Interviewer: Hello this is Hyejung Min, editor and producer at Onsuccess. Today we have a very special guest here with us, one of the most respected venture capitalists in the states, invested in some of the greatest IT software firms and also an expert in listening to his heart. Hello Brad.
Brad: Nice to meet you.
Interviewer: Nice to meet you too. How's your book going?
Brad: It's good. Amy and I have been working on a book called startup marriage for about two weeks now, and whenever you start a new book, and this will be the third book I've written, the first month or so it just takes some time to get into it. We're in the phase right now, we're writing when we feel like it and we're making some progress but not putting too much pressure on ourselves.
Interviewer: What led you to write this book?
Brad: Um.. We've talked on and off - Amy is my wife - have talked on and off about probably a decade about doing something like this.. You know we have a lot of friends obviously who are entrepreneurs, a lot of couples.. And we're thinking about working on our own relationship and trying to get to a place where we can mix both entrepreneurship and relationship and we've been encouraged by a lot of friends to actually take on writing a book at some point, and we decided to give it a shot.
Interviewer: Today we have two main themes for our special interview - the first is 1. Problems and constraints for Asian entrepreneurs wanting to launch a company in the US. We want to learn about the problems and constraints they commonly have and how to overcome them. 2. What does Asia need to improve to make Asia a better environment for startups?
Now Brad, we know that you're investing only within the states therefore you might not know much about the Asian Market, but we'd like to hear based on your experience as an investor for decades and also based on Techstars, and how you are not investing only locally but trying to create this ecosystem in the US generally.
Brad: Sure. On the first topic, unfortunately it's very difficult right now for a foreign entrepreneur to come to the US and start a company because of the different immigration laws and visa rules. It's something I find particularly problematic, unsatisfying with a bunch of other entrepreneurs and a couple of investors I started something called the 'Startup Visa movement' with the idea of trying to make it easy for a foreign entrepreneur to come to the US and start a business. I have a very very strong belief that people should be able to start up a business wherever in the world they want to. I obviously think the US is a great place to start a business, I think you can start a business wherever however, but there shouldn't be things that prevent entrepreneurs who want to come to the US to start a business to get things up and running easily. The Startup Visa is not a law at this point, it's been introduced into congress... I don't know if you're listeners that understand the way the laws work in the US, but basically bills can get introduced into congress, they go through a process and eventually if they get support of congress they become a law that then the president has a chance to veto or approve. Unfortunately because of the current political situation in the US, there's not a lot that's moving through congress, and on the immigration front, there's virtually nothing moving because of a huge political stalemate between the democrats and republicans. So you know, the ideas behind the startup visa are out there and pretty strong but I could remain hopeful and optimistic that something happens.
So in the context of that it is difficult for a foreign entrepreneur to get a company up and running in the US. However if you happen to or are really determined you can often get a different visa type and/or join an existing startup that is doing something similar to what you're working on. And I think US is extremely welcoming to foreign entreprenurs, US entrepreneurs are very welcoming to foreign entrepreneurs - if you look in Silicon Valley and the entrepreneurial community there or the entrepreneurial community in Boston or New York, of foreign entrepreneurs, especially historically in Silicon Valley, I don't know the exact number but every now and then you hear a number that almost 50% of the people in Silicon Valley have at least one foreign founder or non-US founder, I should say. I think culturally I think there's a lot of comfort with having somebody that's Asian or not from the US to be involved with starting a company.
Intreviewer Q. Lets take it a little bit into the individual side. For Asian entrepreneurs, what may be the problems or constraints they might encounter other than the visa problems or the laws? For example, there may be revenue constraints, or language problems, culture.
Brad: I don't sense that there's strong biases in general especially towards Asians. I went to MIT in Boston and when I went there even in the 1980s it was a very multicultural place, many of my friends and peers were Asian, a number of people that I know in the entrepreneurial community that I've worked in Silicon Valley are first or second generation US.. You know one generation ago their parents came from Japan or China and spent a lot of time working with folks from Softbank over the years, they're very involved in my first venture fund so I don't sense that there's a lot of cultural bias.
Interviwer: Q. If it's not a cultural bias what do you think about this - They might have different views or thoughts from Americans therefore they cannot understand the market as much. Do you think this would be a problem?
Brad: I think it's actually probably an opportunity. I think that one of the things it's pretty neat about the entrepreneurs I've worked with, especially teams that have men and women on them, have Americans and non-Americans on them, you know, have diverse groups on them. Individuals tend to stretch each other more because of their differences rather than constrain each other. And from my personal experience, I think there's a different way of thinking about the world that comes from wherever you grew up in, you know I'm here in Paris for a month with my wife, and obviously what we're doing is just experiencing 'living in Paris' for a month, and there's many many things that are different in society and culture here. I think those are real advantages for entrepreneurial teams and frankly I think the current generation of American entrepreneurs, especially entrepreneurs in the US are very inclusive of that. I think that is continuing to change, especially you know, we're talking over Skype, you have a different kind of emotional connection when you see people, interact with people directly then when it's the end of telephone or just a written word, you have to physically travel and interact with each other. So I think when we wind the clock forward the next 10-20 years I think the opportunity for, again for entrepreneurlization, entrepreneurs in the US or anywhere else frankly, just gets easier and easier. I'm optimistic about that stuff.
Interviewer: I'd like to ask you a question about this quote that I saw in your blog: “A company’s physical location becomes a concern for us when it limits that company’s future potential.”Is this the reason why you don't invest outside of the US?
Brad: I think our reasoning to as a venture firm, my firm Foundry Group, I have three partners, I think our view, we made a conscious decision that we would invest- we would base in Colorado which is in the middle of the US, we made a conscious decision that we'd invest in companies all around the US and as a result, we all travel a lot both in the east coast and west coast as well as travel throughout the rest of US. One driver for us is, I felt the four of us just felt like our ability to be affective and also incorporate travel worldwide and be affective worldwide was hard. That was one driver, so that's a personal decision.
Second is, I've had some experience investing internationally both in Europe and Asia, and I think that it takes a lot of effort to really understand the investment dynamics in different countries. My investment in Europe was very unsuccessful, I made 6 investments and all of them failed, all of them were unsuccessful. My experience in Asia was not as bad, but not much better, and I think a lot of it was just the business culture in different countries the market culture, the networks of people, and the things that are required in terms of what causes a company to be successful or not successful are very different from country to country. So it's not just a US - Asia issue or US-Japan or US-South Korea issue, US -Europe or France issue, but every country to every other country and culture is challenging, so I just don't believe that I'm good at it. And as a result, I've chosen not to do it.
Interviewer: Have you seen any good startups that have really good products though?
Brad: Oh yeah, I mean there are tons of very interesting companies in all markets. So I don't think that we are only investing in the US because only the good companies are in the US, quite the opposite. And many of the companies that we invest in end up working with companies in other markets, we have a lot of companies right now that are working with Asian companies on the manufacturing front, companies of ours like Fitbit and Pogoplug and Robotics that make physical devices that have software components to them, we have other companies that have development offices and are in some city areas in Asia, and we're an investor in Zynga which has done some interesting things, both in China and Japan - obviously there are huge opportunities there. So I think for us, as investors there's only so much we can do, and we are trying to take advantage of our experts. I have some friends also who have decided to make a real study of - including some American friends who have decided to make a study of it and invest agressively in parts of Asia, and you know, the people who have been most successful have gone and lived in Shanghai or have gone and lived in Tokyo and have decided to make that the center of their investing activity for a period of time, I think that's real commitment but I think that commitment is what translates into success.
Interviewer: What do you think about the ecosystem in Asia, there are obviously a lot of improvements that could be made. Could you give us an example if you have seen any?
Brad: Sure. so I think that most entrepreneurial ecosystems, most geographies can improve a lot, and there's a couple of very specific things that are important if you want your ecosystem to grow over time. One is to have a very long-term view - my opinion is you have to have at least a 20 year view. You have to believe and as an entrepreneur, be invested in the city or region that you live in for at least 20 years, and be committed to being an entrepreneur in that region because entrepreneurial communities grow because of entrepreneurs, not because of the government, not because of big companies. So lots of people can contribute, investors are not the reason entrepreneurial communities grow. It really is the entrepreneur, so the entrepreneur are sort of making their community work have to be committed to it. That's step 1. Step 2 is they have to be very inclusive of new entrepreneurs. So if you look at the most robust entrepreneurial communities, the ones that work the best, the ones that are continuously encouraging and supporting new entrepreneurs to come into their community - and not just by age, it doesn't have to be young people, although young people obviously are a big source of it, but people who really want to be entrepreneurs, people that move from somewhere else and want to be part of the entrepreneurial community are people coming out of school and joining entrepreneurial community. The existing entrepreneurs need to welcome those people. And frankly need to mentor them, need to provide a way to easily get engaged and involved in different things, and that leads to the last piece, I think it's critically important - one of the motivation for us creating Techstars is that we really think mentorship is the key. We really think that entrepreneurs learn from other entrepreneurs that experienced entrepreneurs make the best teachers of new entrepreneurs and frankly that experienced entrepreneurs learn an enormous amount from new entrepreneurs by being involved and by mentoring them. And so those are all things that are important in the long term creation in the entrepreneurial community.
Interviewer:Q. What has been the major difference to Boulder, Colorado since you founded Techstars and you moved there?
Brad: I moved 15 years ago in the mid 90s and I actually moved from Colorado to Boston, so I've never lived in the Bay area, even though I've spent a lot of time in the bay area, so I've always invested a lot there. Two of my four partners are Ryan and Jason, both lived in the Bay area for a very long time. I've spent a lot of time there, but when Amy and I moved from Boston to Boulder in 1995, we actually thought about moving to the Bay area, but we didn't want to live in a big city, we wanted to live in a small town. We both loved the mountains, spent a lot of time in Colorado and really loved the vite of Colorado. We fell in love with Boulder, and when I moved to Boulder 15 years ago there were plenty of entrepreneurial activity in Boulder, and Boulder's a pretty small town. It consists of only a hundred thousand people. But it has a really high density of entrepreneurs. Many people are entrepreneurs or are involved in entrepreneurial companies. So there's this heavy concentration on entrepreneurial activity which is part of why this makes this special. What's really happened over the last five or six years is that there's been many new entrepreneurs come to Boulder and move to Boulder because of things like Techstars, but also just because the entrepreneurial community and the overall entrepreneurial community which has always been very welcoming. But so many entrepreneurial communities was very diffuse. Everybody kind of did their own thing and people are friends and there was plenty of interaction, but there wasn't a focal point that people had real attention on. Techstars helped create a focal point which has expanded now to be more than just Techstars but is a very important part of it.
Interviewer: Q. Techstars being the major part of the region is in one way good but in another way bad - they might say that, 'if you don't have a connection there, you're not an important part of Boulder.' What do you think about this?
Brad: Yeah well, I don't think we have that problem is one thing because Techstars is one of the piecies of the entrepreneurial community. It's inclusive not exclusive, so we make it very easy for everybody in the entreprenurial community to get involved and we bring the people in Techstars who go through the program each year to the broader entrepreneurial community through various events, you know they practice for their Demo Day at the Boulder new tech meetup which usually has 500 or so people at it.. You know, they become a part of entrepreneurial scene through the program and many of the graduates of the program then are the entrepreneurial part of the scene at large. So I think what we've tried to do philosophically with Techstars is try to make the program inclusive for everybody in the community rather than exclusive. I think that is a really important part, it goes back to this notion of the entrepreneurial community if you really want to engage everybody. I say often, it's not a zero-sum game, it's not that I gain at the expense of somebody else. So if we all work together we all improve the situation.
Interviewer: Do you think the success of Techstars is largely related to your connections to other areas, such as - your partners have lived in the Bay Area for a long time, they have a lot of important connections to Silicon Valley. Do you think that was a key success point?
Also, do you think that the important contracts or deals of Boulder community ultimately merge at Silicon Valley?
Brad: No, I don't think so. I don't think either of the two things are really that dramatic, and I think the thing that caused Techstars to be successful has been the engagement of the mentors, the experience the entrepreneurs (have) in Techstars, their commitment to working with and involving with working with first-time entrepreneurs that go through the program, and frankly the effort and engagement of everybody around Techstars and working with these companies to make them, help them turn into something interesting. I think that's been the key driver.
The broad networks that we have which obviously includes Silicon Valley are additive, but the networks we have in general are additive. If you think again if you get to this core of people working together to try to create something significant. That's where the value is.
Interviewer: If we approach the Asian market with a similar view- you earlier mentioned that people who are peers or entrepreneurs need to be there to advise you - Do you think people who are from Silicon Valley are experienced should help these environments that need improvements in Asia, or do you think a bottom-up approach would be preferred?
Brad: I think both are impactful, I think a bottom up approach is more powerful. In other words, in your community, I'd break it down from Asia to your country to your city, I think it's a very local phenomenon in the city and then it scales up. If you look at Boulder in the United States, Boulder is an entrepreneurial community. There's probably in the US - 20 entrepreneurial communities people around the world are familiar with, Seattle, New York, Boston, Bay Area, couple of others... I think that in the US there are about a 100 cities that are interesting entrepreneurial communities of different sizes, of different levels of vibrancy and activity, but at a city level and then those entrepreneurs tend to connect with the whole country with other entrepreneurs that are doing similar sorts of things, and then across the world who are doing similar sorts of things in the same area- I think that local bottom-up approach is much much more effective. So take your city, find the entrepreneurs in your city and use that as a starting point for making some critical mass that will start to attract people from other cities in your countries and other parts of the world to get focused on what's going on.
Interviewer: Q. One example I'd like to give you about Korean startups is that they tend to keep funding news a secret in a lot of cases. Do you think this is a good phenomenon, because funding is one of the essential parts of building a business. What do you think about this?
Brad: Why don't you give me some more information- what do you think the motivation is for keeping funding news a secret?
Interviewer: Some of the VCs want this when they make a contract, I think it's a cultural thing, they don't want companies to be seen as differently funded - because companies might think of this as unfair. It's an emotional and cultural thing, especially in Korea.
Brad: My reaction to that is that it doesn't sound like a benefit or advantage to the companies. There's a lot of reasons to talk about your funding, there's also reasons to keep things quiet. The reasons to talk about it is obviously for more visibility, to make it more easier to recruit, to make it more easier to develop relationships, to help position the company. Sometimes the reason you'd want to keep something quiet is because you don't want any competitors to know about what you're doing until you're ready to really launch your product or server. I think if there's a specific reason behind it one way or the other that makes sense, but if it's just like well.. we don't want anybody to know, it's cultural, we want to be modest about it, I don't think those are particularly impactful reasons and I encourage people to challenge that, especially the entrepreneurs. The entrepreneurs are the ones that should be determining whether or not there's an advantage to that to be public about the money that they've raised, who their investors are, and whether it's an advantage to continue to be quiet as they develop their competitive position.
Interviewer: Q. When you invest in startups, you primarily look at the people and people who are obsessed in the product. When you invest in these, what is your standard amount that you invest in?
Brad: We invest a pretty wide range. I would say most companies that we invest we end up investing in somewhere between 5-10 million dollars in the company. We often invest a small amount - a 250 to 5000 dollars, we have some companies we have invested in at least 15 million dollars. The range is about 15 million dollars, usually about 5-10, but could be small as half a million in the first round of investment.
Interviewer: Q. What is your standard for how much you invest?
Brad: It varies by company. We have a simple rule that we want to own as much of the best companies as we can. So we don't really have a formula, we don't have a certain amount that we have to own, we don't have any requirements around that. Instead, we're really very focused on developing a deep relationship with entrepreneurs who we fund, and being very involved in creating their companies.
Interviewer: Q. So you think it's a long term investment.
Brad: Oh, for us it very much is. Different VCs have different points of views so some VCs say we have to have 20% of a company to make it worth our while, other VCs have a very specific amount of money they're trying to rationalize when they make investments.. for us we're really investing a long time, we care deeply about the companies we invest in, because of the people that we work with. We're very much focused on the entrepreneurs and wanting to make sure that we're involved as partners with them during the time that we're working together. And you know, that could be five years, ten years, we've had companies which we have invested in for longer than a decade, we've had companies - we've had a company that we've invested in Seattle called Gist that got bought a little bit after 2 years after it got started.. We can't predict the future. We don't know how long it's going to be, so it's important that that relationship be a really good one.
Interviewer: Q. You seem to have a very warm view towards entrepreneurs. You must be thinking about economically/financially being successful but more about the people.
Brad: I've had plenty of success, I've had plenty of things that were not successful, plenty of failures as well. I would say for me, I love doing this, and the motivation for doing it is the involvement and engagement working with great people, great entrepreneurs and creating new things and my belief is that financial returns will follow from that rather than the other way around so we can't generate financial returns unless we're working with great entrepreneurs on really interesting things and even then we're going to have plenty of things that we invest in that don't work so I want to make sure that the people I'm working with are people who I really enjoy working with because when it's successful it's awesome and when it's not successful at least you tried hard with people you care about.
Interviewer: Q. As a last word, could you give us two pieces of advice, one for Asian entrepreneurs and one for Asian VCs in how they should invest, what values they should look for and what companies to invest in?
Brad: I think for the entrepreneurs specifically I think you should create businesses and go after things that you're passionate about. I think the biggest factor, the primary driver as an entrepreneur for what business you do is something that you really care about, what you're obsessed with, what you want to spend all your time on. It's very very hard to be an entrepreneur it's consuming, we talked some about this in the beginning - it consumes you beyond your relationships, it consumes you in terms of sometimes your own health and it's a thing that you spend most of your time on, so you should be incredibly passionate about it. And I think when entrepreneurs spend time and work on things that they're passionate about - the actual long-term success is higher. The chance of the company being successful is higher because you're going to go through ups and downs. Every company I've ever been involved in that was successful had many chances along the way that looked like maybe it was going to fail. And the ones that were successful were because of the entrepreneurs were incredibly committed and excited and invested in this thing they were working on. So that's what I'd say to the entrepreneurs.
To the investors, I'd say invest in things that you care about, and invest in people that you want to be partners with. I think a lot of mistakes investors make is investing in what they think somebody else might think is successful, or they end up chasing things that they don't really care about, and I've made that mistake too. I've ended up investing in companies that I really didn't know that much about, and frankly didn't care much about.
Interviewer: That's why you have themes now.
Brad: That's right. That's why we have themes and the absence of that when I... I mean I was invested in a retail company, a beauty product company in 2000 and there was going on a web something called the Body Shop, and it wasn't ultimately a successful investment of the retail company, the Body Shop was successful but the .com was not. I don't know anything about beauty products, I mean my wife says I can barely remember to shave and remember what a deodorant is. So the whole idea was .. I was an investor in a company and I didn't really care about the products, the people were okay, but I didn't really connect with them. There's a moment in time where lots and lots of people were investing in companies that were trying to create .com version of the businesses. But it wasn't something I was passionate about, and I have a list of... I mean that's one example, I could give you plenty of other types of examples of things like that. And when I reflect on those companies, I really wasn't a good investor for those companies because I couldn't really help them that much. And I wasn't really engaged in that. So my comment to the investors are same things: find things that you care about, and find people that you care about, that you really want to work with for a long period of time and have that shape of what you're investing.
Interviewer: Right. About the entrepreneur comment, I thought that you had to say goodbye to some businesses when you think that's not going to be more successful. You said you have to look in the long term, right, in terms of your life.
Brad: Yup, absolutely.
Interviewer: Thank you so much for your precious advice and time today. Time is already 6 minutes late..
Brad: Bye, my pleasure, it's been a fun interview. Hope it's helpful to your readers and my e-mail address is easy to find, it's email@example.com and if people have additional comments or additional questions they can feel free to email me if they like.
Interviewer: Thank you for being here today, Brad.
Brad: All right. Talk to you soon.