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
80âs & 90âs:
⢠Entrepreneur: Aslan Computing (acqâd by Servinet/Panurgy)
⢠Developer: Windows / SQL DB consultant (Intel, MSFT)
⢠Engineer: Johns Hopkinsâ88, BS Eng / Applied Math
3. 500 Startupsâ¨
Global Seed VC Fund & Startup Accelerator
⢠What is 500?
⢠$200M under management
⢠100+ people / 20 Countries
⢠3,000+ Founders / 250+ Mentors
⢠Capital, Education, Community
⢠#500STRONG
⢠1400+ Portfolio Coâs / 50+ Countries
⢠3 Unicorns ($1B+)
⢠Credit Karma
⢠GrabTaxi
⢠Twilio
⢠50+ exits
⢠Wildfire (acq GOOG, $350M)
⢠MakerBot (acq SSYS, $400M)
⢠Viki (acq Rakuten, $200M)
⢠30+ Centaurs ($100M+)
⢠Udemy
⢠Ipsy
⢠SendGrid
⢠VivaReal
⢠The RealReal
⢠TalkDesk
⢠Intercom
⢠Virool
⢠BarkBox
4. This Talk is AboutâŚ
⢠Re-inventing a 50 year old sport
⢠500 Startups⌠WTF?
⢠99 VC Problems, But a Batch Ainât 1
⢠MoneyBall for Startups: Lots of Little Bets
⢠500 VCs, 500 Funds
28. 500 Strategy: Lots of Little Bets*
1) make lots (>100) of
investments in early-
stage startups
3) wait 3-10 years for returns:
-10-20% small exits @1-5X (<25M+)
-5-10% larger exits @5-20X ($25-250M+)
-1-2% unicorns @20-50X+ (>$250M-1B+)
*See Peter Sims book: âLittle Betsâ
2) over next 2 years, double-
down on top 20%
29. Building Tech Startups
Make lots of little bets:
⢠Start with many small âexperimentsâ
⢠Filter out failures + small wins
⢠Double-down on stuff that looks like itâs working
⢠Incubation: $0-100K (âBuild & Validate Productâ)
⢠Seed: $100K-$1M (âTest & Grow Marketing Channelsââ)
⢠Venture: $1M-$10M (âMaximize Growth & Revenueâ)
31. Investment Stage #1: â¨
Product Validation + Customer Usage
⢠Structure
â 1-3 founders
â $25-$100K investment
â Incubator environment: multiple peers, mentors/advisors
⢠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)
⢠Demonstrate Concept, Reduce Product Risk, Test Functional Use
⢠Develop Metrics & Filter for Possible Future Investment
32. 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 Alpha->Beta, ~6-12 months
â Scale Customer Adoption => âMany People Use It, & They Pay.â
â Test Marketing Campaigns, Customer Acquisition Channels + Cost
â Test Revenue / Unit Economics, Find Profitable Customer Segments
⢠Prove Solution/Benefit, Assess Market Size
⢠Test Channel Cost, Unit Economics, Revenue Opportunity
⢠Determine Org Structure, Key Hires
33. Investment Stage #3: â¨
Revenue Validation + Growth
⢠Structure
â 5-25 person team
â $1M-$10M investment
â Seed & Venture Investors
⢠Make Money (or Go Big), Get to Sustainability:
â Beta->Production, 12-24 months
â Revenue / Growth => âWe Can Make (a lot of) Money!â
â Mktg Plan => Predictable Channels / Campaigns + Budget
â Scalability & Infrastructure, Customer Service & Operations
â Connect with Distribution Partners, Expand Growth
⢠Prove/Expand Market, Operationalize Business
⢠Future Milestones: Profitable/Sustainable, Exit Options
34. Legal review Partner approval
Angel Pre-Seed Seed Post-Seed Series A/B Growth
Accelerator
Seed
âDistro"
Follow-On
Selection Criteria â Data-Driven Process Based on Pre-defined Metrics
⢠Product or service solves a problem for a specific target customer
⢠Capital-efficient business; operational at less than $1M in external financing
⢠Scalable internet-based distribution (search, social, mobile) or proven ability to scale sales
⢠Functional prototype required before investing (or previous product success)
⢠Measurable traction: engaged users, some revenue, and attractive unit economics
⢠Cross-functional team with design, engineering and marketing expertise
How 500 Invests:
Accelerator, Seed, Distro
36. We live in a World of ABUNDANCE
⢠There are LOTS of talented people in the world
⢠There are LOTS of entrepreneurs everywhere
⢠There is a LOT of capital sitting around, BUTâŚ.
⢠Not much is available for un-tested entrepreneurs :(
⢠500 Startups plans to change that.
38. Who/What is an Entrepreneur?
⢠someone who WANTS to start a business
⢠someone who can RUN a business
⢠someone who can run a SUSTAINABLE business
⢠someone who can run a PROFITABLE business
that creates VALUE & employs LARGE # people
⢠someone who can run a $10M/yr business that
employs 100+people
39. How Big Is The Market?
Q: How Many Entrepreneurs?
⢠How Many People = 7,000,000,000 on earth
⢠1% of Humanity is Entrepreneurial = 70,000,000 founders
⢠Live 70 years, try at least once = 1,000,000 founders / year
⢠How Much Do They Need? Zero? $100K? $1M? $10M?
⢠How Big is the Market = 1M founders x $10M = $10 TRILLION / year
⢠Come on, REALLY? (ok Divide by 100)
⢠100,000 founders / year * $1M each = $100 BILLION / year
40. How Many VCs?
⢠How Many Founders? 1,000,000 founders / year
⢠(ok, divide by 100, letâs say 10,000 founders / year)
⢠1 VC can make 20 investments / year
⢠10,000 founders / 20 deals per VC = 500 VCs
41. How to Become a VC
⢠Option 1: Go to Harvard/Stanford/Wharton, Get MBA,
Become VC Associate, Work at McKinsey / Google /
Facebook, Re-Join VC as Junior Partner or Partner
⢠Option 2: Start a Startup, Grow Really Big, Sell for $1B+,
Join VC as Partner
⢠Option 3: Wander around lost in the forest, Work Your Ass
Off for 25 yrs, do some angel investing, Start your own Firm
42. 500 Startups + Stanford University Investor Education Program
#Venture Capital Unlocked: Learn best practices of Silicon Valley Investing
#Startup Accelerator: Build your own accelerator with 500 Startups
#VC/Angel 101: How to build an early-stage investment thesis
#500VCs
43. How to build investment
thesis
Meet REAL startup founders
and conduct selection
Connection with Silicon Valley
investors and mentors
Legal docs: cap table and
standard terms
How to generate deal flow Trends and relevant area of
investments
500 Startups + Stanford University Investor Education Program
#500VCs
44. Feb 8th-19th 2016
@ Stanford+500
signup NOW: â¨
http://500.vc
500 Startups + Stanford University Investor Education Program
#500VCs