VC Evolution: Geeks Got Next.  (aka “Software Eats Venture Capital”)      @DaveMcClure @500Startups    #GROWconf @ Vancouv...
Shit I’m Gonna Talk About                      Pro Tip: Leave Now B4 This Gets Ugly•   500 Startups: Dude. Srsly. Like, WT...
Dave McClure                        Founding Partner & Sith Lord, 500 Startups00’s & 10’s:• Investor: Founders Fund, Faceb...
500 Startups: SRSLY, WTF?           Mountain View, CA – Founded 2010• Seed Fund & Startup Accelerator   –   10,000 sq ft /...
Angel List*: It Fucking Rocks.     (Use it, You *&#% Idiot)               • Startups & Investors               • Activity ...
Making Venture Capital    Work Better  This is Actually Pretty Easy,    Since Most VCs / Funds           Suck Balls.
MoneyBall 4 Startups                   http://slideshare.net/paulsingh/moneyball-a-quantitative-approach-to-angel-investin...
Startups #FAIL & VCs #SUCK.                              But You Knew That Already•   Play Blackjack, Not Roulette. (Count...
Bet on Singles, Not HomeRuns.   (Look for Ichiros, Not Barry Bonds)
Early-Stage Risk Reduction•   Intro: Crazy, Liars or crooks? Fucking idiots?•   Product: does it work? (crappy, not perfec...
Your [up-front] Diligence Is An Illusion        (Real Diligence = Quick Check + 3-6 mo’s)• You Might Be Able to Detect Idi...
TIRED: White Guys in Khakis & Blue Shirts.WIRED: Guild of Geeks. Mentors. YC, 500.
Making Incubators  Work Better(This is Actually Pretty HARD.)           Find & Fund Potential.            Help Them Improv...
It Takes A Village•   Physical Space.•   People = Tribe.•   Mentors (Advise 1st, Invest 2nd)•   Events, Foods, Awesome.•  ...
Education & Community•   Mentors, Investors•   Design, Data, Distribution•   Platform Partners•   Sponsors & Strategics•  ...
Outlier Competition +        Modeling Success Behaviors•   You want min 3-5 “rockstars” to compete•   Rockstars to model s...
Product, Market, Revenue• Product: assess functional use, improve design/UX• Market: test usage, distribution channels• Re...
Hacker, Hustler, Hipster• Hacker: engineers & developers• Hipster: design & UX• Hustler: marketing & business1. Build func...
Growth Hacking FTW• (More Here TBD)
Winners, Losers, Tweeners• Winners #WIN (with or without you)• Losers #LOSE (with or without you)• Tweeners #TWEEN  – They...
Scaling VC• VC is an immature & fragmented market• It’s Ripe for Disruption• It Hasn’t Scaled (Yet)
Going International• Brazil, Mexico, India• Canada, UK, Japan• China, Indonesia, Russia, Turkey• Etc
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VC [R]Evolution: Geeks Got Next.

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VC Evolution: Geeks Got Next.
(aka, Software Eats Private Equity)
Grow Conf, Vancouver (Aug 2012)

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    Would you ever consider a deal like this? I'm offering 9% of my income, for up to 15 years, for $75,000 to expand my start-up. Check out the details in this slide deck: www.slideshare.net/GlennStegall/glenn-stegall-for-sale
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VC [R]Evolution: Geeks Got Next.

  1. 1. VC Evolution: Geeks Got Next. (aka “Software Eats Venture Capital”) @DaveMcClure @500Startups #GROWconf @ Vancouver (Aug 2012)
  2. 2. Shit I’m Gonna Talk About Pro Tip: Leave Now B4 This Gets Ugly• 500 Startups: Dude. Srsly. Like, WTF?• Angel List: Use It, You Fucking Idiot.• Making Venture Work Better (This is Easy) – MoneyBall 4 Startups – Startups #FAIL & VCs #SUCK. – Early Stage Investing = Risk Reduction – Your Diligence Is an Illusion – Guild of Geeks / Mentor Network• Making Incubators Work Better (This is Hard) – It Takes A Village: Mentors, Advisors, Investors – Education & Community – Outlier Competition & Success Behavior Modeling – Product, Market, Revenue, Pitch – Customer Acquisition, Growth Hacking, & Platform Distribution – Winners Win, Losers Lose, Tweeners Tween• Scaling VC• Going Intl
  3. 3. Dave McClure Founding Partner & Sith Lord, 500 Startups00’s & 10’s:• Investor: Founders Fund, Facebook fbFund, 500 Startups• Companies: Mint.com, SlideShare, Twilio, WildFire, SendGrid• Marketing: PayPal, Simply Hired, Mint.com, O’Reilly Media• Speaker: Lean Startup, Web 2.0, Stanford/Facebook80’s & 90’s:• Entrepreneur: Founder/CEO Aslan Computing (acq’d)• Developer: Windows / SQL DB consultant (Intel, MSFT)• Engineer: Johns Hopkins‘88, BS Eng / Applied Math
  4. 4. 500 Startups: SRSLY, WTF? Mountain View, CA – Founded 2010• Seed Fund & Startup Accelerator – 10,000 sq ft / Silicon Valley HQ – 15 people / 7 investing partners – Design, Distribution, Data – US, Brazil, Mexico, India (+ more) – 600 Founders / 180+ Mentors• 350+ Portfolio Co’s / 20+ Countries – Wildfire (acq GOOG, $350M) – Twilio – SendGrid – TaskRabbit – MakerBot – 9GAG  – Unbounce – HighScoreHouse – StoryPanda
  5. 5. Angel List*: It Fucking Rocks. (Use it, You *&#% Idiot) • Startups & Investors • Activity & Metrics • Platform & APIs • *ps – it’s not just for Angels
  6. 6. Making Venture Capital Work Better This is Actually Pretty Easy, Since Most VCs / Funds Suck Balls.
  7. 7. MoneyBall 4 Startups http://slideshare.net/paulsingh/moneyball-a-quantitative-approach-to-angel-investing-austin-tx-aug-2012 1. Make Lots Of Little Bets 2. Count Cards (Monitor Progress & Stats) 3. Double Down on Winners
  8. 8. Startups #FAIL & VCs #SUCK. But You Knew That Already• Play Blackjack, Not Roulette. (Count Cards. Make Lots of Little Bets.)• Don’t Be An Arrogant, Insufferable Prick.• Don’t Assume Your Diligence is 4 Shit.• Don’t Assume You. or They are Smart.• Build a Fucking Brand That Matters.• Increase Sample Size.• Don’t Make Big Bets Too Early.• Simplify Revenue Model. (as in: HAVE ONE, you fucking idiot)• Bet on Hackers, Hustlers, Designers.• Create a Community.• Invest after they have a functional prototype.• Be early and contrarian, or late and right.• Use The Tools (you fucking idiot): Twitter, Facebook, Quora, Instagram, Pinterest, etc• Talk / Blog / Present about something u know about, care about.• Admit Your Faults Frequently.• Laugh a little bit. (at yourself, not others).• Don’t worry too much about legal structure.• Worry a SHIT TON about valuation. (because your exits will be SMALL)
  9. 9. Bet on Singles, Not HomeRuns. (Look for Ichiros, Not Barry Bonds)
  10. 10. Early-Stage Risk Reduction• Intro: Crazy, Liars or crooks? Fucking idiots?• Product: does it work? (crappy, not perfect)• Market: are people using it? (not their mom)• Revenue: will people pay for it? (just a few)• Growth: how will it/they scale?• Finance: what will it cost – Q1: cost to get a customer? – Q2: how & when do you make money?
  11. 11. Your [up-front] Diligence Is An Illusion (Real Diligence = Quick Check + 3-6 mo’s)• You Might Be Able to Detect Idiots & Assholes.• You Probably Can’t Figure Out Winners (Yet).• Your Network is Better Than Your Homework.• Trusted Referrals >> Diligence• Functional Prototype >> Team.• Customers/Revenue >> Market.• You’ll Be Wrong 4x out of 5x. (If U Don’t Suck).• In 6 Months, You’ll Know If They Don’t Suck.• In 1-2 Years, You’ll Know If They’re Awesome.
  12. 12. TIRED: White Guys in Khakis & Blue Shirts.WIRED: Guild of Geeks. Mentors. YC, 500.
  13. 13. Making Incubators Work Better(This is Actually Pretty HARD.) Find & Fund Potential. Help Them Improve. Education & Community. Access to Mentors. Access to Investors.If You’re Lucky, Discover *a few+ Winners.
  14. 14. It Takes A Village• Physical Space.• People = Tribe.• Mentors (Advise 1st, Invest 2nd)• Events, Foods, Awesome.• This is YOUR FAMILY. Make Them AWESOME.• This is also YOUR BRAND. So Don’t SUCK.• Make a Big Tent. (Collaborate, don’t Compete).
  15. 15. Education & Community• Mentors, Investors• Design, Data, Distribution• Platform Partners• Sponsors & Strategics• Marketing & Visibility
  16. 16. Outlier Competition + Modeling Success Behaviors• You want min 3-5 “rockstars” to compete• Rockstars to model success for others• You can’t assume >20% rockstars• Therefore, pick 5x5 = 25 teams• 3-5 rockstar teams emerge, compete, win• 5-10 *other* non-rockstars learn• Prune losers quickly
  17. 17. Product, Market, Revenue• Product: assess functional use, improve design/UX• Market: test usage, distribution channels• Revenue: test cust acq cost, revenue, *timing*• Work on Pitch, Help Find Co-Investors, etc
  18. 18. Hacker, Hustler, Hipster• Hacker: engineers & developers• Hipster: design & UX• Hustler: marketing & business1. Build functional prototypes2. Improve UX so people convert3. Scale customer acq & distribution
  19. 19. Growth Hacking FTW• (More Here TBD)
  20. 20. Winners, Losers, Tweeners• Winners #WIN (with or without you)• Losers #LOSE (with or without you)• Tweeners #TWEEN – They might win with your help – They might lose with your help – Be helpful, but don’t dally – Note: you might be wrong about the losers & tweeners, so don’t be a fucking arrogant asshole.
  21. 21. Scaling VC• VC is an immature & fragmented market• It’s Ripe for Disruption• It Hasn’t Scaled (Yet)
  22. 22. Going International• Brazil, Mexico, India• Canada, UK, Japan• China, Indonesia, Russia, Turkey• Etc
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