Brad Feld, a longtime investor and founder of both Foundry Group in Boulder, Co., and Techstars, now a global accelerator program, next week there’s a new book called “The Way of the Startup Community: Developing an Enterprise Ecosystem,” in which he and co-author Ian Hathaway offer some tips on making growing startup communities as powerful as possible now that they exist around the world.
We met with Feld to talk about the book; we also discussed that the founders in any The ecosystem can survive when something like COVID-19 sneaks up, ruining even the most sophisticated plans. Here is a small portion of this chat, slightly edited for clarity. We will talk more about the discussion, including what is happening with many recently funded companies and what he calls the “measurement trap” in the upcoming Extra crunch a piece.
TC: Your new book talks about complex systems. How do founders balance the need to manage these complex systems with the fact that managing these complex systems is sometimes not in their hands?
BF: The first step is to get rid of the idea that you can control the systems, and instead focus on what you can influence [because] in the context of what you can the influence that is beginning to become a place to concentrate where you put your energy.
An example of this might be the current moment. If you have existing investors, and if you did not directly ask your existing investors how much money they have reserved for you for future finances and what you need to do to get this money from them, you do not focus on what you can influence ,
The worst thing your investor can do is say, “I’m not going to tell you this.” But if your investor is really on your side and wants to see you successful, most likely your investor will say: “Well, well, you know. ,. Maybe some kind of weak [talk] and [dollar] ranges and optional language, but at least you will have a frame of reference, be it zero dollars, some money or a lot of money. And you can begin to understand: “Well, what do we need to do, given this moment?”
TC: Let’s assume COVID negatively impacted the company.
BF: Step one — which we hope you took two months ago — aggressively cut your spending structure so that your money lives as long as possible. And then, secondly, make sure that you understand with your investors what are the expectations for your business compared to previous expectations.
I think that there will be a whole category of companies that will receive an asterisk for their results in 2020. It is like a sports season that ends. Anyone who played in the NBA in 2020, on the back of their basketball card or their online statistics, will be marked with an asterisk because [they played] fewer games. And there will be many companies in which investors will measure your indicators for the period from 2019 to 2021, because in 2020 there is an asterisk on them. So, if you belong to this category, growth in 2020 is not the main thing. Most importantly, the money does not end. ., and really make sure that what you do will be relevant in the world after COVID, instead of assuming that this will continue for three or four months, and then we will just go back to where we were before.
TC: I took event Back in March, when Alexis Ohanyan suggested to the founders: “If what you are doing now is simply not a viable solution in this new world and in another economy, then find something that is.” Have any of your portfolio managers reversed course in response to COVID-19?
I can’t think of anyone who broke their business plan and said: “This will not work; we are going to do something completely different. ” We have a number of companies that have persistently stopped doing different things – whether it is searching for new products, expanding into new markets or trying to go on a certain path, which was an addition to what they were doing.
Then we had several companies that were supposed to change their position. A good example of this is Formlabs, which is currently one of the largest 3D desktop printer companies — arguably the largest in Boston — and very successful and prosperous. Now, part of their business – I don’t know the percentage, but more than 10% – was the dental market. And they had many dental labs that bought Formlabs printers. They own production facilities, so they have many resins that are bio-certified, so they can be made on the basis of a service bureau. or they can sell printers for the dental industry. But when everyone starts to close, the dentists close. They are not required. You cannot go to the dentist. Now you can go to the dentist and brush your teeth, but for two months there are no dentists. And this market fell to zero overnight.
Instead of curling up and saying, “Oh, grief is me,” they looked at the need for certain things in the context of COVID. And they realized that one of the immediate flaws in COVID was [nasal] smears for PCR testing. And it turns out that on Formlabs printers, using their bio-certified products, you can print swabs and lots of swaps quite easily. You can print about 100,000 swabs per day on your existing 3D printer farm. So they began to print swaps; they made a deal with one of their clients who was in the hospital to get their certification. They designed them, they tested them, they went through the whole certification process, which they had to go through very quickly, and suddenly, they began to supply tampons.
Well, as it turns out, hospitals suddenly realize that they cannot rely on a normal supply chain to get smears. They can get reagents, they can get test kits, but they can’t get tampons. And then, suddenly, the hospitals began to realize: “We can print the swabs ourselves if we have a Formlabs printer.” Therefore, they concentrated the part of their business that was previously sold in dental laboratories for sale to hospitals.
TK: That is, the leaders of your portfolio who insist on this situation. ,,
BF: When I reflect on our portfolio, the CEOs in our portfolio who do the best work by looking at this — where their business benefits or where they were affected — insist on trying to continue situational awareness with us and with them, because which by the way, companies that benefit from this could [pandemic’s ripple effects] also see that stop suddenly.
This does not mean that you are still not progressing, but that which pushed you forward [sometimes vanishes], And assuming that these things will last forever, this is another problem of linear thinking. If you told someone on February 15 that almost all the people who work in offices around the world would work from home for the next few months, they would say: “You must be joking, no way. ‘
Similarly, telemedicine made 10-year progress in four weeks. Technology existed, software existed, people could do behavioral telemedicine. But we had this massive phase shift that occurred as a result of this thing, which occurred in a very short period of time. This happens again and again with innovation. And honestly, this is one of the reasons many entrepreneurs are disappointed, especially around investors. Because when entrepreneurs begin such a logical transition to the next, and investors don’t see this, it can be frustrating. Or maybe it will take five years due to the existing dynamics, and you know that in the end you will get to this, but against the background of these changes there is an urgent need: “Why not more now, faster?”.
This is not a criticism of the venture capital industry. I think this is one of the speakers that is also complicated in this mix.