20 VC 065 FOUNDRY GROUP WEEK 1 Brad Feld Founders Should Be Obsessed, Passion Belongs In The Bedroom

In this episode of the 20 minutes VC, host Harry Stebbings chats with renowned venture capitalist Brad Feld, co-founder of Foundry Group and Techstars. Feld shares his journey from early entrepreneurial failures to becoming a leading figure in venture capital with successful investments in companies like Fitbit and Makerbot. He emphasizes the importance of learning from failures, the power of being on the creative side of business, and the significance of founders being obsessed, not just passionate, about their products. Feld also discusses Foundry Group's investment strategy, focusing on affinity for the product, founder obsession, and mutual desire for partnership. Additionally, he touches on his deep-held beliefs, including maintaining a consistent fund size and the importance of directly supporting CEOs. Throughout the conversation, Feld offers insights on leadership, the evolving human-computer interaction landscape, and his latest investment in Glowforge, a 3D laser printer company.

• Brad Feld is a leading VC and co-founder of Foundry Group.
• He has invested in companies such as Zynga, Makerbot, and Fitbit.
• Co-founder of Techstars, a prominent startup accelerator.
• Co-authored "Venture Deals" with Dick Costello and "Startup Communities."
• Active in non-profit organizations, chairing the National Centre for Women in Information Technology and co-chairing Startup Colorado.
• Recognized speaker and author of the blogs Feld Thoughts, Startup Revolution, and Ask the VC.

"Brad is one of the world's leading vcs. Having cofounded Foundry group, Brad has made investments in the likes of Finger, Makerbot and Fitbit, just to name a few."

This quote introduces Brad Feld as a significant figure in the venture capital industry, highlighting his achievements and contributions to the tech community.

• Brad Feld started his first company in college, which was unsuccessful.
• His first venture was Martingale Software, which failed to make progress in software development for the Mac.
• The second company, Datavision, also failed despite raising some money.
• Feld Technologies, his third company, was successful, stemming from his consulting work in business applications for PCs.
• Worked for Petcom, a husband and wife startup, where he learned the value of creating and the leverage it provides.
• Gained experience with equity and royalties, earning significant income as a college freshman.
• Learned to handle failure gracefully and the importance of fully engaged partners.
• Emphasized taking ownership and responsibility for actions and mistakes.

"My very first company was a company called Martin Gale Software, which I started with a handful of fraternity brothers to write software for the Mac when the Apple Mac was just coming out... the end result was we made almost no progress building any software for the Mac." "But I also got paid 5% royalty on all the software I wrote. So I didn't get equity in the company. But for every sale of the products that I wrote, I got 5% of the gross."

These quotes detail Brad's early entrepreneurial efforts and his initial exposure to the software industry, as well as his introduction to the financial benefits of royalties in lieu of equity.

• Feld believes failure is a part of the entrepreneurial experience.
• He learned to navigate the emotional aspects of failure from his early ventures.
• Stresses the importance of engaged partners and taking responsibility for one's actions.
• Disagrees with the notion that failure is a necessity for entrepreneurial success.
• Sees failure as a continuous occurrence rather than a singular event.
• Believes that durability through failure is a hallmark of great founders and investors.

"I think I learned how to fail gracefully. It sucks to fail, but it's part of the experience." "I prefer to think of failure as a continuous thing that happens all throughout one's life on all vectors."

These quotes reflect Brad's perspective on failure, emphasizing its role in the entrepreneurial journey and the continuous nature of overcoming challenges.

• Recognizing the importance of being respectful and graceful during company failures.
• Understanding that respectful handling of failure can build relationships for future opportunities.
• Learning from failure is critical for long-term success.

"Especially if you're playing a long term game, which is to say that you might have a company that fails, but if you do it in a way that's respectful of everybody, it's likely that a number of those people will be there for you the next time, because you've learned a lot from the failure."

• This quote emphasizes the significance of maintaining respectful relationships even in the face of failure, as it can lead to future collaborations and opportunities.

• Initially passed on investing in Fitbit due to a lack of excitement and engagement during the first interaction.
• Reconsidered the investment after encouragement from friends and a more engaged second meeting.
• Recognizes the importance of being fully present and engaged when evaluating potential investments.

"I got introduced to James Park, one of the two founders... I did a conference call with James... I wasn't excited. I wasn't super into it... And so I passed."

• Brad Feld initially passed on investing in Fitbit due to a lack of enthusiasm after a conference call with founder James Park.

"Jeff Clavier at SoftTech and John Callahan at True... both encouraged me to spend time with James and take a meeting... Jeff was way more direct... he basically told me I was an idiot if I didn't take it seriously, I took it more seriously this time."

• Encouragement from fellow investors Jeff Clavier and John Callahan prompted Brad Feld to reconsider and take a second look at Fitbit, leading to a more serious evaluation.

"I realized that I had completely and totally misread James's affect, and that had inappropriately influenced the way I thought about things."

• On a second, more focused interaction, Brad Feld realized his initial misjudgment of James Park's demeanor, which had negatively influenced his first impression.

• Foundry Group's investment approach is based on thematic filters, investment stages, and geographic focus.
• Personal affinity for the product, founder obsession, and mutual partnership desire are key factors.
• Passion is distinguished from obsession, with the latter being a critical trait for founders.

"We have a filter on the front end. We have a set of themes that we're interested in... We then focus our energy on three things. One is, do we have affinity for the product... Second, the founders have to be completely and totally obsessed about the product... And then the last part is, do the founders want to be partners with us as badly as we want to be partners with them?"

• Brad Feld outlines the investment approach of the Foundry Group, which includes thematic interest, affinity for the product, founder obsession, and a mutual desire for partnership.

"Obsession is a different thing, and not an unhealthy obsession, but an obsession that's palpable."

• The quote differentiates between passion and obsession, highlighting the importance of founders having a deep, palpable commitment to their product.

• Human-computer interaction and 'glue' software that communicates with other software are current areas of interest.
• Belief that the future of human-computer interaction will be drastically different, guiding investment decisions.

"Two areas of investing that captures most of my attention. Two of our themes. One is human computer interaction... And then the second area is an area we call glue..."

• Brad Feld shares his specific investment interests, focusing on human-computer interaction and software that serves as an intermediary between other software platforms, which he refers to as 'glue'.

• Brad Feld discusses his investment focus on the application layer of the internet, middleware, and technology protocols.
• Investments are not limited to formal ITF protocols but include various technologies like push notifications and email protocols.
• Urban Airship and Sendgrid are examples of companies they've invested in that operate within these areas.

"software that does stuff. So it's not the system layer or the network layer in the Internet, but it's the application layer and then software that cuts across that application layer."

This quote explains Brad Feld's focus on the application layer, which is the layer where users interact with software, distinguishing it from the more foundational network and system layers.

"What? Maybe when I was in 1980s, when I was at school and running my first company would have been called middleware and protocol are companies that are built around technology protocols that don't necessarily have to be formalized protocols."

Brad Feld reflects on the evolution of technology, indicating that what is now considered application software was once referred to as middleware and protocols in the 1980s.

"They could be things like push notifications, which an example of that would be our investments in urban airship or investments around SMTP, which is effectively the protocol underlying email, such as Sendgrid or return path."

This quote provides specific examples of the types of technologies and companies that Brad Feld and his firm invest in, highlighting their focus on foundational internet technologies and services.

• The Foundry Group operates on a set of deeply held beliefs that shape their strategy and structure.
• These beliefs include not growing the number of partners or adding junior staff, and doing all the work directly with founders.
• They have a consistent fund size for each fund they raise, which is $225 million.

"We have a set of what we call deeply held beliefs, which doesn't mean they're immutable. They can change and evolve over time, but they're deeply held."

Brad Feld emphasizes that while their beliefs are fundamental to their operation, they are not inflexible and can adapt as necessary.

"Another corollary to that is that every fund we raised would be the same size. So we've raised multiple funds. Every one of them is $225,000,000."

This quote specifies one of the deeply held beliefs regarding the consistent size of the funds they raise, which is part of their strategy to focus on value creation rather than firm growth.

• The Foundry Group had a challenging start in fundraising but gained momentum with the success of previous investments and a significant oversubscription for their first fund.
• They settled on a fund size of $225 million after negotiation with investors.
• This consistent fund size allows them to focus on productive work and avoid time spent on non-value-adding activities.

"We started to make some progress after about month four, month five, we started to have some well-regarded LPs commit, and then we had a series of things that happened from our previous fund that were exits of companies that we were involved in and managed that were quite significant, that created even more momentum."

Brad Feld describes the turning point in their fundraising efforts, which was bolstered by the success of their previous investments and the commitment from respected limited partners (LPs).

"And our largest investor and one of our closest friends really didn't want us to raise more than 200. That was the sort of magic number that they wanted us to cap out. And we eventually agreed that 225 was a comfortable number."

This quote reveals the negotiation process behind their fund size decision and the importance of investor relationships in that decision.

• Foundry Group's philosophy centers on supporting the CEO, which means working for them unless they no longer support the CEO, in which case they take action.
• The needs of CEOs and companies vary, and the firm adapts its involvement accordingly.
• The firm's investment strategy involves making approximately ten new investments per year, focusing on potential rather than quantity.

"So part of the magic for us is a philosophy that we carry around, which is as long as we support the CEO, we work for her."

Brad Feld underscores the firm's commitment to supporting the CEO and acting in the best interest of the company, which is a core part of their working philosophy.

"Every single CEO needs something different, and every single company, at different points of time, need different things."

This quote highlights the tailored approach that Foundry Group takes with each company and CEO, recognizing the unique needs and timing for each.

• Brad Feld is an avid reader and recommends several books across different genres.
• "Zen and the Art of Motorcycle Maintenance" is recommended for entrepreneurs and creators.
• For science fiction and future insights, he recommends the "Singularity Series" by William Hurtling and works by Daniel Suarez.

"One is a book I recommend every entrepreneur read is then in the art of motorcycle maintenance. And I actually think anybody who creates anything should read the book and read the book slowly and allow it to just be something that you enjoy."

Brad Feld shares his recommendation of "Zen and the Art of Motorcycle Maintenance" for its value to entrepreneurs and creators, suggesting a thoughtful and leisurely reading approach.

"In terms of science fiction, which I read a lot of, I would encourage anybody that's interested in understanding what's potentially happening five years from now to read the books. The singularity series by William Hurtling."

This quote provides a specific recommendation for those interested in speculative insights into the future, emphasizing the value of science fiction in understanding upcoming trends.

• Brad Feld has a preference for co-investing with specific venture capital firms due to close relationships and complementary working styles.
• True Ventures is mentioned for their close friendships and numerous co-investments.
• SoftTech VC (Jeff Clavier), Greg Gottesman, and Fred Wilson are noted for their collaborative investments.
• Spark Capital is recognized for their teamwork and mutual complementation with Brad Feld's investments.
• Techstars Ventures, which is associated with Techstars, is also a key co-investment partner.
• These entities form the top list of preferred co-investment partners for Brad Feld.

"True ventures. We've done a bunch of investments and have very close friendships there. Soft tech. I mentioned Jeff Clavier earlier, Greg Goddessman, Fred Wilson. We've done a number of investments with the gang at Spark and I think we like to work together a lot and complement each other well. Techstars Ventures, which has techstars, which now has a venture fund called Techstars Ventures. We have co investments there. Those are probably the top list."

The quote emphasizes the importance of strong relationships and mutual respect in co-investment partnerships, highlighting several VCs that meet these criteria for Brad Feld.

• Brad Feld has completed 23 marathons but does not have a current plan for the next one.
• His last marathon was in the fall of 2012, and he is waiting for the right time to get back into marathon running.
• The decision to run another marathon is based on when he feels ready to return to the rhythm of marathon training.

"I've done 23. I don't have a plan for next one. I haven't run one since the fall of 2012. And I'm just sort of letting myself decide when I feel like being back in a marathon rhythm, which it feels like it's coming."

This quote reveals Brad Feld's approach to marathoning as a personal journey, where he listens to his own readiness rather than following a strict schedule.

• Brad Feld would advise his younger self to travel more extensively around the world.
• While he traveled to some first-world countries, he regrets not engaging in adventure travel at a younger age.
• He believes that more travel would have reduced his discomfort in unfamiliar places and provided a broader perspective on society and the world.
• He acknowledges that his lack of immersive travel has resulted in blind spots in his understanding of different cultures.

"I would have traveled around the world a lot more when I was younger. I definitely traveled in certain places...But I have not traveled around extensively in lots of places...I find myself in lots of places around the world uncomfortable when I don't feel like I necessarily need it to be. And I think my perspective on society and the world in general is good, but I've got lots and lots of blind spots as a result of not having immersed myself in different parts of the world."

The quote reflects on the value of travel for personal growth and understanding of the world, suggesting that early life experiences can shape and enhance one's perspective.

• Len Fassler is the best leader Brad Feld has ever met, having bought Brad's first company in 1993.
• Len Fassler's leadership qualities come from his successful entrepreneurial background and the close business and personal relationship with Brad Feld.
• Charlie Feld, Brad's uncle, is also noted as an exemplary leader in a corporate setting.
• Charlie Feld's leadership is highlighted for integrating IT with broad company strategy and making large IT organizations feel part of the overall company.

"Len Fassler, unquestionably...Len bought my first company in 1993...Len and I have done several other companies together...The other person that I would put in that category, that who I've learned an amazing amount that I think is one of the world's best leaders in a corporate setting is Charlie Feld, who's my dad's brother and my uncle."

The quote provides personal insight into the leaders who have significantly influenced Brad Feld, emphasizing the impact of their entrepreneurial and corporate leadership on his career.

• Brad Feld regularly reads certain blogs and newsletters to stay informed and gain insights.
• He reads Fred Wilson's blog, AVC.com, daily and recommends it as a mainstay for others.
• Mattermark Daily is praised for its quality content and is a daily read for Brad Feld.
• Dan Primack's Term Sheet is also a daily read, with Dan being lauded for his thoughtful and provocative writing that remains respectful and informative.

"I always read Fred Wilson's blog, abC.com...I'm an investor in Mattermark. I think the Mattermark daily that they put out has become awesome, phenomenal. And I read Dan Primax term sheet every day, and I think Dan's one of the best writers and the best, I would say not just best writer, but sort of the most thoughtful provocateur."

The quote highlights Brad Feld's daily reading habits and the value he finds in these particular writers and newsletters for their insights and thought-provoking content.

• The most recent investment Brad Feld made was in Glowforge, a Seattle-based company.
• Glowforge is developing a 3D laser printer that uses subtractive technology, which Brad Feld believes has versatile long-term potential.
• The CEO of Glowforge, Dan Shapiro, has written a book called "The Hot Seat," which Brad Feld mentions.
• Brad Feld's investment decision was driven by a deep affinity for the product, the CEO's obsession with the project, and mutual excitement between the investing team and the company.

"So the most recent investment I made was in a company in Seattle called Glowforge...Dan Shapiro is the CEO...The hot seat is the book...We have deep affinity for the product...Dan is the epitome of obsessed about what he's doing...And last, I think we kind of collectively fell in love with each other in a very quick process of us evaluating them and them evaluating us."

The quote explains the rationale behind the most recent investment decision, highlighting the importance of product potential, CEO passion, and mutual respect between investors and the company.