startup ecosystems: local vs. global?

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Startups: Go LOCAL or Go GLOBAL? @DaveMcClure @500Startups #EmTech Mexico City (June 2014)

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slides for my talk on Local vs Global Startup Ecosystems, @ #EmTech conf in Mexico City (June 2014)

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Page 1: Startup Ecosystems: Local vs. Global?

Startups: Go LOCAL or Go GLOBAL?

@DaveMcClure @500Startups #EmTech Mexico City (June 2014)

Page 2: Startup Ecosystems: Local vs. Global?

This Talk Is About…• 500 Startups

–Internet Seed Fund + Accelerator + >200 Intl Startups • Startup Ecosystems & Global Markets

–(# users, by language/geo) * (avg $ GDP) * (% internet) = online spend by lang/geo !

• Why You Shouldn’t Go Global –You’re a Crappy Little Startup with no customers, revenue, or funding –You Don’t Speak the Language (not very well, anyway) –Your local market is >50-100M+ users, and nobody else is going after it

• Why You Should Go Global –You Live in a Small Country / Startup Ghetto –There aren’t [m]any local investors / they give you crappy valuations. –There ARE local investors, but they are predatory, too revenue-focused, risk-averse –Your customers / partners are in [X] (where X = USA, EU, China, Brazil, Mexico, etc)

Page 3: Startup Ecosystems: Local vs. Global?

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Dave McClureFounding Partner & Chief Troublemaker, 500 Startups

00’s & 10’s: • VC: Founders Fund, Facebook fbFund, 500 Startups • Angel: Mashery, Mint.com, SlideShare, Twilio, Wildfire, SendGrid • Marketing: PayPal, Simply Hired, Mint.com, O’Reilly ! !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 4: Startup Ecosystems: Local vs. Global?

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500 Startups Global Seed Fund & Startup Accelerator

What is 500?!• $100M silicon valley VC fund + startup accelerator!• 30+ people / 10 investing partners!• Locations: SV, NYC, MEX, BRZ, IND, CHN, SE Asia!• 1500+ Founders / 200+ Mentors!• Community + Content + Conferences !

750+ Portfolio Co’s / 40+ Countries!• Wildfire (acq GOOG, $350M)!• MakerBot (acq SSYS, $400M)!• Viki (acq Rakuten, $200M) • Twilio • SendGrid !• Credit Karma • Udemy • Conekta • Yaxi • Clip • Mexico Destinos

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500 Startups: Global Seed FundOver 200+ startups outside US, in 40+ countries

Page 6: Startup Ecosystems: Local vs. Global?

GeeksOnaPlane.com (my International road trip w/ geeky friends :)

• Travel The World with Startups, Geeks, VCs • Meet MORE Startups, Geeks, VCs in other countries • Learn about Intl markets, technology, people • Socialize with friends all over the world ☺ !2009-2014: 15 trips to 30+ countries East Asia (3x), Europe (2x), LatAm (3x), India (2x), MENA (2X), SE Asia (3x)

Page 7: Startup Ecosystems: Local vs. Global?

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Local vs Global?• Emerging / Developing Markets!• Global Languages: English, Chinese, Spanish, Arabic • Critical Factors: Education, Mentorship, Capital • Capital Availability: Incubation, Seed, Series A • Positive Macro: SmartPhones, Tablets, Payments,

Logistics, Growing Middle Class, Distribution Platforms • Wealthy Global Users, Shoppers, Travelers

Page 8: Startup Ecosystems: Local vs. Global?

Global Languages

• English: 1-3B+ ppl, most online, high GDP, modest growth • Mandarin: 1B+ ppl, lots online, med GDP, flat growth • Spanish: 500M+ ppl, some online, med GDP, strong growth • Arabic: 500M+ ppl, some online, low/med GDP, strong growth !

• Others: Hindi, Portuguese, French, German, Japanese, Russian, Korean, Turkish, Farsi, Urdu, etc

Page 9: Startup Ecosystems: Local vs. Global?

Global Markets

• US/Can/UK/AU (400M+): big market, not much growth but lots of spend • Europe (400-500M): not much growth, many lang, high GDP • China / E. Asia (1B+): lots of ppl, growing usage / GDP, flat growth (pop.) • LatAm (500M+): Brazil, Mexico, Argentina, Colombia, Chile; LOTS growth • India/Pak/South Asia (1.5B+): lots of ppl, growing mobile, strong growth • SE Asia (600M+): Indonesia, Vietnam, Thailand, Philippines; strong growth • Middle East / Arabic (500M+): growing mobile, lots of future growth • Africa (900M+): growing infrastructure, lots of future growth

Page 10: Startup Ecosystems: Local vs. Global?

How to Assess Global Markets

• 1) # of ppl / language speakers by geography • 2) % internet usage (web, mobile, smartphone, etc) • 3) $ Avg GDP / $ online spend / disposable income • Online spend / lang, geo = (#ppl) * (%internet) * ($GDP)

– % Growth rates of ppl, lang, internet, GDP !

• Currency, country, culture, etc • Online distribution platforms (search, social, mobile, video) • Online payment methods / credit card distr • Physical goods delivery / logistics • Social media usage / behavior • 3 markets in 1: rich, middle-class, internet poor

Page 11: Startup Ecosystems: Local vs. Global?

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Platforms 2.0 Search, Social, Mobile, Video, Messaging

Customer Reach: 100M-1B+ !

• Search: Google (also Baidu, Yandex, Yahoo-J) !• Social: Facebook, Twitter (also TenCent, Line) !• Mobile: Apple (iOS), Android !• Media: Video (YouTube), Photos (Pinterest, Instagram), Music !• Comm: Email, WeChat/WhatsApp/Line/Kakao, SMS, Voice !

Page 12: Startup Ecosystems: Local vs. Global?

Why You SHOULD NOT Go Global

you’re a tiny little startup, you don’t speak the language,

your local market is big [enough]

Page 13: Startup Ecosystems: Local vs. Global?

Why Stay Local? (Because it’s HOME)

• You don’t speak English (well enough). • Your solution doesn’t travel well / you won’t/can’t localize it well. • There’s not as many startups competing for your local market. • Your local market has 50-100M+ users (ex: Japan, Germany, Brazil) • Your local market customers are RICH (ex: Saudi Arabia, Japan) • You have customers / revenue. • You have a great living situation, family, kids, etc

Page 14: Startup Ecosystems: Local vs. Global?

Why You SHOULD Go Global

you live in a small country, local investors are too conservative,

don’t write [enough] checks give u crappy, low valuations.

!or, you just love California :)

Page 15: Startup Ecosystems: Local vs. Global?

Why Go Global? (because California is *awesome*)

• It’s BIG. (US, EU, China are huge markets… also Mexico/LatAm, Brazil) • All the [rich, online] customers are here. • All the investors are here (Silicon Valley) • All the platforms & partners are here (Silicon Valley). !

• Because you watch too many action movies and rap videos. • Because you love California / NYC. (we understand ☺) • You really love Kim Kardashian, Jay-Z, JT, Beyonce, etc.

Page 16: Startup Ecosystems: Local vs. Global?

Angel* List: It Rocks. (angel.co)

• Startups & Investors • Activity & Metrics • Platform & APIs

!• *ps – not just for Angels, not just for USA

Page 17: Startup Ecosystems: Local vs. Global?

Critical Ecosystem Factors

• Optimism & Belief (“Silicon Valley”) • Mentorship + Education (Knowledge) • Universities + Companies (People) • Capital, Legal, Finance (Infrastructure) • Engineering + Design / UX (Product) • Platforms + Distribution (Customers) • Online Payments (Monetization) • IPO / M&A Market (Exits)

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Page 18: Startup Ecosystems: Local vs. Global?

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Silicon Valley Investor Ecosystem

!!Angels &

Incubators ($0-10M)

!“Micro-VC” Funds

($10-100M)

“Big” VC Funds ($100-500M)

“Mega” VC Funds (>$500M)

TrueFirst Round

A16ZAtomico

Y-Combinator

TechStars

SoftTech (Clavier)

Felicis (Senkut)

SV Angel (Conway)

SequoiaGreylock

Union Square

Floodgate (Maples)

Foundry

Incubation

Seed

Series A

Series B

Series C+

Bootstrap, KickStarter, Crowdfunding

Page 19: Startup Ecosystems: Local vs. Global?

Example Startup Ecosystem

• 1,000 Bootstrap Startups ($0-10K) • 300 Accelerator Startups ($10-100K) • 100 Seed-Stage Startups ($100K-$1M) • 30 Series A/B Startups ($1-10M) • 10 Later-Stage Companies ($10-100M) • 1-3 Mature Company IPOs ($100M+)

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Page 20: Startup Ecosystems: Local vs. Global?

Entrepreneur Education

• Business Plans • Functional Prototypes • Lean Startup • Software Engineering / Design & UX • Online Marketing / Unit Economics • Monetization & Payments • Customer Service + Support • Fundraising & Pitch

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Page 21: Startup Ecosystems: Local vs. Global?

Investor Education

• Startups are NOT Real Estate • Most Startups Fail / Power Law Returns • Portfolio Approach (10-20+ investments) • Legal Structure, Financial Structure • Syndication + Co-Investment • Access to Downstream Capital • Exits & Liquidity

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Page 22: Startup Ecosystems: Local vs. Global?

Questions? Comments?

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

Page 23: Startup Ecosystems: Local vs. Global?

How Big is MicroVC / Seed Stage Market? 5,000 microVCs invest 100,000 startups/yr @ $500K/startup = $50B/yr

How many people are entrepreneurs? How many startups get started every year? • ~1% of Humanity is “Entrepreneurial” (def’n: “can create a $10M rev/yr business”) • 1% x 7B ppl = 70M entrepreneurs, each of which starts 1-5 businesses lifetime • entrepreneurs can create 1-5M new startup businesses every year !

How much capital is needed globally to get seed stage startups rolling? • Assume 1M-5M startups/yr x $50K-$1M funding/each • Low: 1M x $50K = $50B/yr <-> High: 5M x $1M = $5T/yr !

How many metros? How many investors / metro? How many startups / metro? • 1 microVC can fund 10-20 startups/yr * $50K-$1M = $1M-$10M annual budget • 500+ global metros @ 1M+ ppl can generate ~100-1,000 startups / year • guesstimate = min ~100K+ startups/yr across top 100-200 global metros • 5-50 VCs / metro * 200 metros = 1,000-10,000 VCs globally • FUTURE: 5,000 VCs deploy $10M->20 startups = $50B/yr -> 100,000 startups

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