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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First Round Capital News

ToplogoToday, First Round Capital announced that Rob Hayes has joined the team.  (More info here in pdf format).

Based in San Francisco, Rob will be our first West Coast Partner.  The addition of Rob (along with Chris Fralic who joined us in March) will greatly add to the depth of our team and our firm’s capabilities.

Rob comes to First Round Capital from Omidyar Network where he was their first venture investor.  He led most of Omidyar Network's initial venture capital deals and later built and ran the technology investing group.  Prior to joining Omidyar Network in 2004, Rob was at Palm where he started up their corporate venture fund.  While in that role he also managed the strategy effort around Palm OS that led to the spinout of PalmSource.  Rob started at Palm as product manager for the initial device-independent releases of Palm OS and was responsible for the versions of Palm OS on dozens of devices including the initial Treo products. 

I’ve had the opportunity to get to know Rob through our work on two Boards of Directors (Krugle and Feedster) over the last few years and know he will be an extremely valuable addition to the team.  Welcome Rob! 

After all is said and done, more is said than done

Success "After all is said and done, more is said than done."
Aesop 620 BC-560 BC

"A vision without the ability to execute is a hallucination."
Steve Case, former AOL CEO

When I first meet with an entrepreneur I have to make some pretty quick judgments about the individual. Does he or she have credibility? Do they seem smart? Do they have experience starting a company? Do they have integrity? Are they a good leader? It's very hard to make these judgments in a short period of time. If the dialog continues over the course of a few meetings, the added interaction provides additional data points. If we proceed even further, reference checks add significant value.

However, one of the most important criteria I need to asses is the entrepreneur's ability to execute. Can they do what they say they are going to do? If I am truly investing in chefs (not ingredients), then I need to be comfortable that they can really cook.

So - how does a VC get comfortable with an entrepreneur's ability to execute? When I look at my current investments -- and try to separate those companies that are thriving versus those that are struggling -- a few things stand out.

There is greater risk (and variability) in first-time CEOs than in serial entrepreneurs.
While there are some first-time CEOs in my portfolio that are doing unbelievably well, there are also some first-time CEOs that are struggling.   The serial entrepreneurs in my portfolio, on the other-hand, tend to have less variability in their performance. So while past performance (or experience) is not always a determinant of future success, it sure helps!

Just say no.
One of the most challenging jobs a CEO faces is to determine what opportunities/projects to say "NO" to. Given the limited resources that a startup has, it is critical for an entrepreneurial CEO to have real discipline in prioritizing projects. If a CEO can't make tough trade-offs, it has a direct impact on the company's ability to execute.

It's all about the team.
The first 25 hires at a startup are CRITICAL! They will set your culture. They will be the reason you reach (or fail to reach) your milestones. They will be responsible for hiring everyone else. One of the most dangerous mistakes a CEO can make is to accept "compromise" candidates because of time pressure. A strong team is critical to strong performance.

A culture of accountability.
Is there a culture of accountability?  Is there clear operating plan with  monthly/quarterly/annual goals/milestones?  Does the CEO hold him/herself and their team accountable for commitments?  Is there a dashboard to track key metrics? Are they disciplined about forecasting (using a waterfall revenue forecast)?  There is a clear correlation between CEOs who hold themselves accountable to goals and their ability to execute.

Using the waterfall...

Waterfall One of the toughest jobs of a startup CEO is putting together an accurate revenue forecast. While it's always difficult to predict the timing/sizing of revenues in a brand new company, I strongly agree with Fred Wilson that it is important to forecast often.

One of the forecasting tools I recommend to my portfolio company CEO's is a Waterfall Forecast. Typically, this is an Excel spreadsheet that allows a company to show how the forecast for a given month (or quarter) has changed over time.

Over time, a waterfall forecast creates an environment of accountability and allows a CEO (and Board of Directors) to determine key trends. Are revenues shifting month-for-month (ie, did a sale get pushed back by a few days into the next month) or is there a non-linear shift (ie, did revenues get pushed back by several months)? Is the company getting better or worse at forecasting revenues over time? If the company is missing its revenue forecast, are they able to adjust their expense forecast accordingly?

I've attached an example waterfall forecast for (a made-up company). Let's walk through their Revenue forecast. Their revenue budget is highlighted in green (row 9). The next row (row 10) shows how they did in January (the yellow cell, B10) and what they forecasted for the remaining months. The next row (row 11) shows how they did in February (the yellow cell, C11) and what they forecast for the remaining months. And so on.

You can learn a lot by reading a waterfall forecast. For example, you can see that despite revenue shortfalls in January and February, the management initially refused to lower their forecast for the year -- they just reallocated the revenue to future months. In this case it only took two months for the management to realize their plan was too aggressive -- a surprisingly quick reaction time. In March (where revenues were just 37% of plan) they drastically cut their revenue forecast. They also tried to control their Operating Expenses -- their March forecast was 15% below their budget -- but notice that they weren't able to cut Opex dollar-for-dollar...

If you were a board member of, what would you have done at the end of February? The end of Q1? The end of Q2? The end of Q3?

Model Waterfall Forecast -

Another good perspective on forecasting can be found here -

Congrats Reid...

My friend, Reid Hoffman (founder/CEO of LinkedIn), is now one of the "50 Most Important People in Business" (at least according to Business 2.0).  Reid is #22 -- just below Bill Gates, but way ahead of Oprah. 

Reid is one of the smartest consumer Internet guys I know - and it's great to see him get this recognition.

(Note - I am a small investor in LinkedIn).