This document discusses Dave McClure's investment thesis and experience in venture capital. It provides an overview of 500 Startups, including its history, strategy of making many small investments, and how it invests through its accelerator program and seed/follow-on funding. Details are given around 500's investment criteria, portfolio diversification approach, and generating deal flow through its brand and network.
How to define and position your VC brand to attract funding and dealflow.
* note: more recent updated version below:
https://www.slideshare.net/dmc500hats/branding-strategies-for-better-dealflow-and-fundraising-aka-the-helpful-vc
At the Notation annual LP meeting this past fall, we gave a short talk on how we think about pre-seed investing & risk, and why we think there's a particularly interesting risk versus reward tradeoff at this stage.
How to define and position your VC brand to attract funding and dealflow.
* note: more recent updated version below:
https://www.slideshare.net/dmc500hats/branding-strategies-for-better-dealflow-and-fundraising-aka-the-helpful-vc
At the Notation annual LP meeting this past fall, we gave a short talk on how we think about pre-seed investing & risk, and why we think there's a particularly interesting risk versus reward tradeoff at this stage.
We are big advocates of transparency at Seedcamp and understand first hand just how tough the fundraising process can be. It's not just startups who go through this but funds too. In the spirit of openness, we're sharing the deck we used to go out to investors for Seedcamp Fund IV.
Read more about our plans to invest in 100 new European startups with our biggest and boldest fund yet over on our blog: http://seedcamp.com/seedcamp-fund-iv-announcement/
Silverwood Capital Fund I LLC formed to take advantage of a narrow niche in the mortgage note industry. The Company will seek to acquire, workout, and manage nonperforming real estate notes secured by residential 1-4 unit properties. While the primary emphasis will be focusing on nonperforming junior and Home Equity Line Of Credit (“HELOC”) notes, we will purchase select senior liens and REOs.
Using our network of banking and equity fund contacts, and advanced marketing techniques, the Fund will purchase mortgages and real estate at significant discounts to its underlying value. By focusing on distressed mortgages and properties, we know the potential for above average returns exist.
These securities are being offered under an exemption provided by SEC Regulation D Rule 506(c). Only accredited investors who meet the SEC Regulation D 501 “accredited investor” accreditation standards and who provide suitable verification of accredited status may invest into this Offering.
• Any historical performance data represents past performance. Past performance does not guarantee future results;
• Current performance may be different than the performance data presented;
• The Company is not required by law to follow any standard methodology when calculating and representing performance data;
• The performance of the Company may not be directly comparable to the performance of other private or registered funds or companies;
• The securities are being offered in reliance on an exemption from the registration requirements, and therefore are not required to comply with certain specific disclosure requirements;
• The Securities and Exchange Commission has not passed upon the merits of or approved the securities, the terms of the offering, or the accuracy of the materials.
VC Fundraising Deck Template: Carta x Kauffman FellowsNihar Neelakanti
Carta and Kauffman Fellows present a venture capital fundraising deck template highlighting the various components a GP should include as part of their fundraising story to attract limited partners.
How to VC: Creating a VC fund portfolio modelDave McClure
This article aims to help VCs figure out how to size a venture capital fund, how many companies to include in your portfolio, and when and how to do follow-on investments. Most VCs aim to make a 3X (net) return on initial fund capital, at a ~20% net IRR. Note however, likely less than 10% of most VC funds achieve that goal.
Weekend Fund 3.0 - VC Pitch Deck ExamplesPitch Decks
Weekend Fund is a two-person team: Ryan Hoover (founder of Product Hunt) and Vedika Jain writing $100k-300k checks into early-stage startups around the world across consumer and B2B.
After raising an initial $3M angel fund in 2017, then a $10M early-stage fund in 2019, Weekend Fund used this pitch deck to raise a $21M Fund "3.0" in 2022.
Weekend Fund is backed by notable LPs like Naval Ravikant, Troy Carter, Marc Andreessen, Chris Dixon, Suzy Ryoo, Miyuki Matsumoto, Kevin Rose, Chris & Crystal Sacca. They have funded startups like Intercom, Faze Clan, Deel, VoiceFlow & more.
We’re thrilled to announce that we’ve raised Kleiner Perkins’ 18th venture fund -- $600 million to focus on early stage investing. This marks 47 years for our firm, and with a fresh team and strategy, we’re incredibly excited for the next 47 years.
Transparency is one of our core values at Seedcamp and we are no strangers to how tough the fundraising process can be. In a continued spirit of openness and to show how - like with startups - our own story and proposition moves on, we're sharing the deck we used to raise our heavily-oversubscribed Seedcamp Fund V.
Read more about our plans to invest in and support the next generation of exceptional European talent on our blog: https://seedcamp.com/news/
Venture Capital Unlocked (Stanford) / Venture Capital 2.0Dave McClure
slides for my "Venture Capital 2.0" opening talk at Stanford School Continuing Studies, VC101 class "Venture Capital Unlocked" #VCunlocked #500startups
Long Journey Ventures Fund 1 - VC Pitch Deck ExamplePitch Decks
Founded by former AngelList partner Lee Jacobs, Long Journey Ventures operates a unique model based around a federation of angel investors and operators.
Every member of the Long Journey team has started a company and invested personal money into startups for close to a decade. The firm has invested in seed rounds across industries: ranging from healthcare to project management software.
Long Journey has backed notable startups like Affirm, Notion, Loom, Uber, and SpaceX.
Irish Technology Capital-European Technology Venture Fund - John Hartnett - S...Burton Lee
Presentation by John Hartnett, Irish Technology Capital, about the new venture Fund that he is raising in Ireland and Silicon Valley, aimed at the Irish and European hitech startups marketplace. Stanford Engineering, January 4 2010. Program Director and Course Instructor Dr. Burton Lee. Homepage: http://me421.stanford.edu
Silicon Valley Bank and Orrick supported by CB Insights released this years new York Venture Capital Almanach 2013: a useful snapshot of where the New York venture community is right now, as well as a brief summary of
where we’ve been.
"Introduction to 500 Startups" presentation will provide you a comprehensive overview of various activities that we do to promote startup ecosystem globally, discover best early stage companies and help them grow.
We are big advocates of transparency at Seedcamp and understand first hand just how tough the fundraising process can be. It's not just startups who go through this but funds too. In the spirit of openness, we're sharing the deck we used to go out to investors for Seedcamp Fund IV.
Read more about our plans to invest in 100 new European startups with our biggest and boldest fund yet over on our blog: http://seedcamp.com/seedcamp-fund-iv-announcement/
Silverwood Capital Fund I LLC formed to take advantage of a narrow niche in the mortgage note industry. The Company will seek to acquire, workout, and manage nonperforming real estate notes secured by residential 1-4 unit properties. While the primary emphasis will be focusing on nonperforming junior and Home Equity Line Of Credit (“HELOC”) notes, we will purchase select senior liens and REOs.
Using our network of banking and equity fund contacts, and advanced marketing techniques, the Fund will purchase mortgages and real estate at significant discounts to its underlying value. By focusing on distressed mortgages and properties, we know the potential for above average returns exist.
These securities are being offered under an exemption provided by SEC Regulation D Rule 506(c). Only accredited investors who meet the SEC Regulation D 501 “accredited investor” accreditation standards and who provide suitable verification of accredited status may invest into this Offering.
• Any historical performance data represents past performance. Past performance does not guarantee future results;
• Current performance may be different than the performance data presented;
• The Company is not required by law to follow any standard methodology when calculating and representing performance data;
• The performance of the Company may not be directly comparable to the performance of other private or registered funds or companies;
• The securities are being offered in reliance on an exemption from the registration requirements, and therefore are not required to comply with certain specific disclosure requirements;
• The Securities and Exchange Commission has not passed upon the merits of or approved the securities, the terms of the offering, or the accuracy of the materials.
VC Fundraising Deck Template: Carta x Kauffman FellowsNihar Neelakanti
Carta and Kauffman Fellows present a venture capital fundraising deck template highlighting the various components a GP should include as part of their fundraising story to attract limited partners.
How to VC: Creating a VC fund portfolio modelDave McClure
This article aims to help VCs figure out how to size a venture capital fund, how many companies to include in your portfolio, and when and how to do follow-on investments. Most VCs aim to make a 3X (net) return on initial fund capital, at a ~20% net IRR. Note however, likely less than 10% of most VC funds achieve that goal.
Weekend Fund 3.0 - VC Pitch Deck ExamplesPitch Decks
Weekend Fund is a two-person team: Ryan Hoover (founder of Product Hunt) and Vedika Jain writing $100k-300k checks into early-stage startups around the world across consumer and B2B.
After raising an initial $3M angel fund in 2017, then a $10M early-stage fund in 2019, Weekend Fund used this pitch deck to raise a $21M Fund "3.0" in 2022.
Weekend Fund is backed by notable LPs like Naval Ravikant, Troy Carter, Marc Andreessen, Chris Dixon, Suzy Ryoo, Miyuki Matsumoto, Kevin Rose, Chris & Crystal Sacca. They have funded startups like Intercom, Faze Clan, Deel, VoiceFlow & more.
We’re thrilled to announce that we’ve raised Kleiner Perkins’ 18th venture fund -- $600 million to focus on early stage investing. This marks 47 years for our firm, and with a fresh team and strategy, we’re incredibly excited for the next 47 years.
Transparency is one of our core values at Seedcamp and we are no strangers to how tough the fundraising process can be. In a continued spirit of openness and to show how - like with startups - our own story and proposition moves on, we're sharing the deck we used to raise our heavily-oversubscribed Seedcamp Fund V.
Read more about our plans to invest in and support the next generation of exceptional European talent on our blog: https://seedcamp.com/news/
Venture Capital Unlocked (Stanford) / Venture Capital 2.0Dave McClure
slides for my "Venture Capital 2.0" opening talk at Stanford School Continuing Studies, VC101 class "Venture Capital Unlocked" #VCunlocked #500startups
Long Journey Ventures Fund 1 - VC Pitch Deck ExamplePitch Decks
Founded by former AngelList partner Lee Jacobs, Long Journey Ventures operates a unique model based around a federation of angel investors and operators.
Every member of the Long Journey team has started a company and invested personal money into startups for close to a decade. The firm has invested in seed rounds across industries: ranging from healthcare to project management software.
Long Journey has backed notable startups like Affirm, Notion, Loom, Uber, and SpaceX.
Irish Technology Capital-European Technology Venture Fund - John Hartnett - S...Burton Lee
Presentation by John Hartnett, Irish Technology Capital, about the new venture Fund that he is raising in Ireland and Silicon Valley, aimed at the Irish and European hitech startups marketplace. Stanford Engineering, January 4 2010. Program Director and Course Instructor Dr. Burton Lee. Homepage: http://me421.stanford.edu
Silicon Valley Bank and Orrick supported by CB Insights released this years new York Venture Capital Almanach 2013: a useful snapshot of where the New York venture community is right now, as well as a brief summary of
where we’ve been.
"Introduction to 500 Startups" presentation will provide you a comprehensive overview of various activities that we do to promote startup ecosystem globally, discover best early stage companies and help them grow.
SpringOwl's 99 Page Presentation On How To Best Turnaround Yahoo!Eric Jackson
On Dec. 13, 2015, SpringOwl released this 99 page presentation on why Yahoo needs substantial change from the status quo and why it would be a mistake to sell the core business now at the lows. We offer our 9 point plan for how to turn around the company and create the most amount of value with the least risk for shareholders (and employees)
SpringOwl's 99 Page Presentation On Turning Around ViacomEric Jackson
In this 99 page presentation, we lay out why Viacom's stock price has been cut in half in the past year, and our proposed plan for turning the company around.
Venture capitalists, especially those investing at the early stage, could be described as “relationship capitalists”. You’ll often hear how investors approach their commitments like a marriage, and that they think long and hard about with whom they want to go to bed. Avoid picturing that second part.
But the VC mystique can be inexplicable at times. Why do they send such curt emails? What the #%$! do they mean by “traction”? Are they even paying attention?!
Here are some things they might be thinking (but probably won’t flat-out say) during the courtship process, and how you can prepare, take ownership, and rock the pitch.
Top 10 Learnings Growing to (Almost) $10 Million ARR: Leo's presentation at S...Buffer
Our COO Leo Widrich spoke at the SaaStr Annual conference on February 9, 2016 and shared some lessons that have helped Buffer grow. The tips range across product, marketing, and general work culture!
Investors historically sit through pitches and evaluate early stage startups on three primary metrics: 1) great looking product demos, 2) compelling presentations, and 3) a strong team. Steve Blank, the Godfather of the Lean Startup movement said in his Customer Development Manifesto: “There’s no formal way for an investor to assess project maturity or quantify risks. Other than measuring engineering progress, there’s no standard language to communicate progress.”
What has been missing is a common language to communicate objectives and data that investors and entrepreneurs can use to communicate startup readiness.
Fortunately, the principles developed in the Lean Startup movement can be utilized to help entrepreneurs assess their Investor Readiness Level in a way that allows them to demonstrate “evidence” of their readiness. In this session, Max Green and Heath Naquin, both of the IC2 Institute, will share this new method for entrepreneurs to gauge their own investor readiness using the principles of Steve Blank's Investment Readiness Level and LeanLaunchpad.
Entrepreneurs attending this session will learn a valuable approach helping their start-up team prove their competence and validate their ideas by showing investors “evidence” that there’s a repeatable and scalable business model.
Heath Naquin serves as Executive Director for the SW I-Corps Node at The University of Texas at Austin. He also serves as the Managing Director for a multi-university NSF Industry University Cooperative Research Center (I/UCRC) the Center for Next Generation Photovoltaics. Heath was a founding member of three different start-up business initiatives across sectors. He has helped companies raise more than $30 Million in funding from private and government sources.
Heath actively works on international commercialization initiatives and efforts focusing on industry collaboration, new project development and deployment along with building linkages between industry, government, academia and the venture capital community. Heath has worked in more than 20 countries on international commercialization and entrepreneurship initiatives in countries such as Colombia, Jordan, Iraq, Korea, Mexico, Portugal, Armenia, and Turkey. Heath has extensive experience with the NSF, EPA and NIH SBIR programs as an active commercial reviewer for many years. Heath also currently serves as Faculty for the Concordia University Executive MBA program.
WeWork provides small businesses, startups, and freelancers with beautiful workspace, inspiring community, and meaningful services. With weekly events, personalized support, flexibility, and access to thousands of like-minded entrepreneurs around the world - WeWork is the perfect place to grow your business in 2015.
The WeWork Congress location sits in the heart of downtown Austin at 6th St. and Congress Ave. To learn more about joining the community, email joinus@wework.com or call 855.593.9675.
Ncfa Craig Asano Jan 8 equity and funding presentationCraig Asano
Beyond bootstrapping raising capital is critical to launch or grow most ventures. Here's a lean overview of common funding options. Here's to your future success!
From the Women Helping Women in Entrepreneurship on July 24, 2013 at MassChallenge
The Boston entrepreneurial community is home to some of the strongest and most successful women in entrepreneurship. Join the women of Golden Seeds and several local serial entrepreneurs for a discussion on sources of capital for your business. The discussion will be followed by small breakout sessions that focus on the challenges your company may be facing.
www.thecapitalnetwork.org
Starting a business...a guide on what to consider, brand identity, financing, culture, marketing, plus more. Includes interactive tools for you and your team.
Basic concepts of marketing and branding for venture capital. Emphasis on competitive differentiation (aka "How are you different/better than other VCs in your category?"). Specific focus on defining areas of "value add" that aren't BS.
Dinosaurs vs Unicorns aka "Bubble My Ass, All Dinosaurs Gonna Die" (London, J...Dave McClure
my talk on corporate innovation (or the lack thereof), the death of many dinosaurs, the survival of a smart few Raptors, and how to avoid getting trampled by Unicorns.
1.Wireless Communication System_Wireless communication is a broad term that i...JeyaPerumal1
Wireless communication involves the transmission of information over a distance without the help of wires, cables or any other forms of electrical conductors.
Wireless communication is a broad term that incorporates all procedures and forms of connecting and communicating between two or more devices using a wireless signal through wireless communication technologies and devices.
Features of Wireless Communication
The evolution of wireless technology has brought many advancements with its effective features.
The transmitted distance can be anywhere between a few meters (for example, a television's remote control) and thousands of kilometers (for example, radio communication).
Wireless communication can be used for cellular telephony, wireless access to the internet, wireless home networking, and so on.
ER(Entity Relationship) Diagram for online shopping - TAEHimani415946
https://bit.ly/3KACoyV
The ER diagram for the project is the foundation for the building of the database of the project. The properties, datatypes, and attributes are defined by the ER diagram.
This 7-second Brain Wave Ritual Attracts Money To You.!nirahealhty
Discover the power of a simple 7-second brain wave ritual that can attract wealth and abundance into your life. By tapping into specific brain frequencies, this technique helps you manifest financial success effortlessly. Ready to transform your financial future? Try this powerful ritual and start attracting money today!
Multi-cluster Kubernetes Networking- Patterns, Projects and GuidelinesSanjeev Rampal
Talk presented at Kubernetes Community Day, New York, May 2024.
Technical summary of Multi-Cluster Kubernetes Networking architectures with focus on 4 key topics.
1) Key patterns for Multi-cluster architectures
2) Architectural comparison of several OSS/ CNCF projects to address these patterns
3) Evolution trends for the APIs of these projects
4) Some design recommendations & guidelines for adopting/ deploying these solutions.
2. Dave McClure
Founding Partner & Troublemaker, 500 Startups
00’s & 10’s:
• VC: Founders Fund, Facebook fbFund, 500 Startups
• Angel: Mashery, Mint, SlideShare, Twilio, Lyft, Wildfire, Credit Karma
• Marketing: PayPal, Simply Hired, Mint.com, O’Reilly
80’s & 90’s:
• Entrepreneur: Aslan Computing (acq’d by Servinet)
• Developer: Windows / SQL DB consultant (Intel, MSFT)
• Engineer: Johns Hopkins‘88, BS Eng / Applied Math
3. • What is 500?
– $250M silicon valley VC fund + startup accelerator
– 120 people / 30 partners / 25 languages / 20 countries
– 1500+ Companies / 3000+ Founders / 200+ Mentors
– Investment, Accelerator, Distro, Marketing, Events, Education
– Community + Content + Conferences
• 1500+ Co’s / 50+ Countries
– Credit Karma ($3.5B)
– Twilio ($1B+)
– GrabTaxi ($1B+)
– Wildfire (acq GOOG, $350M)
– MakerBot (acq SSYS, $400M)
– Viki (acq Rakuten, $200M)
– Behance (acq Adobe, $150M)
– Simple (acq BBVA, $117M)
– Sunrise (acq MSFT, $100M)
– Udemy
– Ipsy
– TalkDesk
– Intercom
500 Startups
Global Seed Fund & Startup Accelerator
4. VC Lifecycle
(warning: 10+ years every fund)
Raise Capital Call Capital
Generate
Dealflow
Select, Make
Investments
Monitor,
Support
Investments
Decide If/
When to
Follow-on
Sell, Harvest
Investments
Recycle and/
or Return
Capital to
LPs
Get To Carry!
Rinse,
Repeat
first 1-2
years
(or, forever)
years 1-4
first 3 years
(or, forever)
first 3-5
years
FOREVER
years 2-5
(and, 6-10)
5-15 years 5-15 years
year 8-15?
(or never)
year 3-5
5. What’s my thesis?
• “I’m investing in connected hardware that help
make homes smarter & more energy efficient”
• “I’m investing in fintech startups that focus on
emerging market consumers with limited access to
traditional banks but have mobile phones”
• “I’m investing in black & hispanic minority founders
in the US with limited access to VC, yet address
markets that represent >30% of US consumers”
6. Thesis Fundamentals
• Elevator Pitch: high-level description of strategy & approach
• Brand/Marketing: how to generate dealflow
• Team & Roles: investment team, back office, other
• Basic filter & criteria for evaluating investments
• Number, size, frequency, distribution of investments
• Target capital raise; model of investment returns (how to get 3X?)
• Other services: education, community, recruiting, physical office
space, acctg/legal/HR, growth hacking, PR, ETC
7. What / Why / Who / How?
• What is your Unique / Pointed Observation or Hypothesis?
• Why are YOU well-positioned to execute the strategy?
• Has this been done before? If not, why now? If so, why can you
do it as well if not better than others doing similar?
• What is required to be true for you to be successful? What
critical assumptions are you making? What if they aren’t correct?
• What kind of team / org is required to execute on this strategy?
Do you have such a team / can you build one?
• What [historical] evidence do you have that you can do this?
8. 500 Investment Thesis:
Cheap, Global, Scalable, Platforms
CONFIDENTIAL /
/
FEBRUARY23,2016PAGE17
/
• Cost of starting a company has decreased ~100X, essentially as a
consequence of open source software and cloud computing.1
• Internet usage among American adults went from 14% to 86%.2
• Online speeds in the United States are over 120X faster.3
1. http://www.bothsidesofthetable.com/2012/05/23/its-morning-in-venture-capital/
2. http://www.pewinternet.org/data-trend/internet-use/internet-use-over-time/
3. http://www.zdnet.com/the-internet-is-getting-faster-7000002402/
Global platforms are available for marketing, distribution, and monetization
1995 vs 2015 Significant decrease in the
cost of startups1
Appendix - A New Ecosystem: Lower Costs and Lots of Scale
9. Branding & Marketing
• How do you plan to generate/access dealflow?
• What kind of brand / image do you stand for?
• Name, logo, graphics, related content, etc
• Do you have a story about your market, about
yourself? How to develop & market that story?
• Who on your team is responsible for marketing/PR?
• Content, Community, Events, etc
10. Generating Dealflow
• Founder Hunt: Where to find awesome founders?
• Tell Your Story: Writing / Speaking / Events
• Networking: Referrals / LinkedIn / Email/ etc
• Alumni: Company, University, other Networks
• Events: Attend (or Run) User Groups & Conf’s
• Platforms: Angel List / Product Hunt / YC / 500 /
StartX / Kickstarter / other
• Community: Founders / Mentors, other Investors
• ETC: Sports, DayCare, Carpool, Tinder, whatEVER…
10
11. Investment Filter
• What does a target investment look like? (type of company,
founder(s)/team, traction, stage, check size, location, etc)
• What Qs will you ask where the answers clearly determine
a yes or no decision?
• Are you looking for experienced founders? where will you
find them? will they take your capital? why?
• How do you define “traction”? Have you seen it before?
• How will you decide when/whether to follow-on?
12. Startup Investment Stages
• Concept
• Product
• Functional Prototype
• Early Users/Customers
• Other Investors
• Profitable Unit Economics?
• Scalable Cust Acquisition?
• Profitable Business
• Scalable Organization
• Exit / Liquidity?
12
14. # Investments & Pace
• How many investments at what size/stage will you make?
• How much are you reserving for follow-on investments?
• How fast do you plan to call & deploy capital?
• What Qs will you ask where the answers clearly determine a yes or no
decision?
• How do you define “traction”? Do others agree with your definition? Have
you seen it before?
• What % of investments do you expect to get to next round? what % do you
expect to follow-on? what % do you expect to exit?
• How many small / med / large exits do you expect & when will they exit?
15. Investment Allocation Strategy
• How long will companies take to exit / reach liquidity? (3-10+ yrs)
• How long is your investment cycle? (ex: 3-5 yrs)
• When will capital be returned? (1X in 5-10 yrs, 2-5X in 8-15 yrs)
• Simple allocation for $10M investment budget over first 5 years
• 50% initial investment + 50% reserved for follow-on
• ~100 1st checks @ $50K each ($5M), ~20 checks / yr
• ~20 2nd checks @ $250K each ($5M), ~4 checks / yr
1 2 3 54 7 8 109 11 12 13 15146
1 5432
50
15
.. .. ..
16. Returns Model
• How many exits / what size do you expect and when?
CONFIDENTIAL /
/
FEBRUARY23,2016PAGE4
Legal review
Return Multiple
(Blended)
Gross Exit Value Per
Company
% of Companies that Yield
Return Multiple at Exit
Number of Companies Potential Returns2
50X $500M+ 2% 18 $360,000,000
20X $100M+ 5% 45 $360,000,000
5X $20M+ 10% 90 $180,000,000
1X $3M 23% 207 $31,050,000
0X $0 60% 540 $0
Total Returns $931,050,000
Fund Multiple 4.7X
Theoretical Model Assumptions:
• Fund Size: $200M
• Total Invested Capital: $174M
• Number of Portfolio Companies: 900
Lots of Little Bets: we believe a large, diversified portfolio of early-stage investments
reduces risk and maximizespotential return relative to “traditional” VC funds
1. Model is theoretical and is provided for illustrative purposes only. Model is not based on past performance and makes certain material assumptions and projections which may or may not prove accurate. Model does not
purport to guarantee future returns, and returns for investors in Fund IV may be less or more than the returns reflected in this model. “Estimated Returns” and “Fund Multiple” represent theoretically possible results for
Fund IV in the aggregate and do not account for carry and certain other deductions and expenses, which would reduce the amountsreturned to investors.
2. Potential Returns = (Number of Companies) x (Average InvestmentPer Company) x (Return Multiple).
Theoretical Fund Returns Model1
• Generally investing between $50,000 to $250,000 on the first check
• Follow-on investments in top-performing companies, ~ 20% of the portfolio
23. 500 Startups
• “Lots of little bets”: large portfolio of co’s (>200/fund)
• Silicon Valley pedigree: PayPal/Google alumni, geek evangelism
• Global Approach: Silicon Valley HQ + Multi-Country Team/Reach
• Focus on seed-stage, sw + internet startups, post-MVP / pre-A
• Accelerator: 25-50 co’s, structured curriculum, office, support staff,
founder/mentor community, investor intros, pitch prep, demo days
• Dedicated consulting svcs for customer acq (“Growth Hacking”)
• Conferences, Events, Education, Community, Content, CULT.
24. 500 Strategy: Lots of Little Bets*
1) make lots of little bets
on pre-traction, early-
stage startups
3) wait 5-10 years for returns:
-10-20% small exits @1-5X ($5-25M+)
-5-10% larger exits @5-20X ($25-250M+)
-1-2% unicorns @20-50X+ ($250M-1B+)
*See Peter Sims book: “Little Bets”
2) over the next five years, double-
down on top 20-30%
~500 co’s @ $100K 1st checks
100-200 co’s @ $200-500K
2nd/3rd checks
(target 25-50 exits @ $100M+)
(assume high failure rate ~50-80%)
26. Legal review Partner approval
Angel Pre-Seed Seed Post-Seed Series A/B Growth
Accelerator
Seed
“Distro"
Follow-On
Selection Criteria – 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
27. “MicroFund” Strategy
CONFIDENTIAL /
/
AUGUST19,2015PAGE‹#›
Micro funds and Main funds
Global Fund
Seed, A, B
Access to regional/vertical expertise
Access to regional/vertical deal flow
Co-investment/follow-on opportunities
The co-investment strategy shown represents 500 Startups and Fund IV’s current investment strategy and may vary at the discretion of 500 Startups Management or Fund IV’s general partner.
Co-invest Fund
Series C, D, …
GeographicMicroFunds
MENA EEU Turkey VietnamNordic Africa
LatAm SEA Thailand Korea Japan India
VerticalMicroFunds
Mobile
E-com
Fintech
SaaS
IoT
Video
Edtech
Health-
tech
Fashion
+Beauty
Real
Estate
29. The Lean Investor
Make lots of little bets:
• Start with many small “experiments”
• Filter out failures + small wins
• Double-down on stuff that looks like it’s working
• Incubation: $0-100K (“Build & Validate Product”)
• Seed: $100K-$1M (“Test & Grow Marketing Channels””)
• Venture: $1M-$10M (“Maximize Growth & Revenue”)
30. Investment Stage #1:
Product Validation + Customer Usage
• Structure
– 1-3 founders
– $0-$100K investment
– Incubator environment: multiple peers, mentors/advisors
• Test Functional Prototype / “Minimum Viable Product” (MVP):
– Prototype->Alpha, ~3-6 months
– Develop Minimal Critical Feature Set => Get to “It Works! Someone Uses It.”
– Improve Design & Usability, Setup Conversion Metrics
– Test Small-Scale Customer Adoption (10-1000 users)
• Demonstrate Concept, Reduce Product Risk, Test Functional Use
• Develop Metrics & Filter for Possible Future Investment
31. Investment Stage #2:
Market Validation + Revenue Testing
• Structure
– 2-10 person team
– $100K-$1M investment
– Syndicate of Angel Investors / Small VC Funds
• Improve Product, Expand Customers, Test Revenue:
– Alpha->Beta, ~6-12 months
– Scale Customer Adoption => “Many People Use It, & They Pay.”
– Test Marketing Campaigns, Customer Acquisition Channels + Cost
– Test Revenue Generation, Find Profitable Customer Segments
• Prove Solution/Benefit, Assess Market Size
• Test Channel Cost, Revenue Opportunity
• Determine Org Structure, Key Hires
32. Investment Stage #3:
Revenue Validation + Growth
• Structure
– 5-25 person team
– $1M-$10M investment
– Seed & Venture Investors
• Make Money (or Go Big), Get to Sustainability:
– Beta->Production, 12-24 months
– Revenue / Growth => “We Can Make (a lot of) Money!”
– Mktg Plan => Predictable Channels / Campaigns + Budget
– Scalability & Infrastructure, Customer Service & Operations
– Connect with Distribution Partners, Expand Growth
• Prove/Expand Market, Operationalize Business
• Future Milestones: Profitable/Sustainable, Exit Options