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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Community

Community-712702Over the last six years, we have tried to build First Round Capital as a community of entrepreneurs -- not a collection of companies.  We've always tried to find ways for our entrepreneurs to benefit from (and help) each other.  We've invested heavily in building this community.  We get all our CEO's together at our CEO Summits.  We hold portfolio-only conferences for our advertising, e-commerce and entertainment companies.  We have active mailing lists for our entrepreneurs to send questions, thoughts and suggestions to each other.   We even set up an Exchange Fund where qualified First Round Capital entrepreneurs can contribute a small piece of the stock they own in their company -- and share in the performance of all the other companies in the fund. 

And during that journey, we have assembled a diverse group of innovators all on a mission to build something massive.  Some have PHDs from the most prestigious universities in the world and others haven't gone to college.  Many have built successful businesses in the past and for some, this is their first time.  Some have a background in engineering or product management while others built world-class sales and business development teams.  One got suspended from high-school for hacking into the school's phone system, while another has commandeered The Cone of SilenceSome are incredibly young while others are…less young.  And we're lucky to have entrepreneurs from almost every corner of the world working at startups across the country.

Yet, until now this community of innovators was hidden on our website.  So I'm super-excited to unveil the new Community section on the First Round Capital site -- a place to see the faces, biographies and Tweets from the remarkable people that make up our community.

Not a bad day...

Friday'sLogo If day's could have a "like" button, I definitely would push it today.  An exit to Facebook. Two women First Round Capital founders on the cover of Entrepreneur Magazine. And an exit to Google just in time for cocktails.  Just another Friday at First Round Capital.

In the short-term gains category, congratulations to Justin and the HotPotato team.  While we've only been investors for a few months, it's been a real pleasure to see the HotPotato team in action -- and I'm sure they'll do amazing things at Facebook.

In the long-term gains category, I've now been working with Munjal Shah for almost six years.  Back in December of 2004, Munjal first sent me his plan for a photo-site code-named Chunky.com.  That company evolved into Ojos.  Which evolved into Riya.  Which evolved into Like.com.  Munjal is truly a heat-seeking missile -- he has an innate ability to collect a massive amount of data and determine the signal from the noise.  I've blogged about Munjal's journey before -- but it's not nearly as powerful as hearing Munjal talk about some of his lessons learned in this video.  This is our second exit to Google this summer -- and Google is getting an amazing team of folks.  Congratulations to Munjal, Burak, Gaurav, Vinnet and the entire Like.com team!

Finally, I'm super excited to see two of our female entrepreneurs gracing the cover of this month's Entrepreneur magazine.  Both Emily and Susan created their companies out of their personal passions and experiences.  Emily (the co-founder of Foodzie) was working as a brand manager at The Fresh Market and saw firsthand how hard it was for small producers to break into big retailers, even with their awesome stories and top-quality products. So she created a place in which producers could directly connect with customers.  And when Susan (the founder of ModCloth) was in high-school, she spent weekends thrift shopping for unique vintage finds. She found herself snatching up great pieces that weren't necessarily her size, but that she couldn't pass up.  So, at 17-years old, she decided to start an online shop.  Today Modcloth is one of the biggest online retailers of vintage-inspired clothing, with hundreds of employees...

I sure can't wait until next Friday!

New and Improved

NewImproved It's been almost five years since I went to Typepad and created this blog.  And while I've added content over the years -- the look of the blog hasn't changed.  Until today.  Today I launched a redesigned blog -- with a completely new design.  I've also taken off a bunch of the peripheral "widgets" -- which, hopefully, will make it faster to load and easier to read. 

The new look gives me added incentive to add some new content.  So stay tuned...

Thanks to Brett Berson for leading the effort, Philly's own Brian Hoff for the wonderful design -- and the folks at Typepad for helping me with the upgrade!

Founders and Heat Seeking Missiles


As a seed-stage investor, First Round Capital typically funds powerpoints.  Not only are the majority of our investments pre-revenue, but most of the time we are investing in pre-launch companies.  While these companies might have an alpha/beta version of their site, it's usually early enough that we can’t base our investment decision off of any market traction.  Instead, we typically make our investment decisions based on three key areas:  the size of the market, the strength of the team, and the product vision.   This is often made even more difficult by the fact that we know that many of the businesses we fund end up with (one or more) pivots -- since their business plan is always wrong. 

The Team

I've lately started to realize that our most successful companies are led by entrepreneurs who have a unique talent -- they are heat seeking missiles.  It doesn't matter where the missile is aimed pre-launch.  Successful entrepreneurs are constantly collecting data -- and constantly looking for bigger and better targets, adjusting course if necessary.  And when they find their target, they're able to lock-onto it -- regardless of how crowded the space becomes.  When Nat and Zach first came to us with the idea for Invite Media, it was focused on algorithms for ad targeting.  But once they got into the market the team saw a bigger opportunity -- the DSP space -- and they locked-onto that target with a successful outcome.  We funded VideoEgg back in 2005 with the goal of creating tools to manage online video -- but Matt and team quickly adjusted course and have now become a leading media network for brand advertisers.    When we first met Lance and Jia in 2006, they had a cool photo-hosting application called RockMySpace -- but they quickly found  the opportunity was much larger than photo-hosting, and RockYou has since became a leading provider of social networking and gaming applications.

Market

Markets really matter.  Because the bigger the market, the more targets there are for the missile to hit.  I've seen many companies fail to reach their potential because -- despite the skill of the founders -- they ultimately realize that there just aren't enough (or any) big targets for them to lock-onto.  It's really hard to start a company -- and there are so many risks that all startups share, regardless of market size.  Whether you're targeting a $10M addressable market or a $1B addressable market, you're still going to face Hiring Risk, Marketing Risk, Competitive Risk, Technology Risk, and  Financing Risk.   And while bigger markets might pose more challenges than smaller markets, the risks involved in targetting a $1B market are not 100x greater than those involved in $10M market.  Choosing the right market is critical, because the market you choose determines the targets that are available for the heat-seeking missile to hit.

Product

Sometimes entrepreneurs (like Aaron) will have such a strong sense of the market that their initial product plan is dead-on.  But most of the time we see the product iterate and morph over time.  As a result, product is often the hardest thing to evaluate pre-launch.   And some of our biggest mistakes have occurred when we passed on companies based on their pre-launch product.  So today we tend to focus on a company's product vision, rather than on the specific implementation of a pre-launch product.  We've also found that a pre-launch product plan is a great way for us to get additional input on the team.  Have they studied the competition?  Do they really understand how to leverage social networks, game mechanics, etc?  Do they have a data-driven philosophy or a gut-driven philosophy.  Why did they make the choices they made?

At the end of the day, I've really come to believe that you can't predict success based on where a missile is pointed pre-launch.  Instead you have to assess the quality of the targeting system (the team) and the density/size of targets (the market).   And hope that the missile you launch finds a true target -- rather than a decoy...

 

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