Paying to Pitch (revisited again)
February 3, 2010
Two years ago I asked, “Should Startups Pay to Pitch” and last year after reading a post from Jason Calacanis titled, “Why startups shouldn’t have to pay to pitch…“ I revisited the issue. Earlier this week I got several emails from a group called youngStartup Ventures that called my attention to this issue once again.
Koby Radonsky from youngStartup sent several emails to various people at Big in Japan offering to feature ShopSavvy as one of the ‘20 Top Wireless Innovators‘ at the 2010 Mobile Venture Summit later this year. He suggested that if we attended we might be able to meet potential investors. He dropped the names of a bunch of investors including: John Balen, Woody Benson, David Blumberg, Dominic Endicot, Austin Hill, Todd Hixon, Seth Levine, Sean Marsh, Mark McDowell, Ted Mocarski, Ryan Moore, Patrice Peyret, Deepak Sindwani, Miles Spencer, Roger Walton, Sharon Wienbar and Dave Zilberman.
I emailed Koby back suggesting that we were pretty busy, but that if our participation could help his event we would send someone to Boston in April to present. We don’t usually turn down a good PR event. Koby emailed back and suggested that I would need to pay $4,500 to present and be recognized as one of the ‘20 Top Wirless Innovators’. I’ll be honest, I suspected this was a ‘pay-to-pitch’ scheme when I offered to participate. After getting Koby’s second email I let him know about my feelings about ‘pay-to-pitch’ programs.
If I have said it once I have said it a million times - ‘deal flow is the currency of the venture capital community - without it they would fail.’ Imagine inviting a cow to dinner, requiring him to pay and then serving him to your guests. In my view that is exactly what youngStartup is doing. Koby didn’t agree explaining:
“I hear what you’re saying but I don’t agree nor do the many companies who pay to present at our many summits and have secured serious funding. For startups looking to grow into million$ companies and then get bought out for more, which is just about every startups dream, 4500 is chump change. If you calculate the time , costs, traveling, meetings, rejections and aggravation a startup has to incur until he connects with the correct VC partner, your way past 4500 not to mention a little burnt out. Our summits put all the correct people in one room and gives the startup his chance to raise capital in one place, one day, in addition to becoming more knowledgeable in the industry, and great networking opportunities. I’m not sure you’re looking at this objectively.”
I think the whole concept of ‘paying-to-pitch’ takes advantage of entrepreneurs. Clearly Koby and his team are not going to get the ‘20 Top Wireless Innovators’, instead they will get the ‘20 Wireless Companies Willing to Pay $4,500′. Wouldn’t the investors be better served by youngStartup to have the ACTUAL ‘20 Top Innovators’ regardless of whether or not they were willing to pay to pitch? While this is likely an select group, it certainly isn’t exclusive. I wonder if youngStartup is charging the VCs to attend as well or are they getting in for free?
I can’t imagine that John Balen from Canaan Partners would sit in a meeting he knew a startup paid $4,500 to attend. Do you think he charged Blurb or Echopass $4,500 to pitch? I doubt it. Doesn’t it seem like a conflict of interest? By being party to a ‘pay-to-pitch’ scheme does he have some sort of obligation to listen to pitches from all 20 companies? Do you think his limited partners know that he is involved? Does he know Koby is using his name to convince startups to pay youngStartup $4,500?
I am specifically calling out youngStartup because a) they spammed ALL of our email addresses, b) my opinion that charging startups to pitch is just wrong and c) he said I wasn’t objective (just kidding about c).
Update (Jason’s comments):
