slides from my talk @ Digital October (Moscow, Sept 2012)

1. VC
Evolu)on:
Geeks
Got
Next.
(aka
“So(ware
Eats
Venture
Capital”)
@DaveMcClure
@500Startups
@DigitalOctober
Landing
Page
Event
(Moscow,
Sept
2012)

2. 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

3. 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

4. 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 

5. Angel
List*:
It
Fucking
Rocks.
(Use
it,
You
*&#%
Idiot)
• Startups
&
Investors
• Ac)vity
&
Metrics
• PlaTorm
&
APIs
• *ps
–
it’s
not
just
for
Angels,
US

6. Making
Venture
Capital
Work
BeJer
This
is
Actually
Pre^y
Easy,
Since
Most
VCs
/
Funds
Suck
Balls.

7. 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

8. 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)

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

10. 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?

11. 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.

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

13. 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.

14. 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).

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

16. 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

17. 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

18. 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

19. 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.

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

21. Going
InternaRonal
• Brazil,
Mexico,
India
• Canada,
UK,
Japan
• China,
Indonesia,
Russia,
Turkey