I'm Dave McClure, Founding Partner at 500 Startups, ASK ME ANYTHING!


#1

I’m a geek, investor, former coder and entrepreneur, occasional blogger and internet marketing nerd. I’ve lived in Silicon Valley for over 25 years and I’m passionate about startups and entrepreneurship. I’ve invested in hundreds of companies all over the world.

I’m a co-founder and managing partner of 500 Startups (http://500.co), a global venture capital firm with $330M in committed capital started by PayPal and Google nerds. We have invested in over 1,800 companies across 50+ countries including: Credit Karma, Grab, Twilio (NYSE:TWLO), SendGrid, Udemy, Ipsy, TalkDesk, Intercom, MakerBot (acq SSYS for $400M), Wildfire Interactive (acq GOOG for $350M), and Viki (acq Rakuten for $200M).

500 Startups invests in companies building consumer and business internet services. Our headquarters are in Silicon Valley, although our team speaks 25 languages and is all over the world, including San Francisco, Silicon Valley, New York, Los Angeles, Canada, Mexico, Brazil, India, China, Korea, Japan, Taiwan, Singapore, Malaysia, Thailand, Vietnam, UK, Turkey, and the Middle East. In addition to investment, we help startups with product and marketing, customer development, design and usability, online distribution, business metrics, and fundraising.

Looking forward to answering your questions around investing, bringing Silicon Valley to other regions such as Africa, and our upcoming Geeks on a Plane trip.


#2

#3

Hey @davemcclure

Glad to have you with us! And it’s great to see the awesome work you’re doing across so many regions/countries (inc.Nigeria) - places where typical SV firms shy away from. Having said that;

  1. Do you ever wonder if you’re too early for a foreign market?
  2. If yes, do you consider the effect of too much money/hype disrupting a fragile ecosystem?

Of course as a pro, I’m sure you’ve factor in the potential loss of time/money if things don’t pan out as planned. Just keen on your thoughts of unintended consequences…


#4

Hello Dave, you have shown some interest in Africa - what makes you think the timing is right? Could you not be too early for the market?


#5

Hi @davemcclure, thanks for doing this!

Having invested in startups and founders based in a number of countries, I’d like to get your thoughts on what markets an African entrepreneur should build for:

– just the countries where s/he is based
– the whole continent perhaps
– or other markets outside of where s/he is based (incl. the US)

Bonus – What industries/sectors are you most excited about when it comes to Africa (if possible, Nigeria in particular)?


#7

Hi Dave, great to have you on here. Having seen all these companies go through 500 Startups, what do you see as the differentiator between the more successful startups and the ones that don’t do so well?

And what are some of the trends you’ve seen in the African startup scene based on your recent investments?


#8

Hi Dave,

Nice to have you. Thank you for your time. So I have been fortunate to meet with some of 500 partners, from Clayton to Tristan, and they are quite incredible, human and helpful. I interviewed in SF last December.

  1. What’s 500 actual philosophy on investing in two competing companies in the same category, from the same market? That was our hurdle after all things were cleared, but have been asked for a reapplication. So we are looking at 21.

  2. We are in the Trump era, and entering the US is getting a bit dramatic for internationals. No one knows what to expect. What’s 500 approach to helping companies in this regard, and can we expect 500 Lagos/Nairobi any time soon so we don’t have to travel overseas?

  3. Any preference for companies with prior investment?

  4. You are Clinton’s fan and clearly very unhappy with Trump’s election. What’s your take on Peter Thiel?

  5. Uber or Lyft?


#9

Hello Dave, good to know that you believe in African tech. So I wanted to ask you. What key metrics will you consider before picking a Fintech startup from Africa, is it the idea, team, traction or domain knowledge? What will make you select and fund an African fintech startup?


#10

As early as 2011, 500 startups started betting internationally, today approximately ~25% of all 500 Startup investments are international (Outside the US).

I have 2 and a half Questions:

  1. Following all this excitement are we to expect an African on the core 500 startup team anytime soon? To better understand the opportunities available in the African market and the unique challenges facing entrepreneurs and by extension the funds hoping to drive growth behind these Entrepreneurs, you need a homegrown head. If the fund’s excitement for Africa is to taken on face value, i think that goes without saying. As we have seen a number of partners join your team from Asia, and South America due to your apparent interest in those climes.

  2. Its safe to assume you have access to information and research most people don’t on Nigeria. In 2001 and the years following there was much hopefulness about Nigeria and her emerging economic state. A lot of focus and parallel forecast on the MINT or BRIC countries followed. However, today some on that list have fared better than others; that may pass for gross understatement in some cases. My question is, knowing what we know now about Nigeria’s peculiar economic growth, in the course of almost 2 decades, relative to how businesses (today we have tech startups in that mix) have fared, which country or countries would you rather put in that bracket with us (Preferably from Asia), and based on what economic conditions and trajectory?

  • Lastly, On the scale of satisfaction what american dish would you more closely compare to the Nigerian Jollof? If you haven’t had Nigerian jollof, i believe @somtoifezue can hook you up on 500dishes.

-#eyecandy

Fair warning, Jollof rice + Dodo (Slightly burnt) + Double peppered Asun is an unholy mixture. Men have switched nationalities as a result. Welcome to Nigeria.


#11

Nice to have you here @davemcclure. Tech is on the rise in Africa and it is exhilarating to know that the world is taking notice-here’s my question: what will be the highpoint of #500STRONG visit to Lagos Nigeria for you?


#12

DAVE FUCKIN MCCLURE!!!

(I’ll edit this with a question when I’ve calmed down)

Alright. Questions:

  1. Are you thinking of investing or starting an SSA-specific find?

  2. What (if anything) is your thesis on investing media businesses?

  3. Why did you take the non-traditional approach of making many smaller investments and aim for “sluggers” vs “home runs”?

  4. Do you realise how relevant #unsexy is to emerging markets?


#13

Hello @davemcclure, it’s nice to have you here.

  1. What do you particularly look out for in a startup before investing in it?

#14

Hey Dave,

Thanks for doing this and hope to meet you when you’re in Nigeria.

  1. What 4 apps never ever leave your home screen.

  2. Last year, we had quite a number of visits from Silicon Valley folks, especially investors. A common thread was every founding team must have a technical co-founder, in fact it seemed like you had no business “playing” startup if your technical co-founder didn’t own 99.9% of the company and the other 4 founders share the remaining 0.1%. Do you share this view? What are your thoughts on a founding team that has no technical co-founder but have a sustainable and scalable way of building their tech… e.g. early employee?

  3. About 3 Nigerian startups have passed through 500 Startups now and there’s another in therror current batch. What’s your opinion on the quality of these Nigerian founders? Any lessons learnt from these 3 so far that is likely to influence the choice of future Nigerian 500 startups applicants?

1 more question :). What’s the story behind the hat?


#15

Hi Dave.

It’s a pleasure (for me, and hopefully for you) to be here right now.

My question is short: might you have any plans for a SSA fund?

Thank you!


#16

Hi Dave,

Regarding cross-border investing – how does a worsening exchange rate environment (such as Nigeria is currently experiencing) affect how you think about risks/opportunities for return as an investor?

Thanks


#17

Hi Dave! Great to have you here! Big fan of 500 Startups. Been around your office in San Francisco.

I reached out to 500 Startups some time ago and someone on your team told me we were too early for you guys to invest, despite the fact that they liked the product (which I agree actually, it was way too early at the time).

I know a couple of people have already asked almost the same thing but I’ll rephrase mine:

  • When you say “early stage” where does that start for you? At seed stage, do you need to see a certain amount of revenue/users generated first? In other words, is there a cut off? For example, is the mind set “if it has made up to $50k in revenue, then it’s worth looking at” or “$4k is good enough for us”? Just trying to get a better understanding of how you guys work. You might have even ended up answering this completely before you scroll down but I’m throwing it in there just in case.

  • Do you guys invest in Series A & B rounds or is it just seed (and I imagine pre-seed)?

  • Are there investment philosophies you guys follow when you invest in the US that you have to change when you’re investing in an emerging market? What have the differences been for you guys? What fears did you have? Which of them played out how you feared it would and which ones meant nothing ultimately?

  • With Lagos being one of the major tech hubs in Africa, is it possible that you guys will have an office in Lagos within the next few years?

I’ll stop here for now and let you answer :slight_smile:


#18

Hey Dave, do you really accept startups directly into your accelerator program or you need some kind of introduction before considering startups from Nigeria to accept?

Nigerian jellof is better than the best so no discussion on that.

Would you accept startups that will take almost 3 years before getting to profit ?

Are there specific thing (maybe 4) that you consider before taking startups into your accelerator program?

Do you really invest in ideas or founders?

Will you prefer tech startups with a developer as a team member or just 2 founders that knows what they are doing (this is personal for me).


#19

Hi Dave,

The 500 startups investment thesis strongly resonates with me. I patched it together by watching a lot of Dave McClure on youtube. I have 3 questions on “thesis market fit” in Africa.

  1. There have been very few African tech exits, small or big. The big in African terms were small in American terms. There is only 400 companies in the whole of Africa that have $1bn in sales. Will this alter the way you value companies and the percentages you will acquire for a $100k seed check ? Your accelerator values companies at $2.5m post right out of the gate regardless where they are from ? Should it not be adjust to adjust for lower expected exit values to make fund returns work?

  2. Africa’s per capita income is very very low. The challenges facing 99.5% of the consumers are very elemental such as power, finance, healthcare, education, food (agriculture), media. Is your current African portfolio of companies addressing people on $3 a day which is 99.5% of the consumers ? The top 0.5% are already online and transacting but they are a very poor reflection of the next 200-300mn smartphone owners. Business models/products that don’t work at these very low price points will not succeed to scale in Africa ? This narrows your pool of companies you should invest in for big exits ?

  3. Part of the argument from your side for bigger exits in the future is that smartphones, payments and infrastructure will all improve significantly over the 10 year life time of the fund creating a large consumer market. I agree smartphones and payments will improve allowing you to address many more consumers on $3 a day. However infrastructure in my opinion will not improve enough to make B2C logistics cheap enough to allow for B2C ecommerce to flourish (The jury on Konga and Jumia is still out). Should you therefore mostly focus on low cost digital only models ? Secondly is a 10 year fund adequate for a very low exit, low liquidity environment or is more patient capital required to avoid fire sales at the end of the fund?

I have many more question and will make sure i bump into you at the GOAP tour.

Bastian


#20

hi folks, sorry took me a few minutes to get logged in here… will start replying to Qs now.

  • dave mcclure

#21

yes, we often worry that we might be “too early” for some markets, however we do our best to figure out if there’s the right combination of market opportunity, talented entrepreneurs, and available investment capital. most of the time, we know we will be “early”, but that’s perhaps better than being too LATE.

we don’t usually worry that “too much money / hype” is the biggest challenge or problem for new ecosystems – typically it’s a LACK of capital and or too much negativity that’s the challenge.