Josh Kopelman First Round Capital

What Josh Kopelman, First Round Capital says about topics vital to entrepreneurs

Josh Kopelman Posts – Titles

Josh Kopelman  Posts  – Titles  (4 posts)

 

The Unwritten Term on the Term Sheet

Companies are Bought, not Sold

High Valuations Can Limit Exit Opportunities

Invest in Teams that Adapt to Change

Invest in Teams that Adapt to Change

Josh Kopelman Partner First Round Capital and former entrepreneur

“As soon as you hit print on the business plan, things change.  Competitors emerge.  Technologies shift.  Regulatory changes [affect] your marketplace.  Key employees quit.  Macro-economic factors impact customer spending.  Shit happens.  I'd much rather invest in a founding team that shows an ability to adapt to change than one that claims to accurately predict the future. I believe that teams that are nimble, market-focused, and are willing to rapidly test/iterate/shift their plans are more apt to perceive the signals that the music may be stopping.” Josh Kopelman When the music stops... March 10, 2006; http://redeye.firstround.com/2006/03/as_a_little_kid.html

High Valuations Can Limit Exit Opportunities

Josh Kopelman Partner First Round Capital and former entrepreneur

Kopelman advises that entrepreneurs who “[] try to maximize valuation [] in many cases [] might be shortsighted” because high valuations can limit exit opportunities.  “[] too many founders are not aware that they are shutting off the majority of exits -- and therefore increasing risks -- when they accept a high valuation.”  “[] the “unwritten term in the term sheet” [means] few VC’s will willingly part with a “winning company” (i.e., a company that is executing/performing well) for less than a 10x return.”  Thus, a VC could block an exit that could have been a fabulous payout for entrepreneurs and angels.  Josh Kopelman The Unintentional Moonshot, July 10, 2007, http://redeye.firstround.com/2007/07/the-unintention.html;  When the music stops... March 10, 2006;  http://redeye.firstround.com/2006/03/as_a_little_kid.html

Companies are Bought, not Sold

Josh Kopelman Partner First Round Capital and former entrepreneur

“I [] believe that companies are not sold. They’re bought.

In every exit I’ve been fortunate enough to participate in – both big (Half.com or Infonautics) and small (Turntide, del.icio.us, Vamoose.com, e-Touch or Snapcentric) – the opportunity to exit was there only because we had begun to build a company that has differentiated technology, a strong team, offers customers real value, demonstrates traction in the marketplace, and/or solves a real need for the acquirer. You can’t build a company to sell it – I’ve never seen it work.”    Josh Kopelman, When the Music Stops… http://redeye.firstround.com/2006/03/as_a_little_kid.html

 

The Unwritten Term on the Term Sheet

Josh Kopelman Partner First Round Capital and former entrepreneur

 “When a company gets a term sheet with a high valuation, [the entrepreneur] need[s] to pay attention to the unwritten term on the term sheet.”  The entrepreneur should be ok “with [an] exit multiple that would generate [] returns [] to satisfy [] VC[‘s]. While every situation is unique, here's a simple rule of thumb:

Series A – 10X
Series B – 4-7X
Series C – 2-4X ”

“[] the “unwritten term in the term sheet” [means] few VC’s will willingly part with a “winning company” (i.e., a company that is executing/performing well) for less than a 10x return.”

Josh Kopelman The Unintentional Moonshot, July 10, 2007, http://redeye.firstround.com/2007/07/the-unintention.html; file Josh Kopelman Unintent Moonst Unwrt;      http://redeye.firstround.com/2006/03/as_a_little_kid.html