Brad Feld

Month: September 2011

Recently, several entrepreneurs and investors have asserted to me that they don’t think the terms on a convertible debt deal matter much. I was perplexed by the statement and asked each of them to tell me more. In every case, the person hadn’t really thought through the issues. Rather, they were just spouting what they believed was conventional wisdom about terms for seed deals.

In one of the entrepreneur cases, I explained how it was likely that they were going to be on the wrong side of the valuation discussion in the next financing based on one of the terms. In one of the investor cases, I explained the difference between a 2x return and a 15x return – using a real example – based on the way the note was written. And in a third case a separate potential angel investor in the deal brought up a specific term that was important to him that addressed a real concern.

We rarely do convertible debt at Foundry Group – we much prefer to do equity rounds, even at the seed stage. However, many of the seed rounds done in TechStars are done using convertible debt as are many financings of less than $1m. So, if you are an entrepreneur or seed investor, I think it’s important to understand how convertible debt works and what the impact of various terms are.

In Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist, my partner Jason Mendelson and I touched on convertible debt but didn’t go into much detail on the specific terms. A number of people have asked us about them since the book came out so we’ve started a Convertible Debt series on AsktheVC. The first three posts are up:

There are nine posts in the series – coming out every Tuesday and Thursday until we are done. If you notice anything confusing, or incorrect, please comment and/or ask questions so we can clarify and/or fix.

If you can’t wait for the full series, take a look at the annotated term sheet for a convertible note on the TechStars site (also available on the AsktheVC Resources page.)


Jason Mendelson and I are doing office hours at the Boulder Bookstore on Monday 9/26. We will be hanging out from 2pm – 5pm and chatting with whomever comes by. It’ll also be a chance to buy a copy of Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist from your local bookstore and get a copy of it signed by both of us while you wait.

We’ve been asked by a lot of folks how to get a copy of the book signed by us. This is one way; the other is to buy a signed copy directly from us off of the AsktheVC site. Either way, we’d be happy to see you on Monday if you want to swing by. I think Jason will be wearing his wig from I’m a VC.


Marathon #18 – the Kroll’s Diner Bismarck Marathon – has been conquered. My goal was to do it under 5 hours – I finished in 4:54:48. It was a small marathon – I finished #100 (out of 124) marathons, #1 (out of 1) for 45 year olds, but #10 (out of 10) for the 45-49 age group. So I got both first and last place on age, depending how you slice it (kind of like how investment bankers do their league tables.) RunKeeper Live worked remarkably well – Amy, my coach Gary, and whomever wanted to track my progress could in real time – and my iPhone still had 60% of its battery left when I finished.

This was my third marathon this year – the other two were Cincinnati (5:24:45) at the beginning of May and Madison (4:47:27) at the end of May. I had two great months of running over the summer in Europe, with my best month in a decade in Italy. I weighed in a little heavy (213) for this marathon – I’ll blame it on two months of amazing French and Italian food – but felt totally comfortable with the race. If I stay on track for the year, I’ll knock off six marathons, and my upcoming goals are 4:45 for Providence, finish St. Louis (the following week – no time goal), and 4:30 for Philadelphia a month later.

I’ve been to North Dakota once that I can remember – a trip out to Fargo to visit Great Plains Software (before Microsoft bought them). It was in December and brutally cold. Bismarck in September was better (50’s), but it rained all day Friday and during the race on Saturday. We stayed in a very simple hotel that was recommended by the marathon. It was fine, but only one wifi device could be connected at a time (and we had five, so there was plenty of AT&T traffic from our room). The restaurant scene was shopping malls and chains – we ended up having profoundly mediocre meals driven by ordering off of plastic menus.

The flooding resulted in a change to a new course. This course was two loops – starting in a nice little park, looping at St. Mary’s University, with most of the course back and forth on a boring highway with a one mile hill (200 ft.) tossed in the middle. Overall it was a really dull marathon, although the people on the course were incredibly nice and helpful. All the water stops were staffed and they occurred about every mile. There was no food, but one person was handing out Jolly Ranchers so I managed to pick up four of them (ahem – two loops on the same road). The combination of the steady rain and lack of scenery made me very happy I had my iPhone with me. I was powered by Girl Talk, Mumford & Sons, the Decemberists, and Lady Gaga.

My sherpa (Amy) was once again awesome, including taking some great photos which are up on her blog. I love doing marathon trips with her – it’s always such a relief to have her waiting at the finish line for me. We were going to stick around and see Bismarck on Sunday, but after realizing we’d already seen it on Friday and Saturday after the marathon, we decided to head home a day early. Sushi on Pearl Street tonight – and no plastic menus.


Now that Dick and Jane have added a CTO to SayAhh’s founding team, they’ve turned their full attention to working on their product. Today, we’ll look at the impact of the expenses to date on the P&L, Balance Sheet, and Cash Flow Statement.

Since SayAhh is in the pre-launch development stage, the company doesn’t have any revenue yet. They also haven’t launched a product, so there is no corresponding “cost of goods sold” – the direct cost of delivering their product. This results in a gross margin of $0, where gross margin is revenue – cost of goods sold.

The default Quickbooks setup uses “Income” to refer to “Revenue”. Since the Income (“Revenue”) line is $0 and the the gross margin is $0, Dick and Jane haven’t really noticed this yet. For now, we’ll leave it as is but once Dick and Jane meet with a mentor who is a CFO we expect this will change.

As of Aug 31st, here is their P&L.

The largest expense a company usually has at this stage is salaries. However, Dick, Jane and Praveena have decided to initially forgo salaries which helps them conserve cash in the near term. A company at this stage could also face product development costs from consultants if they decided to outsource product development. However, Praveena has committed to personally get the first version of the product up and launched without outside consultants, so there is no expense here either.

Dick is focusing his effort on getting some early customer validation and is using a Lean Startup approach. Dick’s friend Samir, who is hoping to land a job with Sayahh, agreed to put together several static landing pages and email collection forms. Once these were up Dick launched several AdWords campaigns to test customer interest.

Dick, Jane, and Praveena decided to get a small office so they could work out of the same space. Dick recently had a child and didn’t want to use his house as it was too distracting, and both Jane and Praveena felt like their apartments were too small to all cram into. They made the decision that being together every day was better than working separately, so they signed a 1-year lease at $1500/month (prorated from mid-August) and they invested $1930 in capital improvements to remodel the entryway and install a sign. After signing the lease, Samir suggested that they could have saved a lot of money by using a co-working space but once the decision was made and the lease signed, there was no turning back.

In addition to the capital improvements (which show up on the balance sheet below as “Leasehold Improvements”) our fearless founders bought some tables, chairs, and a few other random things at Office Depot. Both the renovations and furniture purchases are “capitalized” on their balance sheet rather than being expenses on the P&L. While the cash is gone, the “expense” is “depreciated” over several years (depending on the type of asset).

Following is the balance sheet and the changes from July to August.

Our founders had some other expenses, including business cards and a trip to an industry conference where they talked to a number of potential customers. While the conference was educational, Dick and Jane were frustrated with the dull gaze they got from uninterested prospects when they tried to explain what they were doing, but couldn’t actually show anything. On the flight home from the conference, Dick and Jane agreed they both needed to help Praveena get the first product out, whatever it took.

Following is the third key financial statement – the Statement of Cash Flows.

In total, SayAhh burned through over $8000 during the month. Annualizing this number, SayAhh could expect around $96,000 in negative cash flow for the year. However, Jane realized that $3430 associated with the new office space security deposit and rennovations is essentially a one-time expense. This resulted in an annualized burn rate more in the neighborhood of $55,200 ($4,600 * 12).


I’m running the Kroll’s Diner Bismarck Marathon on Saturday. This will be Marathon #18 in my quest to run one in every state. I’ll be there for a couple of days so I’m open to any restaurant recommendations y’all might have.

I’ve decided to try something different on this marathon. While I always wear a watch, I’ve never tried to instrument myself “real-time” for the race. Until recently, I’ve been using a Garmin 305, but it broke this summer when I was in Europe and I switched to RunKeeper on my iPhone.

I’ve really enjoyed RunKeeper and even started listening to music on some of my runs again since I had my iPhone with me. I signed up for RunKeeper Live and have been broadcasting my runs publicly to anyone who cared, which is primarily Amy.

The marathon starts at 7:30am Central Time on Saturday. I’ll be broadcasting my progress on this link – you should be able to pick it up after I start the race. Since I’ve always been running, I’m not 100% sure how the UI works on the “watching someone” end of things, but would love to hear feedback from anyone who takes a look. Oh – and cheer me on!

I’ll be wearing my Fitbit also (which I love – and am an investor in). It’s fascinating to me the step variance on the different marathons I’ve done – my stride length clearly varies with the shape I’m in and the shape (or hilliness) of the course. I’ll also check and see which is more accurate over 26.2 miles – the Fitbit or RunKeeper.

I might wear my new Nike+ SportWatch GPS, but so far the Nike+ website has been basically unusable due to performance issues so I don’t want to count on it.

Bismarck – see you tomorrow.


Before we invested in MakerBot, we bought and assembled a Thing-O-Matic. When I say we, I mean me, Jason, and Ross. It took us about 20 hours (Jason and I did the first half; Jason and Ross did the second half) and was a blast – think of it as an adult lego project. Our Thing-O-Matic has been steadily printing stuff – you can play a game of chess with our Thing-O-Matic pieces. the next time you are in my office.

As part of the endless series of Amazing Deals I bring you from my deal site, today’s offer is a fully assembled Thing-O-Matic. If you want your own 3D printer, but you don’t want to assemble it, you can buy it fully assembled for $2,500. But, through the magic of daily deals, there are 20 available for a 20% discount ($2,000). This is a one time offer from my friends at MakerBot so grab ’em while they are available.

In additional TechStars Cloud launched today along with the first episode of TechStars on Bloomberg TV.

And finally, for all of you that have written asking for a “Convertible Debt Series” like our term sheet series, we’ve just started one on AsktheVC.com. The first post is up and introduces the series – we’ll be working through all of the terms in a convertible debt deal over the next few weeks.


On This Week In TechStars #6, David Cohen interviews Jason Mendelson on the making of our hard hitting documentary on VCs music video “I’m A VC.” The interview happens in Jason’s basement music studio where much of I’m A VC was written, composed, sung, recorded, and – well – whatever you do in a music studio.

If you haven’t yet watched I’m A VC, what are you waiting for? And, if you have a connection to Stephen Colbert or Jon Stewart, give me a shout as we’d love to help them educate the world about venture capitalists, along with helping promote our book “Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist.” Mendelson on the Colbert Report – doesn’t that sound cool?


To everyone who lost someone close to them on 9/11 – I’m sending you every bit of good karma that I can today. While I was in New York that day, I was lucky and didn’t lose anyone close, but I’ll always remember 9/11 and I think about it every time I’m in New York.

I’ve always had some survivor guilt around 9/11. I had a lot of emotional trauma from it, but everything ended up fine. My survivor guilt is amplified by my own anxieties around the events that lingered for about three months. I’ve never felt these anxieties were warranted on my part, but they were there and I couldn’t deny them.

While I’ve told my story to plenty of friends, maybe by writing it down and getting it out there on this tenth anniversary I’ll both contribute to the memory of loved ones on 9/11 as well as help me (and maybe others) get some closure. There’s a part of this that feels self-indulgent since I wasn’t directly impacted, but there’s another part of me that knows I’m searching for closure on this. So, here’s the story.

I took a red eye from San Francisco to New York on Monday night 9/10. It was something that I was regularly doing at this time as I tried to manage my way through the collapse of the Internet bubble. I landed at LGA at 6am, took a car to The Benjamin hotel where I was staying for the first time (I randomized my hotels back then just to experience different ones), turned off my cell phone and went to sleep. I didn’t have a meeting until 10 so I set the alarm clock in the room for 9:00. I woke up in the normal haze of jet lag to someone on the radio shouting about something going on at the World Trade Center. At first, I thought it was some sort of drive time radio talk show joke, but as I gradually woke up I started processing that something major was happening. I turned on the TV – something I rarely do in hotels – and saw the first tower on fire and the chaos that erupted as a plane crashed in to the second tower. I don’t remember seeing the plane crash, but I do remember seeing the endless plumes of black smoke.

By the time I was mentally functional, it was about 9:10. I turned on my phone to call Amy who I knew was on the road on the way to DIA to catch a flight to New York. Her birthday is 9/14 – she was going to meet me in New York, we were going to hang out for a few days, and then go to Paris for a week of vacation together. I had trouble getting through on my cell phone but somehow managed to get her on the phone around 10:00. She was bawling hysterically – she’d pulled over to the side of the road and was frantically trying to reach me. Since my phone was off, she couldn’t, and her brain had immediately gone to the place that so many peoples did which was “my loved one is on the plane.”

While we were talking, the first tower collapsed. I remember watching it on TV and being unable to continue talking on the phone. Amy asked me what was wrong and I simply couldn’t answer. It was inconceivable to me that the World Trade Center would disappear and – having been in the building a number of times, immediately starting trying to calculate how many people must have been inside.

I finally pulled it together, told Amy to go back home, and we’d figure out what to do once things settled down. I turned on my computer, plugged in the hotel ethernet cable, and connected to the Internet. Amazingly it worked flawlessly even though by this point I couldn’t make a phone call on my cell or the hotel phone. At the time I was using both AOL and Yahoo IM – a bunch of messages popped up from people who knew I was traveling to New York checking to see if I was ok. Email flowed fast and furiously for a little while and as I surfed the net and watched TV from my hotel room in midtown, I got more and more freaked out.

By about 11am I was completely paralyzed. I didn’t really know what to do. By this point both buildings had fallen, four planes had crashed, and there was total chaos on TV as no one had any idea what was really going on. I remember looking out of the hotel window at the beautiful day outside but being afraid to leave my room. All kinds of doomsday thoughts crossed my mind, like “go get a few gallons of bottled water” but I sat, transfixed to the TV, email, and IM hoping someone would say what was happening. I felt safe in my room, but also terrified that I was in the middle of Manhattan – isolated in the middle of one of the largest cities on the planet.

Early in the afternoon I found out via email that my friend Paul Berberian, who was the CEO of Raindance (I was on the board) was in town with Nick Cuccaro, his CFO. Raindance was a public company and they were talking to investors downtown. They were safe and trying to figure out how to get home. We connected by email and decided to meet at my hotel. By this point all the flights were grounded and as I tried to figure out how to get a rental car, it quickly became clear that it would be – at best – really hard to do.

I wrote an email to Jenny Lawton, a close friend who was working with me at Interliant and lived in Greenwich. Jenny offered up her car if we wanted it. By this point it was early afternoon and the news reporting was now in a cycle of redundancy – lots of speculation but no new information. While I was still scared to leave my hotel room, I had this incredible urge to get back to Boulder.

When Paul and Nick showed up, we agreed to go to Jenny’s, get her car, and drive home. Around 5pm we made our way down Park Avenue toward Grand Central Station. There were no cars out, very few people, and an eerie hush had fallen over downtown. The picture in my mind is that it was already twilight and a chill was in the air. I was anxious but when we got to Grand Central it was empty. We figured out which train was going to Greenwich and got on without a ticket. Thirty or so minutes later we got out and jumped into Jenny’s car.

Jenny made us spaghetti for dinner – I can still remember sitting at her dining room table eating the first proper meal of the day. Jenny gave us the keys to her orange SUV (I think it was an Isuzu, but I do remember it was orange) and off we went. The roads were empty and before we knew it we were cruising through Pennsylvania.

All three of us had an overwhelming desire to get home. We each had cell phones and had touched base a few times so our families knew where we were, but none of us had a car charger for a phone so we were protecting our batteries. We stopped at a gas station to fill up on road food – I stayed in the car but to Paul to grab me some fruit stuff. A gobbled down a bag of it before I realized it was “fruit flavor sugar candy” at which point I had to rid out a hard sugar crash in the back seat of the car as Paul and Nick drove through the night.

I remember a lot of very specific things from the trip. We stopped somewhere for breakfast in Iowa at an I-80 roadside restaurant and had an awesome breakfast. There was no useful information on the radio – we just listened to the same speculation over and over again – clearly, no one had any idea what was going on. The sky was a perfect shade of blue. There were no airplanes in the sky and no contrails, which was especially startling in the context of the blue sky. Nebraska is a wide state – we ended up deciding there was an East Nebraska and a West Nebraska. Three guys in a car for 24 hours after a very anxious previous 12 hours makes for a very smelly car. Our capacity for being thankful that we were alive was endless.

As we got entered Colorado we were out of cell phone juice. Nick was obsessed with going by DIA and getting his car, so we ended up adding two hours to our trip at the end. When I finally got home it was dark, but Amy was waiting at the door. We had a very emotional moment, at which point I went and took a shower and then collapsed for a long time.

I didn’t travel again until December. It was the longest stretch of time since college that I’ve been in one place. Some was travel anxiety, some was re-evaluation of the tempo of my life, and some was just plain acceptance of the exhaustion that had been building over the past few years with the corresponding capitulation from a very emotional moment.

As I write these words, it’s incredible to me that this was 10 years ago. The sheer number of specific memories I have amazes me. The emotional feeling around the event continues to be overwhelming to me. While our capacity as humans to deal with, survive, and move on is powerful, this reminds me that there are many things we never forget.

To anyone who lost a loved one on 9/11 – my heart goes out to you. I know how hard this was for me, and as you can see from my story, I was simply a visitor in the city for a brief time in which this heinous event occurred. I’m thinking of you today, and sending you my love.


I get asked to talk at a conference on a daily basis. I’m flattered by the interest, but it’s impossible for me to accomodate even a small percentage of the requests. I don’t charge anything to speak so I can’t use that as a filter, so I end up using geography and type of participation as my filters.

A while ago I wrote a rant against panels and decided I would no longer participate in them. I hate them, I hate being on them, and I hate listening to them. Every now and then I’ll agree for a friend, like I did for Howard Lindzon at the Thunderbird Global Business Dialogue in Phoenix on 11/10, but only because I know that Howard and I will simply have a blast talking about whatever we want with our poor, unsuspecting co-panelists. Plus I wanted to spend a weekend in Phoenix with Amy. So – that’s an easy filter – no to panels.

My geography filter has become refined to “I’ll do it if I’m already planning to be nearby.” Again, I make a few exceptions, but since I already travel so much it turns out that this works out ocassionally. But this is a frustrating filter for me as there are a lot of things I’m invited to talk at that I’d like to – often in conjuction with students or groups of entrepreneurs (who I love to talk to) – but doesn’t pass the geography filter.

Recently, I decided to try doing conference talks and lectures via Skype. If it’s a keynote, I figure 15 – 30 minutes is plenty. If it’s a class, an hour seems to be the appropriate length of time.

The early response has been awesome. I’ve gotten great positive feedback from the conference organizers who appreciated my involvement. The technology infrastructure is really easy – all that’s typically needed is already there given the A/V requirements of the other speakers. For me, it’s a physical dream – I can do it from my office, from the road, from a hotel room, from my house, or from Tuscany. Suddenly, I feel very untethered in the conference context.

While I don’t get the benefit of participating in the conference, nor do the people at the conference get to spend time with me, this wouldn’t happen anyway since I’m not an avid conference goer. However, if the content that I’m providing is really valued, this approach seems to work really well.

The double bonus of this working in a classroom setting is really appealing to me. I’ve always been a huge fan of incorporating guest lectures into undergraduate and post-graduate education. I love some of the revolutionary things going on in the field of education around Khan Academy, SkillShare, and our new investment Sympoz. However, for now, the traditional university classroom still exists and to the extent that I can participate regularly with students and professors who want me involved, I now have a way to make it work that let’s me relax geography as a constraint.