First Round launches First Round Review, looks even less like a traditional VC firm
Venture capitalists are frequently compared to lemmings, and you can see why. "Oh you funded an Instagram for video at a huge valuation? Sounds awesome! Let me go follow you off that cliff..."
It's not a huge surprise that when Andreessen Horowitz launched its dramatically different agency model of venture capital that -- after initially dismissing it-- a lot of VCs have followed suit. Every few weeks I get an email announcing a new recruiter or PR vet has joined a firm to help portfolio companies.
That kind of copying isn't nearly as negative as funding me too companies at sky-high valuations. Perhaps for a lot of startups its even beneficial. But for companies with multiple investors, they don't particularly need three in house recruiting arms to call on.
First Round Capital at least has taken a different tack as it seeks to distinguish itself from other venture firms. Like Andreessen Horowitz, it's been a leader in rethinking what a venture firm should be. And while Andreessen Horowitz's answer has been to extend venture capital as a services business; First Round is trying to turn itself into what it funds: Scalable software companies. (Both Josh Kopelman and Marc Andreessen are individual investors in PandoDaily.)
First Round has already built things like an internal Quora networks for its founders so that they can connect and share advice without going through the general partners. It similarly dabbled with a version of ProfNet for startups to allow journalists and startups to better connect. Today it is launching First Round Review, which is designed to be like a Harvard Business Review for startups.
The firm's view is that plenty of sites focus on news and what is happening in the startup world; even why it's happening. But few focus on "how." It makes sense. As Web entrepreneurship spreads around the globe, entrepreneurs frequently don't have access to basic advice that we take for granted in ecosystems like New York or San Francisco. "One of the things we've seen pretty consistently at the seed stage is that 90% of it is tactical and only 10% of it is really strategy," Kopelman says. "Tactical" includes questions like: How to I fire an employee? Or, how do I retarget on Facebook?
"I write posts about ecommerce, but I ran an ecommerce company ten years ago," Kopelman says. "We didn't have social. We didn't have Pinterest. Who are the experts today? People starting companies today."
Unlike other First Round projects that are just for its (admittedly large) portfolio, the partners decided to open this up to startups in the world broadly. They're expecting a big response.
The site has been in beta for some eight months and the response has been bigger than the partners expected, Kopelman says. In fact, the posts have well outperformed Kopelman's own blog, with articles routinely getting more than 1000 ReTweets. Overall traffic to First Round's site has increased five-fold just from the beta test.
They articles are written mostly by freelancers, and frequently they are just writing down talks from First Round's events like its recent CTO Summit. They're targeting doing three to seven articles a week-- which seems like a lot to me for an organization that isn't built around editorial. Consistently producing quality content is a drain. First Round has so far just been shuffling resources internally, but Kopelman says the firm will be hiring someone to manage it full time.
It's a good thing for a world of entrepreneurs, no doubt. But something like this is a big undertaking. Consistent, good quality content is expensive. How does this actually help First Round in its core business of investing in the best companies?
Well you could ask the same thing about its outlandish Holiday cards which featured elaborate pyrotechnics last year. First Round has never been a firm that looks for a hard ROI when it wants to try something new. It tries a lot of things on a lark and sticks with what works. We discussed what's worked and what hasn't worked at length at our PandoMonthly with Kopelman. "We look at what is our job as a VC? It's mostly to be a connector. We listen to the problem someone is having and tell them to talk to X because X does this really well. That's a lot of what were doing here," he says.
And here's where we get back to that distinction between what First Round is doing mostly with sites and software and what Andreessen Horowitz is doing with an army of people. Both are models of venture capital that rely less on the knowledge in a general partner's head-- or in his rolodex. But they do it in different ways.
Andreessen Horowitz is trying to better service entrepreneurs by bringing in more people to help them. First Round wants to enable its portfolio to essentially help one another. Kopelman would argue his approach is the scalable one. "We look for companies that use software to create network effects and we're looking to do the same," he says. "In the agency model none of those things apply. There are anti-network effects in those businesses. Every time you fund a new company you weaken the value of the network, because they are all fighting for the same resources. Human delivered services are not scalable. That's where we're trying to innovate."
There's a lot of merit to both models. Kopelman has a point, but certainly reading an article about hiring isn't the same as having a skilled recruiter find your head of engineering for you. What's appealing to me about this path First Round is on is that it's different than what's out there. A company could be funded by both Andreessen Horowitz and First Round and get different benefits-- not just two recruiters to call on.