Illustration by Jeremy Enecio for Fortune
By Dan Primack
June 29, 2015

First Round Capital this morning has taken the unusual step of publishing its most recent quarterly letter to limited partners. It concerns the early-stage VC firm’s thoughts on rising valuations and the possibility of a bubble. “We get asked about this a lot and had thought about writing something publicly, but then realized that we’d already said what we wanted to say in our LP letter, so we chose to share that,” explains First Round partner Josh Kopelman.

You can read the full letter below. For those with less time, here’s the quick synopsis:

First Round doesn’t claim to know if there is or isn’t a “bubble” in private tech valuations. But it does believe that too few VC firms are considering how increased entry prices must be accompanied by similarly increased exit prices, or else returns will suffer.

Moreover, First Round points out that a VC lesson from the dotcom bubble was that the best firms didn’t stray too far from their knitting in order to chase outsized opportunities. Just because there’s a lot more capital in market, that doesn’t mean your firm needs to put a lot more capital to work.

For First Round, that’s meant keeping fund sizes static and increasing the threshold for new deals. If a typical deal costs 30% more than it did several years ago, then First Round wants to be 30% more certain. Yes, that does sound like a small strategic shift, but it also reflects the greater portfolio concentration that comes with higher deal prices without corresponding fund size increases.

Here’s the letter:

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