Philadelphia / Q&As

Friday Q&A: Josh Kopelman of First Round Capital

Josh Kopelman is angry. When Technically Philly pops into his office, the normally cheery venture capitalist is busy trying to figure out why First Round Capital’s email service is down. “They say six minutes of downtime,” he says. “but they’re way over that.” After a brief phone conversation (he would later blog about the downtime) […]

Josh Kopelman is angry.
When Technically Philly pops into his office, the normally cheery venture capitalist is busy trying to figure out why First Round Capital’s email service is down.
“They say six minutes of downtime,” he says. “but they’re way over that.”
After a brief phone conversation (he would later blog about the downtime) he immediately returns to his normal upbeat demeanor and for good reason: Kopelman is one of four founding partners of one of the most active early-stage investment companies in the country. The firm has become as much of a brand as the companies it invests in, boasting the most-visited VC site on the web.
Located in a small, nondescript office building in West Conshohocken, the firm has expanded to San Francisco and will open its New York City offices next week, giving it a headquarters in two of the largest technology communities. The firm is setting a new standard in investment by making a high number of smaller, early stage investments while nurturing companies from the ground up.
First Round, however, is just the latest chapter in the Wharton grad’s career. Kopelman, a New York native, started Internet information company Infonautics while still in college and almost didn’t stay in Philadelphia.
“Once you have 17 people in the company with mortgages and me without, that pressured me to stay,” he says, “Then I grew attached to the area, built networks and planted some roots here and started”
Since then, Philly has treated him well: Kopelman and his partners sold to eBay for $350 million in 2000, giving Philadelphia one its biggest tech “wins” in the Web 1.0 times. After starting and selling Turntide to Symantec in less than a year, Kopelman switched from entrepreneur to investor, making Philadelphia home to one of the most influential Internet investment firms in the world.
We sat down with Kopelman to talk about his take on Philadelphia, what kinds of companies he looks for and why Philly (and every other city) has no comparison.

As always edited for length and clarity. To read the complete interview transcript which includes three times as many questions, follow this link.
What would it take to have First Round located in Philadelphia as opposed to West Conshohocken?
My sense is that I don’t think we’ve lost any deals in the city because we weren’t willing to travel there or the entrepreneur wasn’t willing to travel here. So for me its just about quality of life in terms of ability to get home for dinner, get back to the office and go back and forth. You know we work on two time zones: the east coast and the west coast. If [the office] was further away I might not be as productive.

Is that the struggle for First Round? Because now there’s a Philadelphia, San Francisco and New York office and there’s four of you?
I might actually argue that while I have a strong network in Philly, my network is Silicon Valley is just as strong if not stronger. So when I’m trying to help an entrepreneur on the West Coast I feel like I can be extremely helpful in terms of recruiting and strategy.
And I’m out west enough that the proximity challenge isn’t insurmountable. So we’ve had to invest to do that. We’ve had to build an office in New York, we’ve had to build an office in the valley and we’ve had to build a team in all of those areas and build a footprint. We view ourselves as four partners that just happen to be working out of whatever office they are at right now.
You are almost the ideal Wharton grad for Philadelphia. You come from out of the area, you go to Wharton, you contribute jobs to the local economy. So I wonder many Wharton grads don’t decide to stick around.
My path was more of the exception.
Why do you think that is?
Had I not started a company right out of school and not had any employees, I don’t know if I would have stayed here.
Let’s try to take a different metaphor. I’ve come to see Philadelphia as a place that has a lot great theaters. And there are 70 schools in this area one of the highest densities of schools out there. There are a lot of people at these schools that want to be actors or actresses. And what I’ve seen though is that if you are a graduating student and are an actor or actress not one of them says “I want to be king of the Forrest Theater.”
They move to Broadway. And that’s where the ecosystem that they play in is [established]. I’d say that Philadelphia, as a tech hub, there are definitely bright spots and it is getting brighter. The fact that Technically Philly exists and it didn’t 18 months ago is telling. You have Philly Startup Leaders and Indy Hall. There’s a lot of groups. I think that’s wonderful and I think that’s improving the Philadelphia start-up scene, but I think it’s still hard to compete with Hollywood.
Maybe its an uphill battle, or maybe its misguided? Or maybe we should just try and play to our strengths of pharma?
I’m a big believer in Philly. I’ve started several companies here that have been successful, I’ve invested in companies that have been successful and I’ve met lots of quality of entrepreneurs here. I would not want to discourage anyone from trying to improve on Philly’s tech scene. But I also don’t know if you even need to compare.
New York has a great Chinatown, Philly has a strong Chinatown and they’re good Chinatowns. But stop trying to compete with China.
Most of our readers have lived here since 2002, 2003, not really part of that first generation of online startups like you were. So what have you’ve seen is the biggest difference from the CDNow and Half days versus now?
We’ve invested in almost every major tech market in the country, so one of the things I’ve seen when we compare Philly is that we tend to think we have a really good start-up generation right now. But for whatever reason, the past generation isn’t as engaged.
There’s not that institutional memory from the first round?
We are seeing a lot of first-time entrepreneurs in the region, which is great. But this is the seed-planting stage. You are going to see 100 of these entrepreneurs, ten of them might have some level of success and they might have management teams of five people, so they are new entrepreneurs that will go out and plant. It’s takes some time to move.
Basically, you’re sitting here with your first generation of seed planting, whereas out west you have the redwood forest.
What are the characteristics you look for in a entrepreneur when funding them?

“Basically, you’re sitting here with your first generation of seed planting, whereas out west you have the redwood forest.” -Josh Kopelman, on Philly

For a start-up, I like to fund a heat-seeking missile. It used to be that, 30 years ago you, had to aim missiles. From the moment you launched it, you press go and you have no ability to change the course of that missile one you launched it.
But the heat-seeking missiles are a modern invention that you launch and it adjusts and looks for the heat signature it looks for the target. And if the target is moving it changes. It can start off heading north and then head west or south.
What new trends and things are popping up that get you excited?
At the macro-level, I think there is a massive disruption that’s occurring.
In what way?
We are really focused on the cloud and software as a service, and we are very focused on mobile. I think geography and location-based services is [also] really important.
I think that the concept of redefining the data sets that are available online and their accessibility online is a big trend. Sort of what we have been calling the “implicit web”.
Sort of the API-azation of our lives.
Yeah. When you think about it, it used to be that all your data was offline. But as more and more started happening online you left more and more digital breadcrumbs. Like myself: you wanna know what TV shows I like? TiVo knows that. Want music i like? Apple knows that. What movies I like? Netflix knows that. Where I eat? Open Table knows that. What concerts I go to? Ticketmaster knows that.
So historically all of that data has been in silos… Now once those silos open up APIs and you connect things to them and through them, I think that is really powerful and transformative.
Every Friday, Technically Philly brings you an interview with a leader or innovator in Philadelphia s technology community. See others here.

Companies: First Round Capital / / Indy Hall / Infonautics / Philly Startup Leaders / TurnTide / Wharton School

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