VC Evolution: Geeks Got Next.
(aka “Software Eats Venture Capital”) @DaveMcClure @500Startups Public Policy Forum on Venture Capital & Innovation Quebec City, Oct 2012
This Talk Is About… (Pro
Tip: Leave Now B4 This Gets Ugly)• 500 Startups: Internet Seed Fund + Accelerator + Business School 2.0• Angel List: It Rocks. Use It.• Making Venture Capital 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) – Takes A Village: Mentors, Founders, Investors – Education & Community – Outlier Competition & Success Behaviors – Product, Market, Revenue – Hacker, Hustler, Hipster – Winners Win, Losers Lose, Tweeners Tween• Scaling VC• Going Intl
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’Reilly80’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
500 Startups Mountain View, CA
– Founded 2010• Seed Fund & Startup Accelerator – $50M under management – 18 people / 9 investing partners – 10,000 sq ft / Silicon Valley HQ – SF, NY, MEX, BRZ, IND (+ more) – 700 Founders / 200 Mentors – Focus: Design, Data, Distribution• 400+ Portfolio Co’s / 20+ Countries – Wildfire (acq GOOG, $350M) – Twilio – SendGrid – TaskRabbit – MakerBot – Viki – 9GAG
Angel* List: It Rocks. (Use
it, You Idiot) • Startups & Investors • Activity & Metrics • Platform & APIs • *ps – not just for Angels, or USA
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 Brand That Matters.• Increase Sample Size.• Don’t Make Big Bets Too Early.• Simplify Revenue Model. (as in: HAVE ONE, you 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: 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)
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?
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.
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).
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
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
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 an arrogant a-hole.