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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 Great Internet Stock Correction of 1997, or 1999, or …

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Yesterday I read Kara Swisher’s post What Does the Recent Tech Stock Downturn Mean? The Truth Is Nobody Knows. It’s great. Go read it – I’ll wait for you.

In the last two weeks there’s been a flurry of articles about the implications of a 25% decline in the public market value of a bunch of Internet stocks. They range from “the sky is falling” to “the IPO market window is closing” to “there will be more stupid television shows about Silicon Valley” (I prefer Game of Thrones and 24, thank you very much.)

As many of the Cylons from BSG are fond of saying, “All this has happened before, and all of it will happen again.”

I remember a moment in time in 1997. We were in the middle of fundraising for Softbank Venture Capital (which became Mobius Venture Capital.) It was the first VC fund I’d helped raise. We probably had about $150m committed and were running around trying to get to $300m for what we had positioned as a dedicated Internet VC fund. I can’t remember the month, but I think it was in the summer, that all the public Internet stocks dropped a bunch (probably 25%). Suddenly every meeting we had turned cold with all of our potential LPs either asking how we were going to make money on the Internet or asserting that there was no way that we’d make money on the Internet. A few months later the public markets for Internet stocks turned around and we closed a $330 million fund which ended up doing extremely well.

In 1999 we filed an S-1 to take Sage Networks public. I was a co-founder and co-chairman. We were planning to go public in the early spring, but in February we acquired a company called Interliant which doubled our side. We had to grind through a refiling of our S-1 which cost us a month. We finally hit the road with the intention of going public by the end of April. Our underwriters (Merrill Lynch) told us not to worry that the SEC hadn’t cleared our filing yet – they always did it a few days before you went public. I spent three weeks on a road show with our president and CFO building the book. Day after day passed and we didn’t hear from the SEC. Two days before we were supposed to price, the book was 10x oversubscribed and our $9 – $11 price looked like it could move up meaningfully. They day we were supposed to price we still hadn’t heard from the SEC. “Don’t worry” said the banker at Merrill Lynch, “We’ll get it done.” The next day, when we were supposed to be trading, a fax came through from the SEC. It was 20 pages long and had about a month’s worth of work to pull together on the F-pages of the filing (we had acquired 20 companies.) That night we all drank a lot of scotch – we knew the IPO wasn’t going to happen that week and we’d just wasted a road show. I remember being completely numb the next day as I flew home from NY to Boulder, not completely understanding how we had just blown the IPO.

A few weeks later Internet stocks started to fall. I vaguely recall that eBay was one of the bellwethers at the time and I think it had a big drop. Suddenly the IPO market window closed. No one was interested in Internet stocks, let alone one that was being tortured by the SEC for accounting disclosure on a bunch of acquisitions of tiny companies.

At the end of June I went to Italy for a week vacation with my wife Amy and my parents. We did a walking trip which I remember being wonderful – 10 miles a day finished off with lots of food and wine in a beautiful Italian countryside. No phones, no email. Until Thursday, when I got a call at the villa we were staying at from one of my board members who said “you have to come home right now.” I responded with “I’m flying home Sunday and will be back on Monday.” He said, “No – now – the road show starts again Monday and you have to be at the printer on Saturday to sign off on the filing.”

I scrambled to find a flight home from the middle of Italy, got to NY by Saturday mid-day, re-started the road show on Monday, and we were public by the end of the week. We went out at $10 and traded up to $15. When I checked the market indexes, they were basically the same as they were two months earlier before things dropped.

Lots of folks are going to pontificate about what is going on in the public markets. Most have an agenda or a vested interest.

If you are an entrepreneur, ignore the pontification and go build your business. Pay attention to the dynamics in the macro, since they will impact you, but don’t get caught up in. Don’t create a narrative to justify something that is going on. Focus on the reality – your reality – and do your best operating in the context in which you can’t control.

All this has happened before, and all of it will happen again.

Meditation and the Narrative

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My meditation experience continues. I’m currently meditating almost every morning immediately after I wake up and sitting for 20 minutes with GetSomeHeadspace.com. I’ve internalized the idea of “practice”mode – I’m not trying to get a good grade, do it well, or excel at it. I’m just practicing.

I slept late yesterday and when I woke up I didn’t feel like meditating. I felt odd about it for a few seconds, acknowledged the thought (“I wonder why I don’t what to meditate today” – ok, that’s a thought: odd), and then let it go.

This morning while meditating my mind wandered to the notion of a narrative. Several times I had a random thought that described my interpretation of something going on in my life. When I realized this, I labeled the thought with “thought: narrative” and went back to focusing on my breath.

When I was finished, I walked upstairs and realized the word “narrative” was still floating around in my head. I’ve let it sit there for the past hour as I responded to all the email that came in yesterday while I was taking a digital sabbath.

In the past week, during dinners, meetings, and hanging out with friends, I’ve been observing the narrative that gets created around specific situations. When I’m in business contexts, I’ve been listening to the narrative being told and comparing it with my interpretation of reality. When I read what others are writing on the web (blogs, articles, tweets), I’ve been paying attention to the narrative they are creating. The narrative from others and the narrative in my head are often divergent on subtle, but important points.

This isn’t an issue of fact vs. fiction. It’s not that one party is lying or consciously obscuring the truth. Rather, they are interpreting what is happening, or has happened, and creating their own narrative around it.

For the past 30 years, I’ve found myself reacting to these narratives of others. They impact my narrative, and my interpretation, of what has happened, and what should happen. In many cases, especially stressful ones or where there is conflict, I’ve tried to rationalize someone else’s narrative with mine, struggling to believe that we could interpret the situation so differently.

I have some deeply held beliefs that I adhere to. Amy and I are deep in Game of Thrones (Season 3 at this point) and the notion of a “code of conduct” or the idea of a “man of honor” keeps jumping out at me. My deeply held beliefs are analogous – they are the values on which my behavior, decisions, and actions are built.

But these deeply held beliefs are mine – they don’t map directly to others. They impact my narrative and how I respond to the narrative being told by someone else about a particular system. I can expose my deeply held beliefs to others but I can’t force them to adhere to them.

In the last two months this has come into sharp focus for me through meditation. I realize that many of the narratives I create are irrelevant. When I ask myself “will anyone care in 150 years”, the answer is a definitive “NO!” When I ask myself whether this narrative actually will impact the outcome of the situation, the answer is often “no”, although not necessarily as definitive.

Yesterday, I read Biz Stone’s book Things a Little Bird Told Me: Confessions of the Creative Mind. I like his narrative of the story of Twitter much more than Nick Bilton’s in Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal. I’ll write more about Biz’s book in another post, but it’s a great example of the power of a narrative combined with a set of deeply held beliefs.

The next time you get wrapped up in a narrative about something, ask yourself the question “will this matter in 150 years from now?” And then, contemplate the implication of the question and how it impacts what you do about the narrative.

Oh – and Daenerys Targaryen is a total badass. I’m rooting for her as the one true king.

Empirical Support for the Boulder Thesis

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Yesterday, Kauffman Foundation released a study that provided empirical support for the Boulder Thesis that I came up with in my book Startup Communities: Building an Entrepreneurial Ecosystem in Your City. The study is excellent if you are interested in this topic and can be read at ad “Think Locally, Act Locally: Building a Robust Entrepreneurial Ecosystem.”

Kauffman did a study of 1 Million Cups, a program that was launched at Kauffman Foundation in Kansas City and is expanding rapidly around the US with it now in 33 communities in 21 states. Colorado has two – a 1 Million Cups in Denver and 1 Million Cups in Fort. Collins. 1 Million Cups Denver was also a recipient of one of the first Startup Colorado Community Fund grants.

The study found:

  • Entrepreneurship is a local phenomenon.
  • Entrepreneurs follow local entrepreneurs.
  • Local networks thicken over time.
  • Entrepreneurial demand is high for peer-based learning and networking.
  • Different programs reach different entrepreneurs.

In the report, Kauffman lined this up clearly against the Boulder Thesis, which, if you don’t know it, is:

  1. Entrepreneurs must lead the startup community.
  2. The leaders must have a long-term commitment.
  3. The startup community must be inclusive of anyone who wants to participate in it.
  4. The startup community must have continual activities that engage the entire entrepreneurial stack.

Or, if you are a video person and want to go a little deeper, take a look at the great StartupVille video Kauffman did when I released the book as part of their Sketchbook series.

I gave a 30 minute interview on this and other topics at the Atlanta Tech Village yesterday – nice summary from David Cummings. And there was a good student survey at  showing Chicago and the Midwest as an Evolving Hub for Entrepreneurship.

Today’s Fun – Gnip, Twitter, Uncommon Stock, and Pre-Seed Rounds

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FSA (Feld Service Announcement) – my version of a “public service announcement”: Moz is on the hunt for a VP of UX and Design. This role is one of our most crucial hires this year. The ideal candidate will come to us with experience and examples to show of very complex, technical projects that s/he made simple and fun. I would love for you to share this job description with your network or if you have anyone in mind I would love for you to send them our way.

Yeah, it’s been kind of busy the last week. Congrats to my friends at Gnip on becoming part of the Twitter flock. I have a great origin story about the founding of Gnip and the first few years for some point in the future. But for now, I’m just going to say to everyone involved “y’all are awesome.”

Last week Manu Kumar had a spectacular post titled The New Venture Landscape. While it’s bay area centric, I especially agree with the punch line:

Pre-Seed is the new Seed. (~$500K used for building team and initial product/prototype)
Seed is the new Series A. (~$2M used get for building product, establishing product-market fit and early revenue)
Series A is the new Series B. (~6M-$15M used to scale customer acquisition and revenue)
Series B is the new Series C.
Series C/D is the new Mezzanine

Today at 5pm I’m doing a fireside chat with Eliot Peper, the author of Uncommon Stock, the first book published by FG Press. Join us for some virtual fun and a discussion about fiction, books, and startups.

And – if you miss that, Eliot is doing another event on Friday at 5pm at Spark Boulder.

Massachusetts Has An Innovative Approach To Immigration Reform

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Two big proposals from Massachusetts Governor Deval Patrick today. First, he’s proposing to ban non-competition agreements. He’s also proposing an incredibly clever and innovative approach to immigration reform applicable only to Massachusetts.

I lived in the Boston-area for twelve years (Cambridge for four years and Boston for eight years. ) Even though I often say that was 11 years and 364 days too many for my “non-big city, non-east coast” personality, Boston still has a sweet spot in my heart. I had an amazing (and often excruciating) experience at MIT which was foundational to my personality, thought process, and character. I started and sold my first company there (first office – 875 Main Street, Cambridge; last office 1 Liberty Square, Boston). Techstars Boston was the first geographic expansion for Techstars. I’m not a sports fan but I always root for the Red Sox. I think I have more close friends in the VC business in Boston than in the Bay Area. Two of my closest friends – Will Herman and Warren Katz – both live there. And I know my way around downtown Boston – even after the Big Dig – better than any other downtown in the world.

The Massachusetts non-competition situation has always been stupid. In 2009, my partners and I at Foundry Group joined a coalition of VCs to try to eliminate non-competition agreements in MA. It’s awesome to see Governor Patrick take action on it since it’s one of the major inhibitors of the MA entrepreneurial scene.

The immigration report proposal is even more fascinating. It’s a great example of creative and innovation public-private policy at the state level to encourage and enhance entrepreneurship. Jeff Bussgang from Flybridge explains it succinctly in his post so I’ll just repeat it here.

“The idea is a simple one:  create a private-public partnership to allow international entrepreneurs to come to Boston and be exempt from the restrictive H-1B visa cap.  How is it possible to do this?  The US Citizenship and Immigration Services Department (USCIS) has a provision that allows universities to have an exemption to the H-1B visa cap.  Governor Deval Patrick announced today that the Commonwealth of Massachusetts will work in partnership with UMass to sponsor international entrepreneurs to be exempt from that cap, funding the program with state money to kick start what we anticipate will be a wave of private sector support.” 

Brilliant. As our federal government continues to struggle to make any real progress on immigration reform, I love to see it happening at the state level. In addition to being good for innovation, it’s the kind of thing that dramatically differentiates states from one another on a policy, business, and innovation dimension that actually matters and likely has significant long term positive economic impacts on the region.

Governor Patrick – kudos to you. Governor Hickenlooper – I encourage you to roll out exactly the same thing in the State of Colorado. I know exactly the people at CU who would be happy to lead this, as would I. And since one of our Senators (Michael Bennet) is leading the immigration reform effort in the US Senate and our other Senator (Udall) has been a strong supporter of the Startup Visa and immigration report from the first discussion about it in 2009, I expect you already know your broad constituents support it.

Oh – and to my friends in NY who have been helping on the immigration reform front, let’s crank this up in NY also! Why should MA have all the fun?

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