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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Yet another reason to blog...

Anyone care to guess what day I started my blog?
(Statistics courtesy of Alexaholic. )



Death by Risk-Aversion

Just read a wonderful blog post by Kathy Sierra:

"...So add one more skill to our career advice for young people: be willing to take risks! Perhaps more importantly, be willing to tolerate (and perhaps even encourage) risk-taking in those who are managed by you. Of course I realize that this is much easier said than done..."

  Further encouragement for people to get their fouls...

Get your fouls!

One of my first rules of hiring is that you should always try to hire someone smarter than yourself -- so you can learn as much as possible.  I have been very fortunate to work with some wonderful people over the years. My friend Van Morris (who we hired to become CEO of Infonautics) taught me a wonderful lesson about risk taking.  It's about getting your fouls.

Foul_2If Alan Iverson fouled out in the first ten minutes of an NBA basketball game, you can be sure that his coach would immediately talk to him because he was playing too aggressively...and "urge" him to play it a little safer.  However, if Iverson played several games without getting any fouls, Van believed that a good coach should also talk to him -- because he was playing too safe...and "urge" him to take more chances and be more aggressive.


Basketball players get the opportunity to commit five fouls before they are removed from the game.  Why doesn't that apply to business as well?  We've all seen managers push employees to eliminate risk.  (It's the old "no one ever got fired for buying IBM" thing).  Companies reward safe behavior.  When was the last time you saw a manager push an employee to take a risk, no matter how well thought out?  When was the last time you saw a manager congratulate someone for taking a calculated chance that resulted in failure?


Van believed that a good leader encourages people to get their fouls. If you want to build a team that thinks creatively, acts aggressively and takes initiative, then you have to reward intelligent risks. Even if they fail. In fact, I think a great leader needs to congratulate someone for failing spectacularly. Think about it. A company's risk-tolerance level is set by a leader's reaction to failure. If someone takes an intelligent risk and fails -- and suffers negative personal consequences (termination, demotion, or is seen as falling out of favor) -- that sends a very clear message to the entire organization. However, if that same person is congratulated for taking the risk, asked to evaluate why it failed and suffers no adverse consequences, that also sends a very clear message.


I'm not advocating taking all risks -- just intelligent, well calculated chances. At, my marketing team came up with a number of outside of the box ways to generate attention.  They did it because they knew that they had the  ability to get a few fouls without fouling out of the game.



They convinced the town of Halfway Oregon to rename itself to Oregon, landing us over $5M worth of free media coverage -- including a live product launch on the Today Show.


They convinced the largest manufacture of fortune cookies to put a a coupon (that said "Save A Fortune at") on the back of millions of fortune cookies a day -- distributed in 25% of US Chinese restaurants -- for free.


They even had custom "urinal screens" printed that said "Don't Piss Away All Your Money - Shop at" and hired interns to put them into the urinals at Penn Station, Airports, Hotels, etc.  (You should've seen the faces of the Wharton marketing interns who were hired to do some "hands on viral marketing").

Now, most people (including myself) would consider the Urinal Screen to be a "foul" - (especially when I had to explain what a Urinal Screen was to Meg Whitman)...But if I punished the team for taking the risk, would they have come up with the other brilliant marketing ideas?  Or would they have suggested that we buy some banner ads to market ourselves?

I'd rather have a team that thinks innovatively, acts aggresively and takes intelligent risks to gets their fouls than a team that actively works to avoid them.  Would you?  Is your organization's culture optimized to maximize creativity - or minimize mistakes?

If you're looking for outside-the box marketing ideas like we used at, I'd highly recommend Mark Hughes (the former VP of Marketing at and his agency BuzzMarketing - or at least read his book...

(NOTE - I'm a minority equity-holder in BuzzMarketing...)

Free Consulting

Free2I was talking today with an entrepreneur making the rounds on Sand Hilll Road, and he said something that really made an impact on me. He said that the process of meeting with VCs and pitching his business provided him with “free consulting from some unbelievably smart and experienced people”. What a wonderful perspective! If you approach the fundraising process with that mindset, even a VC rejection adds value.

While I agree that successful entrepreneurs need to be persistent and self-confident, there is a difference between being confident in your business versus being unwilling to hear/accept different points of view. With the right mindset, entrepreneurs can view the fundraising process as a collaborative dialog, rather than a pure “let me tell you how smart we are” exercise.

Are you raising money? Take advantage of the free consulting!

The Power of Small Gestures

426dentist_1 I think most Americans hate their dentist. I don't. I'm actually pretty happy with my dentist. It's not because my dentist gets my teeth any cleaner than any other dentist. It's not because my dental appointments are shorter. I like my dentist because of his followup. Two examples:

  • My wife recently had some minor dental work done. Nothing major. A pretty standard root canal. It went fine. However, at 8pm that evening my wife got a call at home. It was our dentist calling to make sure everything was OK and my wife was feeling fine.
  • I've referred a few patients to my dentist over the last few years. Everytime I've made a referral I receive a handwritten note of thanks from my dentist. 

I don't know whether my dentist is giving me the best care -- but I feel much more confident in my relationship with him than I do with my doctor. A small gesture - a quick phone call or a two sentence note - has made me feel valued and well cared for.

I believe that small gestures can send a large message -- both internally (inside a company) and externally (to the marketplace). Some examples:

  • At we often had real aggressive development schedules and sometimes engineers often ended up working really long hours. For one critical project we had an engineer work all weekend to  launch new credit card functionality. My co-founder and CTO, Sunny Balijepalli, sent flowers to the engineers wife – in recognition that she was making a sacrifice as well as the engineer. It made quite a statement.
  • I’m a big fan of keeping costs low in a startup. At I had a really strong finance team. However, I had a policy that I wanted to see the first expense report of every new hire. Not because I didn’t trust my CFO. But because I found that if I took the expense report, walked over to the new hire, and asked him a simple question (like “what conference was in Chicago last week?”), he/she would realize that their expenses were scrutinized.

Small gestures send large signals. What signals can you send to your customers, competitors, and employees?

(And if anyone is looking for a new dentist in the Philadelphia area, I'd highly recommend Dr. Markowitz!)


Images_1 My friend David Hornik has a great post on the choices facing successful startup companies.  Definitely worth the read..

The hidden value of a Board of Directors Meeting

Bod_1 Over the last few years, I have read a number of great posts describing how to run a board of directors meeting.  They give wonderful advice on how to get the most value out of your board meetings. 

One thing I've seen pretty consistently is that there is a direct correlation between the success of a board meeting and the quality of preparation in advance of the meeting.

Planning for a successful board meeting is not easy – it takes a lot of time to effectively provide insight into the company’s priorities, goals, performance, and challenges. And time is a scarce resource at any startup. When I was CEO of, I had a wonderful board of directors – they offered real strategic input and guidance. However, I believe that half of the value of a Board of Directors meeting comes in advance of the meeting. The time I spent with my management team preparing for the board meeting was invaluable. It insured we were all on the same page. It provided an unque opportunity for the management team to step outside of the daily operational (aka firefighting) mode and think strategically. Looking back, some of the most important decisions we made resulted from conversations while we were preparing for our board meeting, rather than in the meeting itself. Our monthly board meeting provided a firm benchmark to measure our progress by – and also served as an invaluable “motivator” to ensure that we achieved the expectations that were set at the last meeting.


I believe that companies that don’t invest the time preparing for a board meeting are missing out on a lot of value…

Logo_1 I recently learned from my friend (and co-founder) Sunny Balijepalli, that his new stealth-mode startup, will be launching its invite-only alpha in the coming weeks.  If you're at all interested in video mashups, be sure to put your name on the list.


DISCLOSURE - Sunny has shown me a little "founder's share love" in, so I have an equity interest.

Known Unknowns


"There are known knowns; there are things we know we know. We also know there are known unknowns
," Donald Rumsfeld


Most VC’s have a hard time passing on a deal or giving a “firm no”. Instead, startup entrepreneurs are often told “you're too early for us now, but call us when you get some traction.” As a seed-stage investor that’s not a line I can use.  Many of the deals we see are for a pre-launch companies with incomplete teams, unproven technology, and unknown/evolving business models, etc.


One of the most common mistakes founders make at this stage is to assume that investors expect them to have all the answers. When asked about their advertising sales projections, the founder often launches into a five minute explanation as to why their numbers are conservative – when the real answer should be I "don’t know what the sales numbers will be, but here were the assumptions I used.”


Rather than have a founder defend every assumption to the death, I’ve often found that my most productive sessions with entrepreneurs occur when, together, we try understand the different risks facing the business. While Donald Rumsfeld has been criticized for his comment about “known knowns”, I actually think he was onto something. When I review a new opportunity, I like to divide the risks into three categories:

Known Knowns
These are the assumptions that have some proof or external validation. For example, if your customer acquisition model is based on customer acquisition using paid search, I’ve found that spending $200 on Google Adwords could provide you with some real-world data on your cost to acquire a customer. If you’re trying to build a subscriber base and you have a beta site operational, you might be able to get some real world conversion data to use in your model.  The known knowns are easy to model.

Known Unknowns
These are the assumptions that we don’t have actual data on.  Say your business plan has an assumption that there will be a viral element to your customer acquisition strategy but you don’t have any hard data to base your model on.  In this case, I often like to see if we can get any third-party data to use for comparison purposes. While you might not know what your viral customer acquisition model is, can you get data from analysts, public company statements or similar sites?  If not, I like to see entrepreneurs build a financial model that includes a sensitivity analysis.  This allows you to take a variable (say cost-per-acquisition) and see how it impacts your financial model with different assumptions.

Unknown Unknowns
These are risks that we don’t even know exist – typically the only way we learn about them is after an issue has raised its ugly head. These issues often result from an unanticipated consequence of an internal decision, unanticipated moves by a competitor, economic shifts, etc. While you try your best to anticipate all eventualities, these are the risks that you often can’t control or plan for.  This is one area, however, where having an experienced VC/mentor/advisor could really add value – by helping to build a variety of companies, they can take advantage of “pattern recognition”.

Before you go out to raise money, make sure you know what you don't know...

Thanks to my friend Ed Watkeys for reminding me of the Rumsfeld quote!

Fundraising from A-Z


We just received this email today...I wish them the best of luck.


From: [Hidden to Protect the Offending Party]
Sent: Tuesday, March 14, 2006 10:45 AM
To: ****; ****; ****; ****; ****; ****; ****; ****; ****; ****; ****; ****
Subject: [Hidden to Protect the Offending Party]

Dear potential investors:

I am the owner of [Hidden to Protect the Offending Party]. I am interested in submitting our business plan in an effort to discuss our plans…