Tag: Foundry Group
Semil Shah recently wrote a post titled Investing Outside The Bay Area. In it, he talked about his own experience expanding his investment horizons beyond the bay area, but also mentioned some other folks, including us and USV, where he did a quick analysis of the location of our partner funds.
From Semil’s post:
“Another firm linked closely to USV — Foundry Group in Boulder — has also been investing with an eye for geographic diversity. While I don’t have portfolio level stats for them, their new endeavor Foundry Next (to invest in smaller funds and then follow-on into key investments) has built up an LP basket of 23 positions in a variety of new VC funds. Of the 23 funds listed here, 13 are in the Bay Area, 3 in NYC, 3 in Boston, 2 in LA, and one each in Detroit, Seattle, Toronto, Waterloo, Indianapolis, and Fargo, North Dakota. This is a very clever way of helping new funds get their footing and hearing about what is working before others may pick up the scent.”
That generated a fun email exchange between us and prompted me to do an analysis on the locations of the direct investments that we’ve made since we started Foundry Group in 2007. The geographic breakdown of our 123 direct investments follows:
Twelve years later, we were pretty close. When we started Foundry Group, we said that 33% of our investments would be in California (which, at the time, we thought of as equivalent to the Bay Area), 33% would be in Colorado, and 34% would be in the rest of the United States.
We have always believed that great companies can be created anywhere. While we don’t have a geographic allocation approach, we were willing to travel and invest everywhere in the US. We knew that some places, like NYC, Boston, and Seattle, where we already had deep networks, would be common places for us to invest. We’ve been pleasantly surprised with the expansion of our networks in other geographies, like Southern California (LA, San Diego, and Santa Barbara) and Portland.
It’s useful to note that in addition to our direct investing and partner fund investing, we are investors in Techstars, which has redefined seed stage investing all over the world. Currently, they are running accelerator programs in over 16 cities and 13 countries, in addition to Startup Weekend and Startup Week activity, which thoroughly covers the world.
As we start investing Foundry Group Next 2018, I expect we’ll add a few more states on both the direct and partner fund investing side. Hopefully, we will continue to help develop and expand existing and new startup communities.
We are happy to announce the closing of our seventh fund, Foundry Group Next 2018. The $750 million fund combines all of our prior fund strategies – our early stage, early growth, and partner fund investments – into a single fund.
For historical reference, our early-stage funds (FG 2007, FG 2010, FG 2013, and FG 2016) are all $225 million in size. Our first early growth fund raised in 2013, Foundry Group Select, is also $225m in size. In 2016, when we raised Foundry Group Next, we approximately doubled the size of that fund to $500 million since 30% of it was going to be invested in partner funds and 70% in early growth. So, at the beginning of 2016, we effectively raised $725 million (FG 2016 and Foundry Group Next). Foundry Group Next 2018 is simply the combination of those two funds rounded up slightly.
Our strategy is unchanged – we’ve just combined all of our investing activity into one fund going forward. When we started Foundry Group, we had four equal partners. We now have seven equal partners. We invest all over the United States and Canada. We have a deliberate and focused set of themes that encompass almost all of our investments. We are syndication agnostic, being indifferent between investing by ourselves or with co-investors – especially our partner funds – where we mostly have long and successful relationships. Our goal is to have significant ownership in companies we are investors in (often over 30%). We are very long-term investors, focusing on net cash on cash returns, rather than short-term or intermediate IRRs.
While we have an early entry point from our historical early-stage investing, we don’t have to be the first investor in a company. With the Cambrian explosion of seed funds that has occurred in the last five years, we’ve chosen to invest in these funds directly (which we call our partner funds) rather than try to chase seed investments all around the country. If a company hasn’t raised more than $5 million, we are a good target, as long as it is in the US (or Canada) and in one of our themes.
We are full lifecycle investors and willing to invest, and lead, Series A, B, and C rounds. We refer to B and C rounds as early growth – essentially financings with valuations between $50m and $300m pre-money. By being syndication agnostic, we are happy to lead multiple rounds of companies we are already investors in, but we also love to welcome in co-investors who we like and respect, along with any of our LPs who want to participate directly alongside us.
We have a small team (16 people total). The seven partners all work directly with the companies and partner funds. We have a CFO, a General Counsel, six EAs, and one fund investment associate. We don’t expect or intend to add anyone to our team going forward.
We’ve worked hard to have a network-centric view of the world. As a small team based in Boulder, Colorado, we have developed a very broad network which includes all of the entrepreneurs we work with, our LPs, VCs we co-invest with, our partner funds, several startup studios, Techstars, and many other colleagues through our writing, startup community leadership, and non-profit activities. We think of ourselves as one node on a mesh network, an important node, but not a central node through which everything must flow. We subscribe to the notion of #GiveFirst and try to be helpful to everyone we come in contact with.
We know who we are at year 12 in our journey as a firm, love what we do, and try very hard to do it clearly, honestly, authentically, and transparently with everyone we interact with. Creating and building companies is extremely hard, and we have deep respect for everyone we get to work with through all the ups and downs.
We very much look forward to continuing to work with everyone we currently work with, as well as another group of great entrepreneurs and VC fund managers in our Foundry Group Next 2018 Fund. We are also happy to welcome a small number of new Limited Partners to our family. We are pleased to partner with such a great group of investors.
Thanks for allowing us to be part of your journey.
– Jason, Ryan, Seth, Brad, Lindel, Moody, and Jamey
I regularly get asked by other VCs about how we do our offsites.
When we started Foundry Group in 2006, we had a very deliberate quarterly process in an effort to learn all about each other and become highly effective at working together. For the first three years, we were disciplined about the timing and process, used an outside facilitator, and always spent one night away together as a group. This was intense and rocky for the first few years, as we had to work through a lot of stuff as individuals and as a team, even though we had all been working together since the early 2000s at our prior firm.
Around 2010, as we started to feel like we had hit our stride working together as a team, we shifted from a facilitator driven model but maintained our quarterly rhythm. Recently, after adding Lindel, Moody, and Jamey to the team, we’ve shifted back to a facilitator driven model in an acknowledgment of the value of really learning each other and now becoming a highly effective team of seven, instead of four.
I think a regular offsite rhythm is critical for every VC firm of any size (including solo GPs, where the offsite can include either the whole team or a few of your key LPs and advisors.) While I’m sure there are different approaches that can work, when I reflect on almost a dozen years of our offsites, I think the approach, combined with the simplicity, has served us extremely well.
So, in case it’s useful, following is our approach to offsites.
Facilitator: For stretches of time, especially early on in our working relationships, or during any rough patches, we’ve used an outside facilitator. If you want a referral to anyone, just email me.
Close to Home: We try to avoid the offsite becoming a boondoggle. We keep it close to home and relatively modest. Many of them are either at Jason’s house, my house, or a hotel in Denver. Occasionally we’ll go to a resort in Colorado Springs (a two hour drive). Once every few years we’ll combine it with a trip somewhere (New York, Chicago) just to change the atmosphere a little, but even then, other than a fancy dinner somewhere, it’s on the modest side. But we never do offsites at the office (I mean, it’s an offsite after all.)
At least a full day: We start first thing in the morning and finish with dinner. We often spend the night together (for many years Seth, Ryan, and I had assigned bedrooms in Jason’s house.) We schedule a second day – if we end early, we have time to catch up on things, including stuff that came out of our discussion.
Rotating leadership: When there were four of us, each of us led the offsite once a year. During the stretch we are in through the end of 2018, which is using a facilitator to help us wire up the next level team of the seven of us, I’ve been the leader so there is some consistency of approach. The leader is a lightweight leader, just making sure the offsite happens with an agenda, as you’ll see in a second.
Crowdsourced agenda around two topics: Like many things in our world, we develop the agenda collaboratively and continuously. A month before the offsite, the leader shares a Google Doc with logistics and a skeleton agenda. We then fill it out, rarely exceeding a page. There are two primary segments: (1) our portfolio and (2) our relationship. By using these as the driver, we can go deep on a number of different issues, including our overall strategy. We try to keep the agenda high level and have a section called “Other Things to Discuss” which allows us to put up anything tactical on anyone’s mind. The leader curates the agenda and we finalize it the week before the offsite.
Portfolio: We have lots of different approaches to this, but it’s essentially a deep dive on a portion of the portfolio. The leader chooses the approach, which is often a brand new one, so we don’t get into stale rhythms. My historical favorite is the use of index cards with company logos on them. The leader shuffles the cards (our entire active portfolio, which is now a lot of cards) and turns them over one at a time. Whoever is on the board is not allowed to speak – they have to listen as the other partners reviews the portfolio company. Once the non-board member partners have talked about what they think is going on at the company and what we need to focus on, the board member gets to weigh in. Since our model is that everyone works on everything together, this is an incredibly insightful approach at two levels: (1) the company info and (2) our level of internal communication about the company. It also reinforces the value of being vulnerable to your partners – it’s often really hard to sit quietly and listen to the details without jumping in and trying to steer the conversation or inject your point of view into the mix. A more recent approach that I loved (that Seth came up with) is to start with a portfolio value assessment by company. We put an X-Y graph up on the wall with the Y-axis being amount of work (high to low) and the X-axis being the value to the fund of our ownership in the particular company ranging from $0 to $225m (where a company returned the fund.) We each put the index card for the company we were responsible for up on the wall in the place we think it belongs. We then discussed the entire portfolio for each fund, which generates a lot of discussion and calibration (including moving a lot of index cards around, since if we did the exercise blind, we’d all have different views.)
Ourselves: We either address the question “How Are You Doing?” (which is personal and professional, internal or with regard to others in the partnership) or do a set of facilitated exercises. We often start with a Red/Yellow/Green check-in. We orient the discussion around each person and take our time, rather than rush through updates. If there are conflicts between people, they surface quickly since we are all tuned to talk about struggles we are having, rather than focus on the awesomeness of how great our universe is. Each of us approaches this with our soul wide open – the starting point is trust, vulnerability, authenticity, and other words like that. While “How Are You Doing?” is a simple question, it opens the door wide for a variety of things, and the conversations that have ensued around one person have often generated a richness of discussion that lasts hours and often involves tears and other surprising emotions.
Obvious but important meeting rules: No phone. No email. If you have to go to the bathroom, go. We always make sure there are snacks in the room. Don’t interrupt. Listen with both ears; talk with one mouth. We build 30-minute breaks into the agenda so we can catch up, and, more importantly, breathe and stretch during the day. There’s usually a chance to exercise before dinner.
Dinner is a critical part of things: On some occasions, we have a meaty topic to discuss that we save for dinner. On others, we use it to heal our relationships and remind ourselves that even though we have plenty of conflicts and struggles, we are best friends. We usually do this in a private room somewhere so we can take the conversation wherever we want to go.
We try not to rush. We are gentle with each other, reminding ourselves that a key value of Foundry Group is brutal honesty delivered kindly. And we always remember that one’s individual truth may not be “the truth” and it’s important to be willing and able to explore what happened, or is happening, in a particular situation, instead of simply what you think happened.
Finally, we are always trying new things, so if you have stuff you do in offsites that are different, or additive, to our approach, toss them up in the comments.
Over the past 25 years, I’ve attended approximately 14,387 board meetings. My partners and I talk a lot about how to improve them and today released The Foundry Group Manifesto on Board Meetings. It follows:
In 2013, I wrote a book with Mahendra Ramsinghani about board meetings titled Startup Boards: Getting the Most Out of Your Board of Directors. It was a tough book to write because every time I dug into it, I got bored, but I think it ended up being a contribution to the corpus of entrepreneurial knowledge. However, I anticipate Bored Meetings will be an even more significant contribution.
As a preparation for something new and exciting, let’s reminisce a little. In 2011, we did our first Foundry Group music video “I’m a VC.”
I remember being amazed when the Youtube views went over 100,000. I recall being equally amazed when I heard that our IT guy (Ryan) had cleaned up our random Google accounts, deleted firstname.lastname@example.org, and as a result deleted the video. When it was restored, the view counter was at 0.
My partners and I just announced that our long-time friend and LP – Jamey Sperans – has joined Foundry Group.
We’ve been working with Jamey since the beginning of Foundry Group in 2007 (he was one of our first LPs via Morgan Stanley AIP) and have become extremely close friends.
Jamey and his family have moved to Boulder, so in addition to working with us, he’ll become a part of the extended Boulder/Denver startup community.
We are delighted to have Jamey in town and on our team. If you want the backstory, take a look at the post on the Foundry Group site titled Introducing Our New Partner – Jamey Sperans.
Yesterday, my partners at Foundry Group announced financial support for the Time’s Up Legal Defense Fund.
We strongly believe that sexual harassment is unacceptable in any form. While there can be a debate about whether sexual harassment is about sex, power, or something else, there’s an additional pernicious element of it when the harasser threatens to sue the person being harassed. This extends the harassment and reinforces the issue around the power dynamic, especially when the harasser has much more financial resources than the person being harassed.
My partners and I were considering establishing a VC / Entrepreneurs Sexual Harassment Legal Defense Fund. When we saw the launch of Time’s Up and the Time’s Up Legal Defense Fund, we decided to financially support this activity and try to create a sub-group for the tech industry. As a starting point, Foundry Group is contributing $100,000 to the Time’s Up Legal Defense Fund and Anchor Point Foundation is contributing $100,000.
In addition, we are reaching out to VCs and Angel Investors that we know to see if they will join in our effort. If you are a VC or Angel Investor who wants to financially support this effort, please email me. And, if you are an individual who wants to directly support the Time’s Up Legal Defense Fund, please do so on the Time’s Up GoFundMe page.
Finally, for some inspiration, watch Oprah Winfrey’s powerful speech at the 2018 Golden Globe Awards.
We are excited to announce that Chris Moody is joining Foundry Group as a partner.
When we started Foundry Group in 2006, we were very clear that we were not going to build a legacy venture capital firm; one meant to outlive its founders. There would be no generational planning, no transitions to younger partners, and no senior partner hold-outs who would hang onto economics well after they had stopped working. Simply put, when we are done investing, we will drop the mic and shut off the lights.
In 2014, Seth, Jason, Ryan, and I had the first of many conversations about our long-term plans for Foundry Group. These discussions resulted in the creation of Foundry Group Next, the addition of Lindel Eakman to our team, and our first Foundry Group Next fund which we closed in 2016.
The conversation that we started in 2014 has continued on a regular basis, both formally at our quarterly off-sites but also pretty much every time the four of us were together. As part of this, we started an exercise of explicitly looking forward a decade and talking about what Foundry Group looked like from each of our perspectives at that time. With each new fund we raise, we are making at least a ten year forward commitment to each other, our investors, and the founders whose companies in which we invest. For the first seven years, this was easy, since we each had a 20-year view of Foundry Group when we started it in 2006. But as time passed, we realized we needed to start to think more deeply about the future of Foundry Group and how we evolve our investment activities.
The venture business is an inherently challenging one to scale. Leverage – of time, capacity, and capabilities – is hard to achieve. As Foundry Group raised more funds, we realized that our ability to continue to manage our business effectively was becoming limited by our individual time and capacity. Recognizing this, we started to make a list of people we would consider adding as partners, as one of our deeply held beliefs was never to have associates, venture partners, or EIRs as part of our firm.
For a while, the only name on the list was Lindel’s. It took us several years to get our mind around adding someone, but once we did, we added a few more names to the list. It probably won’t be a surprise to anyone reading this that it is a very short list.
Back to Chris Moody. Chris was most recently VP & GM of Data & Solutions at Twitter, running a multi-hundred million dollar enterprise business unit. In addition to running one of Twitter’s fastest-growing business unit, Chris was responsible for leading Twitter’s developer platform and ecosystem involving hundreds of enterprise partners and one of the world’s largest active developer communities. We’ve known Chris since 2007 and worked extremely closely with him when he was the CEO of Gnip and well as a leader in the Boulder Startup Community. Over the years, we also became very close friends with Chris.
After we had raised the first Foundry Group Next fund last September, we started having a serious conversation about having Chris join us at Foundry Group. This was driven by our reflection on our current workload, how we were adjusting what we were doing based on the addition of Lindel to the team – which had re-energized us a lot, and how we were thinking about the next ten years of Foundry Group.
In addition to working closely with Chris as a CEO (I was on the board of Gnip), we all worked with Chris through Techstars (he was one of the original mentors in the 2007 program). After Twitter acquired Gnip in 2014, Chris joined the boards of two of our portfolio companies (Pantheon and mLab) and worked closely with Ryan on these boards as an outside director.
We knew Chris was an extraordinary board member as well as an extremely seasoned CEO. We had a great affinity for each other, and he shared our value system. When the five of us sat around talking about Chris, after each conversation we got more excited about having him join us, especially as we learned about his personal view for the next decade of his life.
For those of you who don’t know Chris, I encourage you to watch this short video of Chris’ commencement address at Auburn University last spring. I think you’ll get a small glimpse of what he is about and why we’re so excited to have him as our partner.
Chris has been burning the candle at both ends for 27 years without ever taking a meaningful break. We insisted that he take the summer off to recharge his batteries and spend focused time with his awesome wife Sarah and his three delightful kids. He’ll officially join us at the end of the summer.
I’ve become a huge fan of Harry Stebbings, the intrepid entrepreneur turned VC whose age (20) matches the title of his podcast (The Twenty Minute VC.) Today, at SaaStr at 1:40pm in the Hypercritical section, Harry is interviewing me about – well – whatever he wants.
Harry has done hundreds of 20 minute VC interviews over the past few years. It’s a staple of mine on my podcast listening rotation so I’ve heard a bunch of them. It’s fun to watch Harry evolve as an interviewer as his knowledge of the industry has increased dramatically and his point of view about various VC-related things has become crisp and clear. And his hustle is relentless and has led to him also doing the SaaStr podcast and joining Atomico.
All five of the Foundry Group partners have been interviewed at this point. I think our interviews are a great way to get to know us quickly since we each tell our story, our strategy, and our approach in our own words and from different perspectives. Over the past few weeks I’ve probably talked to over 100 VCs between my trip to Australia, LA, and SF. When I find myself telling our story in response to being asked, I often wish I had a short cut to point people to.
This post is now the shortcut. I’ll use Harry’s original titles so you can see how his SEO prowess has evolved.
Yeah – I don’t love the capital letters either, but there you have it.
In case you are wondering about the tone of the 100 VCs I’ve talked to, I’d rate it as very high on the anxiety meter. Some of the tone is from the macro dynamics post election, but some seems deeper and more unsettled. I don’t know what it is, but I switched my Headspace meditation pack from Motivation (which I don’t need any help with) to Anxiety, just to be proactive.