Brad Feld

Month: September 2010

I went on vacation for a few days to celebrate Amy’s birthday and those sneaky scarf makers at Big Red Scarves expose me on the Internets.

I’ve been trying for months to discover their secrets to no avail. I’ve even had Amy take up knitting to try to figure it out.

But now I know. It’s Trada. The real secret is out – Big Red Scarves has been using Trada for their search engine marketing campaigns.  I should have been able to figure it out from the previous videos on the Internets staring Niel Robertson and Seth Levine, but I guess I missed them because I was too busy sheering sheep and cleaning off my sneakers.

I’m not done with them yet – just you wait.  Bwahahahahahahahaha.

– Vladamir Schlockfeld, Chief Researcher at Globoscarf (Brad’s evil twin)


One of my favorite conferences, Defrag, is really heating up.  As always, Eric Norlin is doing a magnificent job of curating the agenda and already has some great headliners such as Esther Dyson, Paul Kedrosky, Vinnie Mirchandani, David Weinberger, Stowe Boyd, and Vivek Wadhwa.

Today, Jeff Ma agreed to keynote Defrag.  From Eric’s blog post:

Jeff Ma, who was the inspiration for the movie “21″ and the book “Bringing Down the House,” and is the author of the *awesome* new book, “The House Advantage” is coming to keynote Defrag. Besides being a world-famous card counter in the game of blackjack (which he, literally, can no longer play in casinos), Jeff has started several businesses (PROTRADE and Citizen Sports – which sold to Yahoo! in May of this year).  Jeff’s current focus is on applying the laws of statistics to business in order to give managers, entrepreneurs and leaders an edge (hence, “The House Advantage”).”

I was re-introduced to Jeff recently through our mutual friend Niel Robertson, the CEO of Trada.   I wrote about this, and Jeff’s great book, in my post The House Advantage.  We’e talked about getting together – it might be that the first time our paths cross physically will be at Defrag on November 17th and 18th in Boulder.

Come join us – register now for the Early Bird Price which is good through September 30th.


Today our portfolio company BigDoor launched the first ever gamification plugin for WordPress. The plugin will allow a WordPress site owner to add leader-boards to their site as well as reward users with badges and points when they leave comments and check-in.  It is a great way to incentivize repeat visits and help build a community on your site.

The BigDoor team has built a powerful gamification API, but until recently it required a programmer to implement it.  The team continues to make big strides in making gamification more accessible by streamlining and simplifying the process of adding points, leader-boards, badges and virtual goods to a site or app.  BigDoor is progressing toward what they call the “15 minute install”.  Their new WordPress plugin takes about an hour from download to being live on your site, but this is a big step toward making gamification, badges and leader-boards more accessible for bloggers everywhere.

If you are a WordPress blogger, download the BigDoor WordPress Gamification plugin and give it a spin. Feedback welcome.


I spent the previous 36 hours in Washington DC, primarily at the O’Reilly Gov 2.0 conference.  I did a ten minute speech on the Startup Visa and a ten minute interview about entrepreneurship, innovation, and the Startup Visa.  The conference was well attended – about 700 or so folks – and I enjoyed a number of the talks that I sat through.

Following are the two segments – first my keynote and then the interview.



I was thinking more about my post from yesterday titled Addressing The VC Seed Investor Signaling Problem.  There were a bunch of good comments that caused me to realize that I wrote the post from the perspective of a VC, not an entrepreneur.  As I mulled the comments over, I realized something very specific.

If a VC invests in a seed round but then doesn’t invest in the next round, there is a signaling problem, regardless of what the VC does with their investment.

When I read the post carefully, I realized that I implied that the VC firm’s strategy of selling back their seed investment might address part of the signaling problem.  In hindsight, it doesn’t address this at all.  It addresses a different problem – the free rider problem.

Most VC’s hate when other VC’s act as free riders.  A free rider is defined as someone who invests in an early round but then doesn’t participate in future rounds.  Note that I explicitly said “other VCs” and not angel investors.  Most VCs expect that angel investors will only invest in the first round or two, so they get exempted from free rider status.  I also exempt “super angels” / “seed-only VCs” from this – if you clearly define your role as an investor in the first round or two, and you never participate in later rounds, then you won’t end up being classified as a free rider.  But, once you start participating in later rounds, the expectation of your financial participation changes.

Early stage VCs are often expected to play at least pro-rata in following rounds.  When companies are successful, the early investors often (but not always) back off their pro-rata.  But, when companies go sideways or struggle, the early investors are often expected, by their co-investors – to continue to participate pro-rata until the company either succeeds or fails.  In many cases, the consequences for not participating are significant and you can get a taste for this from the post on the term Pay-to-Play that my partner Jason and I wrote in 2005.

The firm that I mentioned in the previous post addresses the free rider problem by saying “look, we’ll make it easy, we don’t support going forward so we’ll sell back our equity to the company, entrepreneurs, or angels and get out of the way for new VC investors.”  While this doesn’t address signaling, it does eliminate the free rider – in this case the VC that is not going to participate going forward.

When things are going great, none of this matters.  But when things aren’t, they matter a lot.  If I shift from the perspective of a VC to the perspective of an entrepreneur, I would only want VCs as seed investors who have a proven track record of consistently following their seed investments with future investments.  This will never happen 100% of the time – there are definitely seed investments that don’t make it. In addition, there are often cases where the entrepreneur doesn’t have choices and has to work with whoever shows up with a check.  But to hand wave over the issue is illogical.

Now, as a VC, I don’t want to co-invest with free riders.  I’m exempting angels, super angels, and “seed-only VCs” from this.  But if I co-invest with someone, I want to know that they are going to work with us to continue to fund the company, not walk away 50% of the time “because” – well – whatever “because” means.

The collision between signaling and free riders is what creates a lot of dissonance.  In the current wave of seed and angel investing activity, we haven’t hit a hard down cycle yet.  We will.  When we do, these two issues are going to pop to the forefront.  Anyone who participates in the early stage investment ecosystem (entrepreneurs, angels, and VCs) should make sure they spend some time thinking about this and incorporating it into their own strategy, before it is upon them.


One of the most common criticisms of VC investors making seed investments is something that has become known as “the signaling problem.”  The explanation of this problem is that VCs create a “negative perception” about a company if they make a seed investment but then don’t follow through and make a next round investment.  Another way to say this is that a VC creates a “signaling situation” with their seed investment – if they don’t follow on in the next round they are “sending a signal” that something is wrong with the company (hence the label “signaling problem.”)

Last week I spoke with a partner at a large VC firm whose firm has been around for a long time.  They have a new seed program (as of a few years ago) after eschewing seed investments from 2002 to 2008.  The partner that I talked to told me that they are doing 30 seed investments out of their newest fund.

I was surprised on two levels – the first is that they have a very visible anti-seed reputation.  I pointed out that their market reputation was that they didn’t do seed investments nor did they do many Series A investments.  He said “we changed that a few years ago.”  I suggested that their web site didn’t talk about their seed program; he responded “yeah, we need to work on our web site.”

The second, more important thing, was that I couldn’t make the math work on their fund.  I asked them how many of the seed investments they expected to follow with regular first round investments.  He said “half of them”.  So – 15 of their investments in the fund would come from their seed program.  I asked how many other investments they’d have in the fund.  He said 30.  So they’ll end up with 45 active investments in the fund (high for their fund size) of which 33% came from seed investments.

I then asked how they were going to deal with the “signaling problem” for seed investments they didn’t follow on with.  Here he said something that made me pause: “We’ll sell them back to the founders, the company, or the angels at somewhere between $1 and our cost.”  I probed on this (as in “seriously, can you give me some examples?”)  Without naming names he explained three situations in the past two years where they’ve done this.  And, in each case, his firm had decided not to follow on, took themselves out of the cap table, and the three companies were able to raise additional financing (in one case from a different VC firm.)

I thought this was a pretty clever way to deal with this issue.  While it doesn’t eliminate the problem created by the signaling issue, it addresses part of it.  I don’t know if this firm will follow through on unwinding their positions in 15 of the 30 seed investments they make. I also don’t know how they’ll feel when one of the 15 they decided not to follow goes on to be massively successful and their seed piece, if they had kept it, would have returned a meaningful amount of money to them.  But if they do take this approach it seems like they should shout it from the rooftops as part of their VC / seed positioning statement.

I’m not a fan of this “spray and pray” seed investing strategy for VCs.  Instead, when we make a seed investment, we don’t treat it any differently than our non-seed investments.  Rather than repeat our approach here, take a look at the post How I Think About Seed Investing As A VC that I wrote a month ago.  That said, I found the approach of selling back the seed investment at $1 to be an interesting way to address part of the signaling problem.


Now that my Apple and Google experiments have been huge successes, I thought I’d try an Android phone one more time.  I like my iPhone 4, but it’s pretty weak with all the Google apps.  Specifically, I badly want better contact integration, clean email sync, and Google voice.  Plus, AT&T still blows in Boulder.

Any suggestions out there for the “best Android out there today.”  I was using a Sprint EVO for a while (and liked it a lot) until it was stolen by my assistant Kelly.  So, I open to any choice – suggest away.


TechStars is coming to New York City.  The first program runs from 1/10/11 to 4/8/11.  Applications are open now.  The NY mentor list is stunning and includes the following:

Phin Barnes (First Round Capital), Alex Blum (KickApps), Matt Blumberg (Return Path), Brad Burnham (USV), Jeff Clavier, Dennis Crowley (FourSquare), Chris Dixon (Founder Collective), Roger Ehrenberg, Darren Herman (The Media Kitchen), Jennifer Hyman (Rent The Runway), Alex Iskold (Adaptive Blue), David Karp (Tumblr), Zach Klein (Boxee, Vimeo), Evan Korth (NYU/HackNY), Mike Lazerow (Buddy Media), Ben Lerer (ThrillList), Sam Lessin (Drop.io), Joey Levin (MindSpark, IAC), Howard Lindzon (StockTwits), Eric Litman (Medialets), John Maloney (Tumblr), Dave McClure, Hilary Mason (Bit.ly/HackNY), Jeremie Miller (Telehash), Howard Morgan (First Round Capital), Charlie O’Donnell (First Round Capital), Eric Paley (Founder Collective), Raphael Poplock (ESPN), Alex Rainert (FourSquare), Avner Ronen (Boxee), Naveen Selvadurai (FourSquare), Justin Shaffer (HotPotato), Tim Shey (NextNewNetworks), Andy Smith (Daily Burn), Rex Sorgatz (Kinda Sorta Media), Jon Steinberg (BuzzFeed), Vinicius Vacanti (YipIt), Albert Wenger (USV), Fred Wilson (USV)

David Cohen, who is relocating to NY for January to March of next year, and David Tisch (I’m encouraging him to change his name to just Tisch to save me the brain damage of “which David”) will be running the program.  When we went about setting up the NY program, we evolved our funding model to be as inclusive of the local VC / angel community as we could.  We’ve created a long term funding model, which I expect David Cohen will write about at some point, that we implemented in TechStars Seattle and will be rolling out to Boulder and Boston this year.  As a result, the investors in TechStars NY include many local financial investors such as:

AOL Ventures, DFJ Gotham Ventures, FirstMark Capital, First Round Capital, Foundry Group, IA Ventures, Jove Ventures, Lerer Ventures, RRE Ventures, Social Leverage, Village Ventures, Zelkova Ventures, Peter Hershberg, Josh Stylman, David Tisch, Nate Westheimer, and Kal Vepuri.

When David first talked to me about his idea for TechStars in 2006, if you had asked me if we’d have Boulder, Boston, Seattle, and NY programs up and running by 2010 I would have chuckled (a real chuckle, not my evil laugh chuckle.)  The Seattle program is crushing it already and I’m excited to go spend time up there.  And I can’t wait to see the NY program start cranking.

We’ve got a few other interesting pieces of TechStars news coming over the next month – look out for them!  And, if you are an entrepreneur interested in the TechStars NY program, apply now so you can come to TechStars for a Day on 11/20/10.


Amy and I created a tradition about a decade ago we call “four minutes in the morning.”  We try to – fully clothed – spend four minutes together every morning 100% focused on each other.

I’m an early bird – usually getting up around 5am regardless of the time zone I’m in (except on the weekends – then I sleep until I wake up – sometimes 1pm.)  Amy sleeps a little later (usually 6:30am).  So – I often have around 90 minutes alone every morning, which I treasure.  I have a well defined morning routine that includes a cup of coffee and 85 or so minutes in front of my computer.

When Amy gets up, I try to remember to jump up from my computer and start our four minutes.  Sometimes I forget and notice it when she thumps me on my head or clears her throat loudly.  But I eventually remember.  We then leave the office area, go to our living room, or outside on our porch, and spend our “four minutes” together.

Of course, the “four minutes” is metaphorical.  Sometimes it’s 15 minutes.  A few times a year it turns into an hour when we end up in a discussion about something.  But it’s always 100% bi-directional attention, except for our dogs who often want in on the discussion.

I travel a lot so this often translates into a phone call in the morning.  We recently started using Skype instead and it makes an amazing difference.  This morning, as Amy was in Keystone and I was in Boulder, we caught up with each other in our un-showered goodness.  Now, if we only had smell-o-vision, the experience would have been complete.

I miss Amy a lot whenever we aren’t together.  We’re lucky that we get to travel together a lot and that each of our work experiences have lots of location flexibility.  Skype has helped in a surprisingly nice way with one of our routines.

My recommendation to all my guy friends out there – try the “four minutes in the morning” routine with your significant other.  It’ll pay many dividends.