building 500 startups: #500strong
DESCRIPTION
slides for my talk on "Building 500 Startups" @ Stanford ETL Lecture (Jan 2014)TRANSCRIPT
Building 500STRONG
DaveMcClure - 500 Startups Stanford ETL - January 2014
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
2
This Talk
bull How did i get here
3
Dave McClureFounding Partner amp Chief Troublemaker 500 Startups
00rsquos amp 10rsquos bull VC Founders Fund Facebook fbFund 500 Startups bull Angel Mashery Mintcom SlideShare Twilio Wildfire SendGrid bull Marketing PayPal Simply Hired Mintcom oDesk OrsquoReilly 80rsquos amp 90rsquos bull Entrepreneur Aslan Computing (acqrsquod by ServinetPanurgy) bull Developer Windows SQL DB consultant (Intel MSFT) bull Engineer Johns Hopkinslsquo88 BS Eng Applied Math
What a Long Strange Triphellip
bull Hillbilly in WV + MD (1966-82) bull Math+CS JHU (1982-88) + frisbee bull Geek+Coder SF (1989-95) bull Entrepreneur Aslan (1992-99) bull Geek+Marketing PayPal (2001-04) bull Angel+Blogger 500 Hats (2005-08) bull Angel+VC Founders Fund (2008-10) bull VC + Sith Lord 500 Startups (2010-)
5
This Talk
bull How did i get here bull What is 500 Startups
6
7
500 StartupsGlobal Seed Fund amp Startup Accelerator
bull What is 500 Startups ndash ~$100M under mgmt ~$7M annual budget ndash seed fund + accelerator (SF MV MXC) ndash 30 team members (10 investing partners) ndash SV SF NYC MEX BRZ IND CHN SE Asia ndash 1000+ Founders 200+ Mentors ndash Conferences Community Geeks on a Plane ndash500STRONG
bull 650+ Portfolio Corsquos 40+ Countries ndashWildfire (acq GOOG $350M) ndashMakerBot (acq SSYS $400M) ndash Viki (acq Rakuten $200M) ndash Twilio ndash SendGrid ndash Credit Karma ndash Udemy ndash Zozi ndash ElaCarte ndash Virool
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
2
This Talk
bull How did i get here
3
Dave McClureFounding Partner amp Chief Troublemaker 500 Startups
00rsquos amp 10rsquos bull VC Founders Fund Facebook fbFund 500 Startups bull Angel Mashery Mintcom SlideShare Twilio Wildfire SendGrid bull Marketing PayPal Simply Hired Mintcom oDesk OrsquoReilly 80rsquos amp 90rsquos bull Entrepreneur Aslan Computing (acqrsquod by ServinetPanurgy) bull Developer Windows SQL DB consultant (Intel MSFT) bull Engineer Johns Hopkinslsquo88 BS Eng Applied Math
What a Long Strange Triphellip
bull Hillbilly in WV + MD (1966-82) bull Math+CS JHU (1982-88) + frisbee bull Geek+Coder SF (1989-95) bull Entrepreneur Aslan (1992-99) bull Geek+Marketing PayPal (2001-04) bull Angel+Blogger 500 Hats (2005-08) bull Angel+VC Founders Fund (2008-10) bull VC + Sith Lord 500 Startups (2010-)
5
This Talk
bull How did i get here bull What is 500 Startups
6
7
500 StartupsGlobal Seed Fund amp Startup Accelerator
bull What is 500 Startups ndash ~$100M under mgmt ~$7M annual budget ndash seed fund + accelerator (SF MV MXC) ndash 30 team members (10 investing partners) ndash SV SF NYC MEX BRZ IND CHN SE Asia ndash 1000+ Founders 200+ Mentors ndash Conferences Community Geeks on a Plane ndash500STRONG
bull 650+ Portfolio Corsquos 40+ Countries ndashWildfire (acq GOOG $350M) ndashMakerBot (acq SSYS $400M) ndash Viki (acq Rakuten $200M) ndash Twilio ndash SendGrid ndash Credit Karma ndash Udemy ndash Zozi ndash ElaCarte ndash Virool
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
This Talk
bull How did i get here
3
Dave McClureFounding Partner amp Chief Troublemaker 500 Startups
00rsquos amp 10rsquos bull VC Founders Fund Facebook fbFund 500 Startups bull Angel Mashery Mintcom SlideShare Twilio Wildfire SendGrid bull Marketing PayPal Simply Hired Mintcom oDesk OrsquoReilly 80rsquos amp 90rsquos bull Entrepreneur Aslan Computing (acqrsquod by ServinetPanurgy) bull Developer Windows SQL DB consultant (Intel MSFT) bull Engineer Johns Hopkinslsquo88 BS Eng Applied Math
What a Long Strange Triphellip
bull Hillbilly in WV + MD (1966-82) bull Math+CS JHU (1982-88) + frisbee bull Geek+Coder SF (1989-95) bull Entrepreneur Aslan (1992-99) bull Geek+Marketing PayPal (2001-04) bull Angel+Blogger 500 Hats (2005-08) bull Angel+VC Founders Fund (2008-10) bull VC + Sith Lord 500 Startups (2010-)
5
This Talk
bull How did i get here bull What is 500 Startups
6
7
500 StartupsGlobal Seed Fund amp Startup Accelerator
bull What is 500 Startups ndash ~$100M under mgmt ~$7M annual budget ndash seed fund + accelerator (SF MV MXC) ndash 30 team members (10 investing partners) ndash SV SF NYC MEX BRZ IND CHN SE Asia ndash 1000+ Founders 200+ Mentors ndash Conferences Community Geeks on a Plane ndash500STRONG
bull 650+ Portfolio Corsquos 40+ Countries ndashWildfire (acq GOOG $350M) ndashMakerBot (acq SSYS $400M) ndash Viki (acq Rakuten $200M) ndash Twilio ndash SendGrid ndash Credit Karma ndash Udemy ndash Zozi ndash ElaCarte ndash Virool
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Dave McClureFounding Partner amp Chief Troublemaker 500 Startups
00rsquos amp 10rsquos bull VC Founders Fund Facebook fbFund 500 Startups bull Angel Mashery Mintcom SlideShare Twilio Wildfire SendGrid bull Marketing PayPal Simply Hired Mintcom oDesk OrsquoReilly 80rsquos amp 90rsquos bull Entrepreneur Aslan Computing (acqrsquod by ServinetPanurgy) bull Developer Windows SQL DB consultant (Intel MSFT) bull Engineer Johns Hopkinslsquo88 BS Eng Applied Math
What a Long Strange Triphellip
bull Hillbilly in WV + MD (1966-82) bull Math+CS JHU (1982-88) + frisbee bull Geek+Coder SF (1989-95) bull Entrepreneur Aslan (1992-99) bull Geek+Marketing PayPal (2001-04) bull Angel+Blogger 500 Hats (2005-08) bull Angel+VC Founders Fund (2008-10) bull VC + Sith Lord 500 Startups (2010-)
5
This Talk
bull How did i get here bull What is 500 Startups
6
7
500 StartupsGlobal Seed Fund amp Startup Accelerator
bull What is 500 Startups ndash ~$100M under mgmt ~$7M annual budget ndash seed fund + accelerator (SF MV MXC) ndash 30 team members (10 investing partners) ndash SV SF NYC MEX BRZ IND CHN SE Asia ndash 1000+ Founders 200+ Mentors ndash Conferences Community Geeks on a Plane ndash500STRONG
bull 650+ Portfolio Corsquos 40+ Countries ndashWildfire (acq GOOG $350M) ndashMakerBot (acq SSYS $400M) ndash Viki (acq Rakuten $200M) ndash Twilio ndash SendGrid ndash Credit Karma ndash Udemy ndash Zozi ndash ElaCarte ndash Virool
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
What a Long Strange Triphellip
bull Hillbilly in WV + MD (1966-82) bull Math+CS JHU (1982-88) + frisbee bull Geek+Coder SF (1989-95) bull Entrepreneur Aslan (1992-99) bull Geek+Marketing PayPal (2001-04) bull Angel+Blogger 500 Hats (2005-08) bull Angel+VC Founders Fund (2008-10) bull VC + Sith Lord 500 Startups (2010-)
5
This Talk
bull How did i get here bull What is 500 Startups
6
7
500 StartupsGlobal Seed Fund amp Startup Accelerator
bull What is 500 Startups ndash ~$100M under mgmt ~$7M annual budget ndash seed fund + accelerator (SF MV MXC) ndash 30 team members (10 investing partners) ndash SV SF NYC MEX BRZ IND CHN SE Asia ndash 1000+ Founders 200+ Mentors ndash Conferences Community Geeks on a Plane ndash500STRONG
bull 650+ Portfolio Corsquos 40+ Countries ndashWildfire (acq GOOG $350M) ndashMakerBot (acq SSYS $400M) ndash Viki (acq Rakuten $200M) ndash Twilio ndash SendGrid ndash Credit Karma ndash Udemy ndash Zozi ndash ElaCarte ndash Virool
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
This Talk
bull How did i get here bull What is 500 Startups
6
7
500 StartupsGlobal Seed Fund amp Startup Accelerator
bull What is 500 Startups ndash ~$100M under mgmt ~$7M annual budget ndash seed fund + accelerator (SF MV MXC) ndash 30 team members (10 investing partners) ndash SV SF NYC MEX BRZ IND CHN SE Asia ndash 1000+ Founders 200+ Mentors ndash Conferences Community Geeks on a Plane ndash500STRONG
bull 650+ Portfolio Corsquos 40+ Countries ndashWildfire (acq GOOG $350M) ndashMakerBot (acq SSYS $400M) ndash Viki (acq Rakuten $200M) ndash Twilio ndash SendGrid ndash Credit Karma ndash Udemy ndash Zozi ndash ElaCarte ndash Virool
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
7
500 StartupsGlobal Seed Fund amp Startup Accelerator
bull What is 500 Startups ndash ~$100M under mgmt ~$7M annual budget ndash seed fund + accelerator (SF MV MXC) ndash 30 team members (10 investing partners) ndash SV SF NYC MEX BRZ IND CHN SE Asia ndash 1000+ Founders 200+ Mentors ndash Conferences Community Geeks on a Plane ndash500STRONG
bull 650+ Portfolio Corsquos 40+ Countries ndashWildfire (acq GOOG $350M) ndashMakerBot (acq SSYS $400M) ndash Viki (acq Rakuten $200M) ndash Twilio ndash SendGrid ndash Credit Karma ndash Udemy ndash Zozi ndash ElaCarte ndash Virool
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
500 StartupsGlobal Seed Fund amp Startup Accelerator
bull What is 500 Startups ndash ~$100M under mgmt ~$7M annual budget ndash seed fund + accelerator (SF MV MXC) ndash 30 team members (10 investing partners) ndash SV SF NYC MEX BRZ IND CHN SE Asia ndash 1000+ Founders 200+ Mentors ndash Conferences Community Geeks on a Plane ndash500STRONG
bull 650+ Portfolio Corsquos 40+ Countries ndashWildfire (acq GOOG $350M) ndashMakerBot (acq SSYS $400M) ndash Viki (acq Rakuten $200M) ndash Twilio ndash SendGrid ndash Credit Karma ndash Udemy ndash Zozi ndash ElaCarte ndash Virool
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
500 Startups Global Seed Fund Over 150+ startups outside US in 40+ countries
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital
10
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Daft Punk Lean StartupSimpler Faster Cheaper Smarter
1 Startup Costs = Lower 2 Users Bandwidth = Bigger 3 Transaction $$$ = Better
Building Product =gt Cheaper Faster Better Getting Customers =gt Easier More Measurable
Iterative Product amp Marketing Decisions based on Measured User Behavior
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Changes in Tech + VCbull LESS Capital required to build product get to market
ndash Dramatically reduced $$$ on servers software bandwidth ndash Crowdfunding KickStarter Angel List Funders Club etc ndash Cheap access to online platforms for 100M+ consumers smallbiz etc
bull MORE Customers via ONLINE platforms (100M-1B+ users) ndash Search (Google) ndash Social (Facebook Twitter LinkedIn) ndash Mobile (Apple Android) ndash Local (Yelp Groupon Living Social -gt FB GOOG TWTR) ndash Media (YouTube Pinterest Instagram Tumblr) ndash Comm (Email WeChatWhatsAppLineIMChat Voice SMS etc)
bull LOTS of little bets Accelerators Angels Angel List Small Exits ndash Y Combinator TechStars AngelPad 500 Startups ndash Capital + Co-working + Mentoring -gt Design Data Distribution ndash ldquoFast Cheap Failrdquo network effects quantitative + iterative investments
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Platforms 20Search Social Mobile
Video Messaging
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Got Crunched Yet
Source Bullpen Capital
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Before amp After 2 Dot-Com Crashes Daft Punk Lean Startup Simpler Faster Cheaper Smarter
Before 2000 bull Sun Servers bull Oracle DB bull Exodus Hosting bull 12-24mo dev cycle bull 6-18mo sales cycle bull lt100M people online bull $1-2M seed round bull $3-5M Series A bull Sand Hill Road crawl bull Big Fat Dinosaur Startup
After 2008 bull AWS Google PayPal FB TW bull Cloud + Open Source SW bull Lean Startup Startup Wknd bull 3-90d dev cycle bull SaaS online sales bull gt3B people online bull lt$100K incub + lt$1M seed bull $1-3M Series A bull Angel List global visibility bull Lean Little Cockroach Startup
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Crunch Good Crunch Badbull Series A bar higher bull $1M revenue 1M active users 10M downloads 100 YoY growth bull Lots of Incubation Seed startups will ldquoFAILrdquo
bull BUT Fail Budget = $50-$500K not $5M+ bull Many ldquofailedrdquo startups = ramen-profitable small acquisition
bull hellip or MBA alternative (lt$100K) bull Series AB VCs have LOTS to choose from (not bad)
bull Overall founders market getting smarter bull More focus on customers problems revenue bull Many die some survive (1-5x) some thrive (20x+)
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Angel List It Rocks
bull Startups amp Investors bull Syndicates amp Backers bull Activity amp Metrics bull Jobs amp Talent bull Platform amp APIs
bull ps ndash not just for Angels or USA
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Industry Changes Challengesbull SW Startup Efficiency Reduced CapX Costs bull Growing Market Growing Platforms bull VC Industry Upheavals (2000 2008) bull Super Angel -gt Micro VC Seed Funds (ex FRC) bull Incubators amp Accelerators (ex Y Combinator) bull Big VC (ex A16Z) amp Platforms (ex Angel List) bull httpPreMoneyco
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Lots of Little Betsaka ldquoMoneyBall for Startupsrdquo
bull VC Evolution Physician Scale Thyself (Aug 2012) bull MoneyBall for Startups 500 Startups Investment Thesis (Jul 2010)
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo
20
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
21
500 Strategy ldquoLots of Little Betsrdquo
See Peter Sims book ldquoLittle Betsrdquo
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Minimum Viable TeamHacker Hipster Hustler
bull Hacker engineers amp developers bull Hipster design amp user experience (UX) bull Hustler marketing amp business ldquogrowth hackerrdquo
1 Build functional prototypes 2 Improve UX so people convert 3 Scale customer acquisition amp distribution
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
The Lean VCLots of Little Bets Incremental Investment
Method Invest in lots of startups using incremental investment iterative development Start with many small experiments filter out failures and expand investment in successeshellip (Rinse amp Repeat)
bull Incubator $0-100K (ldquoBuild amp Validate Productrdquo) bull Seed $100K-$1M (ldquoTest amp Grow Marketing Channelsrdquordquo) bull Venture $1M-$10M (ldquoMaximize Growth amp Revenuerdquo)
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Investment Stage 1 Product Validation + Customer Usage
bull Structure ndash 1-3 founders ndash $25-$100K investment ndash Incubator environment multiple peers mentorsadvisors
bull Test Functional Prototype ldquoMinimum Viable Productrdquo (MVP) ndash Prototype-gtAlpha ~3-6 months ndash Develop Minimal Critical Feature Set =gt Get to ldquoIt Works Someone Uses Itrdquo ndash Improve Design amp Usability Setup Conversion Metrics ndash Test Small-Scale Customer Adoption (10-1000 users)
bull Demonstrate Concept Reduce Product Risk Test Functional Use bull Develop Metrics amp Filter for Possible Future Investment
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Investment Stage 2 Market Validation + Revenue Testing
bull Structure ndash 2-10 person team ndash $100K-$1M investment ndash Syndicate of Angel Investors Small VC Funds
bull Improve Product Expand Customers Test Revenue ndash Alpha-gtBeta ~6-12 months ndash Scale Customer Adoption =gt ldquoMany People Use It amp They Payrdquo ndash Test Marketing Campaigns Customer Acquisition Channels + Cost ndash Test Revenue Generation Find Profitable Customer Segments
bull Prove SolutionBenefit Assess Market Size bull Test Channel Cost Revenue Opportunity bull Determine Org Structure Key Hires
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Investment Stage 3 Revenue Validation + Growth
bull Structure ndash 5-25 person team ndash $1M-$10M investment ndash Seed amp Venture Investors
bull Make Money (or Go Big) Get to Sustainability ndash Beta-gtProduction 12-24 months ndash Revenue Growth =gt ldquoWe Can Make (a lot of) Moneyrdquo ndash Mktg Plan =gt Predictable Channels Campaigns + Budget ndash Scalability amp Infrastructure Customer Service amp Operations ndash Connect with Distribution Partners Expand Growth
bull ProveExpand Market Operationalize Business bull Future Milestones ProfitableSustainable Exit Options
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG
27
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Fundraising amp Team-Building
bull Ignorance amp Inexperience bull New Fund Small Fund bull Crazy Strategy Crazy People bull No Money No History bull Manufacturing Budget bull Building Destroying Believing Your Story bull Hustle amp Humility
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Strategy Brand Marketingbull FUN IRREVERENCE FLIP-FLOPS Etc
ndash donrsquot be boring donrsquot wear khakis + blue shirt + blazer bull Lots of Little Bets Online Platforms bull Design Data Distribution bull Blogging Facebook Twitter bull 500STRONG for Geeks by Geeks bull Seed Fund vs Accelerator bull Community from Silicon Valley to the World bull Conferences amp Events + GeeksOnaPlanecom
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Deal Flow Strategy amp Selection
bull Lots of Little Bets bull Take Lots of Small Risk Early amp Often bull Differentiation amp Branding bull Revenue Emphasis Small but Real Problems bull Focus on Online Platforms bull Hacker Hipster Hustler bull Global vs Local
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Portfolio Developmentbull How do we help How can we help bull Importance of (trying to be) Helpful bull Board seats or not Useful to VC not founders bull Product Market Revenue bull Mentorship amp Connections bull Platforms amp Distribution bull Downstream Investors amp Syndicates
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Platform(s) amp Communitybull Mentors Engineering Design Marketing bull Distribution Search Social Mobile bull Global LatAm Asia India EU MENA bull Social LinkedIn Quora Angel List bull Angel List Second Market Trusted Insight bull Dashboard MatterMark DataFox
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Follow-On Strategybull Should we follow-on Why or Why Not bull Signaling Risk vs Portfolio Returns
bull Investor opinion shouldnrsquot matter more than business fundamentals (if so thatrsquos a problem)
bull Downstream Investor Syndicate is critical bull Using Angel List to drive visibility bull Global Strategies (more capital connections)
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Feedback Loop amp Metricsbull Bad decisions = obvious quickly bull Good decisions = not obvious for years bull Short-term metrics revenue users next round bull Sharing best practices for decisions bull Lots of Little Bets helps speed up learning bull ldquoWinnersrdquo vs Numeric Returns bull Economics of 1st check vs follow-on bull Easy to get big multiples on small checks BUT bull Larger checks with smaller multiples still good
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Scaling VC
bull Lots of Little Bets Or a Few Big Bets bull Power Laws Singles vs Home Runs bull Focus on Network Effects bull Communication Platforms bull Portfolio Size vs Investment Stage bull Recruiting Thousands of VCs
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
How Big is MicroVC Seed Stage Market 5000 microVCs invest 100000 startupsyr $500Kstartup = $50Byr
How many people are entrepreneurs How many startups get started every year bull ~1 of Humanity is ldquoEntrepreneurialrdquo (defrsquon ldquocan create a $10M revyr businessrdquo) bull 1 x 7B ppl = 70M entrepreneurs each of which starts 1-5 businesses lifetime bull 1-5 startups 75 yrs avg life = (~1 startup25 yrs) 70M = ~3M startups per year
How much capital is needed globally to get seed stage startups rolling bull Assume 1M-3M startupsyr x $50K-$500K fundingeach bull Low 1M x $50K = $50Byr (this is the LOW end estimate) bull High 5M x $500K = $25Tyr (thatrsquos ldquoTrdquo as in ldquoTrillionrdquohellip)
How many metros How many investors metro How many startups metro bull 1 microVC can do 10-20 startupsyr $50K-$500K = $500K-$10Myr budget bull 100-500 global metros gt1-2M ppl can generate ~500-2000 startups metro yr bull guesstimate = ~100K-200K startupsyr in top 200 global metros bull 10-50 micro VCs metro 200 metros = 2000-10000 microVCs globally bull EST 5000 microVCs can deploy $5Myr each or $50Byr in ~100000 startups 36
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
This Talk
bull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull Growing 500 + ldquoThe Lean VCrdquo bull GLOBAL Entrepreneurship
37
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Going Local Going Globalweb gets bigger -gt world gets smaller
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Local vs Globalbull ldquoSilicon Valley is Uniquerdquo mdash BULLSHIT
bull we had a 50-70 year head starthellip they will catch up
bull Emerging Developing Markets 3-5B+ bull English Chinese Spanish Arabic bull Challenges Payments MobileWeb Logistics bull Challenges Capital Mentorship Exits bull Investor Ecosystems Mentorship amp Community bull Does the Future look different (yes we hope)
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Global Trendsbull Growth of Global Languages (see MyGengocom)
ndash 1B+ speakers Mandarin English ndash 300-500M+ spkrs Spanish Arabic
bull Smart Device Proliferation ndash mobile tablet TV console etc
bull More Young More Old ($$$) Users Online bull More Bandwidth More Video More Social More Mobile bull Wealthy Chinese + Indian Web + IRL Globetrotters ($$$B) bull Acceleration of Global Payment E-Commerce bull Dramatically Reduced Cost Product Dev Customer Acqstn bull Global Distribution Platforms
ndash USEU Apple Facebook AMZN GOOG (Search YouTube Gmail Android) Twitter ndash Asia Baidu Tencent Alibaba Sina NHN Yahoo-J Softbank Rakuten Yandex MailRU
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
This Talkbull How did i get here bull What is 500 Startups bull Changes in Tech + Venture Capital bull ldquoThe Lean VCrdquo bull Growing 500 500STRONG bull Global Entrepreneurship bull Being a Loudmouth A-hole in Public bull QampA Heckling
41
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure
Questions Comments Heckles
bull Thanks for Listening bull Feedback Appreciated bull We are Hiring + Internships
bull More Info ndash http500co (our company) ndash http500hatscom (my blog) ndash httpsangelco500startups (our fund) ndash Dave McClure DaveMcClure