Brad Feld

Month: April 2010

We’ve been having a running joke within Foundry Group for several years about “stealth mode.”  My partner Seth alludes to it in his blog post a few years back titled To stealth or not to stealthI’ve always been on the side of “not to stealth” but after watching the remarkable stealth experience of Trada, thinking about how Niel Robertson (Trada’s CEO), Seth, and the Trada team have effectively used stealth mode, and reflecting on what “stealth mode” actually means, I’ve changed my mind.

Niel wrote a brilliant post on this titled The Stealth Mode: Trada’s Position on Staying Stealth.  I read it carefully when he first wrote it.  I just read it carefully again.  You should also.  It’s one of the best posts I’ve ever read on this topic.

Even though I enjoy hazing Seth, after reading the post again this morning, I thought about how other companies in our portfolio have been effective at using stealth mode principles from Niel’s post.  Even though Zynga is extremely visible these days, a number of the principles have consistently applied throughout the business, especially in the first year.  Oblong, which is absolutely crushing it, has been “playing their own game” for a long time.  AdMeld, another company that Seth is on the board of, adhered to many of these principles as they built up a massive position in their market.  And we’ve got another stealth company quietly building something amazing which I’m sure they’ll start talking about when they are ready.

Niel redefines stealth mode very nicely in his post and then applies it to how Trada went from an idea being bounced around between him, Seth, and a few other folks to a very unique business, growing like crazy, with no direct competitors or fast followers.  Sure – competitors may appear over time, but the head start that Trada has is dramatic and their ability to lead their market segment now that they’ve emerged from stealth mode is insured.

Read Niel’s post The Stealth Mode: Trada’s Position on Staying Stealth.  Actually, read it once, send it around to your executive team, read it again, and then discuss how it applies to your business.  It’ll be worth your time.

I’ve enjoyed my interviews on in the past and think Bambi Francisco and crew do a great job of highlighting up and coming entrepreneurs, companies, and their investors.

Vator is holding a Splash event on May 13, at the Cafe du Nord in San Francisco. Like its last event, about 400 attendees are expected.  Zappos CEO Tony Hsieh will talk about how he built a company to a $1 billion exit to Amazon and Gurbaksh Chahal will talk about how he started and sold two companies for $340 million before the age of 25.  About 30 investors from VC firms will be there and as a special bonus, there will be an afterparty with a band consisting of Adbrite founder Philip Kaplan, Mayfield VC Raj Kapoor and Norwest VC Tim Chang.

While I can’t attend since I’ll be on my Q2 vacation with Amy hiding from the world , Bambi gave me a discount code of “Splashfeld” which gets you 30% off on the registration.  And there is still time to join the competition and get on stage.

While some people hate the phrase “failing fast”, I find it instructive when it’s used to signify that one isn’t going to pursue a particular path in the context of a larger set of activities.  A few weeks ago, I wrote a post about The Proliferation of Standardized Seed Financing Documents. It generated several hundred email responses and a handful of phone calls.  A week or so later, my partner Jason Mendelson wrote a post titled Why There Will Never be a Standard Set of Seed Documents. I’ve concluded that Jason is right so rather than torture myself, I’m failing fast with regard to trying to help create a set of standardized seed documents.

Since I received so many private responses to the original post, I thought I’d summarize them here by type of respondent.

Lawyers: By far the largest numbers of responses were from lawyers offering to help (thanks!)  I didn’t count them up, but I got well over 100 emails from all over the US.  In many cases, the lawyer offered to come to the meeting, share their seed documentation, and work to make sure that seed documents were complete and acceptable to their firm.  The vast majority of lawyers provided solid background on all the seed investment work they had done.  Several weighed in with their views of the potential issues, often sighting the NVCA standard document process which everyone seemed to refer to as some version of “a mess.”  A few made sure to remind me that east coast lawyers needed to be involved or the docs wouldn’t work on the east coast.  A few brave ones told me why I was destined to fail but wished me luck anyway.  Fortunately, due to the magic of Gist, I now have contact information for a whole bunch of lawyers I didn’t know before.

Entrepreneurs: The next largest number of respondents were entrepreneurs.  I think all of them cheered me on, told me how much they hated paying lawyers for their seed documents, and asked if there was some way to reduce everything to a few standard pages, not unlike a mortgage document.  A few told me “don’t include lawyer X in the process – he charged me $70,000 for my seed deal” and a few suggested that lawyers should have to use paper and crayons instead of word processors.  Several asked if I’d be interested in funding their companies.  All demonstrated a sense of humor about the situation.

VCs: The VC comments came in a few different flavors.  A few said “I don’t see the problem – it’s fine having multiple seed documents.”  Another reminded me that “great is the enemy of good” (although the real, and more relevant quote is “The perfect is the enemy of the good”) and the existing forms floating around are “very good – much better than they used to be.”  Another suggested that none of the standard docs worked for him, but he was perfectly happy to sign the forms from Law Firm Z without any modification.  Several asked me whether I was still watching 24 (yes, I will watch it to the bitter end.)  I received private emails from each of my partners containing a slightly different version of “are you out of your fucking mind?”

LPs: I only had one email from an LP.  It was a short one.  “Don’t waste your time on this.”

After pondering all of this, I realized that I was both trying to solve a problem that didn’t really want to be solved while at the same time falling into a common trap of working on something that, while on the surface seems like a good idea, isn’t really my issue to solve, at least not in this way.  As many of you know, the issue is not only the term sheet, but also the underlying documents supporting the deal.  I think this is a nuance that is often missed, as the seed docs need to be robust enough to easily support a next round financing (Series A or Series B) since the seed financing is rarely the last one.  So, while a simple term sheet might be able to be agreed on, I realized that getting the actual docs agreed on would be a miserable, and likely impossible, thing to try to deal with.

Hence my failing fast.  While in theory this might be a great idea, I’ve concluded that I can’t be successful at this.  There are plenty of people – namely all the lawyers that work with startups – that have a much greater incentive than I do to get this right, be efficient for the entrepreneurs they work with, and be cost-effective for the companies they bill.  So, I’m going to leave it to them.

Over the past year the amount of emails I receive on a daily basis from entrepreneurs has reached a point where I can’t deal with it any more.  My partners at Foundry Group feel the same and as a result we’ve moved to twitter to deal evaluation

If you are interested in talking to me about a potential investment, please just tweet it.  Limit yourself to 140 characters – that’s more than enough to describe what you are doing.  Optimally, you’d DM me, although I realize that I have to follow you for this, so just use @bfeld in your tweet and I’ll see it.  And please – don’t sent me multiple tweets – that kind of defeats the purpose.