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.”
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.
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.
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.
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.
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