Pay to Pitch?

A recent story in The New York Times by small business blogger Laura Kolodny has re-ignited a continuing debate in some parts of the Twittersphere: Should start-ups pay to pitch to investors? And if yes, how much is too much?

At issue is Boston-based angel investment group Revolutionary Angels, which kicked off its first business plan competition in October and is charging what it calls a "participation fee" of $4,995. Most U.S. pitch competitions are free, charging $25 in application processing fees -- at most. But Revolutionary Angels comes in as the latest investor group to set a fee in the thousands. The group says it is accepting applications for free but will charge 100 finalists to take part in its finalists' event, where they can pitch ideas to panel of investors and compete for $250,000 in seed finance.

Revolutionary Angel's CEO, Chris Hurley, told Kolodny that he believes the contest will be of special value, especially to entrepreneurs who didn't get MBAs at top business schools. Hurley told the Times: "Plenty of small-business owners don't have access to this V.C. or that investor through an alumnni network, and bootstrapping is a lot harder these days with low home values making it tough to get loans, and friends and family tapped out in the recession." Further, he told the Times, Revolutionary Angels -- which will take a 10 percent common stake in the winning businesses -- isn't looking to get rich on fees. "We're dedicated to supporting entrepreneurs and bringing early-stage financing opportunities to otherwise overlooked great companies," he told Kolodny. "It takes overhead to achieve this." The $4,995 fee, he says -- about the price of one business course at a top university -- gives entrepreneurs a full day to rub elbows with experienced investors and chief executives. [Finalists also are offered a 20 percent discount on business services provided by the fund's partners.]

Revolutionary Angels' competition isn't the only pay-to-pitch contest -- nor the most expensive. DEMO LaunchPad, part of the DEMO tech conferences produced by privately-owned IDG, charges $18,500 to those it selects to present. For that money, finalists get the chance to pitch to world-class investors and compete for funding as well as $1 million worth of free advertising and support services. Earlier this year, DEMO introduced AlphaPitch, where early-stage start-ups pay $5,000.

What do you think? Is $5,000 a small price to pay for exposure and a chance to get funded? Or are pay-to-pitch competitions an unfortunate byproduct of the current credit crunch and a surge in the number of entrepreneurs competing for a fixed pool of investment capital -- the old laws of demand overtaking supply? [Or are experienced entrepreneurs with investment capital simply being entrepreneurial?] And finally, do you think pay-to-pitch contests will go away after the market shifts or do you think they're here to stay?

Let us hear from you.