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Feb 08

The Open Angel Forum & The Changing Face Of The Venture Industry

Posted by: Mark Solon        

Last week I had the opportunity to attend the first Colorado Open Angel Forum (OAF). The OAF was born out of the frustration of some well-known investors including Brad Feld (An Angel Investor Group That Makes Me Vomit), David Cohen (An Offer To Funding Universe) and then inculcated and formed by Jason Calcanis (Why Startups Shouldn’t Have To Pay To Pitch Angel Investors) and others. Their frustration was with organized angel groups charging entrepreneurs to “pitch” their ideas, sometimes as much as $10,000 for the privilege.

My purpose here isn’t to debate the issue though I do fall on the side of the fence that believes it’s somewhat perverse for a bunch of angels to charge startup entrepreneurs on a shoestring budget a lot of money to sit around and eat hamburgers and listen to the entrepreneurs’ pitches. The OAF event itself was absolutely terrific. Don’t take my word for it, here’s a post from one of the entrepreneurs who presented and here’s another and another, and yes, another.

entrepreneurs shouldn't have to pay to pitch these guys

Entrepreneurs shouldn't have to pay big money to pitch guys like this

As successful as the event was, what’s even more intriguing to me is the continuation of a theme that I’ve been witnessing over the last year or two. Guys like Brad, David and Jason are part of a groundswell of younger investors who are steadfastly determined to grab the crusty old venture capital industry and shake it to its very core.

You see, these guys didn’t go through a ton of effort recruiting 30 qualified investors from near and far, getting sponsors for the evening, securing a meeting place, and going through about 100 applicants for personal gain. They did it because it was the right thing to do; to set an example for angel organizations everywhere that it’s about the entrepreneur.

The venture industry has been the favorite whipping boy of the media for almost two years now and deservedly so. Dismal returns throughout the last decade have tarnished a once-noble industry. My partner Phil (who raised venture capital from the legends of the venture industry in the 70s & 80s when he was building ComputerLand and BusinessLand) often regales me with tales of VCs like Tommy Davis of Mayfield and Mike Kaufman of Oak, people who built the venture industry on the backs of their genuine passion for helping great people build great businesses.

As we all know, somewhere along the way, the venture industry lost its way. It would be easy to sit here and play the blame game but when vast sums of money become easily available and fortunes can be amassed in short periods of time, human nature takes over and good people act irrationally. That’s not a phenomenon to be placed at the feet of venture capitalists, but at the DNA of any capitalist. I’m not defending the actions of the industry in late 90s, merely trying to look back through a wider lens.

So how does this relate to the OAF last week? Well, guys like Brad and David remind me of those groundbreaking VCs that Phil always talks about. I know Brad and David well. I  admire the hell out of the astonishing amount of energy and passion they pour into their love for entrepreneurs. They’re incredibly accessible and freely give copious amounts of their time, not just to their portfolio companies, but to any entrepreneur trying to build a business. They’re great role models for any young investor, either institutional or angel.

David & Brad in one of their more serious moments...

David & Brad in one of their more serious moments...

What’s really encouraging is that there’s a whole generation of guys just like Brad and David. Well known guys like Josh Kopleman of First Round Capital, Fred Wilson of Union Square Ventures, Jon Callaghan of True Ventures and Bo Peabody of Village Ventures are leading the way and setting examples for a whole new generation of authentic, high-character venture capitalists who are building right-sized firms filled with “changing-of-the-guard” partners intent on bringing some much needed respect to our industry. Folks like Jeff Clavier of SoftTech VC, Dave McClure of Founders Fund, Trevor Loy of Flywheel Ventures and Bryce Roberts of OATV are just a few examples of younger investors who are quietly building terrific smaller firms that entrepreneurs feel great about working with. Okay, so maybe Dave’s not doing it that quietly…

I’ll wrap this up with a story about Dave from the OAF in Colorado last week. I was sitting next to him and talking to him about a recent blog post he had penned. If you know Dave, you’ll know that he’s nothing if not brash and outspoken. He’s also one of the brightest guys I’ve ever met and has more passion about helping entrepreneurs build great businesses than most people have about anything in their lives. After a successful career in technology, Dave’s been part of the Founder’s Fund and also has been making a bunch of angel investments (with some terrific success) and is now in the process of raising his first venture fund, focused on making seed investments in web-based businesses.

I wouldn't bet against this guy...

Dave McClure: Expect him to drive innovation in the venture industry

When I pressed him on his post in which he challenged some of the core foundations of the venture industry he laughed and then broke into a big grin and said “I’m gonna blow the whole goddamn thing up. VCs have told entrepreneurs for years to innovate; yet they’re too chicken-shit to do it themselves.” I’ll tell you what, not only wouldn’t I bet against him, but I think he’s spot on.

It’s funny. It wasn’t that long ago that when people asked me what I did for a living, I’d mumble something about being involved in “investments.” That’s changed these days. When it means being associated with the likes of the folks above, I’m proud to say that I’m a venture capitalist.


11 Responses to “The Open Angel Forum & The Changing Face Of The Venture Industry”

  1. […] This post was mentioned on Twitter by TechVC News Eqentia and NYC Tech Eqentia, Nelbee. Nelbee said: More kudos for @openangelforum and @jason: […]

  2. avatar Toby Murdock says:

    couldn't agree w/ you more (as my post also talked about).

    your industry is really in the midst of a transformation. in fact, just today i came across this debate in the comments of a post about the emergence of micro VC's.

    who's going to win? i agree w/ you (or D. McClure): just like in technology, you should always put your $$$ on the disruptor.

    • avatar Mark Solon says:

      Thanks Toby. No doubt there's a sea change brewing. Doesn't mean the end of larger firms, just that there's a whole new breed that's emerged (along with some great angel organizations that don't charge - Kudos to the Boise Angel Alliance BTW - that's helping to fill the funding gap.

      Keep up the great work Toby. You made a terrific pitch at #OAFCO

  3. avatar Chris DeVore says:

    Awesome post, Mark - right on. Andy came back from OAF raving about the group and the energy - we're super-stoked to help drive this vision up here in the Pacific Northwest. Let's make it so!

  4. This is a great post and captures the core of the changing landscape…this went straight into my bookmark folder. I’ve been working on a similar thesis for a couple weeks (and to be honest, my title was almost the same- might need to rework that a bit).

    In a nutshell, I see the very top tier ‘traditional’ VCs (Sequoia, Kleiner, Benchmark, etc.) as having healthy businesses driven by their brands. Below them you have a few thousand 2nd and 3rd tier ‘traditional’ VCs that are (or will be) facing turbulent waters (what ppl refer to when talking about the ‘VC model being broken’).

    Then you have a dozen or so small, focused, and usually pretty new VC firms like First Round who have entered with a different model (smaller rounds into startups with nearer-term exit potential) that works better in today’s climate. Marching alongside them you have the ‘super angels’ like Aydin Senkut and Jeff Clavier, as well as things like OAF that are shaking up the seed and angel worlds (in some ways displacing some of the older, established angel groups). And finally, you have the incubators and alternative funding mechanisms like crowd-funding (e.g. sponsors and pre-sales) that are creating new options, especially for web and digital media co’s.

    Definitely an exciting time as the landscape shifts violently and dramatically…

    Anyway, long-winded way of saying, “great post!” Nathan Beckord

    • avatar Mark Solon says:

      Thanks for the terrific comments Nathan. Agree with just about everything you say here other than believing that there's more than a dozen or so small, focused funds. They're just not on your radar yet. Keep your eyes open and you'll begin to see more and more of these.

  5. avatar Mark Solon says:

    Thanks Chris and thanks to you for all your hard work in Seattle on this front. Look forward to meeting you soon!

  6. avatar Jay Parkhill says:

    The Keiretsu Forum and other organizations have become so popular they *can* charge companies a lot to present, which doesn't mean they should. It is great to see folks trying to recalibrate.

    I have one quibble with OAF's model, which is that the service providers who can afford the $1500 fee need to make that up through time billed to clients. I.e. the companies still pay the presenter fee- they just pay it over a longer period to their lawyers and accountants. No free lunch indeed.

    And lest I come off as purely altruistic- I am an attorney who has worked with startup companies for my whole career. I keep expenses low so that I can keep my rates low, and consequently get priced out of events like the Open Angel Forum. That works for me.

    I hope the OAF is a smashing success and spawns loads of great companies. You won’t find me there, though. I will be down the street meeting entrepreneurs over coffee.

    • avatar Mark Solon says:

      You prove once again that there's many sides to every situation Jay and that many folks have different perspectives when looking at the exact same thing. This is the real value of a comment section of a blog, and you've given me some great food for thought. Thanks for weighing in and doing what you do for entrepreneurs…

  7. […] Mark Solon — The Open Angel Forum & The Changing Face Of The Venture Industry […]

  8. avatar Liz Marchi says:

    We agree, it’s unethical to charge entrepreneurs to pitch. Very good post. As we continue to build the Montana Angel Network, it’s gratifying to see people who want to invest in their own back yards for a double bottom line return.
    It’s about making money and building meaningful enterprise.
    Liz Marchi
    Fund Coordinator
    Frontier Angel Fund, LLC

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