Brad Feld, managing director at Foundry Group and Mobius Venture Capitol, has been in the technology business for a long time. He started his first company out of his fraternity at MIT, and hasn’t looked back. Since selling his initial company, after 8 years of growth and management, in 1993, Brad now serves to support other entrepreneurs.
Brad has been around for some time, and his advice comes from success, failure and a whole lot of effort. “Passion,” Brad says, “Is critical, but not sufficient,” especially in the way that passion may cloud the process of discussion, or argument.
From starting his own company, to now helping others do the same, Brad has gained an invaluable perspective. “The entrepreneurs I love to work with,” Brad says, “Are guys who have had a success and a failure, and not necessarily in that order.” Brad recognizes that what he has learned from failure, has been infinitely more valuable that what has learned from success. His advice for those looking to enter the world of entrepreneurship? “Try different things.” Don’t set yourself down a single path, when ultimately, many paths could lead to equal success.
Brad Feld wears a shirt that simply states, ‘No one reads my blog.’
At 22, I was running a company called Feld Technologies. Which I started. My dad was very proud of me because it was named after him. We were a software company in Boston, Massaschusetts. At 22, I guess I was still in school in a masters program while running the software company.
We were probably 3 back in 1987. We eventually got to be about 20 people when we were acquired by a public company. But self funded business. Me and a partner started it. We didn’t know any better. We just got going and started a company.
I’d say we generally had a good time doing it. We had our ups and downs. Every start up does. But I never thought about working for anybody. It’s always a case of that’s the first thing I did out of school. And I’ve always continued to do entrepreneurial stuff since then.
So we you weren’t tempted to go get a ‘real job?’
I don’t think I know how to have a real job. Really, at this point, having done this for 20 years, I don’t think of working in a company as something I would understand how to do. Even then, I guess you always have it in the back of your head. If this doesn’t work, I can always go get a job.
We used to joke about it. We always had our idea applications in case the business failed. But it was less, a real fallback and more for the dark days when we were fucking up and making our way through whatever we were doing.
What was the biggest obstacle you faced as a young entrepreneur trying to establish your own business?
Probably inexperience. We were lucky that we had some good mentors early on. My dad was involved in the business as an advisor. A couple of our early clients were really good in terms of helping us. Not just being customers, but also helping guide us through decisions we made in up and down rough spots. I think the hardest thing was not having any experience about how to start and build a business and having to figure it out as we went. That was also a benefit.
The barriers that you normally see as barriers…they weren’t barriers! We didn’t know there were barriers. We started the business in Massachusetts in 1987. The Massachusetts Miracle, which in 1987, you weren’t around yet.
I was three years old.
The Massachusetts Miracle was that everything was going great. Massachusetts was going to be the next big thing. All of a sudden it all blew up. But we didn’t know that. We didn’t understand what a recession was at 22 years old. Just built a business. I think it works for you and against you in terms of inexperience.
So was the highlight eventually being bought out?
I think being acquired was the end point, not the highlight. There were some really great times in the business. It was really fun. We had some smart people working for us. The culture was great. It was a very young group of people. We were doing pretty hard stuff at the time. Our clients respected us. Our motto was ‘We suck less.’
The thing we did was we wrote software for other businesses to use in their business. At the time it was all PC based. It was a time where there was a transition between mini computer based to PC based computer technology. But it was still very hard to do database applications. There wasn’t an internet in terms of commercial use. Building multiuser computer applications was just hard.
A lot of times we would be the 2nd, or 3rd, or 4th company to be brought in to do it. Our clients would have already spent their whole budget on the last couple of people that didn’t get the thing built for them. So we constantly were setting expectations. ‘Look guys. It’s not our fault that you already spent all your money on that. Let’s figure out how to do something successful for you. Our job is just to suck less than the last guys that were in here.’
We were able to be playful about it, but serious at the same time. We took our project seriously and our customers seriously. We definitely got tired over time. We ran the business for seven years. It was a hard business. It required a lot of effort. We were very profitable. We also realized that growing the business from 20 people to 40 people, doubling the size of the business, we’d probably make the same amount of profit. So it wouldn’t be that we would double the profit too.
We never really thought about an exit strategy for selling the business. We were fortunate that someone came along around that same timeframe and ultimately paid us a fair price for the business.
So the next step, after you got acquired, did you get into what you’re into today?
I worked for the company that acquired us, which was a public company, originally running a consulting group that was within them. Much larger business. Ultimately, I ran around and helped with the deal team as they did acquisitions. While I was there I started doing some angel investments with my own money. I helped start some early companies in the mid 90’s that were internet related businesses and helped put together some angel financing for those companies at the very beginning of what became a nice timeframe for starting new companies in ’95-2000 timeframe.
We moved from Boston to Colorado in ’95. We got out here because when I sold my business I was 28. I told my wife Amy that by the time we turned 30 we would be out of Boston. Boston wasn’t home. She was from Alaska and I was from Dallas. So Boston was fine, but it wasn’t where we wanted to live our life. So two months before we turned thirty, she informed me that she was moving to Boulder.
We didn’t know anybody. We didn’t know what to expect. We figured worse case scenario, we didn’t like it here we’d keep going west. We fell in love with Boulder and have had an awesome of being here since.
While I was doing that I was doing these angel investments. I did some instutional investing. I ended up started a venture capital firm with some other guys, which is what I’ve been doing since then.
Z: I’m sorry, what is angel investments? I’m not familiar with that term.
Angel investments are, in a lot of cases, the first money a start up raises. When you raise a seed, or a Series A round, but the first time you raise money, instead of raising it from venture capitalists or instutional sources of capital, you often raise it from individuals. There’s two categories of individuals. There’s friends, people you know, like your grandmother and brother in law’s next door neighbor. That category is called friends, families, and fools. That’s often lumped into the same category of angel investors.
They’re people who like to make early stage investments in young companies. They typically take somewhere between a very passive role in the company where they give $25,000. Or they might take an active role where they sit on the board and be an advisor. Typically financing of $100,000 to a million dollars. Once you start raising bigger amounts of money than that, you typically need to go to a traditional instutional sources of financing in which venture capital is a natural one. Not the only one, but a natural one.
What was it about your initial angel investments that got this career going for you? What was your interest in it?
At first I struggled with, ‘Am I the investor or the entrepreneur?’ My first company I was the entrepreneur and the CEO. As an investor, and especially as an angel investor, I was kind of straddling both fences. I didn’t run the company, I wasn’t always the CEO. But I was chairman a lot of the times. I part time would help create the strategy for the business. I was very involved in something going on in the company, although, not always.
There were examples of that of me on the other side of the fence. There was this company called NetGenesis, where I was initially chairman of the company. I helped put together the first round of financing and was very involved through the first couple of rounds of financing with the business.
Another example of the other side was a company called Harmonics Music Systems, which makes the game Guitar Hero. Which I helped put the angel round of investing together. I put some money in. My dad put some money in. The guys that bought my first company put some money in. A couple of friends put some money in. I put that together and the helped the guys, but I wasn’t really that actively involved.
Z: How long ago was that?
That was ’95, ’96. That timeframe.
So I was trying to figure out, as I was doing this, there were times were I spent time with the company and ones where I was an investor and maybe helped at a high level in terms of guidance and things like that. But played more of an investor role. Picking the balance between those two was important to figure out.
In the cases where I was actively involved as a co-founder, and I did that with a handful of other companies, what would end up happening is, it’s very hard to be an active investor and also be an active co-founder of one or more companies.
The behavior is just different. Your brain has to split itself in half and behave in two different ways, and that’s difficult. I became very interested in the investment of it, with these early stage companies. So I love being involved in helping create a company at the very beginning. I love being an investor. I love working closely with the CEO of a company. But someone else is running the company. There’s a leadership team that the CEO hires, not a team I’m hiring or is ultimately responsible to me. I’m just one of the investors. Even if I’m the only investor in the company.
At some point, I made that shift to being clearly just the investor. Then it became logical to do some stuff on a larger scale. Hence, raising outside capital in addition to the money I was investing so we could make larger investments.
So what gives you the biggest thrill in investing? Is it helping out young entrepreneurs in the early stages? Is it getting a big paycheck?
There is not a biggest thrill anymore. I think there was a point and time where the beginning stages were the most exciting. What I’ve found is that it’s not very satisfying to make an investment in a company and then have it ultimately fail. If you only get excited about the front end of the process, you end up doing too many investments, and not focusing on building successful ones. If all you’re focused on is the end point, then the whole process, you don’t add much to it. So I think there’s a balance.
For me, it’s the actual life cycle of creating a company. I love the beginning phases. I love when I can step back from a strategy perspective and a recruiting perspective a little because there’s a team and you can watch the company start to accelerate. And pick your spots in terms of engagement more actively. It’s really exciting when a company gets acquired or goes public or is ultimately successful. It’s also exciting when companies become profitable. All of those things are powerful pieces of it.
I think when I look back on it, the relationships and friendships that have developed in being involved with a number of different companies is really where it’s at. I have many, many deep friendships with people that I’ve worked with. Not just the CEO’s and not just the founders of the companies, but also other people on the leadership team. You’re working side by side on stuff. You’ve gone through plenty of adversity. You’ve gone through something that’s meaningful and successful. That’s a real satisfying part of the process.
And doing it again with people that you’ve had success with before. Even failure. I like to say that my favorite entrepreneurs are ones that have been successful once, and have failed once. I don’t really care what the order is. Because you know both. You know that it’s not easy. You know that success is not a given, but you also have the confidence that you can be successful and you’re willing to go for it.
What do you look for in investments in the people that walk in? Because ideas are really a dime a dozen, but you’re ultimately the guy who determines the drive in people. What exactly provokes you to make that investment?
I’d say a couple things. We approach things as a team thematically. We’re interested in very specific areas. Either technologies or markets that are evolving very rapidly. We like to get involved in helping create a theme. A couple of years before there is broad commercialization, we go really really deep in understanding how to turn it into something really significant. As a result, we’re looking for people that already have technical expertise or interest in these areas. We like to work with people. We don’t care if they’re first time enterpeneurs or experienced folks. But we like to make sure there is experience around the table, especially if you’re going for a big idea.
We like to invest in companies where the opportunity is significant. And people are trying to create a very big company. Versus, yet another feature, yet another function.
However, when you’re investing in two or three people, you might have a very very big vision for what you’ve got, but you don’t know what the roadmap to get there is. We look for people who can articulate the roadmap. They’re good thinkers that are flexible and willing to really go after trying to create something significant.
But it’s within these areas thematically that we’re comfortable with. So someone approaches us with something that’s outside of the theme that we’re typically interested in. Even if that person is great, we typically won’t spend a lot of time with that. Because we don’t invest in clean tech. There’s lots of great clean tech entrepreneurs. There’s lots of great life science entrepreneurs. That’s not our thing though because we don’t know anything about that and we can’t be helpful.
But if someone comes within those areas that we really know, then we’re all over it.
Where does passion rank on that scale when you’re deciding?
I think passion is critical, but not sufficient. You have to have it. But just having passion doesn’t get you there. You can be incredibly passionate about something and be completely unable to execute. So they really go hand in hand.
If you’re a really great executer but you have no passion for something, that doesn’t work either. You have to get the right blend of that. It doesn’t have to be across the whole team. It has to be in the leadership of the team. A lot of teams need someone who is very passionate about what they’re doing because that will cause everyone else to come along with them, and follow them.
But if everyone is incredibly passionate to the exclusion of some people being skeptical and asking hard questions and challenging the path you’re going down, you can just head right down that cliff as fast as you can. You’ll go right over it if everyone is not asking the hard questions of ‘Is this good? Are we making the right decisions?’
So some intellectual tension between the people is also very helpful.
So that’s basically the limitations of having too much passion. Is that you can blindly go over a cliff if you don’t have the right things in place.
Well, I don’t think you can have too much passion. I think the more passion the better. I think if you just have passion, that’s not useful. It’s not enough. It’s not that you’re too passionate, therefore you’re going to just be stupid about the decisions you make. I don’t think that’s true. I think smart people can be incredibly passionate and well course correct continually as they learn stuff. But if you don’t have the underlying ability and muscles to get stuff done, to question what you’re doing, to constantly be looking around the environment and recognize that no companies start at point A and get to point B with a path that’s a straight line.
So with the businesses that you’ve invested in that have succeeded, what has made them get there?
Well, let’s stay back with those two thoughts. One is people being passionate about what they’re doing. But you can’t work fifty, sixty, eighty hours a week if you don’t care about the thing you’re trying to create. Real vision and ability to deliver on the vision. People. Ability to build a team. Ability to find other great people who are attracted by your idea that are willing to go out and go after the same idea you’re going after.
Fearlessness about trying to create something. I think really, really good entrepreneurs just keep going. They don’t worry about the setbacks and recognize that if things don’t work, there’s always ups and downs, and you have to keep going after it. But again, going after it with a thoughtful eye. Rather than blindly bashing through a wall no matter what.
So on the opposite end of that question, what about the businesses that have failed? Why have they gone?
Most of the failures come from one of two places. One is the people. They either have a lack of competence. They make bad choices about key people. They have an inability to attract great people. Big blind spots on the part of the entrepreneur with an unwillingness to deal with them. That’s kind of one category.
The other category is, I was going to say execution, but it’s not even execution. It’s ending up in a position where the thing you’re doing is not compelling. It’s not compelling for a variety of reasons. Either the software you build sucks. You can’t get it out the door. You have a mismatch of what customers or the market moves away from what you’re able to provide. And you’re not able to adjust with it. Broadly speaking, it ends up in that bucket of you do something that’s not as interesting as the premise was at the beginning.
Those are the two primary drivers of failure. There’s some others too that are sort of exogenous. When the Internet bubble burst in 2001, capital vanished. So companies that had previously been consuming capital at an incredible rate and were having capital shoved down their throats by public and private market investors all of a sudden couldn’t raise capital. It’s very hard to take something that’s speeding along at a certain pace and radically change it and have it survive. There’s a lot of companies that just went off a cliff or slammed into a wall because of that.
You can say that they should have saw that coming. You can say they should have built a better business. But that’s all hindsight. Because if you were living in that moment of time, you were getting rewarded for more customers without worrying about making money. Build more traffic. You weren’t getting rewarded in terms of more capital and more value for the cash flow you’re generating. So those are some exogenous factors, but they’re linked to others. Because there were plenty of companies who were able to pull through that period, put the brakes on, scale back and then emerge out of that with very successful businesses.
So, in the middle of those two questions that I just asked, have you ever seen an entrepreneur come in here with tons of enthusiasm and drive for their idea, and then lose it along the way?
What’s that process like when they lose it?
I’m thinking of a couple specific examples where the entrepreneur was blinded by their own salesmanship. There’s definitely a category of entrepreneurs that believe that if you can just convince other people how great your idea is, then your idea must be great. And what happens is that you convince some other people how great your idea is, and then you have to start building it. Then you realize it’s not so great, and you lost interest. Or the stakes change and you panic. Or the rules change and you have to build something slightly different and you don’t know how to deal with that.
There are definitely things that cause that perspective to change. But that comes back to the person. Being true to yourself as an entrepreneur in terms of what you want to do is really important. If, as an entrepreneur you find yourself trying to come up with something that looks, feels, smells, taste different, just to convince someone to fund you or to come work with you. If you’re faking yourself out to get to a certain goal, it’s probably not going to be sustainable.
I mean think about the trip you guys are on. If you weren’t really excited about what you’re doing…how many cities have you been to now?
I don’t know. Ten?
Yeah. And you have to get back in the thing on the road again and drive around. If you weren’t doing what you wanted to do, why would you do it? So you have to start there with a vision and execute on the vision. But you got a long way to go if you want to do a book and documentary. You got a ton of work in front of you. Along the way people are going to say this is stupid. Or that interview with Feld was a waste of time. Or ‘Gosh, there’s really not content for a book here. You’re going to have to do a lot of work. You’re going to have to go back and interview those people again because you didn’t ask them the right kinds of questions. Or whatever!
You take that feedback and figure out what you want to do with it, which includes knowing when people are wrong and believing in what you’re doing and keep going. Or adjusting and having to continually reengage. I think that’s a big part of it.
It is a big part. Regaining that drive because you can definitely lose it.
And you let yourself go up and down. Human beings are not constant emotion meters. No matter how upbeat and optimistic a person is, and enthusiastic and passionate a person is, they have bad days. And sometimes you have two bad days in a row. And sometimes you have a bad week. And sometimes something happens.
I love the cliché that life is a fatal disease. Ultimately you die. You have these moments where you realize that this isn’t going to go on forever. When you’re in that mode, you have different emotional ranges. Some people get depressed, some people get sad. Your girlfriend breaks up with you. You get in a fight with your parents. You get in a fight with your business partner. It doesn’t matter. You have to go through those ups and downs. Sometimes the downs sustain longer than you’d like them to. Sometimes they trigger off some self doubt and questioning. That’s all a normal part of entrepreneurship. That’s all a normal part of creating this stuff.
Just powering through isn’t always the right answer. Because it’s not possible to always power through. Time passing usually solves that stuff. But you have to be able to reenergize yourself along the way. Having a fundamental belief and vision of what you want to create, going back to passion is important.
I think that also carries over to careers as well.
Absolutely. Remember what I said. Entrepreneurs I love to work with are guys who’ve had a success and a failure. I don’t care what order. It could be two successes and one failure or two failures and one success. It’s a taste of both sides of the equation.
I’ve had lots of things work, and I’ve had lots of things not work. The lots of things that work, when I remember them, I remember them fondly and happily. I forget all the things in them that didn’t work because they ultimately worked.
The things that didn’t work…some of them I remember not very fondly. I kind of want to ignore that I had that experience. But at the same time, I learned something from it. As long as I took something out of it that I was able to then apply going forward to the new things I’m doing, it was probably some semblance of a useful experience.
In some cases, it was profoundly useful. Because the stuff I learned from the failure was much greater than anything I learned from the success.
So if you could go back to when you were 22 years old, and tell yourself one piece of advice, what would you say?
I was going to do the Alan Arken, Little Miss Sunshine quote, but this is a family video right? It’s an inside joke. If you don’t know it, you should watch Little Miss Sunshine.
What would be the advice I’d give a 22 year old. Or that I’d give myself as a 22 year old. I would have tried more different things. I was too focused when I was 22. I was already very committed to the path I was on, and I didn’t shut down choices, but I didn’t go searching for different things that was outside of the natural range I was in. And as a result, I think there’s a set of things I didn’t try that would have had an interesting impact on the ultimate trajectory.
Z: Do you think you would have been able to start your firm if you had done those things?
I don’t know. I think to be successful the way I was successful the focus was required. In that moment and time. I don’t know that by expanding the lens more broadly in terms of other things would have caused me to not be successful. But it would have looked different.
I don’t regret any of that. But again, you come back to what’s the advice? My sense is that the advice there would be to make sure you’re continuing to cover a wide range of ideas. Even if you are focusing on a particular thing that you’re trying to get done.
Z: How active a role does a venture capitalist play in these start ups?
It varies dramactically. It varies by start up and by venture capitalist. It doesn’t even vary by firm in a lot of cases. It varies by the style of the individual person who is investing. I’d even say that across the level of which I make my investments, deep engagement in the companies early on varies based on the needs, skills, and experience of the entrepreneurs.
It’s not that the more experienced people need less help. It’s that they may be better at asking for help and get better leveraged help than somebody who’s inexperienced.
There’s not a formula and a pattern that’s a clear pattern.
Z: Is that hard? Can you almost stifle an entrepreneur if you try to help out too much?
Of course. The worst thing a VC can do to an entrepreneur is show up every week and spend a day in the office. I’m an early stage entrepreneur and I hear lots of people say ‘We love to spend real face time with our entrepreneurs.’ That’s good. I spend lots of face time with the people I fund and work with. But if you go and spend a day a week, you can almost guarantee that the day before is going to be spent thinking and preparing for that meeting. And the day after will be spent doing random things that came out of that meeting. You basically are cutting your focused work time in half in the aggregate. You lose two or three days out of a six day work week.
Do you really want that investor all over you, all the time?
The other thing that can really stifle a company is having too many investors sitting around the table early on. You’ve got a CEO. You’ve foreign investors in an early stage company. Every one has a point of view.
As CEO of the company you spend all your time managing your investors point of view versus going off and creating something. So being thoughtful about that stuff matters, but it ranges. I’ve seen first time entrepreneurs in their twenties be phenomenal at leveraging their VC’s and what their VC’s can bring to the table. And I’ve seen experienced entrepreneurs who have been through it a couple times just have dismal relationships with their investors. It’s not an either or. Every situation is different.
Part of being a great investor is understanding how best to be helpful to the companies and entrepreneurs you’re funding.
So what’s going on here in Colorado? It seems like there’s a huge buzz going on about all these entrepreneurs in Boulder and Denver. It’s cool to see. I talked to Andrew Hyde this morning and he said there’s amazing people in this area.
There’s a lot of great stuff here. Boulder is one of those well kept secrets, broadly speaking. When I moved here in the mid-90’s, I didn’t expect to do any business here. I was already doing stuff on the east coast and west coast, and I expected to continue to do stuff on the east and west coast and just live here.
What happened from ’95 to 2000 was there was a bunch of entrepreneurs that started companies, some of which were very successful. When I moved here, the rap on Boulder was that there was no senior management, CEO’s, VP of Sales, VP of Marketing with experience. Those companies imported a lot of people and they moved to Colorado to stay. It’s a fantastic place to be.
So what you’ve now got is the next generation of people building companies that have been involved in companies. They’re on their third or fourth startup in a lot of cases, they understand how to be involved in a significant business. And they’re still young enough where they’re going for it. They’re in their thirties and forties. That combined with a very vibrant college town where you have endless amounts of smart kids coming out of CU Boulder. Plus, if you’re 22 and you’ve been to 10 places, where does Boulder rate?
It’s a great spot.
It’s a great place to live. If you love the outdoors, if you like to hang out, if you like to do all the stuff in your twenties it’s here. And by the way, if you want a big city, it’s just down the road. Thirty minutes to Denver and you can do big city stuff all day long.
Notwithstanding that there isn’t a good strip joint in Boulder. If you need a good strip joint, you can go to Denver. Take your pick.
Denver has everything you’d want from a big city.
What’s happened is it’s turned into a fun scene. There’s a lot of energy in place. We like to joke that this is the place where the hippies out of steam stopped. If they were headed to California and saw those mountains, you just stopped here.
I wanted to ask you about your online presence and the affect it’s had on your offline life. I was talking with Andrew this morning about Twitter. Last week you put out a Twitter saying anyone want to grab sushi and 60 people showed up.
The stuff I like to invest in is often times stuff I like to use. I’m a nerd. I’ve always been a nerd. I’ve always loved to build technology. I’ve been playing around on the internet stuff since it started to be commercialized in the mid 90’s. I started blogging in 2004, not because I had any expectation of the outcome. I just wanted to learned how the stuff worked. I wanted to learn what it felt like to get published and have stuff end up there and have my mother send me an email criticizing me about what I wrote.
I learned an enormous amount about the technology and how it worked. How to interact with other people with that technology.
Just set a personal worst for a marathon in San Francisco. Wants to run a marathon in every state by the time he’s 50. The one in San Fran was his ninth race.