On Monday, June 1st, I told Amy that I wanted to engage deeply in helping eliminate racism in the United States.
I’ve been involved in gender inequity issues since I joined the National Center for Women & Information Technology board in 2005 shortly after it was formed. 15 years later, I’ve learned an enormous amount about gender, especially in tech, and while I am nowhere near finished on that particular journey, I feel that I understand and can be helpful in my role as a male advocate (or “male ally”) in eliminating gender inequity in tech and entrepreneurship.
While Amy and I have been philanthropically supporting social justice issues for over 20 years through our foundation, I don’t feel like I’ve engaged in a meaningful way. I have an enormous amount to learn about racial inequality in our country and my network for and advocacy of Black entrepreneurs and investors is woefully inadequate.
In my discussion with Amy, we decided to personally fund and get involved in at least 10 initiatives right away, which I defined as “by the end of June.” I’ve spent several hours a day each day since last Monday reaching out to Black friends I know with one question.
“What are two initiatives you are involved in right now that I could put time and/or money into in support of you and your activities?”
In each case, I offered money along with a desire to actively engage in support of them and their activities. This is not “I’ll do a mentor call with you” or “Email me anytime you have a question” but an open-ended “tell me what I can do to help you execute a particular initiative.”
The conversations have been excellent and extremely enlightening. Given that almost all of them were with people I already knew, I don’t need to do any diligence on the organizations they are asking me to get involved in as their reference credibility is enough for me. In a few cases, I had inbound from people I didn’t know and I also chose several of them to engage with.
Right now, these are philanthropic contributions to non-profit organizations or sponsorships for people going through some kind of program (non-profit and for-profit). This is a completely separate initiative from investment activity with my partners at Foundry Group, which we’ll be talking about more soon once we’ve made clear decisions about what we are going to do over the next few years.
My first of these commitments is to the Zane Access Inaugural Pre-Capital Program Cohort. I got an email from Shila Nieves Burney asking if I would donate 20 copies of Venture Deals. I responded yes and asked if there was anything else I could do to help their first cohort. Shila responded that they’d love to do an AMA and asked if I would be willing to underwrite the tuition for one of the founders, as there were eight in the program who were accepted but would have to forgo the opportunity to join the program due to the financial investment obligation.
I told Shila that I’d do the AMA and underwrite all eight founders who were not in a position to make the investment. I wanted to ensure that no founder who reached the high barrier to be accepted into the program would have to turn it down due to financial concerns.
I’ll be doing the AMA early in the program, so my hope is that I’ll get to know some of the founders, can help them throughout the program, and then connect them into some of my networks proactively where appropriate.
In my previous post, I said that for a while I’ll include one powerful thing each day that I read about racial injustice and Black Lives Matter. Today’s is from Donna Harris, a long time friend who I met through our work on the Startup America Partnership. She’s the co-founder of 1776 and now runs Builders and Backers. When I read her post The Hurt is Everywhere I cried (a “Jerry Colonna induced type of cry.”)
The hurt is everywhere. In every community. If you don’t see it, it just means you’re not talking to the people who are experiencing it.
That’s where we must start. We cannot create a society where all men are truly equal and every community flourishes if we don’t understand how badly the deck is stacked against so many of us and listen to and acknowledge the deep anguish that causes. Then, all of us must commit to repairing the broken places. In our nation. But also in our families, in our schools, and on the streets of our own neighborhoods. To that end, the next time you see a black man walking down your street, stay on the same side of the road and say hello.
Please go read The Hurt is Everywhere.
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.
Given my role in the world, I say no a lot.
I get hundreds of unsolicited emails a day, often asking me to get together, invest, or look at something. Lots of VCs and execs who I know simply ignore and don’t respond to these emails. I’ve always tried to at least respond to them unless they are clearly a mass email.
A long time ago I learned how to quickly identify what I don’t want to spend time on, which I wrote about in 2009 in my post titled Saying No In Less Than 60 Seconds. As time has passed, I’ve tuned this filter more, as the volume of requests has gone up.
It’s not a burden to receive the requests. It used to be a burden to say no, but it isn’t anymore. I’ve spent a lot of time thinking about why, how it used to affect me, and how it affects me now.
I’m fundamentally an information synthesizer. I want more, not less, data. I want it from a diverse range of inputs. My brain does a good job of storing away bits and pieces of the stuff I see, read, and hear (although I’m worst at hearing – I much prefer seeing or reading) and brings them back to the forefront connected to other things at the appropriate moment. That’s one of the reasons I read such a diverse set of books.
But I don’t need a lot of data to make a decision as to whether I want to spend time on something. I’m already extremely booked up, so if I don’t say no as often, and as quickly as I do, I can’t begin to imagine what things would look like in my world. While I’m open to lots of new things, I only want to spend time on things that interest me or that I feel like I can add something to.
The one downside of this is that a lot of my schedule is a reactive one, where I’m spending time on things because I said yes to a request. I believe this is part of my job and it can be a satisfying part of my existence. But, when it gets out of balance with all the actual proactive work I need – or want – to do, it often causes me to have lost stretches of time like I did this summer.
I’m sitting in Amy’s office with my laptop catching up on stuff today. I’ve already told about 20 people no so far as I went through my emails from yesterday and overnight that I hadn’t yet responded to. I’m sure I’ve got another 20 after I finish this post, at which point I’ll start attacking my weekly non-urgent to-do list. The music Amy chose is nice and mellow, the sun is shining, and I’m calm and contemplative after a full week.
If I say no to you, realize that it rarely has something to do with the quality of your idea or you as an individual. Instead, it’s about me and how I want to spend my time. I know there’s often dissonance in that, especially if you are a founder who is trying to get my attention because they’d like me to be an investor in their company. But realize that by saying no quickly, I’m respecting you and your time by not wasting it.
Over the years, I’ve been in many multi-party negotiations. I don’t know the maximum number of participants in a single negotiation, but I’m sure it’s greater than ten active negotiating parties in a transaction.
I don’t mean the number of entities participating in the transaction, but the actual number of active negotiating entities. The best way to figure this out is to count the number of different law firms involved in the transaction.
We shifted our behavior some years ago. Often, we lead deals. When we lead, we negotiate the terms. We work collaboratively with any other co-investors, but we’ll take the lead.
But, if we don’t lead, we follow. This can be tricky, as our instincts (or ego) can often get in the way since we are used to leading deals. Or, the lawyers can get confused about what our real goals and intentions are in the negotiation. We always have a few key things that we need, but these are almost always non-controversial. But they can get mixed up in the fog of a transaction, making the unimportant seem important, and the unemotional seem emotional.
I’ve grown to like the phrases “term setters” and “term accepters.” Simply put, if we lead we negotiate the terms. If we follow we accept the terms. The lawyer fees are much lower when you behave this way.
I’m on the receiving end of a lot of reference calls. I try to be thoughtful and direct in my responses, but I’m increasingly annoyed by the generic nature of the questions. Over time, I’ve developed an approach to doing reference checks, and my approach actively avoids asking any of the following questions.
I don’t know which VC or Private Equity firm first came up with this list of questions, but like many elements of a term sheet, they seem to have been passed down from generation to generation.
My answer to the last question is “Do you ever get tired of doing reference checks this way?”
On Saturday night I got on a plane and flew to the other side of the planet, where I am now. I’m in Melbourne, finishing my coffee, getting ready for one last meeting here before I fly with David Cohen to Adelaide for the day.
When I left, I had the voices and energy of 25 people in my head. Last Thursday evening was the beginning of the second Reboot VC Bootcamp at my house just outside Boulder.
Amy and I have a second house on our land, which we refer to as “the Carriage House” and the Reboot gang calls “Chez Feld.” The first floor is an event center that we use for non-profit events. The second floor was going to be a man cave, but my idea of a man cave is carrying my laptop around the house wherever Amy goes and sitting down next to her. The idea of hiding out from her a separate place has never made any sense to me so we turned the second floor into a retreat center which friends and companies in our portfolio are starting to discover and use, especially since it’s a lot less expensive (free) than renting a hotel conference room for the day – and a lot more pleasant.
About 20 VCs from around the world showed up for an intense four day experience lead by Jerry Colonna and his Reboot team. The website is understated about the experience.
“Over this long weekend with Jerry, Brad Feld and Team Reboot, we’ll work to uncover your authentic leadership style and teach practical skills for managing the array of feelings that can be triggered–all in the name of helping you become the best investor/board member/supporter you can be.”
To really understand it, read the following four posts from attendees of the second bootcamp.
I was a little sad to leave Saturday and not be part of everything, but reading each of these posts this morning made me very happy. It’s not just that “VCs are people too”, but that the 20 people who showed up in Boulder for four days opened themselves up completely as they each went down their own path of radical self-inquiry. Jerry and the Reboot team continue to amaze me (and many others) in their magical abilities around personal exploration and growth in a professional context (well – and a personal context.)
For everyone who showed up – thank you for coming and letting me be a part of it. As I sit here on the other side of the world with my soul gradually catching up with me from the jetlag, it’s powerful to ponder that we are all just bags of chemicals.
I had lunch recently with a founder. We were talking about current and future board configuration for his company and he said “Up until this point, all my board seats were simply for sale. Whenever a new investor showed up, they wanted – and got – a board seat.”
I loved the phrase “board seat for sale.” It’s exactly the opposite of how I think about how to configure a board of directors, but I recognize that it’s a default case for many VCs and, subsequently for many entrepreneurs and companies.
It’s a bad default that needs to be reset.
I wrote about this a lot in my book Startup Boards: Getting the Most Out of Your Board of Directors.
In the past few years there have been some interesting changes. In pre-seed and seed stage companies, there’s been a trend against having board of directors. Instead, there is no formal board, or no formalism around the board, so it’s just a free for all between the collection of early investors (angels and pre-seed/seed VCs) and the founders. This can be fine, but often isn’t when there are challenging issues that involve founders, financing, execution, or conflicts. And, when things stall out, figuring out what to do is often harder for the founders because of the communication dynamics – or non-communication dynamics – that ensue.
Post seed boards tend to be founder and investor-centric. This is the norm that I’ve seen over the past 20 years. With each round, the new lead investor gets a board seat and all of the other significant investors get either a board seat or an observer seat. The board quickly ends up becoming VC heavy and the board room expands to have a bunch of investors in it since they all have observation rights. Having been in plenty of board meetings with over 20 people in the room, I can assure you that these meetings are ineffective at best and often trend toward useless.
One approach to this is the pre-board meeting, where only the board members meet with the CEO prior to the board meeting (similar to an executive session of the board.) This is an effective way to deal with part of the problem, but it then makes the board meeting, in the words of a good friend and fellow VC, kabuki theater.
I prefer dealing with reality. I have a deeply held belief that as long as I support the CEO, I work for her. Yes, I do have some formal governance responsibilities as a board member which I take seriously and am deliberate around them. But most of my activity with a company is in support of the CEO. When I find myself in a position where I don’t support the CEO, it’s my job to do something about that, which does not mean “fire the CEO.” Instead, I have to confront what is going on, first with myself, then with the CEO, and finally with the rest of the board, in an effort to get back to a good and aligned place with the CEO.
As a result, especially for early stage and high growth companies, I think the CEO and founders should be deliberate about the board configuration. I like to have outside directors on the board early as it helps the CEO and founders learn how to recruit and engage non-investor directors. The CEO can learn how to build and manage the board and get value out of board members beyond the classical dynamics around an investor board member.
Most of all, I hate the notion of board seats for sale. I get that many investors want board seats as part of their investment. I appreciate that some now have strategies of never taking board seats. But too few VCs think hard about what the right board configuration is at the point in time that a company is doing a new financing. I think that’s a miss on the part of VCs and I encourage CEOs to think harder about this.
Each quarter Cooley does a VC market update. This quarter they interviewed me as part of it on Quarterly VC Update: Brad Feld on the State of Venture Capital Investing. The full Cooley Q3 report includes a bunch of data and trend graphs which I encourage you to go take a look at. The interview with me follows.
The tone of Q3 felt like a continuation of Q2 with summer vacations tossed in. The existential freakout that occurred in January and February seemed like the distant past with the lingering hangover being a clearer focus on valuation and overall funding needs from new investors. While there are a few clear trends in the data, such as lower valuations for Series A through C rounds and more flat rounds, the overall changes from Q2 is not dramatic.
It continues to be highly dependent on company, stage, and location. At the early stages, raising the first $2m tends to be straightforward in most geographies that have meaningful startup communities. At the same time, if you are a clearly successful growth company, there is a huge amount of capital available once you’ve reached a point of clear success (often after $20m – $40m has been raised). The stage in between – what used to be called a Series B or Series C – continues to be extremely hard to raise unless you are clearly on a very rapid growth trajectory.
So – for early stage companies (Pre-Seed, Seed, Series A), the terms tend to be clean and simple, and valuation is in a modest range that probably has a median around $5m. For growth companies (usually Series D or later), there are pretty clear market comparables based on growth rate, revenue, gross margin %, and type of company. For everything in between, good luck and be flexible.
The word unicorn was used about 1000 times more often in 2015. There is much less focus on a $1 billion private valuation (thankfully) as both entrepreneurs and VCs have again shifted much of their discussion to what needs to be done long-term to build a successful company. There’s a lot less whining about the public markets, although there continues to be many opinions as to whether going public is a good thing along with whether it’s smart or stupid to delay the decision as long as possible. I’ve already forgotten what the trendy things of 2015 were since AI, machine learning, bots, and autonomous cars are all the rage, although it’s almost 2017 so it’s time for something new. M&A activity on one hand seems very lively, although it’s less in everyone’s face. Most importantly from my frame of reference, the amount of activity at the early and seed stage seems to be extremely robust.
We make around ten new investments every year. We’ve made seven so far this year and have three more that are in process, so we are right on track. I expect we will make around ten new investments in 2017. Since we are early stage investors, it simply doesn’t matter if we are a short term bull or bear. We are long-term extremely optimistic about the opportunity to invest in and help build important, new, innovative technology companies.
It’s the same. There is a huge capital supply gap for companies that are in between early startups and companies that are successful growth companies. As a result, the “Series B” problem is simply calling out something that has always been around – it’s tough to get the mid-stages funded. Early is a lot sexier, exciting, and easier – you are selling your future vision. Late-stage is more straightforward to evaluate. Mid-stage is when you are now selling reality and are often too early to show that you will be a large, long term successful business.
Yoda was right – do or do not, there is no try. Decide to do it. Then do the work. If you want hints, my partner Jason and I wrote 200 pages of them in our book Venture Deals: Be Smarter Than Your Lawyer or Your Venture Capitalist* (*unless they are from Cooley…)
If so, how does that influence the venture market or your investment strategy? This is mostly impacting the later stages. In 2015, there was a huge influx of hedge fund, crossover, and private equity investors doing late stage rounds. Clearly the moonbeams the unicorns were riding attracted them. This vaporized at the end of the year and in Q1 as the public markets corrected. Private equity investors seemed to shift primarily to acquisitions of these companies rather than investing while large amounts of international capital suddenly showed up. For us, none of this really matters as it tends to be short term in nature driven by a variety of often conflicting forces. We try to keep our heads down and just help finance our companies continuously through all stages.
Well, there’s this thing called an election which hopefully will be over soon. In addition to creating some certainty about the dynamics in our government going forward, it’ll also result in a decrease of political advertising in all media, which I generally think will enhance my life although some adtech and media companies will be bummed out about it. Beyond that, I have no real clue about the macro.
My partner Lindel Eakman wrote a post a few days ago about his transition from Austin to Boulder and a really helpful one about how to work with him titled A Human User Interface….with lots of quirks. This prompted me to poke around for other content from the limited partner (LP) side of the LP/VC/entrepreneurship universe.
I think the first LP blogger was Chris Douvos who periodically puts up an instant classic post at Super LP. I fondly remember a meeting with Chris in NY at the end of the day when we were raising our first Foundry Group fund. I was tired and dragging a little from the fundraising, but Chris’ energy and enthusiasm around VC picked me back up in advance of dinner. He didn’t invest in our fund, but he made a strong impression on me.
OpenLP is a new site moderated by the gang at Sapphire Ventures that seems to be a collection of all the LP stuff floating around the web. They are also promoting the idea of an #openlp twitter hashtag. It does appear that they need to work on their SEO so they don’t get confused with Free Open Source Church Worship Presentation Software
The team at Notation Capital is doing a really good podcast with interviews with LPs. Sapphire Ventures is again in the mix as a sponsor and – no surprise – episode 3 is with Chris Douvos.
As I continued poking around, I found a few LP firms hosting blogs on their websites. I never find this as compelling as when an individual LP has their own blog, but it’s better than nothing. A few blogs I found include Top Tier Capital Partners, Weathergate, and Sapphire Ventures (on Medium).
I wish more LPs would blog to help VCs and entrepreneurs understand them better. If you know of any, please leave them in the comments.