There’s a kind of holy war in the startup/VC community over whether it’s fair to ask budding entrepreneurs to shell out money for the opportunity to pitch their ideas. Pay-to-pitch companies charge anything from a ‘nominal application fee’ to thousands of dollars for access. The justification is economically obvious, they say: investors receive thousands of applications a month, far too many to hear every idea, and finding treasure in the slush pile is an expensive and time consuming process. Application fees not only help cover the admin costs, asking startups to back up their pitches with money means investors are less likely to hear poorly prepared or half-baked plans. Guaranteed paid access levels the field to some extent, giving entrepreneurs with few connections an equal chance to be heard.

Others can’t stand the idea. Like American uber-investor Jason Calacanis, they say a pay-to-pitch culture risks bringing in unscrupulous operators looking only to make money from poor startups by selling them ‘opportunities’ with investors who may or may not be real. Sorting the dubious from the genuine becomes a minefield for startups and often, paying the fee doesn’t even guarantee you’ll get a response. Truly talented investors should have a nose for potential success and can make plenty of profit from successful investments, after all.

Entrepreneurs.my has been on the case this week with its story on Malaysia’s Virtuous Investment Circle (ViC), established as a non-profit intermediary between its angel investor members and startups. At issue is ViC’s RM500 (US$160) application fee, which all applicants pay whether or not they’re selected to pitch. Companies who obtain funding also pay a 3-5%commission. ViC justifies the charges in their FAQs by saying it pays for their time, is low compared to similar fees in other countries, and filters out entrepreneurs just ‘trying their luck’.

There was a backlash, with some questioning ViC’s motives and credibility as a non-profit or saying it simply looked suspicious. ViC has responded to the feedback, acknowledging concerns but restating their belief that their current model is the best option for now. Only the community at large can make the final call: can pay-to-pitch and application fees be advantageous to budding startups (and angel investors), or is it an unwelcome shift in the investment paradigm?

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