Dave McClure is a founding partner at 500 Startups, a global seed fund and startup accelerator. 500 Startups has invested in over 1700 companies across 60+ countries. McClure discussed building startup ecosystems in emerging markets like MENA. He said the critical factors include optimism, mentorship, universities/talent, capital/infrastructure, product skills, platforms/customers, payments, and exit opportunities like IPOs and acquisitions. The most important thing is developing a culture of innovation and entrepreneurship locally, even if not physically located in Silicon Valley.
8. Data from ~600 companies from 500 Startups Funds I + II (2010 - 2013 cohorts)
$1-10M
Q: How Many Startups to Get 1 Unicorn?
Unicorns 50:1 | Centaurs 20:1
18. Q: How many VC funds do we
need to build an ecosystem?
âą USA: ~800 VC funds; 2.5 per 1M ppl
âą China: ~700 VC funds; 0.5 per 1M ppl
âą MENA: ~30 funds; 0.1 per 1M ppl
NOT EVEN CLOSE!
19. A Brief History of
US Venture Capital
âą first VC funds: ARDC, JH Whitney (1946)
âą SBICs / Small Business Investment Act (US, 1958)
âą Shockley -> âTraitorous Eightâ -> Fairchild (1958) -> Intel (1968)
âą Sutter Hill (1964), Venrock (1969), Kleiner, Sequoia (1972)
âą ERISA laws + âprudent man ruleâ (1974, 1978)
âą Pension Funds in VCs: $39M (1977) -> $570M (1978) -> $4B (1989)
âą Tech Explosion: 80âs, 90âs, 00âs
âą Microsoft (1975), Apple (1976), Oracle (1977), Sun (1982), Cisco
(1984), Amazon (1994), eBay (1995), Yahoo (1995), Google (1998),
PayPal (1998), LinkedIn (2002), Facebook (2004), Twitter (2006)
20. Q: How to Bring 500 VC Funds
to Emerging Markets?
21. A) Invite VCs to Dinner?
Q: How to Bring 500 VC Funds
to Emerging Markets?
22. A) Invite VCs to Dinner?
B) Give VCs some Arabic Coffee?
Q: How to Bring 500 VC Funds
to Emerging Markets?
23. A) Invite VCs to Dinner?
B) Give VCs some Arabic Coffee?
C) Take VCs for a Ride on a Camel?
Q: How to Bring 500 VC Funds
to Emerging Markets?
Umm, NO.
24. A) Invite VCs to Dinner?
B) Give VCs some Arabic Coffee?
C) Take VCs for a Ride on a Camel?
⊠orâŠ
D) Invest in VCs!*
Q: How to Bring 500 VC Funds
to Emerging Markets?
Umm, NO.
26. The Lean Investor
Make lots of little bets:
âą Start with many small âexperimentsâ
âą Filter out failures + small wins
âą Double-down on stuff that looks like itâs working
âą Incubation: $0-100K (âBuild & Validate Productâ)
âą Seed: $100K-$1M (âTest & Grow Marketing Channelsââ)
âą Venture: $1M-$10M (âMaximize Growth & Revenueâ)
27. Investment Stage #1: âš
Product Validation + Customer Usage
âą Structure
â 1-3 founders
â $0-$100K investment
â Incubator environment: multiple peers, mentors/advisors
âą 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)
âą Demonstrate Concept, Reduce Product Risk, Test Functional Use
âą Develop Metrics & Filter for Possible Future Investment
28. Investment Stage #2: âš
Market Validation + Revenue Testing
âą Structure
â 2-10 person team
â $100K-$1M investment
â Syndicate of Angel Investors / Small VC Funds
âą 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 Generation, Find Profitable Customer Segments
âą Prove Solution/Benefit, Assess Market Size
âą Test Channel Cost, Revenue Opportunity
âą Determine Org Structure, Key Hires
29. Investment Stage #3: âš
Revenue Validation + Growth
âą Structure
â 5-25 person team
â $1M-$10M investment
â Seed & Venture Investors
âą 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
âą Prove/Expand Market, Operationalize Business
âą Future Milestones: Profitable/Sustainable, Exit Options