Josh Kopelman, Entrepreneur While still an
undergraduate at Wharton, Josh cofounded
Infonautics Corporation with entrepreneur Marvin
Weinberger. In 1996, Infonautics went public on the
NASDAQ stock exchange. Josh left Infonautics to
found Half.com in July of 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
July 2000 in a stock deal valued at the time at more
than $300 million -- and Josh remained with eBay for
three years, running the Half.com business unit and
growing eBay's Media marketplace to almost half a
billion dollars in annual gross merchandise sales
In early 2004 Josh helped to found TurnTide, an
anti-spam company that had created the world's first
anti-spam router. TurnTide was acquired by
Symantec just six months later for an estimated $28
million.
Five Rules of Investing for Success
Over the last several years I've made several angel
investments in high-technology companies. To help
me quickly screen through prospects, I've come up
with a short list of success factors to rely on when
considering new investments.
1. Reduced Market-Acceptance Risk When I
was at Wharton, I remember learning that successful
entrepreneurs try to find a new, untapped or
underserved market. I disagree. I think the markets
are extremely efficient - and there are so many smart
entrepreneurs out there - so that if a market
segment is "untapped" or "underserved", there
typically is a reason why. That's why I try to find
companies that offer a unique solution in an already
large space -preferably in a frothy market where
there's already lots of money and where "pain" is
evident. In 1999 the fastest growing space on the
Internet was e-commerce - and the biggest segment
was books. Hence, Half.com addressed that market
with a unique solution. In 2004 spam was quickly
becoming one of the top-three problems facing CIO's -
and billions of dollars were being spent to eliminate
it. That's why I was so excited when Lucinda
Duncalfe Holt introduced me to the TurnTide
technology - because it provided a unique solution to
a very large problem.
There are always risks in startup companies -
technology risk, execution risk, financing risk, etc -
but the risk I fear the most is market acceptance
risk. By focusing on large, existing problems I hope to
mitigate this risk. And if you are able to provide a
unique solution, it increases the odds of a successful
exit. When I find a great opportunity, I like to be the
first money in - I'm not afraid of investing in pre-
revenue companies.
2. Stick to what I know I tend to focus on
companies and markets where I have a strong
experience base and ability to add value. I reject
more deals for this reason than any other. By only
investing in what I know, it makes it much easier to
evaluate a business concept -- I already have a clear
understanding of the marketplace, competition and
the financial dynamics of the industry. I also value
simplicity and clarity - if it takes more than 5 minutes
to get me excited about your business, you might be
trying to do too many things.
3. Unique Business Model I look for
companies that are able to leverage advances in
distribution, technology or marketing to change
industry economics or invent a new business model.
I especially love investing in technologies and
business models that are able to shrink existing
markets - Microsoft did this extremely effectively to
the encyclopedia industry with Encarta...and
Half.com did the same thing to the publishing
industry. If your company can take $5 of revenue
from a competitor for every $1 you earn - let's talk!
4. Pull versus Push Marketing From a
marketing perspective, I look for companies that are
at a point of persuasion, not education - that use
a "pull" versus push strategy for new products. It's
really too difficult to educate a market or to try to
change consumer behavior. I also think the marketing
plan should be as creative as the product. Take our
marketing strategy for Half.com. Mark Hughes and I
worked together to convince Halfway, Oregon to
rename itself Half.com as a marketing stunt. When
they agreed, it instantly gave Half.com national
publicity. Too many companies treat marketing and
sales as a tactical afterthought. I believe marketing
is strategic and seek companies that are marketing
focused - with marketing requirements driving
product development.
5. Experienced Leadership Beginners make a
lot of mistakes. I spend a lot of time advising and
mentoring first-time entrepreneurs - but I don't
invest in them. (I call that tuition - not investment).
The odds of success are much more in your favor as
an investor with second-time entrepreneurs.
Second-time entrepreneurs bear the scars of their
first venture - and have learned their job on someone
else's dime.
