from 500 startups to 500 vcs

45
500 Startups to 500 VCs Dave McClure January 2016 Honolulu, HI

Upload: dave-mcclure

Post on 21-Apr-2017

52.066 views

Category:

Small Business & Entrepreneurship


0 download

TRANSCRIPT

Page 1: From 500 Startups to 500 VCs

500 Startupsto 500 VCs

Dave McClureJanuary 2016Honolulu, HI

Page 2: From 500 Startups to 500 VCs

Dave McClure Founding Partner & Troublemaker, 500 Startups

00’s & 10’s: • VC: Founders Fund, Facebook fbFund, 500 Startups • Angel: Mashery, Mint.com, SlideShare, Twilio • Marketing: PayPal, Simply Hired, Mint.com

80’s & 90’s: • Entrepreneur: Aslan Computing (acq’d by Servinet/Panurgy) • Developer: Windows / SQL DB consultant (Intel, MSFT) • Engineer: Johns Hopkins‘88, BS Eng / Applied Math

Page 3: From 500 Startups to 500 VCs

500 Startups Global Seed VC Fund & Startup Accelerator

• What is 500? • $200M under management • 100+ people / 20 Countries • 3,000+ Founders / 250+ Mentors • Capital, Education, Community • #500STRONG

• 1400+ Portfolio Co’s / 50+ Countries • 3 Unicorns ($1B+)

• Credit Karma • GrabTaxi • Twilio

• 50+ exits • Wildfire (acq GOOG, $350M) • MakerBot (acq SSYS, $400M) • Viki (acq Rakuten, $200M)

• 30+ Centaurs ($100M+) • Udemy • Ipsy • SendGrid • VivaReal • The RealReal • TalkDesk • Intercom • Virool • BarkBox

Page 4: From 500 Startups to 500 VCs

This Talk is About…

• Re-inventing a 50 year old sport

• 500 Startups… WTF?

• 99 VC Problems, But a Batch Ain’t 1

• MoneyBall for Startups: Lots of Little Bets

• 500 VCs, 500 Funds

Page 5: From 500 Startups to 500 VCs

Re-inventing a 50 year old sport:Venture Capital 2.0

Page 6: From 500 Startups to 500 VCs

Football

West Coast Offense

Baseball

MoneyBall

Basketball

3 point revolution

Venture Capital

500 Startups

“Lots of little bets”

500 Strategy: MoneyBall for StartupsRe-inventing a 50-year old sport

Page 7: From 500 Startups to 500 VCs

Before & After 2 Dot-Com CrashesLEAN Startup: Simpler, Faster, Cheaper, Smarter

Before 2000 Big, Fat, Dinosaur Startup • Sun Servers • Oracle DB • Exodus Hosting • 12-24mo dev cycle • 6-18mo sales cycle • <100M people online • $1-2M seed round • $3-5M Series A • Sand Hill Road crawl

After 2008 Lean, Little, Cockroach Startup • AWS, Google, PayPal, FB, TW • Cloud + Open Source SW • Lean Startup / Startup Wknd • 3-90d dev cycle • SaaS / online sales • >3B people online • <$100K incub + <$1M seed • $1-3M Series A • Angel List global visibility

Page 8: From 500 Startups to 500 VCs

Platforms 2.0 Search, Social, Mobile,

Video, Messaging

Page 9: From 500 Startups to 500 VCs

Changes in Tech Startups• LESS Capital required to build product, get to market

– Dramatically reduced cost for servers, software, bandwidth – Funding Platforms: KickStarter, Angel List, Funders Club, etc – Access to online platforms for 100M-1B+ consumers, smallbiz, etc

• MORE Customers via ONLINE platforms (100M+ users) – Search (Google, Baidu) – Social (Facebook, Twitter, LinkedIn, SnapChat, Instagram) – Mobile (Apple, Android) – E-Commerce (Amazon, Ebay/PayPal, Alibaba) – Media (YouTube, Pinterest, Instagram) – Comm/Msgs (WeChat, WhatsApp, Line, SnapChat, Email, Voice, SMS, etc)

• LOTS of little bets: Accelerators, Angels, Angel List, Small Exits – Capital + Co-working + Mentoring -> Design, Data, Distribution – “Fast, Cheap Fail”, network effects, quantitative + iterative investments

Page 10: From 500 Startups to 500 VCs

500 Startups… WTF?

Page 11: From 500 Startups to 500 VCs

500 Startups Mission

1. Find Smart People.

2. Give Them Money.

3. Wait for Good Shit to Happen.

Page 12: From 500 Startups to 500 VCs

Building Startup Ecosystems

Page 13: From 500 Startups to 500 VCs

500 Startups Mission• Provide capital, community, education

to smart people (founders, investors)

• Build functional startup ecosystems (founders, team, angels, accelerators, VC funds, capital, exits, liquidity, etc)

• #HFGSD: Have Fun, Get Shit Done.

Page 14: From 500 Startups to 500 VCs

500 Startups History: What a Long Strange Trip It’s Been

Page 15: From 500 Startups to 500 VCs

Year People Locations AUM $ Companies

2010 5 MV 10 75

2011 10 BRZ 30 250

2012 15 MX, IND 50 450

2013 30 CHN, SEA 75 650

2014 50 SF, MENA 125 900

2015 100 Korea, UK, Thailand, Vietnam, Germany,

Israel, MENA, Japan, Turkey, E. EU

200 1400

2016 150+ +10-20 More ??? 2000+

500 Startups History: What a Long Strange Trip It’s Been

Page 16: From 500 Startups to 500 VCs

500 Startups: a Platform made of People#500STRONG #500LOVE #HFGSD

Page 17: From 500 Startups to 500 VCs

100 People, 20 Countries, 25 Languages

Page 18: From 500 Startups to 500 VCs

500 Startups: “Full-Stack” VC

Page 19: From 500 Startups to 500 VCs

http://bit.ly/99VCProblems

Page 20: From 500 Startups to 500 VCs

Portfolio Diversification “Spray, not Pray”

Page 21: From 500 Startups to 500 VCs
Page 22: From 500 Startups to 500 VCs

Q: Chances of spotting unicorn? /

a) 1% b) 2% c) 5% d) 10% e) ZERO

Page 23: From 500 Startups to 500 VCs

Chances of spotting unicorn = ~1%/

Page 24: From 500 Startups to 500 VCs

If portfolio size = 15 companies /

Page 25: From 500 Startups to 500 VCs

/ If portfolio size = 30 companies

Page 26: From 500 Startups to 500 VCs

/ If portfolio size = 100 companies

Page 27: From 500 Startups to 500 VCs

500 Strategy:MoneyBall for Startups

“Lots of Little Bets”

Page 28: From 500 Startups to 500 VCs

500 Strategy: Lots of Little Bets*

1) make lots (>100) of investments in early-stage startups

3) wait 3-10 years for returns: -10-20% small exits @1-5X (<25M+) -5-10% larger exits @5-20X ($25-250M+) -1-2% unicorns @20-50X+ (>$250M-1B+)

*See Peter Sims book: “Little Bets”

2) over next 2 years, double-down on top 20%

Page 29: From 500 Startups to 500 VCs

Building Tech Startups

Make lots of little bets: • Start with many small “experiments” • Filter out failures + small wins • Double-down on stuff that looks like it’s working

• Incubation: $0-100K (“Build & Validate Product”) • Seed: $100K-$1M (“Test & Grow Marketing Channels””) • Venture: $1M-$10M (“Maximize Growth & Revenue”)

Page 30: From 500 Startups to 500 VCs

Startup Risk Reduction

ConceptEarly

Customer Usage

Scalable Customer

Acquisition

[about to be] Profitable

Unit Economics

Scalable Profitable Business

Functional Prototype

PRODUCT

MARKET

REVENUE

Exit?

When 500 Likes to Invest

Page 31: From 500 Startups to 500 VCs

Investment Stage #1: Product Validation + Customer Usage

• Structure – 1-3 founders – $25-$100K investment – Incubator environment: multiple peers, mentors/advisors

• Test Functional Prototype / “Minimum Viable Product” (MVP): – Prototype->Alpha, ~3-6 months – Develop Minimal Critical Feature Set => Get to “It Works! Someone Uses It.” – Improve Design & Usability, Setup Conversion Metrics – Test Small-Scale Customer Adoption (10-1000 users)

• Demonstrate Concept, Reduce Product Risk, Test Functional Use • Develop Metrics & Filter for Possible Future Investment

Page 32: From 500 Startups to 500 VCs

Investment Stage #2: Market Validation + Revenue Testing

• Structure – 2-10 person team – $100K-$1M investment – Syndicate of Angel Investors / Small VC Funds

• Improve Product, Expand Customers, Test Revenue: – Alpha->Beta, ~6-12 months – Scale Customer Adoption => “Many People Use It, & They Pay.” – Test Marketing Campaigns, Customer Acquisition Channels + Cost – Test Revenue / Unit Economics, Find Profitable Customer Segments

• Prove Solution/Benefit, Assess Market Size • Test Channel Cost, Unit Economics, Revenue Opportunity • Determine Org Structure, Key Hires

Page 33: From 500 Startups to 500 VCs

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

Page 34: From 500 Startups to 500 VCs

Legal review Partner approvalAngel Pre-Seed Seed Post-Seed Series A/B Growth

Accelerator

Seed

“Distro"

Follow-On

Selection Criteria – Data-Driven Process Based on Pre-defined Metrics • Product or service solves a problem for a specific target customer • Capital-efficient business; operational at less than $1M in external financing • Scalable internet-based distribution (search, social, mobile) or proven ability to scale sales • Functional prototype required before investing (or previous product success) • Measurable traction: engaged users, some revenue, and attractive unit economics • Cross-functional team with design, engineering and marketing expertise

How 500 Invests: Accelerator, Seed, Distro

Page 35: From 500 Startups to 500 VCs

500 VCs,500 Funds

Page 36: From 500 Startups to 500 VCs

We live in a World of ABUNDANCE

• There are LOTS of talented people in the world

• There are LOTS of entrepreneurs everywhere

• There is a LOT of capital sitting around, BUT….

• Not much is available for un-tested entrepreneurs :(

• 500 Startups plans to change that.

Page 37: From 500 Startups to 500 VCs

Who, What is an Entrepreneur?

Page 38: From 500 Startups to 500 VCs

Who/What is an Entrepreneur?

• someone who WANTS to start a business

• someone who can RUN a business

• someone who can run a SUSTAINABLE business

• someone who can run a PROFITABLE business that creates VALUE & employs LARGE # people

• someone who can run a $10M/yr business that employs 100+people

Page 39: From 500 Startups to 500 VCs

How Big Is The Market?Q: How Many Entrepreneurs?

• How Many People = 7,000,000,000 on earth

• 1% of Humanity is Entrepreneurial = 70,000,000 founders

• Live 70 years, try at least once = 1,000,000 founders / year

• How Much Do They Need? Zero? $100K? $1M? $10M?

• How Big is the Market = 1M founders x $10M = $10 TRILLION / year

• Come on, REALLY? (ok Divide by 100)

• 100,000 founders / year * $1M each = $100 BILLION / year

Page 40: From 500 Startups to 500 VCs

How Many VCs?

• How Many Founders? 1,000,000 founders / year

• (ok, divide by 100, let’s say 10,000 founders / year)

• 1 VC can make 20 investments / year

• 10,000 founders / 20 deals per VC = 500 VCs

Page 41: From 500 Startups to 500 VCs

How to Become a VC• Option 1: Go to Harvard/Stanford/Wharton, Get MBA,

Become VC Associate, Work at McKinsey / Google / Facebook, Re-Join VC as Junior Partner or Partner

• Option 2: Start a Startup, Grow Really Big, Sell for $1B+, Join VC as Partner

• Option 3: Wander around lost in the forest, Work Your Ass Off for 25 yrs, do some angel investing, Start your own Firm

Page 42: From 500 Startups to 500 VCs

500 Startups + Stanford University Investor Education Program

#Venture Capital Unlocked: Learn best practices of Silicon Valley Investing#Startup Accelerator: Build your own accelerator with 500 Startups #VC/Angel 101: How to build an early-stage investment thesis

#500VCs

Page 43: From 500 Startups to 500 VCs

How to build investment thesis

Meet REAL startup founders and conduct selection

Connection with Silicon Valley investors and mentors

Legal docs: cap table and standard terms

How to generate deal flow Trends and relevant area of investments

500 Startups + Stanford University Investor Education Program

#500VCs

Page 44: From 500 Startups to 500 VCs

Feb 8th-19th 2016 @ Stanford+500

signup NOW: http://500.vc

500 Startups + Stanford University Investor Education Program

#500VCs

Page 45: From 500 Startups to 500 VCs

Questions? Comments? Heckles?

• More? – http://500.co (our company) – http://500hats.com (my blog) – https://angel.co/500startups (our fund) – Dave McClure, @DaveMcClure