousands of dollars), they have NO investors at all. With Angelsoft, we have created (for the first time anywhere) and provide (completely for free) a single, searchable directory of just about every angel group around. Together with a free "common app" for funding (as you noted), and the ability to apply to multiple groups at no charge through the site with a single click, I think it is fair to say that Angelsoft has done more to help entrepreneurs navigate the often-confusing world of angel investing than anyone else, ever. That's why we're the official software platform of the non-profit national and international associations of angels and angel groups in the US, Canada, Europe, Australia, the Middle East and elsewhere.
I think the best way to look at Angelsoft is in the context of something like LinkedIn, for both investors and entrepreneurs. As with LinkedIn, basic use of the system is free to all, which enabled them (and enables us) to establish a meaningful universe of participants who gain real value from the basic services. With the platform then in place, they (and we) can now layer on additional, value-added services which may (or may not) be worth the cost to any given participant.
Do you think less of LinkedIn because they charge for job postings? How about receiving InMail, for which privilege the sender pays? If you don't want to receive InMail, you simply uncheck a box. If the sender doesn't feel that the ability to send messages is worth $25-$400/month, he or she doesn't pay it. But without the existence of the underlying site, value-added features like InMail and job postings wouldn't be possible in the first place.
With Angelsoft, we are always trying to navigate carefully among the needs of our three constituencies: angel investors, entrepreneurs...and ourselves as a for-profit company. Investors would love it if they only got one deal a month, and it was a guaranteed 30x return that was available only to them, for free. Entrepreneurs would love it if they could have free and unfettered access to the personal emails of 15,000 check-writing investors. I would love it if both of the forgoing paid Angelsoft hundreds of millions of dollars annually :-). Unfortunately, all of the above desires are mutually exclusive.
We think that we've done a pretty good job at creating a compromise platform that supports all three constituencies (well, at least the first two; we're not quite breakeven at Angelsoft yet :-), but we welcome any constructive comments or suggestions as to how we can improve our value proposition to everyone.
If you're dumb enough to pay money for this, you're dumb enough that your site will never make any money. The only ones who will get rich from this are the owners of the site - they are selling you a dream, and you are paying for it.
Spend the money on some proper SEO services instead, it will do you more good.
And let me give it to you square - your site will NEVER get funding. It's not hot, it has little potential of becoming huge. It's the type of site that can make solid money, but only by targeting the users directly. When you are making good money, the angels will come to you.
If you are trying to raise funding for your site, you are in the business of dreams, not reality.
[+] [-] amobilebiz|17 years ago|reply
While I believe the first model is useless money spent, I do believe the second model is much better and entreprenuers should not avoid filling out an angel groups investment application based solely on the fact they use Angelsoft to process the application. I have utilized the process myself and while I did not get funding from (I did get face-to-face meetings though) the angel groups I submitted to I found the application process easy and organized. I am familiar with several groups that utilize the Angelsoft platform and all are very reputable.
Long story short, blindly sending your business plan to just about ANY investment group (excluding YC and similar models) is not going to get you anywhere. Introductions and networking are the only true way of having a chance at any investment. I can think of other things to spend the $250 on than a membership with Angelsoft. On the other hand, if you have interest in a specific angel group or VC and they point you to Angelsoft to submit your business plan, etc... know that (a) it is free for you; and (b) that Angelsoft is a legitimate platform for submitting your application.
Note that I have no affiliation with Angelsoft other than I have utilized their platform to submit to several VCs.
[+] [-] drstarcat|17 years ago|reply
First let me clarify that since 2004 Angelsoft has been building tools that help Startups and Investors communicate more effectively. That's what we talk about every day. That's what keeps me up at night. Open Deals is one of those tools.
We originally released Open Deals as a way for Angel Groups to post deals that they wanted to do, but didn't have enough cash to do alone (This is a surprisingly common problem for these groups).
As Open Deals gained traction with our groups, we thought we could use it to solve another problem: Unknown entrepreneurs applying to groups and getting rejected because they were unknown. Most guys who are unknown are unknown for a reason, but obviously if you can never get an investment unless you've been successful before, we've got a problem.
We figured we'd encourage these new entrepreneurs to apply to Open Deals, let the investors crowd source them, and if a guy was legit, he'd get voted up and referred into some groups. Since he was referred, we figured the group might pay attention to him.
So has it been successful?
1. First, our marketing around it has sucked (and still does). We're more of software company and marketing hasn't come naturally to us. We're working on a complete site redesign coming out early in March we think will fix this.
2. Since we began we've had 243 companies referred from Open Deals to groups. That's about 25% who applied.
3. Companies that are referred from Open Deals are 225% more likely to get a meeting with a group than a direct submission to that group.
In short, Open Deals is doing okay. You guys are smart enough to figure out if it's worth $250 for you, but I can say, that for most entrepreneurs its more than worth the money. And I'm not talking about those that get meetings. A lot of entrepreneurs get dinged or ignored when they apply. We take some heat for that, but the truth is, these guys paid $250 to find out they're not ready for prime-time. And speaking as an entrepreneur who has spent thousands of dollars and years of his life pursuing ideas that were not ready, I can say that $250 is a bargain.
[+] [-] andrewljohnson|17 years ago|reply
I'm considering applying for my company - www.trailbehind.com, after we launch our new version next week.
[+] [-] pg|17 years ago|reply
Angel groups generally are worthless (out of 102 YC-funded startups prior to this cycle, zero got money from angel groups), and the ones that charge you to present seem particularly dubious. If they had good deal flow, they wouldn't have to charge you to pay their operating expenses; angels would pay them for access to it. Plus the best angels tend not to be members of these groups; they don't need to. Which means this is a world where lame startups present to lame investors.
[+] [-] bouncingsoul|17 years ago|reply
[+] [-] cperciva|17 years ago|reply
[+] [-] breck|17 years ago|reply
Why not apply without paying and if they actually ask you for the $250 then say screw it.
If they think you're going to be successful, they'd want you to use their site and won't charge you.
[+] [-] alain94040|17 years ago|reply
So AngelSoft is successful in that regard, with the hundreds of groups using them. The fact that they tried to monetize it by charging rookie entrepreneurs, well... it depreciates their brand.
[+] [-] davidsrose|17 years ago|reply
After spending five years of time, effort and a 20 person team developing a single platform that now powers a large majority of the world's organized angel investing, we've finally got something which entrepreneurs [correctly, in my view] believe is worth paying $250 for: powerful tools for managing their fundraising process, combined with access to over 15,000 legitimate investors who use the other side of the platform as their own deal processing tool.
In contrast, there are probably two dozen sites on the web which purport to be 'matching services' for entrepreneurs and investors, but the unfortunate dark secret is that while those sites often charge much, much more (in some cases, thousands of dollars), they have NO investors at all. With Angelsoft, we have created (for the first time anywhere) and provide (completely for free) a single, searchable directory of just about every angel group around. Together with a free "common app" for funding (as you noted), and the ability to apply to multiple groups at no charge through the site with a single click, I think it is fair to say that Angelsoft has done more to help entrepreneurs navigate the often-confusing world of angel investing than anyone else, ever. That's why we're the official software platform of the non-profit national and international associations of angels and angel groups in the US, Canada, Europe, Australia, the Middle East and elsewhere.
I think the best way to look at Angelsoft is in the context of something like LinkedIn, for both investors and entrepreneurs. As with LinkedIn, basic use of the system is free to all, which enabled them (and enables us) to establish a meaningful universe of participants who gain real value from the basic services. With the platform then in place, they (and we) can now layer on additional, value-added services which may (or may not) be worth the cost to any given participant.
Do you think less of LinkedIn because they charge for job postings? How about receiving InMail, for which privilege the sender pays? If you don't want to receive InMail, you simply uncheck a box. If the sender doesn't feel that the ability to send messages is worth $25-$400/month, he or she doesn't pay it. But without the existence of the underlying site, value-added features like InMail and job postings wouldn't be possible in the first place.
With Angelsoft, we are always trying to navigate carefully among the needs of our three constituencies: angel investors, entrepreneurs...and ourselves as a for-profit company. Investors would love it if they only got one deal a month, and it was a guaranteed 30x return that was available only to them, for free. Entrepreneurs would love it if they could have free and unfettered access to the personal emails of 15,000 check-writing investors. I would love it if both of the forgoing paid Angelsoft hundreds of millions of dollars annually :-). Unfortunately, all of the above desires are mutually exclusive.
We think that we've done a pretty good job at creating a compromise platform that supports all three constituencies (well, at least the first two; we're not quite breakeven at Angelsoft yet :-), but we welcome any constructive comments or suggestions as to how we can improve our value proposition to everyone.
-David S. Rose, CEO, Angelsoft
[+] [-] matthias|17 years ago|reply
[+] [-] Cunard2|17 years ago|reply
[+] [-] point|17 years ago|reply
Spend the money on some proper SEO services instead, it will do you more good.
And let me give it to you square - your site will NEVER get funding. It's not hot, it has little potential of becoming huge. It's the type of site that can make solid money, but only by targeting the users directly. When you are making good money, the angels will come to you.
If you are trying to raise funding for your site, you are in the business of dreams, not reality.
[+] [-] andrewljohnson|17 years ago|reply
Of course, we'll need more in 2010, hence my constant quest for more money.