Should you pay to make a startup pitch presentation to investors?
Opinions vary on this topic. However, in general, you should never have to pay to do your startup pitch presentation for them.
Proponents of charging entrepreneurs to do their startup pitch presentation point to a variety of reasons. They include:
- that charging an upfront fee is a sort of "idiot tax". That keeps less than serious entrepreneurs from wasting the investor's time.
- Andrew Hyde pointed out that putting on a quality pitch event can be costly for the investors.
- the cost of having analysts perform the necessary due diligence.
Within most business models I would agree that these are costs that must be recouped. But making the decision to be an investor is not your typical business model. Investors know that there is inherent risk in what they do. Including trying to work through their deal flow to find the right investment opportunities.
The responsibility rests on the investor's shoulders
In my opinion, it is the responsibility of investors to make sure that they do enough up-front fact finding. This ensures that the startup pitch presentations they see are already of significant interest. For example, my friend Eric Dobson, who runs the Angel Capital Group, uses a technology driven application process. This process ensures that the startups that he puts in front of his investors have already been heavily vetted. While there is a cost to that application process, they are able to minimize those costs and increase the number of potential deals they look at. Thereby reducing their cost per application.
Would you pay to pitch?
Now it is your turn. Would you ever pay to pitch? If so, what would you expect in return?