Why Facebook for India Is a Waste of Time

 This article first appeared on CitizenTekk

In a country of almost 1.3 billion people, mid-20th century infrastructure, rampant corruption, over 400 million people below the international poverty line, roughly another 400 million people that are considered middle class and one of the youngest populations on the planet – building the next Facebook is not exciting.

So what *is* exciting? Solving problems for over 800 million people who don’t have access to smartphones, tablets or computers. The real opportunities in India for smart, savvy entrepreneurs is to solve the problems plaguing them on a daily basis. And there really is no shortage of problems, big or small.

For example, A SMS based service that brings “mandi” (market) prices directly to a farmer and allows the farmer to know exactly how much his produce will get him at a market in Mumbai, Delhi, Indore, Kolkata, etc. In 2009, Thomson Reuters made over a million dollars a year by providing this service to farmers in only three states in India. In many cases, information about current market prices has helped farmers better negotiate fair prices with middlemen, sometimes tripling the amount of money the farmer receives.

Ever hear of “star dialing”? Chances are that if you live in the US, you haven’t. In India, on my mobile phone, I can dial *123# and my current balance will pop up on an iPhone just as easily as a Nokia 1100 feature phone. The best part is that “star dialing” doesn’t cost the caller anything – and no call ever gets terminated. Well, can you imagine building a banking solution on top of this for people who don’t have access to a bank? Eko Financial, based in New Delhi, has done exactly that. For the millions of people who don’t have access to a bank or the millions who need to send money back home to their family in a small village, can now do so quickly and easily by going to a local bodega (we call them “kirana” stores in India) and by giving cash to the store owner. The store owner simply enters a sequence of numbers to authenticate the service and transmits the cash to the destination account. All of this is done in minutes and payments can be tiny or relatively large.

Imagine you live in a rural area with no terrestrial Internet connection, no 3G, no 2G – nothing.  You have a mobile phone to communicate with the world via voice and SMS. Imagine if you could search the web simply by sending an SMS to 55444. Now you can find the Rotten Tomatoes ratings for a movie playing over the air, or you can join IRC style chat rooms simply by using SMS. Innozlet’s you do all of these things and a whole lot more. It’s bringing the power of the Web and applications to people who would never have had access to them. The reality is people living in remote, rural parts of India can now connect with people in cities over IRC style chat rooms, find out the seven day forecast, and even get the best price for a TV from eBay simply by sending a text message.

These are just a few examples of mobile applications that people have built in India over SMS. Add in smartphone apps that alert civic authorities to sewage problems, garbage piled up on the side of the road, illegal construction, unsafe working conditions, etc. and you have a tech savvy urban population that can use technology to improve their quality of life. The opportunity in India isn’t in building another social network or e-commerce site that sells printed kurtis online. The poor across India are hard-pressed to get access to basic resources. The middle class is very aspirational and though price sensitive, the household savings rate, as a percentage of GDP, fell to 7.8% – the lowest in 20 years, according to a report in Times of India. This means middle class Indians are spending and it’s been increasing.

Today, it’s possible to get a basic smartphone in India for INR 4,500 or less than USD 85. The Aakash tablet was an ambitious project to produce a basic Internet device that can be used anywhere a mobile phone can at a USD 50 (subsidized to USD 35). A good deal of controversy surrounded the Aakash tablet. However, the push from the Indian government as well as manufacturers towards more affordable smartphones and tablets will help to create massive opportunities for entrepreneurs. These saavy entrpreneurs will be able to provide solutions to every day problems including education, entertainment, sports, content, and other utilities all while serving hundreds of millions of people who are accessing technology for the first time.

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Sink or Swim: What it’s Like Being at 500 Startups

When I was a kid, my dad taught my brother and I how to swim using an unconventional – and some might say, borderline negligent – method: he threw us into deep end of our pool and yelled, “use your arms and stay above the water!” I won’t lie; It was scary as f*ck, and I may be traumatized even to this day. But crazily enough, we learned how to keep ourselves above water in just a matter of minutes.

*Disclaimer* my dad is an amazing swimmer, so he could have jumped in and saved us. Don’t do this with your kids unless you want a visit from CPS.

The point is, we didn’t learn how to swim by reading about it, watching YouTube videos, taking classes or meeting professional swimmers. We learned by being put into a situation where we had to do it. And where the only option besides success was complete failure, i.e., dad jumping into the pool and dragging us out (and likely chastising us about the incident for the rest of our lives).

Some people think that if you’re accepted into 500 Startups, you’re set for life. We’re the magic gateway to success, and once you step out of the elevator and into our office, your startup never has to worry about failure ever again. They’re wrong. And not just kind of wrong – 100% wrong. We give you all the resources you need to succeed. However, connecting the dots – and staying afloat in the swimming pool – is completely up to you.

What We Don’t Do

No investor or accelerator can make a startup any better or worse than it already is. All we can do is accelerate whatever path the founding team decides to take. We give you great resources to make your startup as successful as possible, like a massive network and on-staff expertise, but we don’t get you customers. We don’t fundraise for you. And we definitely can’t fix a sh*tty product.

But you can. In our accelerator, you’ll get access to resources that’ll make it easier for you to make a product that doesn’t suck. You’ll also meet people who will put money into your startup and keep you alive. We give you everything you need; you’ll just have to work really hard to make your startup successful. If you’re looking for a place where someone sits you down and teaches you how to be an entrepreneur, well…

nobody We give you the tools. It’s your job to use them correctly. 

Your Startup Has to Survive without Us

One of the most common questions people ask us is, “What happens once the accelerator is over?”  We don’t have an extension program where we gradually release our startups back into the wild. After Demo Day, you’re thrown out into the real world where you have to succeed – or die trying. And while you do have the 500 community on your side (which is a massive advantage), it’s up to you to figure out how your company’s going to stay above water. Having a hands-off approach during our accelerator program teaches companies how to be self-sufficient.

At 500, we throw you into the deep end to teach you how to swim. But unlike my crazy dad, we at least put other people in the water who can help you stay afloat. Sink or swim.

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It’s Not Michelin Star Cuisine: Why Venture Capital Can (and Should) Scale

TL;DR: Venture capital, like other kinds of businesses, can scale beyond traditional constraints like time and space. Investors that make “too many deals” can add lots of value outside of just a check.

When I ask an entrepreneur why they are picking us or anybody else as their investors, I get a very similar answer:

“It’s because of the value you bring to the table.”

I agree with the broad idea that there’s some value an investor can bring on top of their checkbook. However, I believe most people in the startup world are misguided about how that value is delivered.

At 500, people are always asking why we make so many investments – usually implying that we are participating in way too many deals. Then the usual follow up question is, “how can 500 add value to so many investments if your time is so limited?” That’s a fair question. How is it possible to add value to 450+ companies and counting, with only ~10 people on the investment team? This question is what keeps me up at night, yet at the same time, makes me most excited about our future.

Why don’t people ask this question in other industries?

Someone would never ask a restaurant owner or retailer why they have so many customers. That’s because we’re all familiar with the concept of repeatable processes. If a restaurant’s food is good, the waiters are nice, and the space is enjoyable, then we don’t complain that they’re serving too many other customers. (unless we’re hipsters, but that’s a different story)

It’s widely known that there are multiple ways a company can scale without having the head chef welcome every single customer, show them the menu and prepare every dish directly. Moreover, we understand that chefs can transfer their knowledge and even create branches of a whole franchise.

Most of us have realized the underlying mechanics of scale, and we praise companies like Google, Amazon, eBay for being able to grow their services to provide value to as many people as possible. Who would argue that Apple creates less value because they have millions of customers? Or that startups’ products becomes less useful when more people use them?

This is why the question about 500 investing in so many startups fascinates me. Why do people assume a venture capital firm can’t do what so many businesses have — scale? Why do people think investment firms should be run as boutique mom and pop shops? Why is it that most VCs (and other players) equate value to time spent in front of founders?

For decades, people in our industry have acted like they’re running a Michelin Star restaurant.

Many VCs perpetuate the perverse idea that personal attention is key, but despite delusions of grandeur, (most) investors aren’t 4-star chefs  I love Jiro, but restaurant owners – or in our case, VCs –  are being delusional if they believe that our entire industry should operate like Jiro.

Professional investors compete to back the most talented people pursuing some of the most ambitious businesses. While they certainly control where the money goes, they still need to convince entrepreneurs that their dollars are more valuable than a competitor’s.

Venture capitalists invented terms like “smart money,” “value add” and “partner time” to prevent people like you and me from taking their money at face value. While it’s true that facetime can be a nice thing to have, there are many other things a good investor brings to the table – especially in the age of the internet.

What’s so great about a Venture Capital firm that can scale on a massive level?

Branding

An investor can lend a personal or business brand. Mark Cuban writing you a check for $10k is different from me writing you a check for $100k. This value has nothing to do with time. And the Maverick himself doesn’t have to spend lots of time with every single company in his portfolio to keep building a strong brand.

Family

When a firm does 200+ deals a year, they’re going to have a LOT of portfolio companies. And while these companies may not get face time with investors, they can reach out to them (and each other) over the Internet for advice, networking and even just to meet up for a beer. A large network of peers is what makes programs and funds like Y Combinator, TechStars, First Round Capital, and 500 such great communities for entrepreneurs.

The bigger your startup becomes, the more this matters. When you try to expand your business into other regions or new markets, you’ll be thankful to have friends in other parts of the world and other industries. As an investor, few things feel better than saying “Hey, you should talk to Jane at Startup X; they are a portfolio company and the founders know a lot. Email her directly and put 500 in the subject line.”

The Network Effect

Each company adds their unique combined knowledge to the network, so our network gets smarter as we participate in more deals. 500 holds the combined lessons of hundreds of companies that have gone through thousands of ups and downs. And what some will discover, others will use as preemptive knowledge.

By standing on the shoulders of their peers, our startups are able to see farther than companies that are going it alone.

Functional support

At scale, it’s easier to help companies with clear challenges. Some investment firms will offer access to marketing, tech, finance, public relations or even legal staff. These are all activities that almost every company needs, but especially when they’re still small.

It’s definitely a challenge to hire a comprehensive full time staff for this. Firms like Andreessen Horowitz and Google Ventures have set the standard for this. We salute and admire what they’ve accomplished.

At 500, we’re all about constantly iterating and trying new things, making mistakes (and even big f*ck ups) in the process, then optimizing. Our companies don’t get a ton of facetime with the 500 staff, but they get one of the biggest, best networks in the startup world; It’s a slight trade-off, but we think it’s worth it. Especially when our companies have access to mentors, founders and partners on nearly every continent.

**Additional note to the entrepreneur: If you really want the venture capital equivalent of a Michelin 3-star experience, make sure you pick one of the maybe 10 people in the world who can provide it. *Wink* *wink*, we are not in the list.

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#500Fuerte – Mexican Founders Share Their Startup Stories

Last week, our Mexico City Venture Partner, César Salazar, told you why Mexico is shaping up to become one of the biggest markets in the next decade. We’ve had more than a few Mexican founders come through the 500 ranks over the last few batches – here are a few of their startup stories:

Manolo Diaz, CEO and co-founder, Yogome

manolopresenting

Our story with 500 Startups had an amazing start. We meet Dave at Mexican.VC Demo Day in March last year, and during that week one of our games reached the Top 10 in the app store. I remember watching Dave go to his iPhone after I mentioned that, and it worked because after the presentation, he went directly to us and started asking about our team and our process to make the games. One week later, we were shaking hands to close the formal invitation to the new batch. I will never forget that.

When the batch started it was like a dream come true. We always wanted to go to Silicon Valley, and now 500 Startups was validating that we had something amazing going on. We’ve had the opportunity to work with incredible mentors with years of experience, and some of them even decided to be more than that and invest on the company. I really enjoyed all the nights working late with amazing mentors (like Maneesh Arora) and getting tacos for dinner while working on distribution. I even invited Paul Singh to an event in Mexico where he had a great time helping other entrepreneurs.

Having 30 companies from all around the world in the same place working and sharing knowledge is extremely helpful. Especially since sometimes you’ll have the answer to someone else’s problem, and other times they will have the answer for you.

Ricardo Cacique, CEO and co-founder, Fontacto

ricardo

500 Startups was an accelerator in all senses. It was where we met people with bold visions and learned strategies to take over the telecom market in Latin America. The first effect it had on us coming from Mexico was a cultural one. Within a couple of days, we debunked a ton of myths about Silicon Valley. Yes, there is something in the air that makes big things happen in the valley, but it’s ultimately up to you to be successful. It doesn’t matter if you come from a small city in Mexico that people have never heard of and can’t even pronounce (I’m from Queretaro, Mexico); if you work hard enough, you can create stuff that helps millions of people, pushes the limits of the status quo and makes a ton of money.

500 forced us to optimize for the important stuff: product design, raising money, listening to customers, and building the best cloud phone system for businesses in Latin America.

Ricardo-Cacique-and-Dave-McClure-at-Mexican-VC-Demo-Day-March-16-2012

500 also accelerated our heart rate (in a good way) in the weeks prior to and during demo days. Dave’s feedback can be tough, but it was exactly what we needed; we were from a different country and really had to stand out to overcome the language and cultural barrier.

After 500, you become part of a global family of doers, and what I experienced there will always encourage me to do my best. It’s like being in the Space Program – you’re pushing the edge of what is known, and you optimize to succeed not because you have to, but because you can.

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How .CO Kicked Goliath’s Ass

Tired of everyone saying you’ll never beat the competition? Well guess what…sometimes David beats the hell out of Goliath. Case in point: Juan Diego Calle. He’s the guy responsible for going up against the giant of his industry, Verisign –  and winning.

So how did he do it? Below, he opens up about competition and scaling for massive growth.

How did you become an entrepreneur? What was it about entrepreneurship that attracted you?

I never made the conscious decision to become an entrepreneur – it just kind of happened organically. My family is very entrepreneurial and it felt natural to follow in my father’s footsteps. In middle school, I sold sandwiches out of my locker. When I was high school, I ran a custom stereo startup out of our garage. I’ve always had this strange feeling that the world is coming to an end – and that I’d better do something big before it does.

In 2009, .CO went against Verisign and other companies  in a bid for the .CO. extension. What did you do to win?

It felt like a David versus Goliath situation going up against Verisign, the company behind .com,  the legacy domain extension. It was a surreal experience! Having great co-founders – who shared the same epic vision – is what helped us beat Goliath. Teaming up with Neustar (to run the technical operations) and a great legal team was also instrumental in helping us to win the bid to administer and market .CO to the world. We ended up submitting a 1,165-page bid package to the government. I’ll never forget that number. In college, I think the longest essay I wrote was 20-pages… and I failed that class.

There has been a trend of large companies applying for their own domains, which could make the market heavily fragmented. How can entrepreneurs make themselves stand out?

Search will become more important in a world of unlimited domain choices. Today, individuals looking for something specific will to go to flowers.com or insurance.com because they’re expecting to find a credible site. Once new top-level domains (aka TLDs) hit the scene, people will build sites on lots of different extensions; we’re already seeing tons of amazing quality sites on .CO. With so many choices, entrepreneurs will be able to find the perfect TLD that compliments what they’re trying to bring to life.

How does .CO plan to react to this shift to TLDs?

Before .CO, TLDs were always treated like utilities. So we’re sticking to the strategy we’ve had since we launched which has 3 key pieces. One, to build a global brand that is synonymous with innovation. Two, to target early adopters and tech startups that help us to accomplish the first point. Three, to build a global community of individuals and companies that help propel the brand forward. We want to be more than just a domain. Our Membership Program has helped us support the global community we’re building by offering .CO-ers free benefits like education, promotional support, networking and much more – basically, all the things they need to succeed. Apart from being a huge differentiator for us, there’s nothing more rewarding than supporting the innovators who are building the future on .CO — and watching them succeed.

What’s been the biggest challenge for .CO, and how have you dealt with it?

I think our biggest challenge has been one that’s very common in startups – consumer awareness and adoption. New technologies have a long adoption curve, and in our case, we’re dealing with 25+ years of .com dominance. We have to change public perception and break the .com tradition to disrupt the status quo.

The good news is, we’re seeing awareness of .CO increase, and public perception is changing. And just last week, nine .CO companies (including  Tinypost.co, Fosbury.co, Mailstrom.co, Simpler.co, Shopinterest.co, Vine.co, Angel.co, Deliv.co — and of course, 500.co) were covered on TechCrunch in a 7 day period. I don’t think that’s ever happened for any other domain extension besides .com.

What are 3 pieces of advice you can give to bootstrapped entrepreneurs trying to get their business off the ground?

1. JFDI: Just F%#!n Do It!

2. Worry more about getting traction for your business and less about raising money. If you get traction, you’ll raise money. It’s not the other way around.

3. Build a solid team. A company’s growth and potential is only as big as the talent of its people. If you want to build something big, you have to hire big. Shoot for the stars, get your team aligned around a huge vision, and have at it!

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Mexico: The Sleeping Giant

TL;DR: If you think Mexico is a violent, derelict nation with a couple really nice beaches, think twice. This economic and cultural powerhouse represents one the most overlooked investment opportunities on the planet.

Over the last few decades, Mexico’s reputation has suffered tremendously. From the late seventies to the mid-nineties, the government’s economic policy proved to be flawed, creating two unfortunate effects: a substantial increase in undocumented immigration to the US and a spike in organized crime. Clearly, these are major issues, and there are still challenges ahead. But they do not represent Mexico in its entirety.

During the last 15 years, Mexicans have built upon a couple of their core strengths: relentlessness and creativity. The work of many has yielded returns, and today the country is climbing up the ladder. We’re now in the position to become a top ten economy before the end of the next decade.

For starters, Mexico is a 120-million-people land of opportunity, and it’s GDP per capita is larger than everyone’s favorite emerging market – Brazil.  Even though commodities such as oil rank high in terms of GDP contribution, other industries like tourism and manufacturing are at least as important. In fact, Mexico is the second largest trade partner of the US, only behind Canada.

In spite of this, the 12th largest economy of the world has been often ignored as an investment destination. But this is finally changing.

Over the last five years, a younger generation of Mexicans has seen drastic social and economic change. This educated group of digital natives is more than aware of global opportunities, and is working hard to make Mexico more innovative. In just the last 18 months, Mexico went from zero to the second largest player in the Startup Weekend Community, with 23 cities and more than 40 events, putting us just behind the United States. Communities such as SuperHappyDevHouse, Women 2.0, Sandbox Network and Global Shapers have very strong chapters in Mexico, and even the MIT Technology Review is holding an event for top innovators in Mexico City.

mexico

The timing couldn’t be better. A digital revolution seems to be right around the corner, as internet penetration has recently shown record growth rates. Just after the dotcom crash of the late nineties, Mexico had just over 3 million people connected to the Internet. That number will be 20 times larger by the end of 2015.

And there’s more to come. A recent reform could end a long-lasting monopoly in the telecommunications sector. Competition will certainly increase the quality of service and prices could eventually go down, making it easier for people to get connected. Mexico’s banking system is also stronger than ever, with profitable, well-capitalized private banks. Ironically, Banamex accounts for 15% of Citigroup’s profits, which makes the Mexican subsidiary its most profitable unit.

So, is it a good time to invest in the market? We think so.

Mexico has an active entrepreneurial ecosystem that’s solving real problems. Hundreds of founders are building Internet-powered businesses to improve education, health, access to financial services, transactional platforms, commerce, and transportation, just to name a few spaces. And these entrepreneurs are  revenue-oriented instead of just being driven by growth. This seems to be a response to the historical lack of venture capital and the need to bootstrap their own endeavors. But again, things are getting better; the recent arrival of new funds and accelerators is increasing the odds for entrepreneurs, who now can find equity financing and grow their businesses much faster.

Macroeconomic trends have aligned with grassroots entrepreneurship in Mexico, and we believe a “perfect storm” is on its way. We’re putting our money where our mouth is by investing in entrepreneurs who will make it one of the biggests markets in the next decade.

It may take some time, but Mexico will soon shed its violent reputation and become one of the biggest players in the global economy.

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Health, Wealth, & Startups: Tapping Qualcomm Ventures’ $100 Million Fund

Spurred by new regulations, astronomical systematic costs, and a population that seems to be getting sicker and sicker, the healthcare space is going through major changes. Jack Young heads up the $100M Qualcomm Life Fund (QLF) at Qualcomm Ventures, which was recently ranked as one of the most prolific venture investors in the digital health sector.

Check out what Jack has to say about how startups are being affected by new regulations, key trends he’s seeing for emerging opportunities, and how he decides whether to pull the trigger on a startup investment.

What’s happening in the healthcare industry, and how is it affecting startups?

Traditionally health care in the US has been a “fee-for-service” model. Under this system, providers often focus on quantity of care based on payment, rather than quality of care. However, the health care reform laws passed in 2010 (otherwise known as “ObamaCare”) aim to extend insurance coverage to all citizens, while curtailing the growth in health care spending. This mandate combined with the fact that US health care costs already account for  ~18% of the GDP (which is the highest among the OECD countries, and is projected to continue trending higher), is challenging that status quo.

While investment in the digital health space has increased significantly over the past few years, it’s still extremely challenging for early stage digital health startups to raise capital. There are far fewer routes to explore compared to the digital/social media space where angel/super angel funding is more readily available from alumni networks of Google, Paypal, LinkedIn, Facebook and a number of high profile incubators such as Y-combinator and Techstars. The current challenges are likely to persist as there appear to be few, if any, blockbuster VC-backed exits on the horizon in the digital health space which could unleash capital to be reinvested in the ecosystem.

 The risk and the reward for startups in the medical space have never been higher.

Are there any regions that are booming in the digital health sector?

Outside the US and Canada, many industrialized nations are fertile grounds for digital and wireless health innovation and adoption. A few nations in particular, such as the UK, Sweden and Australia are particularly ripe for deployment; they are already focused on cutting costs and have the power to implement new technologies.

In developing countries, access to mobile phones in some cases exceeded access to clean water. Wireless health technologies promise unprecedented reach and cost benefit to some of the neediest populations. For example, vision examination can now be performed with an attachment device to a smartphone by a technician with minimum training in the field, which gives people access to prescription glasses for the first time. Blood lab tests are being developed with cartridges linked to a smartphone without the need for shipping to a laboratory or cold storage. And tools are being developed so counterfeit drugs may be identified using short-code text messaging.

What do you look for when investing or partnering with a company?

In addition to the conventional VC investor checklist, there are three key factors we think about:

Solution with mass market appeal: At Qualcomm, we have had success on a large scale and look for our investment opportunities to have the same potential. We are less inclined to fund a company tailored to an orphan disease or niche areas.

Balance of Life Sciences and IT: We believe new technologies will breathe new life into existing medical  services through insights from patient data. For example, diabetes management used to be a lonely personal endeavor, but now with connected glucose meters and insulin injection devices, patients and their caretakers can manage this condition much more proactively. This does not require a new glucose sensing technology to be introduced, or a new type of insulin to be approved, but can still totally change the way the disease is managed.

Revenue traction: Convincing a single health care provider to pay and deploy your solution (not a pilot or a trial) to alleviate one of their top pain points is a giant step for many startups. We’ve limited our scope to revenue-generating stage companies as our primary investment target.

What are 3 pieces of advice you can give to bootstrapped entrepreneurs trying to get their business off the ground?

 Focus on the business: Health care is challenging due to extremely long buying cycles and misaligned interests between payers/providers/patients, and understanding this system is paramount to success. An entrepreneur also needs to address a particular pain point and create the right incentives for everyone involved (payors, providers and patients) for a product to be successful. In health care, technology is often the easy part. Finding a way to get people to adopt your product is the real challenge.

Have a Well-Rounded Team: Building a successful digital health company requires expert knowledge in both tech and healthcare. This applies to the executive team and staff, investors, board and advisory members.

Timing is everything: Many companies that have tried to address issues in health care have failed – some due to technology, but many due to lack of understanding of the drivers and the right timing. Since policy and regulations constantly change, an entrepreneur in this space needs to time the market entry point very carefully.

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Hacking VC: Why Community Is 500’s Secret Sauce

I met Dave McClure in 2006. I had been producing a bunch of tech shows, and Dave was nothing if not memorable on the conference circuit. In those days, he was actually tamer on stage…maybe he would throw in a few f-bombs when you’d least expect it, but he wasn’t at the point of, say, flipping the bird to an audience. Still, he was shocking…and the tech atmosphere amplified it.

This was a time when funding rounds were much larger than they are today, tech was still rebounding from the crash of 2002, and the general mood was more conservative. So let’s just say Dave stuck out. It was obvious to me (and a lot of other folks in the industry) that he represented a coming shift in Silicon Valley culture. But as usual, he was ahead of the trend – the great worship of coders and hackers hadn’t yet begun.

At that time, everyone worshipped VCs, and the developer community was a subculture that only a few folks understood and represented.

In 2009, I started a company and Dave was my largest client. All the while, he was cooking up the idea for what he’d later call “500 Startups” (after many iterations, such as “Sandworm Ventures”). He would call me at random times during the day, spouting off a new realization he had about structuring the fund or building the “network”…he was so excited, hardly taking a breath between words, and he’d always end with “this is going to be good.”

Thinking back, I was completely naïve about the scale he was targeting because I would hang up and think, “Wow, I’m so excited! This is amazing! But really – WTF was he talking about?!!”

Still, I couldn’t shake the feeling that he was onto something. Maybe it was the infectious thrill in his voice when he described how he would raise a fund, spread small amounts across hundreds of companies, build a mentor network, run events, and travel the world to source deals. My head would spin trying to process everything. At times, I considered that perhaps, maybe, possibly… he was smoking crack. I mean seriously…how would ANYONE have the bandwidth to do all that?

But it sounded so fun, and it was a time in my life when I just felt ready to take a risk. So I left my own company to join the founding team @ 500.

Those very early days (I say this fully aware that we’re still in our early days) were beyond insane, each day more stressful and fire-laden than the one before. But they were also incredibly magical.

And as time went on, it hit me like a bag of bricks what Dave was actually doing, and had actually been describing all that time.

A lot of people want to know what’s behind the curtain at 500…how we manage so many startups, how we do so many events, how we deal with Dave (wine helps), how how how how…

And its true, there IS a secret. But it’s not what people think…its not some amazing data platform or a huge ivy-league-pedigreed team or a pile of cash that we throw around at marketing. It’s not even genius or irreverence or strategy. Sure, those things may be part of the recipe, but they are NOT the secret ingredient.

The secret ingredient is…(listen close and I will whisper it): COMMUNITY.

We got a lot wrong in those early days. But if there’s one thing that was spot-on, it was Dave’s vision of building a community around 500 Startups. It was something that had never been done, at least not to this extent. And it was something that was entirely odd, especially for a VC firm. We were investors – our job was to pick winning tickets, not to build some kumbaya community. But actually, it made sense.

And what I also realized was that Dave brought me + the amazing Christine Tsai to lead this effort. Christine was building our mentor network and platform partnerships, and I was building our business development, corporate partnerships, and global events division. In addition to Dave’s constant press attention, our combined g-forces were the holy grail of his business plan to achieve massive scale and virality with minimal input.

Taking a page from the developer manifesto, Dave was hacking VC.

So I thought I’d give a “backstage tour” of what’s behind the #500strong community:

The Core – 500 Team > We’re growing exponentially and now have a sizeable team in the U.S., Mexico, Brazil, China, India, and Southeast Asia. But for the first 12 months, there were 5 of us. We had a strong core, but very minimal manpower. In fact, it was mostly woman-power. (sorry, I had to…but its true, women outnumbered the men + still do)

Middle Layer – The Startups > We invest in startups rapidly. Some of them attend the accelerator program, but many do not. They are located all over the world, so as our portfolio number rises, our community grows…and as the startups grow, so do we.

Outer Layer – The Mentors > We have 250+ global mentors who help us identify, vet, and nurture our startups. Instead of pumping 500 with staff, we field a lot of data through our mentor network, many of whom co-invest on follow-ons. More importantly, they support, connect, and taut our startups, which increases the virality of the model.

Stratosphere – Events & Corporate Partners > Our partners bring an additional layer of education to our startups and community, and help them navigate the tricky waters of things like development, customer acquisition, scaling, hosting, operations, and more. With their support, we’re able to produce conferences on topics that actually matter to startups + companies – like UnSexy (B2B startups that ain’t sexy but make $), Mamabear (tech for moms, kids, + families), and Warm Gun (Design & UX). Our partners include Google, GE, Qualcomm, SoftLayer, .CO, PayPal, MailChimp, Microsoft BizSpark, Amazon, and more.

Universe – The Global Startup + Tech Community > This is the largest group, and possibly the most daunting to tap. But we’ve made a ton of headway through our many tech conferences and “Geeks on a Plane” (#GOAP) tours. While our conferences are topic-focused and coalesce communities in the U.S., our GOAP tours are what I call the “United Nations of Startups” and bring together 1,000+ tech geeks together in regions with massive market potential. The beauty is that each time we produce a new conference or GOAP tour, we increase that viral coefficient even more.

All this said, building a community is no easy feat – it was probably the most difficult, painstaking way of gaining critical mass. But it was unchartered territory, and a huge opportunity. My Partners and I have been completely overwhelmed by it at times. But again and again, I find myself in awe of the community we’ve built and the seemingly infinite ways it compounds the 500 mission.

There’s a reason we often refer to our network as the “500 family.” Community IS 500 – it’s our lifeblood. We’re there for each other for the long haul, and as we host more events and invest in more startups around the world, we only get stronger.

We prefer to stay as humble today as we were on day 1, so the truth is – we don’t know the future. We can’t completely predict how the industry might shift again, and what lies ahead – no one really can. But if the past is any indication of what’s to come, I can only imagine that the #500 family will get larger, stronger, and even more community driven.

There is still a lot of work ahead of us…but every now and then, it feels so good to look back at everything we’ve achieved and be completely, utterly grateful to the people who actually built 500 – our community.

Want to be part of the 500 family? Register for Geeks on a Plane Southeast Asia and our MamaBear conference, then check out our other upcoming events.

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