The Ashimmy Blog: How to get into the VC business without any money down

OK, I’ll admit it. I love the ingenuity that a good scam shows. Whether it be the Nigerian bank official who would like you to help get the 8 million dollars out of his country or the “virus scanner” that implants a virus and makes you pay to remove it or even the infamous fake ATM at a recent security show - like PT Barnum said, “there is a sucker born every minute.” That is why I have to half admire the “Revolutionary Angels” that Seth Levine from Foundry Group has a good post up about today. Seth references a NY Times piece about this Boston-based group. This topic has actually been ~~explored~~ exposed already by several other VCs including Brad Feld and Fred Wilson.

Here in a nutshell is the scam. The Revolutionary Angels get 100 companies to put up 5k each to pitch their companies to the group. The winner out of the 100 gets an investment of 250k from the group. The runner up also gets some investment. The beauty of the scam is the money comes from the competitors entrance fees. So for the Revolutionary Angels, they put up none of their own money. They wind up with a stake in the top two companies of the 100 they saw and they pocket a little money to boot. You have to admire the chutzpah!

Now not being a VC I don’t get as passionate about it as Seth does or Brad who wrote that he wanted to vomit. Looking at it through my Bernie Madoff glasses, seems like these guys are on to something. They are the PT Barnums of the angel investment world.

Now what about the companies forking over the fees? These are the suckers. In the best scams, the suckers don’t even know they are the suckers. Such is the case here I bet. Desperate times call for desperate measures. I would bet many of the entrants have gotten turned down by more than one VC (who hasn’t) and with tight credit, banks are not an option. It is sort of like entering a 100:1 lottery with a 50:1 payout on your table ante, plus maybe some good advice. I think this scam is more a sign of our times than anything else. All of the community hours posted by all of the VCs in the world does not make up for the fact that getting funding for a new business (especially if you are a first time entrepreneur) is as hard as it has been in a very, very long time. Nature abhors a vacuum and folks like the Revolutionary Angels are filling it.