BOSTON ( TheStreet) -- At first blush, the business model of new investment firm Revolutionary Angels appears like a lottery. All it takes is $5,000 and a dream.
Based in the innovation hotbed of Cambridge, Mass., the firm, launched last month, has a pay-to-play plan that works like this: As many as 100 startups each pay $5,000 to compete for a maximum $250,000 initial round of funding. The runner-up gets $50,000. The rest get feedback.
"This does not seem kosher," says Emily Mendell, vice president of the National Venture Capital Association, in an e-mail message, upon hearing about the firm. "Real angels would never do this."
Founder and Chief Executive Officer Chris Hurley says Revolutionary Angels offers novice entrepreneurs a shot at financing as well as advisory services at a time when they're hard-pressed to find funding through traditional routes."If you're a first-time entrepreneur or an early-stage company, there are a lot of challenges to get investments," says Hurley, who previously worked in corporate development at Sun Microsystems (JAVA). "You can spend a lot of time chasing your tail, and with an early-stage company, time is money." No argument there. For starters, even bank loans are hard to come by, thanks, in part, to the downfall of CIT Group (CITGQ). And while total venture funding increased 17% to $4.8 billion in the third quarter from a year earlier, first-time financing fell 20% to $633 million, according to the quarterly MoneyTree Report from PricewaterhouseCoopers and the NVCA. That's the least amount for first-time deals in the survey's history.