Ready to learn from Josh Kopelman?
1- See it to believe it and really believe in it.
Kopelman said that he was “always fascinated with entrepreneurship,” in part because his grandfather was an entrepreneur. Kopelman is another case for see-it-to-believe-it, because sometimes we need that to know what is possible.
It happened to Penn Jillette when he went to clown college in Florida. There he found people like him, who wanted to sit around and talk about what make jokes funny. “It was really important to me,” Jillette said.
Ezra Klein and B.J. Novak both said this was true for becoming writers. When Michael Lombardi saw Vince Lombardi he felt the same thing, even though the two had nothing in common besides their last name.
This is only the spark. For see-it-to-believe-it to take hold, you need to embrace whatever it is.
Kopelman calls the early days of startups a “magical time,” and that things need to be “organic.” He talks about startups like a parent talks about a baby (in hindsight). Kopelman cares greatly about entrepreneurship because he’s embraced it.
In his book The Hard Thing About Hard Things, Ben Horowitz wrote that “yoga isn’t culture.” Similarly, in Deep Work, Cal Newport wrote that giving kids iPads doesn’t make them tech savvy. Those are superficial responses to deep problems. Those are responses to things that aren’t embraced. If you dive deep into something like Kopelman did, you won’t have this problems.
Another superficial response, to just give money.
2- Give more than money.
Torenberg commented that the First Round service model was different, and asked how they came to that business model. Kopelman said that the founders asked, “(what if) instead of being a venture firm managing a portfolio, if you could be a venture firm building a community? It could be far more powerful.”
Kopelman said he saw this in 2007 when Mint.com won a TechCrunch conference. As 25K people flooded the service databases collapsed. Mint needed help, not money.
First Round started making calls. They found someone who worked at Facebook on databases, and someone else who had faced the same problem. They had social capital that could help with the problem faster than financial capital. They found positive network effects.
In the Michael Covel post we saw the power of network effects vis a vis birthdays. For example, did you know it only takes 23 people to have better than 50/50 odds that any two of those people share a birthday?
What Kopelman discovered was that rather than birthdays – which is a fun way to demonstrate network effects, but not useful – the network connected skills. A founder may not know if she needs help with SQL or SEO, but the more people she can reach out to, the better connection she can find.
And there are a lot of First Round people:
3- Virality dust.
Kopelman says there’s no such thing as virality dust (or community dust, see #1), but that the potential needs to be baked in from the beginning. Ryan Holiday wrote about this is Growth Hacker Marketing, but Casey Neistat explains it in a matter of minutes.
According to Neistat you need a few things for virality:
– Zeitgeist: “make sure it’s of the now.”
– Timing: “if you’re too late no one cares, if you’re too early no one knows what you’re talking about.”
– Fresh: “if you’re doing something a million people have already done, chances are it’s not going to catch on.”
– Message: “is it something that everyone’s going to get?”
Next you have to make, “a totally kick ass video that people actually want to watch.” Even if you nail all these things, Neistat notes, “the video probably won’t be viral.”
4- “They’re there, we’re here.”
Kopelman explained that he lives in Philadelphia for family reasons, but that he doesn’t need to live in silicon valley. “Great companies can be founded anywhere,” Kopelman said. “There’s a real benefit to not being in the valley echo chamber….to see how the rest of the world views technology is really compelling.”
Michael Mauboussin noted that investors share this advantage too if they are away from the cacophony of Wall Street. Chris Dixon talked about the value of being where things are quiet. Tadas Viskanta and Tyler Cowen both explained why this is harder now than ever before.
But – and you should have known this was coming – there are some times when you need to be there. Sarah Tavel said that for technology startups (financial, content, and advertising aside) you need to be in the valley. Our timeless example is that of Samuel Zemurray, the man who went from a wheelbarrow of bruised bananas to running the largest banana import company in the United States. While his competitors at United Fruit sat in Boston Zemurray was in New York, New Orleans, and Honduras, rallying his company by saying, “they’re there, we’re here.”
The way to figure this out is to ask, where do I need to be to do my most valuable work? Warren Buffett and Charlie Munger spend so much time reading, they don’t need to be anywhere in particular. Adam Davidson and Taylor Pearson write books, and can do that work from where they choose. Sophia Amoruso moved Nasty Gal back to L.A. because that’s where the sellers and models were.
5- The XMBA.
To succeed in venture capital is hard, Kopelman said. His advice? “Start off with smaller checks than you expect to write and view them as tuition.” This idea of tuition has popped up a number of places lately.
Tim Ferriss said he viewed his angel investing as tuition rather than paying for an MBA.
Sophia Amoruso wrote that “Nasty Gal has been my MBA.”
Ezra Klein viewed a writing fellowship as his version of graduate school.
In my own research about the survivorship bias (sign up for updates and the ebook when it’s finished) founders of failed companies note this. “I like to look at my experience as if I went through an affordable MBA. Stanford and Harvard both welcome you at about $100,000 per year, and I doubt I would have learned so much more there – even I if could afford it,” one founder wrote.*
6- How to evaluate entrepreneurs.
“A product is a DVR for decisions a founder has made.” – Josh Kopelman (click to tweet)
Kopelman says that founders can often give good meetings, and his job is to figure out how to get beyond that. His job is to think at the second level and beyond.
We’ve seen the advantages of second level thinking in other interviews. Mellody Hobson gets to the second level by reframing questions. Ken Fisher gets to the second level by asking what other people think. Tyler Cowen gets to the second level by assuming somethings is true and walking through the consequences.
Kopelman gets to the second level by asking what decisions has an entrepreneur made and why.
7- About luck.
Kopelman gave one of the best quotes about luck: “We bust our ass to try to get lucky.”
That’s what it takes. It’s a long list of people who attribute some success to luck: Seth Godin, Mark Cuban, Jason Zweig, Morgan Housel, and Michael Mauboussin among many others. Each of them worked really hard and got lucky.
Thanks for reading, I’m @mikedariano on Twitter.
* A consistent point of my research has shown that part of the reasons startups fail is because they didn’t understand why they saw an opportunity, but others didn’t. Kopelman advises that if you don’t have an edge because you know the team involved or know the industry, then the reason there aren’t any other fishermen at that pond is because they already know there are no fish.