Questions we get all the time.
Sometimes you just want a straight answer about how things work and why. Here’s a list of common questions, what we think and how we work.
Is it ever too early to approach First Round about investing?
It’s never too early to reach out, but it can be too late. We don’t see divisions between angel, seed and pre-seed — we’re interested across the board and find that founders’ needs are the same early on. In fact, most of our 300+ companies came to us when they were a couple people and an idea, having raised no capital before they met us. So, even if you don’t think you’re ready, we’d still like to get to know you. Maybe we can even help in the meantime.
What if I’ve already raised some money from angels — is it too late to talk to you?
Of course not. While we’re usually the first money in, we’ve worked with a number of teams that raised a small friends and family round before coming to us. That said, if you’ve already raised more than a few million dollars, we’re probably not a fit.
I’m raising my Series B or Series C — should I contact you?
Unfortunately, we’re named First Round Capital for a reason. If you’re raising your second, third or fourth round, consider one of the great VCs on this list of peer-ranked firms.
How We Make Decisions
Does First Round only invest in particular areas or industries?
No. We don’t think VCs predict the future — founders do. And we look to founders to teach us what’s next. We were fortunate to invest in Uber before the rise of the on-demand economy. We invested in Blue Apron before everyone jumped into food tech. But all of our companies have one thing in common — we met the founders when they were just starting out.
Yes, our investments tend to cluster around enterprise, consumer, hardware, fintech and healthcare. That’s not where our curiosity ends. If you’re building something different, we still want to hear from you and learn about the vision of the future you have in mind.
How do you weigh different criteria in your decision-making process?
The biggest factor in our decision-making is always the founding team. How innovative, resourceful and resilient are you? What’s your superpower? Why are you going to be the ones to prevail where others won’t? What in your history shows that you thrive off the beaten path? Of course, we evaluate product and market too, but to be honest, we mostly look at that to evaluate the strength of founders too. Looking at what you’ve done already for this company — and before in your career — gives us a record of hundreds if not thousands of decisions you’ve made to get you where you are today. And that’s what success lives or dies on in this industry: the ability for founders to make really quick, good decisions. We want to understand how you do it, and we give that a lot of weight.
What does First Round look for in an idea?
Above all, we look for compelling and contrarian insight into how the world works. What do you understand about a market or a need that no one else does — that other companies in the space get wrong? And why is your company the most likely to win at addressing this gap?
Second, if you have a product in market, a small group of passionate early customers is a strong indicator for us. Several years ago, we heard a handful of our founders raving about a new business intelligence tool called Looker. We reached out to the company and invested. If there are people using your product or service who wouldn’t know what to do without you, we want to hear about it. That’s one of the strongest data points you can offer. As an extension of this, we want to see creative thinking around go-to-market strategy as well as product. The best startups take both seriously.
Third, we take a close look at the market you’re going after. Let’s say you win the whole thing. Is the prize worth winning? The game is long and hard, and some markets are more rewarding than others. SaaS companies have a different range of opportunities than on-premise software makers. First-party retailers are valued very differently from third-party ecommerce sites. To mix our metaphors, before a founder starts building their castle, they have to make sure they’ve picked the right piece of land.
What do you look for in a founding team?
Building an enduring company is ridiculously hard. You have to overcome inertia, have an unbelievable amount of conviction, and be willing to drive through brick walls. You can’t wait for someone to hand you a roadmap. You can’t even wait for a roadmap to come into focus. You have to be able to draw it yourself and execute at the same time. This is an exceedingly rare set of skills — and it’s what we seek to find in every founder conversation we have.
That’s number one. Then there’s all the typical stuff: integrity, credibility, market understanding, learning ability, etc. But there are a few other things we haven’t seen written about or discussed to death that end up mattering a lot:
- Delayed gratification. Being a founder is a constant, grueling exercise in deferring happiness and victory. The most successful entrepreneurs are willing to sacrifice in the short term for long term impact. When we consider working with you as a founder, we look for your willingness to make these tradeoffs earlier in your life and career. Did you skip spring break to pursue a long-term project? Did you work while you were in school? Have you built anything that took months in heads-down crunch mode to make possible?
- Admit unknowns. We’re always meeting the same two types of entrepreneurs. The first thinks they’re expected to know the answer to every question. So they’ll make sure they have a definitive response always, even if they shouldn’t. They’ll tell us their pricing model. Why they’ll be competitive with Google. What will cause customer churn in three years. Whenever we try to address potential risks, they tell us they don’t exist. This is not our ideal type of founder. The second type of entrepreneur will answer questions when they can, but when they don’t know, they say so. When asked the same question about pricing, they might say, “Well, we’re considering a few different options depending on the outcome of some tests we’re running.” When asked about the cost of customer acquisition, their response could be, “We don’t know what our numbers will be, but here’s our model based on comparable companies.” When asked about the risks, they identify several — and engage us in discussion about how to handle them. The founder who volunteers their ignorance has far more credibility. No one expects a pre-launch company to have all the answers. In fact, it’s a red flag if you think you do. Don’t sell us on being 100% correct. We’d much rather understand how you’re attacking the market, evaluating the risks, and taking on unknowns.
- Good storytelling. All successful founders can deliver a compelling narrative. They have to be able to sell against the status quo. They have to convince investors and employees that this incredibly unlikely thing they’re doing is about to take the world by storm. They have to capture media attention, keep their board aligned and energized, and consistently bring new customers into the fold. If a founder can’t tell an amazing story, it’ll be hard for them to do any of this. If you’re interested in developing these skills, be sure to read The Seven Deadly Sins of Startup Storytelling, Transform the Way You Give Presentations and How to Tell a Story When Raising Capital.
- Founder-market fit. We’ve lost a ton of money betting on seasoned enterprise founders pursuing consumer ideas, and vice versa. This doesn’t mean that our decision pivots on domain expertise — it means that a key part of our process will be determining whether a founder is capable of succeeding in the field they’re headed into. We need to hear a good argument.
- Rate of execution. Great founders move very, very fast. So if we meet with an entrepreneur over six weeks, we’re watching closely what they’re accomplishing at the same time. If the company’s been around for 90 days or 6 months, we want to see how much they’ve gotten done in that period. There are a ton of leading indicators there. We want to work with companies and founders that make great speed a habit.
Do you invest in companies located outside of San Francisco and New York?
Yes! While we have large concentrations of investments in those metro areas and Los Angeles, we’re interested in companies nationwide. We are proud to have funded companies like Bazaarvoice in Austin and Gnip in Boulder.
What is your investment process and how long does it take?
These answers vary from company to company, but there are some basic steps everyone goes through. While we often try to move at the pace of the founder, an important rule applies: the less time we have to make a decision, the more conviction we have to feel about a company. Sometimes we spend months developing a relationship (which, honestly, we prefer). Sometimes we move from intro to close in under a week. Generally speaking, here’s what you can expect:
- Initial review: Every startup that connects with First Round is reviewed by a partner. We have no junior members of our investment team, only partners. We’ll look at any materials sent by the founder, determine whether the business fits our basic investment criteria, and try to ensure it’s not directly competitive with any of our existing investments.
- Initial meeting: Your first meeting (or phone call) will always be with a partner. We let the founder do most of the talking, and hope they use the opportunity to dig into the specifics of their team and business. This usually lasts 30 to 60 minutes.
- Second meeting: Most of our “passes” occur after the initial meeting. If you’ve made it past that meeting, you’ll sit down again with your “point partner” as we both continue to learn more about each other. This is our chance to focus in on particular areas of the business where we have questions — and for founders to ask us more about First Round, what working with us is like, and what they could expect as a member of our community.
- Follow-up: Our partnership makes all decisions as a team. So, we often introduce promising founders to another First Round partner for an additional conversation. We often like to introduce the founder to the partner who has the “most skepticism” about the company at this point – as it ensures that all questions are addressed and gives us the ability to probe more deeply into the core assumptions of the business for an hour.
- Partner meeting: If these conversations go well for both of us, we’ll typically make some reference/diligence calls and invite you to meet with the rest of the partners at our twice-weekly investment meeting. Here, you’ll have about an hour to tell your story to the entire partnership and answer questions. Typically, we fund about half of the companies that make it to our partner meeting.
- Final Decision: After your presentation, our partnership will discuss your company in great detail with the goal to give you a final answer usually within 24 hours of the meeting.
You can see more about our terms and how deal specifics usually work below.
How should I get in touch with First Round?
Ideas are easy to describe on paper. People are not. That’s why we value referrals from people we know and trust. This includes people leading and employed by First Round companies, angel investors, other entrepreneurs, service providers like lawyers, accountants, bankers, recruiters, etc. It gives us more data to work with.
A direct referral will get a quicker response, but don’t be afraid to email us yourself. We know good ideas can come from anywhere, so our partners review every single investment opportunity we receive, whether it’s through a warm intro or cold outreach.
Do you invest outside of the United States?
We tend to focus exclusively on companies based in the U.S. because that is where we have the most experience and can be the most valuable partners. We’ve made a few exceptions for companies headquartered in Canada (like Buddybuild in Vancouver) and companies whose management is located in the US but has overseas development teams, but in general if you’re located outside of North America, we’re probably not the right investors for you.
How do I know which partner is the best fit for my company?
While our partners have different and diverse interest areas, we’re extremely collegial in how we work. We often evaluate investment opportunities as a group and frequently hand off companies to the partner who has the most experience in the space (or is located in the right geography). The investment team constantly talks about everything they’re seeing and what they find interesting. So don’t hesitate to get in touch with your closest connection to get the ball rolling.
How much do you usually invest in a new company?
Typically, our initial investment in a startup ranges from $500K to $750K, but we’ve gone higher and lower in some cases. As the largest seed stage venture fund in the country, we’re very serious about supporting our companies with follow-on investing. In fact, we reserve 75% of our fund’s capital for follow-on investments.
What size rounds does First Round participate in?
No round is too small for us to invest. The average size might be $1.5 million, but we’ve invested in rounds as small as $100,000 and as large as $5 million. Regardless of check size, you get the same First Round experience.
Will First Round only invest if it can lead the round?
While we tend to lead most of the time, we’re not the lead investor about ⅓ of the time. We have a long track record of partnering with outstanding seed-stage VCs and angels. The most important thing (to us), is that we’re aligned with founders and have a meaningful stake in every company (so we can spend meaningful time trying to help the company win).
We’ve found it’s in a startup’s best interest to have an active lead investor. We’re allergic to party rounds. In our experience, it’s in a founder’s worst interest to have a group of investors without a leader. For more advice on this, check out our article on Series A fundraising. When we lead an investment, we’re there for the founder, and ready to roll up our sleeves to help them get the job done.
Do you have a strict ownership requirements?
No. Unlike some traditional venture funds who need 20 to 25% ownership requirements, we don’t. We like to own enough of the company to make sure that we can dedicate meaningful time and resources to helping you build. Our ideal ownership is roughly 7.5% to 12.5% after your seed round. Unlike most (smaller) seed funds, we’re unique in that we deploy the vast majority of our capital in follow-on investments, supporting our companies as they grow.
Will you sign my confidentiality agreement / NDA?
No. We’d explain why in detail here, but we think Brad Feld does a great job in his blog post, Why Most VC’s Don’t Sign NDAs.
What It's Like to Work With Us
What is First Round’s stance on diversity and inclusion?
Our mission is to build and serve the strongest community of entrepreneurs. Diversity and inclusion are core to the strongest communities around the world, and we believe the First Round community and broader technology ecosystem are no exception.
In the past, we’ve been reluctant to talk publicly about our efforts to support diversity and promote inclusion because we lacked diversity on our own leadership team. But we realize that we need to speak up in order to make things happen — and that when we do, we can play a meaningful role in the conversation. We’re starting with this FAQ answer.
We won’t ever claim to be leaders or experts on the subject of D&I, but rather — with beginner’s minds — we’ll try to find the best ways to support, encourage and engage entrepreneurs to build a more representative community.
Most importantly, we’re not going to just sit around and talk about it. We’re going to take action. We know that there’s real work to be done to improve the representation of women and underrepresented minorities among First Round’s cohort of Founders, within the broader startup community, and on our own team. This goes far beyond the stats and numbers. We’re committed to taking steps across all aspects of our day-to-day work to reduce bias and increase inclusion.
We believe that Community is First Round’s superpower, so that’s where we are starting. We’re committed to increasing the diversity of our entire ecosystem and like the startups we work with, we take an iterative approach to the way we operate at First Round. We’ve applied this principle to our D&I efforts, and as of February 2017, here’s what we’ve done thus far:
- We highlighted diversity in our annual State of Startups Survey to shine a light on the continuing challenges that exist in Silicon Valley. You can see the results here. After we published, these data points caught the attention of the press (here, here and here), exposing disparities while reinforcing the need to bridge the gap.
- Last year’s CEO Summit brought nearly equal numbers of men and women to the stage — but our events strategy goes much further than that. We make sure we’re attending more diverse events ourselves. We continuously source referrals for remarkable people who have been underrepresented for too long to attend our Salons — our educational dinner series. By being conscious and intentional about how we expand our community in these ways, we hope to make First Round more approachable for founders from all backgrounds.
- Given that our 2016 survey identified a lack of female role models as a cause of limited diversity at startups, we’re proud that 39% of First Round Review stories featured a female over the last year — up more than 2X from The Review’s first year. We’re continuing to push this number until we get to parity.
- We’ve produced a number of instructional experiences focused on D&I for First Round-backed companies. These include Salons about fostering diverse cultures, and workshops that break down the best tactics for inclusive hiring. Most recently, we published a guide for companies on First Round Network that walks through best practices for keeping diversity front and center in recruiting efforts.
- As many in tech bemoan the “pipeline problem,” we’re working to actively engage a diverse pool of talented students through Dorm Room Fund. We’ve found that an astonishing 20% of student Dorm Room Fund partners choose to work in venture capital post-graduation. Of those who’ve become investors, 47% are female and 6% are black. We published these stats and others in a DRF Diversity Report to showcase how university entrepreneurs and investors compare to industry benchmarks — and where new gains can be made.
- Here at First Round, we’re taking steps to cut out bias and increase inclusion. We’ve run unconscious bias training for our employees and actively encourage our founders to do the same. We’re examining our investment process to try to reduce and remove bias. And we often convene internal conversations to share how these issues impact all of us — our lives and our work — so that everyone feels included.
- Every time a role opens on our team, we work phenomenally hard to source a diverse pipeline of candidates, engage as broad a field as possible, and check bias at the door of every interview. We promote openings where we know they’ll be seen by underrepresented audiences, and we lean on our extended network to help us find outstanding people who offer new experiences and perspectives. We’re proud of the team these efforts have produced, but we know we can do better. We’ll continue to invest heavily in building First Round to match the world around us.
- We’ve chosen to publish some of our internal data on the performance of women founders in hopes that others will choose to start companies.
- These actions are already making an impact. If you look at the new investments we’ve made in the last year, 20% of those companies have either at least one female or under-represented minority founder. There’s ample room for improvement, but we’re encouraged by these early results.
All of the efforts above are ongoing — and while we have a ton to learn, we hope they’ll set off a positive ripple effect through our companies and out into the broader tech community. If you have other ideas for us, we’d love to hear from you. Send them our way at email@example.com.
Last updated 3/24/17
What makes First Round different?
We’re focused on being the world’s best partner for founders at the very first stages of company creation — so we’ve designed the firm to do just that. When you work with First Round, you get super active partners working side-by-side with you on your biggest and smallest challenges. Whether it’s setting strategy for a fundraise or thinking through your organizational design, we’re in your corner through the thick and thin of company building over those first few critical years.
On top of that, you get access to our 15-person Platform Team, working to help you fast forward through the tough nitty-gritty of building a company so you can focus on what makes yours special. Whether it’s our Pitch Assist Team building your Series A deck, or our Talent Team connecting you with top-tier candidates, we’re here to help across all your needs.
Most importantly, we pioneered the concept of transforming a portfolio into a community. When our partners were entrepreneurs themselves, the most valuable advice and support they ever received came from other founders. That’s why we provide the tools and forums you need for employees throughout your company to learn from and help their peers. If you’re a PM, a CFO or a junior marketer, you can benefit from the collective wisdom of many others. For more on how we do this and the services we offer, check out our Philosophy page.
How do you help your companies raise money?
First Round companies have raised over $17 billion in follow-on capital after our initial investment across 1,000 rounds — and we’ve watched them all closely. This makes raising capital one area where our partners will always have more experience than our founders, no matter how brilliant they are. Leveraging this knowledge, we do everything we can to help our companies get to Series A and beyond.
These learnings are an integral part of our Pitch Assist program, developed to help companies get through what’s undoubtedly the toughest part of starting something new. Every engagement starts with strategy meeting with our partnership. We figure out which VCs founding teams should pitch and in what order based on our experience with almost every tier one investor in the country.
Once a coherent strategy is set, we pair entrepreneurs with a dedicated designer and content expert for a 4-6 week boot camp. They come out the other side with a finalized fundraising plan, a compelling narrative, a gorgeous presentation (built in-house here at First Round) and a bulletproof story that showcases their unique value prop. First Round founders also get tons of rehearsal time with our entire partnership to make sure they nail their presentations right out of the gate.
Since launching in 2014, Pitch Assist has helped over 30 companies raise more than $500M. As market conditions shift and the Series A pool shrinks, we’re seeing this kind of resource become a serious advantage.
How do you help your companies hire?
It’s said that successful founders should spend over 50% of their time on hiring during growth periods. We actually think this is an understatement. But we also know devoting this many hours while running a company can seem impossible.
That’s why we have a small, focused team to help share the load. And our partners will always pick up the phone to help close candidates (they have a pretty astonishing batting average).
Our Talent Team works side-by-side with our earliest-stage companies to help them jumpstart their hiring process. Their work sourcing candidates and making introductions is complemented by our rich, proprietary dataset on compensation so that you can make the smartest offers. And, since we’ve now worked with over 300 startups, we’ve been able to put together best practice guides — essentially manuals written by veteran entrepreneurs — all in service of giving founders a head start on hiring.
How do you help your companies acquire customers? How do you help companies grow?
Many early-stage founders don’t come in with an innate sense of how they’ll acquire customers. They might know the usual levers to pull and experiments to run, but every company is different — and sometimes very different if they’re working in a new industry or domain. Whether you’re a consumer company trying to nail early paid marketing or an enterprise company crafting its go-to-market strategy, the best way to get up to speed fast is the same: learn from folks who have been there before.
In addition to being entrepreneurs themselves, our partners have worked with hundreds of founders on their early growth and customer acquisition plans and experiments. We’ve seen every type of company, sector and tactic — and we make a point of sharing all we know (and lessons hard won by our other companies) in working sessions between partners and founders, often every other week.
If we don’t have the answer, we know someone else who will. It’s our job to make it easy to find. First Round Network allows our entire community (everyone at all of our companies) to candidly air their worries and problems, ask questions, present their problems, and help others with what they’ve learned. Most questions asked on Network are answered within 24 hours, giving people a nearly real-time resource whenever they hit a wall. Many of the questions focus on customer acquisition and growth, how to evaluate the costs involved, what has already worked for others, and pathways through scaling.
Lastly, we have a real-world database of hundreds of experts across functional areas who we can connect to our companies to provide custom, focused advice based on the exact situation. Hailing from incredible careers at companies inside and outside the First Round portfolio, these folks have told us what they know in granular detail so we can match them very specifically to the right problem-solving opportunities — all on demand. So whether a startup needs to know how to restructure its sales team, which A/B test to run on its landing page, or how to calculate its CAC and LTV, we can set them up for a call, coffee or meeting that will neutralize the problem and slingshot them forward, fast.
Growth isn’t something that just happens. It’s a slog. It’s hacking through the jungle and traversing the frontier without a map. Every single time. When that’s the reality in front of you, all you can ask for are the best guides — and we’ve got you covered.
Do First Round partners take board seats?
Yes, we do in some cases. What’s consistent is that we’ll be extremely active helping you build your company in the first two years of its life. Often, we’ll take a board seat at first and give it up to a new investor after later rounds. (We’ve found that entrepreneurs like this – as it helps them manage the size of their boards as they grow).
Outside of board meetings, we prefer what we call “working sessions.” Every 4 to 6 weeks, we go deep with a founder on a big challenge. We’ll spend the entire meeting working through the problem, and we’ve found this type of collaboration far more valuable than traditional reporting and governance. That said, we know how to operate and make an impact in more formal meetings too. (And, by the by, if you’re looking for board meeting best practices, check out this piece from one of the best board wranglers we know.)
If we partner with you, do we get to be in the Holiday Video?
Yes! If you don’t understand this question, we recommend you go here.
I want to email you. Where can I do that?
For general questions email firstname.lastname@example.org. It might take us a while to get back to you, but we’ll do our best!
Where are your offices?
First Round San Francisco (151 10th St, San Francisco, CA 94103)
First Round New York City (60 Madison Ave #1001, New York, NY 10010)
First Round Philadelphia (4040 Locust Street, Philadelphia, PA 19104)