Author: Alan Shimel

Brad Feld, co-founder of Foundry Group and Tech Stars, recently joined us on TechStrong TV to talk about his new book, co-authored by Ian Hathaway, “The Startup Community Way.” Brad is one of my oldest friends and has a lot of great insight into the tech community and the shift in the balance of power in many organizations, and his latest book discusses that at length and more.

The video is immediately below, followed by the transcript of our conversation. Enjoy!

Transcript

Alan Shimel: Hey, everyone, thanks for joining us on this segment for TechStrong TV. I am, like, thrilled beyond thrilled to be joined by an old friend of mine—not that he’s old, but we’ve known each other a very, very long time—my friend, Brad Feld, who really needs no introduction in any kinda tech kinda discussion. Hey, Brad—welcome.

Brad Feld: Alan, it’s great to be here. Awesome to see you.

Shimel: It’s awesome to see you, my friend. I haven’t seen you in too long, and I don’t know when I’m gonna see you in person again with the current state of affairs, but I hope it’s soon.

Feld: I get virtual Alan and you get virtual Brad.

Shimel: That’s the best that we’re gonna have to do. So, Brad, we have you on here today because your book came out, I guess it was last week it came out officially, right? And it’s called “The Startup Community Way.” It is a sequel or follow on to “The Startup Community” book that you originally authored how long ago? That had to be, what, seven years ago was the first book?

Feld: Yeah, “Startup Communities” came out in 2012, and along with the publication of “The Startup Community Way,” we came out with a second edition of “Startup Communities” that has some updates to it and some things that I got wrong the first time around fixed. So, it’s nice to freshen up.

Shimel: Well, we’re gonna talk about those. Yep, and we should mention, Brad, that you have a coauthor in this “The Startup Community Way” book, and that’s Ian Hathaway. And Ian may be less entrepreneurial or less experienced in the VC entrepreneur world, but very experienced in research and kind of doing, you know, looking at this scientifically, if you will.

Feld: Yeah, he was a really good coauthor, he’s become a close friend, and part of the thing that was good about it was, we do have different frames of reference. So, as we talk through and work through the book and work through different ideas around the book, you know, pressing against each other from different frames of reference really generated, I think, much better ideas and much better writing.

Shimel: Excellent. So, Brad, I’m gonna make some assumptions, here. First of all, our audience is a very geeky, techy audience, right? We cater to digital transformation, DevOps, cloud-native, open source kinda stuff, and of course, cyber. They know who Brad Feld is. They’re familiar with tech stars, they’re familiar with startups, they’re probably even familiar with the term startup community, which you kinda initially coined with the book, right? So, I don’t want to spend all of our time sort of laying that foundation. They’re familiar with who Brad Feld is as well.

And if you’re not, I’m gonna tell you really quick. I sold my first company to Brad in 1997. He’ll tell you I was wearing a stupid sports jacket, but we’re not even gonna talk about it. [Laughter] He’s been at SoftBank Venture Capital, Mobius, Foundry Group, started Techstars, one of the kind of forces behind—how do you pronounce it? National Nitwit is—what does it stand for, Brad?

Feld: NCWIT, National Center for Women in Information Technology.

Shimel: Yep, and, you know, one of my favorite things you’ve done. But, I mean, beyond—we could go on and on, but let’s not. Brad, I started reading “The Startup Community Way,” and I have some issues, questions, areas I want to jump in on with you if it’s okay.

Feld: Sure. So, obviously, with your initial “Startup Community,” you had what you coined the Boulder Thesis, and there were four main points in the Boulder Thesis. Number one, though, and sort of primal to me was that, for startup communities to thrive, they need to be led by entrepreneurs, right? These entrepreneurs had to have a long-range kinda commitment to the community, and let’s stop right there for a second.

Shimel: I noticed in this, in the new book, you kind of made a realization that, in informing that, we set the entrepreneurs up as sort of the alpha predators, as the top dogs on the food chain, right? But in doing so, it might have created a little bit of us versus them between entrepreneurs and the other, I’m not gonna say equal participants, but vital participants in this equation of a startup community. The workers of these companies who go to work at entrepreneurs, universities, government agencies—the community, right? It’s not just entrepreneurs.

And I think one of the things you’re seeking to address in the book is to kinda ease that tension, the us-versus-them tension, correct?

Feld: Yeah, that was a mistake I made in the first book, and it was a mistake of language, not of intent or description. So, in the first book, I made the strong assertion that the leaders of a startup community have to be entrepreneurs and, in the absence of a critical mass of entrepreneurs playing leadership roles, your startup community won’t grow and evolve.

I then labeled everyone else a feeder, and my intention was not to have leaders be one up on feeders—you know, one up, one down relationship—but just different. And I tried to categorize them differently and spent a fair amount of time in the book describing what leaders do and what feeders do. And the miss was, there’s a lot of people who play leadership roles in startup communities who are not entrepreneurs, and in the new book—and I also went back and updated the second edition of the old book—I now call them instigators. And the idea of an instigator is that they are playing a leadership role in the startup community, and that’s a very powerful notion.

So, essentially, people now are classified as leaders and instigators, and the organizations are feeders, and that’s really important, because the organizations tend to be hierarchical. They tend to have their own agenda in addition to the agenda of the startup community. And the fundamental goal of a startup community, pure and simple, is to help entrepreneurs succeed. And the feeder organizations, part of their goal as organizations are to help entrepreneurs succeed, but that’s not their only goal.

We also distinguish now between the notion of a startup community and an entrepreneurial ecosystem. A startup community, at its core, exists to help entrepreneurs succeed, and an entrepreneurial ecosystem has, at its core, a startup community, but it’s a much bigger thing, and it engaged all of these other organizations around their goals and how they engaged with entrepreneurship.

So, I think we’ve done a better job in “The Startup Community Way” of talking about leadership and who provides leadership and the people providing the leadership in the startup community being both the leaders, the entrepreneurs, and the instigators, people who aren’t entrepreneurs, but who are playing a leadership role. And then the organizations, the other actors who contribute to the startup community but don’t control it, don’t try to organize it, don’t try to run it, just participate in it.

Shimel: Excellent. You know, Brad, there’s a lot of analogies there to what we see in the DevOps world, right? The developers have become the entrepreneurs of the first edition of startup community, where it seems the rest of the DevOps ecosystem revolves around these developers, and look, developers are impossible to hire. They’re, as you know from your companies, they demand a lot of money, they want a lot of say over their environments, their culture, and everything else. They’re kinda calling the shots, and the rest of the world kind of revolves around it.

But also, a lot more is thrown on these developers’ shoulders in terms of what—they’re no longer responsible just for code, they’re responsible for deployment, they’re responsible to make sure the testing is right, you know, for that whole software factory. They, in essence, run the factory. And a similar kinda thing has happened in DevOps where we say, “Hold on—yes, the developers’ role is a very important role, but so is that of the cyber person, so is that of the SRE, so is that of the tester. And literally, it does take a community, and it’s caused a bit of a realignment, if you will, within how we look at DevOps and cloud native and continuous deployment.

I wonder, you know, carrying that analogy out, Brad, though, I think a lot of our audience out here, they tend to interchange entrepreneur with technical entrepreneur, and I wanted to talk to you about the role of the business entrepreneur for my own selfish reasons, but you know—and you have a ton of experience on this. When we talk about entrepreneurs, Brad, how much of it is, you know, so a technical entrepreneur, the kind of person who goes on to be the CTO in their startup or in their company versus people who come from the business side of things, right? And what’s the right mix, or what’s a—I don’t know if there is a right mix, but what’s the right formula for when we look at the entrepreneurs within the greater entrepreneurial ecosystem, within the startup community, between technical entrepreneurs and, let’s call them, business-orientated entrepreneurs? Make sense?

Feld: Well, they’re both—it makes total sense. They’re both essential. And when I talk about entrepreneur, I don’t really distinguish between the two. I think there are many different roles that founders or entrepreneurs play. And, for a lot of people, the word entrepreneur tends to be triggering. Like, it used to be something that was very well understood.

Today, the word entrepreneur gets used, I would say, almost indiscriminately in a lot of different contexts. And, to your question, I would come back to the notion specifically of a founder. A founder of a company, somebody who is one of the people who helps create the company from the very beginning, and you need a combination. You need technical founders, technical entrepreneurs. You need business founders, business entrepreneurs. Most companies generally have more than one co-founder, but there are definitely successful companies with one founder.

But generally speaking, if you have more than one founder, especially if you have a combination of a business founder and a technical founder, you can make a lot more progress a lot quicker in many cases. And if you have three or four founders, I generally try to encourage people to have at least an equal number of technical founders to non-technical founders, and preferably, more technical founders than non-technical founders. And, you know, Alan, you’re humble. I mean, you talk about yourself as the business guy, but you have very, very deep technical experience at this point. Even when I met you when you were running your first company in the late 1990s, you had deep technical experience.

So, the technical founder doesn’t necessarily mean just somebody who writes code, and I like to shift the language to be product-oriented instead of technical. So, if you think about three founders, three co-founders, the idea that two of them are focused on product and one of them is focused on the business, and the product and the business obviously overlap with the customer, and so, all three of the founders are paying attention to the customer, the evolution of what you’re trying to do from the very beginning can move a lot quicker.

By the way, there are a lot of very, very good technical founders who also have strong business sense in the same way that you’re a strong business person that also has strong technical sense. So, it’s not cut and dried, and you’re not like, “Oh, I’m in this box and you’re in this box.” I try to encourage entrepreneurs to think more broadly about what they’re doing and how they’re doing it.

Shimel: Excellent. Hey, I’d like to shift a little bit away from the entrepreneur because they get all the press, anyway. I want to talk about something that was really highlighted in your book, and that is the role of, within the community, within the ecosystem, the role of universities and the role of government, the role of these hierarchical groups as you referred to them.

Let’s talk a little—and I’m gonna bring it home to what I see here in South Florida, for instance, but Brad, you know, (a) it’s an important role they played in this big picture, but what optimally, what can the government do optimally, for instance, to help you—there’s federal, there’s state, there’s local—you know, where do you see it?

Feld: You have to be somewhat granular, and you also have to be focused on the specific place that you’re at, whether it is local, state, or federal or national governments. Interestingly, in the first book in 2012, I basically punted on this issue. I said, “The best government can do is do no harm to the startup community.” And, you know, I would say that was a combination of me not really having a particularly clear view of what government could have along with me kinda punting and being lazy about digging into it—based on my own experience, my own experience in Boulder, for example, is that the local government basically pays no attention to entrepreneurship and doesn’t really understand how to engage it in an effective way.

The state of Colorado government, actually, has done a pretty good job, and there have been a number of things over the years that the state of Colorado has done around this and then, you know, our federal government in the U.S. ebbs and flows. Sometimes there are some programs that are incredibly helpful and oftentimes, there are things that either get in the way or are counterproductive.

So, I’ve come to a place where what I think is important for government at any level to start with is to understand what their goal is. And I’m gonna come back to this statement I said earlier, which is, the goal of a startup community is to help entrepreneurs succeed. So, if government wants to engage in the startup community, their goal should be to help entrepreneurs succeed.

Now, at a local level, that often means that the best way to do it is an instigator—gonna use that word again—who is a person who works for a local government who actively engages as a leader in the startup community. So, they’re not actually bringing government so much to the startup community, but they’re, in their role in government, they may have a full-time job to help with economic development or developing the entrepreneurial ecosystem or whatever it is. Like, their first step should be to become part of the startup community as an instigator rather than show up as government and say, “Hi, I’m from the government, I’m here to help.”

Shimel: Mm-hmm.

Feld: One of the things the government really struggles with is allocating capital. Government has a lot of capital, as we’ve just learned from the COVID crisis. You know, overnight, the federal government allocated or deployed $2 trillion, and it looks like it’s gonna allocate another $1 trillion across their society. And a lot of that money went towards helping, quote, small business, where government thinks of small businesses and entrepreneurial businesses as the same.

If you use that lens, though, and you look at how that money was allocated, it was primarily allocated through two vehicles, PPP loans and EIDL loans. It was incredibly inefficiently allocated, and as a result, some companies got financial support, others didn’t. And it was done in this very, very sort of explosive way that may have had some very powerful short-term impacts, but it’s unclear on whether it has medium or longer-term impacts.

One last sort of comment on governments, state [Audio skips] governments over and over again. We need more venture capital here, we need more capital here, and we need to do things to get more capital here. In “The Startup Community Way,” we actually defined capital as having seven different flavors, where financial capital was one. Because generally when people talk about capital, they’re talking about money, and this is another place where governments can really help is to think about what capital the startup community already has that’s not financial capital—what kind of intellectual capital, what kind of network capital, what kind of infrastructure capital exists and what more is needed. And then try to figure out how to use the resources of local or state government to amplify those types of capital that ultimately then is a positive reinforcing loop to attract other sources of capital.

So, unfortunately, it’s—I think, for government, it’s nuanced, and a lot of times government is looking for a playbook and a solution, like, “I just need to do the following four things and then good things will happen.” And this is essential to “The Startup Community Way” where we talk about startup communities now as complex systems.

Shimel: Yeah.

Feld: And one of the things that many organizations have a lot of trouble interacting with—especially government, but not exclusively government—is complex systems.

Shimel: So, let me talk a little bit about complex systems here in South Florida. I know you’ve been down in Miami a few times, you’ve had a chance to see sort of the Miami startup scene and, you know what, in four or five short years, it’s actually come a long way. You know, it’s the gateway to Latin America and they talk about all that, but more importantly, there are some really concrete programs, the Knight Foundation, a few other organizations as well as local government has instituted it, and we’re beginning to see a startup community take hold there, in my opinion. It’s not bolder, it’s not awesome, but it doesn’t have to be, it’s Miami, and it does it in its own unique Miami way.

But South Florida is more than Miami, right? You basically have a tri-county or three city sort of metro area of Miami, Fort Lauderdale, and West Palm Beach. Taken together, I forget if it’s the six or seventh largest metropolitan area in the U.S., right, between these three counties—Miami-Dade, Fort Broward, and Palm Beach County. A tremendous amount of universities, we haven’t even talked about universities yet, but we have University of Miami and FIU and FAU here. Lots of universities—universities that are, you know, in your first book when you talked about the role, you know, they do serve as anchors.

I think what holds us back in the South Florida area, though, Brad, is that we have shoguns, right? I remember when your business card used to shogun, remember those days? [Laughter] But we have shoguns here every 10 or 15 miles, each little town or incorporated village is afraid that the next one is gonna do more, better than them.

Here in my little neck of the woods, Boca Raton and Delray Beach constantly—they’re right next to each other—constantly banging heads. Boca has the universities, maybe a little more capital. Delray has a great sort of startup scene brewing and they do have local economic development and a number of co-working places and stuff like that. But they can’t seem to get their act together to work—and these are just two little, piddling towns, to tell you the truth, right? If they would put it together, they might have something—but they can’t, they’re too busy competing. And it’s the same thing up and down this coast, right?

So, you have an area with a lot of universities, a lot of capital, a decent amount of tech talent—I mean, not deep enough, by any means—and certainly, many entrepreneurs. But they’re at loggerheads. How do you—in creating this entrepreneurial ecosystem, how do you overcome this sort of petty jealousy, these shoguns fighting for supremacy?

Feld: Well, you have to start from a perspective of playing a positive-sum game, and what you’re describing is a classic zero-sum game, where there’s winners or losers.

Shimel: Yep.

Feld: And, you know, the ones that we’re used to in terms of zero-sum game and election is a zero-sum game, somebody wins, somebody loses. Sports of events, most of them, zero-sum game—winner, loser, sometimes you tie if you play soccer. But, you know, for most games, there’s a definitive winner or loser. You don’t wanna play a zero-sum game

You wanna play the opposite of that, which is a positive-sum game where the cliché would be a rising tide lifts all boats, right? You’re helping each other over time sort of building something that’s more and more successful. And, in defining startup community, you can define startup community however you want in terms of geography. You can define it in a little town like Boca or Delray. You can draw a bigger circle around it and call it the Greater Miami Metro Area or whatever you wanna call it.

By the way, you said something earlier that’s really important is that you don’t need to create or emulate somebody else. Boulder is Boulder, Miami is Miami, Greater Miami is Greater Miami, Boca is Boca—like, you already have an identity as a city. But the key is to try to work with the people who are close to you to build a broader and more robust startup community. And, interestingly, if you’re taking this approach and playing a positive-sum game where you help each other versus you compete for resources and you compete to win or lose in sort of an inappropriate way or an unhelpful way, it doesn’t really matter.

The very specific example I’d give you is that, does it cost anything to travel from Delray to Boca? Do you have to pay—

Shimel: You could walk.

Feld: – you could walk, right? You don’t have to pay a tax, you don’t have to have somebody, you know, stamp your passport to get from one place to another. I mean, you really are part of a—

Shimel: Not yet.

Feld: – not yet. You’re part of a collaborative collection of people, and the goal should be that you wanna encourage cross-fertilization between these communities and you wanna encourage amplification of what’s going on and get critical mass around it.

Now, there’s nothing wrong with local pride, and I can use Boulder and Denver as really good examples of that. Boulder and Denver are both very, very vibrant cities. Boulder is 100,000 people, Denver is 2,000,000 people. They’re about a 30- to 45-minute drive apart from each other. They have independent identities, but there’s an enormous amount of collaboration between the two, and that’s very, very, very powerful.

Shimel: I mean, so, I’ve done Meetup groups in Denver and Boulder. You know, we started one with the Jump Cloud folks called IT as Code. The first meeting was down in LoDo. But we had people from all over, from Boulder and everyone else drive in, and we had a great meeting at one of the breweries there—good times.

I’ve started a bunch of Meetup groups here in South Florida, and we’re constantly, “Jeez, we have to do this one in Miami for the Miami people. We need to be down near Fort Lauderdale-Hollywood this time, or out at the university out West there to attract that Broward crowd.” There isn’t that sense of community that the rising tide lifts all boats, and I’m hoping that books like “The Startup Community Way” kind of make their way into the stream here, the mainstream of what these people are thinking about.

We even see it, Brad, with—so, we have the South Florida Technology Association, then we have the Palm Beach Technology Association. There’s several counterparts in Miami. They even compete at such a—and it’s a petty competition, frankly.

Feld: Well, they could really change the game in the region by deciding to collaborate, and they can have separate organizations with separate memberships and separate goals even if they’re in the same place because there’s no need for there to be one monolithic thing. In fact, you probably want a bunch of different things. But instead of viewing it as an, “I win, you lose,” they’re all trying to help entrepreneurs succeed. And in the context of that—again, the instigators, the leaders of those organizations, right, those organizations, even if they’re comprised of entrepreneurs, they’re still feeder organizations, right? The organization themselves is a feeder supporting entrepreneurs. The people in those organizations who are playing leadership roles can play a leadership role in the startup community, which is separate from their organization. Their organization is not the thing that’s organizing, managing, running the startup community. It’s just another participant in this.

And so, changing that frame of reference for humans is hard, because we’re used to competing, and you know, we’re—

Shimel: No, it’s like “The Highlander”—there can be only one. [Laughter] Right? And it’s a problem—I get it.

Feld: Well, and changing that is important and, you know, it’s one thing to say it’s important to change; it’s another thing for a bunch of leaders in a startup community to say, “You know what? Enough of this. We don’t need the segmentation, we don’t need the competition. Let’s all pull together even though we’re addressing different things, and we have some overlap. We’re trying to do something together that makes our place better.”

Shimel: Fantastic. Brad, we’re almost out of time. I wanted to leave you a couple minutes at the end here for our audience watching. If you had the three biggest takeaways from the book that you want people to go home with, what would you say they are?

Feld: The first is the distinction between a startup community and an entrepreneurial ecosystem and the reinforcement that the goal of the startup is to help entrepreneurs succeed, and you can define everything from there.

The second is that a startup community is a complex system, and in a complex system, there is no deterministic outcome. There is no playbook. There is no set of rules to get from Point A to Point B. A simple system would be making a cup of coffee. You put beans into the machine, you get coffee out. It might not be a good cup of coffee, but it’s a cup of coffee.

Shimel: Coffee it is.

Feld: Coffee it is. A complicated system would be manufacturing a Boeing 787 airplane. Once it’s designed, the rule book’s now really big, but you put parts at the beginning and at the end comes out a Boeing 787.

A complex system would be raising a child—and you’ve raised two. And you know that on day one of the child, what you tell the child to do and what you aspire for the child to do at age 21 is not what’s gonna happen. Every little thing you do, the child evolves and changes and grows and develops and all that stimuli is positive and negative along the way. And at the end, the child is whatever the child is. But it evolves in a way that you can’t predict. That’s what a startup community is—you cannot predict what that outcome is and you can’t control the outcome.

The last—and we cover this in the book and there’s several examples. I gave one which was the notion of capital not just being money and defining it as the seven capitals instead of just financial capital. Another would be something we could call the measurement trap. Everyone in a startup community feels the need to measure things, and this is especially true for government, this is especially true for nonprofits like the different associations that you probably described.

They’re measuring constantly—number of companies created, number of unicorns, dollars raised, number of jobs. These are things to measure, but they’re not the important things, they’re the easy things. And the really important thing that happens in the growth and development of a startup community and complex system is not the parts, not creating more pieces, it’s the interaction between the pieces, interaction between the parts. And measuring that interaction is really, really difficult, but that’s where all the power comes from.

Shimel: Got it. Love it. Hey, Brad, first of all, thank you so much. I know you’re crazy busy with promo-ings on the book and everything, so thanks for taking the time to come join us here on TechStrong TV. Best of luck with the book. We should mention it’s available on Amazon, it’s on all the usual places where one buys books today. Not going to book stores very much, unfortunately, but yes. So, it’s “The Startup Community Way,” Ian Hathaway, Brad Feld—check it out. It’s available in Kindle and hardcover at this point. I don’t think a paperback is out yet, right?

Feld: No paperback yet, just Kindle.

Shimel: Yep, hard book and Kindle. I have it on my Kindle here, I was all ready with my notes—but Brad Feld, author, “The Startup Community Way,” Foundry Group, Techstars, tech entrepreneur extraordinaire, and one of my best friends for a long time.

Feld: Thanks for doing this, it’s so awesome to see you, and congrats on everything you’re doing with your business now. It’s wonderful to see it.

Shimel: Thank you.