VC  Evolu)on:  Geeks  Got  Next.  (aka  “So(ware  Eats  Venture  Capital”)  

@DaveMcClure  @500Startups  @DigitalOctober  Landing  Page  Event    

(Moscow,  Sept  2012)  

Shit  I’m  Gonna  Talk  About  Pro  Tip:  Leave  Now  B4  This  Gets  Ugly  

•  500  Startups:  Dude.  Srsly.  Like,  WTF?  •  Angel  List:  Use  It,  You  Fucking  Idiot.  •  Making  Venture  Work  BeJer  (This  is  Easy)  

–  MoneyBall  4  Startups  –  Startups  #FAIL  &  VCs  #SUCK.  –  Early  Stage  InvesRng  =  Risk  ReducRon  –  Your  Diligence  Is  an  Illusion  –  Guild  of  Geeks  /  Mentor  Network  

•  Making  Incubators  Work  BeJer  (This  is  Hard)  –  It  Takes  A  Village:  Mentors,  Advisors,  Investors  –  EducaRon  &  Community  –  Outlier  CompeRRon  &  Success  Behavior  Modeling  –  Product,  Market,  Revenue,  Pitch  –  Customer  AcquisiRon,  Growth  Hacking,  &  Pla]orm  DistribuRon  –  Winners  Win,  Losers  Lose,  Tweeners  Tween  

•  Scaling  VC  •  Going  Intl  

Dave McClure Founding Partner & Sith Lord, 500 Startups

00’s & 10’s: •  Investor: Founders Fund, Facebook fbFund, 500 Startups •  Companies: Mint.com, SlideShare, Twilio, WildFire, SendGrid •  Marketing: PayPal, Simply Hired, Mint.com, O’Reilly Media •  Speaker: Lean Startup, Web 2.0, Stanford/Facebook

80’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: SRSLY, WTF? Mountain View, CA – Founded 2010

•  Seed Fund & Startup Accelerator –  10,000 sq ft / Silicon Valley HQ –  15 people / 8 investing partners –  Design, Distribution, Data –  US, Brazil, Mexico, India (+ more) –  600 Founders / 180+ Mentors

•  375+ Portfolio Co’s / 20+ Countries –  Wildfire (acq GOOG, $350M) –  Twilio –  SendGrid –  TaskRabbit –  MakerBot –  9GAG

Angel  List*:  It  Fucking  Rocks.  (Use  it,  You  *&#%  Idiot)  

•  Startups  &  Investors  •  Ac)vity  &  Metrics  •  PlaTorm  &  APIs  

•  *ps  –  it’s  not  just  for  Angels,  US  

Making  Venture  Capital    Work  BeJer  

This  is  Actually  Pre^y  Easy,    Since  Most  VCs  /  Funds  

Suck  Balls.  

MoneyBall  4  Startups  

h^p://slideshare.net/paulsingh/  moneyball-­‐a-­‐quanRtaRve-­‐approach-­‐to-­‐angel-­‐invesRng-­‐ausRn-­‐tx-­‐aug-­‐2012  

1.  Make  Lots  Of  LiJle  Bets  2.  Count  Cards  (Monitor  Progress  &  Stats)  3.  Double  Down  on  Winners  

Startups  #FAIL  &  VCs  #SUCK.  But  You  Knew  That  Already  

•  Play  Blackjack,  Not  RouleJe.  (Count  Cards.  Make  Lots  of  Li^le  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  Fucking  Brand  That  MaJers.  •  Increase  Sample  Size.  •  Don’t  Make  Big  Bets  Too  Early.  •  Simplify  Revenue  Model.  (as  in:  HAVE  ONE,  you  fucking  idiot)  •  Bet  on  Hackers,  Hustlers,  Designers.  •  Create  a  Community.    •  Invest  afer  they  have  a  funcRonal  prototype.  •  Be  early  and  contrarian,  or  late  and  right.  •  Use  The  Tools  (you  fucking  idiot):  Twi^er,  Facebook,  Quora,  Instagram,  Pinterest,  etc  •  Talk  /  Blog  /  Present  about  something  u  know  about,  care  about.  •  Admit  Your  Faults  Frequently.  •  Laugh  a  li^le  bit.  (at  yourself,  not  others).  •  Don’t  worry  too  much  about  legal  structure.  •  Worry  a  SHIT  TON  about  valua)on.  (because  your  exits  will  be  SMALL)  

Bet  on  Singles,  Not  HomeRuns.  (Look  for  Ichiros,  Not  Barry  Bonds)  

Early-­‐Stage  Risk  Reduc)on  

•  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  Be^er  Than  Your  Homework.  

•  Trusted  Referrals  >>  Diligence  •  FuncRonal  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.  

TIRED:  White  Guys  in  Khakis  &  Blue  Shirts.  WIRED:  Guild  of  Geeks.  Mentors.  YC,  500.  

Making  Incubators    Work  BeJer  

 (This  is  Actually  Pre^y  HARD.)  

Find  &  Fund  PotenRal.    Help  Them  Improve.  

Educa)on  &  Community.  Access  to  Mentors.  Access  to  Investors.  

If  You’re  Lucky,  Discover  [a  few]  Winners.  

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).  

EducaRon  &  Community  

•  Mentors,  Investors  •  Design,  Data,  DistribuRon  •  Pla]orm  Partners  •  Sponsors  &  Strategics  •  MarkeRng  &  Visibility  

Outlier  CompeRRon  +    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  funcRonal  use,  improve  design/UX  •  Market:  test  usage,  distribuRon  channels  •  Revenue:  test  cust  acq  cost,  revenue,  *Rming*  

•  Work  on  Pitch,  Help  Find  Co-­‐Investors,  etc  

Hacker,  Hustler,  Hipster  

•  Hacker:  engineers  &  developers  •  Hipster:  design  &  UX  •  Hustler:  markeRng  &  business  

1.  Build  funcRonal  prototypes  2.  Improve  UX  so  people  convert  3.  Scale  customer  acq  &  distribuRon  

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  a  fucking  arrogant  asshole.  

Scaling  VC  

•  VC  is  an  immature  &  fragmented  market  •  It’s  Ripe  for  DisrupRon  •  It  Hasn’t  Scaled  (Yet)  

Going  InternaRonal  

•  Brazil,  Mexico,  India  •  Canada,  UK,  Japan  •  China,  Indonesia,  Russia,  Turkey