Deep Dive with Brad Feld

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This is a podcast episode titled, Deep Dive with Brad Feld. The summary for this episode is: <p>Brad Feld is partner and co-founder of Foundry, and a long time early stage investor and entrepreneur. In this episode, he and Matt take a deep dive into how startups and venture capital have changed over the past 25 years—and what has stayed the same.&nbsp;</p><p>They also discuss the dynamics of startup boards, along with common characteristics that make founders or companies successful at scale. </p>
Startups and venture capital have changed, or have they?
01:08 MIN
Investment activity has evolved
01:14 MIN
The understanding around "high growth startups" has changed
01:27 MIN
There are significantly more options around financing
01:42 MIN
Having strong relationships with your co-founders is a MUST
03:25 MIN
You've got to be obsessed with the product to succeed
03:13 MIN
Silent killers, like Gnip, are the real big hitters
05:47 MIN
The best boards are the ones where the CEO views it as a team
02:40 MIN
"When companies fail, it's because of the board."
03:09 MIN
Communication is key
03:40 MIN

Intro: Welcome to the Daily Bolster. Each day we welcome transformational executives to share their real world experiences and practical advice about scaling yourself, your team, and your business.

Matt Blumberg: Hi, welcome to The Daily Bolster. I'm Matt Blumberg, the co- founder and CEO of Bolster, and we are here today in deep with Brad Feld. Brad is partner and co- founder of Foundry. He has been an early stage investor and entrepreneur for a long time. He and I have known each other for over 20 years. He was involved with Return Path, he was involved with Bolster. We've been on some other boards together, we've written a book together. He inspired me to write my first book. So Brad, we are happy to have you here today.

Brad Feld: I'm pondering what in deep actually means. In deep what? Is kind of -

Matt Blumberg: In deep means this is not the five- minute version of the podcast, but maybe we'll come back and answer that at the end. So you've been in the venture business for a long time, from SoftBank Venture capital to Mobius to Foundry in the early days to Foundry today. And I wanted to start by just asking you, when you pull up from that journey as an early stage venture investor, how has the venture business changed? How have startups changed? How has the whole process changed over the last 20 or 25 years?

Brad Feld: Well, some things have changed a ton and other things haven't changed at all. One of the things that amazes me to this day that really hasn't changed very much is even with efforts over time to create much more efficiency in lots of aspects of the business cycle, especially around deals, transactions, investments, partnerships, the magnitude of friction that exists in all of those things seems pretty unchanged. I wrote a book in 2010 called Venture Deals, and I went to-

Matt Blumberg: Which by the way, if anyone's watching this and hasn't read it, you need to read it.

Brad Feld: There you go.

Matt Blumberg: It's the gold standard book for understanding how to finance a startup.

Brad Feld: Matt Blumberg, book salesman. I went to a mentor of mine who had started doing VC in the late- 70s, actually. I think 1979, a guy named Jack Tankersly. And I said to Jack, " Hey, can you send me a couple of term sheets from when you started doing deals in the late- 70s?" And he said, " Oh, that's easy, Brad. I keep a deal book for every deal I do." Which a deal book back in the 1970s was like a bound-

Matt Blumberg: Yeah, like the green leather.

Brad Feld: With green leather on the side and the name and Golden Boston.

Matt Blumberg: Yeah.

Brad Feld: He sent me, I don't know, four or five banker boxes full of these things. And the term sheets were typed on typewriters, and I looked through the term sheet and it was the same term sheet as the term sheet that in 2010 we were doing. I mean, yeah, sure, there were little bits and pieces that were different, but it was basically unchanged. So there's a bunch of stuff like that that just sort of carries through the system that seems, I don't know, tiresome, tedious, whatever, but it's just part of it. What has changed dramatically is all of the dynamics around starting a company and scaling a company up. In the 1980s when I was in college and starting to do stuff around entrepreneurship, the business plan was 150 page type document.

Matt Blumberg: What would you do if someone sent you one of those today?

Brad Feld: I don't know. I don't know. Mail doesn't come to me. I don't know. What's mail? I don't know. I just don't know. The characteristics of founders and the requirements of the founding team and the experience that they had was reasonably well bounded. There were definitely cases where you had young first time entrepreneurs, but there was an awful lot of cases where sort of the traditional founding team looked like a traditional founding team from the 1970s or 1980s or 1990s. The amount of investment activity was very different. And an example I'd give is I started making angel investments in 1994. I sold my first company in 1993, and in that first company, we didn't have any investors. We didn't raise any money. So I knew nothing about making investments. And I started making angel investments. And I made angel investments at the pace of about one a month for three years. So I did about 40 investments in three years. And at the time, that was considered insane, because if you're an angel investor, maybe you made one or two angel investments a year. And the dynamics of making those angel investments, for me, I was very, very focused on two things. One was the product and the other was the people. And it was the very earliest stages. So it was very loosely formed. And I would be in conversations with other angel investors who were asking about five- year projections and what's the go to market plan, even though it wasn't called that. What's the sales plan? And all this sort of stuff that today at the very early stages feels much more like how I did it in the mid- 90s, but was very counterculture to the norm of how these things happen. Maybe the last big point here is early stage entrepreneurship. Well, company creation happened everywhere. There was this sort of confused separation between local business and high growth businesses and sort of small businesses and startups. And so that language was very separated. So there was local business and small business everywhere. And in fact, in the US of course, we have a thing called the Small Business Administration. But the idea of high growth startups or high growth businesses wasn't that well understood. And for example, we don't have a government agency called the High Growth Entrepreneurial Organization. It's the Small Business Association. So that language and the universe of high growth companies was very unique and was very geographically clustered in a couple of places. And even in the internet bubble where there was lots of stuff in the late- 90s happening all over the US and all over the world, it was still pretty clustered versus today where it really is globally democratized. And that phenomena feels very different, not just the creation of these companies, but the amount of information entrepreneurs have to create companies. I mean, back when I was starting my first company in 1987, there was no information about starting a company. The best I could get was a biography on Lee Iacocca.

Matt Blumberg: Right? And now there are 400 different startup boot camps, accelerators studios.

Brad Feld: 10 million blogs, whatever. And by the way, the biography of Lee Iacocca, totally useless to a 20- year- old who's trying to start a business. And most of the other books were biographical or autobiographical. And the way I used to describe them to people, most of them are, " Here is my childhood, and then here is my professional beginning of my career. Oh, now there's some photographs in the middle of book. Look at me as a kid and young adult and my first business. Oh, now look at me standing in front of my plane and how successful and rich I am in my fancy house." And then the last half of the book is, " And look how awesome I was to create my business." That was kind of the biography tempo at the time. Versus a really detailed blog post on how to price increase prices on your SaaS product. There's not just one of those, if you search for that in Google, there's 30 of them. I can't figure out which one's the useful one. So, those dynamics are very inaudible.

Matt Blumberg: It feels to me also that the dynamics of financing first check and second check are very different as well. They're instruments. And it's the safe, which didn't exist. Everything used to be priced or debt. It feels like there are a lot more options for financing first check and second check. Besides when I started Return Path, it was friends and family or you went to a VC.

Brad Feld: I think it is very true that there's lots more options. I don't think the structures are all that different because really the two choices have always been you do a actual equity transaction or you do a transaction where it's going to convert the future into equity. And for a long time, that was a convertible note. And now there's synthetic versions like a safe. That's not a convertible note, but it sort of looks like a convertible note and you can kind of do all the same things and dot- dot- dot. So there's advantages and strengths and weaknesses to each, but I view it much more that pool of people investing in startups has changed a lot. And in the mid- 90s when I started doing angel investments, it was a relatively small number of entrepreneurs like me who had made some money and had some success that wanted to invest in new companies. It was people who had a bunch of money that we're interested in investing in tech and startups for whatever their motivations were. It was friends and family people that you knew that you could cobble together some money from that. And then it was VCs. And most VCs, even if they were making investments, at the seed stage, they're being very careful with their investments at the seed stage. Back again to this notion of team, do you have the right experience? Do you have the right pedigree? Have you put the right people together today, the velocity of all that is much faster. There's a much, much larger pool of different types of people who are willing to invest, much greater magnitude of successful founders who have invested as angels. Much more understanding of how to do it. For the entrepreneurs, the information asymmetry is mostly gone. And so the entrepreneurs have a relatively easy time of putting that together versus before where it's like, okay, well how do I do a financing? And the answer is, well, you got to go find a lawyer that's going to tell you how to do it. So that has changed quite dramatically.

Matt Blumberg: Yeah. What is one thing you would do if you were going to start a business today? I think you're out. I think you're out of that side of the equation. What's one thing you would do that's like, " Oh, the first thing I would do is X?" That may be very different than when you started your first company in the'80s.

Brad Feld: I actually don't think the first thing that I would do is different. In the'80s, the first thing I did was spend a lot of time with my co- founder, a guy named Dave Gill. And we were already really good friends. He was three years older than me. We'd gone to college together and overlapped for a year and lived in the same place. And so we knew each other and had developed a real friendship, but before we really started the business, we spent a lot of time talking to each other about what our motivations were, what we wanted to do, what our fears were, what our constraints were. I kind of had no constraints. He had some constraints. So that conversation was helpful because it wasn't helpful to him when I would just sort of be in this unconstrained mindset, whether my risk tolerance was higher or I didn't have a mortgage or whatever. Those kinds of pieces. And I don't think he had a mortgage then, but he was married by then. Just all those things that cause you to approach the problem. And we spent all our time talking about the business and the idea. We spent a lot of time talking about that. We spent a lot of time talking to each other about what our own goals, motivations, dynamics were. I think I would do that with any co- founder. And I have started a handful of things with people that I knew really well where I didn't feel like I needed to do that. But in the cases where I've started things without really then, it doesn't have to be before you start the thing, but early on that's what you're doing. And I can use Techstars as an example. When we co- founded Techstars in 2006, I didn't know David Cohen at all. I met him on a random day. I met him for 15 minutes and I committed to write a check and get involved in this thing in the first meeting. He knew David Brown, who was one of the other co- founders, extremely well, because they'd done a business together. But I'd never even met David Brown and the fourth co- founders, a guy named Jared Pollis-

Matt Blumberg: Jared, yeah.

Brad Feld: ...who I was really close friends with, but David knew of him because Jared was reasonably well known, but they never met him. And I would say, when I think about the relationships there and who was really actively involved in the beginning of that, more than just sort of the individual feedback, it was David Cohen and me. David was running it. David Brown was still CEO full- time at a company. Jared had a bunch of other stuff going on and then very quickly became a congressman. And so he had to sort of say, " Hey, I can't really be involved in this. I want to be supportive, but I can't really do anything." And I mean, the amount of time that David and I spent getting to know each other by doing stuff together and exploring things in that first six to 12 months was very substantial. So I'd go back to that. I mean, the thing that kills companies early the most is some kind of terminal relationship between founders. There's plenty of other things that kill companies, but that's the biggest.

Matt Blumberg: Yeah, I mean, certainly the people I know who are coaches, my wife among them, she has done a lot of work counseling co- founder relationships, and those can be very consuming. So let's build on that and talk not about things that can kill companies, but about what makes companies successful. So you've had a number of incredibly successful investments, Zynga, Fitbit. There's a long list. When you sort of think across all of those, what are the things that those CEOs, founders had in common that drove, not just drove success, but drove success at scale?

Brad Feld: I think the primary and starting point for each person was an obsession about the product. And the word obsession has positive and negative connotations. So I'll make it less dicey as a word and say, ask the question, were you put on planet Earth to do this thing? And it doesn't mean that you're going to do this thing for the rest of your life, but in this moment. And when I think about the two examples you gave, Mark Pincus was obsessed about social games. And the idea of social games didn't exist. He really was one of the creators of it. Now the idea of doing games that are social existed, but the idea of using this new kind of technology that was starting to really become emergent with Facebook and build games on top of that and use that to connect with the people. I mean, he was utterly and completely obsessed around that idea and built a company that did that. I think about James Park, who's the CEO and one of the two co- founders of Fitbit. And James was again, obsessed with this idea of creating a device that was essentially, at the time, I don't think he used the word health, but was essentially a health device. There's a whole bunch of human behaviors that we should be able to keep track of and play it back to you in a way that helps you improve your health. And that started off as a simple step counter, but evolved quite significantly over time to include lots of other characteristics, including sleep and including exercise and including dot- dot- dot. So that obsession is key. It's so important to have your focus on the thing you're doing. I know so many entrepreneurs who were excited about an idea, or even many who are passionate about an idea, but couldn't stick with it at the level of intensity it needed to have, especially when things got hard, especially when there were other interesting things that were starting to attract them somewhere else. And you see a lot of companies that started off pretty interesting and then lose their way. And part of the reason they lose their way is because the founder, and in many cases the founder, CEO, wasn't obsessed about a problem. They were grabbing onto something that they then followed. And when that didn't work or started to work not as well, they went somewhere else. And the word pivot ended up becoming part of the vernacular of venture capital. And I think it actually came from Josh Kopelman and First Round, but I could be wrong. And that word I think confused a lot of founders because pivot didn't mean throw away everything you're doing and do something completely different. But a lot of founders started using it, " Oh, this isn't working. I'm going to try something different." Well, if you don't care about the thing that you're working on enough to keep trying to grind it into something that's going to work, you're not obsessed about it.

Matt Blumberg: Now, I always say that the true definition of pivot is one foot stays where it is. The other foot moves around a little bit. It's not a restart.

Brad Feld: Yeah, that's right. I mean, but for somebody that as a seventh grader played some basketball, I understand that.

Matt Blumberg: You're a big sports guy. Come on, Brad.

Brad Feld: Totally. Yeah, that pointy ball game, they just had one of those. Right? That was a big thing.

Matt Blumberg: One of the things I've always loved about the portfolio that you have is it's a pretty broad range of types of companies. So you have things, like Zynga and Fitbit, that everybody knows, and then you have a bunch of companies that no one has ever heard of and no one ever will hear of unless they're pretty deep in a sector or infrastructure, something like that. What's a good example of one of those, and is it the same? Is the characteristics of success the same, whether it's high profile B to C or low profile, geeky B to B?

Brad Feld: No, they're all over the place in terms of what they are. I'll give an example of one that I think I used to coin a term that describes these types of companies, which I really like too. They're my favorite companies to be involved in. The term is silent killers. And the idea of it is that no one knows anything about this company, until all of a sudden either it's a huge success or something happens, and now everybody knows about the company because of what it did. And I think the company that I coined the term on for that was a company called Gnip.

Matt Blumberg: Yeah, that's a good one.

Brad Feld: Gnip was a company that was started, this was around 2010,'09, 2009, somewhere in there, when social networking had now become a thing. And the data coming out of social networking was quite significant. The social networking systems, and not just social networking, but YouTube. And this was a timeframe where there was a whole bunch of products. It wasn't just the dominance of Facebook and even LinkedIn I think at that timeframe. It was significant, but it wasn't that dominant in terms of what it was. And so maybe you had 50, a hundred different companies that were generating data exhaust from the interactions between people. And what Gnip decided to do was try to become a central server for all of that data. And so if somebody wanted access to the data of a certain type, they could get it from Gnip, using a single interface, single type of call. And what Gnip did was it aggregated all the data from all these different services through all the different APIs that every service had its own API. Everything worked differently. Over time, that turned into a business that mostly consumed the Twitter fire hose and a couple of other services. And then on the other side, people subscribed through Gnip services to the Twitter fire hose. So it became this sort of business layer for Twitter data, and there were a lot of rules around it. So it was done in such a way. Where there was a real data economy built. And part of the thing that was fun about this particular business was they were really figuring out the data economy as we went. And in the context of figuring out the data economy as we went, they helped set a bunch of those rules, which other companies then did not subscribe to Facebook being one of the most pernicious. And of course in 2016, '17, '18, there was all kinds of stuff around that. That business raised almost no money, it only raised 6 million total and very quickly grew. I think when we sold it was about a$ 40 million business and was a cash flow positive, profitable business. And the buyer was Twitter because Twitter decided it wanted to own all of that.

Matt Blumberg: Its own business layer. Yeah.

Brad Feld: And that business ended up before the takeover of Twitter by Elon Musk. That business, I believe, at its peak was about a$ 400 million business, and it generated$ 300 million plus of cash to the business. That's how profitable it was. There's a lot of noise about what's happened to that business and what's happening to that business. I do know that almost everybody that was working on that product were fired in the first wave of Twitter firing. So lots of interesting stuff there. But if you play that game out, no one knew this business unless you were a company that wanted to buy data from these other services. And they had a very high profile competitor. And that high profile competitor raised 10 times the amount of money they raised. And that high profile competitor made tons of noise all over the sort of tech landscape. And in the end, that company failed. It was worth zero. And when Twitter bought Gnip, it turned out that the Gnip data was like 90% of the entire economy that was had been built. So I just give that example. The founder of that or the CEO of that company was Chris Moody, who's one of my partners at Foundry. The co- founder of the start of the company was Jud Valeski. And the two of them just put their head down and focused on a problem, focused on really deep technology, got customers, got revenue, and didn't care that much about all of the noise that is performative, but doesn't really help your business.

Matt Blumberg: Obsession gets you pretty far in life. It could also get you in jail, but that's probably a different topic.

Brad Feld: Of course.

Matt Blumberg: All right, last topic boards. So you've been on a lot of boards, you've been on some bad boards and some good boards and some great boards. When you think about the great boards you've been on, what are a couple of things that they have in common that made them so strong?

Brad Feld: The CEO, whether or not the CEO as the chair of the board or not, the CEO viewed the board as a team and worked really hard one- on- one with people, but also sort of broader set of people around the system. Second, the boards were balanced between VC founders and outside directors or independent directors. And in fact, I think probably the best boards I've been on have been more independent director oriented boards, one or two VCs, mostly independent directors, CEO, maybe a founder. Next, they are groups of people who build some effort of emotional connection between them, especially around conflict. So I don't try to win you over, I don't try to run you over as a fellow board member. I might disagree with you. I disagree constructively in public and kindly. And I'm also willing to back off my position if everybody else has a different position or it's clear that I'm an outlier. I've said what I think I accept whatever we're doing. I just wanted to contribute to the conversation much more than somebody trying to get their way or hold people up or enforce a position. And then the last is ones were, I would say that there's a combination of extreme communication and openness with people who come from very different places, whether those places are gender, race, experience, education, and there isn't a one up, one down dynamic. Everybody views each other as peers. If you're the wealthiest person on the board, that doesn't put you in a different position than the person on a board who has a whole bunch of domain knowledge about the business, but has never had an exit, but is the outside director? It's really a group of peers versus a segmented one up, one down based on, " Well, I was CEO of a Fortune 10 company and so therefore I have all of this experience and power. You second- time entrepreneur that had an exit, da- da- nah." You just treat everybody as peers.

Matt Blumberg: So let me ask you, give advice to a CEO-

Brad Feld: You already have a clip of it, which is like what fucks up aboard? That's really interesting.

Matt Blumberg: Okay. Well, what fucks up aboard?

Brad Feld: There's a cliche, which is that when companies succeed, it's because of the team. And when companies fail, it's because of the board. Boards that give off mixed signals, boards that try to control the leadership team where, they don't recognize, and an individual board members who don't recognize that, yeah, there's a governance role of the board, but really their job is to help the leaders and the company succeed. When those even just one person on the board doesn't realize that, it really creates a difficult pattern. Board members who endlessly show up via flybys. They're not really engaged in the company. They show up, they bloviate about whatever's on their mind.

Matt Blumberg: But they haven't read the board book, they skimmed a page of it.

Brad Feld: And they don't have commitment to actually solving the problem. By the way, a lot of those, that archetype a board member, the third time you have a board meeting, you realize that that person only has a couple of different things that they're going to say. so that's not helpful. And there's always conflict that happens when a board board is replacing a CEO or a board is replacing a founder. I'll leave that aside. Usually by the time you get to that, there's lots of other problems going on. It's more the lack of ability for people to be intellectually honest about what they think in the moment and to receive what somebody else is thinking as data rather than an attack. On what I'm thinking. And I've had this. I'll use Fred as an example because Fred Wilson and I have been on your board together for a long time. We'd be sitting in the Return Path boardroom and be three hours into a board meeting. And Fred would say something that not only did I disagree with, it kind of contradicted something I'd said an hour ago. And it'd be very easy for me to take it personally. " Oh, Fred's attacking me," or, " Oh, Fred doesn't agree with me or didn't listening to me." A much healthier view is to think about it and decide whether in real time, whether it's worth continuing to pursue that thread or not. And if he says something and I really disagree with it, and I think about it for a moment, I say, " You know what, Fred? I disagree with you. Here's why." And Fred is not going to say, " Fuck you. I'm right, you're wrong." There's a debate neither of us trying to win. The beneficiaries of that debate is you, the CEO and the management team that's sitting around and maybe board members. And at the end of the day, two of us have very deep respect for each other and longtime trust. It's totally fine if we disagree. There's no risk of that. That's healthy. And when that doesn't happen, it's really unhealthy. And then I say to another board member afterwards or I say to you afterwards, " Boy, Fred's a real jerk. He didn't listen to me and dah- dah- dah-dah." And that kind of gossip, that kind of ad hominem whatever, versus just address the issues and try to sort them out.

Matt Blumberg: As I sort of think about what can go wrong on a board, the things you just said and some other things, there are some of them that a good CEO as leader of the board. Again, whether or not the CEO's, the chair can work through in the process of building a good team, in the process of being a skilled meeting facilitator, et cetera. Let me ask you about a couple things that I think are a lot harder for CEOs to manage on problematic boards, under the sort of heading of what advice would you give a CEO if she runs into. So one is what do you, if there's a board member that they're given a board seat in a financing, so it's a VC, they are the flyby type and they are the, " Hey, I'm more important than the rest of you type." What do you do with that as a founder?

Brad Feld: Well, I think there's the layer of things you do because you're trying to have that person be more effective and you be more effective with them. And then there's the things you do when you've given up.

Matt Blumberg: Let's do both.

Brad Feld: In the first category, I believe the healthiest thing to do is to engage more with that person.

Matt Blumberg: If they will, if they're willing to, yeah.

Brad Feld: But most people will engage at some level if you're engaging with them in that situation. Most of the time that person, the thing the CEO is not getting is, " Wow, this person's not showing up in a way that's helpful to me." All right, well, you could blame them or you could say, " All right, you know what? I'm going to go try to build the relationship with them so that they show up in a way that's more helpful to me." And I need to understand their constraints because they might have some constraints too that I don't understand. I'm assuming that they can do something or operate in a certain style or way that they just can't for whatever other reasons are going on. So I think the first step would be to try to engage directly with the person, not to call them out, not to embarrass them, not to tell them how disappointed you are, but to try through the development of the relationship to bring in a relationship that's more functional. If that's not working, you haven't given up yet, but that's not working, oftentimes enlisting one of the other board members who you do have a really strong relationship with to help you. Not going hand in hand to that board member, but to have a conversation with that board member. Not the conversation of, " Hey, Mary told me that you suck and therefore can you stop sucking at being a board member?" But having that board member say, " You know what? I'm going to go have dinner with this person. I want to just listen to what their concerns about the company is. I want to engage them around it. I want to, again, try to pull them in more to it." And in that they might say, I just totally don't trust the CEO. Engage with that conversation. " Why don't you trust the CEO?" " Well, the CEO said they're going to do this." And you can sometimes find all of the behavior links to one bad experience that all it needs is an apology and you need to then not repeat the bad experience. That also, by the way, means that the CEO has to understand and agree that it's worth apologizing. In that context, you have somebody help you.

Matt Blumberg: Now what do you do when you've given up?

Brad Feld: I give up. I can't get this person's attention. They don't show up at things. Whenever they show up, it's like they're talking in a totally different language. They have no idea what's going on in the company and they're entitled to this board seat and it's starting to really be interfering. I think there's really only, again, two things you can do there because it's very hard to fire a person from a board seat who has a board seat. The most productive thing is to, again, enlist someone on your board, hopefully someone that's viewed by that person as a peer, to have a conversation with them about the dynamic, " Hey, you're not showing up. Here's some very specific things that are problematic. Do you really want to be on this board? Is there something going on? Is there somebody else in your partnership that should be better at this board? Because I see this dysfunction. I don't see it as healthy." Where, again, that person's personalizing. I don't see it as healthy, not Mary the CEO doesn't view it as healthy. And then the last is depending on the relationship that you have with the venture fund, if you have none other than through that one person, you have no real availability to do this. But if you have relationships with other partners or someone on your board has relationships with other partners, having the conversation in a way that isn't political, doesn't create political problems within their firm for the person, " Hey, it feels like Joe the board member has been distracted lately. Don't know what else is going on. I'd love to talk to you." There are always awkward conversations. " I'd love to talk to you about how your firm's thinking about the business. Is there something we can do here so that the dynamics are more productive?" That type of conversation, again, often through the proxy of a peer, another VC on the board is probably better than CEO to somebody in the venture fund. But in the absence of anything else, if you've really given up, you're kind of like, " Okay, I got to deal with this."

Matt Blumberg: Yeah. So let me throw one more tough situation at you, and this will be the last one. Frequently, as companies scale, they get bigger and bigger. They do subsequent rounds of financing. They can end up with a board that has some really early stage investors on there who are 10 X in the money, 20 X in the money, the mid- stage ones who are well in the money, and then some late stage ones, who they come in at a billion dollar evaluation. Those investors can think very differently about the business and outcomes and what's good for the business, or what's good for the founding team maybe very different than what's good for each of them. So you sort of end up with this sort of lack of alignment. How does a good CEO navigate that?

Brad Feld: Open conversations, open conversations about the reality of what's going on in the business at all levels. Your capital structure is going to have an impact on what you can and can't do depending on what your business is doing. If everything is going great, it's not going to matter. If everything is a disaster and it's failing, it's not going to matter. It's the in between states, especially if you need to raise more money or you get an offer to acquire the company at a good but not great for all investor price or a price where maybe the last round just gets their money back. Just open communication and involvement with everybody around the thought process is key. I've seen so much anxiety from the background conversations. The person who's a founder that's on the board but isn't involved in the company anymore that's poking on the CEO and that's poking on an early investor to try to rile them up, or the late- stage investor, who, I mean, I think of one situation where I was part of the problem, which is that when this late- stage investor says, " We will not sell for less than three X," instead of me saying, " That's a totally nonsensical statement, the offer on the table, you're getting in a very short period of time. You're getting two times your money, your IRRs off the charts. You can recycle the money if you want, but the notion that you're going to hold this up for three X makes no sense." I think everybody just tried to accommodate that last round investor, most of whose money was still in the company, hardly any of it had been spent yet. And the conversation could have been very different. " It could have been what? This is a really good offer for the company. Management team really wants to do this. We understand that based on what you just invested in, it's a disappointment relative to what you hoped. But again, the return is quite good logic." Let's have that conversation. Instead of everyone's like, " Oh, shit, we got to get three X, or if can't get three X, we can't do this deal." Which in that particular case generated a negotiating strategy to try to get three X, which failed and the deal didn't happen. And with benefit of hindsight, I think even that investor would've said, " God, that was dumb. We should have taken the money." So it's that sort of thing. It's instead of being fearful of engaging in the conversation, just to air it out. Have the conversation. Figure out what people's real issues are. And if you disagree or you say, " Hey, look, I get that you're conflicted in your own mind here because of what you wanted versus what it is, but let's talk about what it is versus what it could be based on where we are right now with the information we have."

Matt Blumberg: Words to live by. Air it out,

Brad Feld: Say it. Just talk about it.

Matt Blumberg: Yeah. Brad, thank you so much for spending the time on this. There's some things in here that are just gifts to entrepreneurs. So I appreciate that. Thanks for being on the Daily Bolster.

Brad Feld: It is awesome to be here with you. Anytime, Matt.


Brad Feld is partner and co-founder of Foundry, and a long time early stage investor and entrepreneur. In this episode, he and Matt take a deep dive into how startups and venture capital have changed over the past 25 years—and what has stayed the same. 

They also discuss the dynamics of startup boards, along with common characteristics that make founders or companies successful at scale.

Today's Host

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Matt Blumberg

|Co-Founder & CEO, Bolster

Today's Guests

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Brad Feld

|Partner, Foundry