First Round Capital

“I talked to first round the day after I left looker. And so we raised money or we didn't even raise the money. We had a handshake agreement to raise the money like four days after we left the company.”

“So in 2011, we went out and we raised money from Google and first round capital and a few other top shelf VCs and they bought into the marketplace concept.”

“And then I met with Josh Koppelman, and they had this deal at first round that they would give any second time founder, a 250 K bridge note with a ten million dollar cap, sight unseen.”

“First round capital, I think, is one of the best seed firms. Guess how many companies they have in each fund? 80 companies.”

“Our roadmap hasn't really changed in a year and a half. When we first pitched first round, those slides are basically our roadmap today. You know, priorities shifted, but The same core things that we're trying to build are true then as they were true now.”

“We raised a hundred thirty two million dollar fund. That fund returned 50 x. So Princeton and Yale each got a billion dollars back, actually moved their needles.”

“And when it exited, Uber returned 22 times the whole fund.”

“So we did Roblox, and you know, that in the end returned even more than Uber. Like, 23, 24 XCI.”

“In 2005, I think our average entry pre-money valuation was in the two million range. And a couple of years later it got into three and then it got to five and six and the exits did not continue to increase.”

“And what I'd realized over time was that if you eliminate Uber and Roblox from the equation whose seed rounds were led by first round capital, it's close to impossible to identify power law companies in which the seed round was led by a seed stage venture capi…”

“We raised two million dollars from Google, first round capital, a whole bunch of, you know, angels and stuff like that. Four months later, we raised another four million. A year later, we raised 10. Actually, it was 18 total between secondary debt and equity. …”

“Josh Koppenman, I remember him saying to me, I'll give you two million dollars uncapped note ahead of the next round. A lot of this was in his portfolio already, where he went, like, what's the quadrant that's really killing it? What first round used to do is,…”

“We do this, like, for example, at first round, we do this for, we have a structured forum for evaluating a company in terms of whether you should invest in it. Because, you know, there are facts and then there are the way that you model those facts. And so it'…”

“And if you have product market fit, and as you are progressing along this journey, the marginal customer should be getting easier and easier and easier to get, like easier to acquire them, easier to give them good service with a good product. And that's means …”

“And for the best enterprise companies, I like, I would say they tend to reach extreme product market fit in like roughly four to six years, right? There's some variance but roughly four to six years.”

“Of the three dimensions that you just recapped, Lenny, it's satisfaction first, demand second, efficiency last, when you're at level one. Like, it's actually okay to be inefficient at this stage, if it helps you uncover something that delivers an insanely good…”

“I tend to gravitate towards the, like, I want to sell it before I build it because I really want the signal from customers. And I want that to sort of be the guide and the oxygen that drives what I'm building.”

“A benchmark we would say is that your sales conversion without a warm intro is still probably like 10%, something like that. Like first call to close one is like around 10%.”

“Looker is interesting because they spent actually kind of a long time at level one, but then like flew through level two. And the reason is because they, Lloyd, the founder, the first five customers of Looker, he was basically going in and doing consulting for…”

“So like, you know, we're talking about our gross margin needs to be above 60%, hopefully above 70%. Our burn multiple is now below three, right? Like ideally we're in like the, ideally we're like close to one, right? Burn multiple, like in the one to three zon…”

“The majority of companies, so greater than 50%, probably closer to 60 or 70% are gonna get stuck at L one or L two. And so that leaves, you know, roughly, let's say, 30%, make it to L three or L four, just in our experience looking broadly.”

“I think it's like much more tangible for a founder to think of the market as like a collection of people. Right? Like Jack Altman was thinking about his market as all of the HR leaders out there. And he was thinking about how many of them are there and what ar…”

“If you had reacted like, yeah, that sounds kind of interesting. That's a no, right? That is a no. That is a polite way of saying the word interesting is a polite way of saying no.”

“If a customer has a problem and like, I really think they have a problem and they know they have the problem and they're looking for a solution for the problem, or they've even tried to build their own solution to it and failed. That's like the best customer, …”

“The first institutional fund that first round ended up raising was a 50 X on a hundred and twenty five million dollar fund. It had Roblox, Uber, and Square.”

“I think Jim made as much money from his investments in first round as Howard did from his LP stake in Rentech.”

“Is I think in, in the history of first round across 450 businesses, it's the only company that didn't miss a number all the way through sort of massive exit or sort of somewhat directionally, that's the case.”

“The first time we met Warby Parker, Those guys didn't have design sense. You know, Dave dresses pretty well now, but he didn't then. And like, there was no like style person on that team, but the truth is that the glasses had to look good, but that wasn't the …”

“You've raised over thirty three million dollars, I believe at this point from great folks, Andreessen Horowitz, NEA, Sam Altman, and of course us here at First Round.”

“I just like, I like those guys, and I think they I think they really care about helping founders get to product market fit. Like, I think they're, they will sit and spend more time with the founders to help them get there than other funds that I know, so that'…”

“We have 20 folks on the dot. It's 16 in product and engineering, so very heavy on the build side. And that was intentional because we were fortunate to be able to raise a good amount of capital actually from two former Looker board members at a pair of VC firm…”

“I met with first round capital, general catalyst, Maveron, you know, all the names that we know today of backing up some of the biggest and best brands and companies. And Despite having connections or relationships with people, when I showed up with a deck tal…”

“I recently got, couldn't take on an outsider first-round project and referred it to them. It's 47,000 dollars for a name.”

“And then we followed that up with another 6.1 that first round led.”

“And when they came into the venture business in 2005, They started tracking time from when they saw a deal to when that deal was done, whether or not they actually did that deal. And I think in 2005, it was a hundred days. In 2016 or 17, when they said, man, t…”

“I mean, there's 75 people working on Platform initiatives, investing, content production, et cetera.”

“First Round has been historically a very size disciplined firm, whereas a lot of their peers have now grown to managing in each fund many, many hundreds of millions of dollars. They've still stayed pretty much only one and a half to two times their original si…”

“I'd say in the Valley today, there's really two types of investors and most fall in the first bucket. There's the cheerleaders and the people that'll give you the tough love. And I fall in the second bucket for sure. And I think the reason why a lot of people …”

“Capital is a commodity now. Good founders with good ideas are making a decision about who should have their equity based on what value they bring. If they're good, they've got plenty of options for getting where they get the capital. It didn't used to be the c…”

“If a founder walked into most venture firms, I think they would probably fire half the team from an operating standpoint, because it is not the thing that is traditionally driven returns is building great services and delivering great quality of service to fou…”

“Our partnership. Acts like a board of directors for our operating team, and we've released a very much a board operating cadence with them that we meet every four months, and they present an operating plan to us. All the senior level, senior members of the tea…”

“When a founder leaves the room, we don't talk. So they come and pitch typically for an hour. We ask questions. It's relatively conversational type of approach when we, when they're pitching the partnership. And then we literally just write for about 15 minutes…”

“We posted publicly and rethought the whole process. We said, we're hiring a new partner. We put out a post. We had a lot of people apply over a thousand people apply for the job. We looked at every single one of them.”

“It used to be that when we wrote a 500 K check to seven 50 K check, we could buy 10 to 15% of the company when we were early in the life of first round. That is no longer the case. That is not the market price clearing price for a seed round today.”

“Seed rounds are much higher value and our average initial investments about three million dollars these days.”

“We have two partner meetings a week now rather than one. We used to have just one on Thursdays. Now we have one on Monday and one on Thursdays. And so you're never more than 72 hours from getting in front of the whole partnership.”

“If they're part of a larger fund, typically we won't be calling them because we do not want to highlight the deal for them.”

“We decided not to invest in January of 2008. A lot of it was based on the price. Your listeners might laugh, but a ten million dollar valuation seemed outrageous, was way out of our normal range back then, and the game really looked raw.”

“About six months later, we were able to make our first small investment and then later on did a larger investment.”

“Yeah, I think we might have been fortunate back in those days to have made a really poor investment decision, missed one of our biggest of all time, with Twitter. When we were all early users, we had an opportunity to invest at first round, and didn't, primari…”

“We invested at about an eleven million dollar valuation when we first came in, and then we led around And put in about three million dollars at what was around a forty million dollar valuation, which was very high, but we could see the traction in the revenue,…”

“It turns out that fund had Uber and Square and Roblox in it.”

“Our initial investment was 500 K Roblox or so, and that was probably on the high end of an average investment. And we were starting to think about our best companies and opportunities. Where could we put more capital to work? How could we deploy more into the …”

“I think it's way harder for everything you mentioned, and there's so much more capital that's around so many more firms. Again, like, I think Roblox was unique in being under the radar company for so long, whereas anything that's got traction and visibility wi…”

“We had the opportunity to look at Etsy, and I was almost dismissive, or I just thought of it as this little niche of handmade goods or something, and I think I was jaded. I mean, I thought I knew so much from eBay that it kind of turned me off to the whole cat…”

“If you look at our investments in our two most notable returns with Uber and with Roblox, we had taken some capital off the table along the way at various points, Which made sense and drove great returns relative to that investment, and yet what was left was s…”

“And then as an investor at first round for the last 15 years, I've deployed about a hundred million dollars in about 75 companies.”

“Like, those Black businesses should be held to the same standard of return on capital. It's just the opportunity to have access to that capital, have access to the support and training that Y Combinator companies may get, or that, you know, first-round capital…”

“My favorite were the quick yes, my second favorite were the quick no, and my least favorite was the long drawn out, maybe if you show me this, improve this. I knew that I wanted to be in class one or two, And that's what I optimize for, you know, quick yes or …”

“Like those black businesses should be held to the same standard of return on capital. It's just the opportunity to have access to that capital. Have access to the support and training that Y Combinator companies may get, or that, you know, first-round capital …”