For much of the past 15 years, venture capitalist Josh Kopelman has lived his life in 15-minute increments, dashing from one phone call or meeting with a prospective entrepreneur to another. It’s paid off handsomely: Among the start-ups that Kopelman’s First Round Capital has backed are Uber, Refinery29 and Warby Parker. Meanwhile, Kopelman himself — a 46-year-old Penn grad whose second company, Half.com, was sold to eBay for more than $300 million in 2000 — has become one of the most influential people in Philadelphia, not only as the tech scene’s biggest player but also, more recently, as the chairman of Philadelphia Media Network (PMN), the company that operates the Inquirer, the Daily News and Philly.com. On a warm day in late June, Kopelman offered up a few of those coveted 15-minute slots and sat down in his University City office to chat about tech, Philly, and the next wave of disruption that’s headed our way.
Last summer, you took a sabbatical. Was it valuable?
Yeah. This is a job where you’re dealing with a lot of travel. It’s just a fast-paced job. But having done it for 12 years, it was nice to be able to take three months and just control my calendar. Because the hard part about the job is that the calendar is controlled by other people. By entrepreneurs. By companies.
Did you come back with a different perspective?
I wish I could say something profound [laughs]. I think what I’ve tried to do a little more of lately is schedule time to think. You could go from one meeting to another to another — and then at the end of the day, yes, you’ve gotten a lot of meetings done, but you haven’t had time to process, to analyze, to think about it.
When it comes to backing a start-up, you’re focused more on the person than the idea, right?
One hundred percent. We clearly assess a product, and we clearly assess a market, but we’re doing that as a lens to review the founder. So a founder comes in and presents a product to me. Well, you know one thing: The product is wrong. It hasn’t hit the market yet; it hasn’t launched. So the product is going to change.
What we try to do is rewind. Because the product is a synthesis of a thousand decisions. We’re trying to understand: How does a founder make decisions? Your product is basically a DVR of every decision you’ve made over the last two years.
Do you have an investment that you take the most pride in — because you were smart about the way you picked it?
Look, I think there’s a lot of survivor bias in this. Which means that in venture capital, you’re wrong more than you’re right. People tend to ascribe genius to their successes, as opposed to stupidity to their failures. Luck plays a massive role in this.
One contrarian view that I think we have is, what does it take to be successful as a kid? I think to be successful as a kid, you’re pretty much following a conveyor belt that teaches conformity. You showed up your freshman year, and your teacher said, here’s the syllabus for this class. The syllabus said, here are the books you need to read to master the subject. Don’t try guessing which books — I’ll tell you which books. Here are the dates of the quizzes and the tests. Here are the projects; here’s how you’ll be graded. The teacher hands you a map. Now, you have to follow the map well. You have to put in the time to learn it. But a teacher has given you a map of how to succeed in the class.
When you start a business, no one gives you the map. In fact, the key to being a successful founder isn’t being a successful navigator — it’s being a successful surveyor. It’s being the person who can actually build the map. We try to say: Has this founder demonstrated, at any point in life previously, an ability to build their own map?
It strikes me how similar your job is to being a talent evaluator for a pro football team. You’re in the scouting business, essentially.
We are betting on people. We’re betting on someone’s ability to adapt, because change is the only constant.
I heard you say recently that there’s so much innovation happening within big companies, it can be hard for start-ups to compete.
Yeah. I think it’s also that [big companies] understand the playbook. In technology, at least, what we’ve seen is that each new platform brings massive disruption. The personal computer industry was massively disruptive. The Internet was massively disruptive. Mobile was massively disruptive. And each time there’s a new platform, there are winners and losers. AOL was the dominant player, but they missed one platform shift, from dial-up to broadband. You miss one platform shift and you go from the number one way people get online to, Oh yeah, I remember AOL. … Yahoo missed two platform shifts — search and mobile — and went from one of the most valuable Internet companies to a has-been.
The tech industry has learned that if you miss a platform shift, you’re doomed. And one of the reasons they’ve learned this is because the platform shifts have been happening faster and faster. So the telegraph happened sometime in the 1830s, completely disrupted the world — but it took 40 years for the telephone to come out after that. So the people who were the managers who dealt with the disruption of the telegraph weren’t in their same roles when the telephone came along. And then, 50 years later, when television came out, it was completely different people. What’s happened is, these changes are just as big, but they’re happening so much faster that people have an advantage — Oh wait, I saw what happened to the loser who didn’t respond to the last change. Which is why Facebook bought Oculus, a VR company, because maybe that’s the next platform. Which is why Apple and Google are investing in autonomous vehicles, because maybe that’s the next platform.
What do you think about the state of the Philly tech scene right now?
So I’ve been in the tech scene here in Philly … wow … almost 30 years. That’s scary.
What was it like when you arrived in Philly?
It was a very different time. When I graduated, I co-founded a company. When you graduate from Penn, they send you a survey that [asks about] your post-graduate employment. And back in the early ’90s, when I was trying to check which box was right for me, “Unemployed” was the closest option [laughs]. Because there wasn’t “Started our own company but not making a paycheck.”
It impresses me how it’s grown. What we’re seeing in the industry is a democratization of entrepreneurship. The barriers to entry and the costs to entry have come down so much. And as it’s gotten democratized, you see entrepreneurs in every city.
The renaissance we’re seeing in Philadelphia is also being seen in Pittsburgh, Atlanta, Detroit. There are more mobile app developers in the dorms at Drexel or Penn today than there were in the entire City of Philadelphia 10 years ago. And just like great actors aren’t all born in Hollywood, great companies aren’t all born in Silicon Valley. Now I’ll put the big asterisk on it: Just because you can start a great business anywhere doesn’t mean that you can scale a company. When companies are small, they need generalists. But as a company grows, you start looking for specialists, people who have done that before. Those specialists tend to congregate in one specific area, which tends to be Silicon Valley. If you’re in retail or finance, it tends to be New York. So what ends up happening is, a lot of companies that get started in Philly or that get started anywhere say: This is a great place to get my first 20 employees, but it’s not where I’m going to get my next 200.
Let’s talk about the Inquirer. How do you see your role there?
I want to be very transparent. Terry [Egger] runs the Inquirer and is doing a fabulous job. I run the board. And I do play a role in trying to understand what the strategic challenges and opportunities facing local media are. And how do you innovate? There’s a little bit of karma. I spent the last 20-plus years working to leverage the power of the Internet to disrupt slow legacy incumbents. And now I’m at the legacy incumbent that’s been disrupted by the Internet. What’s fascinating is that there’s no unique, powerful insight. I can sing the disruption alphabet A to Z with my eyes closed, because it’s a playbook I’ve followed before. But I liken this to trying to sing the alphabet Z to A.
But I’ve been impressed by the quality of the recent hires they’ve made in terms of product, in terms of audience, in terms of other things. And I really laud Gerry Lenfest for his visionary thinking. Who else owns a newspaper through unfortunate circumstances, chooses to donate that asset to a nonprofit, and then endows it with tens of millions of dollars focused around not just helping that newspaper survive, but building a playbook for all of local media? And I think it’s super-important. It’s funny; when I first joined the board, a bunch of people said, Why’d you do this? I don’t get it. After the election, no one asks me that anymore.
I think that having vibrant local media is critical to a vibrant city. I don’t think Philadelphia should be the first major city that doesn’t have a major newspaper.
What innovations do you see that might help newspapers survive?
When it comes to local news, there’s innovation happening in all cities. So we’d be foolish to say we have to invent it all here in Philadelphia. I think there’s probably some low-hanging fruit in terms of what can we do. I think the second thing is, the Inquirer and PMN have had so many owners in the last six years that they’re underinvested in a lot of areas in terms of tech. Before you can innovate, I think you need to upgrade the level of digital platforms. There’s some basic infrastructure that needs to be put in place.
Do you call up Jeff Bezos and compare notes?
[Laughs] I haven’t. But PMN has sent people down to the Washington Post.
There’s been a lot of talk lately, by Elon Musk and others, about the impact of artificial intelligence and robots. Are you nervous about changes coming down the pike?
I think we’re already seeing the impact of increased automation. This last election — job loss was blamed on China, but a lot of that is really automation. The amount of people it takes to manufacture something is going down due to technology. And I actually see that accelerating, and it’s not just going to impact the lowest-paying jobs. I wouldn’t be telling my kid to become a radiologist right now. When it comes to looking at a musculoskeletal X-ray, AI is already better than humans. And look at what’s going to happen with drivers. In more than 17 states, the number one occupation is driver. That’s going to be disrupted.
It’s really concerning for society because … okay, McDonald’s. You pull up at the drive-through. A human says, “Hello, what can I get you?” and takes your order. How many McDonald’s are there? Call it 15,000. And let’s say each employs four people on different shifts to work the drive-throughs. So there’s 60,000 people who are supporting themselves and their families and paying taxes by taking orders. There’s no reason that Alexa or Siri isn’t going to be doing that five years from now. Those 60,000 jobs get eliminated, and that’s pure profit to McDonald’s and Burger King. The [personal] income taxes go away. So societally, I think you’re going to see massive challenge.
The hard part here is this: When I talk to people I know and respect who are thinking about this stuff, I say, let me throw this challenge to you. Imagine you’re well-off. And you have a cousin who’s a truck driver. Your cousin’s 32 years old, and you know that your cousin is going to be replaced by autonomous trucks sometime in the next five years, 10 years maybe. So you want to give your cousin a head start. You’re willing to spend $50,000 to retrain your cousin to do X. But to do what?
We funded a company called MissionU that is building an alternative to college, trying to train people for different careers. Instead of paying tuition, you go for free for a year. After you get a job, they’ll take 15 percent of your earnings — if you’re making above $50,000 — for the next three years. They have all the risk. Really interesting business model in that regard. So as a venture capitalist, of course we’re going to be funding technologies that improve productivity. But we also think there are going to be massive investment opportunities for companies that help those impacted find gainful employment or redefine what that employment is.
From a human level, it’s really challenging. Business doesn’t have a built-in, intrinsic motivation to think about the consequences. Government has the intrinsic motivation to look after its citizenship. And I think part of the problem is that government hasn’t caught up to this challenge.
How much do you think about the disruption factor when you’re looking at a company? More than you used to?
I think about it. But I also recognize that all progress has been driven historically through these levels of disruption. No one is sitting back and saying, man, Ford should have thought about all the stable hands he unemployed. The difference here is that previously, disruption happened vertically. But artificial intelligence and automation and machine learning are happening horizontally. So it’s going to be impacting lots of industries at the exact same time. Previously, when there was a wave of disruption … think about it as a tsunami: It caused a ton of damage, but the water subsides at some point and everyone rebuilds. What’s happening now is you’re seeing wave after wave hit at the exact same time. So there’s not much place for the water to go. Or for those affected to go.
On the other hand, having a smart phone … 15 years ago, dialing 411 for information was a $6 billion-a-year industry. That was more than government spent on cancer research that year. We were spending more to get the 10 digits of a phone number than to cure cancer.
Are we talking about this stuff enough?
I think the tech industry has begun to. I think people hear people in the tech industry talk about guaranteed basic income and roll their eyes and say, “Huh? What are you talking about?” But when you look at Stephen Hawking and Bill Gates and the Y Combinator folks — all of the players who understand what the next 20 to 40 years might look like — you’re seeing a lot more uniformity of thought than differences of opinion. Is it going to be the 2020 election or the 2024 election before it becomes a mainstream issue? I don’t know. But it should be. It used to be that companies’ revenue growth and profitability growth almost always went in lockstep with employee growth. But you’re actually going to get to a point where you see companies laying people off and reducing their workforce while revenues go up and profits go up. I predict you’re going to see a lot of that now.
There’s a huge consequence to that.
A massive consequence to that. Because the way we compensate people, the way we provide insurance to people, the way our government collects revenues, is based on humans doing work and getting paid for that work.
Are you interested in getting into this on the public-policy, or even political, side?
I have zero political interest, personally.
The “Kopelman for Mayor” movement is going nowhere?
[Laughs] But I do think it’s important to have public discussion about the consequences of what is happening. And I’ve been spending a fair amount of time thinking. Because there’s an altruistic part, and there’s also an investment part. Just as there’s an investment opportunity in the companies that are disrupting jobs, I think that we should be thinking about what the opportunities are to help people. What would I give my cousin the training in? And that’s something I want to help with.
Published as “Just Josh” in the August 2017 issue of Philadelphia magazine.