The big wigs at 500 Startups gave a brief but exhaustive look into what it takes to be a venture capitalist and how to adapt to various dynamics in the investments business.
The session was very informative and highly insightful with the founder and managing team at 500 Startups, one of the biggest tech investment vehicles in the world speaking to guests at length.
Taking turns to cover aspects of what it calls “VC Unlocked,” the big wigs at 500 Startups comprising CEO/Founding Partner Dave McClure, Venture Partner Monique Woodard and Brazil/Latin America Venture Partner Bedy Yang, gave a brief but exhaustive look into what it takes to be a venture capitalist and how to adapt to various dynamics in the investments business.
Here are the highlights of the session:
500 Startups is one of the active seed investors in the world with presence in over 20 cities and a portfolio spanning about 1700 companies globally.
In the 500 Startups portfolio of companies, there the categories of business: 3 Unicorns (over $1 billion valuation), 30+ Centaurs (typically $100–999 million valuation).
The amount of startups that are valued above $1 billion has grown from just 3 between 2000 & 2010 to 118 between 2015 and 2016.
Many of the companies that have gone to earn above $1 billion or more in valuation have been very disruptive.
Tech/tech-enabled startups grow faster than traditional businesses (It Marriott 88 years to build its portfolio of 600+ locations, Airbnb achieved same in 4 years).
Only about 1–2% of seed stage startups go on to be unicorns (above $1 billion valuation).
500 Startups likes to invest really early in a startups life cycle (usually seed stage).
Breakdown of funding rounds and how much 500 Startups typically commits to its investment at each stage: Incubation ($0–$100k), Seed stage ($100k — $2M), Series A/B ($2M — $10M), Series B/C ($10M — $50M)
Chances of spotting a unicorn at seed stage is less than 1%. (Sequoia Capital has the best spot rate in the VC business with 5%).
About 50% of pre-seed investments get to Series A, about 25% of Series A investments get to Series B and about half of those get to Series C and so on.
500 Startups believes it’s best to invest early in a startups life cycle — it’s usually too late to make any meaningful return without committing a huge investment the farther a company is in its fundraising cycle.
Notable quotes from VC Unlocked: Lagos Edition.
“Writing a lot of small checks is what will grow [the Nigerian] ecosystem. Entrepreneurs are not the problem, investors only looking for the big buys are.” — Dave McClure on investment culture in Nigeria.
“We aren’t looking for billion Dollar companies. We’re looking for 50x companies — at least until the market develops.” — Dave McClure on the kind of startups 500 Startups is looking to invest in here in Nigeria.
“We don’t invest in ideas. We invest in startups that have a product and product fit.” — Monique Woodard on the approach 500 Startups takes in its investment strategies.
“You can replicate Silicon Valley here in Lagos if you study what makes Silicon Valley what it is. In fact, you’d do it faster.” — Dave McClure on how Nigeria can get to Silicon Valley status.