Brad Feld did a Venture Deals AMA recently and we extracted gems of advice out of that conversation.
In the time of COVID, would you invest in companies virtually?
Brad Feld says he does lot of investments via Zoom. Fitbit is one example where Brad never met the founders until after investing.
Is it possible to raise money from foreign investors?
At early stage most of the capital comes from the local angels and seed funding. Raising funding from a foreign country is generally very very hard.
What matters the most in the early stage of investing?
Brad is very focused on people and products. In the initial stages, the qualitative aspects of product and idea matters a lot compared to quantitative aspects. e.g. There is no revenue or margins to look and measure. Of course, at a later stage, all those financials matters.
How much does TAM matter in early stage companies?
a. TAM doesn’t matter as much when the companies are very early. Questions like “How big the customer is?” and “What is the LTV?” are all important but don’t spend too much energy on it.
b. Uber TAM was how much is the Blackcars initially for the wealthy people (which is very small). After they started working on it, they realized the expansive market and the opportunity grew a lot to mobility domestic and international.
Should I reveal the secret sauce to Investor? Would they copy it?
a. Secret sauce is not that important anymore. The “essence” is what you want to share with investors so they know why you are special.
b. First 60 seconds of Pitch : “What I do?” and “why should you care?” and “What’s magical about what you do.”
c. If that it’s easy to do something and replicate, then the secret sauce is not that defensible anymore. Anyone can do it.
What is the advise to the startups in 2020 with COVID-19?
Most of the portfolio companies in 2020 are advised to have more cash in their account to run into 2022, even if it means to spend less money now and grow less in 2020 and 2021. Floating around in these times is the biggest focus.
Would investors take my idea and share with portfolio companies?
Know your investor really well - if there are similar companies in their portfolio, make sure you talk about the competitive aspect of companies with them.
Do you have other advice to share with startups? Share it with us at firstname.lastname@example.org