Frank I really enjoy these letters of the week. They could be an opportunity to get some beneficial dialogue going.

I like T.D.'s letter for its anti caffeine and anti egotistic entrepreneur sentiment. Now if Angels would just say the same thing about their peers that express the same negative traits it would go a long way to improving Angel investing. Entrepreneurs act in that negative manner because of the many Angels and VCs that encourage such behavior.

My only problem with this letter is that although the author is 'now hoping I'm not part of the punchline to the old classic joke "How do you make a small fortune in angel investing?"', the author does not define what s/he means by attributing success to "good fortune".

Many Angels and VCs insist that venture investing is just luck. However:

1. We see the same firms and individuals consistently rated among the top investors year after year.

2. A fund of NASDAQ companies outperforms venture funds.

3. Stanford's Office of Technology Licensing made about $208million for about $84million invested.

All of these examples individually and collectively prove to us that there is a method to the madness of venture investing. I wouldn't suggest that any venture investor rely on "hope" that they do not become part of the old punchline, but rather follow the examples of successful investors.

Sure "good fortune" is important. For the purposes of venture investing it is best understood in the context of "no man is an island". For example, the good fortune of Bill Gates depended not solely on himself but someone else first inventing the Graphical User Interface, and before that someone else inventing the PC, which in turn depended on a host of other inventions; and they all depend on the consumer.

Microsoft also had the good fortune that Apple Computer used its similar technology solely for their own products and did not compete for space on IBM clones. Regardless of what Apple was going to do or not do, Microsoft had to do what it did to remain relevant.

Microsoft acted just like the NASDAQ companies that outperform venture funds and the university technology transfer offices that outperform most Angel investors. They all have a limited amount of money to invest in their next product(s) and therefore must have their finger on the pulse of the needs of the customer and the direction of technology.

The biggest problem entrepreneurs who follow these sound examples have when it comes to fundraising is not competing good ideas. For example, Microsoft had no substantial Graphical User Interface competition for space on IBM clones. Every year we see a very limited number of huge exits. Therefore competing good ideas cannot be the problem.

The biggest problem is Angels and VCs who don't get out of their own way and also get in the way of their peers. The gimmicks and poor advice they espouse on picking investments never seems to end. This causes the good ideas to not be able to differentiate themselves in the eyes of investors who refuse to see the forest from the tree.

Do Angel Investors really imagine that the CEOs of NASDAQ companies that outperform venture funds are asking their employees for fast pitches, to show them their passion, their ability to generate excitement, and so on? Is this what they imagine is going on at successful university technology transfer offices? If they were they would be getting culled just like VC firms are now experiencing.

We generally don't see the very best VCs sponsoring fast pitch competitions or selling books. Could it be that they have more profitable uses of their time? We don't see this behavior from university technology transfer offices either. Careful analysis is the approach of choice.

Today when an entrepreneur has an investment that truly has huge exit potential, he has to go up against Angels and VCs that espouse the nonsense that there are an unlimited number of good ideas, and the huge exit opportunity s/he offers is judged against passionate exciting entrepreneurs promoting hair extensions, ice machines, robots that pick fruit, and green energy. None of which have huge exit potential.

Robots that pick fruit! Give me a break! I'm supposed to believe that instead of low wage fruit pickers, farmers are going to buy these expensive machines and hire expensive employees to maintain them, and if they break down the crop rots in the field. At the very least the company that builds the robot should be hiring them out to get paid by the basket just like the farm worker, and send the robots around just like migrant workers. If they can't make a profit doing that they haven't proven their concept. And even if it did work, we have to be talking about a very low profit margin, hardly a venture worthy investment. The profit the robot can make is limited by how much fruit is available to be picked, how many workers it can displace, and it has to do it cheaper.

When are Angels going to stop relying on "good fortune" and make their own just like other successful venture investors are doing? When are they going to stop lumping low and no return opportunities with high potential opportunities? Until then the biggest hurdle for the Entrepreneur who is outside of networks of university technology transfer offices and outside the networks of the best VC firms, will remain the Angels and VCs with weird ideas on how to judge the potential for success and who proudly display the chaff that comes their way rather than sorting through for the wheat.