Last week Adam Neary, founder of the startup Profitably, laid out the saga of finding funding for his company over the past year. In the post, he threw some digs at the venerable investing group, the New York Angels.
After 13 weeks and a commitment from one member to lead the round, Mr. Neary ended up with nothing when the investor missed his closing deadline. “No doubt, there are a handful of credibly amazing investors who attend their meetings, but from my perspective, clearly the New York Angels process is broken.”
On Twitter, several investors voiced their assent. “It’s about time somebody had the balls to talk about their true experience working with angel groups,” wrote Zelkova Ventures co-founder Jay Levy. “It will be very interesting to see if the NY Angels tries to learn from recent criticism or gets defensive.”
Mark Birch, an independent local angel investor, retweeted Mr. Levy. “The NY Angels process is broken, because their model has stayed the same, while the environment has changed,” Birch told Betabeat by phone. “At a certain point in time they were one of the only entities investing in early stage tech, and that was invaluable, but now they are just one of many options.”
One early stage venture capitalist who asked to remain nameless, said he explicitly tells entrepreneurs he meets not to pitch NY Angels. “Everything there suffers from being decided by a giant committee.”
Brian Cohen, the Vice-Chairman of NY Angels, admits the group may have fallen a bit behind the times. “There is an emphasis on speed now, and that is something we are going to work on. But we have a process, a set of best practices, that let us make educated investments.”
The process, as detailed by Mr. Cohen and in the original blog post by Mr. Neary, include an online application, a pitch to a screening committee, a meeting to refine the pitch, a second pitch at the monthly breakfast, a due diligence meeting and then follow up by interested members. “We’re looking to tap the wisdom of the collective,” says Mr. Cohen.
But Mr. Cohen insists that the group is still New York’s most vital resource for seed stage funding. “I don’t think anyone can come close to the number of deals we have done over the last five years, around $21 million in 35 New York companies.”
Mr. Cohen says he understand why entrepreneurs are turning to services like Angel List, the online platform that matches founders and investors. “It’s possible for them to raise a lot of money very quickly on there. But that doesn’t mean that the backers are going to get a return.”
Betabeat asked why NY Angels website, which displays a large portfolio of companies, stopped showing new investments after 2009. “That list is a little out of date,” said Mr. Cohen. “But we are building a new website, so check back in 60 days.”