The Yin & Yang of Marketing and Innovation

Guest Blogger – Jascha Kaykas-Wolff, Chief Marketing Officer Mozilla 

“Business has only two functions—marketing and innovation.”

I have heard this quotation attributed to Peter Drucker, a.k.a. “the father of business consulting” (talk about a guy with some dubious children), as well as Czech novelistMilan Kundera.

Citations for Drucker usually extend the quotation, adding, “All the rest are costs.”

Kundera. Drucker. Novelist. Consultant. Marketing. Innovation.

The Circular Interplay

There’s a wonderful, circular nature to the relationship between marketing and innovation.

First, I should say I do believe everything other than innovation and marketing in business is a cost—a necessary cost, usually. But the only thing that produces business profit is innovation and the discovery of a market need for that innovation—or, conversely, the discovery of a market need and the creation of an innovation to meet it.

Accounting, human resources, customer service, operations—all of these things are imperative, but not the reason we are in business. We are in business to figure out how something works (innovation) and to figure out who would find it useful (marketing) and then provide it at a profit. Marketing and innovation are intricately linked in that endeavor, and the interplay between the two is like the yin and yang of the business world, the result of which is the determination of price.

One creates the other, and the more they feed off each other, the better their net contribution to the business grows and the more profitable the price, where:

Gross Revenues – Costs = Net Marketing & Innovation Contribution to Revenue

Anything that lowers costs—from cost of goods sold to financing costs to labor costs—increases net marketing & innovation contribution to the business. Anything that increases revenue—either number of units sold or price per unit or both—increases net marketing & innovation contribution, as well.

In all cases, it is the interplay between marketing and innovation—innovation and marketing—that creates a situation where customers are willing to pay above cost for a good or service.

(Of course, there are other ways to make a profit by monopoly or oligopoly, legislation, and price manipulation. These are not the kinds of business practices I’m talking about, because, however pervasive, they are outside the scope of what agile marketing and true competition are all about.)

Did Marketing Emerge From Innovation or Vice Versa?

In his book Incomplete Nature: How Mind Emerged From Matter, Terrence Deacon, neuroscientist and chair of UC Berkeley’s Anthropology Department, discusses in great detail the integral connection between presence and absence in our world, how each caused the other to be. He explains the interplay between materialism and consciousness, between the present and the emergent, has created all the world we see around us and within us.

However complex the book’s science and philosophy, it was Deacon’s simple description of the first organic replicators that struck me as a direct conceptual parallel to the connection between marketing and innovation—and indeed the connection between many things in life.

A Creates B Which Creates A

When Deacon discusses the misconceptions surrounding DNA and RNA replicators, he writes,

“Although it is generally believed that polynucleotide chains like DNA and RNA molecules constitute life’s replicators…they do not replicate themselves. To be more explicit: polynucleotide A cannot directly produce another exact duplicate of polynucleotide A. Instead…polynucleotide molecule A can produce a complementary polynucleotide molecule B, which in turn under the same conditions can produce polynucleotide molecule A.”

The reason this is the arrangement we see today is that, in replicators where A made itself in exact duplicate, the instability of the system doomed it to fail. That is, anytime A made a bad duplicate of A, the system would break down and not survive.

However, when A makes B which in turn makes A again, the stability of the system is exponentially more robust, because a mutation in B doesn’t necessarily doom the cycle to failure if the small change in B doesn’t destroy its original ability to make A. In fact, it makes adaptation possible.

I find this idea to be a profoundly useful for agile marketing:

Stability and adaptation come not from self-duplication, but from the interplay of complementary opposites.

This idea is in many ways apparent and intuitive. Think: positive/negative, up/down, light/dark, form/entropy, male/female—one doesn’t exist without the other, and strength is the result of the complementary nature of the relationship, not the imposition of sameness or domination of one by the other.

Our problems in business between innovation and marketing occur when this need for opposites gets thrown out the window in favor of one steamrolling the other.

“Marketing Is Too Important to be Left to the Marketing People.”

That’s what David Packard of Hewlett-Packard fame once said. I think the humor of Packard’s statement shouldn’t be overlooked, but I find within it a glance at the innovator’s outright dismissal of marketing’s role. And I think he’s referring to traditional Mad Men-style, sell-the-sizzle advertising and marketing, a dismissal which may be deserved.

But with agile marketing—small iterations through test and measurement, responsive work in tandem with product development, trying anything once but not failing at it twice—marketing has moved more into the world of scientific approach and hypothesis testing, the world engineers and innovators know and respect.

In a complementary-opposite response, innovators must now move more toward understanding what marketing is and what the market says and does. That is, innovators have to let markets guide their innovation, rather than making something and trying to foist it upon the market. When innovators make things that markets do not want—or when they don’t listen and adapt to changing market sentiments—marketing has to get too reactionary and “sales-y” to try to sell products people don’t want.

When marketing gets too sales-y, the complementary-opposite relationship with innovation loses it’s strength and balance and falls apart.

Sales Is Not Marketing. Sales is the Cost of Bad Marketing.

To use another quotation from Drucker, “The aim of marketing is to make selling unnecessary.”

I absolutely believe the more hard selling a business must do indicates how poorly it has studied the market and how poorly it has created products to match the market. Selling—like other functions of business outside marketing and innovation—is a cost, a necessary cost, perhaps, but one like all costs to be minimized.

Innovation creates agile marketing, which creates innovation, which creates agile marketing, which creates innovation, which creates agile marketing, ad infinitum.

  • Doesn’t the need for too much selling indicate a breakdown in the relationship between innovation and marketing?
  • Doesn’t the iterative and complementary activity between marketing and innovation require that one department not usurp the other?

I think it does.

And the profound concept of A makes B makes A bears this out in a bigger way. When marketing goes agile, it’s reaching out to the innovators for stability. Innovators have to reach out to marketing, as well, without turning marketing into something unstable and subservient, where A makes A.


Thank you to Jascha Kaykas-Wolff for contributing to the 500 blog. Jascha will be a speaker at this year’s Weapons of Mass Distribution 2016 conference on Nov. 4 in San Francisco. Get 20% off tickets with code: JASCHA or Buy your ticket HERE

For more insights from Jascha, follow him on Linkedin or Twitter.

This article was originally published on Jascha’s Linkedin

500 Startups Announces 18 New Investments in Latin America

Today we are announcing our newest LatAm Accelerator Batch, a program based in Mexico City which focuses on startups in LatAm and Spanish speaking regions. This is our 6th LatAm batch and we’ve invested in 91 companies to date through the program.

Alongside this news, we’ve also opened a new LatAm HQ in Mexico City with an expanded team!

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After receiving over 408 applications for the current LatAm program, and conducting over 100 founder interviews, 500 Startups chose 18 high potential teams to participate in the program. Each company receives $65K in investment, and joins for 4 months of working side-by-side with support from 500’s team and global family of mentors.

Among the 18 startups in Batch 6, there are companies from Mexico, Argentina, Chile and Colombia, covering industries including e-commerce, education, SaaS, food tech, logistics, government services, tourism, amongst others.

The program covers legal, product, marketing and growth, and finance among other critical themes that founders must master. The program also includes dedicated sessions with specialized mentors each week, and brings in local as well as international expertise.

Additionally, it is currently running in 500’s new LatAm HQ in the Juarez neighborhood of Mexico City, a space that was remodeled over the past few months to be the home of our growing Latin America operations. The space is designed to offer a workspace for startups, as well as an event space that accommodates up to 150 people.

Our LatAm team is growing with new additions Didier Quiroz and Daphne Salinas who will work as Associates to the LatAm fund. Didier and Daphne will be working alongside Bedy Yang as Managing Partner, Santiago Zavala as Partner, and René Lomelí as Director of Operations.

latamteampic(Left to Right: Daphne, René, Santiago, and Didier)

And now, we’re proud to announce the 18 newest companies to join the #500Strong family!

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#LOOKEA – Ready to shop style inspiration destination for consumers who love fashion and lifestyle products. The company creates high quality leads for fashion e-commerce sites and brands. Moreover, they allow users to upload their own photos and their algorithm identifies and recommends similar fashion items they can buy.

Asistia – A health platform where you can hire high quality caretaker services for elderly citizens and schedule recurring daily or weekly visits. The company’s allow caretakers to log in the beginning and end of a service and also post notes relevant to the service.

Backstartup – Professional accounting and legal services made for startups. The company focuses on having all their clients investment ready, from having all legal and accounting matters up to date and ready for due diligence to helping founders understand and negotiate investment terms.

Buenchef – Delivers recipes and all the ingredients the client needs. Redefining weeknight dinner. The founders have a successful previous experience in the food delivery space with an exit and now are trying to improve and solve

Cívica Digital – has develop digital tools to strengthen citizenship and for governments to have the appropriate feedback on the services they provide to the community with the intent of improve them. The company also works with NGOs in order to improve many aspects of society.

CuidaMiMascota – Allows users to find high quality and trustful pet sitters near them. By scheduling a service, the company connects you to one of their many sitters and helps you coordinate the service in the easiest way possible, so your furry friend is well taken care in your absence.

Deporprivé – Sport-specific flash sales website where members receive exclusive access to sales from top sports brands. Each week there are specific sales ranging from running shoes to training equipment and technology.

EasyPoint – Receive e-commerce products in a network of pickup points over neighborhood stores

EcomExperts – Suite of tools to help online sellers manage their account, thus making them sell more and reduce costs. Moreover, the company offers analytics for clients to have insights on their business.

HostTonight – Service that allows new and experienced Airbnb host to delegate the property managament and take full advantage of the Airbnb model without the pains and problems associated with it such as key exchange logistics, cleaning services and negotiation with guests.

HoyPido – Is a Blockchain-inspired FDN (Food Delivery Network). By analyzing the excess capacity of small kitchens, the company incorporates them to their program and use that excess capacity to provide standardized meal to workers in near by businesses.

Impulsando Academy – Is offering specialized content and skills. The company’s educational platform provides live and recorded sessions so students can learn as better suits them. Moreover, the company is focused on providing personalized experiences so all their students get most out of their lesson.

LocalAventura – Online platform that allows travelers to search, book, and pay for tour with passionate local guides in Latin America. The company simplifies the experience of traveling to the region offering a truly personalized offering catered to you needs and taste.

LECO – One stop solution for lens users. Through their Platform users can access their correct prescription and order the visual solution of their choice either contact lenses or glasses whenever and wherever they need it.

Tarefa –  Is working to give any student timely answers to the questions on topics such as math and science. Through their educational platform the company connects students with teachers to solve their must burning questions. Also, the company is developing software that will allow to solve some of these questions without a teacher

TipiTop – End-to-end service to sell or buy pre-owned cars in a reliable and easy way. The company is growing a network of certified mechanics and sellers that verifies every car that goes through their platform, assuring the quality of such an important acquisition.

Yaydoo – Through their network of suppliers the company is creating and On-demand procurement assistant that resolves all the needs of a business reducing work and logistics to ensure that companies have everything they need for their daily activities.

Yetcargo – Allows companies to ship their product at affordable prices by allowing them to use the excess capacity of shipment and delivery trucks.

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500 Startups Brings Distro Dojo to Berlin!

For the first time ever, 500 Startups is running its highly selective “Distro Dojo” growth hacking program in Berlin. The three-month intensive growth marketing program for Pre-Series-A companies started in September with six startups. The program is hosted at hub:raum with sponsorship from Deutsche Telekom.

The program will focus on:

  • Teaching a scientific growth process
  • Creating a marketing experiment pipeline
  • Testing and adding emerging channels
  • Making the right hires for your growth team
  • Talks from 500 Partners and industry experts

“We see a lot of impressive startups in Berlin, so we’re expanding our local presence by launching our Distro Dojo program here, following on the program’s warm reception this past year in London,” said Matt Lerner, Head of 500 Startups London office.

This first Berlin batch of companies includes:

Voya.ai simplifies business travel by combining the expertise of travel agents with the efficiency of a chatbot. Offering a concierge like service on a familiar chat-interface, Voya built the simplest way to book and manage business trips. They created the first business travel service that both companies and their users love, which may be why their business is doubling each month.

Junomedical – A digital health platform where patients worldwide are matched with high-quality medical care abroad at an affordable price. Junomedical’s passionate team of digital experts and geeks is led by Dr. Sophie Chung – tackling a $50 billion medical travel industry.

Heycater! Lets busy office managers quickly order catering online. Founders, Sophie Radtke and Therese Köhler don’t simply plan to unite clients and caterers on a curated platform; their mission is to shape the way people eat at work and create a movement of happier, healthier and more productive companies.

Zenjob is a mobile tech company that solves short-term staffing emergencies by providing hourly workers on-demand. Zenjob actually hires the workers and lends them out to companies. People working with Zenjob earn more than minimum wage and companies have less admin hassle and more flexibility than with traditional temp agencies.

Movivo Movivo’s platform allows users to cover the cost of their mobile minutes by completing surveys, crowdsourced tasks and by downloading new mobile apps. Movivo works with many of the world’s largest telecoms operators and the service is growing quickly in a number of emerging market countries.

Job Pal builds chat bots that automate candidate engagement and pre-screening. Companies want to engage much more with prospective employees, but cannot due to a lack of resources. Meanwhile, recruiters mostly sift through irrelevant applications while they need to spend more time with relevant candidates. Job Pal solves both problems through Machine Intelligence.

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About the Distro Dojo

The “Distro Dojo” is a three-month hands-on growth program where companies receive investment from 500 Startups and work side-by-side with world-class entrepreneurs and growth marketers to start the growth process within their companies. The process, created and refined by experts at many of the great hyper-growth startups of the past 15 years, includes identifying the right business metrics, identifying “hacks” to increase customer engagement, and testing them out through a process of experimentation and iteration. Participants work with experienced entrepreneurs and growth experts throughout the program. After 11 Dojos in 7 cities, participant feedback has been overwhelmingly positive.

“For us, the program was transformative” said Truly Experiences founder Jack Huang, who participated in the London Dojo. “In 1 month, we fully revamped our SEO, SEM, data stack, CRO and implemented a new experiment process. Not to mention gathered more ideas for channels and tactics to test. Plus, mentors and guest speakers really know their stuff and roll-up-the-sleeves to get dirty, unlike the majority of advisors and consultants out there.”

500 Startups in Europe

With over 140 investments in Europe, 500 Startups is fast becoming one of the most active investors in the region. Our European portfolio includes consumer and enterprise companies including TalkDesk, Intercom and Skimlinks.

Meet the 500 Berlin Team

Matt Lerner, Nopadon Wongpakdee & Jess Erickson.

Matt Lerner – Partner, 500 Startups

  • Matt runs our London office and leads our European Distro Dojo. He specializes in conversion optimization, analytics, engagement and retention. As a member of the in-house growth (AKA”Distro”) team, he works closes with 500 portfolio companies to help them build growth engines and scale. Previously, Lerner worked as Marketing Director at PayPal, where he built and managed growth teams for many years.

Nopadon Wongpakdee – Growth Hacker In-Residence

  • Nopadon Wongpakdee is a London-based Inbound Marketing Consultant with over 15 years experience. He specialises in SEO, User Acquisition, User Retention and Inbound Marketing Strategies. Before consulting, he was the 10th employee at acclaimed London startup Huddle.com, where I was responsible for developing and executing their digital marketing strategy.

Jess Erickson – Program Director, 500 Startups

  • Jess Erickson is the Program Director at 500 Startups. She spent her early startup years at Speaklike, 6Wunderkinder & General Assembly. She is also the Founder of Geekettes, an organization uniting, mentoring and promoting women in tech of worldwide.

Hooks: An Intro on How to Manufacture Desire

Guest Blogger – Nir Eyal, Author “Hooked: How yo Build Habit-Forming Products”

Type the name of almost any successful consumer web company into your search bar and add the word “addict” after it. Go ahead, I’ll wait. Try “Facebook addict” or “Twitter addict” or even “Pinterest addict” and you’ll soon get a slew of results from hooked users and observers deriding the narcotic-like properties of these web sites. How is it that these companies, producing little more than bits of code displayed on a screen, can seemingly control users’ minds? Why are these sites so addictive and what does their power mean for the future of the web?

We’re on the precipice of a new era of the web. As infinite distractions compete for our attention, companies are learning to master new tactics to stay relevant in users’ minds and lives. Today, just amassing millions of users is no longer good enough. Companies increasingly find that their economic value is a function of the strength of the habits they create. But as some companies are just waking up to this new reality, others are already cashing in.

First-to-Mind Wins

A company that forms strong user habits enjoys several benefits to its bottom line. For one, this type of company creates associations with “internal triggers” in users’ minds. That is to say, users come to the site without any external prompting. Instead of relying on expensive marketing or worrying about differentiation, habit-forming companies get users to cue themselves to action by attaching their services to the users’ daily routines and emotions. A cemented habit is when users subconsciously think, “I’m bored,” and instantly Facebook comes to mind. They think, “I wonder what’s going on in the world?” and before rationale thought occurs, Twitter is the answer. The first-to-mind solution wins.

Manufacturing Desire

But how do companies create a connection with the internal cues needed to form habits? The answer: they manufacture desire. While fans of Mad Men are familiar with how the ad industry once created consumer desire during Madison Avenue’s golden era, those days are long gone. A multi-screen world, with ad-wary consumers and a lack of ROI metrics, has rendered Don Draper’s big budget brainwashing useless to all but the biggest brands. Instead, startups manufacture desire by guiding users through a series of experiences designed to create habits. I call these experiences “Hooks,” and the more often users run through them, the more likely they are to self-trigger.

I wrote Hooked: How to Build Habit-Forming Products to help others understand what is at the heart of habit-forming technology. The book highlights common patterns I observed in my career in the video gaming and online advertising industries. While my model is generic enough for a broad explanation of habit formation, I’ll focus on applications in consumer Internet for this post.

Nir Eyal Hook

Trigger

The trigger is the actuator of a behavior—the spark plug in the Hook Model. Triggers come in two types: external and internal. Habit-forming technologies start by alerting users with external triggers like an email, a link on a website, or the app icon on a phone. By cycling continuously through these hooks, users begin to form associations with internal triggers, which become attached to existing behaviors and emotions. Soon users are internally triggered every time they feel a certain way.  The internal trigger becomes part of their routine behavior and the habit is formed.

For example, suppose Barbara, a young lady in Pennsylvania, happens to see a photo in her Facebook newsfeed taken by a family member from a rural part of the State.  It’s a lovely photo and since she’s planning a trip there with her brother Johnny, the trigger intrigues her.

Action

After the trigger comes the intended action. Here, companies leverage two pulleys of human behavior – motivation and ability. To increase the odds of a user taking the intended action, the behavior designer makes the action as easy as possible, while simultaneously boosting the user’s motivation. This phase of the Hook draws upon the art and science of usability design to ensure that the user acts the way the designer intends.

Using the example of Barbra, with a click on the interesting picture in her newsfeed she’s taken to a website she’s never been to before called Pinterest. Once she’s done the intended action (in this case, clicking on the photo), she’s dazzled by what she sees next.

Variable Reward

What separates Hooks from a plain vanilla feedback loop is their ability to create wanting in the user. Feedback loops are all around us, but predictable ones don’t create desire. The predictable response of your fridge light turning on when you open the door doesn’t drive you to keep opening it again and again. However, add some variability to the mix—say a different treat magically appears in your fridge every time you open it—and voila, intrigue is created. You’ll be opening that door like a lab animal in a Skinner box.

Variable schedules of reward are one of the most powerful tools that companies use to hook users. Research shows that levels of dopamine surge when the brain is expecting a reward. Introducing variability multiplies the effect, creating a frenzied hunting state, activating the parts associated with wanting and desire. Although classic examples include slot machines and lotteries, variable rewards are prevalent in habit-forming technologies as well.

When Barbra lands on Pinterest, not only does she see the image she intended to find, but she’s also served a multitude of other glittering objects. The images are associated with what she’s generally interested in – namely things to see during a trip to rural Pennsylvania – but there are some others that catch her eye also. The exciting juxtaposition of relevant and irrelevant, tantalizing and plain, beautiful and common sets her brain’s dopamine system aflutter with the promise of reward. Now she’s spending more time on the site, hunting for the next wonderful thing to find. Before she knows it, she’s spent 45 minutes scrolling in search of her next hit.

Investment

The last phase of the Hook is where the user is asked to do a bit of work. This phase has two goals as far as the behavior engineer is concerned. The first is to increase the odds that the user will make another pass through the Hook when presented with the next trigger. Second, now that the user’s brain is swimming in dopamine from the anticipation of reward in the previous phase, it’s time to pay some bills. The investment generally comes in the form of asking the user to give some combination of time, data, effort, social capital or money.

But unlike a sales funnel, which has a set endpoint, the investment phase isn’t about consumers opening up their wallets and moving on with their day. The investment implies an action that improves the service for the next go-around. Inviting friends, stating preferences, building virtual assets, and learning to use new features are all commitments that improve the service for the user. These  investments can be leveraged to make the trigger more engaging, the action easier, and the reward more exciting with every pass through the Hook.

As Barbra enjoys endlessly scrolling the Pinterest cornucopia, she builds a desire to keep the things that delight her. By collecting items, she’ll be giving the site data about her preferences. Soon she will follow, pin, re-pin, and make other investments, which serve to increase her ties to the site and prime her for future loops through the Hook.

Super Power

A reader recently wrote to me, “If it can’t be used for evil, it’s not a superpower.” He’s right. And under this definition, habit design is indeed a super power. If used for good, habits can enhance people’s lives with entertaining and even healthful routines. If used to exploit, habits can turn into wasteful addictions.

But, like it or not, habit-forming technology is already here. The fact that we have greater access to the web through our various devices also gives companies greater access to us. As companies combine this greater access with the ability to collect and process our data at higher speeds than ever before, we’re faced with a future where everything becomes more addictive. This trinity of access, data, and speed creates new opportunities for habit-forming technologies to hook users. Companies need to know how to harness the power of Hooks to improve peoples’ lives, while consumers need to understand the mechanics of behavior engineering to protect themselves from unwanted manipulation.

What do you think? Hooks are all around us. Where do you see them manufacturing desire in your life?

Here’s the gist:

  • The degree to which a company can utilize habit-forming technologies will increasingly decide which products and services succeed or fail.
  • Habit-forming technology creates associations with “internal triggers” which cue users without the need for marketing, messaging or other external stimuli.
  • Creating associations with internal triggers comes from building the four components of a “Hook” — a trigger, action, variable reward, and investment.
  • Consumers must understand how habit-forming technology works to prevent unwanted manipulation while still enjoying the benefits of these innovations.
  • Companies must understand the mechanics of habit-formation to increase engagement with their products and services and ultimately help users create beneficial routines.

Thank you to Nir Eyal, Author or “Hooked: How to Build Habit-Forming Products,”  for contributing to the 500 blog. Original article found HERE. Get 20% off tickets with code: NIREYAL. Nir Eyal will be a speaker at this year’s Weapons of Mass Distribution 2016 conference on Nov. 4 in San Francisco. Buy your ticket HERE

500 Startups Doubles Down on Durians: New $50M Fund II for Southeast Asia

Currently, 1/4 of our Southeast Asia portfolio companies have raised > $2 Billion US dollars for further growth, and none of them have shut down. Our thesis being that some of these companies will grow to be Southeast Asia’s next generation of startup success stories.

The return of the King (of fruits)

Our second fund, 500 Durians II, builds on this momentum.

We target to raise a $50M* fund to invest $50K to $150K in ~200 more seed stage companies. Historically, we’ve primarily invested alongside other seed stage and angel investors that we’ve grown to trust and respect and will continue to do that. The $50M fund will also allow us to follow-on with up to $500K of additional capital in the companies that show exceptional progress. This follows the classic 500 Startups strategy of making many little bets and doubling down on winners that have taken flight across our family of funds, including 500 Durians I.

The original seeds

The funding for Durians II was entirely kickstarted by inside investors from our first fund, Durians I. MAVCAP (a fund of funds investor) has returned to anchor 500 Durians II. Their early and continued conviction was a critical component for us to operate at full speed. While we will continue to fundraise the remainder of Durians II, we’re grateful for all of the interest we’ve received in seeding us.

More important than money

A thriving ecosystem is not just about startups having more money. Spending it well is even more important.

One of the biggest areas of startup spend is in distribution (growth marketing). To help them with that, we brought 500’s signature Distro Dojo growth marketing service to Southeast Asia. We have already  accelerated the growth of 26 carefully selected post-seed companies across 4 cohorts in Malaysia via a partnership with MaGIC. The companies went through 2 months of heads down growth marketing with local and regional specialists working with them on blowing up their growth.

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It was June 2014 when 500 Durians I, our first Southeast Asia dedicated fund, made its first investment. Like many others at that time, I had grossly underestimated how rapidly Southeast Asia’s startup scene would mature.

The first cheques that we wrote went to startups like Grab (formerly Grab Taxi), Carousell, and Bukalapak. They did not look like the hundred million and billion dollar companies they are today. Very quickly, we saw more investment-ready startups. We more than doubled our original $10M 500 Durian I fund to $25M to keep up with the increasing opportunities in the local ecosystem.

In the 2 years that continued, we invested in a total of 119 startups. We soon became the most active early-stage investor in Southeast Asia, having participated in over 26% of all seed deals in the region recorded by CB Insights.

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Beyond spending money well, there’s something people tend to forget. Southeast Asia’s new generation of founders hail from a variety of backgrounds: existing industry experts, foreigners, and local talent coming home from experiences overseas. Binding the social fabric between them is crucial for a self-generating ecosystem.

In Malaysia, Singapore, and Indonesia, our portfolio founders co-organize and host portfolio meetups. Their friendships and peer support continues in our founders-only chat / mobile messenger groups.

By being in the 500 network we hope founders not only raise money, but know how to spend it well, and have peer support throughout their journey.

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Next generation venture capital

Who is going to do all of this work? I sure as hell ain’t the only one. New talent is needed to mobilize venture capital well. I was lucky to have much of Durians I built side by side with folks like Vishal Harnal. Vishal is an equal partner for Durians II with me, and the distinctiveness of his hairstyle has now superseded mine.

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While I bring the ‘local founder with 2 exits’ side of the equation, Vishal’s brings his experience representing the government’s and world’s largest corporations as an international disputes lawyer at Drew & Napier. He’s led large teams in high-pressure, high-stakes situations, and his leadership has helped us to rapidly and thoughtfully scale our brand, investments and operations across the region. As an entrepreneur, he has also built a successful communications education company with Singapore’s top schools as customers.

We’ve been growing our team. We shot out a Facebook post with 6 openings that resulted in 1,300 applicants in 2 weeks. Now after making these hires, 500 Durians II will be operated by a larger team of 10+ people, more than double the team size for Durians I. We believe in getting the best of the best from other realms of expertise into venture capital. For example, our head of community engagement is a floating shark.

Picture5The making of a complete ecosystem

While later stage capital like Tiger Global, Sequoia, Softbank, and others have made investments in 500 Durians portfolio companies, a welcome development is the emergence of new local players like B Capital, Venturra, and Banma Capital launching Southeast Asia focused funds. Those funds will provide an additional $1B of follow on capital for promising startups. They exemplify new sources of capital from corporates, family conglomerates, and China coming into the region. Governments have been making large waves as well, with Thailand’s $570M Government backed venture capital fund making the biggest news.

This deluge of capital is catching up to the market potential and opportunities in sight.

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Southeast Asia’s GDP is way ahead of its venture capital availability relative to India, China, and the U.S. The top 10 cities in Southeast Asia have almost double the Facebook users of the top 10 cities in the U.S. Startups here can be built more cheaply, and reach more customers faster than many developing nations. Taking a walk in any Southeast Asian city, one will see the spending power of Southeast Asia’s middle class at work. Because most startups here target this segment of consumers, investing in startups here has less to do with national data, and more to do in the story of the booming urban population of its cities.

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Singing the song of this region is something we will continue to do more of, through our Geeks on a Plane trips, our Southeast Asia founders pitching in Silicon Valley, investor exposure tours, and media rampage.

Southeast Asia has a ready pipeline of explosive growth companies. We want the world to hear about them.

Follow the 500 Durians team on Facebook, Twitter, and Instagram.

Note: *all amounts listed reflect USD.