Dave McClure

Founder & troublemaker at 500 Startups

THIS CHAT HAPPENED ON September 24, 2015

Discussion

Dave McClure@davemcclure · lost boy.
The king of curse, the dark lord of disruption, the baron of bull shit... I am ready for you to ask me anything; are you ready for the answers?
Adam Marx@adammarx13 · Freelance writer/editor and music addict
@davemcclure Hey Dave, It's a widely repeated statement among VC's and accelerators that (for many of them) the most important thing is the team, the people in which they invest. Given a product/service that has some potential, what sorts of qualities speak to you most in a person or team? To you, what makes someone magnetic?
Dave McClure@davemcclure · lost boy.
@adammarx13 actually we think team is important, but it's hard to tell what people are really like until you get to know them well / work with them a lot... so we tend to look at the product, the customers, and the business as the work product that the team produces. hopefully this avoids bias in looking at people and judging based on what we *THINK* they can do...
Ali Halabi@xalihalabi · Founder & CEO at Volt
@davemcclure @adammarx13 How do you look at solo / non-technical founders?
Adam Marx@adammarx13 · Freelance writer/editor and music addict
@davemcclure @adammarx13 That's a good point; one can't know how people really are (especially under pressure) after 1 or 2 simple meetings. Certainly the team needs to be a factor that buttresses an already promising product/service, not something that acts in place of one. Thanks!!
Dave McClure@davemcclure · lost boy.
@xalihalabi @adammarx13 well, if you're solo you better be DAMN GOOD. and we don't just look for "technical" founders, we look for folks who can: 1) build product (code or visual design) 2) market & sell the product 3) manage & grow the team mostly we look for founders who fit 1 or more of the above categories, and what is there vs. missing when startups ask us to invest. we also look a LOT at the potential for growth, and strategies for customer acquisition.
Ryan Hoover@rrhoover · Founder, Product Hunt
Dave! Welcome (this is going to be fun). I'll kick it off with two easy questions: 1) What's on your homescreen? 2) What app or product are you most embarrassed to admit you use?
Matt Silverman@mattjsilverman · Product Designer
@rrhoover "whats on your homescreen?" -- such a good question!
Dave McClure@davemcclure · lost boy.
@rrhoover morning Ryan :) my homescreen is full of a bunch of saved links to files... it's kinda messy. but my browser is pretty much constantly open to facebook, twitter, and email... which makes me terribly unproductive ;) app or product i'm most embarrassed to use? hmm... well i'm a social media douchebag so it's almost everything. but i'm not embarrassed!
Adam Marx@adammarx13 · Freelance writer/editor and music addict
@davemcclure @rrhoover "Social Media Douchebag" is going to be the name of my next ska-punk album I think ;)
Natalya Matyushenko@ambercamel · Co-founder/COO at Spycob
Hello Dave, How critical it is whether or not a startup generates revenue for its application to accelerator to be successful? We have multiple avenues for collecting payments from customers, some of which we already tested. For example, "Buy for $1" feature that allows to search discounts over 75%. We grow on 5-7% per week and we don't want to sacrifice growth to short term earnings. Hence, we do not expect our revenue growth to be anywhere close to subscription growth in the near term. Could the Pinterest type of model where the key driver of value is subscription base rather than actual cash flow be something of interest to the accelerator?
Dave McClure@davemcclure · lost boy.
@ambercamel for 500 startups, we like to focus on companies that 1) already have a shipping product, and 2) have some amount of usage and or revenue. the primary reason is it's easier for us to be helpful to companies when they already have users or customers, and we can focus on how to grow the business, improve the UX, and/or increase revenue or profits. these are much harder to work on if companies haven't shipped yet, or don't have much user / revenue traction.
Erik Torenberg@eriktorenberg · Former Product Hunt
@davemcclure You have SO much to be proud of. What's something you're _not_ proud of?
Dave McClure@davemcclure · lost boy.
@eriktorenberg oh gosh... i'm such a huge fuckup in so many areas. - i wish i was a better manager, and gave my team more props & respect when they do great shit - i wish i were a better parent, and had more time to spend with my kids - i wish it didn't take me so goddamn long to figure out startups & VCs & the valley (i'm still working on it at age 49) - i wish i weren't such an argumentative douchebag and was a little bit slower to anger / insanity - i wish i were taller, less bald, less fat, more sexy, and a lot smarter but then again, all in all i have a pretty fortunate life, and so i don't worry about all that shit and usually i'm just happy & grateful to be here... and hopefully i can be helpful to other folks. that makes me feel good :)
Andrew Ettinger@andrewett · PMM @Twitter // Previously @ProductHunt
Hey @davemcclure, which lesser-known startup/product to have gone through 500 do you wish everyone knew about?
Dave McClure@davemcclure · lost boy.
@andrewmettinger there's a bunch, but at the moment some of our best accelerator companies are: - TalkDesk - Intercom - Tout - Mayvenn - Conta Azul (brazil) - Realty Shares - Love With Food - PicCollage - there are many many others... apologies i just picked a few favorites :)
Hey @davemcclure what are your favorite books? and what are you reading now?
Dave McClure@davemcclure · lost boy.
@alfink92 some of my favorite books: - Guns Germs & Steel - Don't Make Me Think - Godel, Escher, Bach: An Eternal Golden Braid - The Mystery of Capital - Spent: Sex, Evolution & Consumer Behavior - Flatland - Ender's Game - Snowcrash
Adam Marx@adammarx13 · Freelance writer/editor and music addict
@davemcclure @alfink92 "Guns, Germs & Steel" is amazing. also heard his book "Collapse" is equally hard-hitting.
Ben Tossell@bentossell · newCo
@davemcclure Hey Dave - what is the craziest thing you've seen in a pitch that you can tell us about?
Dave McClure@davemcclure · lost boy.
@bentossell umm... someone tried to pass themselves off as a massage therapist / gift from one of our partners, and then tried to pitch their startup while i was getting a massage. pretty uncomfortable / weird / sketchy experience. and i wouldn't talk to that entrepreneur ever again... so PLEASE DON'T FUCKING TRY THIS PEOPLE. #ahem
Ed Choudhry@edch2020 · Founder and CEO of Sample Labs
@davemcclure @bentossell I thought ours was up there by putting red bull coolers in both offices for a couple weeks with our ipad app but dave was out the country that whole time.. :(
Ed Choudhry@edch2020 · Founder and CEO of Sample Labs
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Alex Cook@aacook · Freelance & NanaGram
Hey Dave, thanks so much for doing this AMA. A couple weeks ago Sam Altman released a post about the "Post YC Slump" (http://blog.samaltman.com/the-po...). He talked about how some YC startups grow quickly and then flatline after YC ends. Sam also gave some great advice on reporting on growth to investors and friends. Curious if you see a similar pattern at 500? Do your teams continue to update 500 on their progress after the accelerator is over?
Dave McClure@davemcclure · lost boy.
@aacook i think the experience is perhaps similar... lots of folks come out of 500 on a "high" and feeling like it was a great experience, but honestly the hard work of building a company is just beginning. that's not really a bad thing -- eventually, summer camp or college come to an end, and you have to get down to business and figure out what you want to do with your life, your startup, your product, and you need to build a sustainable business that produces products / services your users & customers care about... that's not easy, and even harder getting that to scale big. there are lots of moments of self-doubt, stalling out on product or customers, ups & downs, etc etc you have to motivate yourself and others every day to keep working hard, even if you don't always feel like it (or sometimes when you feel like shit). i don't have all the answers, but i know many folks get tired / fall by the wayside... it's not easy being an entrepreneur and getting a startup off the ground.
Dave McClure@davemcclure · lost boy.
ok folks, my apologies tried to keep up with all the Qs! it's about 20m over the time period for the AMA, and i gotta get back to some other work now... hope i got to most of your burning questions :) thanks & see you in the salt mines!
V.S.VIVEK@vsvivek93 · Unoccupied
@davemcclure Hey Dave, Thank you for doing the AMA. I have two questions regarding the Indian ecosystems. What are your thoughts about the Indian ecosystem? And how far is it from reaching the maturity of the valley? In the valley there is a lot of activity and knowledge sharing surrounding the startups like (designers , product , marketers and many other similar groups) but this is not the case in india, Would 500 startups be interested to look into startups which want to change that for india in specific?
Ameya Sahasrabudhe@astronautameya · CEO, Ithaka
@vsvivek93 They recently opened up in South East Asia and accept indian startups regularly, I'd say pretty soon.
Dave McClure@davemcclure · lost boy.
@vsvivek93 i think there is huge potential in the Indian startup ecosystem -- we've done ~50 investments in India over the past 3-4 years, and we expect that to continue and/or grow to 20+ investments per year in future (maybe more). we've always been bullish on India startups, however after the Modi government came to power it seems like there's a lot more business optimism in the country, particularly among local VC community. also Softbank putting $1B into SnapDeal, FlipKart raising big money, and other Japanese / Chinese / other investors coming into to the market has made people a lot more positive about the future. we think valuations/prices may be getting a bit ahead of themselves lately, but we are still very bullish on the long-term prospects for startups in India. talk to Pankaj Jain (@pjain) on our team for more details about our India strategy & plans, and also to Shalini Prakash (@shalini_prakash) in Bangalore :)
V.S.VIVEK@vsvivek93 · Unoccupied
@davemcclure @vsvivek93 Thanks Dave ! Will certainly do that
Erik Torenberg@eriktorenberg · Former Product Hunt
Some people have critiqued your approach as "Spray & Pray" -- what are the biggest misconceptions they have about your investing thesis & approach?
Dave McClure@davemcclure · lost boy.
@eriktorenberg they tend to think we don't have a process or methodology, or that it's like "gambling", or that we are drunk or high or crazy as we are doing it. it's a bit frustrating, but we try to ignore the haters and just focus on what we know works best for us. i've written more about our philosophy in this blog post: 99 VC Problems But a Batch Ain't One https://500hats.com/99-vc-proble... to be clear: investing in lots of companies IS NOT GAMBLING. in fact, it's quite the opposite... we are applying a very straightforward and mathematical approach to investing based on data and results. most VCs don't agree, but then again most VCs also don't find unicorns or even return capital to their investors. our methods work, and we have already found/invested in 3 unicorns (Twilio, Credit Karma, GrabTaxi) with another 30 companies that are valued at >$100M and growing. and we have many more on the way. it may only be the case that we are "right" in a big way 1-5% of the time, but if you don't invest in at least 100s of companies, your chance of finding unicorns or big outcomes are close to zero.
Augustus D'Souza@augiwan · CEO, Rockode Inc
@davemcclure Hey Dave! I have a question regarding international applications to 500 (Montain View/SF) : Internally, is there a grading system where your team allocates certain "points" to startups based on how "favourable" their location is (for founders/team to be part of the program in the US) ; does being in another country affect the application in any way?
Matt Silverman@mattjsilverman · Product Designer
@davemcclure Hey Dave - AARRR!!!!! I have admired you for quite some time now and constantly find myself referring to your, "startup metrics for pirates" slide decks, as well as the many other published sources of yours. So thank you for helping inspire my career. #500strong My question is, when YOU invest in a seed round - what are the most important metrics you look for in a consumer software startup?
Dave McClure@davemcclure · lost boy.
@mattjsilverman generally it follows a lot of the same concepts applied in reverse: - is there a shipping product? - are there users or customers? - what's their experience like? is it easy to "activate" or engage with the product or service or app? - how many users or customers are "active" and keep coming back / what does retention look like? - are the unit economics cashflow positive, or can they be in the near future? - HOW DO WE GROW THE BUSINESS? what channels are currently working & scalable & profitable? - how do we get to sustainable / scalable growth, or sustainable / scalable revenue? - or are we sure the business will have downstream investors / acquirers? also: - what color is the sky, and how do i feel about having lunch with this founder several times a year for the next 5 years? ;) (some things aren't always analytical, and life is too short to work with assholes -- except me, of course ;)
Ameya Sahasrabudhe@astronautameya · CEO, Ithaka
Hey @davemcclure I just tweeted you to remind you about this AMA! Facebook became a social giant. Google became a search giant, Apple became a gadget giant and Uber seems to be on its way in Logistics. Where do you think the next giant will come from, which sector/field in particular.
Dave McClure@davemcclure · lost boy.
@astronautameya certainly we are waiting the emergence of a giant in VR/AR, and also in drones / delivery. i'm not the world's best maker of predictions, so i won't try and guess what's happening next... we just like to invest in smart people who have potential, and we make a LOT of those bets :)
Ameya Sahasrabudhe@astronautameya · CEO, Ithaka
@davemcclure @astronautameya How about travel? AirBnB has captured our imagination with their unadulterated hustle, but nobody has really dominated world travel with a GOOD PRODUCT yet. the Priceline and Expedia mafia is just plain crap :/ DISCLAIMER: I am biased, we are building a travel startup :D
Raisa@raisarahm · Co-founder, Airposted
@astronautameya @davemcclure I just started a peer to peer international shipping company.. Huge focus on travel and delivery :) https://airposted.com
Pritish Sanyal@sanyalpritish · Director Business Development
@astronautameya @davemcclure I don't agree with your UBER hypothesis, it will have a similar outcome as Walmart.. Massive US success & failure in every other major market... the only way this will be true is if UBER wins against OLA
Olly Whittle@owhittle · founder, BudiPay, BeBirbal and SWARM
@davemcclure what is one thing you tell every startup no matter what the product or industry?
Dave McClure@davemcclure · lost boy.
@owhittle 1) watch what customers do, not what they say. 2) work on marketing as much as product. 3) don't give up. get back to fucking work.
Matthew Berman@matthewberman · CEO, Sonar (sendsonar.com)
Hey Dave - Three questions: 1) As a major world traveler, what's your current favorite country to visit? 2) What are the qualities you look for from a potential venture partner @ 500 Startups? 3) Who is your favorite former 500 Startups employee and if it's not me, why not?
Dave McClure@davemcclure · lost boy.
@matthewberman HAHAHA awesome questions. 1) toss-up, but right now Thailand, Japan, Singapore, Dubai/UAE are favorites... but so many :) 2) people who know their shit, are passionate, and not afraid to voice their opinions... also domain expertise in some area of engineering, product, marketing, or design 3) of COURSE IT'S YOU MOTHA FUCKER!
John Freddy Vega@freddier · CEO, Platzi.com
Hey @davemcclure, do you see a shift in "unicorns" being born outside of Silicon Valley? Where? Or is Silicon Valley still the best place on Earth to create a world-changing company, even if you're a foreigner?
Dave McClure@davemcclure · lost boy.
@freddier we don't worry about whether they're going to be unicorns when we invest -- we just want to see smart founders with useful products and growing customer base. that can be done in MANY places around the world that aren't Silicon Valley. and we expect PLATZI to be one of those!
Erik Torenberg@eriktorenberg · Former Product Hunt
Huge Thanks to @davemcclure for taking the time to drop knowledge bombs on us today.
Dave McClure@davemcclure · lost boy.
@eriktorenberg thanks for the opportunity Erik! :)
Rainer Dechet@rainerdechet · Founder of Adrond - App for ads
Where's your mustache and why didn't you invest in Uber, at that time?
Dave McClure@davemcclure · lost boy.
@rainerdechet i usually have a scruffy goatee and a 5-day mustache... after that it gets itchy and i shave 1x or 2x week. re: uber -- it was a giant fuckup on my part, and i think about it almost every goddamn day... le sigh.
Rainer Dechet@rainerdechet · Founder of Adrond - App for ads
@davemcclure Cheer up! The next unicorn is sure to come...