We have seen a pretty amazing wealth of information about financing models and structures come to light in the last 10 years. It wasn’t that long ago that VC and angel financing were dark arts that few entrepreneurs understood. We have always worked hard to demystify startup financing on StartupNorth and have done a long series of articles, which began in 2006 and shed light on angel investing as an option for entrepreneurs.

But the question we hear a lot is, “Should I have to pay an angel group to pitch them?”

I’ll keep it simple: generally the answer is No. By definition, angel groups are made up of wealthy individuals who are happy to foot the bill to organize the group.

For example, a group might have 100 members all paying $1000 a year. That would mean that the angels themselves are fronting $100,000, which is generally enough to hire a part-time (or even full-time) director or organizer as well as to host the necessary meetings. (Sometimes members will donate space for the meetings as well or offer other services in-kind.)

But if you do have to pay, how much should you expect to pay?

The Angel Capital Association, a professional and trade association for angel networks across North America, provides direct guidance on this:

 

 •Of the 81 angel groups surveyed by the association, 31 groups or 38 percent charge fees.

 •Of the groups that charge, the range of fees to pitch is $175–$750, with two outliers charging $1,500 and $3,000.

 •With the two outliers, the average is $580.

 •Without the outliers, the average is $338.

 

We have surveyed all Canadian angel groups and the fees charged in Canada are similar to the range quoted above, except that one of the outliers is a Canadian angel network. Paying to pitch is less common in Canada as only about one-quarter of the total charge a fee.

We have only found two groups in North America that currently also charge a percentage of the total raise as well as a one-time payment. They are both in Atlantic Canada. One charging 8 percent and the other charging approximately 0.5 percent to 2 percent of the transaction. That means that except in two cases the presentation fees will be the only fee you pay, and those fees are only charged about 40% of the time.  We have not completed our research on this and if we uncover any more we will share that data on Startup North.

Our advice? Tell the angel group that you prefer to forego the fee completely. If they believe you have a great deal then a shrewd angel group will still want to get an opportunity to fund you. If they say, “No way”? Then you have to decide just how serious you think THEY are.

 

Jevon MacDonald is the CEO and CO-Founder of GoInstant of Halifax, which was acquired by Salesforce last year. This column originally appeared in Startup North, a website devoted to Canadian startups. The opinions expressed here are MacDonald’s own.