Aug 10 2010

Trada – from the beginning

Brad has a lengthy post up describing how we think about seed investing at Foundry Group. In it, he describes our philosophy around seed investing and differentiates it from what others (but not everyone) in the market is doing. Importantly, he notes that:

our seed investments are not “options on the next round.”  We price our seed rounds as equity investments, always lead or co-lead … and treat them the same way we would a $10m investment… when we make a seed investment, it gets everyone’s attention.  We try hard not to smother it with love, but we recognize that we usually each have something unique to add to a seed investment and try to help accordingly.  As a result, we are all emotionally involved in the investment (a phrase you’ll see in later posts about this topic) which I believe is both beneficial to the entrepreneur and extremely important to the VC firm.

At the end of his post Brad lists out the companies in the Foundry portfolio that started as seed investments (AdMeld, Gnip, Lijit, Mandlebrot, Next Big Sound, Standing Cloud, and Trada). I thought it would be interesting (and illuminating) to describe the story of one or two of these investments as a way to put some color around how we think about seed investing.


With that pre-amble, let me describe the story of Trada – a company that helps businesses more effectively manage their search marketing campaigns via its marketplace through which paid search experts work collaboratively and competitively to maximize the effectiveness of Trada customers search marketing campaigns.

I’ve known the CEO of Trada, Niel Robertson, for almost 10 years. He’s founded several companies that our predecessor fund invested in (one of which was a huge success, one of which was not). The roots of Trada can be traced back to a series of conversations Niel and I started having months before the concept of Trada was born. They started with the idea that we wanted to work together on another company and some concepts about the operating philosophy of our relationship, the kind of company culture we wanted to build and the ideal pattern of communication that the two of us would have around the business. With the foundation of our operating philosophy intact we turned our attention to what this new business should do. I had been spending quite a bit of time looking at the online advertising market and suggested to Niel that, while the display market was large (and there were plenty of interesting businesses to be built there) I was particularly interested in trying to figure something out around search – which is a larger market than display and significantly concentrated with the search platforms (there were and are far fewer companies playing in the search ecosystem than in display). This mapped with some of the ideas Niel was thinking about as well and over a series of months we tossed around a number of different ideas in search marketing. Niel eloquently describes the birth of the idea behind Trada on the company’s blog (worth taking a look at and considering the varied genesis behind businesses).  To be clear, while there is a small group of us that are Trada founders, the idea of Trada is completely Niel’s. From the initial idea we worked together to validate the operating assumptions of the business – doing collaborative due diligence on the crowdsearch SEM marketplace that was the idea behind Trada.

Of course coming up with the idea is the easy part. Executing against that idea is another matter. In this case neither Niel (nor I) had any interest in creating a traditional syndicate to fund the company. Instead we quickly put our heads together about a financing (we like to say it was over beers, but the truth is more mundane – we hammered out the details in a 10 minute conversation in the conference room of the Foundry office). We decided that we wanted to bring in some experts to help us with the business and together flew around pitching the business to a small handful of strategic angel investors to pull together a small syndicate that became the initial Trada investor base. Niel and I hammered out a second financing in similar fashion (again around the Foundry conference table, this time without the need for an angel roadshow). It’s a great example of how we like to work with entrepreneurs – especially those that we have a long history with. We like to be involved early (in this case before an idea for a business even existed) and we think of our angel investments as a down payment on a subsequent investment in the business (we’ realize that we need to give early businesses some time to develop).

More recently in Trada’s history we announced that Google has joined us in investing in the company. It’s hard to imagine a more strategic investor in a search business than Google and we’re extremely happy to have Rich Minor and the Google Ventures team on board.

We’ve come a long way with the business and strongly believe that there’s no better platform for small and medium sized businesses to leverage the power of search. If you’re a business or PPC agency spending $3k – $100k per month on search marketing, I’d encourage you to give them a try.