Following Sam Altman’s commitment to offer follow-on investments to all companies that go through Y Combinator, McClure says 500 Startups has a different approach:
We make follow-on investments when we think we are going to make money and we don’t when we don’t think we are going to make money. It’s pretty simple. I think if other investors are worried more about my opinion than they are about the company’s performance, there is already a problem. I recognize it happens but that’s just part of the market. We generally wait until after Demo Day and after they have a term sheet from another investor. Signaling is important before Demo Day but we don’t worry about it after Demo Day.
McClure says 500 Startups does follow-on investments for 20-30% of its companies.
Japanese operator NTT DoCoMo has announced that it is investing in 500 Startups, as part of a deal that sees it launch its own mobile-focused incubator in Japan in partnership with the US company.
DoCoMo revealed plans for its own startup-focused venture last October, and it says that the project is worth 10 billion yen — approximately $109 million today. The new DoCoMo incubator program is focused on tablet and smartphone related startups in Japan, as you’d well expect from a mobile operator. The company has not revealed specific details of how startups can enter, there is no mention of a website as yet, but it is already saying that the deadline for applications closes on March 11.
500 Startups will specifically help startups tap into the North American market, but will assist with other regions and will also arrange “short study programs in Silicon Valley” to help connect the DoCoMo-backed businesses with the right people in the US.
500 Startups will now leverage AngelList for all applications after successfully testing out the platform.
According to McClure, in its previous round of testing the incubator set aside five spots for AngelList applicants, but ended up finding a lot more interesting startups than expected. In total, about 10 startups from AngelList ended up being picked for the current class, and a few more were close calls.
Beginning today, all startups interested in applying for the Spring 2013 Accelerator program can do so at angel.co/500startups. The program is open through March 1, with final decisions are expected by March 25.
Clarity, the startup that connects experts with entrepreneur advice seekers for one-on-one calls, today announced a $1.6 million seed investment round including a lot of notable investors, all of whom are Clarity users themselves, according to founder Dan Martell. In addition to 500 Startups, Investors include Baseline Ventures, Freestyle Capital, Mark Cuban, Boris Wertz from Version One Ventures and Real Ventures. Using Clarity to call Mark Cuban costs $166/minute.
500 Startups closed its tenth deal in India, backing technology startup ZipDial. Paul Singh said the investment was higher than the typical $250,000 ( Rs 1.3 crore) the fund invests in early-stage companies but was under $500,000. Bangalore-based ZipDial, has developed a mobile-engagement platform, which is based on the distinctively Indian concept of a “missed call”. A consumer just needs to make a call to a unique ZipDial number a company provides and disconnect after a single ring to receive an SMS or a call with details that the company wishes to provide.
The firm files an SEC document for a 500 StartupWallah fund, which would be focused on investments in India. And for a 500 Luchadores fund, for investing in Mexican startups. 500 Startups seeks to raise $5 million for those regions.
George Takei visits the 500 Startups office:
The Company announces 33 companies to be accepted for its fifth accelerator class. Rather than through referrals, this group is the first to come from an open open application process. The Company received hundreds of applications, from which 500 Startups selected eight companies. The participating startups follow a few key themes: Mostly the fund’s focus on international and female founders. Seven of the startups chosen, or 21 percent, have at least one female co-founder. And more than half of the companies came from overseas.
Launches application process through AngelList. Until now, companies needed a recommendation from a 500 Startups partner to join the program. McClure says the accelerator program previously avoided an application process because of the hassle associated with sorting through to get the good candidates. However, he says using AngelList in addition to its own network of founders and mentors should fix that problem.
We realized we were missing out on a lot of potentially good startups that weren’t connected to the Valley.
McClure expects about 500 startups to apply for the program’s fifth batch of companies but only plans to choose five to ten. 500 Startups offers entrance at 3-4 percent equity for any company that’s previously raised at least $250,000. (The firm says a typical accelerator pledges $50,000 for five percent equity and an option for up to $200,000 in future rounds.)
The Company invests in nine additional technology startup companies in Mexico, for a total of 16 Mexican companies through its subsidiary, Mexican.vc, based in Mexico City. 500Startups partner Santiago Zavala said that each of the very early stage startups, with 2-3 “very passionate cofounders,” would receive a $25,000 cash investment in addition to workspace and other services, including a startup bootcamp, in exchange for a 10% equity stake. One of the companies [[Rubberit]] is a mail delivery condom distributor.
The Company buys Mexican.VC. extending its range in Latin America and bringing Mexican.VC partners César Salazar and Santiago Zavala onto the team. According to McClure, 500 Startups made nine investments in Brazil, with another five or six in Chile, Argentina, and Mexico. With Mexican.VC, it expects to make an additional 20-30 investments in the region each year.
Mexico is the world’s 12th largest economy, according to Salazar, and might even be growing faster than Brazil. It also expects to see the number of Internet users double over the next five years.
SMASH Summit, a conference supported by 500 Startups, aims to teach startup how to “hack & dominate customer acquisition. Covering new “hack-tics” & strategies for Pinterest, Facebook, YouTube, Twitter, and more, you’ll leave armed & ready for EXPLOSIVE growth!”
The Company backs Jeeran, a local reviews site, which covers a handful of cities in the Arab world, with a current focus on Saudi Arabia and Jordan.
According to a SEC regulator filing 500 Startups is raising a new $50 million fund. The group’s first fund was $15 million and included 257 companies, a handful of which were later acquired by major tech companies. McClure said startups in international markets could account for 25% of its investments.
:McCLURE: I think the mentality of some Silicon Valley venture firms is to expect everything to come to them. We actually don’t. We get off our asses and go across the country and around the world.
The group also recently promoted Paul Singh and Christen O’Brien to partners.
In an interview just after Demo Day, McClure talks about the perfect formula for a startup: (hacker + hustler + designer) and why the three Ds — Design, Data and Distribution — are important for young companies. He says that the fund basically makes its $25K to $250K bets on companies with simple revenue models. “Things that are easily understood and make money.” He compares the 500 Startups to baseball:
If Sequoia’s the Yankees, we’re the Oakland A’s
A reference to Michael Lewis’ Moneyball, a book that chronicles the unexpected success of underdog Oakland A’s because of their strategic building of a winning team.
500 Startups seed accelerator is publicly launched by Dave McClure after being in stealth mode for the previous few months. The program offers between $25,000 and $100,000 funding in exchange for 5% equity (with some exceptions), and lasts for three to six months. 500 Startups offers more than Y Combinator — perhaps the best-known such program — but doesn’t match the additional $150,000 Yuri Milner and Ron Conway offer each Y Combinator startup on entrepreneur-friendly terms.
I think it’s a wonderful time to be investing in consumer Internet ideas, the macroeconomic picture for goods and services around the world is growing dramatically. In the US because of iPad devices you’re adding lots of young users and old users who weren’t in the market before.
In addition to funding, the 500 Startups Accelerator program offers access to 120 mentors, sponsorships from infrastructure providers like Microsoft, Rackspace, and Amazon Web Services, and office space at 500 Startups headquarters high over downtown Mountain View. They also get a chance to participate in a demo day, where they’ll present their creations to potential investors. Currently, 12 startups are participating in the program.
Even though 500 Startups is only a few months old, it has already made 8 investments outside the US (4 in Europe, 4 in Asia), most recently ChinaNetCloud.
Christine Tsai, former YouTube, Google Product Manager joins the Company as Principal. Tsai spent more than 7 years at Google, where she once led product marketing for YouTube and also worked in the AdSense and Google Analytics units. Most recently, Tsai was the lead for Google I/O, the company’s largest annual developer event.
SEC filings show McClure has raised $30m for his new fund, which will be called “500 Startups”.
McCLURE: 500 Startups is a new, edgy, risk taking seed fund which invests in early stage consumer internet companies. Incubator/seed investment funds are popping up left and right and we’re looking to differentiate ourself through edgier design. Our founder likes to swear. In public. A lot. Think Ari Gold, but for tech companies and without a suit.
We are not — *not* — your typical fund composed of a bunch of stiff white guys sitting around a board table. We’re young. We’re diverse (Women! People of color!). Our investments are blustering balls of sleepless eagerness, And the markets we’re looking to dominate are murky and emergent.
TechCrunch reports that Dave McClure is turning from an angel investor (who spends his own money) to a more organized venture capitalist (investing on behalf of limited partners) by creating his own fund McClure has been a direct angel investor in a half dozen or more startups, including Mint, Simply Hired, Mashery, TeachStreet and others, and has invested in dozens more through fbFund, a $10 million Facebook investment fund backed by Founders Fund and Accel, and FF Angel, a Founders Fund early stage fund. McClure says:
McCLURE: If investors don’t have operational backgrounds in design, development, or marketing from proven consumer internet companies, you probably don’t want their money.
Following stints working with Mint, SimplyHired, and Stanford as a lecturer, McClure joins Sean Parker at Facebookfb Fund in 2008 where he helped close more than 40 investments including Wildfire, Twilio, Bitly, andTaskRabbit.
He joined Paypal in 2001 as a Marketing Director rubbing shoulders with future founders of Valley staples like LinkedIn, Yammer, YouTube, and Yelp. As Dave put it, he’s been ”a witness to genius.
Dave McClure grew up in West Virginia and Maryland where his father was an elementary school music teacher. After graduating with an engineering and computer science degree at John Hopkins University, he took various programming roles, which led him to the West Coast where he founded his own consulting company called Aslan Computing. It was eventually acquired for under $1MM in what Dave described as, “spending 5-7 years doing a ton of work, for not very much money. It was more like a paid MBA and I wish I’d had that 5-7 years compressed to 1-2 years.” He adds, “There were a lot of things I learned that I would not have gotten as employee 300 at Paypal.”