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Seed Capital From Angel Investors: Brad Feld, Managing Director, Foundry Group (Part 7)

Posted on Sunday, Aug 8th 2010

By guest authors Irina Patterson and Candice Arnold

Irina: Do you have any preferred investment types? What is it? Preferred shares?

Brad: Yes, we always make equity investments and we almost always take preferred shares.

Irina: Do you think about exit strategy when you invest?

Brad: We don’t think about it.

Irina: What would be your suggestion to the companies that you invest in or any angel backed companies? What should they do to increase their success?

Brad: You could talk about this for several hours. I think the biggest thing, which is something I continue to preach not just directly but through my involvement in things like TechStars, is entrepreneurs, especially first-time entrepreneurs, surround themselves with mentors who can help them, people who have been through it before, who can really help them build a great company.

Irina: A lot of angels say that entrepreneurs don’t take enough advantage of their mentors. Tell us more about TechStars.

Brad: It’s a mentor-driven, accelerated program. We have three programs a year, one in Boulder, one in Boston, and one in Seattle, and each are ninety days long. Ten companies go through it, with usually twenty-five to thirty entrepreneurs.

TechStars provides $12,000 to $18,000 worth of funding and takes 6% of the company in common stock so it looks like a cofounder. The companies join the program typically before they’ve raised any seed money, though not always. Some of the companies have raised some seed money.

And then, the goal as they come out of the program in a much stronger position, is to be able raise anywhere from $250,000 to $1 million and do that first seed financing.

We’ve now had sixty companies go through the program over the past four years. It’s been extremely successful. It’s got some nice exits to date. Companies such as SocialThing, which AOL bought. DailyBurn was just acquired by IAC. Occipital, which makes a product called RedLaser. They just sold the product RedLaser to eBay.

There’s been a high percentage of companies exiting, and also interestingly, about 70% of the companies that go through the program are raising money. So every year, I think, six companies raise money and one company will end up bootstrapping from each of the programs. I think that’s been, roughly, the percentages. It’s pretty amazing to look back at all of the different companies that have gone through the program and see where they and the entrepreneurs are today. It’s really fulfilling.

This segment is part 7 in the series : Seed Capital From Angel Investors: Brad Feld, Managing Director, Foundry Group
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