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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Video Pre-Roll Advertising: SOLVED

SolvedStampWe've all had the experience -- we want to watch a video online, but have to watch some useless pre-roll video beforehand.   This often frustrates the user, doesn't deliver value to the brand, and reduces the consumer's perception of the publisher.  

Finally, there's a new approach.  Created by Solve Media (a First Round Capital portfolio company), the folks that re-invented the captcha, comes a new approach to video advertising.   Instead of watching the whole pre-roll advertisement, consumers can type in a part of the brand message -- allowing them to access the content faster...and providing real engagement for the brands.  It's a simple solution adds real value for the industry and the consumer.  Video pre-roll advertising -- SOLVED.

Check out the video below for information on how it works...


Solving the Pre-Roll Blues from Solve Media on Vimeo.

Brett Berson - Turning a Portfolio into a Community...

Ever since I became a VC, one of the most frequent questions I get asked is: “Don’t you miss being an entrepreneur?  Will you ever do another startup?”   And I think my answer typically surprises people – because my answer to the question is always: “First Round Capital is a startup – it’s just a startup venture firm.”   Just like was started to capitalize on a gap between eBay and Amazon, First Round Capital was started back in 2004 to fill the gap between venture funds and angel investing.

I’ve often said how surprising it is that an industry that exists to support innovation and disruption has changed so little.  While there have been some really positive changes in the last few years, for the most part it seems that the biggest innovation in venture capital during the last forty years has been the increase in carried interest from 20% to 25%.   As a firm, we’ve tried to do things differently – and rethink traditional venture orthodoxy.  We’re stage specific (seed), distributed (with three offices), and active (we were the most active-seed fund last year).  We even hold our partner meetings on Thursday (gasp!) so that we have the ability to meet with almost any entrepreneur we want to on a Monday.   

And while I’m super excited about the strength of our investment team, and the value we can add personally -- we’ve worked very hard to transform our portfolio of entrepreneurs from an unconnected group of companies working independently into a community of entrepreneurs who help each other.  We’ve invested heavily in building products, events and services to help our entrepreneurs help each other.    What began as a simple Yahoo Group email list for our CEOs six years ago has now grown into a full-fledged online network – we are one of the only venture funds I know that has full time engineers working on products for our entrepreneurs.  We hold more summits, workshops and dinners than most event planning companies.  And our Venture Concierge service has saved our CEOs hundreds of hours of time by providing them with a lightweight consulting/research service. 

The reason we show up to work every day is to help amazing entrepreneurs succeed.  We want First Round to be a founders First Call .  And we try to provide our entrepreneurs  with assistance both from our investment professionals as well as from the First Round “platform”.  All of these platform initiatives don’t happen accidentally – they require a ton of investment and hard work.  That’s why I’m so excited to announce that Brett Berson has been promoted to serve as our Vice President of Platform.  Brett joined First Round Capital as an intern in 2008 (following in the footsteps of other FRC interns like Nat Turner, Jason Toff and Phin Barnes) and I don’t think he’s taken a day off since he joined.  As a former film-school graduate, Brett is the force behind our holiday videos and has helped us grow our platform initiatives from ideas on the back of a napkin to reality.  He doesn’t do this alone – he’s built a platform team of six amazing people.  And we all couldn’t be happier that Brett’s title reflects the reality of his contributions – and look forward to years of continued innovation with Brett leading the way…

Ecommerce Referrals

First Round Capital portfolio company Monetate just released a very interesting infographic showing how Pinterest and other social tools are rapidly changing how people get referred to ecommerce sites. Check it out...



Good Luck Charlie

20100927153632!good_luck_charlie_-_logoAfter two years at First Round Capital, today Charlie O’Donnell announced he was leaving to launch his own seed-stage venture fund, Brooklyn Bridge Ventures - the first venture capital fund based in Brooklyn.  I’m really very excited for Charlie and can’t wait to see the impact his firm makes on the Brooklyn tech community.  When Charlie initially joined First Round Capital, we had both agreed that it would be for a one-year term.  After witnessing Charlie’s hustle and energy firsthand, we extended his position for a second year.  During his time at First Round, Charlie made a real impact -- helping us expand our New York presence (we now have an office on Union Square with three investment professionals – Howard, Chris and Phin), sourcing seven deals (including GroupMe, which was acquired by Skype), and placing over a dozen people in our portfolio companies.  On a personal level, I think that almost every blog post I wrote during the last year was a direct result of Charlie’s frequent barbs like “Hey, did you lose the password to your Typepad account?  How come you’re not blogging more.”

Ever since Charlie joined First Round Capital he and I have talked about his goal of starting his own firm one day – and I’m excited to see him take the plunge.  All of us at First Round wish him the best of luck and look forward to working together with him in his new fund.  


We, We, We so excited for our annual holiday video

Over the last few years, one of my favorite holiday traditions has been putting together First Round Capital's annual holiday video.  In the past we have used song, dance and our impressive physiques to work our way into your hearts over the holiday season. This year has gone by fast and we have added a whole new cast of remarkable characters to our community.  We are really inspired by our talented portfolio and lucky to be able to roll our sleeves up and deliver the 2011 edition of the First Round Holiday Video.  


While it's not yet Friday…we hope it brings you a little holiday cheer.  (Although my kids are getting to the age where their Dad's performance in the video has shifted from "cool" towards "embarassing").  




Thanks to Phin Barnes for the lyrics, Brett Berson for masterminding the entire video, and our portfolio company CEO's for honoring the "participation" clause in our term sheets ;-)   

Saving Time vs. Killing Time

Killing-TimeOver the years, we've met with thousands of entrepreneurs who were starting consumer Internet businesses.  And as we listen to them describe their business, I find myself categorizing the opportunity.  One of categorizations I've found most helpful has been to determine whether the company is looking to help people "save time" or help people "kill time".  

Companies like Youtube and Zynga entertain people (and help them kill time)  -- while companies like Google, LinkedIn and are great utilities and help people save time (but users rarely visit them for without intent or for for pure entertainment).  At First Round, we've funded both:

Why create such a distinction?  Well, I think it is helpful in looking at how the businesses will operate -- and what metrics you care about.  It's much easier to measure the impact of a Kill Time company than a Save Time company.  For example, in a kill time company you'd really want to see strong DAU (daily active user) counts and really long session lengths.  Yet short session length might be a good sign in a "save time" company.   If it took longer for Google to answer your question -- and you spent more time on their site searching -- I don't think that Google would view that as successful.   The fact that allows you to manage your finances quickly and easily is a good thing.  

I think it's typically much harder (for me) to indentify which "kill time" companies will be successful at the seed stage.  The Kill Time companies are successful because they are able to entertain users -- and it's very tricky to identify good entertainment from a Powerpoint.   Save Time companies, on the other hand, are a little easier to evaluate pre-launch -- because these companies have a clear value proposition that can be measured in advance.  When we first heard of Uber, for example, we were able to understand the value propisition and user benefit immediately. 

Finally, the monetization strategies of Kill Time companies typically require much larger customer bases / audiences to be successful.  These companies frequently monetize through advertising or low-price virtual transactions -- both of which require significant volume to generate meaningful revenues.  

This is not intended to be a "perfect" framework -- and I can easily identify several exceptions -- yet I've found it helpful to keep in the back of my mind when I'm meeting with entrepreneurs.   (And there are rare times where companies can be in both categories.  Twitter is one such example.  There are use cases where Twitter can be the perfect way to kill time -- yet it has also become on of the most efficient ways for people to stay current on the news.) 

Fun Fact of The Week: Path to Revenues


Last week I posted some data from our portfolio about the pace of seed-stage financings.   And it sure looked like things are speeding up.

This week, I thought we'd take a look at the speed at which our companies generate revenue.   Specifically, we took a look at the 14 investments we made in our first fund (which was a 2005 vintage)...and wanted to know how many of them generated at least $250K in revenue in the 18 month period post-investment.  (I recognize that $250K and 18 months are arbitrary thresholds - but hey, we had to choose something).   And it turns out that just three of the fourteen companies in our 2005 fund (21% of the portfolio) generated revenues in excess of $250,000 during the 18 month period.  I was surprised to see how long it took those companies to generate revenue.  Especially because that fund has some really incredible companies in it.  It includes Bazaarvoice (who recently filed for an IPO ).  It includes SayMedia (formerly VideoEgg) who currently employs over 300 people in 10 different cities across the globe.  And it included (which was acquired by Google).

Then, we looked at the companies in our most recent fund (a 2010 vintage).  Specifically, we took a look at the 32 companies that have been in the fund for at least six months (since we didn't want to include the pre-launch companies we just funded).   And it turns out that 19 of the 32 companies in our most recent fund (around 60% of the portfolio) have already generated over $250K in revenues.

I was not expecting such a dramatic increase -- especially because while our fund size and investment team has increased over the years, our investment strategy has not.  Our average initial investment remains under $500,000.  We continue to invest in a company's first round of funding.  We still are focusing on capital-efficient internet startups.  So what's changed?

The numbers might influenced by the fact that we are bullish on online commerce -- and ecommerce companies typically have a shorter path to revenue.   It might be that the last six years have seen a dramatic growth in monetization platforms (whether it be advertising technologies, mobile platforms, virtual currencies, etc) that reduce the friction/cost/time to generate revenues.  It might be because the cost and technical complexity to start a company has decreased so much, companies today are able to get to market much faster (and possibly raise money much later) than they previously did.  It also could be that First Round has just gotten better at investment selection (though given the size of our woulda coulda shoulda list, I'm not too sure about that -- and I'm also not aware of any data that shows that a company's time to revenue generation corresponds to the size of a company's success).

Whatever the reason, I was surprised to see that companies today are 3 times more likely to get to $250K in revenue during an eighteen month period than they were six years ago. 

Disclaimer - these results are based on a small sample that only consisted of one fund's experiences.  This post is not intended to claim statistical significance -- just an observation of what we're seeing in our fund. 

Save The Internet

I rarely (or never) post about politics here.  However, today Congress holds hearings on a bill that would create the "first American Internet censorship system".  This bill is being rushed through Congress without any input from the technology industry -- yet it poses major risks to free speech online...  And could prevent the next Youtube, Facebook, or Tumblr from getting off the ground.

Please watch the video below, read more about the proposed law (Brad Burnham has a wonderful blog post about this today), and make your voice heard by visiting American Censorship Day today.  

UPDATE:  If you have five minutes and want to make your voice heard, click here and this cool Tumblr app will automatically put you in touch with your local congressman.  


Fun Fact of The Week: Time from Inbox to Investment

FactDuring the last few weeks there has been a lot of commentary about what’s going on in the seed funding markets.  Some say that web startups face a cash crunch.  Some disagreeSome think there is a “Series A Crunch”.   Others disagree.  

During this same time period I saw the movie Moneyball (liked it, thought the book was better) and my fund held our Annual LP meeting.  So I’m full of fresh stats about our portfolio of over 125 seed-stage companies.  I thought it might be interesting to take some of the data we’ve collected, and share it to help try to shed some light on what we’re seeing in the market.   So here is the first installment of a multi-part series:  Fun Fact of The Week

While there has been a lot of discussion about the number of seed deals vs the number of Series A deals, I haven’t seen anyone other than Chris Dixon talk about the impact of the accelerated pace of seed-stage funding rounds.   As the market for seed-stage investing has gotten more active, the average time to get a deal closed has gone down dramatically.  That means that the entrepreneur and investor spend much less time to get to know each other before making a major, long-term commitment.  This, as Chris Dixon put it, "is bad news for everyone."

From an investor perspective, the more time I can spend with an entrepreneur, the more I understand how they think, how they approach problems, what they are "working for", how they handle divergent views. It helps me get a better sense for their product vision. It gives me more time to do reference checks on the team. And it also lets me get educated on the market -- learning more about competitive products, etc.  And if I'm going to be paying a higher price due to increasing valuations, I am more comfortable doing so after being able to spend more time with the founders.  I know that there are situations when investors don't have the luxury of time -- and you have to make a quick decision. And of course I've made gut decisions that have worked out well.  But, I've found that there is much more variability in the investments where we've don't have enough time to get to know the founders well...

From an entrepreneur perspective, the more time they can spend with an investor, the better they understand their investor's goals and how they view the market.  They can make sure the investor shares their vision for the future.  They can call other CEOs to see how the investor behaves in the board room and how they behave in good times and bad.  They can get a better sense of the alignment of interests and personalities.  And they can try to get some insight into how helpful the investor will be in recruiting, strategy, future fundraising, and making introductions.   

So here's the data:

We took a look at the last four years of our initial investments (ie, not including follow-on investments).  We then identified the time it took for an company to go from "inbox" (when we first were introduced to the opportunity) to "investment" (when the deal closed).   The chart below shows the relative change in the median number of days it took us to go from inbox to investment for each year, baselined against 2008 (which was set at 100).   You'll note that the chart does NOT show the actual number of days we review each investment -- just the percentage decrease from the 2008 baseline.  You can see that the time we have to evaluate a prospective company has shrunk by 50 percent over the last four years.  While this data just represents our experience at First Round Capital, from what I hear from my colleagues at other seed-stage funds, they are experiencing the same thing...  

Inbox to investment

So the key question this raises is: Why is this occuring?  It could be because of the increase in available seed capital over the last four years.  It could be because of an increase in the number of great startups recently.  It could be because of the growth of incubators and their "Demo Days" (where companies often leverage their unveiling to force quick decisions and raise a round within a week or two).  It could be because of the growth in platforms (like Angelist and Gust) which seek to create a liquid seed funding marketplace.  It could be a combination of these factors.   What do you think?


As Philadelphia gets ready for Halloween and the first snowstorm of the year, it's a reminder that holiday season is right around the corner.   And the approaching holiday season can only mean one thing -- it's almost time for First Round Capital's annual holiday video.   Our team is hard at work producing this year's video (and definitely feeling the pressure)...but in the meantime, I thought I'd share some of our favorite moments from the making of last year's holiday video.