Brad Feld

Tag: Venture Capital

There have been many different approaches to ranking VC Firms over the years I’ve been an entrepreneur and a VC. Each approach I’ve seen has issues. Most are easily gamed or have statistical bias issues.

I got the following note from Roy Bahat at Bloomberg Beta a while ago about a new approach called Founder’s Choice.

We and a few other firms sponsored a “founders choice” version of the Midas List, with a legit (IMHO) rating methodology, built by two Penn students. No vitriol possible (unlike The Funded, etc.). We’ve wanted this to exist for a long time — NPS of us as a firm is too forgiving a metric, everyone scores well.

My first question was:

How are they dealing with sampling bias on this one? For example, we send to all our founders and say “please fill this out and give us high scores.” Mostly just curious on methodology.

Roy had a thoughtful answer that made me a believer after a few more questions.

You are literally the only one (and I’m relieved someone did) to ask on sampling bias. For context, the general way it works is founders auth with LinkedIn and then the product tosses away their identity (or, more accurately, only keeps a hash and disconnects it from their ratings). Then the founders get asked for pairwise comparisons of only the VC firms who have backed them (so this is about who founders like as investors, not who has sour grapes from a pitch). How this addresses, to a degree, sampling bias:

1. Dampens outliers: because it only asks for pairwise comparisons between firms (like an ELO rating in chess, if you’re familiar), one very un/happy respondent can only affect so much, and same for a sample. (As opposed to giving one firm a 10 and everyone else 2’s or something.)

2. At the same time, it forces comparisons. A firm can ask founders to rate them highly, but ultimately founders have to choose who gave them more value. Can’t rate everyone a 10.

3. This is why we’re looking for as broad participation as possible, because the sampling bias will actually probably most show up in which firms even have enough ratings to count. (Like ELO in chess, more ratings doesn’t necessarily help you — you get more “points” if a founder rates you as better than a highly-rated firm. More ratings can just as easily hurt as help.)

If you are a founder, go spend five minutes and anonymously rank your VCs on Founder’s Choice.


Connie Loizos is one of the long-time tech industry writers who I respect. I don’t respond to many interview requests these days, but I’ll always talk to her.

She has a good article today in TechCrunch titled Embrace the down round (it’s going to be okay, maybe). I like the quote she pulled out of me in our conversation.

[Brad Feld] says his “strong belief” that “just doing a clean resetting — at whatever the valuation so that everybody is aligned and dealing with reality —  is much, much better for a company.”

Now, I’m not encouraging anyone to do a down round if unnecessary., especially when many existing investors are currently willing to add on additional dollars at the most recent valuation. If you can do this cleanly, take the money.

Rather, when you have a choice between a financing at a lower valuation and a financing with all kinds of crazy structure to try to maintain a previous valuation, negotiate the best price you can but do a clean financing with no structure.

If you don’t know what I mean by structure, they are terms like:

  • Multiple liquidation preferences (you’ll start seeing lots of 2x and 3x on new money)
  • Participating preferred on new money
  • Weird ratchets (other than the typical weighted average), including full ratchets, on next round financings
  • Annual preferred return, including PIK and cash pay on new money
  • Blocks on all kinds of things that a new investor should not have blocking rights on

… and a bunch of other things.

Sometimes, given your syndicate configuration, you have no choice but to take structure in a new round. But if you can do a clean financing at a lower price, I always think that’s a better option for everyone (founders, employees, and existing investors.)

While my optimistic personality hopes this downturn/adjustment is short-lived, I fear it won’t be. So, as an entrepreneur, I encourage you to deal with reality.


Today’s book recommendation, for anyone interested in venture capital, is The Business of Venture Capital: The Art of Raising a Fund, Structuring Investments, Portfolio Management, and Exits by Mahendra Ramsinghani.

A decade ago, I got a cold email from Mahendra. He was investing in Detroit and eager to write a book about the art and science of venture capital. At the time, Jason and I were just finishing up the 1st edition of Venture Deals: Be Smarter Than Your Lawyer And Venture Capitalist and I was enthusiastic about helping anyone else working on a book that demystified venture capital investing.

I immediately introduced Mahendra to a bunch of Foundry Group LPs, partners, and entrepreneurs. He made progress quickly, and I fondly remember the first edition with the green cover.

Mahendra and I kept in touch. During a book tour for the 1st Edition of Venture Deals, Jason and I visited the University of Michigan. Mahendra cornered me in a hallway and pitched the idea of doing a book together around how a board of directors works at a startup. A few months later, we started working on it.

Startup Boards: Getting the Most Out of Your Board of Directors was released in 2014. Soon thereafter, Mahendra started to work on the second edition of the Business of Venture Capital. Given our recent collaboration, he asked me to write the foreword for the second edition, which was an easy yes for me. The 2nd edition had a blue sky cover and was also released in 2014. In the foreword, I wrote that “VC is a business where each investment teaches you something new – the book provides only a basic framework but each one has the ability to carve a different path in this universe.”

Mahendra recently came out with the 3rd edition of The Business of Venture Capital: The Art of Raising a Fund, Structuring Investments, Portfolio Management, and Exits. It’s now 500 pages and includes much-needed frameworks for culture, diversity, and values that are timely topics when we look at the challenges we have seen in venture capital around gender, race, diversity, and sexual abuse. This time the foreword is from Scott Kapor of A16Z who in 2019 wrote an excellent book on venture capital titled Secrets of Sand Hill Road: Venture Capital and How to Get It.

 

If you have suggestions for the fourth edition, please reach Mahendra at mr “at’ secureoctane.com.


I had a really nice week off the grid. More on that in another post.

I woke up this morning with a very long run in mind. The air quality in Longmont is awful because of the forest fires and, after checking the weather on my iPhone and seeing an air quality index of 138, I decided that a run wasn’t going to happen.

So, I ate breakfast with Amy and read the Sunday New York Times.

That was an error. Breakfast was great, but the NY Times was awful. Well, the paper wasn’t awful, but it made me feel awful. I hadn’t read any news all week, including any tech news, and 15 minutes of turning the pages made me anxious.

I think that’s the last time I’m going to read the NY Times.

I needed a palate cleanser. I saw on Slack that my partner Moody released episodes two and three of his Venture Kills vlog. Since I’d finished off The Last Dance during the week, I figured watching Moody might work to shift my mood.

I should have just watched this and skipped the NYT. I feel mostly back to normal now.


My partner Chris Moody decided to be a vlogger and has started a new video series. I suggested he hang out on TikTok but he prefers trying to get famous on Youtube.

So far he has 57 Views but 102 Subscribers. I find that fascinating.

Enjoy!


I recently recorded two free courses with LinkedIn Learning. They are each under an hour long and broken up into a bunch of small segments.

The first one is on Raising Venture Capital and is based on content from the book Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist that I wrote with Jason Mendelson. Amy tells me that this is her favorite shirt from my current rotation of Robert Graham shirts.

Raising venture capital from Brad Feld on Raising Capital by Brad Feld

The second one is on Validating Your Startup Idea which based on the book Startup Opportunities: Know When to Quit Your Day Job which I wrote with Sean Wise. Same recording studio (an Airbnb in Rancho Santa Fe) but a different shirt.

Evaluating your startup idea from Brad Feld on Validating Your Startup Idea by Brad Feld

The team I worked with at LinkedIn Learning was dynamite. They reached out to me about this and I was happy to give them a day of my time to see how it worked. My goal was that in the worst case I’d give them some useful content to do something with.


There are some blog posts that every entrepreneur should read.

Hunter Walk at Homebrew recently wrote one of them.

It’s titled Oh Shit, Your VC Just Quit Her Fund! What a Good CEO Should Do Next.

He covers three cases:

  • Bullish aka You Are Absolutely Killing It
  • Written You Off
  • Too Early To Tell – Some Good Stuff, Some Challenges But A Lot To Do

The real gold in this post is in the Too Early To Tell category. Hunter has a great lead in:

Here’s where I think founders and cap tables should be more proactive. The default is to let the firm assign another person at the fund (hopefully a GP) and then just keep working on the plan of record as if nothing changed. My experience suggests this will be neutral to negative long term, unless you end up in the “killing it” camp by next fundraise.”

Hunter’s notion that founders and the CEO should be proactive here is right on the money.

At Foundry, we periodically load balance our boards. This is a different phenomenon than the one Hunter is talking about, although we’ve learned to be clearer about what we are doing when we are doing it. I recall a personal low point when a founder/CEO who is a close friend asked to go for a walk and started the conversation with “You could have told me that you were leaving my board in a more graceful way than a one paragraph email.” Very true.

The lesson once again is things change, communicate clearly, and be proactive.


My partner Seth Levine has written several posts over the years on the topic of how to get a job in venture capital.

His 2019 post, titled creatively How To Get A Job In Venture Capital is excellent. Things have changed in the last decade since his 2008 post titled How to get a job in venture capital (revisited), which was an update from his 2005 post titled How to become a venture capitalist. All three posts are worth reading.

Following is a teaser for each of the key points Seth makes.

  • Take the long view. Despite the relative increase in the number of venture firms, there still aren’t all that many jobs in venture.
  • Get involved in your community. Venture and entrepreneurship aren’t spectator sports and are best experienced from within.
  • Get involved in companies. There are lots of great ways to help out companies directly. 
  • Network. Most people are terrible networkers. They treat networking transactionally and they are always looking to take from their networks vs. give to them (good networkers adhere to the #givefirst mentality)
  • Engage. Lots of venture capitalists put out a lot of content and it has never been easier to engage with the venture community. Comment on blog and Medium posts, follow VCs that you respect on Medium and Twitter, send them ideas and thoughts on what they’re writing about and investing in. Stay active and top of mind. 
  • Look for any way in. Your first job in venture is typically the hardest to get.
  • Work for a startup or start one of your own. This was true 10 years ago and it remains true today.
  • Invest if you can. With investment becoming slightly less regulated there are opportunities to put even modest amounts of money to work through platforms like AngelList and others. If you have the ability, it’s not a bad way to show an interest in investing and give you something to talk about in your networking. 
  • Persevere. Getting a job in venture is hard and can take a while. Likely it won’t happen. Keep the long game in mind, have fun while you’re going through the process and keep at it.

If you are interested in a job in venture capital, go read Seth’s posts How To Get A Job In Venture Capital (2019). And How to get a job in venture capital (revisited – 2008). And How to become a venture capitalist (2005).


I’m a recent conversation with Eric Paley, he gave me an amazingly wonderful analogy for how the career of a VC unfolds. He said:

“Being a VC is like taking a walk from Boston to San Francisco”

I’d never heard that before so I said: “tell me more.” He went on an awesome ramble, which I’ll try to capture below.

You start out on a sunny day in Boston. You put on your new, clean walking shoes. It’s just walking. It’s fun, fresh, and exciting. It’s a new experience, with lots of hopes and expectations in front of you. You get tons of support and encouragement from all of your friends. You meet plenty of new and interesting people. It’s just walking.

After a few days, you feel like you are getting into a rhythm. You feel you are good at this. It’s still easy and exciting, but now you know what to expect each day.

At some point, you find yourself in the middle of Ohio. It’s raining. Your shoes are worn out. You’ve got blisters and a sore ankle. Your backpack smells – a lot. While it’s still just walking, it’s not much fun anymore. But you grind through it, buoyed by the occasional sunny day, even though it’s now cold outside.

By the time you get to Chicago, you can’t remember why you are walking San Francisco. But you keep walking.

I’ve been doing this for 25 years. While it’s just walking, I’ve crisscrossed the country a bunch of times. And I keep walking.