The Exchanges

Q I mean, speaking of kind of building that valuable business over the long period of time, I do want to put back in the operator hat now, because you said before, and I love this, you said run your fucking business. So super obvious, maybe, but why did you say this? And what did you really mean behind it, Brad?

A Well, anyone who's ever been involved in a company that I've been an investor in, in a boardroom or CEO at some point, again, not necessarily at the very early stages, because there's so many different things that are going on at the early stages. You're trying to get your business going, but at a point where you have a real business, you have real revenue, you have a real customer base, you have a market position has heard me say some version of that. And it's usually the equivalent of me throwing a fit. My temperament is not a volatile temperament. So, you know, when I say something like run your fucking business, it's not me being aggressive or angry. It's me trying to underscore the notion that, okay, we're now in a zone where actually having a really good, effective business is going to accrete value faster than lots of other things. A lot of times that's become profitable, but sometimes it's, hey, we've decided, you know, we've got twenty million dollars of cash in the bank. We've decided that we're going to lose Half a million dollars a month, every month, and we're going to now grow based on losing half a million dollars a month, every month. And if we lose half a million dollars a month, every month, we've got basically capital that'll last us forever. And if we can get our growth rate in the 50, 60, 70, 80, 90% on that kind of a burn, that's equivalent to being effect…

AI assessment note: “Getting the CEO and the leadership team focused on the core economics”

Q Sorry, Brad, you know me, I'm always looking to improve. What would a fake VC day be in your mind?

A Oh, I don't know. Maybe spending some time doing interviews on podcasts. For sure, I think VCs spend way too much time, you know, seeing and being seen. It's one of the joys of being in Boulder, Colorado, is that the people that I end up spending time with face-to-face, it's much more intentional. During the era that I was at SoftBank and then Mobius, I spent a decade in In the Bay Area, one to three days a week, and much of the time that I spent in the Bay Area was in the office, company, company, network, company, network, and then at the end of the day, event, and the next morning event, and it was just this enormous amount of what was effectively lightweight, low-impact networking that consumed a lot of time, maybe raised My profile sum certainly improved my network, but didn't really get to the core of helping generate economic value for the fund and for the companies that I was involved in. Another example of fake VC days would be the endless amount of time that VCs spend with each other, whether it's in a partnership or it's in sort of the guise of getting to know each other, To do something. And you know, every VC that listens to this will, will recognize this. Hey, let's do a deal together someday. And hey, let's do a deal together someday is one of the most hollow statements in the world of VC, because that's so different than, Hey, I'm working on this thing that I'd …

AI assessment note: “effectively lightweight, low-impact networking that consumed a lot of time”

Q No, I'm with you. I should definitely pick this up more. We shall see. Fingers crossed. Tell me, other than Banjo-Deals, which is my must-read book, what book would you say is the must-read and why?

A Well, I mentioned Reboot earlier, and I think that Jerry's book is an incredibly important book to read for any entrepreneur and any leader, so I'd put that one high on the list. The other book, which I'll add to it since I said Reboot earlier, that I thought was a fantastic book Was Melinda Gates's book from this year. I don't know Melinda other than from a distance, but she wrote a book like Jerry's book. It's a combination of memoir, storytelling, philosophy, and I would say advice, frame of reference, and weaving those things together is extremely hard to do, and I think she did a great job of that as well. Bonus points, by the way, would be for Jean Case's book, Be Fearless. Also did the same kind of thing. Wove together memoir, Philosophy, storytelling, and advice.

AI assessment note: “Jerry's book is an incredibly important book to read for any entrepreneur and any leader”

Q I'm ecstatic to have you here. I'm over the moon. I'd love to start off at the beginning. We often see you as this titan of the tech industry, but can you take us back to the beginning for you?

A Sure. I started my first company when I was in school and college. I'm, I'm about almost 50, so that would have been, uh, 30 years ago. And, uh, the first couple of companies I started failed. So, my, uh, Very first company was a company called Martingale software, which I started with, uh, a handful of fraternity brothers, um, to write software for the Mac when the Apple Mac was just coming out, 1983, 1984, and, um, uh, the end result was we made almost no progress building any software for the Mac. Uh, we did manage to raise 10,000 dollars, and at the end we sold all the equipment that we had for 7000 dollars, so we gave our investor back 70 cents on the dollar, uh, Um, but it was still a total failure. Uh, second company was a company called Data Vision that I started with, um, a client of a company that I worked as a, uh, uh, early employee of, and I'll, I'll, I'll describe that in a minute, because I should have included that in the, in the beginning. And, uh, I had 20% of that company. He had 80%. We raised a little money. We tried to build a product. Uh, it failed. And my Third company, and the first one that was successful, was a company called Feld Technologies, which grew out of consulting work that I was doing while I was in college, uh, writing, uh, business applications for PCs in the late, uh, or mid, mid-nineteen-eighties to the late-nineteen-eighties, back when …

AI assessment note: “I started my first company when I was in school and college.”

Q And you talked there briefly about the equal partnership at the Foundry Group. Is that the key determinant or the key driver for you in what makes the Foundry Group so successful?

A Um, no, I think it's a, I think it's one of many characteristics. We, we have A set of what we call deeply held beliefs, which doesn't mean they're immutable. They can change and evolve over time, but they're deeply held. And I would say those deeply held beliefs create structure and strategy for what we do. And that is unchanging over a long period of time. So an example would be when we started Foundry, a deeply held belief was that we would never, uh, grow. It would just be, you know, the initial, the initial partners. We'd never add any, uh, Uh, junior people, and that we would be the ones that were doing all the work, uh, with the founders versus, you know, having a staff or a team in, in between us.

AI assessment note: “no, I think it's a, I think it's one of many characteristics.”

Q And you said, though, that it didn't get you excited. So what, what, do you see any commonalities in what does get you excited? What makes you leave a meeting going, I want to be involved?

A Yeah, I think it's stylistic as a result of how my partners at Foundry and I work. So, um, the four of us, and, and there's only four of us, we don't have any associates or principals or, or junior people, uh, and we're all equal partners, work on everything together, and the, uh, the, the dynamics are quite simple. We have a filter on the front end, uh, we have a set of themes that we're interested in, Uh, we're early stage investors, but we don't have to have to be the first money in, so if you've raised less than three million bucks, we're a potential target. Uh, and then we only invest in the US. If you get through that filter, you're in a theme, you've raised less than three million bucks, and then you're in the US, we then focus our energy on three things. One is, do we have affinity for the product? We don't have to love the product. It doesn't have to be like the most important product in our universe, but we have to have affinity for it. We have to care about it. Um, we've made enough investments in our history and stuff that we didn't really care about, and at some point realized that wasn't interesting. Second, the founders have to be completely and totally obsessed about the product. And I don't mean passionate. I hear the word passion used all the time with entrepreneurs. You know, I can be super passionate about even talking on a podcast. You know, it's so awesome…

AI assessment note: “we then focus our energy on three things. One is, do we have affinity”

Q I'm ecstatic to have you here. I'm over the moon. I'd love to start off at the beginning. We often see you as this titan of the tech industry, but can you take us back to the beginning for you?

A Sure. I started my first company when I was in school and college. I'm, I'm about almost 50, so that would have been, uh, 30 years ago. And, uh, the first couple of companies I started failed. So, my, uh, Very first company was a company called Martingale software, which I started with, uh, a handful of fraternity brothers, um, to write software for the Mac when the Apple Mac was just coming out, 1983, 1984, and, um, uh, the end result was we made almost no progress building any software for the Mac. Uh, we did manage to raise 10,000 dollars, and at the end we sold all the equipment that we had for 7000 dollars, so we gave our investor back 70 cents on the dollar, uh, Um, but it was still a total failure. Uh, second company was a company called Data Vision that I started with, um, a client of a company that I worked as a, uh, uh, early employee of, and I'll, I'll, I'll describe that in a minute, because I should have included that in the, in the beginning. And, uh, I had 20% of that company. He had 80%. We raised a little money. We tried to build a product. Uh, it failed. And my Third company, and the first one that was successful, was a company called Feld Technologies, which grew out of consulting work that I was doing while I was in college, uh, writing, uh, business applications for PCs in the late, uh, or mid, mid-nineteen-eighties to the late-nineteen-eighties, back when …

AI assessment note: “I started my first company when I was in school and college.”

Q And you said, though, that it didn't get you excited. So what, what, do you see any commonalities in what does get you excited? What makes you leave a meeting going, I want to be involved?

A Yeah, I think it's stylistic as a result of how my partners at Foundry and I work. So, um, the four of us, and, and there's only four of us, we don't have any associates or principals or, or junior people, uh, and we're all equal partners, work on everything together, and the, uh, the, the dynamics are quite simple. We have a filter on the front end, uh, we have a set of themes that we're interested in, Uh, we're early stage investors, but we don't have to have to be the first money in, so if you've raised less than three million bucks, we're a potential target. Uh, and then we only invest in the US. If you get through that filter, you're in a theme, you've raised less than three million bucks, and then you're in the US, we then focus our energy on three things. One is, do we have affinity for the product? We don't have to love the product. It doesn't have to be like the most important product in our universe, but we have to have affinity for it. We have to care about it. Um, we've made enough investments in our history and stuff that we didn't really care about, and at some point realized that wasn't interesting. Second, the founders have to be completely and totally obsessed about the product. And I don't mean passionate. I hear the word passion used all the time with entrepreneurs. You know, I can be super passionate about even talking on a podcast. You know, it's so awesome…

AI assessment note: “we then focus our energy on three things. One is, do we have affinity”

Q And then moving from this failure to, to incredible success recently that you've had, and I want to say congratulations for the success you've had with Fitbit, but I'm aware that on the first opportunity you didn't invest in them. Why was that, and what changed?

A Yeah, so, uh, in, in the case of Fitbit, uh, it, like a number of other companies that we were investors in, you know, several which are, are very successful, are good examples of companies that we initially passed on, and then, you know, six or 12 months later, uh, made an investment. Uh, for, for Fitbit specifically, um, I got introduced to James Park, the founder, one of the two founders, James and Eric are the founders, the CEO, by, um, Uh, two, two other investors who I'm good friends with, Jeff Clavier at SoftTech and John Callahan at True, and, and they both encouraged me to spend time with James and take a meeting, and, uh, I did, but I didn't do it in a way that was particularly present on my part, so, uh, I was, you know, I'm sure I was busy. I had other things on my mind. I did a conference call with James. I was interested topically in what Uh, this notion of what I was calling human instrumentation, but I was just starting to think about it. Um, you know, Fitbit was very early in its, in its curve in terms of product cycle. And I had a 30 minute phone call with James that I just came away from pretty flat. I wasn't excited. I wasn't, like, super into it. I didn't dislike it. I didn't dislike him. But I wasn't like, wow, I want to really dive into this. And so I passed. And about, I don't know, six, nine months later, they never ended up raising any money at that st…

AI assessment note: “I had a 30 minute phone call with James that I just came away from pretty flat.”

Q And what do you think you learned from the early failures?

A Well, I, I think I learned how to fail gracefully. Um, you know, it sucks to fail, but it's part of the experience, and, you know, when, when, when you're four guys in a fraternity, you got a whole bunch of computers in a room, uh, in 1980, you know, 83 and 84, it's, it's pretty exciting when you get all the computers, and you get some initial funding, and you start doing stuff, and then a year later, when you shut the company down, uh, you know, in plain sight of your 55 other people that you live with, it's a, it's a little tough. Um, I think, you know, I learned how to work through the emotional cycle of that. Not completely, but certainly the experience of it. Uh, I learned the importance of partners who were all fully engaged. Um, the four of us that started the first company, uh, really, I would say, uh, two of the four of us did the vast majority of the work. And it wasn't to say that the other two were bad partners, but, you know, we were all Freshman, except for one who was a senior, and everybody had, you know, lots of other things that were priorities. Um, and then the last is I, I think I learned very early on the, uh, idea of Essentially taking, taking ownership and taking responsibility for whatever the reality is, because I, I, I fucked up a lot of things. I made a lot of mistakes. I said a bunch of stupid things early on and, you know, you, you very, very quickl…

AI assessment note: “Well, I, I think I learned how to fail gracefully.”

Q Brad, what are you doing to make the second half of twenty-twenty not as bad as the first half of twenty-twenty bluntly?

A A couple of things. One is, I accepted that we're living in the middle of a remarkable moment in time, and rather than try to fight or control things, I'm existing within it. Second, I realized that as much effort as I put into taking care of myself, or think I put into taking care of myself, I wasn't really doing a very good job of taking care of myself the last three months, because I felt that there were so many things I had to be involved in to try to help To address various versions of the COVID crisis. And while I'm still engaged in many things, whether it's for Portfolio companies, or for the state of Colorado, or for different groups of people that I'm involved in, or different initiatives I'm involved in, I reprioritizing myself in the context of that. And the last is, I had a framework that I've been operating under for the last year and a half or so, conceptual framework for how I wanted to organize all the different pieces of my work life, and I realized it was not serving me well. And so, I tore it up and threw it away about 30 days ago, and I'm just approaching things differently.

AI assessment note: “A couple of things. One is, I accepted that we're living in the middle”

Q Brad, what are you doing to make the second half of twenty-twenty not as bad as the first half of twenty-twenty bluntly?

A A couple of things. One is, I accepted that we're living in the middle of a remarkable moment in time, and rather than try to fight or control things, I'm existing within it. Second, I realized that as much effort as I put into taking care of myself, or think I put into taking care of myself, I wasn't really doing a very good job of taking care of myself the last three months, because I felt that there were so many things I had to be involved in to try to help To address various versions of the COVID crisis. And while I'm still engaged in many things, whether it's for Portfolio companies, or for the state of Colorado, or for different groups of people that I'm involved in, or different initiatives I'm involved in, I reprioritizing myself in the context of that. And the last is, I had a framework that I've been operating under for the last year and a half or so, conceptual framework for how I wanted to organize all the different pieces of my work life, and I realized it was not serving me well. And so, I tore it up and threw it away about 30 days ago, and I'm just approaching things differently.

AI assessment note: “A couple of things. One is, I accepted that we're living in the middle”

Q I mean, speaking of kind of building that valuable business over the long period of time, I do want to put back in the operator hat now, because you said before, and I love this, you said run your fucking business. So super obvious, maybe, but why did you say this? And what did you really mean behind it, Brad?

A Well, anyone who's ever been involved in a company that I've been an investor in, in a boardroom or CEO at some point, again, not necessarily at the very early stages, because there's so many different things that are going on at the early stages. You're trying to get your business going, but at a point where you have a real business, you have real revenue, you have a real customer base, you have a market position has heard me say some version of that. And it's usually the equivalent of me throwing a fit. My temperament is not a volatile temperament. So, you know, when I say something like run your fucking business, it's not me being aggressive or angry. It's me trying to underscore the notion that, okay, we're now in a zone where actually having a really good, effective business is going to accrete value faster than lots of other things. A lot of times that's become profitable, but sometimes it's, hey, we've decided, you know, we've got twenty million dollars of cash in the bank. We've decided that we're going to lose Half a million dollars a month, every month, and we're going to now grow based on losing half a million dollars a month, every month. And if we lose half a million dollars a month, every month, we've got basically capital that'll last us forever. And if we can get our growth rate in the 50, 60, 70, 80, 90% on that kind of a burn, that's equivalent to being effect…

AI assessment note: “Getting the CEO and the leadership team focused on the core economics of what they've got”

Q Sorry, Brad, you know me, I'm always looking to improve. What would a fake VC day be in your mind?

A Oh, I don't know. Maybe spending some time doing interviews on podcasts. For sure, I think VCs spend way too much time, you know, seeing and being seen. It's one of the joys of being in Boulder, Colorado, is that the people that I end up spending time with face-to-face, it's much more intentional. During the era that I was at SoftBank and then Mobius, I spent a decade in In the Bay Area, one to three days a week, and much of the time that I spent in the Bay Area was in the office, company, company, network, company, network, and then at the end of the day, event, and the next morning event, and it was just this enormous amount of what was effectively lightweight, low-impact networking that consumed a lot of time, maybe raised My profile sum certainly improved my network, but didn't really get to the core of helping generate economic value for the fund and for the companies that I was involved in. Another example of fake VC days would be the endless amount of time that VCs spend with each other, whether it's in a partnership or it's in sort of the guise of getting to know each other, To do something. And you know, every VC that listens to this will, will recognize this. Hey, let's do a deal together someday. And hey, let's do a deal together someday is one of the most hollow statements in the world of VC, because that's so different than, Hey, I'm working on this thing that I'd …

AI assessment note: “Another example of fake VC days would be the endless amount of time that VCs spend”

Q No, I'm with you. I should definitely pick this up more. We shall see. Fingers crossed. Tell me, other than Banjo-Deals, which is my must-read book, what book would you say is the must-read and why?

A Well, I mentioned Reboot earlier, and I think that Jerry's book is an incredibly important book to read for any entrepreneur and any leader, so I'd put that one high on the list. The other book, which I'll add to it since I said Reboot earlier, that I thought was a fantastic book Was Melinda Gates's book from this year. I don't know Melinda other than from a distance, but she wrote a book like Jerry's book. It's a combination of memoir, storytelling, philosophy, and I would say advice, frame of reference, and weaving those things together is extremely hard to do, and I think she did a great job of that as well. Bonus points, by the way, would be for Jean Case's book, Be Fearless. Also did the same kind of thing. Wove together memoir, Philosophy, storytelling, and advice.

AI assessment note: “Jerry's book is an incredibly important book to read for any entrepreneur”

Q Can I ask Brad, and this is a transition that I've been going through, and it's not necessarily an easy one, actually, I think, and I don't think it's talked about enough. But in terms of transitioning from angel to VC, how did you find that transition in terms of the institutionalization of your mindset and your process? Was it challenging? And how did you go through that process?

A It was a mess. And it was a mess for me personally at two levels. One was the timing, which was this incredibly chaotic and aggressive investing timeframe. If you go back to 1995 96, that was the beginning of the rise of the commercial Internet. And it was a very transitional time for investing because nobody really thought when I say nobody, very few people really understood what the internet meant and what the implications of the internet were going to be. There were some very early leaders and some VCs who were investing in it, but generally speaking, there was a lot of misunderstanding around what the internet was and the tools suck. And so you ended up in this world where building very, very basic things was very hard. So existing companies, You know, large businesses that had significant software businesses. I sort of looked at it like this is a toy, right? So it was still very in the emergent stage. So that was one layer. The other layer was I was going through my own transition from being an operator to being an investor. And when I started as an angel investor, I really was only focused on two things when I made a decision to invest in a company. The first was the people. Did I want to be partners with these people? And the second was the product. And did I care about the product? Did I have an affinity for a product? And I was a very product-centric entrepreneur and p…

AI assessment note: “It was a mess. And it was a mess for me personally at two levels.”

Q rates and availability of capital, and really the oversight We have Bill Gurley on the show, and he said the oversupply of capital is his biggest challenge today. Would you agree with him? And with the many years of venture, Brad, do you not slightly look at some of the pricing today and just feel very uncomfortable? I know I do, and I don't have the decades of hindsight experience.

A Sure. There are a huge number of companies that get valuation marks, and you look at the valuations, and you just sort of shake your head and say, I don't understand that. At least I say that. I don't know that the oversupply of capital is the The biggest challenge, and some of it may be the way that we invest as a firm and where we go looking for investments, which is we're not living in a world of Bay Area, super high inflated rounds with way too much capital going into companies. That's not our normal type of company that we're funding and investing in. We're actually on the other end of the spectrum. It's not that we resist Doing larger financings for companies when they're successful. We actually are obviously very supportive of that, but until the company has clearly hit a success point, we don't want to overfund it. And we'd rather have multiple rounds of investment where we can continue as an investor to get more capital to work in the company at reasonable prices than end up with a huge amount of capital that comes into a company too early in its cycle at too high a price. Because that'll price us out of being able to continue to invest. And so culturally, the companies that we're attracted to, it's not that they're super low burn rate companies, but they tend to have founders who are not trying to optimize in the short term for overly high valuations or huge amounts o…

AI assessment note: “I don't know that the oversupply of capital is the The biggest challenge”

Q do you have to have that existing relationship, though, to know whether that person is specifically the right person for this deal due to expertise, Stage, insertion point, whatever that may be. Do you not have to know that person or for that person to have a very explicit brand where they've already articulated why they like certain deals to really know that person's the one for that deal specifically?

A Yeah, it's an insightful point. The answer is absolutely. However, in my own experience, the only real way to get to know someone is to do something with them. So the first of your evaluative criteria is a decision that you want to work with somebody else based on whatever external information you have. And then the second piece of evaluative criteria is actually working with them and learning about them. And there's lots of ways to do things with other people that are relatively lightweight where you learn what they're like. And it's different than the, okay, I'm going to go check references, or I'm going to go interpret the public persona of the person, or I'm going to go hang out and spend a lot of time with the person. Because in positive environments, VCs, entrepreneurs, I mean, most people present themselves well. Right. I like to say the great salespeople in the world, the great VPs of sales are best at selling themselves. And if a VP of sales can't sell themselves to you, that's a problem. Interestingly, VCs are the same way. Most VCs are really good at selling themselves. That's not where it matters. Where it matters is when things get all screwed up or when you're having tension or when there's exogenous pressures on the other person that have nothing to do with you or the company you're involved in and how they behave in that context. And how they interact and relate…

AI assessment note: “The answer is absolutely. However, in my own experience, the only real way”

Q What advice would you give to a twenty-year younger self?

A Uh, I would have traveled around the world a lot more when I was younger. I, I definitely traveled in certain places. Uh, I spent a summer when I was in high school in London. Uh, I spent a bunch of time in, in, uh, France and a little bit of time in Germany. I spent a decent amount of time in Mexico, Canada. Um, and, you know, in, I, what I would say is kind of first world parts of Uh, you know, the eastern part of the world, but I have not traveled around extensively in lots of places, and I didn't do the adventure travel that when you're 22 or 23 or 24, you can so durably do, and as a result, I, I find myself in lots of places around the world uncomfortable when I don't feel like I necessarily need it to be, and I think my perspective is Uh, on, you know, society and the world in general is, is good, but I've got lots and lots of blind spots as a result of not having immersed myself in, in different parts of the world.

AI assessment note: “I would have traveled around the world a lot more when I was younger”

Q And you talked there briefly about the equal partnership at the Foundry Group. Is that the key determinant or the key driver for you in what makes the Foundry Group so successful?

A Um, no, I think it's a, I think it's one of many characteristics. We, we have A set of what we call deeply held beliefs, which doesn't mean they're immutable. They can change and evolve over time, but they're deeply held. And I would say those deeply held beliefs create structure and strategy for what we do. And that is unchanging over a long period of time. So an example would be when we started Foundry, a deeply held belief was that we would never, uh, grow. It would just be, you know, the initial, the initial partners. We'd never add any, uh, Uh, junior people, and that we would be the ones that were doing all the work, uh, with the founders versus, you know, having a staff or a team in, in between us.

AI assessment note: “no, I think it's a, I think it's one of many characteristics.”

Q What advice would you give to a twenty-year younger self?

A Uh, I would have traveled around the world a lot more when I was younger. I, I definitely traveled in certain places. Uh, I spent a summer when I was in high school in London. Uh, I spent a bunch of time in, in, uh, France and a little bit of time in Germany. I spent a decent amount of time in Mexico, Canada. Um, and, you know, in, I, what I would say is kind of first world parts of Uh, you know, the eastern part of the world, but I have not traveled around extensively in lots of places, and I didn't do the adventure travel that when you're 22 or 23 or 24, you can so durably do, and as a result, I, I find myself in lots of places around the world uncomfortable when I don't feel like I necessarily need it to be, and I think my perspective is Uh, on, you know, society and the world in general is, is good, but I've got lots and lots of blind spots as a result of not having immersed myself in, in different parts of the world.

AI assessment note: “I would have traveled around the world a lot more when I was younger.”

Q I've done my 10,000 hours, but I do want to start. You mentioned episode 65 there, Brad. I want to start with that, and for those that maybe didn't hear episode 65, because I think it was about only my mother that listened back then, tell us, how did you make your way into the world of venture, and what was the founding of Foundry for you and the team?

A Sure. I took a path to venture that went from entrepreneur to angel investor to randomly becoming a VC. To then bracing my reality as a VC. That path was, I started a company in the 19 eighties, which was a self-funded business. We raised 10 bucks, and we had 10 shares of stock, a dollar a share. Fortunately, when we sold it, it was worth a lot more than a dollar a share, but we still had 10 shares of stock. That company was acquired by a public company in 1993, so I got the experience of going from being a CEO of a tiny little company to being on the executive team of a fast-growing public company that also then bought a bunch of companies, so I started investing basically all of the money I made from that first sale. I invested in other startups from 94 to 96. I also learned how to buy companies because the guys that had bought my company were masters at that. Two people, Len Fassler, who's still one of my closest mentors, and Jerry Pak, also a very good friend. And from that, as an angel investor, I did about 40 angel investors in a three-year period and woke up one day and was investing with a group of people that were part of a company called SoftBank. And that was in 1996, and four of us, me and three of the people that worked for SoftBank, ended up raising a fund that was called SoftBank Technology Ventures. It was originally called SoftBank Technology Ventures Four. It …

AI assessment note: “I took a path to venture that went from entrepreneur to angel investor”

Q Can I ask Brad, and this is a transition that I've been going through, and it's not necessarily an easy one, actually, I think, and I don't think it's talked about enough. But in terms of transitioning from angel to VC, how did you find that transition in terms of the institutionalization of your mindset and your process? Was it challenging? And how did you go through that process?

A It was a mess. And it was a mess for me personally at two levels. One was the timing, which was this incredibly chaotic and aggressive investing timeframe. If you go back to 1995 96, that was the beginning of the rise of the commercial Internet. And it was a very transitional time for investing because nobody really thought when I say nobody, very few people really understood what the internet meant and what the implications of the internet were going to be. There were some very early leaders and some VCs who were investing in it, but generally speaking, there was a lot of misunderstanding around what the internet was and the tools suck. And so you ended up in this world where building very, very basic things was very hard. So existing companies, You know, large businesses that had significant software businesses. I sort of looked at it like this is a toy, right? So it was still very in the emergent stage. So that was one layer. The other layer was I was going through my own transition from being an operator to being an investor. And when I started as an angel investor, I really was only focused on two things when I made a decision to invest in a company. The first was the people. Did I want to be partners with these people? And the second was the product. And did I care about the product? Did I have an affinity for a product? And I was a very product-centric entrepreneur and p…

AI assessment note: “It was a mess. And it was a mess for me personally at two levels.”

Q rates and availability of capital, and really the oversight We have Bill Gurley on the show, and he said the oversupply of capital is his biggest challenge today. Would you agree with him? And with the many years of venture, Brad, do you not slightly look at some of the pricing today and just feel very uncomfortable? I know I do, and I don't have the decades of hindsight experience.

A Sure. There are a huge number of companies that get valuation marks, and you look at the valuations, and you just sort of shake your head and say, I don't understand that. At least I say that. I don't know that the oversupply of capital is the The biggest challenge, and some of it may be the way that we invest as a firm and where we go looking for investments, which is we're not living in a world of Bay Area, super high inflated rounds with way too much capital going into companies. That's not our normal type of company that we're funding and investing in. We're actually on the other end of the spectrum. It's not that we resist Doing larger financings for companies when they're successful. We actually are obviously very supportive of that, but until the company has clearly hit a success point, we don't want to overfund it. And we'd rather have multiple rounds of investment where we can continue as an investor to get more capital to work in the company at reasonable prices than end up with a huge amount of capital that comes into a company too early in its cycle at too high a price. Because that'll price us out of being able to continue to invest. And so culturally, the companies that we're attracted to, it's not that they're super low burn rate companies, but they tend to have founders who are not trying to optimize in the short term for overly high valuations or huge amounts o…

AI assessment note: “I don't know that the oversupply of capital is the The biggest challenge”

Q one element there. You said obviously about the primary element of the founder, but then also the product. I'm also today much more enamored and intrigued by the market from a meta perspective, always concerned that products change so rapidly, iterations, and actually the product you invest in today isn't what it is tomorrow. How do you think about product versus market? And that thought process when evaluating opportunities today.

A So most of the companies that I've invested in over the years that have been really successful at the point of the initial investment, the market opportunity, you'd look at it and you'd either say it was zero or infinite. And it was one of these things where the venture cliche of total available market, especially at the early stages is really not that helpful, especially when you're coming into a world with a product obsession, even if you're to Displacing an existing incumbent product. The interesting trajectory of that is that early in the life of a company, the product does matter a ton. As the company starts to grow and develop, the great founding CEOs start to view the company itself as the product. So they evolved from being product focused, and the thing that they're really working on all the time is that initial product, to being company focused, where what they're working on is the growth and development of the company. You actually see this in some companies that look like they're scaling really well and then fall apart for various reasons is that the founding CEOs often get distracted and stop putting the energy into really working on the company. And really charismatic founders can often get a lot of money raised before you really understand that there's cracks in the foundation because there isn't that scaling from product to company.

AI assessment note: “the market opportunity, you'd look at it and you'd either say it was zero or infinite”

Q of core part of our role. I am really interested that, Brad, you know, you've sat on some of the most incredible boards over the last Decade and a half. And so tell me, what would you advise me having just joined my first institutional board, and what kind of wisdom and tidbit would you give to me having just joined that board? I'm super interested to hear this one.

A I think when I reflect on my early board meetings, and again, I had a lot of them, right, because I did all these angel investments, and I joined the board of the 40 companies I invested, and I was probably on the board of half of them, 15 of them, 10 of them, I don't know, maybe 20 of them. I didn't know anything about being on a board because my first company didn't have a board. And In those board meetings, most of the entrepreneurs, because the companies were so early, didn't really have a formalized board dynamic. So my experience was that those were what would be called today working boards versus governance boards. There was a lot of discussion. There was a lot of back and forth. There was a lot of digging into problems. And they were boards that had a continuous characteristic. So it wasn't that you show up at a board meeting once every month or two or three, and then had no interaction. A number of these companies, you know, I'd work out of their offices a day a week. I spent lots and lots of The time with the entrepreneurs and it was across multiple companies, not just one. So if I cycle it back to advice, it would be as an early board member, try to figure out ways that you can work with the founders to be really helpful to them rather than put yourself in a one up, one down position with the founders where you're responsible somehow as a board member for some abstra…

AI assessment note: “advice, it would be as an early board member, try to figure out ways”

Q Sure. Absolutely. And so would you say you don't agree with the recent view that kind of failure is a necessity for entrepreneurs to be successful and that it's so important to Would you say you agree, you disagree with that view?

A I think it's very confusing. There's, there's definitely a correlation causality problem in the discussion, and there's a, I would say there's a, the trendiness problem in the discussion, which is the, you know, the idea of, you know, failure is a badge of honor, or as human beings, we love the, uh, you know, we love the stories of redemption, uh, somebody's successful, then they fail, then they succeed again. Like, those are natural human things that we're attracted to. Um, I, I prefer to think of Uh, failure as a, uh, continuous thing that happens all throughout one's life on all vectors, and it's not that we're focused on that moment in time where the company fails, but every success I've ever been in, uh, involved in has had multiple points of failure, some of them near-death experiences for the company, and the great founders and the great companies Uh, and I think the great investors are the ones that have a lot of durability, uh, through those moments in time, especially if you're playing a long-term game, which is to say that you might have a company that fails, but if you do it in a way that's respectful, uh, of everybody, it's likely that a number of those people will, uh, be there for you the next time because you've learned a lot from the failure. If you're not respectful and grace, graceful in that context, uh, you know, that's, uh, that's going to come back to hau…

AI assessment note: “correlation causality problem in the discussion, and there's a, I would say there's a, the trendiness problem”

Q absolutely fantastic. If anyone listening hasn't read it, it really is a must. But I do want to talk about venture deals, Brad. Now this book has been so formative, I mean, for me, but also a generation of VCs over the last decade, really. And so I want to start with venture deals. When did you start writing it? And what was the core reason behind your writing it?

A So in 2004, I started blogging and I really just started blogging fell.com because I was interested in RSS as a protocol. Blogging had been around for a while. I always like to write, and I just figured, ah, you know, let me try to figure out how this RSS thing works. I'll start blogging. I'll write in public. Who knows where it'll go and what it'll be, but it'll be good muscle building exercise. Shortly after, within six to 12 months, my partner, Jason Mendelson, and I were working on a deal, and it was stupid. Like, literally, you know, it was, we're making an investment in something, and literally, the process was stupid. The lawyer for the entrepreneur was terrible. It's probably a divorce lawyer, not a corporate lawyer. We were not the first money in the company. There was already an investor. The investor's approach to it was really strange, and the things that that investor wanted were dumb, and the entrepreneur was stuck because the entrepreneur really wanted us as investors, but was having a really difficult time navigating the advice. In this case, it was a he. He was getting from this early investor and from his lawyer Against the backdrop of what we thought were non-controversial things, and then on the other end of the spectrum, the things that were coming back at us were just nuts, and we realized, you know, pretty early on, we had a very frank conversation with t…

AI assessment note: “So in 2004, I started blogging and I really just started blogging fell.com”

Q of core part of our role. I am really interested that, Brad, you know, you've sat on some of the most incredible boards over the last Decade and a half. And so tell me, what would you advise me having just joined my first institutional board, and what kind of wisdom and tidbit would you give to me having just joined that board? I'm super interested to hear this one.

A I think when I reflect on my early board meetings, and again, I had a lot of them, right, because I did all these angel investments, and I joined the board of the 40 companies I invested, and I was probably on the board of half of them, 15 of them, 10 of them, I don't know, maybe 20 of them. I didn't know anything about being on a board because my first company didn't have a board. And In those board meetings, most of the entrepreneurs, because the companies were so early, didn't really have a formalized board dynamic. So my experience was that those were what would be called today working boards versus governance boards. There was a lot of discussion. There was a lot of back and forth. There was a lot of digging into problems. And they were boards that had a continuous characteristic. So it wasn't that you show up at a board meeting once every month or two or three, and then had no interaction. A number of these companies, you know, I'd work out of their offices a day a week. I spent lots and lots of The time with the entrepreneurs and it was across multiple companies, not just one. So if I cycle it back to advice, it would be as an early board member, try to figure out ways that you can work with the founders to be really helpful to them rather than put yourself in a one up, one down position with the founders where you're responsible somehow as a board member for some abstra…

AI assessment note: “try to figure out ways that you can work with the founders to be really helpful”

Q absolutely fantastic. If anyone listening hasn't read it, it really is a must. But I do want to talk about venture deals, Brad. Now this book has been so formative, I mean, for me, but also a generation of VCs over the last decade, really. And so I want to start with venture deals. When did you start writing it? And what was the core reason behind your writing it?

A So in 2004, I started blogging and I really just started blogging fell.com because I was interested in RSS as a protocol. Blogging had been around for a while. I always like to write, and I just figured, ah, you know, let me try to figure out how this RSS thing works. I'll start blogging. I'll write in public. Who knows where it'll go and what it'll be, but it'll be good muscle building exercise. Shortly after, within six to 12 months, my partner, Jason Mendelson, and I were working on a deal, and it was stupid. Like, literally, you know, it was, we're making an investment in something, and literally, the process was stupid. The lawyer for the entrepreneur was terrible. It's probably a divorce lawyer, not a corporate lawyer. We were not the first money in the company. There was already an investor. The investor's approach to it was really strange, and the things that that investor wanted were dumb, and the entrepreneur was stuck because the entrepreneur really wanted us as investors, but was having a really difficult time navigating the advice. In this case, it was a he. He was getting from this early investor and from his lawyer Against the backdrop of what we thought were non-controversial things, and then on the other end of the spectrum, the things that were coming back at us were just nuts, and we realized, you know, pretty early on, we had a very frank conversation with t…

AI assessment note: “So in 2004, I started blogging”