Uncapped with Jack Altman

How To Make Money in Venture | Josh Kopelman, Co-Founder of First Round Capital | Ep. 8

(If you enjoyed this, please like and subscribe!) It was a pleasure to sit down this week with Josh Kopelman, one of the original architects of seed stage investing who continues to re-invent what it means to operate within venture. Josh co-founded First Round Capital, which has invested at the earliest stages in companies like Square, Uber, and Roblox. Some of Josh’s more recent investments include Notion, Pomelo Care, Loyal, and Perpay. Since First Round’s inception in 2004, Josh has invested in 500+ startups and has frequently made the Forbes “Midas List” which ranks the top 100 tech investors. Josh has been a founder three times (four if you include founding First Round). In 1992, while in college, he co-founded Infonautics Corporation – and took it public on NASDAQ in 1996. Josh co-founded Half.com in 1999 and led it to become one of the largest sellers of used books, movies and music in the world. Half.com was acquired by eBay in 2000, where Josh remained for three years. In late 2003, Josh helped to found TurnTide, an anti-spam company that created the world’s first anti-spam router. TurnTide was acquired by Symantec just six months later. We covered: - His “Venture Arrogance Score” - The role of relevance in venture - Making money in disequilibrium - Overlooking margin superiority - Decision-making as a product Timestamps: (0:00) Intro (0:25) Current landscape (4:39) Venture Arrogance Score (10:49) Comparing fund models (14:24) The role of relevance in venture (21:03) Small funds vs large funds (26:36) Making money in disequilibrium (33:57) Overlooking margin superiority (43:17) First Round’s strategy (49:02) Operating like a company (56:49) Future of First Round Linktree: https://linktr.ee/uncappedpod Twitter: https://x.com/jaltma Email: friends@uncappedpod.com

JKJosh KopelmanguestJAJack Altmanhost

May 1, 2025·58m·Watch on YouTube ↗

📖 CHAPTERS

1. 1

   Venture has exploded: more funds, more check writers, new LP return expectations

   Josh sets the stage by contrasting the 2004 venture ecosystem with today’s much larger, noisier market. He frames the shift not just as more competition among GPs, but as a fundamental change in LP composition and required returns.

2. 2

   Blackstone-ification vs. the bear case: scale can win—if returns don’t collapse

   Josh describes the bull case for mega-funds: lower percentage returns can still produce massive absolute profits with enough AUM. The risk is that returns compress too far (or go negative), breaking the bargain of illiquidity for outperformance.

3. 3

   The “Venture Arrogance Score”: how much of total exit value must a fund capture?

   Josh introduces a simple but sobering framework: fund size plus expected ownership at exit implies a required share of all venture exit value. For very large funds, the implied market capture can become implausibly high.

4. 4

   Why duration matters: a 4x fund can be “great” or mediocre depending on time

   Josh shows that identical cash-on-cash outcomes can produce radically different IRRs if distributions take longer. As companies stay private longer, duration risk becomes a silent killer—especially for funds implicitly underwriting lower multiples.

5. 5

   Relevance and access in private markets: activity begets activity (the Matthew effect)

   Jack and Josh explore how “relevance” drives access in private markets in a way public markets don’t. Josh argues that venture reputations compound through activity and visibility, sometimes independent of realized performance in the short run.

6. 6

   Relevance without returns doesn’t endure: the Tiger/SoftBank lesson and the 2x2 grid

   They map the tension between hype-driven relevance and long-term performance. Josh emphasizes that relevance alone is transient; enduring franchises need enough real returns to keep playing and keep trust over full cycles.

7. 7

   First Round’s positioning: early-stage focus, founder alignment, and avoiding later-stage conflicts

   Josh explains how smaller, early-stage funds can compete by aligning incentives with founders and LPs. He contrasts this with large multi-stage funds whose fee structures and ownership ambitions can create friction for founders.

8. 8

   Portfolio construction: 70–80 seeds, ownership targets, and the marathon “mortality curve”

   Josh details why First Round invests in a broad early-stage basket over time, and how reserves/pro-rata fit the model. He stresses that many startups look strong early but fail late, requiring a strategy that anticipates attrition at every stage.

9. 9

   Making money in disequilibrium: returns concentrate in bubbles and extreme greed cycles

   Josh argues venture profits are not earned steadily; they arrive in short, frothy windows where multiples expand dramatically. The hardest skill is holding through obvious bubble signals without exiting too early and forfeiting most gains.

10. 10

    Tactical playbook for frothy markets: partial liquidity, secondaries, and founder math

    They discuss what a fund manager can do when the market is clearly overheated, without trying to perfectly top-tick. Josh favors selective secondary/tender participation to de-risk and improve IRR, while staying aligned with founders long-term.

11. 11

    The overlooked assumption behind “software is eating the world”: margin superiority didn’t broadly materialize

    Josh revisits Marc Andreessen’s thesis, agreeing it expanded venture’s aperture but highlighting a missing premise: software-driven businesses would earn software-like margins. In many “software + physical/service” categories, margins stayed industry-normal, forcing valuations back down.

12. 12

    AI’s promise and the seed-stage reality: profound impact, but First Round still bets on people + problems

    Josh is bullish on AI’s societal and scientific impact, while noting many AI startups focus on automating job categories and reshaping labor. As seed investors, First Round avoids theme-chasing and instead underwrites founder-quality and problem selection over early solutions.

13. 13

    Operating the firm like a company: Brett’s role, decision “game tape,” and investing in process

    Josh explains why most venture firms are poorly run as organizations and how First Round treats decision-making as its core product. Brett Person’s operator/CEO-like role enables strategic planning, product development, and continuous improvement in how the partnership invests.

14. 14

    Future of First Round: no “Jiro” steady state—build an evolving machine, not an ’80s greatest-hits tour

    Josh rejects the idea that venture can reach a complacent plateau; the market’s definition of “good” changes too fast. He hopes First Round’s enduring advantage is an adaptive culture and system that keeps inventing how it serves founders as technology (especially AI) reshapes the craft.