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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Announcing our latest investment, Flatiron Health

It's always exciting to get the chance to publicly share a new investment - but today is even more exciting given this is the second time we've partnered with serial entrepreneurs Nat Turner and Zach Weinberg.  Nat was one of First Round Capital's first interns ever and built our very first website.  He then went onto intern at a First Round company, then called VideoEgg (now Say Media) and soon after, with Zach, came up with the idea for a company focused on algorithms and ad targeting called Invite Media (acquired by Google in 2010).


Nat and Zach are the kinds of founders we love to partner with, they're heat seeking missiles.  With Invite Media they pivoted away from their original product and essentially invented what is now known as a Demand Side Platform.  They are insanely effective executors and learners, resourceful and constantly curious.  For example, while they were not ad tech domain experts when they founded Invite Media, they immersed themselves in the space, accumulated as much knowledge as possible and ultimately discovered an opening in the market at the right time and rapidly grew the company before exiting.

So when the guys told us they left Google to dive into an entirely new space -- healthcare -- we were instantly excited and thrilled to participate in their initial round of financing.  Their new company is called Flatiron Health and it's focused on bringing the power of big data to the healthcare space.

I always seem to hear how a ‘cure for cancer’ is right around the corner, but the clinical trials to bring drugs to market is such a long process that 'the corner seems' seems to retreat farther and farther away.  Or, to be more precise, eight years away – the time it takes to test each potential cure.  While part of this time period is required (it can take years before we see the results of a cancer treatment), there has to be a way to make this process quicker.  In other industries, we've seen Big Data help buyers, sellers and everyone in between make more efficient decisions.  Yet Big Data has only just started to make it's way into MedTech.

Flatiron Health, based in New York City, is building an “oncology data platform”, which allows cancer care providers to aggregate, structure and mine their clinical oncology data (they call it "making cancer data actionable"). Flatiron’s platform integrates a cancer center’s disparate data systems to provide a truly longitudinal and comprehensive view of the patient population. Through the platform, administrators and clinicians gain deep analytics for business and clinical intelligence, resource utilization, treatment patterns, network management and research. Cancer centers can also monitor their adherence to national cancer care guidelines and benchmark their performance.  Flatiron is currently in private beta.

Nat and Zach join a number of other First Round companies focused on the healthcare IT space - including DNAnexus, Mango Health and Sherpaa.  Please join me in welcoming Nat, Zach and the entire Flatiron Health team back into the First Round Capital Community.

Oh, and if you're interested in joining the team and changing the world for the better, they're hiring for insanely good engineers and product managers - you can learn more here: http://www.flatiron.com/careers/open.html

Happy Holidays

Still_JoshAs many of you know, this time of the year is one of our favorite at First Round Capital - and not just because it's the holiday season.   But rather because it's time to fire up our camera, polish up our writing skills, dust off our dancing shoes, practicing our singing and prepare for our holiday video.

We hope this annual tradition shows that even though startups are a serious business - we don't take ourselves too seriously.  Our holiday video also gives us the chance to get together with the amazing entrepreneurs we work with to sing and dance, celebrate like it’s Friday, and end the year with a bit of Spice.

As our portfolio has gotten bigger, so too has our video – and it is a “labor of love” for our entire team.  Phin wrote the lyrics, CeCe scouted locations, secured costumes and handled the choreography (you should have seen how bad we were before she coached us), and Brett continues to amaze us all with his direction and production. 

So without any more delay, we're thrilled to share with you, the First Round Capital Holiday Video 2012

We really hope it puts a smile on your face.

Student Engineers: Apply to work at 170+ startups with one Common Application

CaptureWe'vtalked a lot recently about the amazing amount of talent that exists in universities across the country – and one of the main reasons we launched the Dorm Room Fund was to create a new and more efficient way for capital to flow onto campuses and into the best and brightest entrepreneurs.  But we realize that not everyone wants to start a company; many students, instead,  would love to join one.   But it’s often really hard for students to find the perfect startup jobs.  Startups typically don’t recruit/interview on college campuses.  And they rarely post job openings for internships.  Too often, it is often based on who you know.  So a lot of top university talent simply end up taking an internship or full-time job at Google or Microsoft.   We don't think this makes sense.

Last year, we quietly launched an experiment called the First Round Capital Common Application.  It was a simple idea: allow engineering students to fill out one application and get matched with the perfect startup from across our 170 companies.  That tiny experiment lead to some incredible matches.  Will Drevo, undergraduate CS student (and winner of the Autonomous Robotics Competition) at MIT said, "Applying for an internship through First Round Capital unexpectedly landed me a dream internship at a cutting-edge stealth startup of 12 employees - ToyTalk, Inc. It was honestly the best work experience I've had to date and I worked with a truly amazing and fun-loving team. I got to walk into work every day and talk with the CEO and CTO - I really felt like part of the team. But I never would have heard about ToyTalk unless I applied through First Round Capital."

So we’re super excited to launch this year's Common Application for university students.   With this one application, engineering students can apply for summer internships or full-time jobs at over 170 amazing startup companies.  Maybe you're an algorithms and data junkie looking to work on insanely tough problems with a small team in SF, or perhaps you're more interested in doing iOS development for an eCommerce company in NYC  – just tell us about yourself, your interests and desired location and we'll take care of the rest.   If you're a student, you can apply here now.

Once you complete your application, our Talent Team will review your submission and if you're a fit, we'll follow up directly and connect you with relevant companies.  You'll receive a number of introductions so you can choose the opportunity and company you are most excited about.

We hope our Common Application continues to make it easier for the most talented students to have the opportunity to work at small startups with big ambitions.  The only way to learn how to build great companies is to be a part of them - and we hope more students have that opportunity in 2013.

Why First Round Capital funded a lawsuit

You can imagine the scene in the board room.

The CEO of our portfolio company, Techforward, is discussing a “make the company opportunity" -- Best Buy wants us to to power their nation-wide buyback program.   And Best Buy is talking about launching it with a Super Bowl commercial!  We had just finished a pilot test in several Best Buy stores and the results were very strong – and now, before we moved forward with the national rollout, Best Buy was asking us to provide them with access to our proprietary analytical model. This model was our crown jewels -- we had invested years and millions of dollars building it.  But we had signed a non-disclosure agreement with Best Buy – and they had assured us the information would remain confidential and was critical to moving forward. The board ultimately agreed to share the model – knowing we were protected by our confidentiality agreement.

Fast forward a few months and many more meetings in Minneapolis. Best Buy abruptly tells Techforward that it is not moving forward with them – but rather, they are moving forward themselves. They launch a Super Bowl commercial staring Ozzy Osbourne and Justin Bieber to promote their program. And Best Buy goes on to generate over $140M in revenues through this program.

Now imagine the scene in the Techforward board room.  Although the company had been providing services for other retailers (like Radio Shack and Dell), the company had invested well over a year’s effort to get the Best Buy deal underway.  And Best Buy’s last minute actions posed a fatal blow. Techforward sued Best Buy – but it would take a very long time before the case made it through trial.   And since Techforward had invested so much money working on the Best Buy deal, the cash position of the company was not looking good.   The board ultimately had to make a horrible choice – they sold Techforward’s assets to a third party.  BUT – they did not sell the lawsuit. Instead, First Round Capital (along with our co-investor, NEA) decided to keep funding the lawsuit.  And over the last 18 months, we and NEA gave the lawyers hundreds of thousands of dollars to keep the suit going.  This wasn’t an easy decision. We are in the business of funding companies – not lawsuits.   But my partner, Howard Morgan, was a board member of Techforward – and he sat in those board meetings. And Howard was convinced that Best Buy shouldn’t get away with their behavior.   We needed to send a message to Best Buy – and every other large company – that they can’t blatantly violate agreements and steal ideas from startups.  And if big companies believe they can violate agreements with immunity because a startup can’t afford to sue them, it is bad news for every startup in the ecosystem.

Today Howard is smiling.  Because after 18 months in court, a nine-person jury found Best Buy liable for misappropriation of TechForward’s trade secrets and breach of contract, and returned a verdict of $22 million in favor of TechForward.  And the jury also found by clear and convincing evidence that Best Buy did so willfully and maliciously, so the judge awarded an additional $5 million in punitive damages.

As we saw the information that was produced by Best Buy during the trial (some of which is summarized here), I was amazed by their brazenness.  Best Buy had:

  • Internal emails that acknowledged that it would “...be a couple of years before we [Best Buy] have a model that is up and running…” and “...I’m not convinced we’d be able to organically duplicate Tech Forward’s model in a reasonable period of time…” so they “…wanted an opportunity to peek under the hood a little bit at their [Tech Forward’s] modeling…”  
     
  • The models which Best Buy did build internally were virtually identical to the models that Techforward had provided them.  And there were internal Best Buy emails asking Best Buy employees to “…remove the Techforward reference in the file names…”  
     
  • While Best Buy promised to build a “brick wall” to protect the information that Techforward provided them, they acknowledged that they did not do so. And in fact, the same people that reviewed Techforward’s model were the ones who built Best Buy’s model.  
     
  • My favorite email is one from a Best Buy employee (I am using all my willpower to not put his name here) who argued in favor of running the program internally, saying that “I don’t think we should be making this company [Techforward] rich…” 

This has been an educational process for me.   I had (naively) assumed that senior-level employees of a $50B company would know right from wrong.   (And this is a company that recently launched a “College Innovators Fund” to help discover innovative ideas on college campuses… Applicants beware ;-)    Going forward, I won’t be as trusting.  This should be turned into a case study that every major company should make their business development people read.

I also learned that our justice system, while slow and imperfect, does work.   And while the outcome here is still not what we had expected when we funded the company initially, it’s nice to turn a money-losing outcome into a money-making one.   And I am thrilled for the founders of Techforward - Jade Van Doren and Marc Lebovitz - who finally have vindication after doggedly pursuing justice for almost two years.  

I hope that going forward we can stop funding lawsuits – and just fund companies. And I won’t be shopping at Best Buy this holiday season.

25 First Round Capital Cyber Monday Deals

Cyber Monday HomepageAt First Round Capital, we’ve been big believers in the future of online commerce - and over the past few years have invested in many eCommerce companies, all at the seed stage.  These companies have now gone on to to raise over $350,000,000 in follow-on capital and will be shipping hundreds of thousands of products this holiday season to customers all over the world.  Whether it’s Birchbox with discovery through subscription, Fab with curation, Warby Parker building a vertically integrated brand, or Modcloth inverting the supply chain, these companies have set out to redefine traditional eCommerce models while building a product consumers truly love - and we couldn't be more excited.

Today I'm thrilled to announce that over 25 of our portfolio companies have come together to make gift giving just a bit easier and cheaper this holiday season.  And we put together a small site showcasing these exclusive Cyber Monday offers.  We hope you’ll take advantage these offers today – before it’s too late.  Go check it out and give a more unique gift to your loved ones this holiday season: gifts.firstround.com

And no - this isn't meant to replace our annual holiday video.  Stay tuned ;-)

Telling the First Round Capital story...

It is a busy day today.  In addition to announcing Bill Trenchard’s arrival at First Round Capital, we're also excited to share a new firstround.com website experience with the world.

Coming into this redesign we knew we wanted to do a few things differently.  Almost all websites for venture funds focus on partner bios and logos of their portfolio.  For us, we had a few unconventional goals in mind - we wanted to:

  1. Create an experience that goes beyond learning about partners and companies - we wanted to share the knowledge our Community and collaborators produce to help people build better products and companies
  2. Help tell the stories of the people and companies we've been fortunate enough to partner with over the past 7 years
  3. Tell the First Round Capital story and how we help our 150+ companies win
  4. Open up our previously closed Community (just a bit)

Keeping these objectives in mind - and utilizing an entirely new visual design – we built out a few areas of the experience that we think are different:

Homepage: the new First Round homepage is a dynamic collage of our companies, entrepreneurs and content we produce.  It’s up to date and will change multiple times a day - always showing what's new and important.  Coming to the homepage, you might find breaking news about First Round companies, a recap of a recent workshop we held or a new article from our Library that’s authored by a First Round Founder.

Homepage

 

Library: every year we put together over 40 different events for the First Round Capital Community.  We bring in dozens and dozens of speakers that range from CEOs of the largest technology companies in the world - to marketing and engineering practitioners; all with the goal to help our companies and entrepreneurs win.  We’re excited to begin to share some of this content with the world - that was previously only accessible to our entrepreneurs – and think it will help make the whole startup community better.  We hope this becomes an area not just to learn about First Round, but to also learn about the latest in engineering, marketing, management and entrepreneurship. 

Library

 

Company Profiles: We rethought what a company profile page could be in an effort to better tell the stories of our companies.  When you go to a profile page, you'll be able to learn more about what each company does, learn about the founding team, see relevant videos, milestones and key press about their progress. It really is the history of the company in one page.

  Company

 

About: We do a lot of things differently at First Round - and the way we support our companies through our partnership and platform is a core part of what makes us unique.  As a part of the site redesign, we wanted to begin to better tell our story and how we work with our 150+ companies.  You'll have a chance to learn about how we help our companies recruit world-class talent, learn from one another, leverage pooled data through our research team and connect with each other through Network.  You'll also get to see a bit more about how our investment team engages with our companies and the stage we invest. 

 

About

 

We hope you like what we've built, but this is by no means a finished product.  Just like the companies we work with, we'll be iterating and changing parts of the product in the coming months - so do let us know what you like, but most definitely what we can do to make this experience even better.

 

Welcoming Bill Trenchard

Bill Trenchard_HeadshotI’m super excited to announce that Bill Trenchard has joined First Round Capital as a partner in our San Francisco office.  I’ve known Bill for almost 20 years – first meeting him when he was a student at Cornell and his web development company did work for my first company.   And we’ve remained close as he started Jump Networks (which was quickly acquired by Microsoft), joined idealab! (where he worked with my partner, Howard Morgan), founded CallCast (in which I invested – and merged to become LiveOps.  Bill ran LiveOps until 2007, scaling it to a $100M run-rate with 250 employees), and at Readyforce (in which First Round Capital invested).

Bill is an experienced entrepreneur and investor (he’s done angel investing on his own – and previously was affiliated with Founders Collective).  And he has been a mentor and advisor to countless startups – and knows what it takes to be a successful founder.   Bill has begun a blog where he plans to share lessons learned, tips, tricks and other insights into entrepreneurship.  His first post is here.

While we did not have any plans to hire an additional partner at this point in time (having just promoted Kent and Phin to partner positions), when we heard that Bill was considering taking a full-time venture job, we knew we had to try to get Bill to join First Round Capital.  Bill shares our values – he’s founder-focused, he understands seed-stage, he can empathize with founders because he’s been in their shoes, he works hard to help his companies succeed, and he is an all-around-great person.  

After Bill spent the summer “in residence” with First Round, we were even more convinced that Bill is a great addition to our team.  He’s already led two (still unannounced) investments for the fund – and has brought a number of great ideas on how we might expand the suite of products and services we offer to our portfolio companies.   And since our partnership is now larger (by around 15%), we’ve decided to increase the size of our current fund (FRC IV) by approximately 15% as well.  This is the first significant fund-size increase we’ve made in over five years – and it does not reflect any change in our strategy. 

In fact, today we’ve also announced the launch of our new First Round Capital website to better communicate our strategy, values and value-add.   We wanted to tell the First Round Capital story and how hard we work to help our 150+ companies win – and to begin to share the knowledge our Community and collaborators produce to help people build better products and companies.   Check it out here

Announcing hackPR – a New Way for Startups and the Press to Connect

At First Round Capital, we build and deliver dozens of products, services and events to our portfolio every year - and today I’m excited to announce our newest experiment hackPR entirely new way for press and startups to connect.

Through building, investing and supporting over 200 companies, we've seen the disconnect between reporters and startups countless times.  Reporters are constantly seeking interesting new people, companies and trends to cover – and I can’t tell you the number of times I’ve been contacted by a reporter/blogger asking me questions like “do you have any portfolio companies that have been sued for patent infringement” or “what are some crazy things that startup companies do to attract and retain good employees”.  And startups are always looking to connect with those same reporters.  These two parties often struggle to find each other and lack an efficient marketplace to connect.  

hackPR is our attempt at creating a marketplace between press and startups. By giving reporters the tools to connect directly with companies and entrepreneurs, we hope to provide the means for more in-depth journalism while helping startups gain additional PR opportunities.  Here's how we think it will work:

  1. A journalist will be able to send a request out to a range of startups based on size, sector or location with just a few clicks.  Their request could range from anything like "I'm doing a piece on collaborative consumption, what are the startups I should profile?" to "We're doing a piece on college recruiting in startups - have any great stories on how you won a candidate?"
  2. Based on profile data that startups will complete, the appropriate startups will be able to respond.
  3. If the journalist is interested, a match will be made – and the responses will be sent to the journalist
  4. The journalist will receive the contact information of the entrepreneur – and the reporter can make the decision to reach out or not.  (Since the startup will not get the reporters contact information, the reporter will not get spammed.)

This service will be available to any venture backed startup – not just the First Round portfolio.   Like most marketplaces, scale matters and we think everyone will be better off  if it's an open platform.

This is not a new idea – there are other similar services like Profnet (which charges companies to participate) or HARO (which is not limited to startups).  But after using both of those services, I think there is real value that can be delivered by creating a platform exclusively for venture backed startups and the press that covers them…

We plan on launching the first iteration of hackPR in December 2012 – but be sure to grab your place in line as access will be opened very slowly to build the highest quality marketplace. We'll be aggressively iterating on our product as we approach launch – so if you're a startup or journalist, be sure to tell us what you'd like to see.

I strongly encourage any interested reporters or entrepreneurs to sign up at www.hackpr.co today to gain early access and help us beta test.

The Dorm Room Fund

I was a dorm room entrepreneur. 

I co-founded my first company, Infonautics, back in 1991 while I was a Junior at Penn.  By the time I (barely) graduated, we had 20 employees.  It was through this personal experience at Penn that I first learned that college campuses are wonderful ecosystems for creating disruptive ideas.  And I'm not the only one that noticed and took advantage of this.  For other examples, look no further than today’s largest tech companies -- it’s not surprising that Facebook, Microsoft, Dell, Yahoo, Google all started in a dorm room. 

As I look at the environment facing today’s dorm room entrepreneurs, I notice a few things.  Never in history has it been cheaper or faster to start a company.  In my own startup career, the costs to get to “first product ship” went from $5 million in 1991 (Infonautics), to $2.5 million in 1999 (Half.com) and to $750,000 in 2004 (Turntide) – and that doesn’t even take into account the amazing strides and cost reduction platforms of open source software (mysql, memsql), flexible programming languages (python, ruby), cloud infrastructure (AWS, heroku) and new platforms (facebook, iOS6 and Android).   The result has been that products can come to market and create massive user engagement quicker than ever.  It took AOL 66 months to get to one million users.  eBay and Amazon did it in 24 months.  Foursquare in 13 months.  And Path in around 15 days! 

But just because it takes less capital to build a company now, doesn’t mean it doesn’t take any.  And, for a student population already taking out five figure loans to pay for school, finding and obtaining that additional capital is often extremely difficult. Friends and family are usually stretched thin, and in most cases, already do whatever they can to ease the burden on their college relatives.  At the same time, we’ve seen the growth of many wonderful incubators and accelerators – but those often require a student to drop out (or take a “leave of absence” from college).  And traditional venture capitalists are not optimized to write $25K checks to fund a student’s idea while they are still in school.  We’ve heard from several entrepreneurs claiming that it was “much harder to raise our first $25,000 then our next $2 million”.  Given this, I just wonder how many amazing companies we would be talking about today had they received that first small check.  Instead, I hear stories about how amazing students, under the giant burden of college debt, abandoned their startup dreams and chose to take full-time positions at established companies. 

Over the past few years we’ve invested in companies that are disrupting financial markets – from Upstart (which provides a revolutionary new way for college students to raise money to pursue their dreams) to Funders Club (which is pioneering an innovative way for startups to raise capital) to On Deck Capital (which uses technology and data exhaust to underwrite small business lending).  With these as inspiration, I spent some time thinking about how a new venture fund could bridge the disconnect between dorm room ideas and the capital to bring them to life.  In my opinion, a fund would:

  1. Be run by students – not suits  A student investment team would know the entire student and campus ecosystem – allowing them to find, screen and invest in the best ideas

  2. Be located on campus, so that it constantly has a feel for the vibe on campus

  3. Students are engineers, marketers, financers, writers, doctors, lawyers and researchers – and allow them to focus on investing in companies that disrupt big markets that they (students) have expertise in
     
  4. Finance students based on their needs.  Students are scrappy and often just need that first $10,000 - $20,000 in order to build their product and ship a minimum viable product – let’s call their current stage the dorm room stage

That’s why, today, I’m excited to announce the launch of the first Dorm Room Fund, with a pilot in Philadelphia.  This isn’t a business plan competition.  It is a student run investment fund and First Round Capital will be committing $500,000 in capital (or $15,000 on average per Company) to the fund – for them to invest in startups that are founded by a current student at (or recent graduate of) a Philadelphia-based university (such as the University of Pennsylvania, Drexel, etc).  While First Round Capital will be the initial investor in the fund – and I’ll be helping them by serving as an advisor and member of the Investment Committee while they get it off the ground – our goal is to make this an independent, student-run fund…and for them to raise additional outside capital in the future. 

We will be selecting the initial Investment Team of eight students – and our plan is that they will be responsible for selecting their replacements in the future.  If you are a Philadelphia –area student at Penn or Drexel, and if you are interested in applying to serve on the investment committee, please visit www.dormroomfund.com .  We’ll be holding an on-campus information session this Thursday (September 27th) and we'll email the details to every student who goes to the website and signs up

While this is clearly a "pilot", if it's successful we expect (and hope) that Philadelphia will be the first of many cities where we bring the Dorm Room Fund.  And our hope is that this Dorm Room Fund allows for more companies to be built while providing an unparalleled learning experience for the students on the investment team.  Choosing Philadelphia as our first city underscores my commitment to creating a stronger and more vibrant Philadelphia start-up community.  Over the years, we’ve seen amazing companies make it out of Philadelphia’s dorm rooms (Invite Media, Milo and Warby Parker, to name a few), when the capital finds them.  And we can’t wait to add many more to this list.

Welcome Perceptual Networks

Anyone who has been on the Internet for a while remembers HotOrNot -- it has been called "one of the most viral product launchs in Internet History."  And they were one of the first "freemium" companies that showed how you can monetize a free service.

When HotOrNot launched I was still at Half.com -- and we were launching a cool tool called the Half.com Price Patrol.  This was a browser plug-in that monitored your Internet browsing -- and anytime you went to a product page on a shopping site, it alerted you to a cheaper price at Half.com.  The technology was built by a company called ClickTheButton, which was founded by Cheyenne Ehrlich.

Today, I'm super-excited to announce that we've invested in Perceptual Networks -- a company founded by Jim Young (a co-founder of HotOrNot) and Cheyenne Ehrlich (the founder of ClickTheButton).  Even more exciting (to me) is the fact that both Jim and Cheyenee moved to Philadelphia -- choosing to locate themselves (and their company) in Philly.

Both Jim and Cheyenne are in my "300 baud club" -- a group of people who have been actively using, playing, and creating online since the days of the 300 baud modem.  And I'm not the only one who is excited by them teaming up.  Indeed, we were joined in this investment round by a "who's who" of angel investors including founders of Youtube, Paypal, Bebo, Demand Media, Delicious, and many others.  

Perceptual Networks is hard at work developing a suite of products that make it easier for people to find "the best people to connect with" and hopes to launch soon.  I'm thrilled that we continue to find "the best people to invest in" -- and am excited to welcome Jim and Cheyenne to the First Round Capital family. 

More about Perceptual Networks can be found here and here.