Hello Philly!

Warning - long blog post ahead.  

For those of you who just want the punchline, First Round Capital is moving our headquarters from the suburbs of West Conshohocken to the City of Philadelphia  Here is why:

I’ve lived in the Philadelphia area for over 20 years – ever since I was a freshman at Penn.  I helped to found three startups in the Philly area.  I launched First Round Capital in the Philly area.   Yet, for most of my professional career I’ve been “bi-coastal”.   Recognizing that Silicon Valley is the center of the technology ecosystem, I’ve made countless trips out there.  I’m there so often that I know the flight attendants on the PHL-SFO flights by name.  It’s why this blog is called RedEyeVC – and why it has carried the subtitle “A view of the startup ecosystem from a coastally challenged VC”. 

As a result, I’ve often found myself making a mental distinction between my “professional community” and my “personal community”.  Philly is where I live and socialize – and it is where my wife and I have chosen to raise our family.  But while I live in Philadelphia, First Round Capital is a national firm.  And as a result, I feel like I have stronger professional ties to San Francisco and New York (where we also have offices).   When I’m in Philly, I spend far more time talking to NY or SF-based entrepreneurs on the phone (and videoconference)  than I do meeting entrepreneurs face-to-face in my office.  And the First Round Capital portfolio reflects that – with over 80% of our portfolio companies based in either California or New York.

Over the years I’ve been contacted by many Philadelphia-based organizations that have sought to improve Philly’s tech ecosystem.  And while I’ve tried to help, it was always in a limited fashion.  I joined the boards of Innovation Philadelphia and the Wharton Entrepreneurial Center.  I’ve spoken at dozens of local events and met with hundreds of local entrepreneurs.  But I never picked up the “Philadelphia Tech” torch myself --  I always played a more supporting role…providing advice from the sidelines.   And when people have asked me “how do we make Philly more like Silicon Valley” I’ve always thought that was like someone saying “how can I make Philadelphia Chinatown more like China”.

Yet over the last few years, I’ve seen several encouraging changes. 

• First, I’ve seen capital get portable.  When I co-founded Infonautics back in the early 90’s there were several Silicon Valley venture capitalists who offered us term sheets on the condition that we move out west.  Yet today, capital is more geography agnostic.  With e-mail, instant messenger, skype, videoconferencing – and cloud-based reporting platforms that encourage transparency – distance doesn’t matter as much.  And like First Round Capital, more VCs are investing outside of their core geography. 
   
• Second, we’ve seen the growth of more efficient ways of knowledge transfer.  As recently as 10 years ago if you wanted to start a technology company, the only dedicated publications that catered to you were magazines such as Upside and the Red Herring.  And most startup knowledge was passed on from person to person – you learned from in-person interactions with other entrepreneurs and investors.   This created real network effects for technology ecosystems (like Silicon Valley).  Today, however, there are so many online resources to help people shorten their learning curve and build their own networks.  From Techcrunch (and their awesome Crunchbase) to PandoDaily (where I am an investor) to AllThingsD, it has never been easier to keep up to date on the industry.  Tools such as Angellist, Gust and FundersClub connect entrepreneurs to capital.  There are dozens of blogs written by venture capitalists and founders.  Online communities such as Hacker News have emerged.  And social media has made everyone and everything much more accessible. 
   
• Finally, it’s gotten much cheaper to start a company.  I (and hundreds of other people) have blogged about this before.  Five years ago if you wanted to build a mobile app you needed to plan on spending a year negotiating with AT&T and Verizon.  Today, anyone can build an app from their dorm room in a few days.   

And as a result of these changes, I’ve seen more and more interesting startups get created in more and more diverse places.  Cities such as Boulder.  Austin.  Portland.  Providence.  And, yes, Philadelphia.  From Invite Media, Monetate, Curalate, Relay Network, PackLate, Solve Media and Warby Parker (which we were fortunate enough to invest in) to AdMob, Diapers.com, Milo, Venmo, DuckDuckGo and Lore (where we didn’t invest) we’ve begun to see more really exciting companies get their start in Philadelphia.   Every year I see more entrepreneurial activity at Philadelphia’s universities.  Indeed, just last week PandoDaily suggested that the University of Pennsylvania was like “the Stanford of the East”.  And we’ve also begun to see other positive signs in the ecosystem.  Grassroots organizations such as Philadelphia Startup Leaders (which I recently joined the board of) have emerged to provide some “connective glue” for the ecosystem.  Incubators like DreamIt and co-working spaces such as IndyHall, Venturef0rth, Benjamin's Desk, SeedPhilly, and many others have begun to emerge.  Several of our portfolio companies have already expanded into Philly – such as Uber and PublicStuff (which is powering Philadelphia’s mobile 311 app).  We’ve seen the launch of Philly tech blogs like Technically Philly.  And Mayor Nutter is a regular speaker at startup events (like Philly Tech Week) and a real booster for tech entrepreneurship.

Change doesn’t occur overnight.  I’m a big proponent of the what Fred Wilson calls “the Darwinian Evolution of Startup Hubs” – and recognize that in order for an ecosystem to grow you need the alumni from successful companies.  And while it takes multiple generations of successful companies to create a true startup hub, I’m encouraged by the quantity and quality of the current generation of startups.  Monetate, for example, employs over 100 people in the Phialdelphia area (and is looking to hire another 25 people now).  Their team is incredible -- and has the technical chops of a Silicon Valley company.  It isn’t random luck that the company’s founder and CEO, David Brussin, was the CTO and co-founder of Turntide – an earlier Philadelphia success story that sold to Symantec.  The best way to create a more vibrant startup ecosystem in Philadelphia is to help the current class of startups succeed – so that Monetate’s employees will be our next batch of upcoming entrepreneurs.  This doesn’t just create value today – but it also has a compounding effect as today’s successful companies create the next generation of entrepreneurs through their alumni. 

That’s why I’m done sitting on the sidelines.  And so is First Round Capital.  And I am super-excited to announce that First Round Capital is moving our headquarters from the suburbs of West Conshohocken into the city of Philadelphia.   I’m trading my sterile suburban office park environment (and short commute) for proximity to Philadelphia’s entrepreneurs.   We’ll be opening a 10,000 square foot facility in University City – right next to Penn’s campus.  In addition to housing our Philadelphia team, the office will have space for startups – both for our portfolio companies (such as Uber’s Philly team, Curalate and Perceptual Networks) as well as other companies (like Technically Philly – who will be locating their offices there as well).  It will have space to host educational and networking events.  And it will have space for entrepreneurs to hang out and work. 

But for me this is more than just an office move.  It is my acknowledgement that I can do more to help local entrepreneurs get their business off the ground.   And while I don’t expect that I will slow down my travel schedule or that our new office location will immediately result in us funding dozens of Philadelphia area companies – I do want to play a more active role in helping the current generation of Philadelphia entrepreneurs make their mark.  I’m not trying to turn Philadelphia into Silicon Valley (or Chinatown into China) – but I do think we can enable more great companies to be built here in Philadelphia. 

And I can’t wait to get started.

Welcome Upstart

$1 trillion.  A number we normally associate with national debt can now also be used to describe student debt, the result of an exponential increase in college tuition.  At current, two out of every three college students take out an average of $23,000 in college loans; loans that need to be repaid to the tune of hundreds of dollars a month upon graduation.  Add this to post-graduation ‘real-world’ expenses (such as apartment rent) and this is forcing graduating students to find alternative ways to save money, as some choose to move back in with their parents, or earn money, by forgoing their real passions and accepting a job for purely monetary reasons.  All of these financial constraints limit choices and dissuade risk-taking.   

This is why I'm thrilled to share that our newest investment, Upstart, is looking to tackle this problem with an innovative new approach.   Upstart allows graduating students to raise capital in exchange for a modest share of their income over the following 10 years.  This means that students finally have the freedom to make the best choices for them, regardless of short-term income flow.  As the company writes:  

Upstart was founded to help people do what they were meant to do. Many talented college grads take jobs they’re not excited about, rather than following their true passions. Whether constrained by debt or just comforted by traditional career options, too many students take the perceived “safe path.” Upstart aims to provide a modest amount of risk capital - where repayment is tied to the student’s future success - paired with guidance and support from experienced backers, to help grads pursue less traditional and more inspiring careers.

Upstart is launching with five pilot universities in the fall that include Dartmouth College and University of Michigan.

The Upstart team is comprised of a number of ex-Googlers and is being lead by Dave Girouard, who formerly lead all of Google Apps – so if you're a user of Gmail and Google Docs, you're familiar with his work.  Dave joins a number of other First Round Companies that are also shaking up the funding and financing landscape like On Deck Capital, BillFloat, AxialMarket, GiveForward, and FundersClub.

Please join me in welcoming Dave and Upstart into the First Round Capital portfolio and Community.

 

 

 

 

 

Welcome FundersClub

If we think back over the past decade, software has done a great job of making inefficient markets more accessible and efficient.  eBay made it easier for buyers and sellers to find and exchange products.  One of our portfolio companies, TaskRabbit, is creating a marketplace for labor that efficiently connects those who need tasks completed with those that can perform the work.  Kickstarter is enabling, and making it easier for, the world's most creative people to turn their dreams into reality.

But, software and the web have yet to make connecting private companies with seed-stage capital more efficient.  There are some burgeoning platforms, like AngelList and Gust, that are moving in this direction; but the transactions still happen offline,  and usually require large blocks of capital.  If someone is looking to invest $1,000 in a private company, it's still virtually impossible.

And as someone who spends over 30 hours a month on planes/trains, I know how hard it is for someone who doesn’t live in Silicon Valley full-time to stay connected and get access to the strongest startups. 

For these reasons, I’m really excited to announce First Round Capital’s investment in FundersClub.  FundersClub makes it easy for companies to raise capital from individuals without hassle.  Companies have just one shareholder (the FundersClub fund) – and don’t have to deal with the hassles of chasing down individual shareholders for signatures/approvals down the road.  And for investors, it eliminates many of the monetary limitations - it allows investors to invest as little as $1,000 - as well as the geographic limitations of a normal seed stage round.  (You still need to be an accredited investor, though).

FundersClub just launched last week with several companies from the current batch of Y Combinator companies – and if history is any benchmark, the startups listed on the platform will be heavily oversubscribed shortly after YC Demo Day on August 21st.  What FundersClub provides for everyone, is insider access.  If you aren't one of the 300 people to get an invitation to YC demo day, this is your chance to invest in these great companies.  The initial available companies include FundersClub itself, Virool, Sponsorfied, TracksBy, and Coinbase.

Please join me in welcoming Alexander Mittal, an accomplished founder named one of BusinessWeek’s Best Young Entrepreneurs, and Boris Silver, founder of Sport Interactiva, and their Company, FundersClub, to the First Round Capital Portfolio and Community.

Welcoming Mango Health

Every day 149 million Americans (almost half of the U.S. population) take at least one prescription medication – with many taking more than one - and that does not even include the number of supplements/vitamins taken.  At the same time, approximately three out of four adults in the U.S. report not adhering to physician prescribed treatment regimens in one or more ways and almost half of adults report forgetting to take prescribed medication.  This means worse healthcare overall and leads to anywhere from $100 to $300 billion in cost to the system – we think a sufficiently large and hard problem. 
 

This is why today I’m thrilled to announce our investment in Mango Health – an entirely new mobile solution for managing healthcare.  The team at Mango Health is trying to help consumers take control of their health with fun, elegant and easy to use mobile applications.  They’re attacking the problem of managing healthcare by focusing first on the drug adherence market with a simple and elegant mobile app that will incentivize users to take their medication on time, everyday, while also warning them about potential harmful interactions, thereby increasing their safety.
 

When we first met the team back in January, the first thing that impressed us about Jason Oberfest and Gerald Cheong was their passion for utilizingatheir social gaming background to make mobile healthcare more accessible and fun.  Before starting up, Jason served as a VP of Social Applications at ngmoco and SVP of Business Development at MySpace.  Gerald was the Lead Engineer at ngmoco, and has previous experience at VM Ware, Ariba and Microsoft Research.
 

Over the past year, we’ve continued to see incredible opportunities in healthcare that are fundamentally driven by both ubiquitous smartphone use, as well as a trend in consumers continued desire to be more active in their healthcare – and I can’t wait to share a few more investments in the coming weeks.  In addition, we’re starting to see the next generation of healthcare companies that can move at startup speed without the traditional multi-year build cycles that have been historically tied to anything in healthcare IT.
 

Please join me in welcoming Mango Health to the First Round Capital Portfolio and Community.