Truth or dare: Fact-checking Josh Kopelman's venture capital claims

Josh Kopelman, founding partner of First Round Capital and a respected voice in venture capital, [CNBC, Wikipedia, Spotify for Creators, Substack, Firstround, Firstround] made several provocative claims about industry dynamics, market returns, and valuation practices. After thorough research of market data, expert opinions, and industry trends through 2025, we've evaluated the accuracy of his six key assertions. [Apple Podcasts, Podcastgang, Spotify for Creators, Firstround, Deciphr, Annie Duke, Technical, LinkedIn]

Dot-com bubble returns: Mostly accurate with slight exaggeration

Kopelman claimed: "1% a year for the first 17 years, 83% in the last three. And why is that important? Because the last three, it was universally acknowledged we were in a bubble... And if you had said, oh no, we're in a bubble, and you said I want to sell and exit now, you would have given up 83% of your profit."

While the specific percentages appear somewhat hyperbolic, historical NASDAQ data strongly supports his fundamental observation. From 1980-1997 (17 years), the NASDAQ rose from 202.34 to 1,570.35, [Wikipedia] representing about 25% of the total return. From 1997-2000 (3 years), it rose to a peak of 5,048.62, [Wikipedia] accounting for 75% of the total return. [TED, Wikipedia]

The acceleration was dramatic: the NASDAQ rose 21.64% in 1997, 39.63% in 1998, and a staggering 85.59% in 1999. [Wikipedia, macrotrends] Kopelman's core argument—that exiting during an acknowledged bubble would have meant missing substantial gains—is well-supported by historical data. [Nasdaq, TED]

VC industry growth: Mixed accuracy depending on definitions

Kopelman stated: "in 2004, you had fewer than 850 funds... Today, there's over 10,000 funds, you probably have over 20,000 active check writers out there." [Technical, Spotify for Creators, Apple Podcasts, Annie Duke]

The first part of this claim appears accurate. While exact 2004 figures weren't located, NVCA Yearbook data confirms that VC firm numbers were significantly lower then, with 841 firms reported in 2012. [Prnewswire, Points and Figures]

However, the claim of "over 10,000 funds" today is overstated if referring to U.S. venture capital firms only. According to the 2024 NVCA Yearbook, there were 3,417 VC firms in the U.S. at the end of 2023. [Pymnts, Prnewswire, Addepto] PitchBook data indicated that active VCs investing in U.S. companies peaked at 8,315 in 2021 before dropping to 6,175 by 2024. [Pymnts, Edward Conard]

The estimate of "over 20,000 active check writers" is plausible when including individual partners, angel investors, family offices, and corporate VC representatives, though exact confirming data wasn't found.

Software margins: Claim validated by market reality

Kopelman argued that Marc Andreessen's "Software is Eating the World" essay [Andreessen Horowitz, Uptake Digital] assumed 90%+ margins that haven't materialized: "the margin test hasn't played out." [Ryan J. A. Harden, Unified Networking, innovation copilots, Bespoke Partners]

This assessment is largely accurate. Andreessen's essay did mention high margins only once while referencing software 50 times (though the exact count wasn't verified), suggesting margins were assumed rather than deeply analyzed. [Softwareequity, TechCrunch, Uptake Digital, Andreessen Horowitz, Studocu]

Market data confirms Kopelman's skepticism. Most SaaS companies achieve gross margins in the 70-85% range—not the 90%+ suggested—with median gross profit margins around 73-75%. [Lighter Capital, DealHub] More critically, operating and net margins tell a different story: [Lead Edge Capital, Chargebee, Finrofca, The SaaS CFO, The CFO Club, DealHub, Gsquaredcfo, Mosaic]

Publicly traded SaaS companies had average operating margins between -30% and -20% in early 2023
The industry median improved to -11% going into 2024 [Lighter Capital]
North American software firms had an average net profit margin of -19.6% as of 2020 [Statista, McKinsey & Company]

Companies that used software to disrupt traditional industries often have even lower margins. For example, hybrid SaaS companies with payments components typically have blended gross margins under 50%. [Saastr]

The Matthew Effect in VC: Strongly supported by evidence

Kopelman described how "activity begets activity" and advantages compound for already-advantaged VC firms—a classic "Matthew Effect" (the rich get richer). [Deciphr, TechCrunch, Hbs, Wall Street Oasis, Spotify for Creators, Firstround, Annie Duke, Technical]

This claim is strongly supported by research. [LinkedIn, Hackernoon] Empirical studies show remarkable performance persistence in venture capital that doesn't exist in most other asset classes: [ResearchGate, ResearchGate, NBER]

Each additional IPO among a VC firm's first ten investments predicts an 8% higher IPO rate on subsequent investments [Hbs, ResearchGate, Openvc, ScienceDirect]
Approximately 70% of venture capital deals come from connections in investors' networks [4degrees]
VC firms with more influential network positions realize significantly better performance [ResearchGate, Emerald, Wall Street Oasis]
Top-tier firms' investments serve as quality signals to other investors, customers, and talent [TechCrunch, Openvc]

These network effects create a virtuous cycle for established firms: better deal access → better performance → stronger reputation → even better deal access. This dynamic has intensified through 2025, with data showing the gap between established and emerging VCs has widened over time. [Maddyness, Hbs, Harvard, Hbs, ResearchGate]

The "Venture Arrogance Score" and fund math: Logically sound

Kopelman proposed that mega-funds face insurmountable mathematical challenges: "if you have a $7 billion fund and you're going to own 10% of the companies that you're in on average, you just figure out, okay, for each turn of the fund, that's $70 billion, right?" [Crunchbase News, Spotify for Creators, Deciphr, Annie Duke]

While the term "Venture Arrogance Score" appears to be Kopelman's own framing, his mathematical logic is sound and widely supported in venture economics:

A $7 billion fund with 10% average ownership would indeed need to generate approximately $70 billion in portfolio value for a 1x return
To achieve the target 3-4x return that LPs expect, the fund would need its portfolio companies to collectively be worth $210-280 billion
This creates significant deployment pressure and limits the universe of potential investments
Performance data shows smaller venture funds historically outperforming larger funds on a percentage basis [Carta, Prnewswire, Hackernoon, LifeSciVC, Harvard Business Review, Investopedia, Carta]

Industry experts consistently validate these mathematical challenges, supporting Kopelman's skeptical view of mega-funds. [TechCrunch, Pillar VC, The VC Factory]

Allbirds valuation: Remarkably accurate assessment

Kopelman claimed Allbirds "was worth $4 billion because it was valued differently. But ultimately when you value it as a shoe company, it's like 50 million today." [Phillymag]

This assessment is strikingly accurate in both substance and specifics:

Allbirds reached a peak market cap of approximately $3.7 billion shortly after its November 2021 IPO [LinkedIn] (very close to Kopelman's $4 billion figure) [Phillymag]
As of May 2025, Allbirds' market capitalization is $41.89 million (remarkably close to his $50 million estimate) [companiesmarketcap]
The company received a Nasdaq non-compliance notice in April 2024 for trading below $1 for over 30 days [Wikipedia]
It underwent a 1-for-20 reverse stock split in September 2024 to maintain its listing [Wikipedia]

Kopelman correctly identified the fundamental issue: Allbirds was initially valued as a technology/sustainability disruptor before being revalued as a traditional footwear retailer. [Phillymag, Businessoffashion, SF Gate] This pattern repeated across many direct-to-consumer brands that positioned themselves as tech companies but faced traditional retail economics. [Businessoffashion, Morningstar, Inc., Sleep Retailer, Businessoffashion]

Conclusion: A venture capitalist's keen insight

Josh Kopelman's claims demonstrate remarkable accuracy about the venture capital landscape, reflecting his deep industry experience. [Wikipedia, Mercury, Cbinsights, Bowery Capital, Apple Podcasts, Annie Duke, Substack, Deciphr, Firstround, Spotify for Creators, TechCrunch, CNBC, IBIT, Firstround, First Round Capital] While some specific numbers are slightly exaggerated or rounded, his fundamental observations about market dynamics, valuation practices, and industry challenges are strongly supported by data and expert consensus. [Apple Podcasts, CNBC] His critical perspective on industry practices—from software margin assumptions to mega-fund economics to DTC valuations—has been largely validated by market realities through 2025. [Thetwentyminutevc, Firstround, Spotify for Creators, Deciphr, NED Biosystems, TED, Apple Podcasts, Annie Duke, Technical, LinkedIn]