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Keys to a Thriving Startup Scene From VC Veteran Brad Feld

Keys to a Thriving Startup Scene From VC Veteran Brad Feld

Brad Feld of Boulder, Colo., has funded some of the biggest tech success stories of the last decade, including the mobile-game juggernaut Zynga and TechStars, the groundbreaking accelerator program that has worked with more than 100 startups since 2007. This month the partner at VC firm Foundry Group releases his latest book, Startup Communities: Building an Entrepreneurial Ecosystem in Your City. We spoke to him about the state of the startup scene.

What does a community need to become the next Silicon Valley?
First, the culture has to be led by entrepreneurs. Governments, universities or a big local business can't do it. Any that try will fail, since these organizations are hierarchy-driven, meaning that the people in them measure success in terms of climbing the ladder within their organization. Entrepreneurs, on the other hand, are network-driven. They'll work together to build something new.

Second, the people have to stay involved for at least 20 years, riding out the cycles and reinvesting in that community. This is why Silicon Valley has stayed on top for so long: One generation's success funds the next generation.

Third, the community has to be inclusive, no matter what a person brings to the table. The community will find a role for that person: development, marketing, design, manufacturing, etc.

Last, there needs to be a regular and reliable schedule of activities, events and projects to bring the community together to work on stuff. I'm talking about accelerators, startup weekends or a monthly meet-up where entrepreneurs can find mentors to help them with tough questions.

How does a community identify new talent worth nurturing?
In Boulder, our mantra is, "Give before you get." To figure out who's a giver and who's a taker, I give everyone new a task. What happens is that 50 percent will disappear--these are people who came looking for a job. Twenty-five percent will complete the task, which is fine. But the last 25 percent will complete the task and then figure out the next several steps to take. Those people are the leaders.

It seems as if an inordinate number of startups are funded these days.

Is this the result of a VC bubble?
I've heard endless noise about a bubble since 2001, but what you have to understand is that it's cheaper than ever to launch a business. Unlike 10 years ago, it doesn't take $10 million and two years to ship a product to market. Now it can take a few months and almost nothing to get a startup going. That means more startups get funded, which allows VC firms to spread risk. Sure, a lot of these startups are going to fail, and that's OK. It's expected.

What do you think of the flood of copycat startups trying to be the next Facebook or Instagram?
There's always a lot of noise about the trendy stuff, but that often masks the revolutionary work--the foundational programming--that's going into this stuff.

Our investment group, Foundry Group, thinks horizontal, not vertical. We don't invest in categories like healthcare or education. We're not so much interested in the solution a startup is out to solve as the technology behind the scenes. That's where the fun stuff happens.

Do you think the tech VC model can be applied to other industries?
I don't see why not, but it requires a networking culture to work. The one instance that comes to mind is in the natural-foods ecosystem with Gary Erickson, the founder of Clif Bar. He's started investing in new businesses using the network model, my first principle for a successful startup community.

Grant Davis is the Tech and Money Editor for Entrepreneur Magazine.

Like this article? Get this issue right now on iPad, Nook or Kindle Fire.

This article was originally published in the October 2012 print edition of Entrepreneur with the headline: Doing the Community a Service.

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