Prototype ready, need funding in Vancouver, Canada. Is Angelsoft's Open Deals ($250 per month) a good idea?

Big red flag on the Pricing page:

Note: Some groups charge their own fees; these are not Angelsoft fees.

Since when do Angel Investors and VCs charge fees?

Do you absolutely need VCs? Can you get a loan from a bank if you need capital (banks are a lot cheaper)? Can you bootstrap past the prototype to the product stage? If after the soul searching you still need VCs' help, start looking in your area. Investors prefer to invest locally. Find out if there's an event that brings VCs together. Often they participate in panel discussions. Do your homework. Not every investor is a good fit. Many VCs blog. Research online is free. If you find someone you value opinion of, get someone to introduce you. VC may not look like bankers but there's probably more protocols and rituals that govern their circles. Buy VentureHacks' eBook -- fascinating read. Only $10, not $250/mo. Good luck.

You may want to check out ChubbyBrain or Angellist (angel dot co). AngelList does the actual matchmaking and has enjoyed a lot of success - primarily for consumer web startups.

ChubbyBrain doesn't do the matchmaking, e.g., send your biz plan to investors, but they have built an algorithm that takes inputs about your startup and suggests 20 VCs, angels, grant programs, etc that fit based on their near-term investment history (not what their websites say). So it helps show you the fish to catch but doesn't help you catch the fish.

This is David S. Rose, the founder of Angelsoft (and also the Chairman of New York Angels, among other things.) Let me start by clarifying a few things about what Angelsoft is and isn't, and then we can move on to whether or not it's an appropriate tool in this particular case.

Angelsoft developed and operates the Internet platform that is used by a large majority of the world's organized angel investors to handle their sourcing and management of investment opportunities. We're the official collaboration and deal flow software provider for the National Angel Capital Organization in Canada (which is where the original poster is located), and also for the Angel Capital Association and the National Association of Seed and Venture Funds in the United States. As a matter of fact, we handle the funding application process for the national angel investment groups not only in North America, but also Australia, New Zealand, Ireland, France, India, China and many other countries.

What this means is that all of these angel groups (over 600 of them) use Angelsoft's tools to accept requests from companies for funding. And since they're all based on the same platform, once you've applied to one group for funding, you can then reuse the same application information for virtually every other group. This is much like the Common Application for colleges in the US, and has helped to dramatically simplify and speed up a large part of the funding process. Because our mission is to increase smart investments into high-growth, early-stage companies, we don't charge the groups (OR entrepreneurs) for applying through the platform. Ultimately we plan to generate revenue by providing optional, value-added tools and services for investors and entrepreneurs.

As you probably know, the difference between venture capitalists (VCs) and angel investors is that the VCs are professional money managers who invest other people's money. They raise a large pot of funds (often hundreds of millions of dollars) from places like university endowments and pension funds, and then they invest that money into companies (typically later stage ones) that need to fund their rapid growth. In contrast, angel investors are individual people (usually entrepreneurs who have had successful exits of their own) who invest their OWN money out of their pockets, typically at the seed and early stages of a business to help them get started. For example, I myself have personally helped to fund over 80 startups, including a few in Canada.

Because VCs are professionals, they get paid by their own investors to manage the investors' money, usually 2% of the total amount of the fund each year to pay for the salaries and expenses of the VCs and their associates, and then 20% of any profits the money generates. On the other hand no one is paying the angels anything; instead, THEY themselves pay the costs of forming groups so that they can find interesting opportunities, undertake due diligence, and pool their money so they can make larger investments. As an example, in my own group, New York Angels, each of our members pays $3,500 every year to the group, so that we can afford to hire a professional staff person, pay for our meetings, lawyers, interns, and the like.

Because the large majority of legitimate angel investment groups are not-for-profit (that is, the group itself doesn't exist to make money as a company, the way a VC fund does), a few angel groups choose to charge a small application fee to help defray their expenses. This is usually in the $100-$200 range, and does not go into anyone's pocket, but helps to pay for the costs associated with running the non-profit group, hosting the pitch meetings, etc. If a group does choose this, then Angelsoft collects the fee on the group's behalf during the application process.

So if you are an entrepreneur seeking early stage funding, the first thing you should do is visit angelsoft.net and use the free search engine there to find angel groups in your area. Our database is not only comprehensive in its listings of angel groups and venture funds, but it also provides you LOTS of information about the group, including the types of companies they look to invest in, the amount they usually put in, the names of their managers, and much more. You can use Kayak-like sliders to filter your search only to groups near you, that invest in your industry, for companies at your stage, and so on. Once you find the right group(s), you can get more information on them, and then apply to them directly online. You can even use your webcam to record a video pitch directly into the application.

And there is NO CHARGE FOR ANY OF THIS (unless the particular group you've chosen is one of the few that has a small application fee, in which case we'll process it for them.)

So...by now you've probably guessed the one little problem that comes under the heading of 'the law of unintended consequences': we made it SO easy to apply for angel funding, and many entrepreneurs are SO hungry for funding, that unfortunately a large number of startups began to indiscriminately throw applications in to every angel group in their country. They would do this without having taken the time to determine if the group was an appropriate match, or even if the group would accept applications like theirs. This put a real burden on the groups (many of which, after all, have no full time employees), and meant that the smart entrepreneurs, who had carefully researched the one or two most logical angel groups for their business, were getting drowned out by the spammers.

We therefore put our heads together with the angel groups and their national associations, and came up with a solution. It's not perfect (and we continue to think about better ways to do this), but for now, here's the way it works: any entrepreneur may apply to any angel groups he or she wants, however after you've applied to three different groups, any additional applications outstanding at the same time are marked for the receiving group as a "Bulk Submission", alerting them to the fact that this particular entrepreneur is not being selective in his or her funding search.

But we then needed to come up with a solution for the legitimate entrepreneur who wanted to cast a wider net for investors without spamming. The result was Open Deals, which functions somewhat like a giant, global angel group. All 30,000+ accredited angel investors on the platform can browse through this area to find opportunities to bring into their own groups. Because this is a value-added feature that is only possible because of the platform we created, this is the only place that Angelsoft itself charges anything. For $250 you can post your full company profile, including a video and other documents, into Open Deals for 30 days. This isn't a panacea, since only about 2% of companies seeking angel funding get funded (that number, by the way, is across the board, whether you seek it from individual angels, groups, super angels, Open Deals, angel list, etc.) But for many companies it provides a quick way to test their 'angel readiness', and some of the more successful Open Deals postings have resulted in referrals to 10 or even 20 different groups.

In the future, we look forward to building on the current Angelsoft platform to provide many more tools (a lot of them free) for smart entrepreneurs to find smart investors. So if you have suggestions for ways in which we can help streamline and power your angel/venture funding search, we'd love to hear from you. Feel free to drop me a note directly at david [at] angelsoft [dot] net.

In addition to the excellent angelsoft resource, you may also want to go check adwebix.com, a leading online hub connecting entrepreneurs with investors, and join the community. Once you join adwebix you can post your funding request and contact members directly, completely free, there are no fees on adwebix.

Also, you may want to apply to present in front of Vantec - Vancouver-based angel group. There are no up-front charges to entrepreneurs. http://vantec.ca/vantec-guidelines-for-entrepreneurs/

Best, Ashley.