When I asked if Angels have to be responsible for their own sustainability it was not a rhetorical question Frank. I am hoping for some dialogue, back and forth talk, that you have said several times that you want.

We are always taught that in order to succeed in anything in life, whether it be love, marriage, parenting, school, sports, business, work, money, etcetera, we have to take responsibility. But on your show we always hear you and other Angels blame everything except yourselves.

You blame the “bozo entrepreneur”, the market, the economy, the VCs, and so on. When there is no one or nothing for you to blame and you are left looking at yourselves, instead of admitting any mistakes like not doing your homework, you say venture investing is just luck.

But then you have cases like me where the baby was thrown out with the bath water. And cases like DAMPS where TCA members spend time coaching the CEO of a product that failed 10 years ago and select his failed venture as a finalist. And cases like Budding Brilliance that were encouraged and advised for years when they should have been shown that the math is never going to add up.

In the case of DAMPS, one would think the TCA coaches would have at least got the entrepreneur to change the name of his product. If one does an internet search for “DAMPS” and “shoes” or “boots” incredibly negative topics fill the search results, such as the health problems associated with damp shoes and boots.

None of these examples have anything to do with luck. These examples show that Angels have to be responsible for their own sustainability. How much responsibility for their own success are Angels willing to accept? How much responsibility must an Angel accept in order to be successful? No amount of blaming others is going to improve the success of Angels.

These additional questions are also not rhetorical questions. To be clear I am talking about responsibility and not blame. If an Angel claims to be responsible then the Angel is also claiming to have performed some sort of action to ensure success. If no action is taken then no responsibility is taken. How much action must an Angel undertake in order to be successful? How much action are Angels willing to perform?

Doesn’t the example of Ray Chan and Vokle show us that TCA is best served by identifying those Angels that take responsibility like Ray Chan does so that Entrepreneurs can contact them directly instead of getting caught up in the circus of mediocre ventures, failed ventures, and research projects that make up the TCA Fast Pitch contests?

Hoping for some real dialogue,
yours truly,
Matthew Artero

The good news is the answer to your question is within your power to provide. Don't Angels have a responsibility for their own sustainability? Just last year (2009) the first presenter at a TCA Fast Pitch Competition was for a product that had already failed in the market 10 years earlier. It was reported in 1999 that they got their first government contract, but there have been no reports of any repeat orders or any other orders. So how does a company like that make it through the screening process to become a finalist pitcher?

Their website says they are suing Adidas. Did anyone read the complaint they filed in Federal Court against Adidas back in 1996? It only takes a click of the mouse to access it. It’s the most poorly written complaint I’ve ever seen. The Judge cited about a dozen things they failed to do or did incorrectly including citing the wrong laws and so the Judge dismissed the complaint.

What's all this baloney about the downturn in the market and longer timelines to exit? The smartphone industry has been growing every year of the recession. During this recession cellphone subscriptions have reached 5 billion worldwide.

A downturn in the market doesn’t mean people stop having needs. Longer timelines to exit simply mean that the investment relies too heavily on disposable income of customers rather than being a necessity for the customer. Angels simply need to choose investments that people have to have.

For years I offered TCA a technology that everyone in the growing smartphone industry needs in order to make even more money than the annually increasing amount of money they already make. This technology would also dictate who makes money and who doesn’t.

Now that the number of players vying for a piece of the same pie has tripled from 8 Fortune 500 companies to 24 in just three years, the industry will be even more welcoming of my new technology as the many competitors need every advantage they can get. But TCA says no, because they’d rather hear a pitch from a guy who is hocking the same product that failed in the market 10 years ago.

Then I’m supposed to respect them as wiser, older, and more experienced. But that’s an experience I don’t want to have.

Frank, you asked “My challenge? How do I balance a candid assessment of the current trends, the ever extending liquidity timeline, while educating and inspiring them?” That’s easy, stop feeding them baloney and start feeding them steak.

It’s not the candid assessment you claim it is if you are lumping all the bad investments in with the good in order to make the claim of “ever extending liquidity timeline”. For your assessment to be true you would first have to show that the investments that take longer to exit satisfy just as strong a need as those that allowed a shorter exit. If you can’t show that you’re comparing apples to oranges.

That’s how you do it Frank. Keep your feet on the ground. We really don’t need you to keep telling us how to pitch correctly when things like a 10 year old failed product is what makes it through the selection process. To be constantly talking to us about pitching when the selection process is almost non existent really puts the cart before the horse.

Nobody wants to be another Budding Brilliance. We really don’t need that advice. What Entrepreneur of any quality is going to spend his time pitching to an Angel Group that doesn’t know the difference between an industry that grows in spite of a recession and a 10 year old failed product?

This makes TCA look like the stereotypical lost driver that refuses to ask for directions. The Entrepreneur that has carefully researched the needs of the market is the ignored map. TCA seems to strongly believe that they have nothing to learn from Entrepreneurs.

Bet on the jockey of the 10 year old failed product if you like. But the most that even the highest skilled jockey can do is lead the horse to water, even he can’t make it drink.

John Doerr gives us more examples of getting the markets and products wrong. He has two funds that all the indicators tell us must be hurting. Hurting so much that he has been running to Washington DC for help trying to get cap and trade passed.

Doerr told us that energy was going to be bigger for VCs than the internet and biotech combined. It hasn’t turned out that way and he needs to save face with his limited partners before it hurts his ability to raise his next fund. So he goes to the capitol to urge the passing of cap and trade so that all the citizens can pay more for energy so that his fund can have the profits he promised. Of course he has been very public about it because he needs to show his investors that he did everything he could after he led them down the wrong path.

I wonder if the profits for his investors will make up for their higher energy costs if cap and trade passes. Maybe they’ll have a loss from the fund plus hiring operating costs and a higher cost of living to show for it. Thanks John.

Doerr told us that the iPhone is a bigger opportunity than the PC and raised a $200m fund to invest in iPhone Apps. The worldwide market share of the iPhone has long since hit its plateau. New versions of the iPhone haven’t been able to increase that market share and phones with a physical keyboard continue to dominate the worldwide market even among the youth as they want to text without looking at the keys.

The iPhone hasn’t even come close to offering anyone an opportunity bigger than PC. Tomi T. Ahonen, a high profile consultant of the mobile industry tells us on his blog that the average app on the iPhone app store takes 10 years just to recoup its development costs. http://communities-dominate.blogs.com/brands/2010/06/index.html

The investments Doerr’s fund has been making in iPhone Apps rely on advertising revenue or selling a service to make more money beyond the selling of the App. That being the case, it doesn’t make sense to limit your market to a single product that has been unable to increase its worldwide market share any further. Why not advertise to everyone? Why not sell the same service to everyone?

I guess if you don’t have an iPhone your money is not good enough for Doerr. I wonder what his investors think about that, especially after not getting the promise of the iPhone being a bigger opportunity than the PC.

It’s obvious what advertisers are going to think as they allocate their budgets. They’re going to pick those products and services that get them to the larger markets and don’t limit them to a single product.

On average, smartphone users buy a new handset every 18 months. That’s how fast the market for those apps and services that limit themselves strictly to the iPhone can evaporate. If the new must have technology is not available on the iPhone, the number of iPhone users can dry up in just 18 months. Talk about having all your eggs in one basket. Not the smartest move if you need more than 18 months in order to exit.

The spin is that music, apps, e-books, games, services, and more, need the iPhone, iPod, and iPad. The truth is all those things existed before the smartphone and it is the smartphone that needs them in order to increase markets for the hardware device.