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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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The Reputational Damage of Non-Responsiveness

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VCs love to say things like “we are entrepreneur friendly.” It’s trendy, catchy, and looks good on a blog post. But, as I’ve said in my post Your Words Should Match Your Actions, one can “damage their reputations by having their words not match up with their actions.”

Now – this post isn’t about responding to emails. Nor am I trying to be preachy. I’m not trying to explain a new behavior. Rather, I’m making an observation about something I’ve experienced – both as an entrepreneur and investor – since my first angel investment in 1994.

Here’s the situation, as reported this morning by an experienced CEO of a company we are investors in.

“We’re raising money.  I have a good intro session.  Prospective investor wants to meet in person, see a demo.  We have a good 2nd meeting.  We agree on action items.  I go away and follow up.

Radio silence.

Follow up again.

Radio silence still.  

The first time it happened I was inclined to think it was the investor and that they just couldn’t find the time to send an email response saying, “sorry – no longer interested”.   Then, it happened again this month.”

Now – initial non-responsiveness – whatever. Lots of people don’t respond to emails, intros, or requests for meetings. But after two in-person meetings, to be non-responsive is just plain rude.

How hard would be it be to say “Hey – great spending time with you – but this isn’t something I want to pursue.” Or maybe “Sorry for being slow – I’ve been swamped – I don’t have time for doing this right now.” Or – well – anything.

I’ve had this situation come up so many times that I’m immune to it. I assume that the VC isn’t interested. But I’m amazed at how the reputational damage follows the person around. And then – at some point in the future – that VC is looking for a response for something. Hmmm …

I’ve had this happen with LPs. When we went and raised our first fund in 2007, plenty of people wouldn’t meet with us. That’s fine. Lots said they weren’t interested after a first meeting. Totally cool. But some met with us but then were completely non-responsive after the meeting. Ok – whatever. But when those non-responsive LPs call me today asking for something – whether it’s to get together to “get to know me better”, or to get a reference on someone else they are looking at, or to learn more about what I think about the market for hardware investments, it’s really hard to get on the phone and spend time with them. I do – because that’s my nature – but I always remember their non-responsiveness.

I hear – and say – “No thank you” all the time. Every day. 50 times a day. That’s just part of the role I play in business. But I always try to say “No thank you.” It’s just not that hard. Especially when I know someone, or have engaged with them in some way.

Are you the guy the experienced CEO just encountered? How would you feel if your name – and your firm’s name – just went out via email to 60 CEOs attached to this story? Maybe you don’t care, but if your message is “we are entrepreneur-friendly VCs” you just undermined the reputation of your firm in a major way.

VC Posts That Say What The VC Thinks About How It All Works

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Some of my favorite VC posts are ones that say what the VC posts that say what the VC thinks about how it all works. And – importantly – how it impacts the entrepreneur, his choices, and the dynamics between the entrepreneur and the VC.

Fred Wilson does this regularly. For example, see his post today on Valuation vs. Ownership.

My partner Jason Mendelson does the same. See his recent post The “VC Bargain”. Of course, Jason and I aspired to do the ultimate version of this in our book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist.

You don’t have to agree with them. That’s what the comments are for. But they each say what is on their mind, why, how they think about it, and what the implications are for them.

If you want another example, take a look at my partner Seth’s post from last year titled I’m getting sick of the bullshit. And then reflect on the post from the anonymous entrepreneur that I highlighted yesterday titled My Startup has 30 Days to Live.

This shit is really hard and really complicated. It’s easy to have a surface view of it, to romanticize it, or to fall in love with the idea of it. Don’t. Do it because you love it. And find partners who want to go on the journey with you.

I’m going to hang out in the comments on Fred’s Valuation vs. Ownership post and Jason’s The “VC Bargain” post today. Come join me and tell me, Fred, and Jason what you think.

Something Ventured: The Founding of the Venture Capital Industry

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Last night Amy and I watched the movie Something Ventured: Risk, Reward, and the Original Venture Capitalists. This was my reward (I got to choose) since she watched both football games yesterday (and today). We have a 15 minute and 30 minute rule on any movie – after 15 minutes the chooser asks “still into this movie?” If the answer is no, we stop. This question gets asked by the chooser again after 30 minutes. If the answer is yes, we go for the duration, even if someone falls asleep. For example, after 15 minutes the other day, Amy said “still in” on my choice of The Hebrew Hammer. After 30 minutes, we were both “no’s” and that was the end of that.

I figured Amy would veto Something Ventured after 15 minutes. I’d heard from a number of VC friends that it was really good, but the idea of watching a documentary on the history of the creation of the venture capital industry doesn’t sound like an awesome Saturday night movie choice. But after about ten minutes, Amy said, “Wow – this is great!”

As I’m deep into writing book three of the Startup Revolution series (titled Startup Boards: Reinventing the Board of Directors to Better Support the Entrepreneur) I’ve been thinking a lot lately about what makes a great board of directors, and what characteristics of different VCs contribute to this. It ended up being super helpful to see direct interviews with a number of legendary VCs, including Arthur RockTom PerkinsDon Valentine, Dick Kramlich, Reid Dennis, Bill Draper, Pitch Johnson, Bill Bowes, Bill Edwards, and Jim Gaither. They covered a wide range of experiences, but were all there at the beginning of the VC industry and shaped many of the fundamental structures of venture capitalists, VC firms, how they interact with entrepreneurs, how the companies (and investments) are structured, and how boards work.

The entrepreneurs who were in the documentary were equally awesome. They included Gordon Moore (co-founder of Intel), Jimmy Treybig (founder of Tandem), Nolan Bushnell (founder of Atari), Dr. Herbert Boyer (co-founder of Genentech), Mike Markkula (president/CEO/chairman of Apple for many years), Sandy Lerner (co-founder of Cisco), John Morgridge (early CEO of Cisco), and Robert Campbell (founder of Forethought). The interplay between VC and entrepreneur as the story of the founding and funding of their companies was told was very powerful.

After 30 minutes, when asked if she was still in, Amy emphatically said “yeah – definitely.” While I thought I knew all of the history, I learned a few things I’d never heard before, but more importantly I got the nuance of the stories directly from the participants. And all of it was rolling around in the back of my head this afternoon as I spent three solid hours on Startup Boards.

If you are a VC, or aspire to be a VC, do yourself a favor and watch Something Ventured right now. And, if you are an entrepreneur who is interested in how the VC industry got started, I think you’ll also find this fascinating. The film ended with all of the VCs echoing the powerful reminder that without the entrepreneurs, there would be no VCs. It made me happy that it ended on that note.

The Power Of Honesty In An Entrepreneur – VC Relationship

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Rajat Bhargava and I have been working together since 1994. We’ve been involved in creating seven companies together (the most recent ones are MobileDay and Yesware) and, while most have been successful, we’ve had a huge number of positive and negative experiences along the way. We’ve mostly had a lot of fun and, when we haven’t, we always made sure we figured out what went wrong.

 just put up an interview with us on the Inc. Magazine site titled 4 Signs You Should Say ‘No’ to a VC which I thought was excellent. She explores the entrepreneur – VC relationship and suggests four warning signs for an entrepreneur when interacting with a VC.

  1. The VC isn’t fascinated with your product
  2. He (or she)’s just not that into you
  3. You can’t be completely honest
  4. The VC doesn’t treat you like an equal

The paragraph on “you can’t be completely honest” is a seminal moment in my relationship with Raj. It also was a key point in my work career where, upon reflection, I completely and totally grokked the importance of being honest in the moment, clear about my reasoning, and willing to change my perspective based on new information, rather than feeling stuck in simply delivering a message. The section from the article follows:

“The important thing is to be completely transparent,” Bhargava says. “It’s very, very difficult to be transparent about your business, but it goes a long way toward building that relationship. ‘Here’s what I’m going through; here’s what I’m struggling with; here’s what I need help with.’ You have to know if that will spook the investor or if they’ll want to dig in and help you.”

That ability to be honest was a great asset in Feld and Bhargava’s relationship when they worked together on Interliant, the only one of their ventures that did not survive. After some politicking by a different executive, Feld removed a part of the company’s operations from Bhargava’s oversight. Bhargava took a few days to calm down, but then he explained forthrightly how disappointed he was and why he believed Feld had made the wrong decision. “Being open and directly confronting the issues, you get through it,” Bhargava says now. “I felt hurt, but I think our relationship is that much stronger.”

As for Feld, he recalls returning to his hotel after discussing the matter over dinner and feeling physically ill. “I knew I had completely screwed up,” he says.

I count Raj as one of my closest friends and trust him with my life. He’s had an enormous influence on how I behave as an investor and how I interact with entrepreneurs. Raj – thanks man – I look forward to many more years working together.

VCs Are Like D&D Characters

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I spent most of the day yesterday at TechStars Boulder. Demo Day is a week away and I did my annual “talk about how to finance your company” thing which included meeting with each company and giving them advice on where they were in the process. As I walked to dinner, I felt incredibly energized – once again there is a great set of companies coming out of the program and it’s awesome to reflect on the progress that they’ve made in 90 days.

My “near the end of the program” talk has become a ritual for a few of the programs – I just sit around and answer questions about the financing process for an hour. This lets me tune the discussion specifically to what’s going on and what is top of mind of everyone at this stage in TechStars. Since everyone in the program is in the room, they get to hear specifically what their peers are going through and how things are being addressed. This is obviously not a steady state phenomenon from year to year as while some of the issues and dynamics around fundraising stay constant, the environment is continually changing.

I woke up to an email this morning from Isaac Squires of Ubooly which said “Best Analogy Ever: I think it went something like – “VCs are like D&D players – I’m the psi mage, and Jason is the barbarian…”  It was part of my rant about VC archetypes.

One of the biggest mistakes entrepreneurs make is to assume “all VCs are the same.” Over and over again I hear questions like “how do I raise venture capital” or “how do I approach a VC”, or “what does a VC want to see in the first meeting”, or “now that I’m going to pitch a VC, what should I show them?” The answer – generically – is “I have no fucking idea – WHO are you meeting with?” This usually gets the person’s attention, at least a little.

The point I go on to make is that there are dozens are archetypes of VCs. Yesterday I listed half a dozen quickly off the top of my head using one line descriptions. I then paused and used an analogy that occurred to me in the moment and caused all the nerds in the room to smile. I said something like:

“Think about D&D, or Magic the Gathering, or any other game like that. The VCs are individual characters in D&D. Each character has a different set of skills, weapons, money, and experience points and over time develops more. A firm is a combination of different characters – at Foundry Group you might have a mage and a barbarian – and the combination is what you have to pay attention to.”

I played a lot more D&D than Magic (D&D was my junior high school game of choice) but the analogy holds exactly for Magic or even in simpler form Werewolf. One you realize you are dealing with many different archetypes with different skills and skill levels, and the configuration of these archetypes into a firm are similar to how characters combine and interact in a battle, you realize that there is no “generic VC.”

I moved off the analogy to make the point that you should do your research on the person and firm you are talking. It’s easy to do today via the web and the power of all the network connections between people. If you understand who you are talking to, what motivates them, and what they care about you can both target them better as well as have a much more effective conversation with them.

I expect I’ll use this analogy again and again – it’s better than saying “there are lots of different VC archetypes.” I need to think a little harder about the specific archetypes at Foundry Group since right now we all appear to be 3-D printed bobble-heads when you look at our website. At least there’s the consistent theme of beer in the background.

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