Building a business in a quadruple-barrel crisis, Brad Feld, Venture Capitalist, Foundry Group
Startup Victoria’s Growth Club gives scaleup founders access to real world experience on building a high-growth business, from successful founders, technology executives and investors.
This July founders heard from Brad Feld, prominent thought leader, investor, entrepreneur and author. Brad is co-founder of Foundry Group and two other investment firms, and has mentored and advised thousands of founders to grow successful tech companies.
He brings a wealth of experience that can help the founders who are building a business in a quadruple barrel crisis, when a global pandemic, economic crisis, mental health crisis and the necessary fight for racial equity have intersected.
Brad discusses concepts from his most recent book, The Startup Community Way, and explains how founders can use an understanding of complex adaptive systems to help them navigate the unprecedented shifts that are transforming our society right now.
Brad Feld on Complex Adaptive Systems:
Startups as complex-adaptive systems
How much has your original plan for your startup changed and adapted since your original vision, your first hire, your first round of funding?
“The only thing I guarantee you on day one of your five-year plan is that it’s wrong,” Brad says.
Brad describes startups as complex adaptive systems, where predicting the outcomes of plans or policies is challenging because of phase transitions — large shifts that come about quickly.
In a simple system, like making a cup of coffee, you can follow a set of steps for a predictable result. In a complex system, like raising a kid, an understanding of the parts of the system doesn’t translate to an understanding of how the whole system will work together.
You can’t — and shouldn’t try — to plan the adult your kid will grow into.
And, as with raising a child, you’re going to cause untold psychological trauma to your startup if you try and stick to a rigid growth plan.
Instead of building organisations with rigid structures, successful startups build highly connected networks where information flows freely between the connections.
This makes a startup more agile, so that it can respond more quickly to feedback loops than a business with a more traditional hierarchy, where information has to travel up and down a chain of command.
Entrepreneurs can embrace connected networks as servant leaders, who aren’t afraid to hire people smarter than them and have peer relationships with those people. Servant leaders empower people who collaborate, share and build better products together.
An understanding of complex systems extends beyond managing the internal connections of a startup. Founders can use this framework to move through phase transitions in any complex system.
The complexity of mental health
It’s generally accepted that everyone’s mind is complex and unique. But for many, it can still be tempting to approach mental health without considering their own personal experiences or struggles.
How many people discredit their own depression or anxiety because of personal success and a feeling that there’s no ‘reason’ for why they feel that way?
For Brad, depression and anxiety struck at a moment of professional success, which made it hard to be open about his own mental health.
But entrepreneurship is highly stressful, and Brad says that all of the bad days will eventually take a toll on your mental health if you don’t find a healthy outlet for that stress. Otherwise your mental health suffers, affecting not only you but the people around you, especially those you care about.
When Brad’s struggles were overwhelming him, he reached out with blog posts. This helped him overcome the stigma of mental health by connecting him with other entrepreneurs who had and were struggling with similar issues.
As an investor, Brad finds that people will often approach him because he’s made himself available. These connections, incidentally, break down barriers that otherwise exist between entrepreneurs and investors.
Venture capital as a system
Anyone who’s been through a round of funding knows how much uncertainty can be involved.
It can be hard for entrepreneurs to understand how the whole venture capital system works together, but it’s almost impossible without knowing what the individual parts of the system are and what those parts do.
Brad started writing about venture capital because there wasn’t a lot of information out there for entrepreneurs.
“In 2005 I wrote the first blog because thought it was stupid that there was this big imbalance of power that was unnecessary,” he says.
Now, Brad says, there’s almost an oversaturation of information online, with so much conflicting advice.
In particular, the idea that investors are only looking for unicorns is a particularly poisonous yet pervasive idea.
Of course VCs will want a high return on their investment. However, a startup is a complex system, and no VC can predict which of the startups will succeed with a high degree of accuracy.
Brad sees his responsibility as an investor to support the entrepreneur, rather than just as a source of financial capital. Rather than simply ‘picking winners’, Brad says a good VC will build peer relationships and work through problems with the CEO.
A good VC adds another connection to the network, which adds more value than just capital.
Extending the network with startup communities
It wasn’t that long ago that people said you had to move to the Bay Area if you wanted to build a successful startup.
Since then, Brad has been a part of building a thriving startup community in Boulder, Colorado, and has written a number of books on how you can build a startup community almost anywhere.
In The Startup Community Way, Brad and coauthor Ian Hathaway, look at startup communities as complex adaptive systems, and how by building a large number of connections with free flowing information are more adaptive and resilient.
They empower peers to support one another.
These networked communities are optimised for the challenges of extreme phase transitions, whether that’s a global pandemic, the resulting mental health or economic crisis, the fight for racial equity, or whatever else 2020 has to throw at us.