changes in vc + building startup ecosystems

of 36 /36
Changes in Venture Capital + Building Startup Ecosystems @DaveMcClure - 500 Startups Seoul, Korea - March 2014

Author: dave-mcclure

Post on 08-Sep-2014




1 download

Embed Size (px)


slides from my talk at Asian Leadership Conf (Seoul, March 2014)


  • Changes in Venture Capital + Building Startup Ecosystems @DaveMcClure - 500 Startups Seoul, Korea - March 2014
  • This Talk What is 500 Startups? Changes in Tech + VC Lean VC: Quantitative Venture Capital Building Startup Ecosystems Global Entrepreneurship Q&A !2
  • Dave McClure Founding Partner & Chief Troublemaker, 500 Startups 00s & 10s: VC: Founders Fund, Facebook fbFund, 500 Startups Angel: Mashery,, SlideShare, Twilio, Wildfire, SendGrid Marketing: PayPal, Simply Hired,, oDesk, OReilly ! 80s & 90s: Entrepreneur: Aslan Computing (acqd by Servinet/Panurgy) Developer: Windows / SQL DB consultant (Intel, MSFT) Engineer: Johns Hopkins88, BS Eng / Applied Math
  • 500 Startups Global Seed Fund & Startup Accelerator What is 500 Startups? $100M silicon valley venture capital fund internet seed fund + startup accelerator program 30 team members (13 investing partners) SV, SF, NYC, MEX, BRZ, IND, CHN, SE Asia 1000+ Founders / 200+ Mentors Community + Content + Conferences ! 700+ Portfolio Cos / 40+ Countries Wildfire (acq GOOG, $350M) MakerBot (acq SSYS, $400M) Viki (acq Rakuten, $200M) Simple (acq BBVA, $117M) Twilio SendGrid Credit Karma Udemy Zozi ElaCarte Virool
  • 500 Startups: Global Seed Fund Over 200+ startups outside US, in 40+ countries
  • This Talk What is 500 Startups? Changes in Tech + Venture Capital !6
  • Lean Startup: Simpler, Faster, Cheaper, Smarter ! 1. 2. # Users, Bandwidth = Bigger. 3. ! ! Startup Costs = Lower. Transaction $$$ = Better. ! Building Product => Cheaper, Faster, Better Getting Customers => Easier, More Measurable ! Iterative Product & Marketing Decisions based on Measured User Behavior
  • Changes in Tech + VC LESS Capital required to build product, get to market Dramatically reduced $$$ on servers, software, bandwidth Funding Platforms: KickStarter, Angel List, Funders Club, etc Cheap access to online platforms for 100M+ consumers, smallbiz, etc ! MORE Customers via ONLINE platforms (100M-1B+ users) Search (Google) Social (Facebook, Twitter) Mobile (Apple, Android) Media (YouTube, Pinterest, Instagram, Tumblr) Comm (Email, WeChat/WhatsApp/Line/Kakao, IM/Chat, Voice, SMS, etc) ! LOTS of little bets: Accelerators, Angels, Angel List, Small Exits Y Combinator, TechStars, 500 Startups Capital + Co-working + Mentoring -> Design, Data, Distribution Fast, Cheap Fail, network effects, quantitative + iterative investments
  • Platforms 2.0 Search, Social, Mobile, Video, Messaging
  • Before & After 2 Dot-Com Crashes Simpler, Faster, Cheaper, Smarter Before 2000 Sun Servers Oracle DB Exodus Hosting 12-24mo dev cycle 6-18mo sales cycle 3B people online Beta, ~6-12 months Scale Customer Adoption => Many People Use It, & They Pay. Test Marketing Campaigns, Customer Acquisition Channels + Cost Test Revenue Generation, Find Profitable Customer Segments ! Prove Solution/Benefit, Assess Market Size Test Channel Cost, Revenue Opportunity Determine Org Structure, Key Hires
  • Investment Stage #3: Revenue Validation + Growth Structure 5-25 person team $1M-$10M investment Seed & Venture Investors ! Make Money (or Go Big), Get to Sustainability: Beta->Production, 12-24 months Revenue / Growth => We Can Make (a lot of) Money! Mktg Plan => Predictable Channels / Campaigns + Budget Scalability & Infrastructure, Customer Service & Operations Connect with Distribution Partners, Expand Growth ! Prove/Expand Market, Operationalize Business Future Milestones: Profitable/Sustainable, Exit Options
  • Lots of Little Bets aka MoneyBall for Startups VC Evolution: Physician, Scale Thyself (Aug 2012) MoneyBall for Startups, 500 Startups Investment Thesis (Jul 2010)
  • This Talk What is 500 Startups? Changes in Tech + VC Lean VC: Quantitative Venture Capital Building Startup Ecosystems !23
  • !24
  • Example Startup Ecosystem 1,000 Bootstrap Startups ($0) 300 Accelerator Startups ($10-50K) 100 Seed-Funded Startups ($250K-$1M) 30 Series A Startups ($2-5M) 10 Series B Startups ($5-20M) 5 Series C Startups ($20-50M) 1-3 IPOs ($50-250M) !25
  • Investment Strategy Lots of Little Bets / Early Bets Solve Customer Problems -> Tech + Mktg Online Distribution / Growth Hacking Focus on Revenue over Usage Hacker, Hipster, Hustler Global Network + Silicon Valley HQ
  • Network Benefits Silicon Valley HQ + founder network Mentorship & Education Platforms & Distribution Downstream Investors M&A / Exit Environment
  • Follow-On Strategy Should we follow-on? Why or Why Not? Signaling Risk vs Portfolio Returns Downstream Investor Syndicate is critical Using Angel List to drive visibility Global Strategies (more capital, connections)
  • Feedback Loop & Metrics Bad decisions = obvious quickly Good decisions = not obvious for years Short-term metrics: revenue, users, next round ! Sharing best practices for decisions Lots of Little Bets helps speed up learning Billion Dollar Unicorns vs 10-20X ROI
  • Scaling VC Lots of Little Bets? Or a Few Big Bets? Power Laws, Singles vs Home Runs Focus on Network Effects Communication Platforms Portfolio Size vs Investment Stage Recruiting Thousands of VCs
  • How Big is Seed Stage Startup Market? 5,000 microVCs can fund 100,000 startups/yr @ $500K/startup = $50B/yr Q: How many people are entrepreneurs? How many startups get started every year? ~1% of Humanity is Entrepreneurial (defn: can create a $10M rev/yr business) 1% x 7B ppl = 70M entrepreneurs, who create 1-5 businesses lifetime (75 yrs) entrepreneurs could create ~1-5M new startup businesses every year ! Q: How much capital is needed globally to fund seed stage startups? Assume 1M-5M startups/yr x $50K-$1M funding/each Low: 1M x $50K = $50B/yr High: 5M x $1M = $5T/yr ! Q: How many metros? How many investors? How many investors / startups / metro? 1 micro-VC can fund 10-20 startups/yr * $50K-$1M = ~$1-10M annual budget 500+ global metros with population >1M+ people can generate ~100-1,000 startups / yr guesstimate = min 100K+ startups/yr total across top 100-200 global metros 5-50 VCs / metro * 200 metros = 1,000-10,000 VCs globally FUTURE: 5,000 VCs can deploy $10M/yr each, or $50B/yr in ~100,000 startups !31
  • This Talk What is 500 Startups? Changes in Tech + Venture Capital Growing 500 + The Lean VC GLOBAL Entrepreneurship !32
  • Going Local, Going Global web gets bigger -> world gets smaller
  • Local vs Global? Silicon Valley is Unique NOT TRUE. *we had a 50-70 year head start ROW will catch up. Emerging / Developing Markets: 3-5B+ English, Chinese, Spanish, Arabic ! Challenges: Payments, Mobile/Web, Logistics Challenges: Capital, Mentorship, Exits ! Investor Ecosystems, Mentorship & Community Does the Future look different? (yes, we hope)
  • Global Trends Growth of Global Languages (see 1B+ speakers: Mandarin, English 300-500M+ spkrs: Spanish, Arabic, Hindi, Malay Smart Device Proliferation mobile, tablet, TV, console, etc More Young, More Old Users Online More Bandwidth, More Video, More Social, More Mobile Wealthy International Travelers Acceleration of Global Payment, E-Commerce Dramatically Reduced Cost: Product Dev, Customer Acqstn Global Distribution Platforms (Search, Social, Mobile, Video, Comm)
  • Questions? Comments? Heckles? Thanks for Listening Feedback Appreciated We are Hiring + Internships ! More Info? (our company) (my blog) (our fund) Dave McClure, @DaveMcClure