Brad Feld Foundry Group

What Brad Feld, Foundry Group says about topics vital to entrepreneurs

Brad Feld Posts – Titles

Brad Feld Posts  – Titles  (7 posts)

 

The Number One Startup Killer

Brad Feld: 3 Types of Angel Investors

Brad Feld's Investment Criteria

How Entrepreneurs can Increase the Chance of Success

The Math behind the Valuation Calculations

Investors Require Employee Stock Options

Brad Feld:  Tips for Productive Board Meetings

Brad Feld: Tips for Productive Board Meetings

Brad Feld venture capitalist and Managing Director Foundry Group

“I’m a huge believer in distributing the board material a few days in advance, having all the board members comment on it in advance of the meeting, and then having the meeting without going through the board material page by page. [] My favorite board meetings are the “one slide board meeting” where the only piece of paper allowed in the room is the agenda []”.  Brad Feld Categories: Board Meetings  Tags: board, Board of Directors, Google Doc, January 16, 2013; http://www.feld.com/wp/

Investors Require Employee Stock Options

Brad Feld venture capitalist and Managing Director Foundry Group

“Investors will almost always require that the company set aside additional shares for a stock option plan for employees. Investors will assume and require that these shares are set aside prior to the investment, thus diluting the founders.   If there are multiple investors, they must be treated as one in the calculations [].”  Brad Feld, Venture Capital Deal Algebra , July 7, 2004; 

http://www.feld.com/wp/archives/2004/07/venture-capital-deal-algebra.html

The Math behind the Valuation Calculations

Brad Feld venture capitalist and Managing Director Foundry Group

“I’ve found that even sophisticated entrepreneurs didn’t necessar[ily] grasp how valuation math (or “deal algebra”) worked. [] Recognize that this is about the math behind the calculations, not the philosophy of valuation [].

[] The key trick to remember is that share price is easier to calculate with pre-money [valuation] numbers, and fraction of ownership is easier to calculate with post-money [valuation] numbers; you switch back and forth by adding or subtracting the amount of the investment. It is also important to note that the share price is the same before and after the deal [].”Brad Feld, Venture Capital Deal Algebra, July 7, 2004;  http://www.feld.com/wp/archives/2004/07/venture-capital-deal-algebra.html

How Entrepreneurs can Increase the Chance of Success

Brad Feld venture capitalist and Managing Director Foundry Group

When asked what entrepreneurs can do to increase their success,  Feld said, “[] I think the biggest thing [] is [for] entrepreneurs, especially first-time entrepreneurs, [to] surround themselves with mentors who can help them, people who have been through it before, who can really help them build a great company.”  Brad Feld, Seed Capital From Angel Investors: Brad Feld, Managing Director, Foundry Group (Part 8), Aug 2, 2010; http://www.sramanamitra.com/2010/08/02/seed-capital-from-angel-investors-brad-feld-managing-director-foundry-group-part-8/

Brad Feld's Investment Criteria

Brad Feld  venture capitalist and Managing Director Foundry Group

Feld discusses his investment criteria.  Feld first determines if the investment falls within his ‘filters’: US and Canada-domiciled early stage firms which have raised less than $3 million and fall within one of “[Foundry’s] [] [broad horizontal, abstract themes]”.  Assuming the investment fits within these filters, “[] then [Foundry] goe[s] incredibly deep on [] people and product. [] [Feld gets] excited about people who are super-obsessed about a product.  [] [If Feld wants to work with the entrepreneur, and the entrepreneur wants to work with him and is product-obsessed, and Feld has an attachment for that product, then he’ll invest.]  [] [Feld]  [already knows his markets, competitive dynamics, the business model.]  [] All [Feld] care[s] about is what [the entrepreneur is] going to do with the idea [] or the product or [where he’s taking] it”.  The best founding teams are 2-4 people half of whom are product-focused.  His optimal nascent team is 3 people, 2 of whom are product-focused, “all [of whom] are passionate [about] the product []”.  Brad Feld,  This Week in Startups # 319, published Jan. 9, 2013,  @ 25- 32 min. into interview with  Jason Calacanis;  http://www.youtube.com/watch?v=INyouAjKgR8

Brad Feld: 3 Types of Angel Investors

Brad Feld venture capitalist and Managing Director Foundry Group

“[] [entrepreneurs will] encounter three types of angel investors. The first type [] the potential [lead investor]” is decisive and “[] [will lead the round if interested or quickly decline]”.  This is optimal for entrepreneurs because “[entrepreneurs will know where they stand []”. 

“The second type [] (and they’re very common) is [] [a maybe]” who wants to stay informed without an early commitment.  Feld advises entrepreneurs to maintain contact with this type without wasting “[] time trying to convert maybes into lead investors.”

An angel may respond differently depending on the deal so one can’t stereotype.

“The third type [] [isn’t] really [an] angel” and is the most problematic because he’ll “[] cause [] distraction and delay.”

Entrepreneurs should expeditiously characterize each angel into 1 of these 3 types and focus on the first type to reach the first third of the financing.  “[] push aggressively toward the closing with the goal of moving the maybe [to yes or no].” 

If the financing’s first third is committed, the rest generally falls into place more promptly. “[] committed angels [call friends to complete a deal] and some [maybes may join in].  It doesn’t always work this way []” but getting the first third is promising.  Brad Feld, Focus on the First One-Third chapter, book Do More Faster by David Cohen & Brad Feld  copyrt 2011, pg 241-242  

The Number One Startup Killer

David Cohen Founder and CEO TechStars, angel investor and former entrepreneur

Brad Feld venture capitalist and Managing Director Foundry Group

“[] the Number One startup killer []-- making a product for which there is no interesting market”.    David Cohen and Brad Feld, Do More Faster by David Cohen & Brad Feld, Theme 4: Product, pg  171