Category: Entrepreneurship
A Call for Founder Voices for an MIT Study on Entrepreneurial Ethics
I’m helping MIT (Fiona Murray and Alon Shklarek) share a short survey exploring how founders around the world navigate ethical challenges. Insights will shape practical tools for entrepreneurs, investors, and ecosystem leaders.
Survey link: https://mit.co1.qualtrics.com/jfe/form/SV_2rVOSwnXT0Qe8qa?org=3
It takes just 8 minutes, and your input directly contributes to a healthier entrepreneurial ecosystem.
I learned how to do deals from Len Fassler. Last week, I got an email from Dustin Kloempken, who sent me a few quotes he wrote down from the Berkshire Annual Meeting. One of them jumped out at me.
“Turn every page. One important ingredient in the investment field that very few people do. And those people who did read every page aren’t telling you what they learned. You have to read every page.“
In 1996, I was sitting in a law firm conference room in NYC next to Len. We were working on the legal documents for Sage Hosting’s (which we renamed Interliant after we merged with a company named Interliant) first acquisition. It was tiny—a web hosting company doing maybe $100,000 of revenue annually. We had decided to buy this tiny company to get going.
Len read every page of the legal draft of the purchase agreement and marked it up. After reading a page, he’d slide it over to me to read and see what he’d marked up. We had the disclosure document, so we went through those pages.
By 1996, I’d done a lot of angel investments and a few VC investments, but only a few acquisitions. And, I’d deferred to the lawyers on the legal documents. While I generally knew what was happening, there was plenty of fine print that I hadn’t bothered to read or understand.
After an hour, I asked Len why he was going through every page. He told me, “Brad, in any document you sign, you should turn every page. It’s good practice for any document you read, but even if you are skimming, turn every page to make sure you don’t miss anything.”
I bought a green felt-tip pen and started doing this. As documents became predominantly online, I opened them and turned every page. I read every email I received. Even when I skim a book, I turn every page.
Today, I received many Docusigns with just the signature page. This bugs me, and I often ask for the entire document before I sign. Given that I’ve looked at a zillion legal documents, I can turn every page pretty quickly. But I still turn every page in a board package, a legal document that is new to me, or a long paper (academic or white paper) that someone sends me.
Fortunately, I’m a fast reader and have high reading comprehension. I can also read by paragraph (vs. by sentence), so skimming works for looking for things that are out of place.
I love it when people put easter eggs in documents to see if they get read. For example, a set of Return Path board minutes from about a decade ago had something like the following paragraph.
“After our lunch break, where we enjoyed Shake Shack, Mr. Feld drank two Shake Shack Chocolate Shakes in rapid succession. After a few minutes, he had to lie on the floor and nap for about 30 minutes.”
Turn every page—great advice from Len Fassler and Warren Buffett.
I’m not a sports fan, but wow, this is good.
On Tuesday, David Cohen (Techstars co-founder/chair) and I did an AMA for Techstars founders about the SVB crisis. The team at Techstars turned it into a podcast for our Give First series.
The teaser from the podcast follows:
The fall of SVB will go down in history as one of those ‘where were you when …’ moments. For David Cohen, he was sitting at a sporting event when his phone began buzzing incessantly. For Brad Feld, he was couch shopping with his wife.
Feld is no stranger to crises and his instincts kicked in quickly.
“I shifted into problem-solving mode,” says Feld.
But then, almost as quickly, the government stepped in and money began flowing. Crisis averted. It was time to reflect.
Listen as Feld and Cohen share insight into what they saw in the VC and startup community, how communication made all the difference and how many came together to support each other.
They also tackle the looming question weighing heavy on founders’ minds: how will this affect the future of startups.
As for the couch? Tune in to find out.
GlueCon will occur for the thirteenth time, on May 24th-25th, in Broomfield, Colorado.
My Foundry partners and I helped Kim and Eric Norlin create Gluecon in 2009 because we saw the need for a developer-focused event to explore emerging technologies around the cloud and APIs.
The first year that GlueCon occurred, it seemed like nearly every session began with someone defining “what cloud computing is.” In the interim years, dozens of products and startups have launched or used GlueCon as one of the venues for their early premieres. Twilio, Docker, and Kubernetes all appeared on the GlueCon stage long before they were known by the wider tech community.
GlueCon has always prided itself on being a welcoming community that seeks quality interaction over being lost in a sea of people on an expo floor. We’ve long held GlueCon at the Omni Interlocken — a space that allows the attendees to come together in an informal fashion, making it easy to meet just about anyone you’d like to while at the event.
It’s always been fun to host a national tech conference in Boulder. In addition to bringing in plenty of people from around the country, we always get focused attendance from a bunch of tech leaders in Boulder and Denver.
Some of this year’s presenters include:
- KellyAnn Fitzpatrick and Kate Holterhoff from Redmonk
- Adrian Cockcroft, ex-Cloud Architect (Netflix) and VP (AWS)
- Dormain Drewitz, VP, PagerDuty
- Alex Williams (interviewing an industry leader) from The NewStack
Topics cover everything from Observability to WebAssembly to Generative AI for developers to Microservice architecture. You can view the full agenda here.
We hope that we’ll see you at this year’s GlueCon. Use “feld15” to grab 15% off of your registration.
For those of you older than 40, it sort of felt like 2000.
If you are younger than 40, a massive tech bubble just burst. I expect you know that. For the past six months, many VCs have been podcasting, tweeting, publicly writing, … and generally prognosticating about what you should do and what’s going to happen next.
I think the best VCs didn’t prognosticate. They knew what was going to happen next. Instead, they worked with each company to help them deal with reality as it unfolded. Each company is different, and the dynamics of the bubble bursting were not generic.
For example, one of the companies I’m on the board of grew by over 30% last year. Its revenue grew by 30%+. Its gross margin grew by 30%+. Its EBITDA grew by 30%+. Its FCF, before debt service, grew by 30%+.
Another company had a revenue decline of 25%. However, their GM% increased, and their GM$ stayed roughly the same as the prior year. Their EBITDA loss decreased by 50%, and FCF was close to $0 in Q422.
I have 14 other stories from the companies in our portfolio that I’m responsible for. My partners have another 50+. Each one is different. Each one took a ton of work from the leadership team. Many of these teams took on a set of intense challenges as early as Q122 when it was clear that whatever was unfolding was not what they had just finished planning at the end of 2021 when they came up with their 2022 plans.
Almost all of the prognosticating I heard in 2022 was similar to what I heard and often said in 2000. I was 35 at the time and rationalized continually that things would magically and suddenly change for the better. I was wrong, and then 9/11 happened, and then Enron and Worldcom happened, and business kept getting worse. 2001 was a dreadful year for me. 2002 sucked, but it wasn’t as dreadful. But it still sucked. 2003 was hard. 2004 was the beginning of what I now refer to as “the grind,” which ended for me around 2007.
Nothing is going to magically and suddenly change for the better. No one is going to raise a $100 billion VC fund and start spraying money around at fantastical valuations, followed by everyone else suspending disbelief and believing companies, regardless of their businesses, are worth 50x next year’s revenue. No one will value a company with a GM% of 10% at the same as a company with a GM% of 80% just because they are growing revenue at the same rate. Boxes full of magic beans are going to result in jail time. Interest rates aren’t suddenly going back to 0%.
If you are a fan of Harry Potter, think of 2022 as the sorting ceremony. When you put the 2022 hat on your head, did you end up in Gryffindor, Hufflepuff, Ravenclaw, or Slytherin? Did you address reality early in 2022? Are you just now addressing reality? Are you considering what reality might be and hoping it doesn’t happen? Or are you looking around saying, “Huh, what?”
Whatever it is, there’s no looking back and hoping something different happens.
The 2nd Edition of my book Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors launched today.
My co-authors, Matt Blumberg, the CEO of Bolster, and Mahendra Ramsinghani, were a joy to work with.
While the 1st Edition was a good book, I wasn’t particularly proud of it because I didn’t feel like it was my best writing. We worked hard on this edition, and I now feel like it’s equivalent in quality to my other books.
Effective boards are critical at this moment in the entrepreneurial ecosystem. While I hope this downturn is short, I think it will be long and painful. In either case, highly functioning boards can help startups navigate this moment, while dysfunctional and weak boards can accelerate the demise of startups.
If you have a board of directors, want to have a well functioning one, are a director, or want to be a director, I encourage you to grab a copy of Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors.
Since releasing my newest book The Entrepreneur’s Weekly Nietzsche: A Book for Disruptors I’ve been continually getting the questions “Why Philosophy and Entrepreneurship?” and “Why Nietzsche?”
Dave and I cover this right off the bat in the book, so I thought I’d toss up an excerpt that addresses the question with part of my own origin story with Dave. It follows.
Nietzsche? For entrepreneurs?
It was the end of January 1988, about nine months since we had embarked on turning Brad’s solo consulting shop, Feld Technologies, into a real business. We were fraternity brothers and close friends and opened our first office directly across the street from our fraternity chapter house in Cambridge. We planned to use smart yet inexpensive software developers to build business application software. We employed half a dozen programmers, most of whom were undergraduates from our fraternity working part-time. We didn’t have any financing except for Brad’s credit card and the $10 with which we had purchased our common stock.
Dave walked into Brad’s office after calculating preliminary financial results for January. Up to this point, we had mostly broken even, but the news was grim: we had lost $10,000 in one month. We had not seen it coming, and it took some effort for us to untangle what had gone wrong. Dave had been spending most of his time managing the part-time developers, who were primarily working on future products, instead of billing hours to clients. Brad had been selling computer equipment, which had low gross profit margins, instead of billing hours to clients. Much of our revenue for the month had come from one highly productive though erratic undergraduate developer, Mike, who was working on a billable client project.
Before we had a chance to figure out what to do, Mike quit, citing a need to focus on his studies. Now we had no choice: we fired everyone, shut down our month-to-month office, sold all the office furnishings, and moved the business to our apartments in downtown Boston. It was gut-wrenching. Brad wondered whether we had failed just as we got started. Dave worried about paying rent. We had long discussions about the future of the business, including whether or not to continue.
But we did have billable projects. We no longer had to spend our time managing people and had figured out where our bread was buttered. Results were good enough in February to calm our nerves and even better in March. Just as important, we had learned some crucial lessons and settled on a very different idea about how we would move forward with the business. The experience of hitting bottom and the lessons we learned became deeply ingrained in our brains and our company culture as we more methodically and progressively built the firm.
Fast-forward thirty years, when we were in the midst of writing this book, and Dave was reading Thus Spoke Zarathustra. He encountered a passage that said the highest mountains rise from the sea, and that fact is “inscribed…on the walls of their summits.” Because of our experience at Feld Technologies—and many times since—we knew immediately that this had to be a chapter in the book. We imagined the solace and instruction it might have offered us to have seen (and understood) this quote, to have read a short essay like the one in our chapter Hitting Bottom, where the starkness and promise of the situation are presented in black and white, or to have heard Walter Knapp’s story of the crash and rebirth of Sovrn, a genuinely disruptive company.
That is how we wrote most of the chapters and how this project began. In reading Nietzsche, we noticed ideas that reminded us of situations, questions, and concerns that frequently arose in our entrepreneurial and venture investment experience. Nietzsche had a way with words, and we found that some ideas were nicely encapsulated and phrased. We started playing with expanding upon his pithy aphorisms and gathering stories from entrepreneurs, and it clicked.
Feld Technologies never became a disruptive company, despite our ambitions. It plateaued at around $2 million in revenue before we sold it in 1993. Because we had built a solid foundation for a certain kind of success, we never again hit a deep low point, and consequently never again had the painful opportunity to rethink our premises. This point, too, is covered in Hitting Bottom and illustrates why we did not just skip Nietzsche, write some essays, and assemble some entrepreneur stories. Nietzsche—sitting or walking alone, in pain, almost blind—thought deeply and managed to share these thoughts with the world. We tried to follow his lead, thinking hard and pondering additional angles and situations to which the quote might apply. We want you to do the same, as you keep in mind that Nietzsche’s works have been highly influential throughout the 20th century and into the 21st.
In business and entrepreneurship literature, inspiration is sometimes more helpful than instruction. Though there is plenty of how-to information in this book, we aim to give you food for thought from a different perspective. We address issues of leadership, motivation, morals, creativity, culture, strategy, conflict, and knowledge. We push you to think about what you and your enterprise are made of. We expect you to question and ponder these ideas, not just put them into action. If we are successful, you will sometimes get angry and at other times feel pride. At times you will wonder what you really know, and at other times you will charge forward. We hope that the combination of Nietzsche’s colorful language, our elaborations, and some stories from entrepreneurs will offer you intellectual, emotional, and entrepreneurial inspiration.
Nietzsche was not a fan of commercial activity or businesspeople. He saw the former as crass and the latter as lacking nobility. However, we suspect that if Nietzsche were alive today, he would view entrepreneurs differently. He adored intensity and fervor, deeply valued those who create things, and wrote at length about “free spirits” who do not feel bound to tradition or cultural norms. Nietzsche viewed his mission as the “revaluation of all values,” and he intended to disrupt the entire moral tradition of Europe in the late 19th century.
Last week I was scheduled to do a live interview with Eliot Peper about The Entrepreneur’s Weekly Nietzsche. He opted to use Twitter Spaces and diligently tested it out a couple of days beforehand to confirm that it would work. Nevertheless, we immediately ran into difficulties, and after ten minutes, we decided to bail on the interview and reschedule.
This reminded both me and Dave about our chapter in the book, “Play to the Audience.” Nietzsche says:
It is not sufficient to know how to play well; one must also know how to secure a good hearing. A violin in the hand of the greatest master gives only a little squeak when the place where it is heard is too large; the master may then be mistaken for any bungler.
Our translation to contemporary English is:
In other words: Performing well is not enough; the audience must experience the performance well. If the venue has bad acoustics, even a great violinist sounds terrible. A virtuoso can be mistaken for a novice.
Our essay in the book discusses the importance of a speaker having empathy for the audience, not just in terms of the content but also in the communication medium. For example, is the phone connection clear? If you have an accent, are you speaking slowly enough for your audience to understand? Ben Casnocha’s excellent narrative emphasizes audience engagement and interaction, which is crucial in our era of short attention spans.
This was one of the first chapters we wrote, so it was before the pandemic and the enormous shift toward videoconference and online interviews. In keeping with our view that Nietzsche’s observations are mostly independent of time and technology, it can be applied here.
For example, if you are communicating, selling, interviewing for a job, or promoting a message, you need to make sure you will be heard. Your own preferences for technology platforms can get in the way of a successful meeting if the customer prefers a different system or is not set up on it. If you are getting a message out, using the newest or trendiest technology may draw listeners, but they will not hear the message if the system doesn’t work. Make sure your lighting, Internet connection, and camera angle are appropriately professional. Don’t walk around with your phone while you are on a videoconference unless the call is explicitly casual.
Feel free to disagree with these particulars, but think through your own version of “securing a good hearing.”
It turns out that Eliot and I are good friends, and I’m pretty patient with new technology, though those who tried to attend our interview may not have been. Eliot decided to try again, but with an upcoming interview posted on his website.