The Underbelly of Silicon Valley: VC "Finders"
We’ve spent lots of time here discussing pay-to-play, in the context of public pension officials and the placement agents who bribe them. But there is a percolating pay-to-play issue that we’ve only mentioned in passing: The issue of VC conference organizers who charge entrepreneurs to make elevator pitches in front of potential investors. For the record, I agree with those who criticize such arrangements. VC conference organizers should make their profits from sponsors, not from struggling startups in need of cash. And, if sponsorship doesn’t cover it, then also charge non-presenting attendees. For more on this, you can read the vitriolic comment thread on Jason Mendelson’s Vox Populi post from last week. But I’m not raising this to discuss the pay-to-play conference situation. Instead, I’m raising it to discuss something even more insidious: Venture capital “finders.” Last week, a Silicon Valley investor named Hugh Sloan III came across a startup that had received a minor award from Microsoft. He emailed the company founders, saying he had “3 ex Google angels and two Tier 1 venture funds who would be looking at this opportunity with me.” Sounds great, except there was a giant catch: Sloan wanted $7,500 up-front, in order to set up the meetings. No refunds if the investors didn’t offer term sheets.
