“Be calm. But be urgent.” Eight takeaways from AMA sessions with Brad Feld.

Jul 19, 2022

Written by Techstars CEO Maëlle Gavet.

I recently had the pleasure of hosting Techstars’ co-founder, VC, entrepreneur, author and blogger Brad Feld in two Ask Me Anything (AMA) sessions on how to respond to the financial crisis from both a founder and investor perspective. Drawing on his decades-long experience in tech (he’s been an entrepreneur and early stage investor since 1987), Brad addressed topics ranging from fundraising in a downturn to why chasing valuations is wrong, and why founders shouldn’t fixate on when the crisis will be over. Here are a few of the highlights.

1/ The phenomenon of early stage entrepreneurship is still on an extremely sharp upwards trajectory. 

“I remember in 2007-09, when we first started Techstars in the middle of a financial crisis, where people said, ‘Entrepreneurship’s dead; if you’re serious about starting a company, move to the Bay Area. There’s no other place in the world where entrepreneurship will ever work.’ Of course those kinds of statements did not age well. I remember in 2010, when I started talking about startup communities being in any city around the world with at least 100K people that can – and need to – build an innovation culture, and how that’s going to be a powerful driver of long-term economic growth. I look at where we are in 2022, and I think we are still early in the global democratization of entrepreneurship. The economic stress that exists right now is an important and significant part of that evolution and change. Resilience comes from figuring out how to build durable things during these kinds of moments.” 

 2/ New companies being created in the next couple of years, are going to be some of the extraordinary winners 10 years from now. 

“One of the reactions a lot of people have when things become stressful – especially exogenously, as the macro environment shifts – is to panic. But something I’ve learned over and over again is that some of the greatest returns come from these moments. And the new companies being created in the next couple of years, are going to be some of the extraordinary winners 10 years from now.” 

 3/ The best returns over time for venture investors are where strategy is consistent, time-diversified, and done deliberately. 

“Some of the best performing venture funds ever are firms like Union Square Ventures, that have been very deliberate in their long-term strategy. That doesn’t mean they do the same thing over and over again every year – they’re constantly thinking about what they’re doing, and how they’re doing it – but the way they invest, the pace they invest [at], and the way they think about how they’re investing is consistent and linked to their resources.”  

 4/ Chasing valuations is wrong. Period. 

“In the last two years [founders were in a position to say], ‘Why should I go through an accelerator when I can just raise money in three days from angel investors, who know me, at a ridiculously high valuation?’ Chasing valuations is wrong. Period. For an investor, you should chase ownership at the early stages, and you should not worry about what the valuation is in the next round, or the round after that, because the valuation doesn’t matter until you can buy beer with the money. And you can’t buy beer with the money until you’ve actually got a real company that you can either sell, take public, or you have a late stage investor who wants to buy your early stage shares, and you can get some liquidity.” 

 5/ Invest time in building a relationship with investors who can help you with your capital formation going forward. 

“At the pre-seed and seed stage, there’s still a lot of capital out there, so putting real effort into finding a partner or an investor who is going to help you not just with some dollars – along with operational expertise, and mentorship – but also who can help to attract other investors in the Series A, is very valuable. Even a year ago that was not as important as there was so much money chasing deals that were coming out of pre-seed and seed, that there was less descrimination about who your investor was at that stage. So I’d work harder not just to get one, but to get a syndicate of investors at the pre-seed and seed stage, so the network you have when you need to raise your Series A is stronger. At Series A, there’s still plenty of money available, but it’s become much more discriminating in a very short period of time. As you get to Series B and later, the same thing. And late stage, much of the extremely fast checks, momentum-based investing, at very high pricing, has gone to the sidelines. So my strong advice for anyone, at any stage, is to invest time in building relationships with investors who can help you with your capital formation going forward.” 

 6/ Don’t fear down rounds (where capital is raised at a lower valuation than at the previous round).  

For some reason the whole notion of a down round has become this fearful thing. The history of fundraising and raising money for companies is that there are lots of different price points at which money gets raised. Even if you look at the public markets, companies raise money at lots of different valuations, including at lower valuations than previous valuations…so I don’t know why the down round became such a toxic construct. I even heard someone say, ‘Once you have a down round, you’re dead!’. No! People gave you money, so you’re the opposite of dead! You’ve got a chance to keep going. So I would try to change the language around down rounds, and be more realistic about the idea that we were in a cycle where people raised at very high valuations, and future financings in a lot of cases are going to be at lower prices than the last round that was raised.” 

 7/ Don’t worry about when things are going to get better. 

“I have no idea how long this crisis is going to last. The lesson from the Stockdale Paradox is if you anchor on a date when things are going to get better, you do much worse than if you don’t. The advice I give entrepreneurs is: Don’t worry about when things are going to get better, just focus on dealing with your daily reality, and do everything you can with the resources you have.”  

 8/ Be calm. But be urgent. 

This is a moment where being calm and deliberate, but taking action, matters. What’s important is to recognize where you are in your strategy. Adjust in the context of being much more thoughtful about the dollars that you’re spending, and what your balance sheet looks like, and making sure you’re in a strong and healthy position to be able to navigate for a longer period of time than you might have otherwise thought. And then as things unfold, continue to adjust. The blanket statement that you have to have a certain amount of runway, or cash [is unhelpful]. Be calm. But be urgent. It’s the emotional reaction, the histrionics, the ‘Everything’s great!’ or ‘Everything’s awful!’ that is not helpful in this discussion. What’s really important is that the team looks clinically at what’s going on, and makes those deliberate decisions without letting the emotion of all the other things that are flying around get in the way.       

 (N.B. Quotes have been edited for brevity.)

These tips were just a flavor of what Brad had to say over the course of two AMA sessions, each over an hour, attended by hundreds of founders, Techstars staff, and others in our community. Not all of this advice will apply to every company or investor of course, but as Brad says the trick is to process it and “then to look at your specific situation, and with the advisors you trust – whether they are mentors, investors or peers – try to understand what you should be doing in the context of your own business.”

About the Author
Maëlle Gavet

Maëlle Gavet is CEO of Techstars. A three-time founder, she has been a senior executive at numerous large tech companies around the world, including Ozon, the Priceline Group, and Compass, and was a Principal at the Boston Consulting Group. Author of the widely-acclaimed book Trampled by Unicorns, Big Tech's Empathy Problem and How to Fix It (Wiley, 2020), she is currently based in New York City.