2. This Talk
⢠How did i get here?
⢠What is 500 Startups?
⢠Changes in Tech + Venture Capital
⢠âThe Lean VCâ
⢠Growing 500: #500STRONG
⢠Global Entrepreneurship
⢠Being a Loudmouth A-hole in Public
⢠Q&A, Heckling
!2
15. Before & After 2 Dot-Com Crashesâ¨
Daft Punk Lean Startup: Simpler, Faster, Cheaper, Smarter
Before 2000
⢠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
⢠Big, Fat, Dinosaur Startup
After 2008
⢠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
⢠Lean, Little, Cockroach Startup
16. Crunch Good? Crunch Bad?
⢠Series A bar higher:
⢠$1M revenue, 1M active users, 10M downloads, 100% YoY growth
⢠Lots of Incubation / Seed startups will âFAILâ
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⢠BUT: Fail Budget = $50-$500K, not $5M+
⢠Many âfailedâ startups = ramen-profitable, small acquisition
⢠⌠*or* MBA alternative (<$100K)
⢠Series A/B VCs have LOTS to choose from (not bad)
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⢠Overall, founders / market getting smarter
⢠More focus on customers, problems, revenue
⢠Many die, some survive (1-5x), some thrive (20x+).
23. The Lean VC:â¨
Lots 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 successes⌠(Rinse & Repeat).
!
⢠Incubator: $0-100K (âBuild & Validate Productâ)
⢠Seed: $100K-$1M (âTest & Grow Marketing Channelsââ)
⢠Venture: $1M-$10M (âMaximize Growth & Revenueâ)
24. Investment Stage #1: â¨
Product Validation + Customer Usage
⢠Structure
â 1-3 founders
â $25-$100K investment
â Incubator environment: multiple peers, mentors/advisors
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⢠Test Functional Prototype / âMinimum Viable Productâ (MVP):
â Prototype->Alpha, ~3-6 months
â Develop Minimal Critical Feature Set => Get to âIt Works! Someone Uses It.â
â Improve Design & Usability, Setup Conversion Metrics
â Test Small-Scale Customer Adoption (10-1000 users)
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⢠Demonstrate Concept, Reduce Product Risk, Test Functional Use
⢠Develop Metrics & Filter for Possible Future Investment
25. Investment Stage #2: â¨
Market Validation + Revenue Testing
⢠Structure
â 2-10 person team
â $100K-$1M investment
â Syndicate of Angel Investors / Small VC Funds
!
⢠Improve Product, Expand Customers, Test Revenue:
â
â
â
â
Alpha->Beta, ~6-12 months
Scale Customer Adoption => âMany People Use It, & They Pay.â
Test Marketing Campaigns, Customer Acquisition Channels + Cost
Test Revenue Generation, Find Profitable Customer Segments
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⢠Prove Solution/Benefit, Assess Market Size
⢠Test Channel Cost, Revenue Opportunity
⢠Determine Org Structure, Key Hires
26. Investment Stage #3: â¨
Revenue Validation + Growth
⢠Structure
â 5-25 person team
â $1M-$10M investment
â Seed & Venture Investors
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⢠Make Money (or Go Big), Get to Sustainability:
â
â
â
â
â
Beta->Production, 12-24 months
Revenue / Growth => âWe Can Make (a lot of) Money!â
Mktg Plan => Predictable Channels / Campaigns + Budget
Scalability & Infrastructure, Customer Service & Operations
Connect with Distribution Partners, Expand Growth
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⢠Prove/Expand Market, Operationalize Business
⢠Future Milestones: Profitable/Sustainable, Exit Options
27. This Talk
⢠How did i get here?
⢠What is 500 Startups?
⢠Changes in Tech + Venture Capital
⢠âThe Lean VCâ
⢠Growing 500: #500STRONG
!27
28. Fundraising & Team-Building
⢠Ignorance & Inexperience
⢠New Fund, Small Fund
⢠Crazy Strategy, Crazy People
⢠No Money, No History
⢠Manufacturing Budget
⢠Building, Destroying, Believing Your Story
⢠Hustle & Humility
29. Strategy, Brand, Marketing
⢠FUN! IRREVERENCE! FLIP-FLOPS! Etc
â donât be boring; donât wear khakis + blue shirt + blazer
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Lots of Little Bets, Online Platforms
Design, Data, Distribution
Blogging, Facebook, Twitter
#500STRONG: for Geeks, by Geeks
Seed Fund vs Accelerator
Community: from Silicon Valley to the World
Conferences & Events + GeeksOnaPlane.com
30. Deal Flow, Strategy & Selection
⢠Lots of Little Bets
⢠Take Lots of Small Risk, Early & Often
⢠Differentiation & Branding
⢠Revenue Emphasis, Small but Real Problems
⢠Focus on Online Platforms
⢠Hacker, Hipster, Hustler
⢠Global vs Local
31. Portfolio Development
⢠How do we help? How can we help?
⢠Importance of (trying to be) Helpful
⢠Board seats or not? Useful to VC, not founders
⢠Product, Market, Revenue
⢠Mentorship & Connections
⢠Platforms & Distribution
⢠Downstream Investors & Syndicates
32. Platform(s) & Community
⢠Mentors: Engineering, Design, Marketing
⢠Distribution: Search, Social, Mobile
⢠Global: LatAm, Asia, India, EU, MENA
⢠Social: LinkedIn, Quora, Angel List
⢠Angel List, Second Market, Trusted Insight
⢠Dashboard, MatterMark, DataFox
33. Follow-On Strategy
⢠Should we follow-on? Why or Why Not?
⢠Signaling Risk vs Portfolio Returns
⢠Investor opinion shouldnât matter more than business
fundamentals (if so, thatâs a problem)
⢠Downstream Investor Syndicate is critical
⢠Using Angel List to drive visibility
⢠Global Strategies (more capital, connections)
34. Feedback Loop & Metrics
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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
âWinnersâ vs Numeric Returns
Economics of 1st check vs follow-on
Easy to get big multiples on small checks, BUT
Larger checks with smaller multiples still good
35. 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
36. 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 âEntrepreneurialâ (defân: âcan create a $10M rev/yr businessâ)
⢠1% x 7B ppl = 70M entrepreneurs, each of which starts 1-5 businesses lifetime
⢠1-5 startups / 75 yrs avg life = (~1 startup/25 yrs) * 70M = ~3M startups per year
!
How much capital is needed globally to get seed stage startups rolling?
⢠Assume 1M-3M startups/yr x $50K-$500K funding/each
⢠Low: 1M x $50K = $50B/yr (*this is the LOW end estimate)
⢠High: 5M x $500K = $2.5T/yr (thatâs âTâ as in âTrillionââŚ)
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How many metros? How many investors / metro? How many startups / metro?
⢠1 microVC can do 10-20 startups/yr * $50K-$500K = $500K-$10M/yr budget
⢠100-500 global metros @ >1-2M ppl can generate ~500-2,000 startups / metro / yr
⢠guesstimate = ~100K-200K startups/yr in top 200 global metros
⢠10-50 micro VCs / metro * 200 metros = 2,000-10,000 microVCs globally
⢠EST: 5,000 microVCs can deploy $5M/yr each, or $50B/yr in ~100,000 startups !36
37. This Talk
⢠How did i get here?
⢠What is 500 Startups?
⢠Changes in Tech + Venture Capital
⢠Growing 500 + âThe Lean VCâ
⢠GLOBAL Entrepreneurship
!37
39. Local vs Global?
⢠âSilicon Valley is Uniqueâ â BULLSHIT.
⢠*we had a 50-70 year head start⌠they will catch up.
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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)
40. Global Trends
⢠Growth of Global Languages (see MyGengo.com)
â 1B+ speakers: Mandarin, English
â 300-500M+ spkrs: Spanish, Arabic
⢠Smart Device Proliferation
â mobile, tablet, TV, console, etc
⢠More Young, More Old ($$$) Users Online
⢠More Bandwidth, More Video, More Social, More Mobile
⢠Wealthy Chinese + Indian, Web + IRL Globetrotters ($$$B)
⢠Acceleration of Global Payment, E-Commerce
⢠Dramatically Reduced Cost: Product Dev, Customer Acqstn
⢠Global Distribution Platforms
â US/EU: Apple, Facebook, AMZN, GOOG (Search, YouTube, Gmail, Android), Twitter
â Asia: Baidu, Tencent, Alibaba, Sina, NHN, Yahoo-J, Softbank, Rakuten, Yandex, Mail.RU
41. This Talk
⢠How did i get here?
⢠What is 500 Startups?
⢠Changes in Tech + Venture Capital
⢠âThe Lean VCâ
⢠Growing 500: #500STRONG
⢠Global Entrepreneurship
⢠Being a Loudmouth A-hole in Public
⢠Q&A, Heckling
!41
42. Questions? Comments? Heckles?
⢠Thanks for Listening
⢠Feedback Appreciated
⢠We are Hiring + Internships
!
⢠More Info?
â http://500.co (our company)
â http://500hats.com (my blog)
â https://angel.co/500startups (our fund)
â Dave McClure, @DaveMcClure