Podcast - https://capitalallocators.com/podcast/first-round-capital/

Transcript - https://capitalallocators.com/wp-content/uploads/_pda/Manager-Meeting-First-Round-Capital-Bill-Trenchard-Transcript.pdf?t=61ae47eb9b7cd

Ahoy Capital is an LP in First Round Capital.

Chris: 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 size. During that time, they've admitted a couple of new investors, but I was lucky in that being an early investor, we took a pretty big stake. And even though I've moved a couple of times, I've been fortunate that that's come with me. And so, we're today about where we were as a percentage of the fund in 2008 when they raised FRC 2, but that's required a lot of begging, and cajoling, and arm twisting, and all that stuff.

Competition for allocation, the LP world looks really collegial, but boy, the sharp elbows can come out then.

Chris: And I started sitting down with Josh Kopelman. And Josh started articulating a vision for a new venture firm. And he said, "Look, with first round, what we're trying to do is turn venture on its head. The typical venture firm runs like a hub-and-spoke model where everything's going through partners."

"We have the technology. What if we could create a peer to peer dynamic where the entrepreneurs are the network and the entrepreneurs are helping each other and you remove the bottleneck of the venture capitalist? And by creating that community of entrepreneurs who could help each other with different tech-enabled stuff that the First Round guys had built, you could potentially create something really powerful." In 2004, it was just a vision, but man, it's been fun to watch them grow and evolve over past 17 years.

Bill: … if you want to be in the fund business, it's a different game. I would think hard about differentiation. Capital's 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 where they get the capital. It didn't used to be the case, but these days, it certainly is. So, think about how you're going to differentiate, if you want to build a business. And think about where you're really going to stand out amongst the sea of capital that's out there. And I think it could be simple things, like, are you going to make faster decisions? That's simple way to start.

A lot of people start there, and is a simple way to compete against bigger firms. Are you going to focus on specific areas like crypto or infrastructure tech? Are you going to be really great at things like customer introductions? Maybe you're going to help at hiring and talent acquisition. Whatever it is, I think that you need to pick your spot about where you're going to really stand out, how you're going to differentiate from everybody else and your service business, at the end of the day. We're all in the service business. Serving founders, they're our core customers. It's relatively easy to deliver value in the short term, but very different to do it at scale for a lot of customers over a long period of time.

The two things I typically advise early on, are I would size your fund appropriately and think about your strategy appropriately to whatever you think will differentiate you in the market.