Brad Feld at Entrepreneurs Unplugged: Foundations

Largely due to Brad Feld’s own efforts, Entrepreneurs Unplugged has become an event that brings together people with a diverse set of backgrounds, from students and professors to venture capitalists and entrepreneurs, and shares with them some of the lessons learned during the process of starting a company. Although Brad normally moderates the discussion, for this final event of the Spring 2011 semester he was the featured entrepreneur, sharing stories from his past that many people in the room had never heard before, including moderators Brad Bernthal and Jill VanMatre. From his grandfather’s clothing factory to his high school job as a math tutor just for girls, Brad described a childhood in which he “never really thought that hard about the idea of not doing my own thing.”

Describing the clothing factory in Florida, Brad explained that his grandfather was an immigrant from Austria who “made stuff with rhinestones on it that got carried by the knock-off of Marshall’s, hired only Asian immigrant workers because they didn’t need air conditioning, and waited until his clothing manufacturer friends died and then bought their old machinery.” Brad respected his grandfather’s business as well as his father’s medical practice, but he still recalls that the only career decision he ever made was to tell his father, at age eleven, that there was no way he was going to become a doctor. Instead, he convinced his father to help him buy an Apple II with his Bar Mitzvah money and then later sold the computer back to him along with a software program he developed at his father’s request. Brad also got some computer experience from his Uncle Charlie, who was VP of data processing at Frito Lay. Uncle Charlie gave Brad a book on the programming language APL, which literally stood for A Programming Language, sat him down in front of a computer in the company data center, and told him to play, which Brad proceeded to do for hours. Programming, explained Brad, was a step up from reading, his other favorite activity, “because I could actually create my own little world.”

In high school, Brad described himself as a pretty typical kid who liked to play tennis, until he discovered computers and girls. While most of his friends were working in fast food restaurants making a few bucks an hour, Brad kept getting fired from those jobs and ended up tutoring people for the SAT in math, charging $30 an hour and making in a day what his friends made in a week. Demand for his services turned out to be pretty high, so he eventually narrowed his client criteria to include only girls, and then only cute girls, and then two girls at a time so he could make twice as much per hour. Following the girl theme, Brad said he applied to MIT early admission mostly because his first girlfriend was fascinated with the school, and luckily it turned out to be the perfect place for him because “MIT is effectively a daily assault on your self-esteem.”

During college, Brad worked for a bit in a lab getting paid $6 an hour to help install a programming language on a computer, which really made him miss his old tutoring job. So, during the summer he went to work for an oil and gas company in Texas that paid him 5% of gross revenue for the software he wrote, which meant that during the school year he was making $5,000 to $10,000 a month in royalties. He also tried to start a couple of companies, one that focused on writing software for the Mac and one that made technology for automated plastic surgery, which both failed completely but taught him a lot about partner dynamics. He also learned that “failures are totally transient. When you fail you need to fail quickly and gracefully and then move on.”

Brad’s first company after college was Feld Technologies, which he started with his best friend Dave and eventually sold to “this old Jewish deal guy who took me to lunch and offered to buy my company right when I had a mouth full of food.” Brad and Dave had a lot of trouble deciding if they should sell or not, until the deal guy sent over his friend Jerry to ask what the problem was. While they were trying to make their decision the price of the stock they were offered effectively doubled, so they ended up getting a pretty good deal. Brad became CTO in the newly merged company, which he described as “basically a license to run around and torture everybody,” and then he started helping the company buy other companies. This was an interesting process, he said, because “every company they were buying was really a hardware retail company and every founder thought he had created something really special, so my job was to convince them that actually their software was almost uniformly worthless, because we were just after the hardware.”

Around this time Brad started making a few angel investments, some of which turned out to be with pretty big hits such as Guitar Hero (then called Harmonics), Net Genesis, and Critical Path. In 1996 he connected with a Japanese billionaire who wanted to invest in US firms, which Brad and several others were happy to help him do until he suddenly and unexpectedly ran out of money. So, Brad and a few of the guys who had worked with this billionaire started what became Mobius, naming their first fund Fund Four because they had already worked on three funds together with the Japanese company, but also because really, Fund One just sounds bad. Fund Four did very well, Fund Five was a disaster, and then Fund Six also turned out quite well, including such companies as Rally Software, Return Path, Bloom, and Feedburner.

Reflecting on his overall investment strategy as both an angel and a venture capitalist, Brad explained that it’s important to be deliberate, describing how he would make investments of the same amount in every company for his first wave of angel funding and expect to make another contribution of the same amount before seeing any potential return. With every fund, if he can invest in just one company with a 100x return he considers it a good investment no matter how the other companies do, explaining that funds who aim for several companies with a 4x or 5x return simply aren’t going to generate enough profit. Describing his character as an investor, Brad said, “If I’m an investor I’m deeply involved in helping the company be successful. If I support the person running the company, I work for them, and I do whatever they need.”

Brad concluded by describing an epic failure in which he lost millions of dollars, and then “to add insult to injury, after we went bankrupt, the post confirmation creditors committee decided to sue for $150 million to go after the insurance policy, in a process that took three more years.” Returning to his earlier recommendation to let failures go quickly and gracefully, Brad explained the importance of work-life balance, because “you never know when the lights go out. The idea that you’re going to just work really hard for awhile and THEN chill out is completely stupid. Fundamentally you have to figure out as a person how to mix those pieces together so that the total experience you’re having IS your life.” Brad’s wife helped him figure out some rules for how to do this, telling him to “make a recurring calendar entry that says ‘dinner with Amy’ on the first day of the month from now until forever.”