Yesterday, we ran an essay by Jason Calacanis, in which he expressed his disgust and disdain for groups like Keiretsu Forum and PrivateEquityForums that charge startups to pitch angel investors. Below is the second part of Jason’s crusade, in which he publishes some of the blistering responses he has received.
We would be glad to publish responses from Keiretsu Forum, PrivateEquityForums, and other groups mentioned here. — Ed.
Over 1,000 people have contacted me already based on my last email about angel investors that charge startups to hear their pitch. Out of those 1,000+ emails there were only two that were negative, and they both cited “free market” forces correcting the pay-for-play issue. I agree, and this email newsletter is the free market! :-)
A number of smoking guns came in from the email list. Now, I can’t be 100% certain that these folks are telling the truth (maybe these are fake, who knows), but in the spirit of openness, I’m going to let you
decided for yourself. I’ve spoken to a number of the folks below on the phone and checked out a number of their twitter, linkedin, personal blogs, and websites to see if they are who they say they are. I’m convinced these a real testimonials and I’ve personally come around to the belief that these firms prey on the naive and the desperate.
Now, there might be some good people in or around these organisations with good intentions, but they are falling way short from the perspective of the entrepreneurs. These firms are NOT going to last much longer with their current payola incarnations because the word is out. Angel investors and startups should not participate in these forums until they drop their fees–period.
Entrepreneurs know better now, and I think the new kids on the block are going to hear from elder startup statesmen that they shouldn’t participate in these bogus forums. Old entrepreneurs please protect
the new ones.
I’ve been informed that [angel-pitch group] the Keiretsu Forum is filing a lawsuit against
me this week. If they are, my official response is: “BRING IT ON!”…
Also, on Friday I’m going to have some of these people on This Week in
Startups at 1PM pacific and you can watch live. If some Keiretsu Forum
presenters who had a good experience exist, and want to come on the
show, I’m totally willing to show all sides of the debate. I’d love to
have Mike Segal of PrivateEquityForums on, but after he reads the smoking guns I think he
will be suing me as well.
Smoking Guns & Assorted Feedback
Exhibit A: Former Keiretsu Forum Employee
“As a former Keiretsu Forum employee, I wholeheartedly support your
latest effort to end pay-to-play angel pitching. Keiretsu recruited me
directly out of college, yet I only worked for the company for about
[REMOVED] months: the amount of time, I suppose, that it takes a
reasonable and ethical person to come to terms with the reality of
this scam. There are a number of stories that I could tell you about
these networks and the people that run them, and they all would
reinforce that you’re doing the right thing here. For now, though,
I’ll just draw attention to a few highly relevant points.
1) These networks charge because they have to. They know that they
have their business model upside down; I know that they know this
because that was the first input that I offered to the head of one of
the largest branches. After a basic strategic overview, my first input
was: “One side is your customer; the other side is your supplier. One
side has money, the other has ideas. There is one side that is, by
definition, price-insensitive, and another that is, by definition,
incredibly price-sensitive. Why would you charge the latter group?”
2) Why didn’t Keiretsu charge the investor? Because no investor was
willing to pay to be a member. While they say that they have
membership dues (and other branches may very well collect them), I
watched as a full year’s worth of membership dues went uncollected for
the branch where I worked. When I asked multiple Keiretsu investors
(off the record) what was up, they explained that, if they were
charged even a cent, they would simply terminate their membership. And
why was this the case?
3) Because Keiretsu attracted sub-par entrepreneurs, of course. For
the exact reasons that you described. The goal, in any given month,
was to have five entrepreneurs pitch, yet it was a rare month where we
could dig up that many who were willing to pay Keiretsu’s fees ($7,500
to pitch at all four regional locations). So, in reality, we were
essentially accepting anyone who was willing to pay. Most months, we
ended up letting in multiple entrepreneurs at discounted rates, just
to keep the investors happy.
4) Keiretsu has a screening process, but at least in the region where
I was employed, it was a formality. Once again, anyone who was willing
to pay the full price made it through essentially by default. My
memory’s far from perfect, so take that for what it’s worth, but I
don’t remember a paying applicant ever being turned down.
So, reflecting on these core facts, it’s easy to see why Keiretsu’s
investors were not satisfied: because we didn’t actually screen deals.
We took anyone who was willing to pay–aka the most desperate of
entrepreneurs–and they continued to show up on the off chance that a
legitimate investment opportunity might show up one of these months.
Because it didn’t legitimately screen, Keiretsu lost its credibility
with investors, and because investors weren’t willing to pay due to
lack of said credibility, Keiretsu had to keep charging entrepreneurs.
After a few months, I realised that this was no career. I had spent my
undergraduate period studying entrepreneurship at [UNIVERSITY
REMOVED], and this was a passion of mine. When I accepted a job at
Keiretsu, I had thought that I was stepping into a legitimate
profession, where I could help startups to achieve success. Instead, I
found that I was part of a parasitic business that existed only to
prey upon the desperation of entrepreneurs. It disgusted me, and
within a matter of months, I just couldn’t do it anymore. I quit, and
that’s a decision that I’ve never even remotely regretted. Frankly,
the sooner that the Keiretsu Forums of the world are gone, the better.
If there’s anything that I can do to help you, please just let me
know- I would absolutely be interested in doing my part.
Exhibit B: PrivateEquityForums/Mike Segal pitch company
Can’t tell you how awesome it is you’re leading this quest. I’ve come
to f-ckin’ hate these people–particularly PrivateEquityForum and Mike
Segal. Sad to say I’ve fallen prey to them.
Here’s my shameful story: I was desperate for some way to extend my
runway and keep my employees. Being on the sad excuse for a startup
hub that is [CITYNAME REMOVED], no Angel groups were doing anything.
The only one we got a pitch with was called Tri-State PIN–another
group that should be on your hit list, with the same shady i-banker
fee structure (there you pay to apply!). So I trekked to NYC to pitch
them and found the room filled with I-bankers and consultants, not
real investors, including Mike Segal.
He claimed to like my pitch and [said] I should really consider
pitching at his event soon (PrivateEquityForums)…It’ll just be
$18000 (but “negotiable”). I ended up agreeing to pay $1200 to just be
in the room for the 5-hour long event and have him give a 1-minute
announcement about [COMPANY NAME REMOVED]. He bragged about what a
high ratio of investors to businesses would be in the room. But in
fact, there were nearly NO investors there, and all but one of the VCs
he listed as registered didn’t actually attend. It was quite clear we
companies were all paying for a lovely catered meal in an expensive
ballroom for 200 NY banker types. I felt like a [email protected]#$ing idiot. So did
every other startup there.
The war you’re waging is bigger than just a few shady angel groups.
It’s East Coast v. West Coast. (I come from [REMOVE], and I know you
know what I’m talking about.) It’s New v. Old. Its about the old
generation being threatened by the rise of “stupid” ideas out West by
a bunch of kids like Twitter and Facebook. It’s about a city full of
ex-enterprise software salesmen ([REMOVED]) wanting the new generation
to pay their dues so they can kick back in their retirement clubs
(“Angel Groups”). It’s about sales and commissions and consultant fees
vs free and the web and product-driven business models.
You da man. Keep fighting the good fight, and lemme know if I can help.
Exhibit C: PrivateEquityForums/Mike Segal pitch company
I need to keep this all anon, feel free to use it, but I’m still
actively trying to work my way through getting funding, and will most
likely end up at one or more of these events as I get money… I’m a
senior in college.
So attached is all the info I got from Starlight Investments, when I
signed up to be a ‘non-presenting entrepreneur guest’, a measly
$2,450. I actually believed it so much, that my business partner and I
both dropped classes from our schedule in order to reduce our fee
bill, to get us the cash for the cost of being there. In retrospect,
we knew it was stupid, but we were so sold on the ‘you won’t ever meet
so many investors in one place’. We were told that this is the type of
event that we walk away from with funding. (in following up with the
other companies that were there, they all had the same thing to
That link is the link that they tell you is the ‘current guest list’
and from the looks of it, some of those on it are very worth meeting.
That is why I decided to attend, in hopes of meeting a few of those
companies who do not take calls, and an in-person introduction would
be very valuable. This Excel file is who actually attended…
Note the ‘non-attending’…Basically it ended up being a 7 hour long
event of companies that had paid $14,500 ([though] talking to one,
they were able to get it down to $12.5k), to listen to them pitch
back-to-back with 30 min break out sessions every 4th company. There
were no actual investors there. It was all forums, and groups of
investment bankers (broker-dealers). I would also like to add that out
of about 100 people there, about 20 did not pay to attend. This forum
holds a block of tickets for ‘distinguished guests’. Oh, and I should
add that at 5pm, when the cocktails and jazz starts up, all the wives
and girlfriends make their way there. Which makes it extremely hard to
get any business done.
As for Mike Segal, he attends every event in the New York Metro, he is
also one of the most vocal members of the K4 chapter, Tri-State PIN,
and iBreakfast. Any angel event you go to in the New York Metro, he’s
mostly likely going to be there. When I first met him, he asked that I
call him, so I did, and this was the response I got from him:
‘[REMOVED], Thanks for getting in touch. I would be happy to speak to
you on the phone and look at your Executive Summary with a view of
possibly featuring your company or other projects at our next national
investor forum on September 24th. Unfortunately, because of the large
number of projects that are brought to my attention for funding or
advice, I do not have meetings on a non-compensated basis. I initially
charge a minimum retainer of $1,000 to $2,500, plus $475 per hour for
the time that I spend to review, evaluate and make recommendations in
connection with the funding of a business. Based upon my assessment of
the potential of the enterprise, I can then determine if it is
appropriate for me to reach to our U.S. and international network of
capital sources and/or showcase the opportunity at the national
investor forums that we organise in New York. (Note that, if your
company is selected, any payments to me would be deducted from the
fees that we charge for companies to present or attend our events.) If
you would like to be considered by the Tri-State PIN, of which I am a
member, just submit through their site at
If you are interested in working with me, you are welcome to write or
call. Payment for my fees, if applicable, can be made by credit card.
Best, Mike Segal
Yes, he replied to my voicemail, with an email.
Basically, he will charge you to just tell you to apply through the
traditional routes to these angel forums, which also charge a healthy
fee to go to. He also will not pick up his phone, or email you, unless
you’ve made that payment. And Tri-State PIN, for last month, wanted
$625 to pitch there. (I actually considered them the most reasonable
fee of the region). And what if you actually want him to help you get
funding (like you are lead to believe that he will do for you, like
some sort of Rain Man)? He refers you to Starlight Investments. A
’boutique bank’ out of Houston, TX, that specialises in raising
capital for companies. Though if you talk to them, they will tell you
that they only deal with companies who are already turning north of
$3m in EBITDA. But they will consider helping you raise that seed
round, with a fee of 10% of the first $2m, with a $10k/mo retainer.
Exhibit D: PrivateEquityForums/Mike Segal pitcher
Jason, I was contacted by this Mike Segal dude, he harassed me to
present [REMOVED COMPANY NAME] to a group of angels in NYC, didn’t
mention I had to pay to present, then when I said I was interested, he
talked about those crazy fees. I never replied back, one day later he
started calling me twice a day, reducing the fees every time. Out of
curiosity, I asked about the investors who will be there, he sent me a
list of crappy names you’ve never heard of… Don’t even know if they
do exist. That was my story with this bad guy”
Exhibit E: Keiretsu Forum pitcher
“Hi Jason, I don’t think we’ve met, but I’m a repeat entrepreneur in
Silicon Valley, and a veteran of 6 startups (just getting started on
#7). I’m easily checked out (just look on LinkedIn for our mutual
friends). One of these days, maybe I’ll get invited to the WSJ D
poker game :)
In any event, I saw your blog post, and couldn’t agree with you more.
In my 20 years in Silicon Valley, I don’t know of a single person who
has raised money from any of them, including the ones who don’t
charge, like Band of Angels, Sand Hill Angels, etc. On top of that, I
had a bad experience with Keiretsu Forum.
I met Randy Williams (founder/CEO) in [REMOVED], and pitched them on a
company I was working on. They charged me something (I think it was
$500-1k back then, but I could be wrong), and I thought it was worth
it to reach 50 angels. Not so. Complete idiots, no value add, and it
didn’t seem that they wrote checks to ANYONE. Since then, I’ve always
viewed Keiretsu Forum as a bit of a pyramid scheme. Randy collects
money from angels who want to join as well as pitching companies. Then
he franchises out the name to other cities (there are Keiretsu Forum
branches all over the places), and I suspect he charges them for the
privilege. I think it all adds up to a way for Randy to line his
Exhibit F: PrivateEquityForums/Mike Segal pitcher
“I read your great piece. It is very detailed and comprehensive.
Kudos. I was at a lower middle market PE firm until Spring [YEAR
REMOVED] and was invited to attend PrivateEquityForums.com (held at
Yale Club of all places) due to my role as [REMOVED] for [REMOVED].
There was no charge to attend as I represented an investor…
I was appalled at the sub-par quality of many of the presentations I
heard. There were CEOs (if you could call them that) who were so
incoherent in giving their presentations that some of us left the
room. I was SHOCKED to find out how much these Segal brothers (Mike
is one, forget the other brother’s name) were charging the
entrepreneurs to present (and obviously hadn’t reviewed any
presentations at which my third grader could have done a much superior
All in all, I agree. They are scams. Can you do everyone in the
community a favour and ADD all the on-line “venture capital forums”
that are also charging entrepreneurs a fee to have their material
shown to investors? I have been approached by some of them and think
they are also scams.
The most important component that you can delve into is that most of
these “Forums” are serving as “finders” and they are skirting FINRA
rules, i.e. they are NOT licensed to engage in securities sales (Reg
D) etc. “
Exhibit G: Fred Wilson, famous VC
“I agree with Jason that any angel group that charges an entrepreneur
to pitch should be avoided…. both the agent groups and startup
agents that want to charge upfront cash make the argument that it is a
quality filter. But that is nonsense. Some of the best startups I’ve
ever seen were totally broke and living and working in a friend’s
apartment. And some of the worst were well off and working in fancy
offices. The ability of a startup to pay has absolutely nothing with
the quality of the team and the idea. Like any other sector, the
startup sector has its share of scams and scam artists. I think it is
great that Jason is outing them.”
Exhibit H: Robert Scoble, world famous blogger
“I just read Jason Calacanis’ post about angel investors who are
charging to have startups pitch them. That’s totally ridiculous. I
NEVER charge for pitches and NEVER charge to interview startups or
people for my video show or to get on building43. I don’t even ask if
you are a Rackspace customer. It’s totally ridiculous that such a
Exhibit I: David Krug, blogger
“Jason Calacanis get’s it right when he says that Angels shouldn’t be
asking Startups for cash for the time to pitch to them. First off
Angels have the cash, and the time to listen to startups, and if they
don’t have the time they shouldn’t ask startups to pay.” David Krug,
Exhibit J: Brad Feld, venture capitalist
An Angel Investor Group Move That Makes Me Vomit
Exhibit K: Charlie O’Donnell, entrepreneur
Dear VCs and Angels: Please stop participating in events where people
have to pay to meet you