There’s a healthy debate going on right now at many VC firms about whether venture-backed companies should apply to the SBA’s Payroll Protection Program (The Information had a good article on this yesterday (paywall), and Albert Wenger from Union Square Ventures put up an excellent post on the subject here). This program is designed to help businesses struggling with the Covid-19 crisis retain employees and pay for critical infrastructure (specifically rent, mortgage and utilities). I wrote an OpEd piece for CNBC yesterday with Elizabeth Macbride that outlined a number of ways that the program, as currently implemented, is failing to reach many of the businesses it was intended to support. The program is complicated, being implemented through only a subset of the banking sector, is being interpreted differently by different banks, and has a loan forgiveness formula that leaves out many critical businesses that are in desperate need of the money (specifically restaurants and hospitality businesses).

Venture backed companies employ 2.7m people in the US according to the NVCA. There is no question that there are many venture backed companies whose businesses have and will continue to be significantly affected by the economic crisis that has been caused by Covid-19. These companies can and should apply through the SBA’s PPP program. But there are voices in the venture – and broader – community that believe every company in the US should apply for a PPP loan. That this is “free money” from the government. It’s not and at Foundry we think it’s a mistake to view it that way. While the rules of the program are unclear, vague and subject to interpretation and subjective opinion, there are a number of things that companies need to certify to be true about their business. They include:

• Current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”
• “The funds will be used to retain workers and maintain payroll or make mortgage, lease, or utility payments.”

We believe that many companies will look at their businesses and determine that there is a clear and real need for the additional funds offered through PPP. But we’re encouraging all of the companies in the Foundry portfolio to take a step back and consider whether they truly qualify for the program and whether their participation will save jobs and result in the business being less threatened by the crisis. We understand that there will be many companies that fall into a grey area. We don’t know today just how serious the economic downturn will be and just how impacted many businesses will become. Hard calls will need to be made but we’re encouraging companies to make them with thought and compassion.

Below is the email that we sent to our portfolio last Friday outlining our views on how they should approach this. We thought that it was important to share it more broadly.

_______________

Foundry CEOs & CFOs,

First of all, we can’t begin to tell you how impressed we’ve been with the leadership that you have all exhibited over these last several weeks. These are very challenging times both personally and professionally and these are the moments where true leadership is demonstrated. We sincerely thank you for the thoughtful and compassionate approach you have all taken during this crisis so far.

We had over 70 participants on the CARES Act/SBA/PPP call last night and we’ve had countless one-on-one conversations on this topic with many of you over the last few days so we know there is a lot of anxiety around the application process at the moment. The high anxiety levels appear to come from a mix of excitement and uncertainty which is certainly understandable because both components are clearly at play here. Although we can’t immediately relieve the anxiety, we strongly encourage you to take a few deep breaths and step back for a moment of reflection.

As you reflect, we think it is important to start by asking yourself “Was this relief package created for my company?” We’ve heard many of you talk about how attractive the economics of the loan could be for your company. The term “free money” has been tossed around more than a few times. We’ve also heard plenty of excitement around how simple it could be to qualify in part because the qualification requirements are both broad and ambiguous. However, the reality is that receiving a loan for your business means it isn’t going to another business that might also deserve the money so receiving a SBA loan does come at a cost to the broader small business community. Given the already mentioned ambiguity, we can’t, unfortunately, rely purely on the letter of the law to make this qualification decision for us. We all have to apply our social conscience and good judgment to come to the right answer. From Foundry’s perspective, we believe PPP was designed to accomplish two things:

Save jobs

Stop businesses from failing that are gravely threatened by the current crisis

No doubt that all of our companies would benefit from more cash with attractive loan terms on the balance sheet so it isn’t surprising that the majority of you are considering applying for the loan. At the same time, we know that many of you have not eliminated jobs or have no immediate plans to eliminate jobs at the moment. If you aren’t definitely planning to eliminate jobs, should you apply? Will your business likely fail without this loan?

As the application process is currently written, you (and perhaps your affiliates) will have to certify “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” This statement is highly ambiguous and could be interpreted in numerous ways. We’re sure most of you could easily rationalize this statement to be true. At the same time, providing false information in this application is a federal crime that includes jail time. In addition to your social conscience, you should have real conviction and certainty that you qualify in your own hearts and minds.

If you have a strong balance sheet, have recently raised money, or have some certainty around a near-term capital raise, we think you should reconsider applying. Although things are chaotic at the moment and it might be possible to take advantage of a lack of controls in the system, that doesn’t mean we should necessarily do so. Imagine for a moment that three years from now, the WSJ or FBI does a deep forensic analysis on the small businesses that received loans during the crisis. Would you feel good about the details of your situation being revealed in that process?

You are all proven leaders who have repeatedly demonstrated the ability to take a thoughtful and compassionate approach to decision making. While we all sort through the details and logistics of the loan application process, we encourage you to take a step back and remember to consider the big picture.

Thanks for reading.

The thing about being the current platform of record is that all eyes are on you. So when you do something stupid, like co-opting information from around the web into everyone’s Facebook feed without a user’s explicit permission, you get called on the mat for it. Mark Zuckerberg had it right today in his apology for the Beacon debacle when he said:

Facebook has succeeded so far in part because it gives people control over what and how they share information. This is what makes Facebook a good utility, and in order to be a good feature, Beacon also needs to do the same. People need to be able to explicitly choose what they share, and they need to be able to turn Beacon off completely if they don’t want to use it.

That said, the idea behind Beacon is a step in the right direction. It was the implementation that was wrong. Even the most dedicated Facebook users have lives outside of Facebook. In fact, most of what we do around the web has nothing to do with Facebook (at least it shouldn’t, if you have a life . . . ). The problem is that if I want a centralized place to tell people about what I’m up to and to interact with them about it, I need to spend a bunch of time recreating stuff I’ve done everywhere else around the web back at my platform of choice. It’s not efficient and it’s a pain. In my case, I essentially never do it. It’s that real-world problem that Beacon, despite its flaws, is trying to solve. For that, I say kudos to Facebook.

It’s funny how things have a way of working out. I wrote recently of our experience with SEOMoz – from initial meeting a few years ago to finally investing in them earlier this month. Today we announced our investment in Mocavo – a genealogy search platform that provides users with the best tools available to find information on their ancestors. More specifics on the business in a minute but the year long journey from TechStars to Foundry investment is worth noting.

I first met Mocavo at the start of last year’s TechStars Boulder. I liked founder Cliff Shaw a lot and appreciated (although at the time didn’t share) his passion for genealogy. When he asked me to mentor them through the program I thought it was a pretty safe bet. “Sure thing Cliff,” I said at the time, “there’s zero chance that I’d invest in a genealogy site, but it would be fun to work together!” Through the summer I held to that party line.  Cliff and I kept meeting regularly even after TechStars (Cliff knows my soft spot for sushi and would regularly invite me to the Mocavo offices for brainstorming sessions with the team over take-out). But over the winter the lightbulb went off on what a big idea Mocavo really is. I had known that genealogy is a huge (and growing) market but was beginning to realize just how novel the tools that Mocavo is bringing to the market are. And the pent up demand in genealogy circles for better access to content, better tools for sharing this content and better ways to bring offline content (the majority of historical content still resides offline). And how passionate genealogists are about their pursuit of family history and as a result how much time, effort and money they spend in their pursuit.

Launched in March of 2011 (although their paid features only launched a few months ago), Mocavo has seen great growth in visitors to its site, searches on its platform and information indexed in its search engine. The company isn’t out to replace existing genealogical tools – it’s here to augment those tools and provide an overlay social experience that is natural to genealogy. I couldn’t be more excited to be working with the Mocavo team (along with Cliff, I’ve gotten to know Richard, Andy, Ryan really well over the last year).

Welcome to the future of your past!

I wrote a post a few days ago about 2 productivity hacks that I’ve been using that have transformed my work life. I got a great response to that post with a number of people asking me what other tools I’ve found that help make my world more productive. Micah, who works with me at Foundry, put together a list of the tools we’ve been using (or at least experimented with) that I wanted to share. Let me know if you have ones of your own you think I should add to the list.

• TextExpander – store frequently types phrases/notes across all devices
• Wunderlist– To Do list on all your devices – supports team collaboration
• Trello – collaborative task list for Teams, works well with Agile/Lean methodologies
• Asana – To-do list that allows for super granular level of detail for todo lists and team collaboration
• Voxer – Walkie talkie/messaging app for instant communication with your closest contacts you want to be more responsive to than email
• Zapier OR IFTTT – connect the tools you use to each other based on triggers/recipes and actions (Ex. Save pocket starred items to Evernote folder)
• Copyclip or Paste – Keep all of your copied/clipboard items in one place so you don’t lose anything
• Charlie App or Accompany* – Easily get a briefing on who you are meeting
• FullContact – a unified address book across accounts, devices and organizations (now supports teams)
• Notability App – Take notes on your ipad and have them sent and OCR to Evernote
• Yoink – Simplify Drag and Drop by using Yoink to move files around your fullscreen apps
• Call please – web/app call list of people to connect with (helps avoid scheduling set times for meetings that don’t need to be scheduled..)
• LastPass or dashlane – Never forget a password or deal with login troubles again!
• F.lux – save your eyes from the eerie blue glow of screens (especially at night)
• Toggl – A simple online timer with a powerful timesheet calculator, great full review about Toggl here (see RescueTime to block notifications/programs for work blocks)
• Magnet or spectacle – Mac app to move and resize windows with ease (built into windows)
• Headspace – Although it seems counter-intuitive to use a smart device for meditating, this app will help put you in the right frame of mind
• Blinkist – Book summaries, 1,500+ best-selling nonfiction books, transformed into powerful shorts you can read or listen to in 15 minutes
• Goodreads – Lets users track and rate books and network with other readers
• Pocket – Allows you to easily save webpages for later reading (syncs across devices as well, which is a real bonus)

Chrome/Gmail Extension:

• Full contact or rapporative to see public info on people
• MatterMark – Get info on companies (web & mobile app too)
• Grammarly – Writing-enhancement tool with proofreading capabilities to check for a writer’s adherence to more than 250 grammar rules

CRM

• Streak  – Spreadsheet in your inbox, mail merge, email Templates, snooze mail, send later, team collaboration and more.
• MixMax – Awesome for scheduling meetings by sending a live table, avoid the back and forth and double bookings! Also does templates, mail merge and tracks opens, clicks and downloads
• SalesForceIQ – Sales focused CRM

Websites:

• Conspire (recently acquired by FullContact) – see how you are connected to the people you want to reach through your network
• Internet Archive Wayback Machine – See what websites used to look like at a specific point in time
• Power Googling Infograph – Sample search queries to tap into the power of Google Search

Specific Startup tools

• Usepodium.com for pitch feedback
• Docusign OR HelloSign – stop sending PDF’s to sign – streamline the whole process and know when docs are opened, signed, etc.
• Docsend – track, control, send, and present sales materials with real-time document analytics.

Assistant Services

• youcanbook.me or calendly – scheduling made easy, great for sales people, demos or office hours
• Clara ($$)- AI for scheduling (I use Clara for scheduling the majority of my meetings)
• Magic ($) -For simple tasks (schedule oil change, pick up flowers, order food, etc.)
• Pana ($) – Personal travel concierge, book flights by msging Pana where you want to go and when

$ – costs money

* – beta

One of the many things that makes Boulder a great city for start-ups is its incredibly collaborative environment (see posts on my love of Boulder here and here). From the willingness of mentors to help out TechStars companies, to collaborative efforts around recruiting great talent to our city, I’m constantly amazed at how many people are working to make Boulder an amazing place for businesses to thrive.

Today there’s another new initiative launching to help young tech companies in our community – Trada is opening CodeSpace, a free co-working space dedicated to startup developers and software engineers. CodeSpace will be located in Trada’s downtown Boulder offices and will have over 2000 sq ft of space dedicated to the effort.

While there are many places where non-technical entrepreneurs can meet up in Boulder to discuss their startups, there are few places where software developers can camp out for the day, week or month and work together on a project. We wanted to add this environment to the mix of coffee shops, traditional co-working spaces, and rented offices in Boulder. And in CodeSpace you don’t even have to buy coffee to camp out there (in fact the coffee is on Trada!).

But you do need to apply. There are spots for three dev teams (1-4 people each) for semi-permanent space as well as come-as-you-are dev and co-working space (with whiteboards, internet, access to caffeinated beverages, etc).

To start, CodeSpace will be open 8am to 5pm Monday through Friday. The program will run through the summer with the expectation that it will extend/expand in the fall as we learn what works best.

To apply for one of the 3 dedicated co-working spaces please visit trada.com/codespace

A little off topic, but if you’re in the market for a fun summer driver, I’m selling my fake Porsche 356 (not a kit but a "custom" build).  I bought it on eBay 6 years ago and am trying to sell it the same way.  I’ve had it up a couple of times – winner’s financing fell through the first time and it didn’t clear reserve the second.  I’ve taken out the reserve so if you’re interested or know someone who is . . . bid!

http://tinyurl.com/4vp5xf

This was also posted on Brad Feld’s blog and a similar announcement is up on foundrygroup.com as well.

Over the years at Foundry Group we’ve built an extensive network of companies. While we’ve invested in some of these directly, this actually represents the smallest set of companies that we are involved with. We have also invested indirectly in many others through our investment in Techstars. Yet another, and much larger set of companies, come from our investments in other venture funds.

In 2013, we started thinking hard about the future of Foundry Group. When we started Foundry in 2006 we were very clear that we were not going to build a legacy firm. There would be no generational planning, no transitions to younger partners, and no senior partner hold-outs who would hang onto economics well after they had stopped working. Simply put, when we are done investing, we will drop the mic and shut off the lights.

During these discussions, we reflected on the incredible collection of early stage VC firms we’ve invested in personally over the years. We’ve been investing as individuals in venture firms going back almost 20 years. The four of us have served as mentors, and in a number of cases, formal advisors to funds around the world. In 2010 we started making the majority of our fund investments together through a common entity. While we never thought hard about this activity, over the years we’ve amassed a very strong track record through these fund investments. It’s also been fun – a great way to get close to new managers, build lasting personal relationships, and see deal flow for our Foundry Group investing activity.

In late 2014 the four of us got together to talk formally about the future of Foundry Group. We had each taken a month off in 2014 – well needed breaks after what had been a seven year sprint since starting Foundry Group. We were clear at that point that we wanted to continue to make early stage investments through a new Foundry Group fund, which we subsequently raised in the middle of 2015 and started investing at the end of the year.
At the same time we discussed our later stage investment strategy. In 2013 we raised a fund called Foundry Group Select. The strategy behind Select is to make late stage investments into successful companies where our early-stage funds had previously invested. The strategy has been a good one and with two early exits (Gnip and Fitbit) we’ve already returned significant capital.

As a result of our extensive networks, we constantly see other potential late stage investments. We’ve stayed away from these investments, not because they aren’t interesting, but because with the Select fund strategy we had limited ourselves to investing in existing Foundry portfolio companies. We broke this rule recently to make an investment in AvidXchange, a business run by an entrepreneur who I have known for over 20 years. The conversation around AvidXchange brought to light the magnitude of the opportunity we have to invest in interesting companies outside of our early stage portfolio.

We also had a long conversation about our GP fund investing strategy. It is clear to us that we enjoy investing in other VC funds and working to support the GPs. When we looked carefully at our track record, it became clear to us how lucrative this activity has been.
As we discussed the confluence of our fund investing strategy, our current Select strategy, and our interest in acting on our unique later stage deal flow, we realized that there was an opportunity to wrap these three ideas together into a single entity that would encompass not just what we had previously called our Select strategy but would also institutionalize our fund investment strategy as well as leverage those and other relationships to invest in other later stage opportunities in our broader network.

The critical ingredient for bringing this all together was finding the person to help us execute our GP fund strategy. Fortunately we knew exactly who we wanted to work on this project.
For the past 13 years, Lindel Eakman has been the head of UTIMCO’s private equity group. He’s created an incredible portfolio of investments in venture capital funds, including Union Square Ventures, Spark Capital, True Ventures, IA Ventures, Techstars Ventures, and Foundry Group. In April 2007, Lindel committed to be our largest investor in our first fund in 2007, taking 20% of the fund. This was a bold move, as we only had one commitment at the time.
Lindel – through UTIMCO – has continued to be our largest investor. He has been on our advisory board and for the past eight years has been a key advisor to us. Over the years he also has become a close friend.

We’ve been discussing this strategy with Lindel for most of the last year and have started calling the initiative “Foundry Group Next”. The Next strategy will not only allow us to continue making direct investments in high-potential startups, but will also scale-up our ability to support venture firms and funds whose vision and values align with ours. Through this activity, we hope to spread the Foundry Group values and DNA further into the overall venture and startup ecosystem.

We are pleased to welcome Lindel to Foundry Group Next and are excited to start this new chapter with him. And to make the the lawyers in our lives happy, we need to say that in no way is this blog post an offer to sell securities or an advertisement of us raising a new fund. We have yet to announce anything regarding any new funds that we may raise in the future.

Sandy Hamilton (one of the key execs at Newsgator) did a nice follow-up post to the note I wrote about taking 100% responsibility.  In it he talks about what that actually means  – how we present ourselves and the importance of taking responsibility not just for what you are saying, but also for what other people are hearing.

What a powerful concept.  Thanks Sandy for taking this to the next level. In case the link above isn’t working, here’s the  full URL of his post: http://sandyhamilton.blogs.com/sandy_hamilton/2005/04/did_i_say_that.html

I was recently interviewed by Larry Nelson from w2w3.com. That piece is now up on the w3w3 site, and is (in my humble opinion) worth a few minutes to check out.  I talk about what it’s like to work at Foundry Group with Brad, Ryan, Jason and Chris as well as about the role of company advisors (inspired by recent posts from this blog on that topic – here and here).  Enjoy!

We were talking today at our regular Monday partner lunch about accessibility and openness. At Foundry we strive to be transparent and available – from our various blogs (the Foundry blog; plus each of our personal blogs -  Jason, Ryan, Brad as well as this one) to direct email addresses on our website. While in many ways venture capital has been somewhat of a mystery to most people, we’re hoping to provide a little transparency into our daily lives, into the mechanisms we use to evaluate companies and into how VCs think about investing in and growing companies.

With that as a backdrop, I wanted to remind readers that I love hearing from you. Comments to blog posts are great, but please feel free to email me directly – seth@foundrygroup.com.  I particularly enjoy hearing questions or suggestions for future blog posts. So keep the comments and emails coming!