Is the cost of starting a business less than zero?

featurepics-Chart With Downward Trend-102143-1635446There has been a well documented and discussed deep decline in the cost to start a technology business over the past ~ 15 years. From the days where every website was custom and each site element was a de novo build to today where virtual servers are easily and cheaply spun up and down and where frameworks exist for just about every feature and functionality that you could imagine building, the cost of starting a tech business has gone from $5-$10M to maybe $50k or less. It’s a remarkable trend and one of several key factors driving the Democratization of Entrepreneurship.

But is it possible that the cost of starting a tech business has fallen to less than zero? In some cases I think this is now the case. It’s now possible for entrepreneurs to seed ideas into the market and get people to put their money where their mouths are before even laying down a line of code. And this trend is true perhaps even more powerfully on a product level from existing companies.

We recently announced our investment in LeadPages – a platform that allows publishers to quickly create and host lead and conversion pages. The company actually started by selling the product that it was thinking of building, rather than building it first. Co-founder Clay Collins put out the idea for the LeadPages product on his marketing blog and before they had even scoped the project had $40k of pre-orders (paid pre-orders). With that money he built the beginnings of what became LeadPages.

Also in the Foundry portfolio BetaBrand is doing the same thing on a product level through its ThinkTank initiative. The idea is pretty simple – customers “vote” on new product ideas by agreeing to buy them. The ideas that get enough support get made.

Browse Dragon, KickStarter or Indigogo and you’ll see lots of examples of this (not every crowdfunded project fits this but many do) – show your support for something and if we reach a certain threshold, we’ll create it for you.

Another great example of a company taking advantage of this trend is Filament. It’s ThinkTank for web apps. As they describe it: “We show you a vision of a Web app. Your votes determine whether we build it, and its features.”  Exactly what I’m talking about.

I think this trend is incredibly powerful. And we’re just at the start of it. Just as we’ve seen the control of IT systems become decentralized across organizations of all sizes, I think we’ll also see a similar decentralization of the product ideation and development process. And while not every product and innovation can be developed in this way, many many can, should and will.

I’d love your thoughts on this as well as other examples of companies getting creative about pre-sales.

Getting our Angel List On

Screen Shot 2013-10-01 at 7.05.31 AMIn the news/hype cycle of venture and start-ups it’s rare when a single news item captures the attention of the entire community, even for a few days, let alone 3 or 4. But AngelList‘s announcement of “Syndicates” has done just that. And it was pretty fun to watch the reactions which ranged from: “this is stupid” to “this will kill venture investing as we know it” to “this will change angel investing forever” to everything in between (see for example, AngelList Syndicates Will Also Pit Angel Against Angel, The Great Venture Capital Rotation, Leading vs. Following, Some Thoughts on the Big AngelList Deal, and Is @AngelList Syndicates Really Such a Big Deal?)

Of course none of these writers know exactly how Syndicates (which in short creates the ability for angels on AngelList to build funding groups around a specific company and take a portion of the upside associated with the success of the company/investment) will really work and neither do I.

But I do know that Syndicates is an interesting idea – and perhaps more importantly, yet another example of how Naval and AngelList continue to innovate around funding models for early stage companies. But I think what everyone is forgetting in this debate is that the radical innovation here isn’t AngelList Syndicates. It’s AngelList itself.  The idea to democratize capital formation is the important idea here and a continuation of a key trend around start-ups and venture capital of the past 20 years. And despite it’s name, AngelList is really about the entrepreneurs who start businesses more than it is about the people who back them (although for those outside of the valley loop, AngelList is also democratizes the funding side of equation – both key parts of the overall Democratization of Entrepreneurship trend that we’re witnessing).

In many ways, Syndicates simply codifies (and specifies a value for) what’s already going on around fundings on AngelList where people get excited about an idea, commit to funding it, and then try to get others to jump in as well. In that sense it’s not really innovative so much as it’s encouraging activity that’s already taking place, making the rules around it more clear, and trying to get as many people as possible to join the effort (which is what Angel List itself is about).

Rather than debate the hypothetical, today Foundry Group decided that it would be more interesting to jump into the middle of the topic we’re all talking about. We’ve been thinking for quite some time about how to better leverage some of the angel activity that’s going on in our community (and through our investment in TechStars and through our own personal investments in companies and venture funds the four of us are already involved with over 1,000 early stage companies).  The creation of Syndicates presents a great way to do this. So today Foundry is announcing the creation of FG Angels, through which we’ll invest in approximately 50 AngelList companies through the FG Angels Syndicate. We’ll put up the first $50k into the syndicate and will cap total participation in each of our syndicate groups at $500k (at least for now). There’s more detail on what we’re up to on our post about it from this morning.

More than anything, Foundry Group believes that we exist to serve entrepreneurs and to make them successful (and that doing so is the best way generate a great return on our investors’ money). AngelList Syndicates supports this idea and the formation of FG Angels is our effort both to be supportive to the AngelList community and to take advantage of a trend that – good or bad for VCs or angel investors – is part of a tidal wave of change sweeping over our industry.


The New Foundry Video Is Almost Here

You may have seen the video that Foundry Group produced a few years ago – a hard hitting glimpse into the life of a VC told in SNL style.

The video (and more importantly the song) was written and directed by my very talented partner Jason Mendelson. That’s his voice. That’s also his playing every instrument you hear on the track. Awesome

Well…we’ve been hard at work on another video (again written, produced and directed by Jason). This new one takes a look at some of the ways technology has changed our lives and asks the deep questions about whether we’re better off today or if things were simply better before all this gadgetry. It will be out in a few weeks. In the meantime check out the teaser to the new video below. You won’t be disappointed.

Helping our Community with $100,000 from Foundry Group. Please join us.

FFRFI don’t need to tell you about the devastation that has rocked Colorado over the past week. The rain started and it just wouldn’t stop. I’ve lived in Colorado for 17 years and I’ve never seen anything like it. People have lived here for their entire lives and haven’t. Our house and property only sustained minor damage (and we spent a few days without power and water; neither particularly difficult compared to what others are facing). It was heart wrenching to be glued to the news and local reports seeing pictures of our community – all around where we live; our neighbors; the places we go every day  – become ravaged by floods.

We have many friends who sustained real damage to their properties and homes (and like most people effected by this storm the vast majority don’t have flood insurance). A number have been forced out of their houses – some for months. Our house is only a few miles from the town of Lyons, which was completely cut off by the flood waters and totally devastated. The entire town will be shut down for months while they rebuild power, water, sewer and other critical infrastructure. Every single person in the town of Lyons has been forced to relocate. There is a message board at the evacuation center  with people searching for friends, family members and beloved family pets. It’s hard to imagine this kind of loss.

While Ryan, Jason, Brad and I started Foundry with a national vision, being part of the Boulder community was always core to the Foundry identity. We’re proud to call Boulder County home and fiercely loyal to our community. With this in mind Foundry is proud to join the relief effort by giving $100,000 through the Entrepreneurs Foundation of Colorado to the Foothills Flood Relief Fund. These funds will directly help victims of this catastrophe.

With this gift we’re also putting out the call to other funds who have connections to Colorado (either because they are located here or through their investments in the state) to match our gift of $25,000 per partner. To Colorado entrepreneurs and business people who have built their companies in this community, please do what you can to help. And a special shout-out goes to the Denver Broncos, who today announced that they were donating $50,000 to the relief effort. While that money will make an impact, I believe an organization as tied to the community and as successful as the Broncos can do better ($25,000 per player?) The team has the strong support of fans throughout Colorado. Now their fans need support.

If you have any questions about EFCO or your company or organization would like to direct a gift through them to help with relief efforts, please email me. If you’re interested in helping out directly, click on the “Donate Now” button at the top of this post. And, of course, if you’re interested in joining EFCO I’d be happy to talk with you about that. Together we can help rebuild.

Branding Colorado

CO_Logos copyLast week at the conclusion of the COIN Summit Colorado released an new brand for the state. The new branding effort was lead by Aaron Kennedy (of Noodles fame) with the help of a brand ‘committee’ (I was a member) and, importantly, a large network of ‘brand ambassadors’ around the state. The process was an interesting one and was designed by Aaron to be inclusive of opinions and ideas from around the state. The idea was to identify a unifying brand that could represent Colorado across a wide variety of uses (both inside the state and outside). The result is the image in the upper left of this post and the tag line “IT’S IN OUR NATURE”. The logo draws from the green on the Colorado license plate, using updated but similar mountain/peak imagery but also including CO and Colorado (I guess for the avoidance of doubt about what we’re talking about).

I think it’s impossible to undertake an initiative such as this and find any kind of true consensus. And I suspect that people reading this will have mixed reactions to the new logo and branding. That’s kind of the nature of the beast. You should see the size of the three ring binder that I received as part of the Brand Counsel that reviewed all sorts of information from focus groups and brand brainstorms (now would be a good time to point out that the funding for this project was all private – the state didn’t pay for the fancy binders and formal letterhead, etc that I received). Personally, I like the new logo a lot and I think it was time for Colorado to update its image. I also like that the state will be consolidating around the use of this logo but also be allowing companies from Colorado to use the logo to tag themselves as Colorado proud (there are derivatives of the logo that signify that products were Made in Colorado or Designed in Colorado, etc.).

logo_black_text_white_background_SMALLI can’t help but point out the similarities of both the logo and the tag line to the Colorado Entrepreneurial by Nature initiative that I helped start with a handful of other local entrepreneurs (and that was announced about a year ago) – if you’re a Colorado business and you haven’t signed up and badged your website you can do so here. I think the similarities speak to the broad view of Colorado as a place where business and nature mix (and reinforce each other). And I’m really happy that the work that our small group did around EBN was validated by the much broader work of BrandCO.

Look for both the EBN logo and the new BrandCO logo to proliferate.

Hacking Hardware With A Dragon On Your Side


For years, many of our most high profile hardware investments have had a quiet partner. Dragon Innovation – experts at helping hardware ideas actually happen – have helped companies like Makerbot, Sifteo and Orbotix (all from the Foundry family) move from product idea to product reality. As the startup world shifts from an intense focus on bits to celebrating atoms and the “maker movement” of hackers who give those atoms life, there is bright light being shined on the ability of those makers not just to come up with cool ideas, but to take those projects from ideas, to prototypes to delivered product. This is where Dragon shines, and where they aim to completely change the way great ideas are planned, funded, made and sold.

Today, Dragon is opening up a platform focused entirely on great hardware projects and their makers. With the expertise of their years of consulting and hundreds of products they’ve helped come to life, they’re applying a different filter on the traditional hardware crowdfunding model (which is rife with failure due to improperly scoped projects and overambitious and unrealistic expectations). They’re building what they hope will not just become the platform for makers to launch their projects, but ultimately will become the center of the maker community – where makers come to get help from each other, learn about new products and get feedback on their ideas. 

Of course the Dragon marketplace is also about the other side of the funding equation – the backers. The company believes the experience of backing a a company should be about both the project and the maker and they’re building tools into their site to allow makers to better interact with their backers, simplify and make more meaningful the project tiers and, most importantly, to back projects that have a high likelihood of actually delivering.

The company has launched with 8 initial projects (including a special edition of the Pebble watch). The company is also partnering with companies like GE and Qualcomm to help put more muscle behind what they bring to the table (look for more partnership and some innovative twists in the coming weeks). Go check them out!

Reputation Matters

Reputation matters. You know that and so do I. But it’s easy to forget that you’re either building or destroying that reputation in every interaction you have. Not to mention widespread reputation travels in our ridiculously connected world.

I was reminded (again) of this today from an exchange on our CEO email list (which includes about 75 CEOs of Foundry portfolio companies). The email read:

To: FoundryExec
From: [CEO of Foundry portfolio company}
Subject: Have you done business with anyone on this list

I’m on my way back from [an] investor conference where we met a bunch of VC & Private Equity guys.

The event was really useful. Not only did I discover a whole bunch of folks wanted to speak with us about investing, but I feel like I’ve been through an intensive two day course on Series B/C financings. Plus, it was useful to network with a bunch of CEOs and I think we made a few sales in the process :-)

If any of you have ever had any dealings with the firms and/or individuals below I’d appreciate your feedback/tips.

[this was followed by a list of 20 or so firms and individuals]

The response was close to instantaneous – probably 20 messages exchanged in the course of an hour or so listing out people’s experience with various firms. Responses ranged from positive: “Good guys, and super smart.  Happy to take meetings.” and “He was nice, quick to provide feedback, clearly smart.”; to practical: “They want $5m run rate before investing” and ” Very good investors but super picky. Min check size $25M”; to negative: “The most negative experience I’ve had with a VC. …the partner was totally disengaged, dismissive, and rude.” and “Generic VC.  Another friend has him as main investor and every board meeting is “Why can’t you grow faster.”; and “He came late to the meeting. Came off as arrogant and bored”

There were tons of other comments, but you get the drift. The point is that people talk (in this case the topic was VCs but you could imagine the same thread on larger technology company partnerships or the best tools for managing metrics across your business, etc.). And while there are always two sides to a story (and certainly everyone can have an off day) it’s important to remember that with every interaction you’re either building or harming your reputation. I forget this plenty. And this morning was a reminder of why I shouldn’t…

One Metric to Rule Them All

theOneRingA well instrumented business will have literally hundreds of metrics that they track to understand the key parts of their business. Each group within an organization likely has a key metrics dashboard that guides their department functioning and informs their decision making. These dashboards then roll up to other dashboards to form the core of the key metrics that an executive team or CEO look at daily (or more) to keep their pulse on the functioning of their operations.

But what if you didn’t have the luxury of having all these data sources at your fingertips? What if you were forced to decide on one number that was THE number. A single metric with which to keep your pulse on the health of your business.

I’ve asked this question to many CEOs and what’s surprising is how difficult it is to come up with the right answer. But also how illuminating it is once you do. It’s almost universal that your first response isn’t really the right answer upon further reflection. I’d encourage you to try this exercise yourself. You’ll likely focus in on something that is driving your business right now – something you’re keenly focused on and that gives you some kind of insight into future performance. Maybe a sales funnel number. Possibly cash burn. But think more deeply about it. At the core of what you do as a company, underneath the veneer of the business itself is typically an underlying data point that is at the heart of the product or service that you’re providing. That may be the number of domains that you manage, the number of emails that you send out daily, the number of unique website visitors that your business generates. Rarely is this number an input, nor is it generally a forward looking statistic. It’s also likely not a financial number – you won’t find this metric on your income statement. It’s generally an operationally derived output to the running of your business. Surprisingly (and this is part of the power of this exercise) in many cases it’s not something that you’re already tracking on your highest level dashboard. This last point shows the real value of thinking through the “one metric” question thoroughly. I’ve been amazed at how often the answer to the question of what metric would your business track if you were only able to track one thing is something that companies aren’t necessarily watching that closely.

While it may be tempting to just throw out the first thing that comes to your mind as you read the preamble to this chapter and then be done, that’s not the way to do this exercise. And like many things, the journey to the answer is half of the reason to ask the question in the first place. This is a brainstorming exercise that requires some thought and attention. And preferably the help of your management team and even some outside advisors who aren’t as close to the day to day business and can offer you the feedback that only that outside perspective can provide. As you come up with your list and pare it down you might even try focusing on just one of those metrics each day. Force yourself to live the exercise (at least at the CEO or department manager level) and really test out whether you feel that what you’re measuring is really getting to the heart of your company.

Why do this exercise?
Confining yourself to a single metric – even if it’s just for the purpose of a simple exercise – is a chance to remember what it is that your business does at its core. What’s the lowest common denominator of the service that you provide and how can you measure that? What were some of the other numbers you considered and why? Ideally this is an exercise conducted with your entire executive team. And like a Rorschach, the process of choosing a single metric to measure your business by can help you gain insight into the types of managers you have around your executive table and what their biases are. A good CEO can use this information effectively to better manage not just their business but also their executive team.

Should you run your business on a single metric?
Now that you’ve boiled down your company to a single, measurable metric it’s natural to consider whether you can shed all of the other clutter on your dashboard and simply focus on the one thing that really measures the heartbeat of your company. I have another post coming about how the best financial plans actually limit the number of operational inputs they consider in an effort to better focus the power of their model on the small number of things that actually matter (and to more easily run sensitivities on those inputs). Operational metrics can work the same way. And while I wouldn’t argue that you should pare your dashboard down to one large blinking number that is your “one metric”, consider using this exercise as a way to remind yourself what really matters in your business and focus on those things that most effect that number.

The power of simplicity
There’s a great story that Atlassian tells about how they leveraged the power of a single metric into meaningful data that changed the way they ran their business. In this case they were measuring employee happiness (we’re departing here from the “one metric” concept above, but the story illuminates how a single, relatively simple metric can be quite powerful). Outside of conference rooms, bathrooms and the break room this company placed a bunch of iPads on which it asked a single simple question: “Are you happy today?” There was no sign-in. No tracking of who said what. No 1-10 scales. Just a single question with a binary answer. And it was amazing how powerful this exercise was to the operations of their business. Participation was high (it was easy and anonymous to take part) and the company found that it was much more predictive and a better guide to behavior than the longer survey they sent around once a year. The point of this story isn’t that employee happiness is likely your “one metric” (it isn’t), nor even that you should consider doing this same thing in your company (you should; it is easy and cheap and very effective) but rather that sometimes the simplest of metrics has the power to meaningfully inform your understanding of your business.

Handling rejection

Update below with the final email in the chain where the entrepreneur apologizes (and talks about some challenges around fundraising that led to his frustration).

I just tweeted about an unfortunate email exchange I just had with a company founder, but 140 characters isn’t enough to really do the matter justice. And more important than my venting (and to be clear this post is definitely part that) is the real issue that many entrepreneurs face about how to handle a “rejection” email from a potential funder. This is an example of how not to do it.

I pride myself on answering all the legitimate emails that I receive (punctuated by the point that it’s 8:24 on a Tuesday night and I’m sitting here at my desk doing just that). I think this is getting more common amongst VCs, but I do hear from a number of entrepreneurs that they send notes off and get nothing back. I figure everyone who emails me their plan is really excited about what they’re doing and deserves a response. Sometimes it’s a quick no, sometimes it’s more extensive if I have an idea that I think is worth sharing back.

From the entrepreneurs perspective I can understand the frustration of hearing that the idea that you’re so excited about isn’t something that whoever you emailed wants to hear more about (and I can relate – Foundry raised money from investors and got plenty of “no’s” before we managed to pull together a syndicate of fund investors). But the reality is that not everyone shares your passion, not everyone is at the right time in their fund, not everyone has time vs. other things their looking at to take a closer look, etc. And with most firms having some kind of focus, there are plenty of ideas that simply fall outside of a firm’s investment bounds. And, of course, the math makes it hard as well. At Foundry we see something like 5,000 business plans every year of which probably 500 or more are clearly plans that will get funded by someone. So there is no lack of really interesting things to take a look at. But there is a lack of time and money. In our case that means making about 8 new investments a year (give or take). I’m sure many firms have a similar funnel.

Nonetheless, handling a rejection is important. Done well it can keep the door open to further engagement (I’ve had plenty of companies that I’ve turned down drop me notes with updates on their progress and asking me questions or advice) and can sometimes lead to a later investment (we have a company in the Foundry portfolio that we (I) turned down that we funded several years later). I strongly believe in the “no assholes” rule and try to live my life by it.

Below is the exchange in question (personal details redacted), posted in all its glory. Ironically in this case it looks like this is someone I gave some advice to about a prior business plan (I don’t remember the details – it was one of thousands of these sorts of emails that I have responded to over the years). Oy!


Howdy Seth,

Our social site based on privacy never went anywhere.

We were right about the privacy stuff. But no one cares. Oh well, win some you lose some. I’m proud we did it, no regrets.

Check out our site:

We make money, been around a long time, our customers love us.

There’s a big opportunity we need help with (not sure if that’s the right lingo or not).

Any interest?


My initial response:

Sorry that the [redacted] idea didn’t take off. It’s hard to get people interested in a new social networking idea these days (even those who say that privacy is important). Good for you for moving on to something else.

.[redacted] is definitely novel, but doesn’t really fit our investment focus (see Big opportunity is definitely the right lingo (and what you’re searching for…).


And then this is what I get back:

Howdy Seth,

Be honest.Did you even look at the site?

Just worked out a deal today that leads us into one of the two largest captive auto lenders and one of the three largest banks in the US.

But you’re not interested.

Go see the movie “Twenty Feet from Stardom”.

Then get that funding is more about who you know, pedigree, etc., than anything. Get how many talented entrepreneurs there are out there, that don’t make it. For no other reason, then they’re on the outside looking in.

One of these days, I’m going to write about it.

I could have a cure for cancer, you wouldn’t give us a dime. Because you don’t know us, you don’t anyone who knows us, and in my case, I’m too old.

You know how you could make the planet a better place? Start telling the truth to people.

I’m not angry, at least you were kind enough to reply.

Be cool.
or just be.

Obviously it totally pissed me off (thus the tweet and the rant here). This was my response:

I’m debating whether to answer or not given the tone of your email. But I didn’t want to let your belligerent, tactless note pass. I did look at the site – and you have no reason to rudely call me out on having not done so. If you looked at our website you’d understand why this isn’t a fit for us ( – we’ve written extensively on what we’re interested in and what we’re not). And yes – if you had a cure for cancer we wouldn’t be a good target for you because health sciences isn’t in our investment focus (which, again, you would know had you done any research on us). We get over 5,000 business plans submitted to us each year (and fund about 8 new ideas). That’s why we’re so deliberate about what we’re interested in (and good at) and what we’re not. We have entrepreneurs of all ages and “pedigrees” (whatever exactly that is). And have funded people we’ve never met before or who don’t have 1 degree of separation with us. You can believe otherwise if that makes you happy. But there’s no need to be an asshole about it.

Good luck with your idea and with your life. I’m sorry it has left you so bitter and angry.



Postscrip below. Final email from the entrepreneur below. Felt that I owed it to him to include it here.

Yes, rejection sucks.

Yes, I have feelings about VC’s that are…real for me and plenty of others.

For me, they come from how I grew up, poor. They emanate from coming into the tech world in 1988, the hard way. From being turned away at the door so many times, because I didn’t go to Stanford, didn’t come from the right family, didn’t have the right friends.

All these years I’ve financed my business with SBA and bank loans. So has everyone I know. So I don’t know anyone in the venture world, neither does anyone in my circle. You have no idea, how hard it is, to break into this world of yours from the outside. Nowadays, it’s just impossible. Throw in that I’m 54 now…

There’s discrimination in the tech world now. The tech world makes those on the inside richer, and it keeps those on the outside — there. It never used to be that way and yes, I’m angry about that. I need to deal with it.

No one talks about that the chances of getting funding if you aren’t in the know (went to the right school, worked for the right founder, know people in the VC world), are older, are slim and none. Instead, the VC’s have websites that create a false sense of hope. It’s bs and no, I’m not going to apologize for the truth.

That’s what you should write about. That’s, what no one writes about.

But I do apologize for making you wrong. You do what you do. I need, to deal with it.

Go see the movie. I drove two hours to see it. Background singers and entrepreneurs on the wrong side of the tracks, are on the outside looking in, have so much in common.

You’re right, I got anger.


What your “About Us” page says about your company

about_usMaybe it’s because I always love the back story of how an idea came together or because I’m particularly partial to team stories, but I love checking out the “About Us” or “Team” pages on websites. And while many (too many) are really bland, some companies really take the opportunity to show off their story, talk about their mission or present their team in an interesting way. I’ve been polling people for a while for pages that people particularly like. Here are a few that I think are really great. Please add to the list in the comments section. I’m also always curious about the right balance between mission driven About pages that talk about the higher calling of the company and team driven About pages that highlight the people that work for a business. I don’t know that I necessarily prefer one to the other, but it’s always interesting to see which a company chooses to highlight.

Screen Shot 2013-07-23 at 11.27.52 AM


Kickstarter‘s team page is fantastic. Funny. Quirky (no pun intended there!). Definitely original. I love this team presentation as it really brings forward the personality of the company.


Screen Shot 2013-07-23 at 11.33.40 AM



MondoRobot has the same idea, but with separate images. Be sure to mouse over the pictures. Same thing for sumall.




Screen Shot 2013-07-23 at 11.41.23 AM

I like both the Team and About pages of Maptia, both of which I think do a nice job of relaying the story of the company.


Screen Shot 2013-07-23 at 11.37.05 AM


Synapse has a great about us page packed with a bunch of history and cool graphics. A little surprising, frankly, for a 10yr old company.




Screen Shot 2013-07-23 at 11.37.59 AM


The minutes and hours stats to the right of each bio turn the team page for Harvest from a pretty standard team page into something that was fun to read (and kept me scrolling down to see more).




I don’t bring this up for kicks. I actually think how a company presents itself online is important. It conveys a certain personality (or lack there of) to potential customer, partners and employees (and investors) and if done right really offers an opportunity for a business to present itself in a way that’s quite different from its peers.