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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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It’s Monday. Do You Know What Your VC Is Doing?

One Comment

A well worn tradition of most venture capital firms is the Monday Meeting.  While there are several variations of it, including having it the meeting on Tuesday or Friday in an effort to be counter-cultural, most venture capital firms gather on Monday’s to review their portfolios, have companies come in and present for follow-on rounds or new investments, and ponder the state of the universe.

I expect there will be a lot of pondering today.  Given that it’s only 1:23pm and I’ve already received several missives commenting on the Sequoia RIP article (including a skeptical email from someone forwarding the VentureBeat article stating that Sequoia raised the largest new fund in Q3), it’s clear that many VC firms are sitting around today discussing ways they can "help" their portfolio companies in these "uncertain times."

Get ready for a flurry of two things from your VC.  (1) Questions.  (2) Advice.  Not necessarily in that order.  Occasionally you’ll get a demand here and there. 

If you are a first time entrepreneur, be forewarned that this is normal.  The questions and advice usually start on Monday afternoon or Tuesday morning (due to the timing of a partners meeting) a few weeks (or months) after the environment has changed.  Of course, a cynic could (appropriately) ask "where were these questions last week."  Welcome to the world of VC-backed companies.

Given that you now know this is coming, my recommendation regarding the questions is to actively engage your VC(s) rather than simply either (a) answer them or (b) dismiss them.  The questions – while often annoying, redundant, or nonsensical – will cause you to think about things you might not otherwise be thinking about.  Just make sure you’ve got the whole question, think, analyze, discuss, decide loop on a short cycle so you can iterate quickly as the environment changes again (either for the better or for the worse.)

With regard to the advice, my recommendation advice is different.  "Think before you act."  This doesn’t mean sit around with your thumb up your ass.  This also doesn’t mean the advice is wrong.  But it definitely means you should apply your (and your team’s) brain(s) to the advice and see if it matches your view of reality.  This is especially true when the advice is second or third hand (e.g. I read the Sequoia presentation and here’s what you need to do.)

Don’t forget to bring your towel to work tomorrow.

  • Tim Enwall

    I can't tell you how helpful it is for you to be blogging on this subject. Few seem to have the balanced wisdom out there which doesn't factor in “conventional wisdom”, fear or greed in unnecessarily disproportionate amounts.

    From my perspective I've boiled this down to three different aspects (aside from the normal aspects of good business advice like know-thy-business-model and spend-like-it's-your-money:
    - VCs will continue to invest unless there's a tremendous “run on the LP obligations”. Seems like a relatively low probability, especially for Tier 1 and Tier 2 VCs. So there's cash out there. The price will be ugly, though, if one raises money now.
    - If the credit markets cannot get “unstuck” then we're in for a world of hurt — B2B or B2C. Governments seem to have learned extensively from history, here, and the risk of that seems to be relatively lower than in the Depression. It's really the credit markets being stuck that portend the worst/longest part of this downturn.
    - It all depends on who your customer is. If your customer is a consumer spending somewhat disposable income you're in trouble because of the over-leveraged consumer base. If your customer is someone with access to credit markets (and credit is flowing) and is *not* a consumer buying discretionary items you're in better shape.

    The big question I'm still trying to grapple with is: Was our experience with the dot-com bubble an anomaly or something we can/should learn from? Some say that it was an anomaly because we were still building the credit/debt bubble and it was “contained” to the tech sector (not the financial sector). Implication: we're in for 3-10 years of “the Lost Decade” like Japan had. Others say “it's the same” because it's a normal correction and recession. Implication: we're in for a rough 9-18 months. Those are two pretty radically different scenarios to try to work through if one is an entrepreneur or an investor — they require fundamentally different responses.

  • Tim Enwall

    I can't tell you how helpful it is for you to be blogging on this subject. Few seem to have the balanced wisdom out there which doesn't factor in "conventional wisdom", fear or greed in unnecessarily disproportionate amounts.

    From my perspective I've boiled this down to three different aspects (aside from the normal aspects of good business advice like know-thy-business-model and spend-like-it's-your-money:
    - VCs will continue to invest unless there's a tremendous "run on the LP obligations". Seems like a relatively low probability, especially for Tier 1 and Tier 2 VCs. So there's cash out there. The price will be ugly, though, if one raises money now.
    - If the credit markets cannot get "unstuck" then we're in for a world of hurt — B2B or B2C. Governments seem to have learned extensively from history, here, and the risk of that seems to be relatively lower than in the Depression. It's really the credit markets being stuck that portend the worst/longest part of this downturn.
    - It all depends on who your customer is. If your customer is a consumer spending somewhat disposable income you're in trouble because of the over-leveraged consumer base. If your customer is someone with access to credit markets (and credit is flowing) and is *not* a consumer buying discretionary items you're in better shape.

    The big question I'm still trying to grapple with is: Was our experience with the dot-com bubble an anomaly or something we can/should learn from? Some say that it was an anomaly because we were still building the credit/debt bubble and it was "contained" to the tech sector (not the financial sector). Implication: we're in for 3-10 years of "the Lost Decade" like Japan had. Others say "it's the same" because it's a normal correction and recession. Implication: we're in for a rough 9-18 months. Those are two pretty radically different scenarios to try to work through if one is an entrepreneur or an investor — they require fundamentally different responses.

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