changes in venture capital & startup ecosystem (#h2osummit)

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slides from my talk on changes in the venture capital & startup ecosystem for #H2Osummit conf (Silicon Valley, Oct 2013)


  • Changes in Venture Capital @DaveMcClure H2 Summit October 2013
  • This Talk is About Industry Changes: Daft Punk Startup Myth Busting + Deconstructing: The Series A Crunch 500 Strategy: Lots of Little Bets Venture Metrics: The Lean VC Scalable Distribution: Platforms & Community Startup Geography: Local vs. Global vs. Valley
  • Dave McClure Founding Partner & Chief Troublemaker, 500 Startups 00s & 10s: VC: Founders Fund, Facebook fbFund, 500 Startups Angel: Mashery,, SlideShare, Twilio Marketing: PayPal, Simply Hired,, OReilly 80s & 90s: Entrepreneur: Aslan Computing (acqd by Servinet/Panurgy) Developer: Windows / SQL DB consultant (Intel, MSFT) Engineer: Johns Hopkins88, BS Eng / Applied Math
  • 500 Startups Global Seed Fund & Startup Accelerator What is 500? ~$75M under management ~35 people / 10 investing partners Locations: SV, NYC, MEX, BRZ, IND, CHN, SE Asia 1000+ Founders / 200+ Mentors 25+ positive exits in ~3 years 500+ Portfolio Cos / 40+ Countries Wildfire (acq GOOG, $350M) MakerBot (acq SSYS, $400M) Viki (acq Rakuten, $200M) Twilio SendGrid Credit Karma VivaReal Udemy Zozi The RealReal Virool Visually Gengo PicCollage 9GAG
  • 500 Startups: Global Seed Fund Over 150+ startups outside US, in 40+ countries
  • Startup Investor Ecosystem Angels & Incubators ($0-10M) Micro-VC Funds ($10-100M) Big VC Funds ($100-500M) Mega VC Funds (>$500M) TrueFirst Round A16ZAtomico Y-Combinator TechStars SoftTech (Clavier) Felicis (Senkut) SV Angel (Conway) SequoiaGreylock Union Square Floodgate (Maples) Foundry Incubation Seed Series A Series B Series C+ Bootstrap, KickStarter, Crowdfunding
  • Industry Changes, Challenges SW Startup Efficiency, Reduced CapX Costs Growing Market, Growing Platforms VC Industry Upheavals (2000, 2008) Super Angel -> Micro VC: Seed Funds (ex: FRC) Incubators & Accelerators (ex: Y Combinator) Big VC (ex: A16Z) & Platforms (ex: Angel List)
  • Daft Punk Lean Startup: Simpler, Faster, Cheaper, Smarter 1. Startup Costs = Lower. 2. # Users, Bandwidth = Bigger. 3. Transaction $$$ = Better. Building Product => Cheaper, Faster, Better Getting Customers => Easier, More Measurable Iterative Product & Marketing Decisions based on Measured User Behavior
  • Changes in Tech Startups LESS Capital required to build product, get to market Dramatically reduced $$$ on servers, software, bandwidth Crowdfunding, KickStarter, Angel List, Funders Club, etc Cheap access to online platforms for 100M+ consumers, smallbiz, etc MORE Customers via ONLINE platforms (100M+ users) Search (Google) Social (Facebook, Twitter) Mobile (Apple, Android) Local (Yelp, Groupon, Living Social) Media (YouTube, Pinterest, Instagram, Tumblr) Comm (Email, IM/Chat, Voice, SMS, etc) LOTS of little bets: Accelerators, Angels, Angel List, Small Exits Y Combinator, TechStars, 500 Startups Funding + Co-working + Mentoring -> Design, Data, Distribution Fast, Cheap Fail, network effects, quantitative + iterative investments
  • Angel* List: It Rocks. Startups & Investors Activity & Metrics Platform & APIs Syndicates & Backers *ps not just for Angels, or USA
  • Got Crunched Yet? Source: Bullpen Capital
  • Before & After 2 Dot-Com Crashes Daft Punk Startup: Simpler, Faster, Cheaper, Smarter Before 2000 Sun Servers Oracle DB Exodus Hosting 12-24mo dev cycle 6-18mo sales cycle 3B people online 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
  • 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
  • Platform(s) & Community Mentors: Engineering, Design, Marketing Distribution: Search, Social, Mobile, Video, Local Global: LatAm, Asia, India, EU, ME, Africa Social: LinkedIn, Quora, Angel List Angel List, Second Market, Trusted Insight, MatterMark, Funders Club
  • Platforms 2.0 Search, Social, Mobile, Video, Messaging
  • Distribution Platforms Customer Reach: 100M-1B+ Search: Google, Baidu, Yahoo/Bing, Yandex Social: Facebook, Twitter, LinkedIn, TenCent/QQ, WeChat Mobile: Apple (iOS), Android Media: Video (YouTube), Photos (Instagram, Pinterest), Blogs Comm: SMS, IM (WeChat, WhatsApp), Skype, Phone/Voice, etc
  • Going Local, Going Global web gets bigger -> world gets smaller
  • Local vs Global? The Valley is Unique (sort of) Emerging / Developing Markets Too Soon? Too Late? Valuation? English, Chinese, Spanish, Arabic Investor Ecosystems Mentorship & Community Limited History of Exits & IPOs Does the Future look different? (yes, we hope)
  • Global Trends Growth of Global Languages (see 1B+ speakers: Mandarin, English 300-500M+ spkrs: Spanish, Arabic Smart Device Proliferation mobile, tablet, TV, console, auto, etc More Young, More Old ($$$) Users Online More Bandwidth, More Video, More Social, More Mobile Wealthy Chinese + Indian, Web + IRL Globetrotters ($$$B) Acceleration of Global Payment, E-Commerce, Logistics, Delivery Dramatically Reduced Cost: Product Dev, Customer Acqstn Global Distribution Platforms US: AAPL, FB, AMZN, GOOG (Search, YouTube, Gmail, Android), LNKD, Twitter Asia: Baidu, Tencent/WeChat, Alibaba, Sina/Weibo, NHN, Softbank, Rakuten
  • Questions? Comments? Heckles? Thanks for Listening Feedback Appreciated Were Still Learning More Info? (our company) (my blog) (our fund) Dave McClure, @DaveMcClure