Revolutionary Angels Defends Business Plan Competition Amidst Widespread Criticism
A post last week on the New York Times’ “You’re the Boss” small business blog examined the phenomenon of business plan competitions with high entry fees, with the focus largely on Revolutionary Angels, a Cambridge, MA-based competition we profiled in early October. The post questioned whether the $4,995 entry fee that Revolutionary Angels charges companies to participate in its competition—which has projected prizes of $300,000, funded by the participants’ own fees—is a good investment for the typical cash-strapped, early stage startup.
“Five thousand dollars is about the cost of one business course at a top university,” Jill Kickul, who directs an entrepreneurship program at New York University’s Stern School of Business, told Times blogger Lora Kolodny. “Can a competition deliver enough mentoring and coaching to be worth that money? Any more than $5,000 sounds like gouging entrepreneurs, to me.”
That echoes some of the skepticism we heard after our October story on Revolutionary Angels. And the Times piece has sparked a new round of critical comments. Seth Levine, managing director at Boulder, CO-based venture capital firm Foundry Group and a principal at Mobius Venture Capital, wrote on his own blog that “There is no circumstance in which entrepreneurs should pay to pitch their business to prospective investors. Period. End of story.” (Actually, the whole statement was capitalized.)
Levine went on to call Revolutionary Angels’ contest an “underhanded hustle” with unjustifiably high fees. “The fact that more than 100% of their investment dollars come from the entrepreneurs they are supposedly helping out makes it even more pathetic,” Levine wrote. He went to argue that if an angel group doesn’t have enough cash to fund startups out of its own pocket and bear the overhead costs of running an investing operation, “then you’re not rich enough to be an angel investor.”
Many other members of the venture-capital tribe have come down on Revolutionary Angels and other investing groups that require fees before reviewing business plans. Shawn Broderick, executive director of the Boston version of the TechStars venture incubator program, blogged in response to our October piece that he has “an allergy to anything that consumes precious start-up capital that does not generate product progress, customers, or revenues.” Mahalo CEO Jason Calacanis, Brad Feld of Foundry Group, and Fred Wilson of Union Square Ventures have all come out publicly against the “pay-to-pitch” model.
After Levine’s response to the Times blog post, I contacted Revolutionary Angels founder and CEO Chris Hurley to ask for his response. Hurley says critics of Revolutionary Angels seem to misunderstand the organization’s entire model—from the nature of the competition to the services rendered to the reasons for using the entry fees to finance the prizes.
First, Hurley says the Revolutionary Angels business plan competition isn’t a marketing-oriented “pay-to-pitch” program like the DEMO technology conferences, the other example mentioned in the Times post. Rather than simply listening to a pitch, the Revolutionary Angels panel members are acting as consultants, Hurley says.
Second, every startup that enters the competition “gets support and help with their business plan and their strategy,” Hurley says. “We’re really trying to give them the benefit of experience from entrepreneurs who have been there and done that.”
In fact, Hurley says that benefit would be worth the $4,995 entry fee even if … Next Page »