500 Startups Launches 500 LABS

Today 500 Startups, a Silicon Valley VC specializing in middle-out technology, is announcing 500 LABS, a startup studio that creates awesome companies from scratch (see infographic). 500 Labs will bring together founders and teams from all over the world to make startups go harder, faster, better, stronger.

500 LABS is led by experienced entrepreneurs and hyperloop enthusiasts Selcuk Atli and Dominic Coryell. Selcuk and Dom reside in San Francisco, but occasionally migrate north for the summer to Toronto and Waterloo (that’s in Canada, you hoser). They make stuff that works.

Startup Studio: A Model that Works

Startup studios aren’t exactly new — they have been popularized in recent years by firms like Betaworks (creators of Giphy), and Expa (creators of Operator). The model was pioneered in 1996 by Idealab, which has had over 40 IPO’s and acquisitions. Many startups like Uber (Expa), Twitter (Obvious Corp) and Tinder (Hatch Labs) were created using similar studio models. 500 LABS believes if you bring together amazing engineers, designers and marketers and let them run a few experiments, amazing things can happen.

Why 500 Startups?

500 LABS will lean on several unique strengths of 500 Startups to execute this model:

  • Growth Marketing:  500 Startups specializes in training and educating companies on how to grow and acquire customers via search, social, and mobile strategies. 500 LABS will leverage its extensive growth expertise to help new companies grow faster.
  • 500 Founders: Since 2010, 500 Startups has invested in over 3,000 founders and entrepreneurs around the world, in over 60 countries. 500 LABS can recruit experienced operators from the 500 community and network to help build new companies.
  • Global Talent: Some of the best engineers, designers, and marketers don’t live in Silicon Valley. 500 Startups’ global reach will help 500 LABS find and recruit them.

Beyond Silicon Valley

500 LABS is headquartered in Silicon Valley but it will partner with teams all around the world to build products. Initially, 500 LABS is setting up engineering operations in Toronto and Waterloo, a region with top technical talent. The region is home to University of Waterloo, a university that produces top engineers every year. While government support and the lower cost of living make it an attractive place to build companies. In the future, 500 LABS expects to expand into many other regions around the world.

How 500 LABS is Building Companies

500 LABS will be founding companies based on its own ideas and others from engineers, designers and marketers it partners with. It will pick and experiment with a few projects at a time. Once a project starts experiencing exponential growth, 500 LABS will spin out the company with the team who built it and continue to support the company as hands-on co-founders. 500 LABS will invest in these companies, alongside other investors in its network.

500 LABS will initially focus on building mobile products for consumers and businesses. In the future, 500 LABS expects to launch new tracks in areas like marketplaces and SaaS.

About Selcuk & Dominic

500 LABS is started by its founding partners Selcuk Atli and Dominic Coryell.

Selcuk is a Venture Partner at 500 Startups. He’s previously founded Manifest (acquired by Rakuten) and Boostable. He’s a graduate of Y Combinator (W’14), Endeavor Entrepreneur and Fulbright Scholar. Selcuk is also a co-founder and board member of Nomadic Mentors, a non-profit that connects elite startup mentors with founders in developing markets.

Dominic is a Distro Partner at 500 Startups. He previously Co-Founded Talkable (500 and YC backed) where he built referral programs for some of the world’s top e-commerce brands like Bonobos, TOMS and Shutterfly. While in college at Northeastern, he won the Global Student Entrepreneur Award from Kauffman Foundation for his first startup Garment Valet.

Hiring Hackers-in-Residence

500 LABS is hiring Hackers-in-Residence, engineers and designers who will work on various product experiments, and eventually become part of the founding teams of its new companies.   

You can learn more about the roles and apply at 500labs.com/join.

11951626_10102355924709809_5335688814665215744_oBecause, Nerds.

Artwork by Yiying Lu

500 Startups Announces $25M Microfund to Invest in Black and Latino Founders

500 Startups is raising a $25 million dollar microfund to make early stage investments in Black and Latino founders. This fund will invest in ~100 companies and give Black and Latino founders the access to capital, networks, and expertise that they need to grow their businesses.

The United States’ shifting demographics is a clear opportunity for investment. By 2044 people of color with be the majority in the US and Black and Latino consumers currently have a combined $2.5T in purchasing power.

The fund will be led by Monique Woodard, Venture Partner at 500 Startups and co-founder of Black Founders. Monique has access to some of the best deals in this market and her network has a massive pipeline into game-changing founders.

“This is a two-sided investing strategy,” said Woodard. “On one side, you have Black and Latino founders who are undercapitalized and there are great deals to be made. On the other side, you have a population that over-indexes in many areas of technology consumption, increased consumer purchasing power, and an increase in the US Spanish-speaking population. This is making Black and Latino consumers a market that investors should be paying attention to.”

Over the years, 500 Startups has invested in numerous startups led by Black and Latino founders, including Walker & Co., AllDay Media, and Mayvenn. The new microfund will allow 500 to be even more targeted in its investment strategy and fulfill its vision be the most active US investor in Black and Latino founders.

500 Startups has also announced its next Geeks on a Plane (#GOAP) trip which will visit the continent of Africa. This invite-only tour gives startups, investors, and executives the opportunity to learn about high-growth technology markets worldwide. Geeks on a Plane has made 17 trips to 30 countries including Asia, South America, Latin America, India, Eastern Europe, New Zealand, US, Middle East and North Africa. This will be their first trip to Sub-Saharan Africa and will include stops in Nigeria, Ghana, and South Africa.

This trip will allow attendees to connect with African entrepreneurs in startup hubs across the continent. To learn more about Geeks on a Plane and apply to attend GOAP Africa, visit http://geeksonaplane.com/

About Monique Woodard

Monique is a Venture Partner at 500 Startups investing in black and Latino entrepreneurs. She is the co-founder of Black Founders — a national community of entrepreneurs whose mission is to increase the number of successful black entrepreneurs in tech. Previously, she was one of the first Innovation Fellows for the City of San Francisco and has helped cities use technology to innovate workforce and other civic services. She has more than 15 years of entrepreneur and operating experience in consumer, e-commerce, and civic tech. She likes art, fashion, and fly things. Follow her on Twitter @MoniqueWoodard

Artwork by Yiying Lu

PreMoney 2016: The Global Investment Community Crosses Paths in San Francisco

PreMoney Brings Together US + International Angels, VCs, LPs

Eric Osiakwan, Managing Partner with Chanzo Capital in Accra, Ghana, traveled more than 7,600 miles to attend PreMoney San Francisco.

“The world is flat,” he said, sipping a Coke immediately after his panel discussion, “Crossborder Investing: Let’s Go Global, Baby.”

“When I started in tech in 1998, one of the terms that really rang in my ears was ‘the global village,'” said Osiakwan. “Today, it’s very real.”

Eric Osiakwan and Jill Ford
Eric Osiakwan and Jill Ford

How real?

Earlier in the day, Osiakwan bumped into Jill Ford, Head of Innovation & Entrepreneurship for City of Detroit. “We first met in Ghana in 2002,” he said. “I didn’t know she would be here! After I finished my lunch, I was walking out and said, ‘I know you!'”

“This was actually a wonderful surprise,” said Ford, a former Bay Area angel who now manages a team attracting and nurturing startups and SMBs in the Motor City.

“PreMoney should be mandatory for new investors.'”

– Jill Ford, Head of Innovation & Entrepreneurship, City of Detroit

“I’ve been a great supporter and a big fan of 500 Startups for a while,” she said, noting that she and Osiakwan would meet again the following day at the 2016 Global Entrepreneurship Summit. “I was very excited to add PreMoney to my trip, and I’m always so excited when I get to see the kind of content that we had today and a fascinating set of speakers.”

Although Ford has lived in Detroit for years, she said 500 Startups’ social media and events keep her connected to the latest startup news and trends.

“I’m very excited about what they’ve been doing to promote diversity in tech and also have a global reach with regard to connecting entrepreneurs and investors,” she said.

PreMoney should be mandatory for both new investors, and more experienced hands looking for insight, said Ford.

“This is the forum for bringing together entrepreneurs and investors from a large geographic scope to really be the launchpad for great innovation, great ideas and being able to grow startups,” she said.

Content From Global Investors

“This is my second PreMoney,” said Monique Woodard, Venture Partner with 500 Startups, “so I’ve come to expect a high caliber of content from some of the best investors in the business. That’s consistently what 500 and PreMoney delivers.”

Like every other person I spoke to, Woodard’s favorite session of the day was “the three generations of Drapers. Getting to see them interact as a family — and not as investors — was heartwarming and gave us a little insight into the family,” said Woodard.

“I also got a lot out of Jason Calcanis’ time,” she added. “Every time Jason talks, I learn something new.”

Who should attend PreMoney? “As a newbie investor, I would say any newbie investor,” answered Woodard. “You will learn a ton of stuff from a ton of people who have been doing this for a really long time.”

“Every time Jason (Calacanis) talks, I learn something new.”

– Monique Woodard, Venture Partner, 500 Startups

The June 2016 PreMoney gathering “really set the bar higher than the event I attended last year,” she added. “I enjoyed seeing some investors I know, hearing their thoughts on where the industry is going, and I expect to have a really good time at the party this evening.”

“I learned a lot, even being internal to 500,” said Sheel Mohnot, FinTech Partner at 500 Startups. “There was a panel on vertical funds that went very well, and it’s always entertaining to hear Jason Calcanis and Dave McClure. I just wish I could have gone to everything.”

Fireside Chat with Dave McClure + Dave Morin
Fireside Chat with Dave McClure + Dave Morin

“Recently, there’s been more of a focus on cross-border, which is I know, inherent to 500’s focus, but they’re bringing some interesting characters and players who are doing some interesting things that you don’t really see anywhere else, even in San Francisco,” said Mike Prasad, Managing Director for LA-based incubator VentureLab.  “I come here mainly for that, because it doesn’t really exist at the other events I’ve been to.”

“Increasingly, it’s becoming a globalized event, and it’s going to be the best thing that ever happened to Silicon Valley,”

“Increasingly, it’s becoming a globalized event, and it’s going to be the best thing that ever happened to Silicon Valley.” concurred Osiakwan.

“Casual Vibe” at PreMoney Encourages Learning & Relationships

“PreMoney San Francisco has one of the best mixes of people in the VC scene,” said Prasad, “Getting them all in one room, I can’t think of another event that has that kind of mix.”

“Investors of any type should attend,” Mohnot advised. “There’s so much to learn from what other people are doing. They’re clearly so much more fun and not boring,” he said. “You can actually stay awake during the whole thing.”

PreMoney is a great way to get the view from 30,000 feet, and also for doing deep dives, said Prasad. “It’s interesting to see what people are looking at and get the general feel of the room where their heads are at,” he said. “I don’t really know of another way to do that, short of talking to tons of people over the course of a year.”

“PreMoney is very useful for getting information and a good time out of the event, but it’s also something you can jump right into.”

– Mike Prasad, Managing Director, VentureLab

Additionally, Prasad said PreMoney is a unique networking opportunity. “All these people globally who are in VC are in town at one time, which is great.” The ability to participate in open discussions with other investors is also a strong draw, he said.

“You get someone on stage who’s looking at a trend, and then you get the immediate response from someone else, and seeing that dynamic is telling,” said Prasad.

Mike Prasad, VentureLabs
Mike Prasad, VentureLabs

“The last thing is relationship building,” he noted. “We don’t do any deals here per se, but historically, a lot of the relationships that we build here have led to that.”

Typical for a 500 Startups event, “it’s a casual vibe, but it’s not something like you feel it’s a joke,” said Prasad. “People are very serious and doing cool things, but it’s not like you can’t talk to people and have an open conversation. It feels very casual, because there’s no reservations per se.”

That openness creates a fertile environment for exchanging data and ideas, said Prasad. “If you’re someone who’s new to VC, it’s definitely a good event to get perspective for thinking about things you haven’t considered before,” he said. For more experienced investors, “the knowledge transfer there is also interesting.”

“PreMoney is very useful for getting information and a good time out of the event, but it’s also something you can jump right into,” said Prasad.

“I think it’s one of Dave’s best events.”

Missed PreMoney?

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500 Startups Announces $25M FinTech Fund

We’re excited to announce a new vertical fund, 500 FinTech, which will focus on investments in companies that we are deeming as: “Financial Services For the Rest of Us.”

Over the last 6 years, 500 Startups has made some great investments in the FinTech space. With nearly 80 investments in 10 countries, including CreditKarma, Flywire, FeeFighters (acquired by Groupon), Simple (acquired by BBVA), iMoney, and RealtyShares, CB Insights has tapped 500 as the most active early-stage FinTech investor in the world.

During those 6 years, we’ve learned a lot about building next generation financial services:

  • Financial Institutions are still not serving millennials, minorities, women, and emerging markets effectively
  • Technology (especially smartphones) will slash the cost of delivering financial services to billions of underserved consumers and businesses
  • Traditional financial institutions are not innovating fast enough to meet changing customer demands

All of this means we are still in the early days of the financial services revolution, and it’s a great time to be an early stage FinTech investor.

As FinTech entrepreneurs ourselves, we’ve also learned that we know there’s no such thing as a lean startup in financial services because:

  • Navigating regulation requires deep industry expertise
  • Building trust with customers and establishing relationships has long lead cycles
  • Building a great financial services company takes more than building a breakthrough product, it takes breakthrough marketing and distribution too

So we’ve created the world’s leading FinTech-focused program, including a dedicated early-stage fund, an accelerator program and a corporate partner program.

Our FinTech fund, targeting a $25M raise, will let us invest in ~100 early stage companies globally. We will work with entrepreneurs delivering superior value to underserved audiences – whether directly, or in partnership with traditional players. We’re targeting startups in Lending, Investment Advisory, Personal Finance Management, Blockchain, Money Movement, and Insurance.

Our FinTech accelerator complements 500 Startups growth hacking, fundraising advice, connections, and community with FinTech-focused mentors and industry relationships. We’ll be accelerating 20+ companies per year in the San Francisco Bay Area and have already kicked off our first batch of 10 FinTech companies in Batch 16.  

Our FinTech partner program helps bridge the gap between FinTech startups and established players, providing our portfolio companies with access to the expertise, distribution and infrastructure that financial services startups need to scale, and providing banks, insurance companies, software companies, data providers and investors access to vetted FinTech startups from 50 countries around the world.

To find out more, email 500 Partner Sheel Mohnot at sheel@500.co!

About Sheel Mohnot:

sheel-art

Sheel is a Partner at 500 Startups, running the 500 FinTech Fund and the FinTech track within the San Francisco Accelerator program. His recent startup experience includes 2 successful FinTech exits – a payments company and a high-stakes auction company. He also created and hosts a podcast called The Pitch.

He formerly worked as a financial services consultant at BCG and did Microfinance work at the non-profit Kiva. Sheel holds an MBA from the University of Michigan and a BS from Carnegie Mellon. Additionally, he loves furry creatures such as… himself. You can follow him on Twitter @pitdesi.

Many thanks to Mike Sigal (FinTech EIR) for revisions on this blog.

Artwork by Yiying Lu

LatAm Founders Are Hungrier for Success, Solving Big Problems Faster

Anyone who assumes Latin American founders are worse off than their amigos in Silicon Valley has it wrong.

The region’s ecosystem is growing rapidly to support entrepreneurs in every sector, said Didier Quiroz, a 500 Mexico City Associate who joined the accelerator in March 2016. Quiroz, a self-described chilango who was born and raised in Mexico City, provides “a lot of portfolio support” in addition to research, analysis and event planning.

500 Mexico City Associate Didier Quiroz
500 Mexico City Associate Didier Quiroz

“Six years ago, there were a couple of hundred people doing entrepreneurship in tech in Mexico,” Quiroz said. “Now, there’s opportunities for CTOs that have an idea, as well as junior developers who have an ability to build and construct things,” he added. “Seniority doesn’t affect them; if they have an idea, they go on and do it.”

Cultivating LatAm Talent To Solve Big Problems

According to USATODAY, Mexico saw $1B in tech investment last year and counts more than 500K IT professionals.

Although regional founders are just as passionate and driven as American entrepreneurs, they’re also playing for much higher stakes, said Quiroz.

“Latin American founders, given some of the situations that our countries live in, tend to be really hungry for success and are really passionate about their startups and what they’re doing,” he said.

“I know in the US there are passionate people working on everything everywhere, but here, there’s this sense of changing the reality of the people around them because you’re always aware of poverty problems, health problems and finance problems,” Quiroz explained.

In the last six years, 500 Mexico City has invested in 86 startups that collectively generate more than $40M each year.

As diverse as the portfolio is, you won’t find companies offering frictionless laundry service or parking spot reservations. There are two services that facilitate the sale of secondhand clothing, however: Unbisne and Ropanroll.

Several edutech firms connect students across the continent with information that was previously only available in urban classrooms. Misión Admisión offers college prep, LaMusiquta provides music instruction, and Exploiter teaches professional computer security training.

“We have gaming companies, and drone companies and 3D printing for toys, but there’s a lot of people trying to solve bigger problems that we know our government is not solving right now.”

“Great entrepreneurs here in Mexico tend to look at pressing problems in general,” said Quiroz. “Those sectors that are more related to the core problems in our countries are the first that have impact,” he added. “We have gaming companies, and drone companies and 3D printing for toys, but there’s a lot of people trying to solve bigger problems that we know our government is not solving right now.”

The 500 Mexico City Team

“Fintech is very very hot in the world, but in Latin America, it’s even more important because debit and credit card penetration is very low,” said Quiroz. “To buy tech products and services, you need a way to pay over the internet.”

Quiroz, who previously founded a mobile health startup called Disculpe Doctor, said that sector still holds a personal interest. “There’s a lot of things you can do there, especially in countries where you don’t have coverage for a lot of people,” he said. “You need telemedicine or mobile health to heal all these people who are not connected to the system.”

Born in LatAm, Relevant Everywhere

Although the founders he’s working with are from Latin America, they also intend to compete globally, said Quiroz, who also wants to develop more homegrown media startups.

“We need to cultivate more of our outlets in Spanish,” he said. “I know it’s not the global approach, but these companies can can also compete in the US, Europe or Southeast Asia.”

Companies seeking entry to 500 Mexico City need to have their sights firmly set on Latin American growth, Quiroz added. “We want to see that the first step is to approach the whole region from Mexico to Argentina and Chile, and then to take over the world.”

To be clear, applicants aren’t required to be regional natives; they just need to have a damned good idea for a product or service that can connect with Latin American users. “If there are two people from Germany doing a tech startup for the Mexican market, that’s not a barrier to entry.” Quiroz noted.

Un Trabajo Importante: Educating LatAm Investors

Although there’s more access to capital than in many other developing ecosystems, few Latin American investors have any personal experience working with tech startups.

“Most of those people come from a very traditional background, so they don’t understand high-growth startups and how to invest in them,” said Quiroz. “They’re expecting quick returns and revenue, healthy cash flow, and a lot of things that really don’t happen in startups right away.”

Without a frame of reference, “they don’t understand exponential growth,” Quiroz explained. “They know traditional growth that’s backed up by formal corporations with all these departments, but they don’t really understand how a team of three people can grow from zero users to a million or from $10,000 to a million in no time.”

“A lot of people approach these guys who are doing a technology startup and say, ‘OK, you have nothing, here’s 65 grand US, and you need to give me, like, 45% of your company in equity right away,'” said Quiroz. In many cases, these same investors don’t have a local network to support founders down the road, even if they do strike gold, he said.

After a potential VC or LP wraps their head around delayed ROI “and why startups need to reinvest in marketing or growth hacking or product development,” they can be warmly welcomed into 500 Luchadores, the regional fund named after the legendary masked Mexican wrestlers.

After some internal discussion, Quiroz said the Mexico City team decided to change its name.

“We’re calling it ‘500 LatAm’ to make it more regional,” he explained. “Argentinians are very different than Mexicans, so having something in common other than the Spanish tongue can be hard.

Maybe it’s our love of soccer.”

Featured photo: carnagenyc/Flickr

More Users, Less Spend — 10+ ways to Trim the Fat & Save 5-figures on Adwords (and beyond)

You need to put your Adwords Display Network Campaigns on a Diet.

Actually, not a diet… just trimming the fat with aggressive liposuction surgery might be better.

Google Display Network (GDN for acronym lovers) is AMAZING.

With over 2 million Display Network sites that reach over 90% of Internet users worldwide (Source: comScore), there are a lot of opportunities to reach customers.

But with that power… there just as many dangers.

In fact, it’s so dangerous that I rarely meet a startup that’s doing everything I’m going to share with you in this guide.

Let me be clear….

The ENEMY in any Performance Marketing Campaign is one and only one:

WASTE.

If you eliminate WASTE — defined as Impressions, Clicks or Any Action that doesn’t perform  the way you want — you’ll only end up with just the things that work.

If nothing is working, then your problem is a bit more serious 🙁

But if you are post-product market fit, and find that GDN still isn’t working for you — then it’s because you are not aggressively cutting the waste or trimming the fat.

How Did I Learn All This?

Over my life as an online publisher and entrepreneur I’ve generated millions (3M+ and counting) of leads with Adwords, and 90% of those have come from the Google Display Network.

Those leads weren’t free.

Not sure if you’ve followed GOOG stock lately but with billions of dollars in revenue they seem to charge for the traffic.

And because I’ve never been “venture backed,” all that ad spend was my own money. I needed to come back quickly with a positive ROI.

I could never afford to spend $5 to make $1 because the 2 little guys in the picture below needed to be fed, sent to school, etc.

Felipe (2) and Pedro (4) are my sons. If I waste money on adwords they get less diapers, toys and chocolate 🙁

So I needed to figure out a way to make the GDN work for me…

Why?

  • Because Google Search sometimes can be incredibly competitive and expensive
  • And not only that… I can be limited (more on this on my article about 23+ campaigns that every startup should run)
  • I wasn’t going to allow my company not to use one of internet’s biggest channels

I knew that the way to tame the GDN beast was to Slice and Dice the data patiently and with discipline. Go into the account and do the boring stuff. Exclude placements, raise/lower bids, exclude devices, keywords, etc.

But there was a problem …

Every time I’d go into my Adwords account… the sheer amount of options, tabs, etc. was a bit overwhelming and for someone that like any other entrepreneur was always in a hurry -and kind of ADD- I never got nothing productive done.

So I remember the following story from my childhood. Yeap, I’m the nerd that used to read Greek myths for fun. Here is the full story but the relevant part is this:

Theseus announced to King Minos that he was going to kill the Monster, but Minos knew that even if he did manage to kill the Minotaur, Theseus would never be able to exit the Labyrinth.

Theseus met Princess Ariadne, daughter of King Minos, who fell madly in love with him and decided to help Theseus. She gave him a thread and told him to unravel it as he would penetrate deeper and deeper into the Labyrinth, so that he knows the way out when he kills the monster.

Theseus followed her suggestion and entered the labyrinth with the thread. Theseus managed to kill the Minotaur and save the Athenians, and with Ariadne’s thread he managed to retrace his way out.

Theseus took Princess Ariadne with him and left Crete sailing happily back to Athens.

Here’s how you kill the monster, the minotaur… THE WASTE.

So I built a little “thread” and algorithm that allows me to go in my adwords account (or my employees) do the optimizations, kill the monster, trim the fat… and go back without getting lost.

Here’s how to cut the waste from your PPC campaigns, step by step.

1. Remove Adsense For Mobile Apps

How Does Google Pay for Acquisitions?

They make it a default option on Adwords.

Most people will never take the time to optimize and they’ll trust it to the conversion optimizers. But you know what… when I sell education courses I have enough info to know that most of the traffic from adsense in android comes from games and rarely converts.

Most of the clicks are “accidental clicks anyway” so if you are on a budget I strongly suggest excluding the following placement from your campaigns.

Again, do this only if it makes sense for your market… but in most markets it does.

The guys at “Wordstream” make a good case here.

START HERE OR GROW INTO THIS?

You can start your campaigns with this setting or give it a go and if then you see that mobile apps are not converting you exclude them after.

2. Exclude Particular Apps

Suppose you still want to appear on mobile apps, well now go ahead and see what apps are converting and what apps are not! Then exclude those.

Look at the last 2 … less than 1% conversion rate after more than 600 clicks!! I know for a fact that this traffic is not going to convert and is giving me expensive signups!

So if you don’t want to exclude Mobile Apps all together at least use this type of exclusion to remove the apps that are causing WASTE in your account.

START HERE OR GROW INTO THIS?

This one’s not for beginners. For this one, you need data in order to know which apps to exclude. This is one you need to grow into — don’t start here.

3. Add Site Exclusions

Do you really want your ads showing up in pages where there are Crime, Death and Tragedy, etc.?

Well… if you sell coffins that might be a good idea, but not for everybody.

Do you really want your ads showing up in parked domains?? Maybe in remarketing campaigns you do, cause you are following the prospect/client around no matter what… but as your first acquisition touch point?

The point is… use Site Category options to exclude types of sites that won’t fit your advertising goals.

This is especially true if you are on tight budget. (Who isn’t?) Do this from the get go.

Lots of people don’t exclude this and they end up spending large portions of their budgets on parked domains 😉

Sexually suggestive? Think about that twice… Look at the guys at Eat24

START HERE OR GROW INTO THIS?

You can start your campaigns with this setting or give it a go and if then you see that mobile apps are not converting you exclude them after.

4. Create a Black Book or Black Ledger of Placements

This one is one of my favourites.

We analyze data from all of our campaigns in all of our websites and we figure out what sites did not convert for ANY of our websites or products. With that data we create a “Black book or Black ledger” that we exclude from EVERY campaign we run.

I don’t need to spend money twice on torrent, software, ebook site or coupon site that it’s keyword stuffing and SEOing everything just to show adsense ads.

So after you have enough data… go ahead, create your Black Ledger of Placements and add it as site exclusions in all of your campaigns. That way you won’t spend the money twice to find out that there are some pretty shitty internet sites.

START HERE OR GROW INTO THIS?

You’ll need months of data probably to build a good black ledger… but once you built it I always start my campaigns EXCLUDING those placements that never worked for me. No need to spend money twice to learn my lesson.

But if you want, and you think your campaign is completely different and this time will work on the spammy coupon site… you can exclude it afterwards.

5. Remove Demographics That Don’t Make Sense for Your Product (Age, Sex, Parental Status)

This one seems “so obvious” that I don’t get why more people aren’t doing it. All the more reason why you should implement, now.

There are some websites and products who clearly target a specific demographic. In other words, there is no chance in hell that people NOT in that demo will ever become customers.

For example… if you are selling a product to women, you can “Exclude” people that GOOGLE KNOWS FOR FACT are male.

Yes, sounds extremely simple, but many of your competitors aren’t doing it.

Here’s another example:

If you are selling something that requires a Credit Card Transaction, then you would want to EXCLUDE all leads that don’t have a credit card.

For example, in LatAm, people under the age of 24 typically don’t have a credit cards. Likewise, it’s equally unlikely that a 65+ retired guy will enter his credit card on my website.

Same if you are selling diapers… probably a lot better to exclude people that Google knows ARE NOT A NEW PARENT.

These are all ways that you can use simple demographic segmentation to do nuanced exclusions and save a LOT of money.

If you are less risk averse, then you can leave “unknown” on… but if you are on a tight budget you can exclude those also!

[?] Unknown: This group includes people we haven’t been able to associate with any gender/age/parental status.

START HERE OR GROW INTO THIS?

You can start your campaigns excluding (or targeting) some specific demographics or see how it goes and exclude them later.

But, if you are selling to specific demographics and your budget is tight, I recommend starting with this settings.

6. Remove Your List of Leads/Customers

This is another “obvious” one that I also don’t get why most people are not doing it.

Let’s say you are “Groupon”… you need to get “Leads” / “Email Addresses” to your list so you can offer them something. Cool.

You set up a Campaign SPECIFICALLY FOR THAT and it’s working.

So, if someone becomes a lead and signs up… shouldn’t you EXCLUDE THEM from seeing ads that send them to SIGN UP AGAIN?!! Of course you should.

Yes, you can set up Remarketing Campaigns to get them to come back, to buy more… but not to SIGN UP… because they already did that.

In another scenario, let’s say you are a cool SaaS company growing at “Slack Rates” (good job!).

Thanks to your excellent acquisition campaigns, people are becoming paying customers left and right.

Shouldn’t you exclude those paying customers from seeing your ads to buy and your Christmas Promo with a discount?!! Of course you should.

You can target them to come back, to use the app… but please (please!!) exclude them from the original campaign as soon as that campaign serves its purpose.

The screenshot below shows you exactly how to do it.

START HERE OR GROW INTO THIS?

I normally start with this settings. If someone signed up for my “Offers Newsletter” or my “Free Trial” No need to keep showing them ads to do that “again”.

I might show them ads to “come back” or “buy” or something else… but I’ll exclude this guys from the campaigns from the start.

7. Remove Geo Targets

Living in a “Developing Country” (3rd World is a term that our friend Donald Trump would use… ignoring that it’s the “same world” we live in) I can tell you that not all “Markets” or “Countries” are created equal.

I know for a fact that people in Venezuela and Cuba (although things may change from now on for Cuba) will have problems paying for my product.

They’ll sign up for the free trial or the free lessons, but then they won’t pay. So I exclude those type of countries from the start.

Also if you are selling physical goods and you don’t ship to some countries or cities in your country… is better to exclude them!

START HERE OR GROW INTO THIS?

For the obvious cases (leads in that country can’t pay, or you don’t ship to that place) I start with excluding those geo targets from the get go. Depending on your risk tolerance if you “think” that something is not going to work you might wanna exclude it too.

8. Hours/Days of Week

Not every day or hour performs the same for every product. In my case the performance is quite stable for days of week.

But again, if you don’t ship or sell on some days… you might wanna stop the campaigns those days. You’d be surprise how many people don’t look at this!

START HERE OR GROW INTO THIS?

Whether you start here or grow into this depends on a few factors.

For the obvious cases (you have a local store and you are not open on Sat, Sun) maybe you want to start here and use time exclusions right away. But, then again, maybe someone goes to your website on Sat, Sun and then they visit your local store on Mon. So you have to try.

9. Devices

Technically some people won’t consider “devices” a dimensions because some of the settings to exclude them are at the bid level … but I don’t care.

Be aware that people in computers, mobile and tablets convert at different rates!

I’m amazed at how many people:

a) still don’t have a mobile responsive/friendly fast website

and

b) even if they don’t (because they did not have time to build it or whatever)… that they don’t exclude mobile users from their paid campaigns!!

So please… if mobile traffic is not converting for you — for whatever reason — just make sure you exclude it!

In AdWords you can do that that by bidding -100% for mobile.

START HERE OR GROW INTO THIS?

If your site is not mobile friendly or fast, you should exclude mobile from the get go. If not, try it out… and see how it goes. Instead of killing mobile right away (huge traffic is there) you can also make some effort to optimize it before turning it off.

10. Other Ideas

I don’t want to make this longer than I should. I think you get the point.

There are a couple more dimensions you can look in GDN but I feel these most people do.

Basically you can:

  • Remove Topics that are not Working
  • Remove Specific Placements with bad performance
  • Remove Keywords (or put them as Negative) that bring placements with bad performance, etc.
  • Remove Ads with Bad Performance

But these most people do these. On the other hand… the ones I talked here I see very few startups doing it regularly.

Some Statistical Thoughts and Numbers to Take Into Account When Optimizing

But how many clicks, conversions, etc. do I need to wait BEFORE I exclude something?

Well… I’m glad you asked.

Of course the answer to this falls in the category of “It depends” but let me give you some useful guidelines.

Depends on what? Basically on your conversion rate and the statistical confidence that you want to have.

But let’s think about it in the following way.

If your average conversion rate of a campaign from click to free trial signup is 15%… and if you got 30 clicks and no signups.

To get to 15% conversion rate … the next 5 clicks should be a signup.. Possible, but highly unlikely. So I’d kill that.

I never kill something BEFORE 30 Clicks.

Now if you are optimizing towards something that has a 1% conversion rate on avg. You expect 1 sale every 100 clicks. But you know… that’s the avg. So in that case I normally wait up to 4X to 5X the clicks. So if I had 400/500 clicks and no sales or just 1 or 2 with a negative ROI then I turn that dimension off.

This is not 100% based on math but it’s good common sense.

Applying This To Other Platforms (Facebook, Taboola, Outbrain, Bing…)

Of course this approach to reducing dimensional wastage is not only for adwords. You’ll find that this can work in Facebook, Taboola, Outbrain, Bing, Yahoo and many others.

I just wanted to give you a sense and dive deep in Google Adwords cause I believe GDN is one of the most underutilized traffic source in startups because of these pitfalls.

Here’s a simple Facebook Example… You can go to:

Male and Female

Countries

You get the point. With Tools like AdEspresso (a 500 company… I love you guys!) you can zero in into a lot more details.

Note For Startups With Agencies/Freelancers/Outsourcers Running Their Adwords Accounts

I get you are founder with A LOT going on. I still think marketing should be a core skill inside ANY company and outsourcing it I believe it’s a mistake… but I get it… sometimes you do what you can. But… Make sure you delegate things to knowledgeable, hard working people.

If they are not doing these things… Time to have a serious conversation with them 😉

My Last Ask…

If you’ve got any value out of this blogpost… please share it.

On Twitter

Share on Facebook

Share on LinkedIn

Email it to people: http://500.co/more-users-less-spend-10-ways-to-cut-adwords-wastage/

Upvote on GrowthHackers

Upvote on Inbound

You’ll not only save them 1000s of Dollars by doing it and probably open one of Internet’s Biggest Channels To Them (The Google Display Network)… you’ll also make me super happy 😉

So yeah… please share it and feel free to reach out on twitter @juanmartitegui specially if you did some of these analysis on your account and you found some REAL WASTE & SAVING OPPORTUNITIES.

The 500 Accelerator in a Nutshell

Today’s is the last installment in a series of essays by 500 founder Troy Sultan documenting his journey through the 500 Accelerator, Batch 16. Here Troy shares his closing thoughts on the Accelerator, and his opening thoughts for the considerable “Everything Else” that’s on its way. 

To read the rest of the Troy’s posts in this series, scroll to the end of this piece for links. To apply for Batch 18 (deadline June 20, 2016), go here.

It was 10pm on a Monday in November, two hours before the application deadline for 500 Startups’ 16th batch. Two months prior we were interviewed and rejected from Batch 15 — for good reason. We were too early.

The company was barely a couple months old and wasn’t ready to fully leverage the accelerator’s value. While aware of this, we interviewed anyway to learn what that value actually looked like, and if it would be relevant when we were indeed ready for it.

Two months later on that Monday night in the office, we were heads down GSD. My calendar interrupted, reminding me that applications were due at midnight for the next 500 batch.

I broke the productive silence and muttered to Wade for a quick sanity check. “We’re not interested in 500, right? Application is due in 2 hours.”

Wade: “Nah. What’s the value?” I agreed, and that was that.

“But wait!” my brain said. “Lets torture ourselves by imaging a fictional scenario where we regret not applying at some point in the future!”

So I blurted aloud, “Imagine —just for argument’s sake — sitting in the 500 office a few months from now laughing with new friends, fist-bumping over big wins, having grown and learned in unimaginable ways, looking at each other asking, ‘Can you image if we didn’t apply?’”

Fast-forward 6 months, and we’re now 500 grads.

Filming our batch video (full video at the end of this post)

While it’s feels impossible to fully capture in a blog post, I try my best to highlight our experience below.

Some lessons & wisdom we’re walking away with:

  • The people you think have their shit together, don’t.
  • You’re great at some some things and suck at others. Figure out both quickly.
  • Some of the best companies don’t reflect it at the seed stage.
  • As an investor or employee, if you consistently pick winners at the early stage, you’re lucky, not good.
  • Ability to fundraise at the seed stage is largely dependent on you running a “tight process”.
  • Shit happens at every early stage company: cofounder breakups, down months/flat revenue, bad hires. It’s not just you.
  • When your company starts to grow, things get harder not easier.
  • You’re more than just the founder of a company. You’re a unique human being that others love regardless of your company’s outcome.
  • You must find ways to enjoy the journey or you’ll go insane (this one is particularly tough for me).

Other takeaways from our experience:

Focus & Direction

Our target customer changed. We went from selling into multiple customer types to one. This led to us refocusing our product roadmap and feature set, refining our sales and on-boarding process as well as our messaging. We’re more focused.

This changed the way we’re thinking about the business as a whole, which comes with it’s own challenges. Contrary to my broader point here, we’ve lost clarity on the company’s long-term vision as new learnings and opportunities came to light. We’re becoming more comfortable with not building the big vision now and focusing on the immediate opportunity in front of us as things will change.

Collaboration + Community

It’s easy to build in isolation. Isolation from customers/users, friends and family and other entrepreneurs in the trenches. I’ve written before about thepsychological challenges of company-building and I believe isolation is the breeding ground for these. This is something the 500 environment helps you avoid.

The office space was one of my favorite parts of the program. It’s an intensely collaborative space where you can’t avoid cross-pollinating with creative and vulnerable minds on similar journeys. Pains. Lessons. Growth. Fundraising. Hiring. Firing. Emotional swings. Swapping stories. Friendship.

The level of intellect, curiosity, hustle and standard that permeates the 500 office and community is both contagious and addicting. I felt FOMO regularly when leaving the office. I knew that time spent elsewhere had less of an impact on my personal growth.

That said, there’s a clear downside to this setup: distraction. It’s easy to spend the day bonding with batchmates and not building your business if you‘re not disciplined. It’s easy to convince yourself the relationships are valuable (and they are), but there’s a direct impact on your bottom line for each hour you’re not heads down. As they say, balance is key.

Network, Learning and Inspiration

There’s something to say about building a powerful network in a friendly, organic environment vs. one that feels forced. We know a lot more smart folks now than we did before the program and those relationships feel real as opposed to transactional.

We met dozens of operators and investors who came by for late-night chats and shared insights on their mindset and entrepreneurial journey with off-the-record candidness. And they were accessible. We connected with many of them personally who were genuinely interested in being helpful.

Two sessions that had a memorable impact on me were Gary Swart of Polaris Partners and Jess Mah of InDinero. They served as a strong reminder that we’re all human; that we all go through hardship. It’s the ones that don’t give up who win out.

From an evening chat with Wesley Chan of Felicis Ventures, an under-publicized fund with massive wins:

Support & Validation (or a punch in the face)

Confidence is a huge part of staying the course as an entrepreneur, and having a sounding board to let you know when you’re killing it (and when you’re fucking up) is invaluable. The 500 culture is exceptional at telling you like it is, no filter.

He loves us.

The 500 partners have seen hundreds of companies pass through the accelerator, so learning what other later-stage companies looked like at seed makes for an interesting perspective. It’s an implicit measuring stick and helps build confidence when you get praise and create a fire when you’re slumping.

You learn that the teams touting growth, getting press, raising large rounds are, again, just normal humans. Like you and I. Smart, hardworking people who muscled through the troughs. That’s it.

You leave 500 deeply believing this.

Trust

Building a company is a lonely journey. We got close with the 500 team who genuinely care about our success, and not just because they’re on our cap table. They care about our emotions, mental health and how much we’re enjoying the process. They know all days won’t be good ones. They invest in you ability to win long-term and they make that clear. I’ve never felt pressure to exaggerate numbers or disclose anything but the exact truth about the health of our business, my psychology, worries, challenges or concerns. It’s hard to put a price on that.

And although B16 is winding down, I feel like we’ll have that trust forever.

Last but not least: Fun

To my point above on enjoying the journey, we had insane amounts of fun. As a fellow batchmate likes to say, we burned the candle on both ends. I’ll tell this one in pictures:

That night we all went out in suits. For no reason.
Batch ski trip to Lake Tahoe
BBQs on BBQs
Farewell dinner 🙁
More BBQs

After the program ended, a batchmate and I sat in my apartment reflecting on our experience. Best parts? Worst parts?

While this post summarizes the good, we were at a loss for the bad. Sure we can nitpick: mentor whiplash (major first-world problem), seating charts, scheduling, wifi and A/C issues (if I showed up to a meeting with you sweating, it wasn’t nerves I promise) but we had no substantial knocks against our experience — honestly. It was incredible.

That said, our conversation landed on a massive caveat:

You get out of the 500 experience (and other accelerators, by our guess) what you put in. Accelerators are kitchens, not restaurants. You have to get dirty and cut through the noise to find value for team and your business. One can easily go through an accelerator and get marginal value from it. That’s the asterisk next to most self-driven learning models and, well, life in general.

My recommendation

If you’re an early-stage founder, I highly recommend considering an accelerator, whether 500 Startups or another. If you think your business is beyond the ‘accelerator stage’, I’d reconsider (at least as it relates to 500). Much of our batch raised $500k-$1M+ prior to the program and some had up to 20 employees. I’d bet they feel similar to us about the experience.

Do your diligence on existing programs, talk to alumni founders and partners and decide which program is the best fit for your company.

While it’s hard to know today the affect 500 will have on our business long-term, it certainly feels like we made the right decision. It’s changed the way we think — and that lasts forever.


Thanks so much for following our journey 🙂 If you’re interested in joining 500, applications for Batch 18 in SF are now open. Apply here and let me know you applied.

P.S. — Check this out:

Previous posts:

500 Startups Batch 1 — 5 Years Later. Where Are They Now?

At 500 Startups, each group of founders that is accepted into the accelerator’s four-month program is called a “Batch,” an apt description, since participants receive a series of commands they’ll later process and execute.

The founders who presented at 500 Startups Demo Day in August 2011 are considered Batch 1; today, Batch 17 is entering week six of a four-month program that will culminate in their own Demo Day, the product of intense study, practice and camaraderie.

Batch 1’s pitches were presented at 500 Startups’ Mountain View office, but today, Demo Days are held at Mountain View’s Computer History Museum, a venue that can accommodate hundreds of attendees, including investors, friends and the media.

High production values give these pitch sessions the same vibe as a high-energy stage show, but some things haven’t changed since Batch 1: participants continue to be “unified by a strong international and female founder thread and ‘attitude,'” a trait TechCrunch noted in its August 2011 Demo Day reporting.

Today, a look back at several companies that participated in Batch 1 Demo Day to see how far they’ve flown since leaving the nest.

Kudo

Based in Indonesia, Kudo describes itself as “an Online to Offline (O2O) company, bringing e-commerce to mass millions of Indonesians.”

In practice, this means creating sales kiosks in public areas that accept several forms of payment. By targeting consumers in physical spaces, Kudo’s founders hope to drive sales from people who might not be inclined to order online or visit a store.

Because approximately 81 percent of Indonesians don’t have bank accounts, Kudo’s payment and logistics platform bridges financial and technical gaps. Customers use Kudo kiosks to refill mobile phones, purchase tickets or buy physical goods.

Where are they now?

In November 2014, founders Albert Lucius and Agung Nugroho closed a seed round; six months later, their metrics were strong enough to land a seven-figure funding round.

Vidcaster

Vidcaster, a “video experience platform for marketing and training,” created custom workflows that let users easily promote, distribute and manage marketing and training content. Offering turnkey solutions that included hosting and SEO, co-founder and CEO Kieran Farr told TechCrunch that he followed Dave McClure’s advice to launch a freemium service that would augment his existing subscription services.

Three months after Demo Day, Vidcaster raised a $350K seed round, which gave the company enough runway to integrate with Salesforce, Hootsuite and Marketo, increasing its reach. After winning a grant from the City of New York to “hire and expand in Lower Manhattan,” Farr relocated the company from San Francisco.

Where are they now?

In December 2015, Vidcaster was acquired by Vidlet, a marketing research company based in Palo Alto. Farr remained aboard as CTO, where he helped the new company develop a service that uses smartphone cameras to conduct ethnographic research.

Snapette app, via Facebook

 

Snapette

Initially an app that connected shoppers with nearby shoes and apparel, Snapette quickly grew into an ecommerce discovery platform with more than 2 million users.

Where are they now?

In October 2011, co-founders Jinhee Ahn Kim and Sarah Paiji closed a $1.5M seed round; in August 2013, after partnering with more than 200 brands and stores, Snapette was acquired by PriceGrabber, a price-comparison shopping site, for an undisclosed amount.

Looksharp

InternMatch, a jobs marketplace for internships and grad students that launched in 2009, raised $400K in angel funding before securing its berth in Batch 1. While going through the accelerator, founders Andrew Maguire and Nathan Parcells redesigned their site to improve usability and search. A month after their demo, they raised an additional $500K.

Where are they now?

Initially focusing on west coast opportunities, InternMatch gained traction by building a large team of brand ambassadors who were also marketing interns. Employers pay to post listings, but students use it for free. In January 2013, the company raised $1.2M in a bridge round to expand its services to include internships and traditional paid positions for enrolled students and recent graduates.

Six months later, a $4M Series A round allowed the company to add more engineering and marketing roles and develop data products to match users with open positions. After changing its name to Looksharp, the company acquired competitor Readyforce in December 2014.

Today, Looksharp currently claims to serve 10 million users, or 70% of all new graduates and college students.

Elizabeth Yin, 500 Startups EIR, co-founder LaunchBit

LaunchBit

LaunchBit, a customer acquisition tool for SaaS companies, was created to help publishers send content to B2B audiences via niche ad inventory such as newsletters and blogs. The firm also helps publishers identify and manage ad units that can be inserted into email newsletter.

Where are they now?

A year after Batch 1, LaunchBit raised a $960K seed round and relocated from the Bay Area to Las Vegas in search of “cheaper operational costs and a better talent pool to tap,” co-founder and CEO Elizabeth Yin told tech.co. After BuySellAds, a LaunchBit partner, expressed interest in an acquisition, Yin realized that her “passion wasn’t in ads.”

After LaunchBit was absorbed into BuySellAds, Yin joined 500 Startups as a Entrepreneur-in-Residence, and now runs 500’s Mountain View Accelerator as a partner in the firm.

Batch 17 Demo Day is August 2, 2016

Batch 17’s Demo Day is already on the books for August 2, 2016.

Active, accredited investors and their representatives are invited to join our founders and our team at the Computer History Museum in Mountain View on August 2 from 12 – 6pm.

Demo Day requires pre-registration.

Sign up to join Batch 17 Demo Day here.

How To Pitch A VC

“Everyone” understands the high-level goals of a pitch: Make yourself memorable, and drive home your product’s value.

But working out how to put it all into one, non-boring pitch is another matter altogether — and something we work on extensively as part of the 500 Accelerator.

Over the years, we’ve learned that sticking to a step-by-step strategy for pitching VCs is a common struggle for startup founders.

Do they introduce themselves before or after their companies? Should they list their most impressive metrics upfront or work them into the pitch? What’s the proper way to end investor conversations?

Good pitches follow a rigorous structure for engaging investors and proving a company’s value.

Like all good marketing and sales, the startup pitch process starts before you ever walk into the office—it starts with research.

1. Know Your Audience

Before you ever walk into a VC’s office, you need to research the person you’re going to be meeting and adapt your strategy accordingly.

First you have to understand his/her interests:

  • Does the VC have expertise in your area? Adjust your pitch according to how much background knowledge they have.
  • Have they had any successes? If so, frame your company in a similar light.
  • Did they publish mission statements? Figure out their priorities and focus on addressing them.

Then you have to understand the logistics. You need to make sure the fund is in a position to invest in you and that you’re talking to the people who can make it happen:

  • What is their fund size? If they have a $25 million fund, they won’t cut you a check for $10 million.
  • Where are they in their lifecycle? If a firm is towards the end of their fund, they’ll be more selective in writing their last checks.
  • Who are you meeting with? If it’s someone below partner, he/she won’t be making any decisions. You may still want to meet w/ him/her, but it’s important to know.

What you’re trying to find is the simplest possible explanation of your company’s value—tailored for the VC you’re meeting. When you figure it out, practice it again and again until there are no weak points in your presentation.

2. Grease The Wheels, Then Get Straight To The Point

When you walk into the room, your first instinct is going to be to jump right into your pitch. If you do this, you’re wasting a valuable opportunity to refine your pitch for these particular investors.

Instead, start by asking them one question: “What is the most important thing you want to make sure I cover?”

This answer is hugely helpful in focusing the rest of your presentation. If they ask about market size, you’ll know to spend extra time covering it. If they ask about your team, you’ll know where to take a deeper dive.

Opening with this question also gets them engaged early in the process, before you’ve begun to really pitch your product. It helps to set a casual tone for the pitch, which is a huge boost to you.

Have A Casual Opening Conversation

Investors aren’t just investing in your company, they’re investing in you. Beginning with a causal conversation engages them person-to-person, instead of presenter-to-presentee. That connection can be very persuasive.

There are many casual conversation openers, like bringing up a mutual connection, but the key is to give the best, most authentic impression of yourself. Scott Friend, managing director at Bain Capital Ventures, says that he comes to pitches with two questions in mind:

  • “How good of an evangelist is this person going to be for their company?”
  • “Is this someone I would want to go to work for?”

Both of these questions center around your charisma and character, two things you can impress early on with some quick conversation. However, don’t let the conversation prattle on. Keep it to a few minutes tops, and then get into the meat of your pitch.

Start Things Off With A Succinct Tagline

Get to your pitch’s core by introducing your company with a tagline and short explanation. Right out of the gate, you want investors to know what they’re looking at and why they should care.

A good tagline should be seven words max, and should hint at your company’s vision in a memorable way.
Curios Following your tagline, you need to explain what your company does. Do this in less than five seconds, in language anyone can understand.

For example, “We make Facebook ads easy” is a good, straight-forward explanation of your service. “We drive synergistic mobile bitcoin monetization through international arbitrage using a distributed GPU cloud-based computation and transaction engine written in assembly,” is a mess.

The last thing you want is to ask a VC to waste mental energy figuring out your convoluted explanation.

3. Segue To Your Numbers

Now that you’ve piqued investors’ interest, you want to get them engaged with your company’s story. This brings you to a fork in the road:

  • If you have strong metrics, make sure to bring this up early and be specific.  e.g. “I founded this SaaS company two years ago, and today we’re doing a $2m runrate.”
  • If your metrics are weak, begin your story by focusing on how massive the problem is. e.g. “I founded this company after realizing there are a million teenage cricket players like Jim, unable to get a date.”

When you talk about your metrics, you have to make sure they’re integrated into your company’s story. You can’t just say “We have 1000 downloads.” Without context, your metrics don’t make sense.

Showcase Your Most Relevant Traction Metrics

In general, the further down the funnel a metric comes from, the more valuable it is.

For example, having 20,000 downloads doesn’t mean you have 20,000 customers right now. Your active users, on the other hand, show how many top customers you have right now.

Depending on the specifics of your business, your actual metrics might differ, but they should be related to these:

  • B2C Companies: DAU / MAU > Downloads > Partners
  • B2B Companies: Revenue > Number of Customers > Pipeline leads

Maybe your B2C service is a web app, so you track user registrations instead of downloads, but in general this is how you should prioritize your metrics.

Once you’ve decided which metrics to show, keep three things in mind:

  • Do your numbers support each other? If you have a huge number of B2B enterprise-level customers but your revenue is low, investors will sense something is wrong.
  • Are you using industry standard metrics? Making a VC translate your “custom” metrics overcomplicates things.
  • Can your metrics stand alone? If you have weak metrics, highlight some strategic partnerships to prove you have the infrastructure for growth.

It’s important you follow this strategy when you’re focusing on traction metrics. When your traction alone isn’t impressive, however, you’ll need a different approach.

Highlight Your Potential Growth With Market Metrics

When your traction is weak, you can always use market metrics to underscore how high your ceiling is. Market size and availability are key here.

Airbnb’s first pitch went this route:

AirBNBBy breaking down what their company could be in such a simple diagram, investors understood the exact segment of the large market they were attacking.

When you take this approach, you have to convince investors that you understand the problem that customers in this market face and that your product is the best solution to it. You need to be able to describe the specific segment of the market, the specific problem, and your product’s specific and differentiated value in a way that anyone on the street could understand.

If not, it’ll look like you identified a large vague market but couldn’t figure out how to penetrate it.

4. Tell Your Product’s Story

After showing investors why they should care about your product, you’ll be tempted to show off all the features you’ve spent time developing. But investors only care about the problem your product solves, and why it’s the best at solving it.

The most powerful way to explain your product’s value is with a story. Speak slowly and naturally as you tell investors how you, or a hypothetical person (preferably a real one), experienced this real life pain point, and how you dreamed up your product to fix it.

You want your story to be streamlined and approachable. It should make your product’s value obvious, and it should engage investors on a personal level.

If you don’t have a story, you can still explain the problem your product solves, but you’ll sacrifice the personal engagement a story brings. Still, this is a better option than telling a story no one can relate to.

Showing The Product’s Value

When it finally comes time to explain your product, focus on its benefits, not its features. The difference is this:

  • Benefits: What your product helps customers accomplish. e.g. “The iPod puts 1000 songs in your pocket.”
  • Features: What your product does. e.g. “The iPod is a digital music player with 1 GB of storage.”

These benefits are why customers will buy your product and help grow your company, which is an investor’s top concern. However, you’ll need to incorporate your benefits into your company’s story, and you shouldn’t make it sound like they were easy to develop.

Stories without contrast are boring, and investors want to hear about your ups and downs. They want to hear how you struggled early on, what roadblocks almost kept you from building this solution, and how you overcame.

These contrasting points make your story memorable, which should be a primary focus in your pitch. But being memorable alone is not enough. Once you’ve engaged investors with your story, you need to convince them that your solution is the best.

Pinpoint What Makes Your Company Profitable

Explaining your product’s value is one thing, showing how that value becomes revenue is another.

There are three aspects to this:

  • What makes you better than your competition?: Prove your market expertise and highlight your competitive advantage / differentiation.
  • How are you monetizing?: Explain clearly how you’re turning this advantage into dollars.
  • Are you profitable right now?: Compare metrics like CAC to LTV to prove your current profitability.

Your company needs one amazing thing that makes it a real winner, and this is your competitive advantage. More than that, you need a clear path to converting that advantage into profit, and some evidence that your plan is working.

However, investors aren’t just evaluating your product, they’re evaluating you. They need to have faith in your team’s ability, and it’s your job to instill that belief.

5. Sell Investors on Your Team

Investors want your story to be about more than a great product, they want to know how special your team is. They want to see that when things looked grim, your team had the grit and skills to keep the company going.

Investors are also particularly interested in teams because companies pivot all the time in search of opportunity, but their core team usually remains consistent.

Back when Airbnb was still AirBnB, Paul Graham emailed Fred Wilson to urge him to invest. When Wilson said he was skeptical about the product in its current form, Graham told him to focus on the team, saying “Ideas can morph. Practically every really big startup could say, five years later, “believe it or not, we started out doing ___.”

Selling them on why your team is both exceptional and resilient enough to grow your company is critical to instilling confidence in your investors. For a great example of this, look at 500 alumni Headout.

How Headout’s Team Raised $1.8 Million

Headout is an app that handles same-day event booking for travelers. Their pitch raised $1.8 million at our February 2015 Demo Day. Look at their team introduction to see why.

HeadOut1Building a recommendation engine that covers vastly different cities requires a strong team of developers and business development. The team has a balanced skill set that made this a compelling investment to investors.

HeadOut2However, more than just being balanced, the team showed hustle and strength by tripling their revenue in just three months.

In just a minute-long pitch, the company was impressive to a lot of investors.

How To Walk Out Of The Room

Now that you’ve reached your pitch’s conclusion, you need to make a clean exit.

You’ll want to give a very brief summary of your presentation in a few sentences. Include what you do, how you do it, and your key metrics. As a closer, use a memorable phrase, possibly reworking your opening line to include metrics.

There will likely be questions as soon as you finish. Stay confident. Keep your body language and voice natural, and converse with investors as if you were talking to another founder. Always bring the conversation back to your company’s core value.

That value is what investors care about, not just the flair of your presentation. If you stick to this formula to showcase that value, you’re going to be having much more successful results when you’re walking into those offices on Sand Hill Road.

Lastly, you’ll want to have a strong call-to-action.  Find out what are the next steps and make sure not to leave the room without understanding specifically what is going to happen next and on what timeline.  Good luck!

>> Applications for the 500 Accelerator are open now. Apply for Batch 18 here. <<

The Career-Changing Impact of Learning How to Invest

Our flagship Venture Capital Unlocked investor training program is back! The 2 week executive ed. program that we co-run with Stanford Center for Professional Development is now accepting applications for its July 25th – August 5th cohort.

APPLY HERE

Getting the Inside Scoop

In the program, participants get an inside look into 500 Startups’ investment playbook and gain firsthand access to world-famous Silicon Valley VCs, angels, startups and entrepreneurs.

We are looking forward to another great session taught by Stanford faculty and 500 Startups partners, as well as top speakers like the ones who visited during the February cohort (below).

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Program Impact

At the end of 2015, we highlighted the successes of some of our VC Unlocked participants in a 3-part series on female VCs. You can see them on our blog:

Paula Schwartz, Founder of Startup Boat
Pocket Sun, Founding Partner of SoGal Ventures.
Katherine Hague, Creator of Female Funders

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Feb ’15 participants Diana Moldavsky, Elizabeth Galbut and Pocket Sun at 500 Startups Demo day

More recently, we caught up with a few other past participants and discussed the impact the program has had on their professional lives.

Many called the program “life changing,” and spoke about how it really gave them the confidence they needed to embark on a new chapter in their careers.

New Syndicates and Funds

Several past participants were inspired to start syndicates, which have turned into funds. Arlan Hamilton, a young black, female, gay woman turned heads in the largely white investing world after taking part in our inaugural class in May 2015.  

She started an early stage syndicate on Angel List, which turned into a VC fund called Backstage Capital which invests in “over-achieving underrepresented founders.”

Another example is Mohammed Mubarak Al Khater, who after meeting a founder while in Silicon Valley during the VC Unlocked program, felt inspired to invest personally. The founder was raising a bridge round and told Mohammed he would allocate him 10M in the round if he could raise it within a month.

Mohammed Al Khater with his certificate of completion from Stanford CPD
Mohammed Al Khater with his certificate of completion from Stanford CPD

Mohammed went back to Qatar, tapped into his network, partnered with a friend, and together they raised 11.2M in less than three weeks. They formed a new vehicle, MKaNN Ventures, in order to be able to invest in future opportunities.

The Network Effect

One of the greatest benefits of the program is the strength of the network that it creates among participants.

All of the participants regularly communicate with each other to share deal flow and advice, as well as organize and attend events together. Many continue to meet up with each other around the world.

Feb '16 program participants Lee McNutt and Carolina Canida met up in Miami in March to explore a company together.
Feb ’16 program participants Lee McNutt and Carolina Canida met up in Miami to explore a company together.

May 2015 participants Elizabeth Galbut and Pocket Sun even started a fund together (SoGal Ventures).

Some serve as LPs in each other’s funds and countless others have co-invested in companies together, many of which are in the 500 Startups portfolio.

Better & Stronger Investment Theses

The VC Unlocked program uses a project-based learning approach in which participants are continually refining their investment theses throughout the program with the help of 500 partners and Stanford faculty. Many of the participants we spoke to said this was an invaluable part of the course, since they continue to use their theses every time they evaluate a deal.

Stanford professor Michael Lepech with the May 2016 class.

Learning Directly From the Portfolio

One company that passed through the investment thesis filters is Piper, a DIY minecraft computer for kids.

Four VC unlocked participants invested in the company after seeing their founder pitch at Batch 15 Demoday during our February 2016 session.

Piper also scored a new PR representative in Masha Drokova, an angel investor and PR specialist who took part in VC Unlocked.

Participants look at Piper's product, a DIY minecraft computer, at Preview Day
Founder Mark Pavlyukovskyy showing Piper’s DIY minecraft computer to VC Unlocked participants at Preview Day

How to Join the Next VC Unlocked 

If you would like to be part of this fun and effective network of newly inspired VCs from around the world and take your VC career to the next level, join our next class on July 25th.

Seating is limited, so be sure to apply soon to secure your spot at 500.vc:

APPLY NOW