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Building #500STRONG
Dave McClure
Palo Alto, CA - July, 2013
Building 500
• Industry Changes & Challenges
• Fundraising & Team-Building
• Brand & Marketing
• Deal Flow & Selection
• P...
Dave McClure
Founding Partner & Chief Troublemaker, 500 Startups
00‟s & 10‟s:
• VC: Founders Fund, Facebook fbFund, 500 St...
500 Startups
Global Seed Fund & Startup Accelerator
• What is 500?
– ~$70M under management
– ~30 people / 10 investing pa...
500 Startups: Global Seed Fund
Over 100+ startups outside US, in 35+ countries
• Q4/12 added: Germany, Korea, Peru; + Russ...
Silicon Valley 2.0:
Lots of Little Bets
aka “MoneyBall for Startups”
• VC Evolution: Physician, Scale Thyself (Aug 2012)
•...
Fundraising & Team-Building
• Ignorance & Inexperience
• New Fund, Small Fund
• Crazy Strategy, Crazy People
• No Money, N...
Long Journey
• East Coast -> West Coast
• Geek: Engineer & Programmer
• Entrepreneur: Small Startup, Small Exit
• Marketin...
Industry Changes, Challenges
• SW Startup Efficiency, Reduced CapX Costs
• Growing Market, Growing Platforms
• VC Industry...
Changes in Tech Startups
• LESS Capital required to build product, get to market
– Dramatically reduced $$$ on servers, so...
Daft Punk Lean Startup:
Simpler, Faster, Cheaper, Smarter
1. Startup Costs = Lower.
2. # Users, Bandwidth = Bigger.
3. Tra...
Strategy, Brand & Marketing
• FUN! IRREVERENCE! FLIP-FLOPS! Etc
– don’t be boring; don’t wear khakis + blue shirt + blazer...
13
Quantitative Investing before Traction
250+ companies @ $25-100K
(1st check)
- Assume high failure rate (up to 80%)
Dou...
Deal Flow, Strategy & Selection
• Lots of Little Bets
• Take Lots of Small Risk, Early & Often
• Differentiation & Brandin...
Minimum Viable Team:
Hacker, Hipster, Hustler
• Hacker: engineers & developers
• Hipster: design & user experience (UX)
• ...
The Lean VC:
Lots of Little Bets, Incremental Investment
Method: Invest in lots of startups using incremental
investment, ...
Investment Stage #1:
Product Validation + Customer Usage
• Structure
– 1-3 founders
– $25-$100K investment
– Incubator env...
Investment Stage #2:
Market Validation + Revenue Testing
• Structure
– 2-10 person team
– $100K-$1M investment
– Syndicate...
Investment Stage #3:
Revenue Validation + Growth
• Structure
– 5-25 person team
– $1M-$10M investment
– Seed & Venture Inv...
Portfolio Development
• How do we help? How can we help?
• Importance of (trying to be) Helpful
• Board seats or not? Usef...
Platform(s) & Community
• Mentors: Engineering, Design, Marketing
• Distribution: Search, Social, Mobile
• Global: LatAm, ...
Platforms 2.0
Search, Social, Mobile, Vide
o, Messaging
Distribution Platforms
Customer Reach: 100M-1B+
• Search: Google, Baidu, Yahoo/Bing, Yandex
• Social: Facebook, Twitter, L...
Angel* List: It Rocks.
• Startups & Investors
• Activity & Metrics
• Platform & APIs
• *ps – not just for Angels, or
USA
Follow-On Strategy
• Should we follow-on? Why or Why Not?
• Signaling Risk vs Portfolio Returns
• Investor opinion shouldn...
Startup Investor Ecosystem
Angels &
Incubators
($0-10M)
“Micro-VC” Funds
($10-100M)
“Big” VC Funds
($100-500M)
“Mega” VC F...
Got Crunched Yet?
Source: Bullpen Capital
Before & After 2 Dot-Com Crashes
Daft Punk Startup: Simpler, Faster, Cheaper, Smarter
Before 2000
• Sun Servers
• Oracle D...
Crunch Good? Crunch Bad?
• Series A bar higher: $1M revenue, 1M active
users, 10M downloads, 100% YoY growth
• Lots of Inc...
Investor Relations & Reporting
• What do Investors Care About?
• Returns? Dealflow? Strategy?
• How / When do you report t...
Scale & Scaling VC
• Lots of Little Bets? Or a Few Big Bets?
• Power Laws, Singles vs Home Runs
• Focus on Network Effects...
Local vs Global?
• The Valley is Unique… sort of.
• Emerging / Developing Markets:
• Too Soon? Too Late? Valuation?
• Engl...
Going Local, Going
Global
web gets bigger -> world gets smaller
Global Trends
• Growth of Global Languages (see MyGengo.com)
– 1B+ speakers: Mandarin, English
– 300-500M+ spkrs: Spanish,...
Feedback Loop & Metrics
• Bad decisions = obvious quickly
• Good decisions = not obvious for years
• Short-term metrics: r...
Questions? Comments? Heckles?
• Thanks for Listening
• Feedback Appreciated
• We’re Still Learning
• More Info?
– http://5...
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Minimum Viable Team: Hacker, Hipster, Building #500STRONG

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Minimum Viable Team:
Hacker, Hipster, Hustler
• Hacker: engineers & developers
• Hipster: design & user experience (UX)
• Hustler: marketing & business, “growth hacker”
1. Build functional prototypes
2. Improve UX so people convert
3. Scale customer acquisition & distribution

Published in: Economy & Finance, Business
  • Love it. You really should look at the SEARCH FUND model. Original model from Stanford now copied all over but still a small community. I have done three so far and one Angel List. Keep it up
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