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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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Mentors 4/18: Be Direct. Tell The Truth, However Hard

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Today’s installment of the Techstars Mentor Manifesto is #4: Be Direct. Tell The Truth, However Hard.

Let’s start with “Be Direct.”

At some intellectual level, being direct is easy. You just say what is on your mind. You say it in a declarative way. You lead with it and support it with either experience or examples.

But humans have a very difficult time being direct. Many of us can’t get to the point. We thrive on inductive reasoning. We are passive aggressive in our behavior. This is especially the case when we don’t know the answer to something or when we are uncomfortable with the truth.

Reflect for a moment on how you answer a question when you don’t know the answer. Do you use the magic and wonderful phrase “I don’t know.” Or do you skirt around the question, searching for an answer that is somewhat relevant, while reframing the question more to your liking. Or do you just spew out whatever comes to mind, extrapolating truth from one data point you have lurking in your brain somewhere?

Don’t do this.  If you don’t know, say you don’t know. But if you know, be direct.

You might think this contradicts Mentor Manifesto #1: Be Socratic. Remember that “be socratic” doesn’t just mean “ask questions”, it’s all about asking questions to get at the why of something. They key is that when you get at the why, and really get at it, then flip into being direct.

Now, consider the concept “Tell The Truth, However Hard.”

At 48, I’m no longer able, or willing, to lie. As a kid, I’d stretch the truth to exaggerate my own self-importance or the perceived excitement of a story. I did a few things I was ashamed of and lied to cover up and avoid exposing what I’d done. But whenever I got caught in a lie, which was most of the time, I felt badly about myself. My parents handled this really well. Rather than punishing me, they would talk about the deceit and make me face it. They were calm but direct and unyielding. At some point I realized dealing with the ramification of getting caught in a lie was much worse than telling the truth in the first place. I owe it to my parents for instilling this value in me.

By college I don’t think I lied very often. I still exaggerated the truth, but never purposefully lied. The next person to whack me over the head about this was my first business partner, Dave Jilk. At Feld Technologies, I was the primary salesman although Dave sold plenty of business over the years, especially with existing customers. I often made Dave frustrated with two behaviors. The first was when I oversold something and we ended up starting a new client relationship with expectations that were far out of line with what we could deliver. The other was when I was selling Dave on my position, trying to convince him of something by stretching the truth, exaggerating the wonderfulness of the outcome, or, in some cases, just trying to push through with the force of my personality, regardless of the reality of the situation. Dave would regularly challenge and push back on me, which eventually helped me realize that overselling, exaggerating, and overstating the situation ultimately lowered my credibility.

The killing blow for me on lying was when my first wife had a year long affair. The level of deceit in that dynamic, including between the two of us in our inability to be direct with each other about how we felt and what was going on, along with the corresponding emotional fallout for me, was overwhelming. I made an internal commitment to myself to never do that to someone else, regardless of the situation.

I proceeded to get involved in a relationship with a person I’d describe as a “truth teller” or a “fair witness” (for those of you who are fans of Stranger in a Strange Land.) Amy is incapable of not telling the truth, no matter how difficult, and after 23 years of being together, that has become deeply ingrained in my value system.

That doesn’t mean that I don’t make mistakes. I make a lot of them. All the time. And when I do, and I realize it, I own it. Which is another version of telling the truth. It’s easy, especially as a mentor, to gloss over the fact that you made a mistake. But it’s much more powerful to the mentee when you own your mistakes and correct them.

Linking together the ideas of “being direct” and “telling the truth” is very powerful. You end up holding yourself up to a high standard of behavior and communication. And you set an example for those you mentor, just like I learned from my parents, Dave, and Amy.

On The Road Again

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After a year of zero travel for business, I’ve started to venture out into the world again. I just got back from my third business trip this summer – this time to Seattle for the past three days.

After 20+ years of traveling 67%+ of the time for work, I was sick of it. So I’m wandering back in with a little trepidation.

I’ve decided to take a very different approach. Historically on a three day trip to Seattle, I’d have 10 meetings a day, starting early in the morning and going until after dinner. I’d pop from place to place, taxi-ing (now Uber-ing) around town. I’d check my email in cars between meetings, and I’d be a sweaty, smelly mess by the end of the day. I’d meet with every company we are investors in (Moz, Cheezburger, BigDoor, Rover, Techstars, and Impinj), meet with a bunch of entrepreneurs for companies we might be interested in, hang out with a few of my long time Seattle friends, visit at least one or two Seattle VCs, and do a public event or two. And then I’d stay up until 1am trying to grind through my email.

This time I planted myself at Moz on Monday and Tuesday and then Cheezburger on Wednesday. While I had plenty of meetings at Moz, they were all about Moz. I spent Monday with each of the four product teams, going really deep on the existing products. I spent time with people on the leadership team, including significant time with Sarah Bird (CEO) and Rand Fishkin (Founder). I had a dinner with Sarah Monday night followed by a hangout at Rand’s house with Rand, Geraldine, Sarah, her husband Eric, and the tireless Jackson-child.  We had a board meeting on Tuesday along with a bunch of 1:1 meetings. Tuesday night I had an awesome meal on the roof of Terra Plata with the Moz leadership team. And just for fun on Tuesday morning I went for a run on the waterfront with my long time friend TA Mccann, who if you know our origin story includes a run at the first Defrag (where he kicked my ass, just like he did Tuesday morning.)

I slept in on Wednesday, did some email in my hotel room, made a few phone calls, and had a late breakfast with Andy Sack at Purple. I then had lunch with Ben Huh (how’s that – breakfast and then lunch, with nothing in between – what more could you want out of life) followed by a great board meeting at Cheezburger.

As I napped on the flight home last night, I felt very different returning home. I love Moz and Cheezburger – and the people I get to work with there. Each company has had different challenges over the past two years (like every company I’ve ever worked with), but both feel like they are in a great place to me right now. When I was walking to lunch with Ben, he asked me a question about how I was feeling in general and I said that at this point I believe that I’m only working with entrepreneurs who I love, adore, have respect for, and am friends with. That’s a big part of it for me. I know this doesn’t always, and won’t always happen, but as I’ve gotten older I realize it’s an important part of my value system and selection criteria for who I work with.

While I’m not going to turn the travel spigot back on in a radical way, being very deliberate about how and why I’m traveling is part of my new trip planning mantra. We’ll see how it works on the next ones, which are to Austin, LA, and New York.

Capital Is Cheap And Labor Is Expensive

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I was on an airplane for the first time for business in a while and when I woke up from my nap I found my self staring at CNBC on the DirecTV seat back display. I never watch CNBC so I was attracted to the talking heads, who were silent since I didn’t have earphones in. I kept thinking I was watching ESPN with all the sports metaphors, blinking lights, constantly changing headlines, and tightly coifed and good looking men talking at me in rapid fire.

Between a headline about Carly Fiorina exploring a run for president and Zebra Technologies equipping all NFL players with tracking devices I noticed one about companies who were raising prices to inflation proof their business. At least, that’s what I thought it said since it flashed up there quickly between a headline about “Steel is on Fire” and then a video of Warren Buffett walking around without a headline so I had no idea why they were showing him.

The inflation proofing headline stuck in my head. We’ve had a very long period of low to no inflation, at least based on the way the government calculates it. While my cynicism around government math and how inflation is calculated is substantial, there isn’t much question that since 2008 capital has been extremely cheap. Fred Wilson wrote a great post titled The Bubble Question a while ago where his punch line was:

It is the combination of these two factors, which are really just one factor (cheap money/low rates), that is the root cause of the valuation environment we are in. And the answer to when/if it will end comes down to when/if the global economy starts growing more rapidly and sucking up the excess liquidity and policy makers start tightening up the easy money regime. I have no idea when and if that will happen. But until it does, I believe we will continue to see eye popping EBITDA multiples for high growth tech companies. And those tech companies with eye popping EBITDA multiples will use their highly valued stock to purchase other high growth tech business and strategic assets at eye popping valuations. It’s been a good time to be in the VC and startup business and I think it will continue to be as long as the global economy is weak and rates are low.

But I think cheap capital is only half of the equation. The other half is ever increasing labor costs across all aspects of the wage chain. When I was in business school in the 1980s, we talked a lot about the productivity paradox. The premise was that computers and automation would drastically improve productivity, making labor less important as tasks were automated, resulting in lower cost of labor.

As the technology industry rapidly evolved, the notion of non-productivity kept coming up. Nicolas Carr’s HBR Article “IT Doesn’t Matter” was probably the capstone piece around this and how companies could take advantage of the commoditization of IT, rather than how IT was a transformative input into companies and societies.

Suddenly, in 2010, technology was disrupting everything and the technology industry was booming. By 2013 everyone was talking about a bubble, even though the companies being created this time around were substantial. Once again, wages for IT employees and computer scientist were skyrocketing and suddenly coding schools were popping up everywhere, to the point that people are now saying that Computer Programming Is a Trade; Let’s Act Like It.

Capital remains incredibly cheap, so it’s flowing into wages. But that’s only at the high end of the market around technology jobs. At the other end of the spectrum, we have the famed jobless recovery with the elimination of massive numbers of jobs that previously existed, especially in industrial and Fortune 5000 companies. While this is happening, we have an entirely new class of entrepreneurs, or self-employed, being created by companies like Uber.

Yeah – this shit is super complicated and it plays out over a long period of time. In fact, it might only be really possible to understand what is happening in hindsight. But the combination of cheap capital and expensive labor has created a very powerful economic dynamic which right now is driving massive innovation across virtually every industry sector around the world.

We know that extremely low cost of capital will not last forever. We know that eventually there will be real inflation again. And we know that wages can’t increase endlessly. I wonder what happens to the allocation of capital, entrepreneurship, and the impact on society when capital gets expensive again?

When VCs Don’t Bullshit You

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I know many entrepreneurs who feel that VCs have played them, gamed them, deceived them, or bullshitted them. But this doesn’t only happen to entrepreneurs. VCs play this game with VCs all the time.

One of our deeply held beliefs at Foundry Group is that there is no value in bullshitting anyone. We screw up a lot of things, make plenty of mistakes, and often look back and say some version of “oops.” But we never bullshit each other or bullshit anyone we work with.

Seth, Jason, and I had an awesome dinner with one of our LPs last night. In addition to being an incredibly supportive investor in us from the beginning, this LP has become an extremely close friend. He’s someone we trust with anything and listen to carefully whenever he has feedback. And we always enjoy being together – a lot.

As I was walking home after dinner, I thought about the person who had introduced us to this LP. His name will be familiar to plenty of you – it’s Fred Wilson. This LP is also a long time investor in Union Square Ventures and was one of the first people Fred introduced us to when we started raising the first Foundry Group fund in 2007.

In 2014, it’s easy to reflect on what has happened over the last seven years and feel good about it. I’m fortunate to have three amazing partners, an awesome team that I get to work with every day, a hugely supportive set of about 20 LPs, and hundreds of entrepreneurs who we love to work with, and whom I think respect us and appreciate us a great deal.

But is wasn’t always this way. In 2007, when we set out to raise our first Foundry Group fund, early stage tech VC was in the shitter. No one believed that you could make any money as an early stage VC and when we went out to raise our first fund, we heard over and over again that we were on a fools errand. The prior fund that I had co-founded – Mobius Venture Capital – had blown up after having a very successful first fund in 1997. The collapse of the Internet bubble was not kind to us and by 2005 it was clear that our second fund – raised in 1999 – was a disaster, and our third fund – raised in 2000 – was off to a very rocky start.

In early 2006, my partners at Mobius and I decided not to raise another fund. In 2007, several of us (Jason, Ryan, Seth, and I) set out to create a new firm.

I thought I had a lot of VC friends and supporters from the last decade of my life as a VC. I quickly learned that it was easy for these so-called friends to say “I’ll help” and very hard for them to actually follow through.

When we started raising our first Foundry Group fund in 2007, I called many of the VCs I knew and asked them for introductions to their LPs. While some of them said they would help, I only recall three who actually made any serious introductions.

Fred Wilson at Union Square Ventures was by far the most helpful. Fred introduced me to all of his significant institutional LPs. We had been friends for a long time and had worked together on several companies. I had deep respect for Fred and I think he felt the same way about me. There was no hesitation on Fred’s part – he made real introductions, advocated strongly for us, and was unbelievably supportive. Over 33% of our capital ended up being from the same LPs who invested in USV. I will never, ever, ever, forget this. Fred can ask me for help on anything he wants for the rest of his life and I will always be there for him.

The next person on the list of supporters is Scott Maxwell at OpenView Venture Partners. Scott and I were both on the Microsoft VC Advisory Board that Dan’l Lewin organized and ran. While we had never invested together, I felt like Scott was a kindred spirit. We both spoke truth to Microsoft execs, even though they mostly ignored us. I remember a meeting with the Microsoft Mobile 6.0 team as they were pitching us their vision for Microsoft Mobile 6.5. Both Scott and I, on iPhone 1′s or 2′s at the time, told them they were completely and totally fucked. They ignored us. A year or two later they had less than 3% market share on mobile. We had a blast together and as we went out to raise our Foundry 2007 fund, Scott made several introductions which resulted in two wonderful, long term LP relationships.

The last person who was helpful was Jack Tankersley at Meritage. When I moved to Boulder, Jack was one of my early mentors. He was a partner and co-founder of Centennial Funds and he and Steve Halsted basically created the VC industry in Colorado in the early 1980s. Jack was extremely helpful in coaching me on how to create a new firm and made a number of introductions, one of which became an LP. I appreciated the energy he put into this immensely.

There were at least a dozen other VCs who said “I’d be happy to make some introductions for you.” Very few of them did, and the ones that did made introductions to junior people at LPs who quickly blew us off.

My partners and I are forever appreciative of Fred, Scott, and Jack’s help. And, after 90 meetings in the first three months of fundraising, which resulted in 20 immediate rejections and no obvious path to a fund at the end of the first quarter, our appreciation for these three people grew. As we started to have momentum in the second quarter, Fred and Scott really stepped up and advocated for us. By September we were oversubscribed and did our first close with our final close in November. We’ve never looked back.

The wonderful dinner last night with the LP Fred introduced me to reminded me of this. But more importantly, it reminded me of how often VCs bullshit each other and entrepreneurs. And, in the situations where they don’t, how incredibly powerful it is.

Fred, Scott, and Jack – thank you.

My First Known Interview – Age 4

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We’ve all got to start somewhere.

Over the weekend my mom gave me a CD with the recording of my first known live interview. I’ve tossed it up on SoundCloud for your listening pleasure.

This recording was done by KERA, our Dallas-based public radio and TV station when I was four. It was for a video segment on a painting I had done that showed on Channel 13 (our public TV station.) My mom hasn’t been able to find the video so the audio will have to do.

While Amy and I listened to it, we made a bunch of observations over the 15 minute segment.

  • At age 4, I had my dad’s NY accent. Even though we were living in Dallas, my accent hadn’t been neutralized yet.
  • My OCD tendencies were painfully apparent in how I described things, especially the lines and dots.
  • I was very clear that I liked watching cartoons on Saturday – and this was on Friday. Amy was impressed that I knew the days of the week so clearly at this age.
  • I didn’t like to physically fight. I still don’t like to physically fight, but I’m not afraid of battle.
  • My brain was racing. I described it as being like a motorboat. I have no idea where the motorboat metaphor came from.
  • Even at age four, numbers had personalities for me. They still do – I love numbers. Especially prime ones.
  • All the dark colors were my favorite colors, which is still true today.

Thanks mom for digging this up. And for being a great mom.

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