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October 28, 2009

The tale of two auto marketplaces

I always like first hand data.  Here is some first hand data from by brother who just sold his 15 year old Toyota pick-up

“The Craigslist syndrome - too many flakey  people who want everything for nothing.  I just sold my pickup truck.  I listed in on Autotrader, Craigslist and vFlyer.   Every contact I got from Autotrader was a good, solid person who had money and was interested in buying a truck.  Every contact I got from Craigslist was either a kook, a lowballer or a righteous pundit who wanted to tell me all the things that were wrong with my ad, my truck, etc.  Never got a single serious lead from Craigslist.  Sold the old truck for 5k to a nice gal off of Autotrader.   She paid cash and knew that she was getting a good buy.”

My brother’s experience gets to the heart of the issue many sellers have with on-line marketplaces:  They want qualified buyers and as low signal to noise ratio as possible.  While the #1 benefit of any marketplace is scale, enough buyers and sellers, once over that threshold, reducing friction is the #1 benefit.  It seems that AutoTrader in cars is doing a good job reducing friction between buyer and seller delivering quality experience on both ends.  I am going to ask him why he didn’t list on eBay.  Most likely the cost.  If you can get it sold on the free market places, why? 

The take away for me is to provide a low friction, high traffic marketplace for a low cost.  That is what we are doing at Kashless.org for the Free Category.

Posted by Martin at 2:45 PM | Comments (0) | TrackBack

October 21, 2009

thinking about the Dollar

I have been thinking about the sinking dollar lately.  Kudlow MR. Supply side has been saying the low dollar is the end of America economy and leadership worldwide.  Not sure.  I agree if people stop buying it and stop buying Tbills.  But that hasn’t happened yet.  I asked a friend of mine who runs a hedge fund about it and being a hedgie he answered like this

the question with the dollar is against what?

dollar v gold = short
dollar v ag = short
dollar v oil = short
dollar v AUS/CA = short
dollar v Yen = long
dollar v Euro = long
 
So if you are going to trade the trend versus another commodity, those are your trades.  That doesn’t help me, a guy with alot of dollars and all my expenses in the US decide if I should diversify or not. 

Posted by Martin at 2:24 PM | Comments (0) | TrackBack

where your tax dollars are going

unbelievable but true

free meal

Posted by Martin at 10:23 AM | Comments (0) | TrackBack

October 19, 2009

Transparency in fundraising is already here

The row last week over Angel funding and presenting fees has been completely overblown.  I am sad to be still writing about it actually.  A key problem in the marketplace for money that start-ups participate in is information.  What is the right price of money, which firms actually close deals, which angels are good, which are soul suckers, etc.  TheFunded.com has been providing this transparency around Venture firms for some time (much to the VC dismay).  So I thought to check out if the entrepreneurs here had an opinion on some of the for-profit angel groups.  Yup, Kirestsu Forum is there (no ratings.)  So there already is a structured market for this information, just fill it out guys.  Then everyone will know and we can take it off the blog and get back to work. 

Use The Funded.com.

Posted by Martin at 8:53 AM | Comments (0) | TrackBack

October 13, 2009

My last word on Angel Group presenting fees

Ok, now that I have cooled off a bit, here is my last word on this boring non-issue topic.

Here is the problem I have with Jason’s first blog post:
- demanding zero fees from Angel groups treats them all like they are run by scam artists and provide zero value. That is too broad a brush.

Most angel groups are ok and don’t rip people off. There are scammers and rip-offs who should die a slow death. I do hope Keiretsu does sue because you are right, they will loose. They are already loosing in the marketplace. But to generalize from these to say all presenting fees in all groups are bad is a non sequitur. Minimal bozo fees are ok (<$200). It provides a reasonable bozo bar and helps offset an Angel Group's cost. A well functioning Angel group will get the vast majority of it's revenue from sponsorship and membership fees with presenting fees < 10%. High fees, stock percentages are not ok. As a CEO every vendor on earth has tried to roll me for stock and high fees, accountant, lawyer, PR firm, angel group, investment banks, even Fat Boy Slim wanted 1% of my company (LOUD) to play our IPO party. I have raised over $500M for my companies and invested in over 50 start-ups as an Angel, I have seen every scam there is. The right thing for entrepreneurs to do is to tell these people to pound sand. I am not offended that they tried to scam me, it is a free world.

Reading some of the indignation spewed forth against presenting fees you would think the Angel groups were demanding child sacrifice. Lets go ahead and expose the guys who don't deliver value. Then lets all get back to work.

Posted by Martin at 4:50 PM | Comments (1) | TrackBack

OK let me clarify something on the Pay to Present Angel non-issue

1.  As an entrepreneur I would NEVER pay more than a nominal fee present to ANYONE.  I would NEVER EVER EVER issue stock or a % of a deal to an “angel” group.

2.  There are for-profit angel groups and pseudo investment banks that DO try to exploit the pitch process.  Buyer be ware.  Organizations like Kieretsu Forum and Mike Segal are (in my experience) simply not providing a good value to the entrepreneur.  These bad apples should not be supported by entrepreneurs or investors.  I also believe the high presenting fee (plus equity) business model is not long for this world.  But I don’t begrudge them the ability to try. 

3.  The vast majority of angel groups operate on reasonable fees (<$200) and as non profit break-even enterprises.  Calling for ZERO fees is not realistic.  There is expense in these organizations and there needs to be a balance between member dues, sponsorship and fees.  Jason does these groups a disservice by painting anyone with any level of fees as some kind of dishonest crook.

4.  Having a minimal fee is actually a very valuable “bozo filter” to qualify companies.  I support minimal fees. 

5.  The key is in the motivation of the Angel group.  The vast majority are just trying to provide a valuable service to entrepreneurs and Investors.  There is no vast conspiracy.  There is no discrimination. 

6.  I support exposing the frauds.  Lets do that. 

7. Angel groups are not like Venture Capital groups. VC’s have a revenue stream (their management fee) with which to pay people to listen to pitches and to do due diligence.  Angel groups do not.  Trying to equate the two displays an appalling lack of sophistication. 

8.  There is no news here.  What is the news?  That there are scam artists there?  Anyone with 5 brain cells will sniff them out.  This is not rocket science. 

9.  Entrepreneurs need to only present and use networks that actually provide value.  Do you diligence on groups.  Ask other CEO’s.  If you don’t do your homework you deserve to get scammed.

10.  Everyone should settle down and get back to work.

Posted by Martin at 2:18 PM | Comments (0) | TrackBack

I guess Calacanis only wants fawning praise on his blog

Received this just now as his editor deleted my comments.

Ok, the “big fat idiot” was out of line, but come on.  Jason is spinning this up like some human rights violation and defaming plenty of Angel groups.  This is just such a non-issue stupid discussion I just blew a gasket…

Ok. Sorry for the “big fat” part.  But I stand by the “idiot” part.

m

On Tue, Oct 13, 2009 at 11:45 AM, Alex Miller <alex@calacanis.com> wrote:

Hi Martin,

 

Thanks very much for reading Jason’s blog and submitting your comment.  Given the passion surrounding the issue, we’re moderating all of the comments and working to keep the discussion as high level as possible.  You’ve made some great points in your comment, but, because of the couple direct attacks (“you’re a big fat idiot”, “stop being stupid” and “Stop whining”) we can’t approve it for the blog.

 

Could you resubmit your comment, removing any statements such as that and focusing on your great points?  Would like to have it as part of the discussion surrounding this issue

 

Thanks!

Alex

Posted by Martin at 1:06 PM | Comments (0) | TrackBack

Stop whining Jason and get back to work

Jason Calacanis is being a big fat whining idiot complaining about Angel group screening fees.

Presenting at an Angel group is not a fundamental human right. There are costs to running these organizations and they are not monopolies. Angel groups tend to have to charge because they don’t get a management fee on a committed capital base like a VC does (that is why VCs can hear pitches for free). These fees are their only offset to their costs.  For profit angel groups are just that, for profit.  Providing a product/service for a cost.  If you don’t like the product/service, go somewhere else. Entrepreneurs are not required to present. No entrepreneur is being discriminated against because there are fees. There are plenty of angel groups who don’t charge or who charge very minimal fees and operate as non-profits. Entrepreneurs can use their personal networks to bypass Angel groups all together!  In the end if the cost of capital is too high, the entrepreneur should go somewhere else. In tough economic times the cost of money goes up (interest rates, tough getting loans, fees, etc.).  We are in a tough economic time.  Angel financing is a very inefficient market and the cost of providing liquidity in that market has gone up as well as the risk tolerance of investors has gone down.  Given these facts, the cost of enabling the market of buyers (Angels) and sellers (entrepreneurs) is going to rise. 

Next will you be telling us that Investment Banks should provide IPO services for free and Mutual Fund managers should not be paid for their work.

There is no fundamental right to easy, free access to venture capital or angel capital. There is no fundamental right to certain terms in a term sheet. It is all buyer and seller meeting in the marketplace. Capitalism works. Stop being stupid.

Stop whining and get back to work.

Posted by Martin at 9:58 AM | Comments (0) | TrackBack