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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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Deeply Held Beliefs

Comments (22)

I’m at Newark Airport waiting for my plane to take me to Quebec for the Quebec City Conference where I’m being interviewed at the end of the day by Rob Cox of Reuters Breakingviews.  Yesterday Rob and I had a short call so he could get to know me a little better.

As he was probing me about Foundry Group and what makes us tick, we started talking about what we refer to as “deeply held beliefs.”  In my first company (Feld Technologies) we referred to these as “precepts” As we were talking through them, I realized that they defined us, and how we work, extremely well.

For example:

We will never raise a fund larger than $225 million. We just raised our second fund.  It was exactly the same size as our first fund.  Assuming we are successful, our next fund, which we expect to raise in three or four years, will be $225 million.

We will never add anyone to the team.  I have three partners (Seth Levine, Jason Mendelson, and Ryan McIntyre). We’ve worked together for a decade.  We’ve committed to each other to work together as partners “until we are done investing as VCs.”  We work extraordinarily well together and have no interest in ever introducing someone new into the mix.

Entrepreneurs want to work directly with us, not through junior people. The manifestation of this deeply held belief is that we don’t have principals, associates, or analysts.

We all work on the same things.  While we each have different strengths and weaknesses, we only invest in areas and companies that all four of us have expertise and affinity for.

We have plenty of other deeply held beliefs but these should give you a feel for how we think about it.  It’ll be interesting to see how the interview goes today at the conference and if these come up – if I end up on a long riff about it I imagine another blog post on this topic may be forthcoming.

  • hdemott

    I like them. Clean, concise and clear.

    One question: how come $225M – is that something like $50M per partner – with the remaining $25M going to fund overhead? Or is that just where you ended up on the first fund size – so you figured you would keep it there?

    I really like the idea of working directly with the companies. With funding costs coming down – the large banking like structures are really going to end up hurting. Seems like you need a barbell strategy these days – lots of small investments on the low end – and enough firepower to really support companies that take off.

    Last question: what if one of you wanted to leave for whatever reason? Would you then just shrink to 3 and keep on – or look for a replacement then? Do you have key man clauses in your docs for all 4 of you? (I doubt it – wouldn't exactly be great business)

    • messel

      I was curious about that number as well Harry, as in not correcting for inflation or decreases it appears disconnected from early stage costs.

    • Dave

      I have no knowledge of Foundry's fee structure, but VC funds typically have a 2% management fee to cover all the expenses of the business–staff, IT, office space, benefits, looking at deals (although when deals close many VCs get their legal fees covered by the company), etc. There is a phasing element with the management fee often linking to the phase in of capital committments and decreasing on the back end of a fund. My guess is that with this new fund and legacy Foundry/Mobius funds the Foundry partners are doing fine but only make real money if their fund hits.

      This amount seems like it permits Foundry to still make a good number of early stage investments, protect their pro-rata/continue to fund mid-stage portfolio companies, invest in some businesses that are a bit more capital intensive and really double down on home runs by protecting pro ratas into a late stage. While startup costs are lower, costs of continuing to run a business–even successful busineses–have gotten higher as exit horizons have extended markedly. Look at how much capital Facebook and Twitter have raised for example.

    • http://www.missi.com/ PeterBeddows

      I'm also curious as to the answers you might give in response to Harry's questions.

    • http://www.feld.com Brad Feld

      It's where we ended up on the first fund. We went out to raise $175m and ended up with a lot more demand. Our larger LPs helped us determine where we ended up and $225m was the number.

      If one of us left, I expect we would shrink to three – I can't imagine ever adding someone new to the team.

  • http://twitter.com/fredwilson @fredwilson

    wow. we share these beliefs. with a few minor variations

    • http://www.feld.com Brad Feld

      I learned a lot of them from you!

  • joe

    not sure anyone of them are actually beliefs.

    • http://www.feld.com Brad Feld

      I'm not sure what to call them then. Precepts? Parameters? Rules? Doesn't "deeply held beliefs" have a nice melodic ring to it?

      • DaveJ

        If you use a Simon Sinek ("Start with Why") paradigm, there are shared beliefs ("Why"), operating principles ("How"), and tangible results ("What"). I'd call these items you listed operating principles – they're not why you're doing it, they're not what you're doing – they're "how you're doing it."

        I'd say "Operating Principles" is a good term.

  • redtiemedia

    I like it. Thanks for sharing. Sorry we did not meet over the year — it would have been fun to have you as an investor.

    scott cohen
    red tie media http://www.redtie.com

  • Kelly Taylor

    "we don’t have principals, associates, or analysts."

    Do you find this simplifies things and enables you to focus easier on the highest priority stuff or are you bogged down by busy work, logistics and other things an Associate may help you with?

    I have found in Product Development, adding more people usually introduces more non-core, not-important activity into the effort.

    • http://www.feld.com Brad Feld

      This massively eliminates work. Since we have to do all of the work, we triage all the busy work, logistics, and other low value things. It's fascinating when you have to do a particular "thing" that you view as low value – if you don't have anyone to hand it off to, you often realize it's not worth the time and eliminate from the work flow or routine. We have a lot of examples of this.

      • PhilSugar

        That's great insight, and would make a good post.

        You've clearly stated a belief which I kind of have grown into.

      • http://www.midcoastcapital.com Steve Harris

        My partners and I share many of those same precepts/operating principles/Deeply Held Beliefs. Three of us, investing together over 30 years, and with no associates. Our companies do appreciate working with senior people, both for our experience and ability to make quick decisions. By the time you get to 30 years in a partnership, you know your partners have your back and you are not worried about the decisions they might have to make without your input. As for doing all the due diligence at the senior level (i.e. ourselves), I've always felt it important to have all facts and inputs flow into one brain where they tumble around together before leading to better insight and decisions.

        Steve Harris
        General Partner, TDH
        Managing Principal, MidCoast Capital, LLC

        • PhilSugar

          That last sentence is really important. No offense to junior people but if you have them involved in certain key aspects of the decision making process you have two problems:

          The first is that you are willing to have them work on projects that you aren't sure are going forward. Sure meaning that as long as you confirm your thesis and verify you go forward.

          The second is that their goal is to muck around and find anything they can. "Everything looks good" translates in their mind to I didn't really look carefully. Every time I've been involved with a junior partner doing diligence a happy reference has come back asking "What the hell is going on?? They asked me when was the last time I saw you beat your wife"

  • http://gorankem.com adam wexler

    i think an underlying theme to those bullet-points is your team's avoidance of greed. it's a very admirable quality, and just another reason that entrepreneurs like myself look highly upon the foundry group.

  • http://www.missi.com/ PeterBeddows

    As distinct from "Beliefs" in a conventional sense, these are clearly a core set of foundational "Business Partnership Principles", adhering to which is quite possibly the most fundamental reason for the partnership having been successful and surviving for as long as it has.

    From what Fred Wilson has posted in his AVC blog about his partnership in USV and their business focus and methods preferences, it would appear most likely that that partnership's longevity and success also arises because, as Fred has further indicated here, USV also adheres conceptually to these principles albeit in form modified to their particular business focus.

    Constructing viable and lasting partnerships – especially where large sums of money are involved in potentially high-risk venturing activities – is typically one of the most challenging things to do because everyone brings to the party their own personality, "beliefs", expectations and ego: A scenario often worse than even any dating situation might deliver and there are no pre-nupes!

    As Harry Demott observes, what you have laid out here Brad is "Clean, concise and clear": I would also add "unequivocal"; exactly the basis upon which to build any partnership for lasting success which is the specific point I'm establishing here ~ "beliefs" are malleable, amorphous whereas core principles are explicit and definitive.

  • intersectofit

    I akin these "Deeply held beliefs" right alongside leadership philosophies which can consist of Vision (purpose, direction, appropriateness, standards), Values (Loyalty, Respect, Integrity), a Caring attitude, and the continuation of the development of leadership skills, amongst others. Which so happens to align with one of your other 'beliefs' … "motivated by learning".

    Enjoy Quebec City!

  • http://www.feld.com Brad Feld

    We feel very comfortable that we can handle funding six to eight new companies a year among the four of us. At some point we'll reach a capacity, but we are no where near it right now.

    • hdemott

      Thanksso average of 7 deals a year – with $7M per deal in terms of initial investment plus capital reserved for add on's. $50M per year – 5 years of investments – there's your fund!Just a quick question for which I probably should know the answer: when you make an initial investment – you obviously call capital for the initial funding amount – but do you actually call down the capital you reserve for follow on's? or do you just tell people what you think you should reserve for follow on's and call it later?

      • http://www.feld.com Brad Feld

        We call it later as we need it.

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