(Screenshot via YouTube)
First Round Capital’s Josh Kopelman is a rock star in the Philadelphia startup scene. The venture capitalist recently joined the Technical.ly Slack AMA to discuss his investment vision, startup teams and “tech bubble small talk.”
Some of the selected questions below were from members of the Technical.ly team and others were from our Slack community.
1. You and First Round invest really early in startups, which means there’s a big space for them to change after you invest in them. What do you do if a startup begins to do some things that you don’t agree with? Has that ever happened?
Companies pivot all the time, and as investors, we don’t expect to have control over their pivots. So, yes, there have been pivots where we weren’t as excited about Plan B as Plan A — but that comes with the territory. Our overall belief is that as seed investors we owe our founders two things: we owe them the benefit of our unvarnished opinion and we owe them our support (since they are the driver of the bus). Most of the time, we all end up happier with the new vision. I don’t think anyone is complaining that Storably became Curalate…
2. First Round (like most other VCs) puts a heavy emphasis on teams when selecting investments. What are your thoughts on the importance of how a team is formed? For instance, do you have preference for cofounders who met in college vs. met online vs. worked together previously?
I do think it’s important to understand each founder’s “superpowers” — so you understand where the team is strong and where it is weak. You (ideally) want a team that balances each other (in skills, experience, and disposition). And you want founders that have enough confidence to be transparent with each other … do the founders know who “owns” certain areas of the business? Do the founders seem to respect each other? Can the founders explain each others strengths and weaknesses?
3. There’s been a lot of discussion recently about “healthy” startup growth rates. I’ve heard 10-20 percent week-over-week (this seems unreasonable) to something like maximum of 15 percent month-over-month. What are your thoughts? Do you have a number you look for in portfolio companies?
I think there is no “gold standard” growth number — as there are a lot of dependencies. Are you talking consumer or enterprise? Self-service enterprise vs. field sales? Are you paying for growth or is it organic? Fundamentally, I think that venture investors are looking to see proof of (1) strong (and growing) consumer demand, (2) large market size, and (3) validation that the company understands the drivers of continued growth.
4. The tech bubble small talk includes the premise that low federal interest rates brought more new capital into earlier stages of venture in recent years to find an asset class with higher rates of returns. Will interest rate hikes be part of changes to investment focus in the coming years?
While interest rates did play a role, I think the recent talk of bubble (or unicorn inflation) has also been a result of the pretty massive shift of public market investors into private companies. As the Fidelities and T. Rowes of the world tried to invest earlier, they created a pretty sizable dislocation in the market — and currently you have dozens of private companies that are not “comping” to their public company equivalents.
5. We at Technical.ly are kicking off our Tomorrow Tour, in which we’re visiting the emerging entrepreneurship communities of Denver, Miami, Chicago, Detroit, Austin and Atlanta. The perspective we have is that the sense that different tech hubs are “competing” is a misnomer. That we’re all actually on the same pathway and so we all benefit each other if we’re better versions of ourselves, supporting founders no matter where the best place for them to optimize may be. Does that sound grotesquely naive to you?
Not naive at all. I think that you see many “regional” players benefit from similar information exchanges. Most city newspapers, for example, benefit from sharing best practices with papers that aren’t in their cities. Hospitals and theaters as well. I think it sounds like a cool idea!