Redeye VC

Josh Kopelman

Managing Director of First Round Capital.

espite being coastally challenged (currently living in Philadelphia), Josh has been an active entrepreneur and investor in the Internet industry since its commercialization. In 1992, while he was a student at the Wharton School of the University of Pennsylvania, Josh co-founded Infonautics Corporation – an Internet information company. In 1996, Infonautics went public on the NASDAQ stock exchange.

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Monthly Archives for 2010

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The earlier the better...

Most VC’s typically “pass” on a deal with a line like “you’re too early for us, but let’s stay in touch as you execute your plan and hit your milestones.”  Why wouldn’t they?  This non-pass pass gives the VC a second opportunity to see a deal – and let’s the VC avoid the finality of declaring: “Nope, we’re not ever going to fund you.”  In a business that’s all about maintaining options, the non-pass pass has become standard practice.

At First Round Capital, we can’t follow this standard practice.  We prefer to see (and fund) companies early – after all, we’re not Second Round Capital.  We are comfortable with “Powerpoint Risk” (ie, funding powerpoints) and are used to funding incomplete technologies, teams and business models.  Our fund’s average initial investment is just under $500,000.  So I found it ironic last week, when, I ended up passing on several startups using a line like “you’re too late for us – I wish I had seen you six months ago during your angel round.”

Since our inception, First Round Capital has always been focused on early-stage, seed investments.    Just last week we closed a new fund.   And as rumors spread that we might be raising a larger fund, we’ve already started to get more inbound requests for larger, later-stage, deals – ($2+ million funding rounds).   But while our fund is larger, our focus remains the same.  We plan to continue to make the same early-stage, seed investments we always have.   The same initial investment size.  The same investment style.  And the same investment strategy.

Our average initial investment will remain around $500,000.   And our investment goal remains the same – to help an entrepreneur validate, “de-risk,” or disprove his/her hypothesis…and to do so as quickly and capital efficiently as possible.   The only real difference is that we won’t be raising a new venture fund annually (as we did in the past), allowing us to spend more time with our portfolio companies and looking at new deals.    So in an election year where everyone seems to scrambling to embrace "CHANGE", we’re looking forward to more of the same in 2008 and beyond.

(And keep the Powerpoints coming – you can’t send them early enough!)

Comments

Dave

terrific approach.

hope you can keep that philosophy intact as you folks get "bigger"... i think the typical challenge is that succesful VCs grow "up & out" of the early stage space they start out in, and larger amounts of capital tend to force them to move into doing less and/or larger deals.

any ideas on how you guys plan to handle the larger fund but still keep the same investment size / target? more staff to evaluate / do deals? more doubling down at later stages?

regards & best of luck :)

- dave mcclure
http://500hats.typepad.com

ashkan karbasfrooshan

I read your first paragraph and then scrolled down quickly... only to see you boldface CHANGE without seeing the context.

I almost fell out of my chair, thinking "what is it with..." only to realize you were purposely drawing a parallel with the elections.

Good post.

Jeremy Wright

If only you guys invested in Canada, there are tonnes of great companies here that don't have VCs like you guys to stand behind them at that stage (there are only 2 for the entire country that take your approach).

dave mcclure

sorry, re-read the last paragraph again... missed the "don't need to re-raise annually" part the first time.

Nate Westheimer

Focusing on the early stage is a great thing. Must be cool to say that your main skills are will Powerpoint and not Excel.

PS: I sure do love the "too early" template they send back.

Josh too

Glad I finally found your article...at the bottom. Frankly, I'm on the other side of your concept of "Powerpoint risk". As much I found your statement very encouraging, I think I still will complete my plan, technonoloy and team and everything before I reach out to any VC, though I'm on a tight buget. B-school taught me that way, good or bad. lol

Jo

Josh, congrats on the fund and maintaining your focus. I've heard how ridiculously over-subscribed your fund was. In a time when most VCs let fund size drive strategy, it is heartening to hear that you've done the opposite....

David

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