February 22, 2018

Angel and Venture Investing, Part Three: 

Top Mistakes Companies Should Avoid When Pitching for Capital

   (c) Trusted Counsel (Ashley) LLC. All Rights Reserved.

(c) Trusted Counsel (Ashley) LLC. All Rights Reserved.

Speaker 1:                           It's time for In Process, conversations about business in the 21st century with Evelyn Ashley and John Monahon presented by Trusted Counsel, and corporate and intellectual property law firm. For more information, visit trusted-counsel.com. And now, with In Process, here are Evelyn Ashley and John Monahon.

John:                                  Hello, and welcome to In Process, conversations about business in the 21st century presented by Trusted Counsel, a corporate and intellectual property law firm. I'm John Monahon.

Evelyn:                               I'm Evelyn Ashley.

Mike Siavage:                    And I'm Mike Siavage.

John:                                And we are all partners with Trusted Counsel.

Evelyn:                             So here we are, a topic that we often discuss with clients, and we're really excited to have this gentleman join us today. He's someone that we have used his books in the past with both educating clients and even lawyers that do not understand venture deals. So we're delighted to actually have Brad Feld with us today.

John:                               The book that he wrote with Jason Mendelson “Venture Deals” is really a great practical guide on venture capital deals. It really gives the ins and outs, the negotiations, the things that actually we look at a lot too. When I was looking at it, I was like, "Wow, he really hit all the high points." And then of course we also have Mike Siavage here with us again today also who helped us with term sheets previously, and of course is one of our partners. So we have a full house.

Evelyn:                            We do. And actually the thing that Brad and Mike have in common is they both actually live in Colorado.

John:                              So our guest today is Brad Feld. Brad is an American entrepreneur, author, blogger, and venture capitalist at Foundry Group in Boulder, Colorado. A firm he started with partner Seth Levine, Ryan McIntyre, and Jason Mendelson. Feld has been an early stage investor and entrepreneur for over 25 years. He began financing technology startups in the early 1990s first as an angel, and later as an institutional investor. He was an early investor in Zynga, MakerBot, and Fitbit. Great investments. Prior to co-founding Foundry Group, Brad was the co-founder of Mobius Venture Capital. Brad also dedicated himself to the education of entrepreneurs. He was the founder of Intensity Ventures, a company that helped launch and operate software companies. Most recently, he has directed his knowledge and intent to make entrepreneurs smarter by authoring and coauthoring several books about entrepreneurship, venture capital, and startups. His most recent book is his third edition of “Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist”. Brad, welcome to the show.

Brad Feld:                      Thanks for having me.

Evelyn:                           So Brad, word on the street in Atlanta, well because you posted it on your blog, is that you attended the Atlanta Venture Forum last week. So how was that?

Brad Feld:                      It was great. I spent two days in Atlanta. The first day was for the Techstars Atlanta Demo Day, and then the second I did an end of day fireside chat with Michael Cohn, who's the managing director of that program as part of the Venture Atlanta program. And I thought the program was extremely well done, very large audience, super engaged set of speakers. One of the key notes the first day was from Scott Dorsey, who's a partner at a firm called High Alpha, but previously was the founder and CEO of ExactTarget. Somebody I've known for a while. And I thought Scott just totally rocked it in terms of his advice, both his own story of ExactTarget and High Alpha, but then his own advice especially to founders of SAS companies about how to build with scale a large business.

Evelyn:                             Cool.

Brad Feld:                        So it was great energy, I met a lot of people and had a lot of fun.

Evelyn:                            So did you see any interesting companies there, or technologies?

Brad Feld:                       Yeah. I saw a bunch of interesting companies. The Techstars Demo Day was highlighting 10 companies that just went through the Techstars Atlanta program.

Evelyn:                           Mm-hmm (affirmative).

Brad Feld:                      There were a number of them that are pretty cool. The couple that stood out for me personally just in terms of what they were doing was a company called Fraudmarc, which is helping companies make their outbound emails secure. It's a particularly thorny problem right now with all the security breaches.

Evelyn:                           Yup.

Brad Feld:                      And then a company called 2ULaundy, which is a laundry services marketplace that you can basically just click a button and have them come by your house and pick up your laundry, do it, return it, fold it. And super clever approach that they've taken both from a product perspective and a branding perspective. And a number of others. So it was just sort of good soaking in a bunch of the early stage stuff that was going on in Atlanta, as well as some of the more mature companies that are starting to merge.

Evelyn:                          So have you spent time here before?

Brad Feld:                     I haven't in a while in any structured way. We at Foundry Group, my partners and I don't have any investments specifically in Atlanta. We've got some in the southeast US with investors in a company in Charlotte called AvidXchange. It's a very large business now. But we haven't done anything in Atlanta per se at Foundry. Techstars had been, which is one of the firms that I co-founded and we're very involved it, Techstars had ... This is their second year of Techstars Atlanta that they've done with Cox, which is their corporate partner, has been a pretty awesome partner in this endeavor. Prior to that though, I really hadn't been to Atlanta since late '90s from a business perspective. In the late '90s, I was the co-chair of a company called Interliant, and we bought a company in Atlanta that had a large data center. So I was in Atlanta probably about every two months for a couple of years during that period of time.

Evelyn:                           Okay. Okay.

John:                              What would you say the reputation of Atlanta is, or the thought of Atlanta is among VCs? Is there some perception of the city itself and its scent and its companies?

Brad Feld:                       Well, I think it's really important to segment the answer a bit, because I say over and over again that it's really important for entrepreneurs not to think of VCs as a singular archetype. And in fact, I like to say think of VCs as Dungeons and Dragons characters for those of you that are old enough to know that. And if you're not old, Magic: The Gathering characters maybe or even Lord of the Rings characters. But you've got elves, and you've got wizards, but you've also got dwarves, and you've got orcs, and you've got trolls. And individual VCs are all different, and firms are collections of them. And so to say what is the VC community think of Atlanta I think is an impossible question to answer, or the answer to the question is not meaningful.

                                     There are a number, increasing number of venture firms like ours that invest nationally, right? There's still a number of venture firms that believe you either have to invest locally, or the only place to invest is in underlying a geography and pick one or two or three, right? The only place to invest is in Silicon Valley. The only place to invest is in New York. My premise is that great companies can be build anywhere in the world. And in fact, really vibrant startup communities not only can be, but have to be built in all the major cities all around the world. Another book that I wrote in 2012 was a book called “Startup Communities”, and in that book I made the strong assertion that to have a vibrant city long term, you had to have a robust and healthy startup community.

                                    And my view, so not VC general view, but my view of the Atlanta startup community and the activity around entrepreneurship in Atlanta is that it is very vibrant today. It's been accelerating nicely over the last four or five years, all you have to do is sit in a room for one day with 1,000 people. I met I don't know, 100 plus different VCs from 100 plus different firms, some local, some not, all of them investing in the Atlanta area, a bunch of them being seed and early stage investors, but plenty that were mid and growth investors. So my sense is that it's very vibrant right now, and you're on a very strong upward climb.

Evelyn:                          It seems to be ... I think we all ... Those of us that have been in this community since the early '90s do see it as it's had its ups and its downs, and the good part is that we actually are developing some serial entrepreneurs now that are finally coming in and making investments in ... It's kind of building that organic community that support the startups because they know that when they were going through it, there was a lot less cash available for them. So that's a really positive experience.

Brad Feld:                      Yup.

Evelyn:                          Yup. So Brad, let's talk about the Foundry Group a little bit. Tell us what stage fund the Foundry Group is in, and what are your profile client's investments?

Brad Feld:                      Sure. We're primarily an early stage investor. We don't have to be the first money in a company, but if a company had raised more than five million bucks, it's generally too late for us to engage. There's an exception which I'll talk about in a minute. We invest all across the US and Canada. We include Canada in the universe of companies that we'll invest in. We have a set of themes, which if anyone is interested then they can go to foundrygroup.com/themes to see them. But that's how we define the types of companies we ... Or the types of areas that we like to invest in.

Evelyn:                           But it tends to be in the technology arena, isn't that correct?

Brad Feld:                      Yeah, they're all software internet hardware related companies. We have a lot of companies that are either consumer electronic businesses, so for example Sphero, which makes a bunch of different consumer robots like all the Star Wars characters. Find R2D2 and BB-8. We have another consumer electronics company called littleBits that makes electronic construction kits. We have a lot of companies in a theme we call protocol, which are companies built around technology protocols. We have another them we call glue, which are companies that build software that connects machines to machines. We have a them we call human computer interaction, which is around the premise of the way that humans and computers interact.

                                     We have about 90 or so active companies in our existing portfolio. We've raised an early stage fund every three years starting in 2007, a 225 million dollar fund each year. So we've got a billion plus of assets under management at that stage. And then we also invest at the growth stages in our existing portfolio companies. Every now and then we invest outside our portfolio in a company that in a growth stage. Avid would be an example of that, the company I mentioned earlier in Charlotte.

Evelyn:                          Mm-hmm (affirmative).

Brad Feld:                     And then we also in our most recent fund, which we call Foundry Group Next, which was a 500 million dollar fund, 25% of it we invest in other early stage venture funds. So we now have 15 or so other almost entirely seed based venture funds that were traditional LPs, and have invested in their funds and helped support them as an LP.

Evelyn:                          Wow. Really interesting. That's pretty unusual, isn't it? Or is that something that is becoming more common now?

Brad Feld:                     It's very unusual. I think we're the first venture fund to do that. There is a category of investor called a fund of funds, which are LPs that raise funds from various sources, and then invest in other VC firms. But this is very different than a fund of funds strategy because the people who execute those are rarely venture capitalists. They're usually a different category of player in the mix.

Evelyn:                         Their investments.

Brad Feld:                    And in this case, it's not a separate fund. It's 25% of a fund that we're investing in directly in companies, and then 25% of it is invested in this early stage fund.

John:                           Welcome back to In Process. We are here with Brad Feld, venture capitalist at Foundry Group, and author of “Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist”. Brad, when we left off, we were talking about your fund and your investing style. Can you continue to elaborate on that? I guess what is it that you're looking for in companies particularly?

Brad Feld:                    Well, our strategy is one where our view is that we don't have to invest in every great company. Instead, we need to pick 10 companies a year that we invest in that we think could be great companies. Now, we're investing early, and I've yet to meet an early stage investor who said, "You know, I think this company is piece of garbage, but I'm going to invest in it anyway," right? Whenever you make that first investment, you have to as an investor believe that the company could be incredibly successful. And of course at least more than 50% of the companies of VC invest intend to fail, and as a result, there is some dissonance, intellectual dissonance around that because you have to go in with this sense of conviction.

                                   So for us, our goal generally speaking is to say no in 60 seconds to everything. And the way we do that is that if a company doesn't fit in our themes, or a company had raised more than five million dollars, or a company is outside the US, we pass immediately. If it goes through that filter, and it could be an amazing entrepreneur that had a multi billion dollar outcome in their previous company, but we're pretty focused on those areas. Again, with the idea that we only have to find 10 companies a year to invest in that we think could be amazing businesses.

                                   Assuming that a company gets through that filter, we then focus really on three things. The first is whether or not we have an affinity for the product. We don't have to be daily users of the product, but if we don't have an affinity for the product, again we pass immediately. And the reason for that is that we've invested in so many companies that we just don't care about over the years, we just don't want to do it anymore. All my partners and I work on everything together, and we just decided that any company we invest in is one that we have to actually care about what the founders are working on.

                                   The second is whether or not the founders are obsessed about what their working on, both the product and the company. And we use the word obsessed very deliberately. In the world of entrepreneurship, you hear the word passion all the time, and my view is that it's a terrible word to apply to startups because it's incredibly easy to fake passion. Extroverts, people who are enthusiastic about what they're doing, they can be incredibly passionate. And if you use that as your filter, you can get sort of sucked in by that enthusiasm, whereas obsession can show up in lots of different ways. And when you're looking for obsession, you'll find it if it's there. And if it's not there, it's generally pretty obvious.

                                   And then the last characteristic we're looking for are founders who want us as investors as much as we want to invest in the company. So there have been plenty of companies along the way where we were really interested in being investors, but the entrepreneurs for some reason, whatever the reason was, chose somebody else instead of us, or weren't enthusiastic about us. And that's totally fine, but that's a key criteria for us. Now in that, I don't think you probably heard anything about market size, or-

Evelyn:                         Management team. Yup.

Brad Feld:                    Management team etc., right? Because if you look at ... Those are all givens for us, right? We know the market opportunities for the types of things we invest in. Generally the market size is either undefined or infinite at the very early stages of a company. So we can spend a lot of time analyzing that stuff, but it's kind of pointless. Same thing with financial models or business models. Whatever you think the business is going to turn into, you don't have to convince me of the business model because for the themes that we invest in, we generally have deep expertise on those business models, and we understand that the only thing that you're going to be able to predict is a founder with any accuracy is that your first year model and your forward year models are going to be wrong. So spending too much time analyzing that data, and it needs to be rational and a person should have the ability to talk about it. Teams, we put the team dynamic very horizontally, right? Do they want to work with us, and are they obsessed about what they're doing? And those two things allow us to have a different kind of way of looking at the people involved. I don't really care what your educational background is. I don't care what your company history is. I don't care whether you're a first time entrepreneur or a seventh time entrepreneur. You can have founding teams that have all of those characteristics, so it's less about that, and it's much more about again, is the thing you're working on, were you put on this planet to work on that thing? And do you want us to be involved as much as we want to be involved?

Evelyn:                        Interesting. So given that kind of profile and what you're looking for when you actually do make an investment, just how hands on would you say you and your partners actually are? It sounds like once you make the commitment, you're probably all in.

Brad Feld:                    Yeah. I think all in is a good way of saying it. A couple of things that are useful to note. One as I did mention earlier, we all work on everything together, so in our partnership, there aren't deals that Brad did, and deals that Seth did, and deals that Ryan did. They're deals that Foundry Group did. And we actually have a thing we call load balancing where we'll shift board seats back and forth at various times just based on how busy somebody is. And if anybody in our audience is technical, they'll recognize load balancing is what servers do to kind of load balance traffic.

Evelyn:                          Mm-hmm (affirmative).

Brad Feld:                     In addition, we almost always take board seats on the companies that we're investors in, but we're very conscious that we're board members. And our view is we only want to make one operating decision about the company ever, which is whether or not we support the CEO. If we support the CEO, we work for her.

Evelyn:                          Okay.

Brad Feld:                     And every CEO needs something different. So the idea that each CEO needs a certain tempo and rhythm of interaction with me is illogical. So we try to conform our interaction dynamics with the CEO and the leadership team based on what the CEO wants and needs. And in some cases the CEOs, especially first time CEOs, don't have a frame of reference for that, so we're very ... We engage in that conversation, but it's still back to what the CEO needs. If we don't for some reason support the CEO, it's our job to do something about that, which does not mean fire here. What it means is that the first step is to acknowledge that we're now at a place where we're not supporting the CEO, and to put constructive energy in trying to get back to a good place, which doesn't always work.

Evelyn:                          Right.

Brad Feld:                     There are times where we have to fire a CEO and change a CEO, but our view is we don't want to do that. And I use the CEO as a proxy by the way for founders because we work for the CEO, but we think of the founders in that same special and unique way.

Evelyn:                         Mm-hmm (affirmative). Right.

Brad Feld:                    We have many companies as they grow and evolve, founders leave and they go on to the next thing. Sometimes they leave ... Hopefully if they decide to leave, they leave on good terms. Sometimes they don't. Sometimes the founder was the CEO and ends up in a different role. All of those things are part of ... an important part of growing and building companies and how they evolve, but doing it in a way that has, maybe to be cliché about it, a lot of emotional IQ. Real engagement and real involvement with the people, and a view that you're working with each other as partners rather than antagonists is an important part of how we think about working with companies.

Evelyn:                        Which probably you had some hurdles to overcome sometimes on that. There's that kind of bad image just like lawyers. We're all sharks. Venture capitalists have that kind of trait that carries with them too. So it can be difficult sometimes.

Brad Feld:                   I think this is important to go back to the thing I said earlier about VCs and Dungeons and Dragons characters, right? By the way, some ... What's the cliché, some of my best friends are lawyers, right? It's more an issue of if you paint everyone with the same brush, you're ultimately going to have a pretty narrow view of the world, and your chance of developing and evolving great and powerful relationships can be limited. If you view each person as an individual, and each context as unique-

Evelyn:                       So Brad, we're going to take a quick break, and we'll be right back.

Mike Siavage:             Brad, you and your team review a lot of business plans and see a lot of pitches for capital. Let's look at the negative side. We like to stay positive when we do that, but what do you think the top five mistakes that business founders and teams make in that area?

Brad Feld:                 I think the first and probably most profound is not to do any work in advance of approaching a VC, in particular us. We're very easy to find out what we like, and what we're interested in, and how we approach things. My partners and I all write a lot, we're very visible, we've got a website that has all of our companies that we've invested and listed on it. If you do a Google search for Brad Feld, unfortunately you'll find way too much information that you'll have to wade through. But it's just there's just a lot of information out there. It amazes me to this day the number of people who spend zero minutes doing any research in advance once they've got somebody's email. So that's the big number one. Like actually spend a little time understanding what the person you're approaching is interested in. And by the way, you should use that to filter out a lot of people because every time somebody sends me a pitch for a biotech company, or a natural foods company, or a plain tech company, they're wasting their time. They're wasting my time, but they're also wasting their time. So that upfront work is important.

                                  The second is while substance matters, and I'll get to that in a second, form matters also. And the issue around form is it's very easy to either underdo it or overdo it. On the underdo side, there's lots and lots of stuff that comes across, and it's very ... It's sort of very amateurish looking, or unprofessionally, or not well done. And it's not just the way it looks, but it's the way it's written and the way it's presented. The other end of the spectrum is true also. When I get a FedEx of a pitch book from someone that I've never met before that looked like it cost $10 to print, my first reaction is, "Why in the world are they doing this? They don't have any idea whether I'm interested or not."

                                  And there's probably some sales mens salesmanship book somewhere that says, "The best way to get somebody's attention is to FedEx them something that cost you $10 to print. But not terribly effective. So it's get the right kind of form. Have it be professional, but not overdo it. The next is substance, which is I can't tell you the number of times I'm on the receiving end of something when I read through it, and by the time I get to the third paragraph, I have no idea what I'm reading. If I'm looking at a pitch, I'm into slide 10 or 11 or 12 on a PDF or a PowerPoint, I still don't know what the company does and what their product is.

                                  Recognize that the person on the receiving end of this is quickly looking at to whether they want to engage or not. And this is where the substance comes in. If you're giving a pitch verbally, we have many, many experiences with this through the Techstars Demo Days that I think about 1,500 companies or so have gone through Techstars since we started a decade ago. My general view is you got about 60 seconds to do two things: one is tell me what you do, and tell me why I should care. And if you don't have me after 60 seconds, then you're not going to get me. And I would say that's true of executive summaries, of emails, of PowerPoints, it's like start with the punch line. Don't bury it through something that I have to wade my way through.

                                  Another one which is mind numbing is don't make it hard for me to get an understanding of what you do. The email that comes to me that's very high level and not very descriptive that's looking for interest from me, and then at the end it says, "If you're willing to sign the NDA that's attached, I'll send you more information." My response to that email is to just hit archive and move on. So these kinds of things from an entrepreneur's perspective is be thoughtful. Make sure that what you're doing ... Understand the person you're trying to connect with, do the research in advance, make sure that what you're doing is good form but also substantive making it easy for that person to engage with you.

                                  And then the last is maybe the most important is follow-up. It's hilarious to me when I have ... I use Gmail, and Gmail threads emails. And this is a specific thing that happens on a regular basis is I'll get an email from someone where the previous email interaction with them was six months earlier. And they say, "Sorry it took me so long [crosstalk 00:28:33]." Right? And I look at the email, the previous email was from me. And it said, "Hey, can you tell me a little bit more about your this or that?" Right? And so it's almost-

Evelyn:                       Had to think about it, Brad. I had to think it out.

Brad Feld:                   I get it. I get it. And look, everybody has their own pressures, but if you're viewing the engagement with a person who you're going to ask for financing and functional support for your business, again, make is easy through the whole process to engage and build credibility along the way rather than this thing where I look at it and say, "Well, it took you six months to respond to my email. I'm not sure that-"

Evelyn:                        I'm going to bother to respond to you.

Brad Feld:                   I'm not sure that that's the kind of person I'm going to work with.

Evelyn:                       Yeah, exactly. It's funny, I saw an article in the New York Times this past weekend, and I can't recall who actually made this statement, but he was talking about kind of young people, and seeing business plan pitches, and how everyone comes in, they want capital, and they have this attitude of, "I'm a very, very smart person." And he made the point of, "Yeah, you know what? Smart people are actually a dime a dozen. It's the ones that are willing to work hard and think about what they're doing that make me interested now." So I mean, I think that in a lot of ways, there's a progression that's going on there because I think we've all seen that there is work ethics that are changing and everything. But I thought that was a really interesting comment from him.

Mike Siavage:              Brad, in your book on Venture Deals, you point out that a company needs professional advisor to understand venture investing. When representing funds, we've definitely experienced the lawyer on the other side who trashes the deal as a result of the lack of sophistication. Talk to us about your thoughts on that.

Brad Feld:                   Yeah. It's pretty simple. If you're a founder and you're going to go out for any kind of capital whether it's from a VC, or whether it's from angels, or even friends and family, finding a lawyer that knows how to do these types of deals is incredibly important. Your cousin who's a divorce lawyer is in many ways probably going to hinder you a lot more than help you. And you are doing a transaction that the other party at the other side is going to take seriously, and if you don't take it seriously, then you probably get what you deserve in the end in terms of whatever the dynamics are.

                                  Now, there's a nuance here because a lot of founders will say, "Wow, that's all well and good, but I can't afford an expensive lawyer. I'm a startup. I have no money. The reason I'm raising money is because I have no money." And the best startup lawyers will do creative things, right? They'll defer their bills for that first financing, or they've gotten very, very effective at doing very low cost first financings. Some lawyers, I don't know if y'all do this or not, some lawyers will invest a little bit of money in the company, or will take some equity for their service on the first financing.

                                  So I encourage entrepreneurs to find great lawyers who will support them as an advocate and help educate them. But at the same time, I think it's really important for the founders to recognize that they're still the ones that are doing the deal. They are still the ones that are ultimately responsible for it, which is one of the reasons that Jason and I wrote the book is that we just felt that there were so many founders that we were dealing with that really had no understanding of the terms, that the information was asymmetric, and that as investors we'd done lots of deals, so we understood it. The lawyers might have understood it, but the founders didn't.

Evelyn:                        Mm-hmm (affirmative). Exactly.

Brad Feld:                   And it was worth a small investment of the founder's time in the form of venture deals or others to get up to speed, and actually have an understanding of what mattered and what didn't.

Evelyn:                       I think it's really interesting because a lot of the entrepreneurs that we deal with basically abdicate to us. I mean, they basically just hand it off. They don't read the documents, if we try to walk them through it, it's like they have ADD. And it's like, "Okay, I trust you." And it's like, "Well, I'm not actually going to be in there running it. You might want to be curious about this, and understand deeply." But I think there's an inclination of, "I'm so busy that I just can't."

Brad Feld:                    Well, I think it's foolish ... I think it's foolish on the part of a founder to behave that way. I think at the other end of the spectrum, if the founder reads every single page of every single document as part of a financing that's equally foolish-

Evelyn:                        It'd drive them insane.

Brad Feld:                   That's right. It's trust your lawyers to get all that stuff right, but make sure that you're understanding the nuances of things and the trade offs. And this is a ... I talk about smart people that don't do smart things. If you're a smart person, but you don't know everything.

Evelyn:                        Mm-hmm (affirmative).

Brad Feld:                    And when you don't know everything and you're smart, a really simple thing to do is say, "I don't understand that. Can you explain it to me?"

Evelyn:                        Mm-hmm (affirmative). Absolutely.

Brad Feld:                   And if you have somebody who is capable that you're working with, they should be able to do it efficiently, and do it in a way that you understand it. And that should then allow you as a founder to make and informed decision, rather than you saying, "I don't really care. You make the decisions for me." And that rarely ends well.


John:                          Welcome back to In Process. We are here with Brad Feld, venture capitalist at Foundry Group, and author of Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist. Brad, if an entrepreneur is able to get your attention, let's say they haven't made your top five mistakes, they get your attention, they get a meeting, what's the expectation when they go into that meeting? How should they prepare, what should they be expecting?

Brad Feld:                   I'd say a couple things. And again, go back to this notion that VCs are like Dungeons and Dragons characters. My answer to what they're expecting is probably ... Or what I would be expecting is very different than all the other VCs. Like one of the things a founder should do is talk to other founders who have worked with that investor and do some work. Find out what I like, find out how I like the meetings to roll, don't be bashful about asking me about what my expectations for the meeting are. I do it in an efficient way, but in the guise of I'm being prepared.

                                  And I would say in general for me, I'm not really that interested in sitting in front of a computer and a screen and having somebody page through a PowerPoint presentation. I think most people that I meet with can assume that if they send me something in advance, I've looked at it. I want to sit down and talk. I want to talk about what you're doing, why you're doing it, I want to understand what the issues are, what you're concerned about, what you're excited about. I want to get to know a little bit about you, and I want to give you a chance to get to know me and the way I think. So I view that meeting for me when I sit down and start spending time with somebody, and by the way oftentimes it's over video, video conference verses face to face, I want it to be a conversation, not a presentation.

Evelyn:                       So is it ... Would it typically be the founder him or herself, would you expect that they would have someone with them, or what's the who?

Brad Feld:                  It varies. I have lots of one on one meetings with people, I have also lots of meetings with all three founders. I would say it's totally a function of how the founders present themselves, and how they want to engage. When we make an investment, it's not a single meeting and a decision. If the decision is no, it could be a single meeting, but if the decision is yes, there's usually lots of interaction points. And my partners at Foundry and I have an approach where we don't have one partner do a bunch of work, and then have the company come in and present to the whole group of us.

                                Instead each of us spends time one on one or one on team time with each company. And the way we do it varies. My partner Seth has very different questions and things that he's interested than I do. We're constantly communicating about what we're concerned about on a deal or what we're interested in or what we want one of the other partners to explore. And so oftentimes our knowledge about things, and our ability to make a decision is accumulative experience rather than a onetime shot that a founder might get.

Evelyn:                      Interesting. So is there a business meeting or pitch that you've had that stands out in your mind as a positive, a very positive experience? Could you talk to us a little bit about that?

Brad Feld:                  Sure. I mean, I've had many. And I think the ones that stand out to me always are in the category of me feeling within the first 10 minutes or so that this is a founder or set of founders that I want to work with. Interestingly, I've had a number of successful investments where my first meeting was a total misread of the people. And there's one that's I've talked about openly in the past, which is a company called Fitbit where the first meeting that I've had with the CEO James was on a phone call. I was in the middle of a snow storm on my end, I was feeling anxious because we had no electricity at our house except for the landline phones were still working. And I just kind of wanted to get off the phone and go deal with my other shit.

                                And so I had this 30 minute call with James, it was a result of two of his investors Jeff Clavier from SoftTech and John Callaghan from True who are the seed investors in the company really encouraging me to spend some time with him because they thought that I'd like it a lot, and it was right up my alley, and I'd be good for it. And I just had this very uninspired call, which was a great example of where it has nothing to do with the founder. It was totally a me issue because nine months later, I did a video conference with James, and he had made great progress, and the business made great progress. They hadn't actually raised any money from anyone else. And that point, I realized that my misread of him on that phone call in that day where I was totally feeling hassled by the universe was wrong, and we ended up investing, and it turned out to be an extremely successful investment for us. So I think one of the things a founder should recognize is that it's not all under their control, and-

Evelyn:                      We're all human. We're all human. Yup.

Brad Feld:                 That's right. And in that case, James didn't blame me for being uninterested the first time. He was willing to try again when he had the opportunity.

Evelyn:                     So how about an elevator pitch? Is there a ... And I think based on this conversation, you're probably less interested so much in elevator pitch because I think humanity is more interesting to you based on the conversation. But is there one that kind of stands out that you thought was pretty cool?

Brad Feld:                 Yeah. Look, the elevator pitch is ... It's a good cliché, right? Because I would say most of my elevator pitches happen in my inbox these days, right?

Evelyn:                     Yup.

Brad Feld:                And there are two or three paragraphs in my inbox. I would come back to the general case of the best ones are what do we do and why do you care? And then the follow-up, especially when there's a product behind it, whether it's a physical product or software product is to make it really easy for me to play with the product. For me, I'm a product guy. I have technical background. And so it makes me really happy when somebody sends me two paragraphs with a link to actually try the product. Or if I respond positively to something, the next thing they say is, "What's your address?" Or they actually just go on the web and look up my address, because it is listed on the web in Google. And the next day, their product shows up after we've engaged. If the product shows up before we've engaged, not terribly helpful because I might or might not care.

Evelyn:                      Right.

Brad Feld:                 But that same sort of thing where all of a sudden I've got my hands on it, and I can start to play with it.

Mike Siavage:           Brad, I was fascinated by this difference between passion and obsession. Let's put a little bit more flesh on that bone. Talk about how an entrepreneur might exhibit behaviors that appear to be passionate versus obsessed.

Brad Feld:                 This is the most awesome podcast I've ever been on.

Evelyn:                      Yay. Yay.

Brad Feld:                 Right? Y'all are doing an amazing job. Right? It's just I mean, the link for me is that passion often is conflated with enthusiasm. And enthusiasm's great. There is nothing wrong with it, but it is not the defining characteristic of a successful founder. And oh by the way, that example I gave you about James and Fitbit, James is a monotonic communicator. He's very, very calm, and he's very flat affect, and he doesn't really ever have any cadence to his voice, and he doesn't really have much emotion.

Evelyn:                     Well, that would be one of the reasons why you didn't want to have a conversation with him when you were in a freaked out situation.

Brad Feld:                That's right. It's unconscious bias, right? Like I'm not hearing any emotion in his voice, and so I take it as not obsessed. Turns out that James is one of the most obsessed people ever on the planet about the business that Fitbit is in, and the products that they do. And an example of that is I remember maybe the second board meeting I showed up to, he had with his partner Eric, they have one of these jewel boxes, and it's a lacquered jewel box, and in the lacquered jewel box is like a velvet bed that you would put a fancy piece of jewelry on, and in that lacquered jewel box that he opens up, on the bed is this prototype of their next product displayed beautifully, right?

                               And he's carrying it around in his lacquered jewel box to protect it, right? It's just a prototype, right? I mean, like for me, I just put the prototype in my pocket, it'd be fine. And for him, it's like a sacred ornament. And that's because ... It wasn't this overly ... It wasn't his presentation phenomenon, it was that he just cared. And so that's an example of the difference, right? Passion is again, it's enthusiasm, it's an extroverted personality, it's someone who kind of sucks you into their orbit. Obsession is the person that they're on this planet to make this thing happen.

Evelyn:                     Brad, this had been fantastic. We've really, really enjoyed this. Thank you so much for your time this afternoon. And we're going to continue to look you up, and watch your blog, and hopefully we get to do business with the Foundry Group someday. We really would look forward to that.

Brad Feld:                 Well, thanks for having me, and asking interesting questions, and taking me on a fun journey with y'all, and reach out any time.

Evelyn:                      Perfect.

John:                        We hope you enjoyed In Process today. If you'd like to download this episode, you can find our show on iTunes as In Process podcast. If you have any questions on the topic, or would like to be featured as a guest on our show, please email us at inprocess@trustedconsel.com.

Evelyn:                      Thank you.

John:                        Thanks everyone.

Evelyn:                      See you next time.