Actually, I think the basic idea has a lot of potential and could be a fine business. There's several different revenue models and the costs could be pretty low relative to a lot of other types of startups.

The bigger question is why they needed to raise $715k and still needed more.

That was really the thrust of my question. Why was that amount of money to start up a good investment?

I'm baffled too. The Internet Archive first crawled the site in June 2007, so let's be generous and say they were in business for two years (NYTimes article mentions they closed).

Stunning hubris.

Education is a very large market, not sure what all that money was for, but obviously they did a very good job of selling the project.

The fact that they didn't manage to get a second round (and that's a fact that is now very well published) could be due to any number of reasons, such as missing critical goals that they've set in their original presentation and/or changes in the marketplace. It's hard to tell what the real cause is without asking the 8 angel investors involved.

Drawing far reaching conclusions ('angels flee from tech start-ups') from a single sample is not very solid science.

One possible reasons why angel investors are holding back is because of their stock portfolios taking a huge hit.

I also don't see not wanting to invest for a second round as 'pulling out', and I think the fact that all 8 responded unanimously says a lot more about 'twosmartdogs' (what a name) than it does about the investors.

They've had their shot, now they will either have to swim or sink. It's not different for the rest of us, with or without outside investors.

Not all investors are smart. Maybe they were tricked with a really slick powerpoint presentation. With comic dogs and everything.

I've seen much less deserving people get much more money from prestigious and successful VC companies. Don't underestimate a great sales pitch.

teachstreet.com attracted funding from Madrona (a pretty solid VC firm) as well as Dave McClure, I think. Same thing, I suppose.

Bounce around craigslist for a bit and see how many people are buying and selling lessons. It's a big business.

A good percentage of those are scams, eg: "Spanish tutor wanted." They advertise for some lessons from someone likely to be semi-desperate but with a bank account. Then they kite a check from a stolen bank account for twice the amount to the sucker, and ask them to pass the rest to the "nanny". The child of course never appears.. and they say "oh, keep the money." They play on greed and fear to rope the sucker into doing the most dangerous part of the fraud and to keep quiet later.

Seriously. Answer ten teacher wanted ads and 2-3 will be scams of some sort.

Eventhough a minor point - thier homepage still says,

"Copyright © 2007 Two Smart Dogs "