Does First Round Capital have the most powerful network in the Valley?
FORTUNE — By the time Deena Varshavskaya had hired six people for her social shopping startup Wanelo she knew she’d need a bigger office — soon. That’s not an easy task for a young entrepreneur in a city as crowded and expensive as San Francisco. So she turned to one of her most important resources: the First Round Capital network.
She logged on and posted her question to the CEO forum, a network of 150 CEOs of companies funded by First Round. Within the hour, the CEO of a startup just two blocks down posted that his company was moving and his space was available. “It was 98% perfect!” she recalls.
As venture capital firms compete to land investments in the most promising startups, they’re offering an ever broader array of perquisites from access to in-house marketing professionals and founder email lists to annual CEO summits that gather portfolio companies together to hear from high-profile CEOs and network with each other. Philadelphia-based First Round Capital has taken this to the next level. Over the past two years, the early-stage venture firm has built a private social network for its portfolio companies — think Yelp YELP meets Quora with a sprinkling of LinkedIn LNKD — that has become the go-to resource for time-starved startup employees seeking advice on everything from navigating debt-funding to figuring out how much to pay a senior software engineer.
First Round founding partner Josh Kopelman explains the firms aims for half the employees of his portfolio companies to participate in forums designed for founders, engineers, hiring managers, and marketers. “We invest in software companies so we understand the power of software to make more efficient connections.”
Each portfolio company CEO manages the company’s interaction with the network. Members must use a Facebook FB ID to log on because, Kopelman points out, “people might be tempted to share a dedicated log-in and password, but they’re much less likely to share their Facebook info.” CEOs can choose whether to invite their employees to join dedicated groups within the network. The forums work very much like Quora: someone posts a question, and everyone has an opportunity to answer. In addition, the network has a growing list of user-generated reviews for everything from office contractors to lawyers. And entrepreneurs can also request free consulting from a group of Wharton MBA students that intern with First Round. (Example: “We’re a photosharing startup and we need to go to every photo-sharing-related conference in the United States — where and when are they?”)
Anyone can build at social network, of course, but First Round’s network stands out because it is densely populated and frequently used. During a recent demo on an August afternoon, I counted 27 consulting requests made within four days. Many of First Round’s entrepeneurs report visiting the network weekly, and at times, daily. As CEO of Xobni, Jeff Bonforte read all of the questions that were posed on the platform, and when he offered up an answer, his posts were often five paragraphs long. “I don’t have any time at all, but I’d feel compelled to write a page on how to take on venture debt,” he said recently.
To tend this community, Kopelman relies on an inhouse staff of eight people who designed and built the platform and help to maintain it both online and off. Much of the reason it works so well is because its members have met at any of 60 events First Round hosts during the year. These offline relationships help foster a virtual intimacy that allows members to ask tough questions.
But most frequently, the network is useful because it helps people access competitive information in real-time. Warby Parker co-CEO Neil Blumenthal has used it for help with hiring, for example. “They’ve aggregated compensation information (for people that have opted in) for key roles within a company — a junior software engineer, for example, or a CFO. When founders are making these hires, it’s really helpful.”
The network is a perq with a time limit, however. When Yahoo YHOO acquired Xobni, Bonforte joined Yahoo — and lost his First Round network membership. Once a company is acquired or has an initial public offering, its executives lose access. However, the offline relationships the network fosters don’t disappear.