GROWtalks - VC Evolution: Geeks Got Next - Dave McClure 500 Startups

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Dave McClure is a greedy, blood-sucking venture capitalist & founding general partner at 500 Startups, an internet startup seed fund and incubator program in Mountain View, CA. He likes to hang out with entrepreneurs, and occasionally help or invest in their startups if they are foolish enough to let him.

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GROWtalks - VC Evolution: Geeks Got Next - Dave McClure 500 Startups

  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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