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Seed Capital From Angel Investors: Brad Feld, Managing Director, Foundry Group (Part 3)

Posted on Wednesday, Aug 4th 2010

By guest authors Irina Patterson and Candice Arnold

Irina: Have you ever thought about what could make your deal flow more efficient?

Brad: I like the chaos. I like the randomness of it. I have plenty of interactions with people. I try to learn at least one thing in every interaction. We’re very focused on investing only in our themes so, we are very quick if something is outside of one of our themes to try to be polite but say it’s not for us. So, we try to be efficient with everyone’s time, ours and the entrepreneurs’. With those entrepreneurs who fit into our themes, we try to engage very quickly.

Irina: So, on average, from all sources, how many pitches do you get in a month?

Brad: There are probably two ways to count the number. One would be total number, and the other would be the number that we view as qualified and fitting within our themes. If I talk about it across me and my three partners, my guess is we probably have over 1,000 a month of all shapes and fashions. In terms of things that fit within our themes, that are really relevant, probably the order of magnitude is around one hundred.

Irina: Of all those pitches, how many deserve a closer look?

Brad: Well, there are probably one hundred a month in that qualified category, again, fitting inside of our themes. And then within those, I would guess that we probably spend real time, where real time is more than just an e-mail interaction, twenty a month.

Irina: Once you select those, what is your next step of engagement with them?

Brad: We have a very simple model. Since all four of us invest in same types of companies, once somebody gets interested in something, the next step for us is for each of the partners is to spend some time with the entrepreneurs and with the company.

We don’t do that in a group, necessarily. We let everybody do it one-on-one or two-on- one; however, it ends up working. Internally we have a rule that each of us has to be equal to or more excited about the company than our previous interaction to keep going. Because we know the themes and the domains really well that these companies are building stuff in, we don’t have to spend a lot of our time – in many cases we don’t have to spend any of our time – evaluating the markets, understanding how the markets work, and understanding the competitors or the customers dynamics.

Instead, we spend all of our time working with the entrepreneur and the initial team as well as with the products and just really deciding whether we want to be long-term investors and long-term partners with the entrepreneurs.

I would say that we can make a decision quickly in both directions. If somebody walks out of the meeting and feels his or her enthusiasm waning, we tend to stop right away. We don’t try to convince ourselves that we should keep going if somebody is losing enthusiasm for something. If everybody is having good meetings and we’re feeling pretty excited about it, we tend to follow that and aggressively move forward. So, it’s less of a formalized process and much more of – we just want to spend time with the entrepreneurs, and that helps us understand whether we want to invest in the business.

This segment is part 3 in the series : Seed Capital From Angel Investors: Brad Feld, Managing Director, Foundry Group
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