Blake Jennelle (The Blog)

The Philly Business Journal just published a story on this discussion of Angel Venture Fair pricing. See the full article here on the lovely Vuzit document viewer:

http://vuzit.com/view/7cu8/?oid=3&key=Vuzit

As a founder/CEO who has seen the AVF work well for him, I guess I kind of take issue with Blake's view.

Several years ago my company, the Off-Campus Dining Network, was selected to present at the AVF. Getting in to present wasn't easy, as there were many more companies wanting in than could be allowed due to space. Luckily we made the cut, as out of my AVF connections we secured additional funding and added a board member/investor who helped us greatly through our growth. We thankfully ended up as a Philly 100 #3 company (as well as winning a best place to work award from another source) and were able to profitably exit with a sale to Sodexho (a $13B French food service firm) in only 4 years. The AVF clearly played a part in the journey to that success.

On Blake's other comments about the possibly "lame" Philly angels... I hope Blake and other entrepreneurs realize that, in these current times, early stage companies are competing for capital with some very attractive business deals that can be made for stable yet growing companies that simply cannot secure bank financing as they would have in the past, and as such early stage companies have to be much better. I teach in the entrepreneurship program at a local university - and am one of those "lame angels" with investments in multiple companies - so I have seen lots of companies present. Many do not realize what will resonate with Angels - and in that regard I think the AVF process helps greatly. When compared with the costs and complexity of getting in front of other groups - and the coaching and help provided - the money I paid to AVF was a great expediture and I would do it again. AVF leader Valerie Gaydos actually, when my company was there, helped us connect with specific investors for our space, and the communication coaching provided made our presentation really zing. It was good, and I would recommend it to others.

Having said all that - do I think the angel community in Philly can do better - you bet. I am actively trying to do so with actions (like teaching) and investing as an angel.

I know we are all entitled to our point of view, but felt I should make sure alternative views are know.

Hey Ken, thanks so much for your note. Sounds like you're exactly the kind of angel we need more of in Philly - angels who are entrepreneurs themselves, especially with a recent exit and recent operating experience.

Let me be clear - Having an angel fair in Philly is critical. I just think we can do better than the current AVF. We can have one that's affordable (and more respectful) to entrepreneurs. One that qualifies its "angels" to make sure they are actively investing so that pretenders aren't wasting entrepreneurs' time (Brad Feld defines an angel as someone who invests at least $25k each year in a startup). One that emphasizes companies at a stage where angels belong (angels in California and Boston and NY are still playing early with all the same macro trends you mention, and Philly angels still aren't, just like they weren't before these trends).

I'd much rather see the AVF become this kind of angel fair but I don't think any of us expect that to happen.

Blake - thanks for your note. I agree it needs to be made better, and a lot of that may be breaking some of the "old guys" away from the AVF being a social vs. an investment forum. I do think it can be changed - but maybe I am just an optimist!

Anyway - good dialog. Thanks.

Ken
Ken Schwenke
ken@schwenke.cc
(610) 977-2079 (office)
(610) 246-9831 (cell)

While I have indeed had some telephone conversations with Blake regarding AVF, Blake's interpretation of our discussion is absolutely incorrect.

While any investor LIKES to see a company with actual revenues and customers (and $500k wouldindeed be impressive), it is clear from the companies that have been invited to present at AVF - both past and present - and those in which AVF have invested in - that many companies at AVF have been "pre-revenue." So far, 2010 is no different. More than 20% of the companies invited to make presentations this week are indeed "pre-revenue."

This simple fact that can be confirmed just by going to the Angel Venture Fair website and clicking on 'Past Presenters."

http://www.privateinvestorsforum.com/angelventu...

While Blake is absolutely correct that various regions have various risk profiles. And this region may be in some cases a bit risk averse in some industries. This area is also MORE risk tolerant in others.

I too would like to see our regional investors take more risk. But that comes with successful exits.

We indeed need to make greater connections to other parts of the nation. That is why I am actively involved in the Angel Capital Association which is the national network of angel investors. Additionally, PIF Chairman Richard Levin is also a member of the TechCoast Angels in California.

Capital comes from successful companies. Successful companies come from well capitalized companies.

AVF track record speaks for itself. I commend DreamIt, PSL and everyone else who is working to make this community strong. But beating up on each other is counterproductive.

We all want to see this region grow and the more that any of us can do to encourage companies to work together and pool their resources the better. PSL is a great forum in which to do that especially for pre-revenue companies.

Regarding AVF price, I encourage all companies considering to apply to AVF to do their homework. AVF is indeed not for every company since it is not simply a showcase. For the price, AVF pays for various venues, receptions, coaching, exclusivity and one-one one meetings scheduled with investors, key investors invitations geared to the invited companies. For that the price provides extreme value. In fact, some have suggested that it needs to be raised. Each year AVF finalists collectively raise close to $5M. And since 2004 AVF companies have raised close to $16M. Having a historical success rate of having 75% of all finalist companies getting funding speaks for itself.

I welcome all suggestions on ways in which we can all work together to make this region stronger.

"I too would like to see our regional investors take more risk. But that comes with successful exits."

"Capital comes from successful companies. Successful companies come from well capitalized companies."

I think that both of these statements are telling, and I believe to be true, of the state of not only the investor pool, but the pool of companies to invest in.

I think that in Philadelphia, we're still building from all angles (that's angles, not angels), a more mature hi-tech startup ecosystem. Not all of these angles will support one another's approach, nor do they have to. I've spoken out against the ones I disagree with, but also actively support and participate in the ones that I do agree with. There are still plenty of holes in that ecosystem to patch up, and all that means is that there's ripe opportunities to create.

Carpe diem.

I don't know if I feel as strongly about the issue as you do, but it does seem to be a mis-step for a group that is (or should be) showing what they can do for start-ups in Philadelphia.

The group's real constituency is its angels. The problem is when they forget that startups are the main attraction to those angels.

As the founder & CEO of TicketLeap, I felt I should chime in on this. First, thanks to Blake for plugging TicketLeap in the local community. As a lot of folks know, our business has been on fire and it's good to have people looking out for our success.

It would have been great if we could have delivered the services for this event since so many people I care about will be there, but that is more for personal reasons than business reasons. Our business is kicking ass with or without AVF as a client.

I remember that struggling feeling of not having two pennies to rub together and scratching my head wondering where I'm going to get the $1500 to present at an angel event. I forked over the cash on one occasion, but I can't say that is what lead to our eventual funding. The best way to find angels is to network and talk to everyone you know. That's what got TicketLeap its first round.

To get the facts straight, we haven't been pitching to AVF in a number of years and the last serious conversation we had was back in 2005 (a year before Eventbrite was launched). I was willing to give the service away just to get some free exposure, but it was the same story at that time. It would have been nice....oh well, move on.

Now as far as this Blog post goes....I love Blake, but I don't know if online rants are the best way to solve these problems. Back in 2006-2007 timeframe I remember wishing that there was a community of like minded entrepreneurs to talk to and learn from. I was also wishing that Philly had a better community of tech talent. It was right around that time that Indy Hall, Philly Startup Leaders and DreamIT Ventures showed up on the scene.

These groups and ideas are DRAMATICALLY changing what it means to start a company in Philadelphia. If you don't think so, imagine if they weren't there.

So, rather than having shouting matches with institutions that we don't agree with, I say that guys like Alex Hillman, David Bookspan, Blake Jennelle's and everyone else should just keep doing what they are doing to change the world. It really IS different because of you. Don't worry about these other institutions because eventually the story will change.

As for AVF, I have no disrespect at all. They have been around for a long time and some great companies have come out of there - including Fingerworks, AVF 2004, the company that created multitouch (sold to Apple).

http://www.roughlydrafted.com/2010/01/23/inside...

Oh, and thanks for the love, and placement in good company :)

Word. Don't like it, fix it. Bitching in public discourse is not the same thing as mobilizing, something our community has shown time and again it can do.

I haven't agreed with Chris on a lot of things, but I have to give him a big "hell yeah" and a high five this time around.

Blake's record suggests that he doesn't just talk, but primarily acts. (See PSL, or the Missioneurs event, or that, prior to this post, his initial reaction to this problem was trying to privately persuade the AVF people to get a clue.) Your stock criticism may be valid against other individuals in other contexts, but this is not one of them.

Also, in the context of this particular problem, public talk may have value in itself in demonstrating AVF's irrelevance to Philly entrepreneurs and warning them off wasting their money.

I'm hearing you both suggest that you'd rather I didn't speak out without taking action. I see speaking out as valuable on its own. It's also valuable as a first action step. It's how we find out who else is passionate about an issue, clarify our position together and begin to mobilize a community. It's also a great way to identify who wants to lead a collective response.

I disagree. Way more people like to talk than do. You're attracting more talkers, not necessarily more doers.

You can lead with actions. Lobby efforts like this have a singular bi-product, whereas the collective bi-products of action (instead of initiating collective response, a.k.a. noise) is a much larger net gain, even if you're ultimately ineffective with the lobby effort itself.

The fact is, it's harder to lead with actions than with words, because it requires you to take that first step alone. If it's the right step, you wont be alone for long.

I agree for the most part. I think you diminish the importance of conversation more than I would but that's at the margins. Personally I'm glad to be speaking more as I lead than I was before. So far it has opened up more options and resources than the quieter approach I'd been using before.

Thanks so much for your kind words Chris. I think you're right that best way to respond to what's missing is to create (and be) the alternatives we wish we had.

Philly is on a great trajectory. And until our community replaces it with something better, I'd rather have an AVF than nothing at all.

Here here.

Also, I keep saying this. We need to get Jason Calacanis to bring the Open Angel Forum here.

http://openangelforum.com/

Perhaps a good way would be to attract his attention is through his weekly podcast: This Week in Start-ups (http://thisweekinstartups.com/).

Or if you do want to do it yourself, you could always start your own podcast...

It'd be great if Jason were to get involved, but I think the real change is likely to be homegrown. I'd love to see folks in our community take it upon themselves to create something better.

How do we go about bringing OpenAngelForum to Philly?

Nike said it best - just do it.

I love that Valerie Gaydos told you that they weren't looking for companies at the "PSL stage". That's not what I've heard from countless people involved with AVF. This year, had I applied, I would not have had to pay the application fee because the Drexel Baiada Center is a sponsor, but last year, when I would have had to pay, a bunch of people told me to apply. They were more than happy to take my money. (I didn't give it to them.)

I'm with Tal on this one by the way. When we get around to raising funding, we won't be looking in Philadelphia. We already know we don't fit First Round's criteria. There aren't many others worth listening to. There are a few people here, but only individuals.

Also, they say that 70% of companies have raised funding. If they're all $500k+ in revenues, this means those rounds should be in the multi-millions. Based on the data I've seen, there is something seriously off with the whole thing.

I also agree about the TicketLeap thing. It's especially ridiculous that there is cross-over with investors.

Blake, I told you that I was going to sit out on this after that rant on the PSL list, but I'm starting to think differently.

Jameson - thanks for posting. I am not sure why Blake would fabricate such ablatently false statement regarding comments from me personally. It puzzles me why this would be fabricated when the facts and people speaks for itself...even you

As you say "That's not what I've heard from countless people involved with AVF" Facts show that AVF does look at early stage companies and AVF companies have raised close to $16M since 2004.

If anyone has any questions, I encourage you to contact the companies that have gone through the process, not the companies that did not.

You repeated that you're not looking for "PSL stage" companies about five times during our most recent call, which I believe was the fourth call I took with you on this issue. None of my feedback resulted in so much as a token change in price or attitude from the AVF.

Valerie, I'm not sure about all of the details, but I'd be more than happy to speak. Honestly, I know Blake is not the only person who feels this way, and a lot of us aren't particularly interested in going through the AVF process. Reason #1 for me is that the early stage investors who I most respect have made it abundantly clear that entrepreneurs should not pay to pitch. I do hear your side though about needing to charge money, but I do wonder why it costs the entrepreneurs significantly more than the angels. It kind of feels like the entrepreneurs are funding a nice networking event. We don't care that it is at a nice, expensive venue. Maybe the angels do.

I don't want to make a big fuss of things online. Honestly, I'd like to see some resolution, and I'd be more than happy to listen to why I should apply to AVF. I will say that if AVF doesn't address these issues in some manner, I would bet that another event will arise one way or another. There has been some serious discussion about getting Jason Calacanis to bring the Open Angel Forum here.

Anyway, I'd like to grab lunch sometime and discuss. Fragmentation doesn't help anyone. If you're interested, you can reach me directly at jaymstr [at] gmail [dot] com.

OK, so, shouldn't companies with $500K+/year revenues be looking for first-round VC money? These are growth stage companies that have since broken even and become profitable. Why would a company generating this type of revenue even be interested in talking to an Angel? I thought the whole point of Angel investing was to catch a company pre-seed... in prototype, perhaps with some customers but still very early stage. Obviously risk is much higher, but the investments are much, much smaller. These are the types of companies that need Angel investments... smaller chunks of change to help them along their journey to profitability.

These early-stage companies are working out of basements, partnering up and giving %'s of their young companies away to employees that will work for free to help them build their dreams. They certainly do not have $1,250 to drop for a venture fair where they will be competing with dozens of other struggling startups for what is likely a handful of $50,000 investments.

I don't really care who AVF uses for their ticketing. I would prefer Ticketleap, obviously. What rubs me the wrong way here, is the lacking connection between these angel investors and the startup entrepreneur community. Do they really not understand what it means to be a struggling startup? Were they not all there at one point or another?

Equally confused and irritated ~ Aaron

I totally agree. The notion that our angels want to play at the $500k+ revenue stage is laughable. Unless they want to start putting in serious money an individuals, they are sentencing themselves to be very small fish. Are entrepreneurs going to have time to take their calls if they are putting in $25k in a $1M round (i.e. 1/40)?

Philadelphia angels in general are known by all entrepreneurs to be slow wimps who are essentially looking to invest in treasury bonds, or Google circa 2010. Forget upstream or downstream, they don't even know what the stream is.

Fortunately, they are irrelevant. Twenty early-stage companies over the last two years were funded without having to deal with the local angels, because of the innovative frustration of three angel investors who founded Dreamit Ventures. One of these investors, David Bookspan, was even once head of Robin Hood and decided it was important to have Dreamit in Philadelphia.

I am a founder of one of those companies. For our angel round we had to go to Michigan to raise funds. Yes. Michigan. Because the angels we talked to in Philly were a waste of our time.

Laughably conservative angel investors are killing Philadelphia startups.

DreamIt really is helping to fill a critical part of the funding gap. Much more is needed.

For investors, the seed stage presents a great opportunity. They have their pick of their litter because startups have nowhere else to go, and valuations are really favorable. If I had an exit behind me, you can bet I'd be investing way early.

If you're describing this thing accurately, the AVF is full of suckers and lamers. I wouldn't feel at all bad about sitting it out. I'd exert my energies instead on organizing or promoting Philly events with *actual* angels in attendance.

I think you're right. Expecting these things change is a recipe for frustration. Supporting (or building) alternatives is the way to make a real difference.