2014 changes in vc
TRANSCRIPT
-
8/10/2019 2014 Changes in Vc
1/28
Changes in Venture Capital +Building Startup Ecosystems
@DaveMcClureFounding Partner
@500Startups http://500.co#MENAsummit Bahrain - May 2014
-
8/10/2019 2014 Changes in Vc
2/28
This Talk
What is 500 Startups?
Changes in Tech + VC
Lean VC = Quantitative Venture Capital
Building Startup Ecosystems
Global Entrepreneurship
Q & A
-
8/10/2019 2014 Changes in Vc
3/28
Dave McClureFounding Partner & Chief Troublemaker, 500 Startups
00s & 10s: VC: Founders Fund, Facebook fbFund, 500 Startups Angel: Mashery, Mint.com, SlideShare, Twilio, Wildfire, SendGrid
Marketing: PayPal, Simply Hired, Mint.com, OReilly
80s & 90s: Entrepreneur: Aslan Computing (acqd by Servinet/Panurgy) Developer: Windows / SQL DB consultant (Intel, MSFT)
Engineer: Johns Hopkins88, BS Eng / Applied Math
-
8/10/2019 2014 Changes in Vc
4/28
500 StartupsGlobal Seed Fund & Startup Accelerator
What is 500?
$100M silicon valley VC fund + startup accelerator 30+ people / 10 investing partners Locations: SV, NYC, MEX, BRZ, IND, CHN, SE Asia 1500+ Founders / 200+ Mentors Community + Content + Conferences
750+ Portfolio Cos / 40+ Countries Wildfire(acq GOOG, $350M) MakerBot(acq SSYS, $400M) Viki(acq Rakuten, $200M)
Simple(acq BBVA, $117M)
Twilio SendGrid
Credit Karma
Udemy
-
8/10/2019 2014 Changes in Vc
5/28
500 Startups: Global Seed FundOver 200+ startups outside US, in 40+ countries
-
8/10/2019 2014 Changes in Vc
6/28
This Talk
What is 500 Startups?
Changes in Tech + VC
Lean VC = Quantitative Venture Capital
Building Startup Ecosystems
Global Entrepreneurship
Q & A
-
8/10/2019 2014 Changes in Vc
7/28
-
8/10/2019 2014 Changes in Vc
8/28
Changes in Tech Startups
LESS Capitalrequired to build product, get to market Dramatically reduced cost for servers, software, bandwidth Funding Platforms: KickStarter, Angel List, Funders Club, etc
Access to online platforms for 100M-1B+ consumers, smallbiz, etc
MORE Customers via ONLINE platforms (100M+ users)
Search (Google) Social (Facebook, Twitter) Mobile (Apple, Android) Media(YouTube, Pinterest, Instagram, Tumblr) Comm(Email, WeChat/WhatsApp/Line/Kakao, Voice, SMS, etc)
LOTS of little bets:Accelerators, Angels, Angel List, Small Exits
Y Combinator, TechStars, 500 Startups
Capital + Co-working + Mentoring -> Design, Data, Distribution Fast, Cheap Fail, network effects, quantitative + iterative investments
-
8/10/2019 2014 Changes in Vc
9/28
Before & After 2 Dot-Com CrashesDaft Punk Startup: Simpler, Faster, Cheaper, Smarter
Before 2000
Sun Servers
Oracle DB
Exodus Hosting 12-24mo dev cycle
6-18mo sales cycle
3B people online
-
8/10/2019 2014 Changes in Vc
10/28
Lean Startup:
Simpler, Faster, Cheaper, Smarter
1. Startup Costs = Lower.
2. # Users, Bandwidth = Bigger.
3. Transaction $$$ = Better.
! Building Product => Cheaper, Faster, Better
! Getting Customers => Easier, More Measurable
IterativeProduct & Marketing Decisions
based on Measured User Behavior
-
8/10/2019 2014 Changes in Vc
11/28
Platforms 2.0
Search, Social, Mobile,Video, Messaging
-
8/10/2019 2014 Changes in Vc
12/28
Angel List:Platform for Investors + Startups
Startups + Metrics
Founders + Bios
Investors + Syndicates Accelerators + Online Applications
Jobs + Talent
12
-
8/10/2019 2014 Changes in Vc
13/28
This Talk
What is 500 Startups?
Changes in Tech + VC
Lean VC = Quantitative Venture Capital
Building Startup Ecosystems
Global Entrepreneurship
Q & A
-
8/10/2019 2014 Changes in Vc
14/28
Silicon Valley 2.0:
Lots of Little Betsaka MoneyBall for Startups
VC Evolution: Physician, Scale Thyself(Aug 2012)
MoneyBall for Startups, 500 Startups Investment Thesis(Jul 2010)
http://500hats.typepad.com/500blogs/2010/07/moneyball-for-startups.htmlhttp://500hats.com/VC-evolution-geeks-got-next/http://500hats.typepad.com/500blogs/2010/07/moneyball-for-startups.htmlhttp://500hats.com/VC-evolution-geeks-got-next/ -
8/10/2019 2014 Changes in Vc
15/28
15
500 Strategy: Lots of Little Bets
-
8/10/2019 2014 Changes in Vc
16/28
The Lean VC:Lots of Little Bets, Incremental Investment
Method: Make little bets in lots of startups usingincremental investment, iterative development.Start with many small experiments, filter out failures,
and expand investment in successes.
Incubator: $0-100K (Build & Validate Product)
Seed: $100K-$1M (Test & Grow Marketing Channels)
Venture: $1M-$10M (Maximize Growth & Revenue)
-
8/10/2019 2014 Changes in Vc
17/28
Investment Stage #1:Product Validation + Customer Usage
Structure 1-3 founders $25-$100K investment Incubator environment: multiple peers, mentors/advisors
Test Functional Prototype / Minimum Viable Product (MVP): Prototype->Alpha, ~3-6 months Develop Minimal Critical Feature Set => Get to It Works! Someone Uses It. Improve Design & Usability, Setup Conversion Metrics Test Small-Scale Customer Adoption (10-1000 users)
Demonstrate Concept, Reduce Product Risk, Test Functional Use Develop Metrics & Filter for Possible Future Investment
-
8/10/2019 2014 Changes in Vc
18/28
Investment Stage #2:Market Validation + Revenue Testing
Structure 2-10 person team $100K-$1M investment Syndicate of Angel Investors / Small VC Funds
Improve Product, Expand Customers, Test Revenue: Alpha->Beta, ~6-12 months Scale Customer Adoption => Many People Use It, & They Pay.
Test Marketing Campaigns, Customer Acquisition Channels + Cost Test Revenue Generation, Find Profitable Customer Segments
Prove Solution/Benefit, Assess Market Size
Test Channel Cost, Revenue Opportunity
Determine Org Structure, Key Hires
-
8/10/2019 2014 Changes in Vc
19/28
Investment Stage #3:Revenue Validation + Growth
Structure 5-25 person team $1M-$10M investment Seed & Venture Investors
Make Money (or Go Big), Get to Sustainability: Beta->Production, 12-24 months Revenue / Growth => We Can Make (a lot of) Money!
Mktg Plan => Predictable Channels / Campaigns + Budget Scalability & Infrastructure, Customer Service & Operations Connect with Distribution Partners, Expand Growth
Prove/Expand Market, Operationalize Business Future Milestones: Profitable/Sustainable, Exit Options
-
8/10/2019 2014 Changes in Vc
20/28
This Talk
What is 500 Startups?
Changes in Tech + VC
Lean VC = Quantitative Venture Capital
Building Startup Ecosystems
Global Entrepreneurship
Q & A
-
8/10/2019 2014 Changes in Vc
21/28
Critical Ecosystem Factors
Optimism & Belief (Silicon Valley)
Mentorship + Education (Knowledge)
Universities + Companies (People)
Capital, Legal, Finance (Infrastructure)
Engineering + Design / UX (Product)
Platforms + Distribution (Customers) Online Payments (Monetization)
IPO / M&A Market (Exits)
21
-
8/10/2019 2014 Changes in Vc
22/28
Startup Investor Ecosystem
Angels&Incubators($0-10M)
Micro-VC Funds($10-100M)
Big VC Funds($100-500M)
Mega VC Funds(>$500M)
TrueFirst Round
A16ZAtomico
Y-Combinator
TechStars
SoftTech (Clavier)
Felicis (Senkut)
SV Angel (Conway)
SequoiaGreylock
Union Square
Floodgate (Maples)
Foundry
Bootstrap, KickStarter,Crowdfunding
-
8/10/2019 2014 Changes in Vc
23/28
Example Startup Ecosystem
1,000 Bootstrap Startups ($0-10K)
300 Accelerator Startups ($10-100K)
100 Seed-Stage Startups ($100K-$1M)
30 Series A/B Startups ($1-10M)
10 Later-Stage Companies ($10-100M)
1-3 Mature Company IPOs ($100M+)
23
-
8/10/2019 2014 Changes in Vc
24/28
Entrepreneur Education
Business Plans
Functional Prototypes
Lean Startup
Software Engineering / Design & UX
Online Marketing / Unit Economics
Monetization & Payments Customer Service + Support
Fundraising & Pitch
24
-
8/10/2019 2014 Changes in Vc
25/28
Investor Education
Startups are NOTReal Estate
Most Startups Fail / Power Law Returns
Portfolio Approach (10-20+ investments)
Legal Structure, Financial Structure
Syndication + Co-Investment
Access to Downstream Capital Exits & Liquidity
25
-
8/10/2019 2014 Changes in Vc
26/28
This Talk
What is 500 Startups?
Changes in Tech + VC
Lean VC = Quantitative Venture Capital
Building Startup Ecosystems Global Entrepreneurship
Q & A
-
8/10/2019 2014 Changes in Vc
27/28
Local vs Global?
Emerging / Developing Markets Global Languages: English, Chinese, Spanish, Arabic
Critical Factors: Education, Mentorship, Capital
Capital Availability: Incubation, Seed, Series A
Positive Macro: SmartPhones, Tablets, Payments,Logistics, Growing Middle Class, Distribution Platforms
Wealthy Global Users, Shoppers, Travelers
-
8/10/2019 2014 Changes in Vc
28/28
Questions? Comments?
More Info?
http://500.co(our company) http://500hats.com(my blog) https://angel.co/500startups(our fund) Dave McClure, @DaveMcClure
https://angel.co/500startupshttp://500hats.com/http://500.co/