Luke Brown Marketing Blog

Pay-to-play is a concept that surfaced years ago in radio (the payola scandal of the 1950s), spread to live concerts (Hollywood’s Sunset Strip in the 1990s) and has now reared its ugly face in, of all places, angel investment groups.

The concept is that entrepreneurs looking for funds for their startup business will pay handsomely – up to $1,500 handsomely – to get in front of those with the money to invest, the so-called angel investors.

To most people, angels are heavenly and spiritual. In business, there are angels in name only who have no confidence in their ability to spot a good investment and manage it to maturity. So they take money from the entrepreneur up front. Call me cynical, but these are the people your Mom told you to watch out for.

A few courageous and principled men have decided to take a stand against this type of ‘angel’ investor (screw it, let’s just call them by their proper moniker – devil investors).  Jason Calacanis, CEO and founder of Mahalo.com (a human-powered search engine) is expecting Sky Dayton, who founded Earthlink, and Matt Coffin, founder of LowerMyBills.com, to join him as he launches the Open Angel Fund in the first quarter of 2010.

Calacanis, who is no stranger to controversy, hopes his Open Angel Fund will put Keiretsu Forum out of business.  Calacanis has singled out Keiretsu as an example of pay-to-play angel investors. Keiretsu has 18 chapters, 14 in the US and 4 international chapters in China, England, France and Spain.

Keiretsu is one of the largest for-profit angel groups in the world and, naturally, issued a “… we support and welcome his new organization.” statement. Nobody who rakes in money like Kieretsu wants competition so their corporate statement is the typical smiling face which stabs you in the back the second you turn around. I wouldn’t be surprised to find several cases of Vaseline in their corporate offices.

Calacanis has stated that the Open Angel Forum would not charge entrepreneurs or members any fees. He said he’ll personally cover all expenses and invest in as many as 10 promising companies every year. Calacanis is confident he’ll be profitable and doesn’t seem fazed by any upfront expenses he may incur.

I wish Jason Calacanis the absolute best of luck in this endeavor.  I respect him for his courage and initiative. That’s the spirit of an entrepreneur. That’s the type of person – somebody with an idea, a plan, and passion to act – who can make a difference in business. That’s what business is all about. Go get ‘em, Jason. Go get ‘em.

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