10 Challenges for Emerging Market Startup Ecosystems
1. 1 0 C H A L L E N G E S F O R
E M E R G I N G M A R K E T
S TA RT U P E C O S Y S T E M S
@ D A V E M C C L U R E @ 5 0 0 S TA R T U P S 5 0 0 . C O
2. Dave McClureâ¨
Founding Partner & Troublemaker, 500 Startups
00âs & 10âs:
⢠VC: Founders Fund, Facebook fbFund, 500 Startups
⢠Angel: Mashery, Mint.com, SlideShare, Twilio
⢠Marketing: PayPal, Simply Hired, Mint.com, OâReilly
80âs & 90âs:
⢠Entrepreneur: Aslan Computing (acqâd by Servinet/Panurgy)
⢠Developer: Windows / SQL DB consultant (Intel, MSFT)
⢠Engineer: Johns Hopkinsâ88, BS Eng / Applied Math
3. ⢠What is 500?
â $200M under management
â 100+ people / 30 investing partners / 18 Countries
â 2500+ Founders / 250+ Mentors
⢠1300+ Portfolio Coâs / 50+ Countries
â Wildfire (acq GOOG, $350M)
â MakerBot (acq SSYS, $400M)
â Viki (acq Rakuten, $200M)
â Simple (acq BBVA, $117M)
â Credit Karma (~$3.5B)
â GrabTaxi ($1B+)
â Twilio ($1B+)
â Ipsy
â SendGrid
â VivaReal
â Udemy
â Zozi
â The RealReal
â Virool
â BarkBox
â Tradesy
500 Startupsâ¨
Global Seed Fund & Startup Accelerator
4. 1 ) T H E R E A R E N â T M A N Y I N V E S T O R S .
M O S T O F T H E M A R E E V I L O R S T U P I D .
⢠low valuations and crappy terms: â51% for
$100Kâ
⢠supply vs. demand problem; fewer investors
than startups, lack of competition = no
urgency,
⢠NO to business plans / revenue projections
⢠YES to mktg plans, expense projections
⢠wins & exits => FOMO, competition increases
5. 2 ) T H E R E A R E N â T M A N Y E N T R E P R E N E U R S .
M O S T O F T H E M A R E C L U E L E S S .
⢠more mentorship,
more founder
experience
⢠product management,
design & UX, growth
hacking & marketing
⢠changes after 1st gen
founders exit -> 2nd
gen startups
6. 3 ) T H E R E A R E N â T M A N Y C U S T O M E R S .
M O S T O F T H E M D O N â T PAY.
⢠no longer true; 3B+ smart
phones; massive mobile market
⢠increasing internet availability +
rising consumer GDP
⢠improved payment & logistics
⢠local/regional markets are BIG
⢠access to global markets easier
7. 4 ) S TA RT U P S D O N â T H AV E T R A C T I O N ,
A N D N O I D E A H O W T O G E T I T.
⢠Growth Hackers -> DISTRO
⢠STOP building product features;
START growing customers (via online
platforms)
⢠unit economics: CAC vs. CLV, timing
of revenue & expense, conversion
metrics
⢠find profitable, high-volume customer
acquisition channels that convert to
KPIs, learn how to grow them
8. 5 ) T H E R E A R E N â T M A N Y E X I T S .
M O S T O F T H E M A R E S M A L L .
⢠where are the unicorns?
⢠acquirers crossing borders to find
talent (US, EU, China, Japan, etc)
⢠non-tech companies acquiring
startups for innovation
⢠global companies looking for
emerging market footprint
⢠local -> regional -> global growth
9. 6 ) I N V E S T I N G I N R E A L E S TAT E I S B E T T E R
B E T T H A N I N V E S T I N G I N S TA RT U P S
⢠startups arenât real estate!
⢠real estate doesnât go up
forever
⢠most startups fail completely
⢠but a few startups grow up to
be unicorns
⢠use real estate to lower risk,
drive liquidity
10. 7 ) M O S T A C C E L E R AT O R S S U C K .
A N D T H E Y â R E G O I N G T O D I E . S O O N .
⢠Accelerator economics are tough.
⢠Most startups fail. Most wins are small.
Big wins take time (5-10 years).
⢠Most accelerators are under-staffed,
under-capitalized, short time horizons.
⢠Accelerators should verticalize, focus on
industry-specific expertise, get
corporate / academic / govt sponsors
⢠Create operational capital via investment;
use real estate to hedge risk, be creative
11. 8 ) E M P L O Y E E S D O N â T U N D E R S TA N D E Q U I T Y.
F O U N D E R S D O N â T G I V E I T T O T H E M .
⢠equity should be distributed widely
among team (not just founders and
management)
⢠when exits happen, a thousand
angels are born
⢠US: PayPal, Google, Facebook
⢠CHINA: Alibaba, TenCent, Baidu
⢠MENA: Souq + ?
⢠create equity culture, angel investor
culture
12. 9 ) M O S T S TA RT U P S N E V E R G O G L O B A L .
M O S T T H AT T RY W I L L FA I L .
⢠startups have to start SOMEwhere
⢠some local & regional markets are BIG
India, Turkey, Brazil, Indonesia, MENA
⢠50-100M customers good place to start
⢠hard to jump to global markets without
local market MVP, product/market fit
⢠you donât need to go to Silicon Valley,
get Silicon Valley to come to YOU.
13. 1 0 ) M O S T F O U N D E R S & I N V E S T O R S D O N â T
T H I N K T H E Y â R E A S G O O D A S S I L I C O N VA L L E Y.
⢠Silicon Valley isnât a place, itâs a
State of Mind.
⢠Most startups in Silicon Valley
came from somewhere else
(PayPal, WhatsApp, FreshBooks)
⢠The biggest problem isnât lack of
experience, itâs lack of confidence
(for both investors & founders)
⢠Youâre Good enough. Youâre
Smart enough. Get Going!