A few days ago, I shared that Bessemer Venture Partners posts the deal memos of some of their most successful investments online. Along the same lines, I recently found an interview in which First Round Capital Board Partner Chris Fralic talked about the firm's thinking when it invested in Roblox. First Round Capital is a seed-stage venture capital firm and often writes the first institutional check into a company. Roblox is an online gaming and game-creation platform. Per Fralic, Roblox was one of the firm’s best-performing investments. 

A few interesting takeaways from the interview:

• In early 2009, First Round passed because the $10 million valuation was too high
• Chris watched his son and his son’s friends spend increasingly more time on Roblox throughout 2009
• Chris maintained a relationship with Roblox even though his firm had declined to invest
• Six months after declining to invest, the firm wrote a $500k check at a $14 million valuation
• In May 2011, the firm wrote a $3 million investment at a $40 million valuation
• Roblox was a company that was mostly substance, not hype, so it flew under the radar of many venture capital investors for many years
• First Round sold some of its shares along the way before Roblox went public
• First Round owned more than 5% when the company went public via direct listing in 2021

Roblox went public via direct listing in March 2021. Its market capitalization (i.e., valuation) was ~$35.5 billion when it began trading on the first day. According to Roblox’s S-1 filing (page 172), First Round owned 6.8% of Roblox when the company went public. Its position was worth ~$2.41 billion when shares began trading.

It was interesting to hear a VC firm partner recap how he decided to invest at the seed stage of what ended up becoming a very large company.

For those interested in learning more, Chris did a great job of detailing his reflections, lessons learned, and more about First Round’s partnership with Roblox in this blog post too.