In this week’s edition of The Third Degree, we chatted with Charlie O’Donnell, a principle at First Round Capital and founder of NextNY. He started off in the pension fund industry before becoming an analyst at Union Square Ventures. Along with being a constant presence at start-up events, he organizes a lot of sports for tech types, and agreed to do this Q&A on the condition that Betabeat use a photo of him riding his beloved bicycle.
Q: You always remember the ones that got away. Tell us about the startup you regret passing on the most.
A: I do have a bad habit of not being at a venture firm when I see things that would make great investments. I was between gigs in venture when I saw Twitter blow up at SXSW. I was working on my own start-up, Path 101, when Foursquare first clicked for me. Those would have been nice.
Q: What “me too” trend should we avoid or invest in?
A: I didn’t realize group messaging was a space until we invested in GroupMe! I think certain entrepreneurs come out of an industry, and they have an idea they want to pursue, and when a certain obstacle is removed, technological or financial, they can go after it. Then there is another class of entrepreneur, who doesn’t have as much experience, who spends a lot of time following the conversation online and thinking about how they can get in on the game. For me, it’s about investing in folks who don’t go chasing the perceived interest, but tap into their area of expertise.
Q: What’s the weirdest pitch you ever heard?
A: I’m ready for this one. I was at Union Square Ventures and a pitch came in through info@usv, which I thought was a total pass. Then, about three years later I ran into the guy, and he says, hey you turned down my deal. Here’s the basic premise. He had built a device which you took out with you at night, say to a bar. He felt like it was a bit sketchy to just go up and introduce yourself to someone, so what you did was you clicked this thing in their direction, and if they had the device, it recorded that, and at the end of the night you could take it home and see who clicked you. It was kind of like a real life Facebook poke, but I wasn’t sure I saw the market for creepy stalkers as being such a great opportunity.
Q: What’s the best way to ride out a bubble?
A: Remember it’s about the team, not timing the market. My view is definitely very colored by the down cycles, cause I started in 2001, I think I saw nine negative quarters in venture before I saw a positive one. Everyday I came in and things were getting worse and it was just a question of where is the bottom? Eventually we did some purchases of secondary portfolios, in 2003 maybe, buying up venture portfolios from instutional investors at a steep discount, and they ended up being big winners. My own personal experience raising an angel round, well to go out raising in October of 2008, world’s greatest timing. I remember being on the phone with a Boston based VC, and he just started cursing to himself in the middle of my pitch, watching the market tumble. So yeah, surround yourself with good people, because you can’t predict the market.
Q: The last thing you want to hear from a founder is?
A: “I quit”
Q: Explain, without jargon, what the word pivot means to you.
A: You have disproven one hypothesis, and you are looking to discover something else.