Josh Kopelman - The Past, Present, And Future Of Seed Investing

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:56)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
My guest today is Josh Kopelman, the founder of famed venture capital firm First Round Capital. Prior to starting First Round, which has invested in the earliest stages in companies like Square, Uber and Roblox, Josh was a three-time entrepreneur, so our conversation spans early-stage investing, business building and entrepreneurship. I'll not soon forget his analogy distinguishing between navigators and cartographers, nor the rest of the interesting ideas he shared after seeing and investing in so many businesses.
We also discuss how First Round has bucked the trend to build what I'd call a platform adjacent to the core investing business, which does a lot for their entrepreneurs and is a model for other professional investing firms, both in venture and elsewhere. Please enjoy my conversation with Josh Kopelman.
Josh, thanks so much for doing this with me. I get to talk to a really early-stage seed investor about the post-COVID-19 investing environment. We're going to spend a lot of our time on just evergreen investing principles, but I sort of feel obligated to start with a couple of questions on just how the environment has changed very quickly. Had we had this conversation when we first scheduled it in January, you and I would have probably talked about very different things. It's amazing how quickly the world has changed. I would love to just begin by hearing your take on how what has happened in the world affects your part of the investing ecosystem really at the earliest seed stage.

**Josh Kopelman** (2:40)
Sure. So, I think that the job of a CEO is to predict the future or invent the future, and oftentimes you're trying to deal with an uncertain world and your aperture is set to a certain range. Right now, just given the period of uncertainty that we're going through, the aperture is so broad. If I was to differentiate, I think there's two different challenges.
The first is companies that have already been funded. So companies that raised their seed funding sometime in the last 18 months, they raised a certain amount of money and they have a job to do with that money, whether it's to build a product, to generate product market fit, to get to market.
Those companies are all now quickly recalibrating how much capital they have and how much runway they have to accomplish their job. For new companies, I think they're trying to deal with the fact that VCs say they're open for business and VCs say we're still writing checks. That's exactly what they said in 2008 and 2009 The first quarter of 2009, the venture funding was less than 50% of where it was in the first quarter of 2008 We have yet to see it play out in terms of the new funding environment.

**Patrick O'Shaughnessy** (3:54)
I'm curious how you think the type of founder that is pulled to start a new company into this environment affects how you think about what you fund. Do you find that this sort of stressful environment attracts a different sort of founder that's looking for their first check now? Maybe that's just beginning to start their business than three months ago?

**Josh Kopelman** (4:14)
So I think right now you have yet to see the change in the market. Anyone who's out fundraising now was pretty much working on their idea before COVID-19 hit.