Saturday, September 20, 2014
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Dorm Room Fund will finance Philly student start-ups

Josh Kopelman's First Round Capital pumps first $500k

Dorm Room Fund will finance Philly student start-ups

Josh Kopelman, boss partner at Philadelphia-based, nationally-focused venture investor First Round Capital, has started the Dorm Room Fund to back student entrepreneurs. Which is how he and a lot of other people who got rich in their 20s started. Details: Writes Kopelman:

Today, I’m excited to announce the launch of our first Dorm Room Fund -- in Philadelphia. This isn’t a business plan competition. It is a student run investment fund and First Round Capital will be committing $500,000 in capital (or $15,000 on average per Company) to the fund – for them to invest in startups that are founded by a current student at (or recent graduate of) a Philadelphia-based university (such as the University of Pennsylvania, Drexel, etc)...

I was a dorm room entrepreneur. I co-founded my first company, Infonautics, back in 1991 while I was a Junior at Penn. By the time I (barely) graduated, we had 20 employees....

College campuses are wonderful ecosystems for creating disruptive ideas... Today’s largest tech companies - it’s not surprising that Facebook, Microsoft, Dell, Yahoo, Google all started in a dorm room...

Never in history has it been cheaper or faster to start a company. In my own startup career, the costs to get to “first product ship” went from $5 million in 1991 (Infonautics), to $2.5 million in 1999 (Half.com) and to $750,000 in 2004 (Turntide) – and that doesn’t even take into account the amazing strides and cost reduction platforms of open source software (mysql, memsql), flexible programming languages (python, ruby), cloud infrastructure (AWS, heroku) and new platforms (facebook, iOS6 and Android)...

It took AOL 66 months to get to one million users. eBay and Amazon did it in 24 months. Foursquare in 13 months. And Path in around 15 days!

But just because it takes less capital to build a company now, doesn’t mean it doesn’t take any...   Raditional venture capitalists are not optimized to write $25K checks to fund a student’s idea while they are still in school. We’ve heard from several entrepreneurs claiming that it was “much harder to raise our first $25,000 then our next $2 million”...

We’ve invested in companies that are disrupting financial markets – from Upstart (which provides a revolutionary new way for college students to raise money to pursue their dreams) to Funders Club (which is pioneering an innovative way for startups to raise capital) to On Deck Capital (which uses technology and data exhaust to underwrite small business lending)...

A new venture fund could bridge the disconnect between dorm room ideas and the capital to bring them to life. (Such) a fund would:

1. Be run by a students – not suits.  A student investment team would know the entire student and campus ecosystem – allowing them to find, screen and invest in the best ideas

2. Be located on campus, so that it constantly has a feel for the vibe on campus

3. Students are engineers, marketers, financers, writers, doctors, lawyers and researchers... Allow them to focus on investing in companies that disrupt big markets that they (students) have expertise in.

4. Finance students based on their needs. Students are scrappy and often just need that first $10,000 - $20,000 in order to build their product and ship a minimum viable product – let’s call their current stage the dorm room stage...

While First Round Capital will be the initial investor in the fund – and I’ll be helping them by serving as an advisor and member of the Investment Committee while they get it off the ground – our goal is to make this an independent, student-run fund…and for them to raise additional outside capital in the future.

We will be selecting the initial Investment Team of eight students – and our plan is that they will be responsible for selecting their replacements in the future. If you are a Philadelphia area student at Penn or Drexel, and are interested in applying to serve on the investment committee, please visit www.dormroomfund.com. We’ll be using the sign-up list to provide interested students with information on upcoming on-campus information sessions, which will be held later this week...

We expect (and hope) that Philadelphia will be the first of many cities where we bring the Dorm Room Fund. Our goal for the Dorm Room Fund is to help more companies be built while providing an unparalleled learning experience for the students on the investment team.

Choosing Philadelphia as our first city underscores my commitment to creating a stronger and more vibrant Philadelphia start-up community. Over the years, we’ve seen amazing companies make it out of Philadelphia’s dorm rooms (Invite Media, Milo and Warby Parker, to name a few), when the capital finds them. And we can’t wait to add many more to this list.

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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