What Brad Feld, VC at Foundry Group and Co-Founder of Techstars, Wants Early-Stage Entrepreneurs to Know
The other week, I got the chance to interview Brad Feld, VC at Foundry Group and Co-founder of Techstars. The interview came about at the same that he announced an exciting partnership and commitment to support the Grid110 South LA program. I got to ask him questions about the current state of the world, what founders should expect the next few months and any advice he has for startups that are considering fundraising.
Our conversation is summarized into bite-size topics, so you can read his advice on what is most applicable!
About Harmony vs. Balance
“I’m fundamentally an optimistic person; and, I think the next six months of our experience on this planet will be the hardest six months of our life-to-date (regarding Covid-19). It’s because of many things that you can anticipate: Summer is ending — we’re going to wander into flu season this fall, and respiratory diseases are going to complicate things. People are exhausted, and this current pattern is going to continue. I don’t think life will ever go back to what it looked like in February 2020 in many dimensions of our society.
There is a compelling theory that says that if your expectations are high, and you don’t meet them, your unhappiness is disproportionate vs. if your expectations are low and you exceed them. At this moment, there is a lot of external noise about “It has to get better, and we have to get back to normal.” But it’s going to be much harder to process when things collapse vs. if we approach it from the standpoint from acknowledging that the next few months will be a real challenge. Through this time, I am now using, and have been for a long time, focusing on achieving Harmony instead of Balance.
Having harmony in your life allows you to have sustainability over time, knowing that you’re going to have your ups and downs emotionally, psychologically, and physically.
If you live with this illusion that you can keep things in balance, you will fail.”
About Dealing With Anxiety and Stress
“I’m sure many of you are experiencing, this whether it’s with kids or with your family, or with your partner — things flare up a lot faster. It’s a lot easier to have artificial conflict or misunderstanding turn into real conflict. If it takes much energy to engage in a conflict, it also takes much energy to be more empathetic.
Another thing I found very helpful as well is to name your fear and say it out loud. Just name it to label it, and to acknowledge it. We have so many things that are causing us anxiety and stress. When I acknowledge that a certain thing is causing me anxiety in many ways, it makes it less powerful.
It’s a bit like when you see conflict instead of running away from it and moving towards it. If you move towards it as a leader in a business context, your chance of resolving it is much higher. If you walk away from it, it becomes more significant. So I leave you with the essential thing: Be kind to yourself while acknowledging the things that are causing you anxiety in your mind.”
About Fundraising — When is it a Good Time to Fundraise?
“It’s a tough question to answer in the absolute because it’s situation and company-specific. Generally, I believe the goal as an early-stage company should be to get the least amount of money that gets you to the next level of your business as an early-stage company. It is quite essential to understand the dynamics of what that means.
If you don’t need to raise any money and if you can bootstrap, that’s awesome. Your customers are the best way to get going and to test things. If you need to raise money, figure out what you think is the least amount that you need to get you to whatever the next level is. The nice thing is that you get to define both of those characters. You get to determine the next level, and you get to define the amount of money you need to get the next level, not anybody else.”
About Mistakes Early-Stage Founders Make
“One of the mistakes many early-stage entrepreneurs make is that they hear, “Oh, I need to raise a million bucks….I saw on Techcrunch that XYZ company raised 4 million dollars.” You feel this needs to raise more money, but that does not correlate with what you need to make progress. I started my first company when I was 19. I’ve repeatedly been hearing how hard it is to raise money for almost 35 years. Want to know something? It’s really hard to raise money.
It doesn’t matter what you read on Techcrunch; it doesn’t matter what you see; it’s hard to raise money. It’s hard to raise money from friends and family. It’s hard to raise money from Angels. It’s hard to raise money from VC’s. Remember that money is the thing that grows your business, not the thing that validates your business. Many successful businesses have not raised any money.”
I always have and continue to still, even though I’m a VC whose job is to give people money, emphasize that you can build businesses without needing to raise money.
About How Much Money You Should Raise
“You need to prove to get to a place where you’re selling products consistently that are generating a gross margin, that you can then use to invest in your business (it’s not just the revenue that’s meaningful, but pay attention to your gross margins). If you sell a retail product and 60% of that product you sell, you have to pay to the vendor of the product, you’re only getting 40% of that money to pay.
But if that 40% can be used for salaries and rent, and technologies — that’s a very different dynamic than if you’re building a web-based software product, where all you have to do is pay your AWS bill each month, and your gross margin is 90%. You have to know how your business economics work. The amount of money that you should raise is probably the amount of money that you need to give you 12 to 18 months of progress in the business.
Another question to ask yourself is: “How much money do I need to pay for the negative that I am creating as I’m scaling up?”
About Obsession vs. Passion
“Make sure that you are working on something that you believe you are put on planet earth to work on. I use the word obsession instead of the word passion in the context of this. A lot of people say: “Make sure you are passionate about what you are doing!” But honestly, passion is easy to fake. It’s almost impossible to fake obsession.
As somebody who has worked with a lot of different founders over the years, the ones who believe that their purpose on this planet is to build this company are the ones at the early stages that have the most resilience.
Part of it comes from being excited about something and then things get challenging. It will be much harder to continue to climb the mountain of entrepreneurship with a backpack full of rocks. If you believe that you were put on this planet to climb the mountain, you will find a way to achieve it. It’s a different mindset, and it’s so important in the early stages because the company that you’re trying build will literally will itself into existence.
There is so much noise in the world that is not useful to you in building your business. Much of that noise is about what other people are doing and how they’re doing and why they’re doing it the way they are doing. A lot of it is the comparison of how you’re doing to somebody else. It’s not that they’re making the comparison to you, but that the comparison you’re making to them.”
There are endless people in the world who will not get what you’re doing. They will not believe in what you do, and they will not support what you are doing. As humans, we need to figure out how to view other people’s reactions as data without it impacting us and our energy levels.
About His New Book “The Startup Community Way”
“I wrote this book as a sequel to my previous book back in 2012 because I believe that people should be able to create startups anywhere in the world they wanted to. I think that any city with more than 100,000 people should be able to develop their startup community. The framework that I bring up in the book is the idea of a Complex Adaptive System. For example, the current COVID crisis is a complex system — the health part of it, the economic component, and the racial equity part of it. All of these factors are interacting with each other without a deterministic outcome.
Interestingly enough, the book talks about startup communities, but it applies to any complex system. Our goal with the book was not just to focus on startup communities but also to encourage people to think about things using a complex system approach and using the startup community as an example. In our current world, I’ve come to believe that the premise that I had for so long is evolving — which was that you had to have a physical place to build a startup community. While it’s still essential, geography is becoming less critical.
What’s becoming more important is building virtual startup communities that cut across geographies and figuring out how to deal with non-urban or rural startup communities.”
