How Might A Clinton Presidency Affect Silicon Valley?

Editor’s Note: Today’s post is Part 2 of a two-part series that examines how the U.S. presidential race could affect Silicon Valley innovation, an ecosystem that’s affected by economics, immigration policy, international relations, and other factors.

These positions were publicly stated by each campaign; instead of characterizing proposals as good or bad, we’re merely speculating on their impact.

Part 1 looked at the potential outcomes affecting Silicon Valley from a Trump presidency; today, a look at Hillary Clinton’s Tech & Innovation agenda.

Hillary Clinton’s positions on innovation and tech are well-documented and generally reflect prevailing industry attitudes. This is likely because the candidate’s campaign team includes former government officials with tech backgrounds, as well as executives and entrepreneurs. Today, we’ll dig into the details, and the exceptions.

1. Use Federal Grant and Loan Programs To Jump-start Startup Ecosystems

To promote greater regional, gender and ethnic diversity in startup funding, Clinton’s plan calls for a national network of “innovation clusters and entrepreneurship hubs” in “underserved areas” that will support 50,000 entrepreneurs.

To free up capital where VCs are scarce or unknown, she’d double spending for Treasury’s Community Development Financial Institutions Fund, which boosts growth in “distressed communities” and the State Small Business Credit Initiative, a $1.5 billion fund. Clinton’s plan would also extend the New Markets Tax Credit, a mechanism created to boost capital flow that’s set to expire in 2019.

Analysis: These efforts could stimulate more regional startup growth, but a President Clinton would need to secure majorities in the House and Senate to fund these programs.

2. Taxes: Eliminate Carried Interest Deduction, Implement “Buffet Rule”

Like her opponent, Clinton has called for an end to the Carried Interest Deduction, which taxes investment proceeds at 23.8%, instead of the higher rate that’s levied on personal income. Clinton said she’ll ask Treasury to make the change if Congress fails to take action, a nod to the fact that Democrats have made multiple failed attempts to eliminate the deduction in the past.

Clinton’s tax proposal also calls for a 4% “fair share surcharge” for those earning $5 million/year, as well as an implementation of the Buffett Rule, which would make sure anyone with an annual income over $1 million paid an effective tax rate of 30%.

Analysis: As with many of her proposals, it could only become law with Congressional Democratic majorities. If enacted, VCs and their partners would receive a smaller slice of payouts; whether that would stifle innovation is anyone’s guess.

3. Defer + Forgive Student Loans To Incentivize Young Entrepreneurs (And Startup Workers)

Clinton hopes to coax more startup founders into the marketplace by giving them the option to freeze payments and interest on federal student loans for up to 36 months “while they get their new ventures off the ground.” To help those founders build teams, she “will explore a similar deferment incentive” for “early joiners, such as the first 10 or 20 employees.”

Founders who launch in “distressed communities” or “provide measurable social impact and benefit” could see up to $17,500 of their student loan debt forgiven after five years.

Analysis: Many Millennials cite personal debt as a leading reason for not starting a business. Combined with other existing and proposed programs created to spur investment in underserved areas, these incentives could produce results.

3. Immigration: “Staple” Green Cards To STEM Degrees, Startup Visas For Founders With Funding

To reduce “visa backlogs and other barriers,” Clinton would reform immigration guidelines to offer green cards to students who receive “STEM Masters and PhDs from accredited institutions.”

If an immigrant startup founder can “obtain a commitment of financial support,” her proposals would create a pathway to a green card as long as a founder agrees to “create a certain number of jobs and reach performance benchmarks.”

Analysis: Without Democratic majorities in the House and Senate and/or a new Supreme Court appointee, it’s likely that her proposed immigration reforms would be defeated.

4. Expand Consumer Broadband, 5G + Free Public WiFi

By 2020, Clinton plans to connect every American household to “affordable broadband” by funding existing programs and by ordering agencies in her administration to consider expanding the use of “fiber, fixed wireless, and satellite” connectivity.

She’s also called to step up the deployment of 5G wireless to “enable the Internet of Things and a host of transformative technologies.” Accelerating the rollout of 5G networks will spur the development of “smart factories, driverless cars, and much more.” To support these efforts, she plans to “reallocate and repurpose spectrum for next-generation uses,” which could include bands in use by federal agencies.

Her agenda proposes a new $25 billion Infrastructure Bank that awards grants for projects that bring more people online, whether it’s by reducing regulatory barriers or developing partnerships between the private and public sectors. Grants would also be available for projects that perform technology upgrades in concert with other infrastructure investments.

Analysis: Reallocating existing spectrum and speeding up 5G rollout could open up new opportunities in telecom and consumer tech. If the Infrastructure Bank becomes a reality, it could expand markets for homegrown startups and established players alike.

5. Open Internet Standards, Defend Net Neutrality

Clinton says she’ll press foreign governments to provide its citizens with access to an open internet free from restrictions, forced technology transfers, and censorship. To govern international standards, she calls for “a global community of engineers, companies, civil society groups, and internet users,” instead of “government-led multilateral organizations.”

Analysis: It’s unclear if a President Clinton would be successful when it comes to promoting open standards internationally; any efforts to do so would likely be rolled into trade agreements, which can take years to negotiate and ratify.

6. Cut “Excessive” Patent Litigation, Strengthen IP Protections + Consumer Privacy

The Clinton tech agenda calls for additional reforms to “rein in frivolous suits by patent trolls” and streamlining Patent and Trade Office procedures to ensure “faster review of patent applications and clear out the backlog of patent applications.”

To cut red tape and orchestrate these efforts, she plans to appoint a Chief Innovation Advisor to “spearhead reforms across the government.” Additionally, Clinton would permit the Patent and Trade Office to keep the money it collects from patent applications and reinvest it in day-to-day operations. (Currently, Congress diverts those fees.)

Without going into details, her plan pledges to protect American IP via Export Control Reform and promote policies that will counter Chinese “cyber-enabled economic espionage.”

Her plan would protect consumer privacy via “regulatory enforcement,” but “without stifling innovation.” To gird US cybersecurity defenses, Clinton seeks to unlock additional funding and build more public-private partnerships.

Analysis: Patent litigation reform is a popular idea, but it’s been hard to accomplish to date, as rules vary between regions.

If Clinton can prevent forum-shopping and can bring more transparency to the litigation process, it may provide some industry relief.

7. Encryption: Greater Cooperation Needed, Not Backdoors

Although her campaign hasn’t officially staked out a position on encryption, Clinton said she supports a “Manhattan-like project” that allows the government and the private sector to work together.

In a December debate, Clinton said she opposed efforts to require tech companies to create backdoors for law enforcement, but wants to see more cooperation regarding data-sharing.

“There must be some way,” she said. “I don’t know enough about the technology to be able to say what it is, but I have a lot of confidence in our tech experts.”

Analysis: None of Clinton’s public statements offer any specifics for achieving greater cooperation between tech and law enforcement.

Conclusion: It Takes a Village

Although Clinton offers more specificity, and innovation-friendliness, in her plans for the tech industry, most of her ideas would be extremely unlikely to come to fruition unless she’s also able to secure Democratic majorities in the House and Senate.

Even then, she’d need to retain those majorities after mid-term elections in 2018, which would buck historical trends.

The considerable delta between Clinton’s expressed plans and their execution serves as a reminder of Clinton’s own aphorism, “It takes a village.” Indeed, it takes not only a village but a House, a Senate, and a public to accelerate futuristic promises into actionable reality.

>> Read Part 1, how a Trump presidency would affect Silicon Valley’s innovation ecosystem <<

How Might A Trump Presidency Impact Silicon Valley?

Editor’s Note: Today’s post is Part 1 of a two part series examining how the U.S. presidential race could affect Silicon Valley innovation, an ecosystem that’s affected by the United States’ international relations, immigration policy, and other political factors.

We have attempted to stay away from political preferences and present findings as publicly reported by the candidates themselves.

Part 2 will look at how a Clinton presidency could affect Silicon Valley, and will be published next week.

[Update, 8/14/16: Malcolm McGough, the Trump campaign’s California political director, contacted us after this was posted and confirmed that we stated the candidate’s views on these issues accurately.]

With 87 days left until the 2016 presidential election, we’re taking a look at how the candidates’ policies might impact innovation and the tech industry. In Part 1 today, we take a look at the potential impacts a Trump presidency could have on Silicon Valley.

(Full disclosure: I left a message with the Trump campaign’s San Francisco office, but they did not respond.)

1. Condense Tax Brackets, Raise Taxes On Carried Interest, Repatriate Overseas Tech Wealth

Donald Trump has called for sweeping changes to the tax code, starting with the elimination of federal income taxes on individuals who make less than $25K and couples who make under $50K. Additionally, he’s proposed condensing the existing seven tax brackets into three.

First-bracket earners would pay 12%, middle-bracket workers would pay 25%, and those at the top would pay 33%, instead of today’s 39.6%, said Trump, who also wants to raise the tax rate on carried interest — net capital gains passed through to a fund’s general partner and investment managers.

Today, carried interest is taxed at 23.8%: of that, 3.8% is an investment tax, and 20% is for net capital gains. Under the Trump plan, carried interest would be taxed at 33%, which would reduce earnings for VCs and portfolio managers.

In an August 8 address to the Detroit Economic Club, Trump described the Carried Interest Deduction as one of several “special interest loopholes that have been so good for Wall Street investors, and people like me, but unfair to American workers.”

The New York-based real estate magnate said he would lower the top tax rate for business income from 35% at 15% and would also encourage US corporations to repatriate “trillions” of dollars kept in offshore banks. “Our plan will bring that cash home, applying a 10 percent tax,” said Trump.

An estimate by Moody’s Investor Service said $504 billion of the $1.7 trillion in overseas cash US firms held in 2015 was in the accounts of five tech companies: Apple, Cisco, Microsoft, Oracle and Alphabet. If a President Trump could convince these titans to bring those dollars home, the funds could be used for stock buybacks, increased dividends, R&D, distro, and much more.

2. Proposed Immigration Rule Could Ban Startup Founders From US

Although he initially called for an immediate halt to all immigration from countries with majority Muslim populations, Trump has since broadened his stance. This week, GOP Vice Presidential candidate Gov. Mike Pence said he and Trump now want “a temporary suspension of immigration from countries or territories compromised by terrorism.

Without a specific list of nations, it’s hard to predict how this might affect the US tech community, which has generally welcomed talent, regardless of one’s country of origin. It’s also unclear whether countries that have experienced terror attacks — such as the UK, France, Belgium, and Israel –would be impacted by this proposed policy.

3. Is Trump Anti-encryption?

It’s unclear whether Trump is opposed to tech firms offering encrypted products, but when Apple refused to help the FBI access an iPhone used by the perpetrators of the San Bernadino terror attack, Trump called for a boycott.

However, CNET revealed that Trump still holds between $1.1 and $2.25 million in Apple stock. Because the candidate hasn’t mentioned the issue since first raising it in May, it’s hard to determine exactly where he stands on encryption standards.

4. Tougher Stance on IP protection in China

According to Trump’s Detroit speech, “improved protection of America’s intellectual property in China would produce more than 2 million more jobs right here in the United States.”

Politico reports that Trump’s stats are from a 2011 International Trade Commission report that estimated 2.1 million new jobs and up to $107 billion in increased sales if China stepped up IP enforcement, but economists aren’t able to quantify the “specific impact of such a policy change.”

5. Make Tech Manufacturing Great Again

“We’re going to get Apple to build their damn computers in this country instead of other countries.”

In a January speech at Liberty University, Trump ended with a pledge:

“We’re going to get Apple to build their damn computers in this country instead of other countries.”

On several occasions, Trump has criticized firms like Ford and Carrier for shuttering US plants and reopening them in Mexico to lower labor costs. So far, his campaign has not provided a detailed proposal for attracting a large base of high-tech manufacturing jobs that can accommodate global demand for consumer tech.

Tech manufacturers tend to rely on lean supply chains to keep labor costs low and maximize profits, so it’s hard to imagine what incentive they’d have to stop ordering from China, where workers who assemble iPhones earn about $750/month with overtime, according to China Labor Watch.

Since launching his campaign, Donald Trump has continued to workshop policies after they’ve been announced, so it’s not entirely clear which of these ideas he’d attempt to codify. Legislators on both sides of the aisle have long resisted calls to boost capital gains rates, and when the state of Kansas exempted pass-through income from taxation, it blew a hole in the state’s budget. The candidate hasn’t shared details for his manufacturing plan, and many experts agree that his proposed immigration policies “defy the logic of science, engineering and law.”

While it’s impossible to know exactly how a Trump presidency would affect Silicon Valley, or the nation at large, we believe it’s important to look closely at self-reported pledges from each candidate to understand their impact on innovation, founders, and the investment ecosystem.

Stay tuned next week for Part 2: How would a Clinton presidency affect Silicon Valley?

Raising The Drawbridge? Brexit’s Implications For UK Startup Founders & Investors

In 2015, 500 Startups Partner Matt Lerner joined the firm so he could lead the London-based Distro Dojo, a growth marketing boot camp/think tank that helps early-stage startups scale up for their next round. When he took the reins, Lerner had many expectations, but the notion that 51% of British voters would soon vote to leave the European Union was not one of them.

500 Startups Partner Matt Lerner
500 Startups Partner Matt Lerner

The UK’s relationship to the EU has been ambivalent for decades, but that hasn’t stopped London from becoming a hub for European startups, said Lerner. Like Silicon Valley, London has access to sufficient money, talent and experience to sustain a startup ecosystem. Brits haven’t imported California’s sunny optimism, Lerner said, but “they have always embraced and celebrated failure.”

The UK and the EU have a couple of years to figure out the political and economic ramifications of Brexiting, which leaves plenty of room for fear, doubt and speculation. Gloom-and-doom headlines forecast recession, thousands of immigrants (like US-born Lerner and his German wife) are wondering about their legal status, and some pundits have started to wonder about the pound’s status as a reserve currency.

Is it accurate to say that uncertainty over Brexit also comes with a fair amount of hype?

Yes, definitely.

Do you have a clear sense of what’s going to change for you?

Short term, investors don’t like uncertainty. You saw how the stock market got rattled, and I have seen a few people sort of trimming their exposure. I say that anecdotally. A few founders have told me that someone has dropped out of a round here or there, or that they’re unable to close a round because of Brexit.

Your Distro Dojo portfolio is tied to the almighty dollar, which bodes well, I presume.

As an investor, I believe that saying, ‘you should be greedy when others are fearful, and fearful when others are greedy.’ My attitude is, we’re investing out of a US fund, so if the pound gets weaker, then we get more company for our dollar.

Any other upsides from Brexit and the disruptions it’s creating?

If there are fewer VC at my stage in London, then I’ll get access to more and better investments at lower prices, so for me, this makes me optimistic. At this point, nothing’s changed that would make these companies less investable.

For startup founders who are deciding whether to launch in London or Dublin, what would tip a person towards the UK?

That’s the long-term question. You need talent, you need money, and you need customers. In terms of talent, UK immigration policies are a big unknown. Right now, any European can move to the UK, no problem. What they could do is move to a merit-based system like the US has, where you can move from anywhere to the UK, but you need to be talented, you need to be successful.

That might be better for startups, in the sense that you have more of the best and brightest from China, India, and from all over the world. That could mean more of the highest caliber talent, which would be good. You’d get less cheap labor, but startups don’t tend to use cheap labor in the UK anyway.

What’s the impact on startup funding in the UK, post-Brexit?

It’s much easier for startups to get funding than anywhere else I know of in Europe. There’s truly a lot of money in the UK, and people move their money into sterling because it’s a bit of a reserve currency. A lot of it is made available to startups through some very generous tax incentives for early-stage startups. Right now, the easiest place to raise money is the UK.

Is it just a language and culture issue? Why is the UK so startup-friendly?

The legalities of incorporating and raising money is very easy to do in the UK; I’ve invested in Irish, French and German companies, and it’s a lot harder. As a VC, all things being equal, you’d rather put your money in a place where everyone’s going to spend less money on legal fees. Things will happen there.

Distro Dojo kickoff

What about access to customers post-Brexit? How will leaving the EU impact startup growth and customer acquisition?

That’s a bit more concerning. Today, as part of the EU, the UK’s got instant, automatic access to all of the European markets, as well as any markets it’s negotiated trade agreements with. If they leave the EU, they’l have to find and negotiate new trade agreements.

Where else might a European startup founder go besides London and Dublin?

You’ve got startup hubs in Stockholm, Lisbon and Berlin. It’s not like Silicon Valley, where if you want to leave, there are no viable alternatives for thousands of miles. Get on a flight in Dublin, and you can be in Berlin in an hour. Talent is super mobile these days.

One company we’ve invested in, they’re British incorporated, but they’re based in Berlin, because you can get better, cheaper talent there. It’s a fairly trivial thing at an early stage to move a company.

When you talk to other UK tech investors, what’s the mood?

Everything is wait and see. People are watching their customers and their numbers to see how things go. We don’t have too many companies at this level that depend on trade agreements at the moment. And talent is very pragmatic day to day; a lot of times, they’ll just hire someone who’s remote in another country, anyway.

You haven’t made any long-term predictions.

Long term, I am pessimistic. The UK is a net exporter, and like most countries, they generally tend to benefit economically from immigration. Brexit can hurt both of those things; it weakens the pound and reduces its appeal as a reserve currency, which will lead to a net outflow.

We’re getting into macroeconomic theory, but on balance, my prediction is pessimistic. I just think we’re moving so quickly.

More on Distro Dojo:

 

 

The Most Common Myths About Startup Accelerators — Busted

In most aspects of life, the gulf between expectation and reality is larger than expected, but that’s where growth comes from.

This principle also applies to startup accelerators, where founders fortunate enough to gain admission can access networks that provide mentorship, emotional support, and eventually, funding.

Tristan Pollock, a 500 Startups Venture Partner and Entrepreneur-in-Residence, is part of a team at 500 that reviews thousands of applications for each 12-week batch, which usually only admits 40 or 50 companies.

Today, we’ll reveal the most common myths founders have when they join an accelerator, and how Tristan’s own expectations evolved after joining 500.

EIR + Venture Partner Tristan Pollock
EIR + Venture Partner Tristan Pollock

What are some of the top misconceptions founders have before joining an accelerator?

A large part of it is setting expectations at the beginning. Sometimes, the people that do the best coming into the accelerator are the ones who realize that most things in life are what you make of them.

They come in and say, ‘I want to talk to this person about this specifically,’ they ask the best questions, they put the time in where it’s needed, but they don’t go to every single thing if it’s not helpful. They have good EQ, overall.

The people that struggle think we’re going to work for them, like 500’s going to be like adding more employees to the team. It’s not the case. Most founders coming into the batch are really bad at standing up and presenting. If you could see the quality of the pitches at the beginning versus what people look like at the end, it’s like night and day.

The smartest founders are interested in the more actionable things that will help their business grow.

Do people think they pitch well?

I think people come in probably with a higher level of confidence than they should.

Many of them confirm the idea that Americans are way overconfident. You’ve seen those studies about how Americans think they’re good at math, but they’re way worse than they think they are? Like that.

Maybe they just haven’t been challenged in a public speaking setting. It’s one thing to be good in your head, but to convince other people who work in startups or investors is different.

Even people who have good experience in the past — bought a company, or sold one — might not have been challenged to be a better public speaker. Some people come in who are horrible, some are OK. Getting that confidence and boiling the pitch down to a short, simple message? That can be the difference between getting funding and not getting funding.

How much does prior experience help a founder who joins an accelerator?

Generally, people coming in with past experience have something specific that they’re looking for, like all the newest growth marketing avenues they could be using, or they want to access the 500 network because they’re not from Silicon Valley, so they’re gong to meet as many people as they can here, and take advance of the founders’ network.

People come in thinking different things about what they’re going to get out of it, usually it’s not the money, though.

 

It’s not about the money? It IS an investment vehicle.

The smartest founders are interested in the more actionable things that will help their business grow. You can throw money on a failing company, but once they come in in and take advantage of our growth expertise, the network or the founders around them, then they can get a lot more out of it.

Which of your expectations were the first to fall after you joined 500?

[laughs] That’s a good question. For me, having raised money from 500, I didn’t go through the accelerator, so it’s like a night-and-day comparison since founders are taking a small $50 to 100K check. 500 did Storefront‘s seed and series A, so I was kind of clumped in with a ton of other companies, but 500’s accelerator has a real community.

I went through AngelPad, and some of the things from that experience definitely helped, like the mentorship and the network. My biggest misconception was looking at 500 as ‘spray and pray,’ where they’re just going to do a s–t ton of companies.

People come in thinking different things about what they’re going to get out of it, usually it’s not the money, though.

Did other perceptions shift after becoming an EIR and venture partner?

When I came in, I saw that the community was so strong, along the people on the team. The culture in the office that our founders selected, making sure that people are respectful and very conscious of each other and taking care of each other?

I don’t know, there’s just something special about the culture that I never really saw from the outside.

Working in a startup can be isolating. Do founders get culture shock when they’re dropped into an immersive social environment like 500?

Most are eager and enjoy it, but for some, maybe if you’re on the technical side of the company, it can be very difficult to get work done. I know I need to focus and it can be hard to get work done in the office.

But, that’s also one of the big benefits; there’s serendipity when you can introduce a founder to someone who’s dropped in, and a lot of good things cam come of that. But yes, it can be distracting a lot of the time. You spend a lot of time with founders in each batch, and they spend a lot of time together. During a Demo Day, I saw how tight those relationships can grow, which was unexpected.

They’re not only building a network that they’ll bond with and go to with questions or hard times, but also people they can have that beer when they really need it, as well as 500 staff people who really take care of you and make sure you have an outlet. I’ve had meetings with people where they cried, or we’ll go for a run or go get beers. There’s that hard side of startups that 500 really acknowledges, so you can come to us not just for the business side, but for everything. We’re a very loving family.

Are there cases where a founder you voted against accepting into the accelerator defied expectations?

Oh, for sure. [laughs] And it’s happened the other way around, too. The accelerator is a place where you get to see real progress, so it’s really incredible to see where things go. Sometimes, you have that ‘I told you so’ moment, and sometimes, you’re thinking, ‘this is a great founder to have around, but the business is going to have a hard time succeeding.’

The best companies sometimes come out of polarization in the selection process. When one person says, ‘I hate this company,’ and another person says they love it, that creates great debates, because it causes people to have such strong opinions.

Related:

>> APPLICATIONS TO BATCH 20 ARE OPEN NOW <<

Why Your Accelerator Rejected You

500 Startups Partners Marvin Liao and Elizabeth Yin are warm, friendly individuals, but they also break a lot of hearts.

As gatekeepers for 500’s San Francisco-based accelerator, Liao and Yin lead teams that review anywhere from 1,500 to 3,000 applications per 12-week round.

marvinliaoheadshot
Venture Partner Marvin Liao

There’s nothing fun about raining on someone’s parade, but with only 35 to 45 slots available, there’s a lot of disappointment to go around. “We have to look through every single one, then we filter it down,” said Liao.

500 Startups EIR Elizabeth Yin
Venture Partner Elizabeth Yin

Which Applicants Are Most Likely To Hear “Yes” From 500?

“We really do take it case by case,” said Yin, though there are a few hard and fast rules. “In most cases, we look for a complete full-time team that has a product already launched, ideally with paying customers.”

“We’re a customer acquisition-focused program,” said Liao, so he’s always seeking opportunities “in some huge market that we’re all personally interested in, and where there’s availability of downstream capital.” Many applicants embody a several of these traits, “but it kind of needs to hit all of these points before we bring you in,” Liao said.

No Market, Revenue, Customers Or Live Product? Come Back Later.

Even in Silicon Valley, there’s such a thing as being in too much of a rush, Liao and Yin agreed.

“If you have an idea and haven’t done anything with it, that would probably fall under the category of too early,” she said.

In other cases, “it may be that the market’s there and founders are really awesome but they’re still very early, so they better suited for a batch downstream,” Liao added. “They don’t know who their customers are, or, after I walk out of the interview, I’ll have no idea of what they’re working on.”

Cap Tables Matter

In many cases, international startup founders are more likely “to have a cap table that’s screwed up,” said Liao. “We love you, we love the company, but the fact that you as founders own 30% of the company is going to make it hard for you to raise downstream capital, so we can’t invest, period,” he lamented. “That’s a lot more common than you’d think for international companies.”

“This is not a one-time thing. You’re not applying to college. This is a continuous process.” — Elizabeth Yin

Yin said 500’s interests are “fairly broad” and extend beyond software into verticals like fintech and ecommerce,”where you can get a lot of online customer acquisition.”

Entrepreneurs seeking to join a 500 batch should make sure they’re good with the size of the checks they’ll receive; pharma founders need not apply, as the sector is “too rich for 500,” said Yin.

Entrepreneurs who don’t follow the guidelines or submit incomplete applications aren’t even considered, and liars need not apply.

“We had someone say in their application that they’re doing $5 million in revenue,” recalled Liao, “and then we interviewed them and found out that they hadn’t even launched yet. That interview ended pretty quickly, he said. “We haven’t had to kick anyone out yet, knock on wood. you try to catch that stuff during the interview process.”

“We should not be picking people based on personality because great entrepreneurs come in all shapes and sizes.” — Elizabeth Yin

Results Are More Important Than A Startup Founder’s Personality

If Yin and Liao question an entrepreneur’s values or business acumen, they’re unlikely to move forward, Yin said, citing an example of a team with a high burn rate. “If they hadn’t raised that much money and it seems like the money they had wasn’t going towards anything useful, we thought these people were too spendthrift and the money’s not going to go towards growth.”

That was a subjective judgment, Yin acknowledged, but it was came from key metrics, not a personal vibe. “That part is where subjective, unconscious biases can start to creep in, and I am very leery of that,” she said.

“When everybody says, ‘I really love this founder because he or she is a hustler,’ I push people to dive into what specifically does that mean,” Yin said. “Do you like a person’s personality because they’re outgoing and charming and friendly? Or, is it that they have actually exhibited concrete results?”

“We should not be picking people based on personality because great entrepreneurs come in all shapes and sizes,” said Yin.

Liao concurred. “Do we think that they’re smart? do we think that they’re coachable? Do we think that we can be helpful?” He’s not looking for polished presenters. “They learn that due to people on my team like Andrea Barrica, who are very good pitch coaches and storytellers with an ability to say to founders, ‘here’s what really matters.'”

When Yin encounters serious introverts who have great products and no sales skills, she advises them “to really make the concerted effort to sell more, or bring somebody else on board.”

Even among the founders who are accepted, “about half just don’t do well in the interview,” admitted Liao.

“We value persistence.” — Marvin Liao

500 Startups’ Transparent Rejection Process Encourages Founders To Reapply

As a former entrepreneur, Yin said she always grew annoyed when investors would pass on her pitch without offering any feedback or rationale. “If you try to push them further, they’ll say, ‘it’s not a good fit or something vague like that,'” she said.

Instead, Yin said she strives to be as open as possible with founders who weren’t accepted into the batch of their choice. “Any company who asks us specifically why we’re passing, we’ll be very up front about that,” she said. “This is something that I strongly believe in.”

“A rejection from us is not a rejection forever.” — Elizabeth Yin

“A rejection from us is not a rejection forever. We recognize that entrepreneurs are constantly learning and people will make lots of mistakes,” said Yin, who said a handful of the companies in each batch were initially rejected. “Even if we don’t agree and see eye to eye, it doesn’t mean that we’ll never aligned later on.”

“This is not a one-time thing,” she said. “You’re not applying to college. This is a continuous process.”

Liao said founders who aren’t accepted should ask 500 for feedback and advised them to stay in touch. “As you’re getting traction and making progress, keep us updated,” he said. “We value persistence. And, don’t take it personally. We’re fairly selective.”

 

The Best Startup Pitches Are Empathic, Not Egotistic

For entrepreneurs to pitch effectively, they must first free themselves of attachment — the root of all suffering.

Which makes 500 Startups Venture Partner, Entrepreneur-in-Residence and pitch coach Andrea Barrica a spiritual guru.

andreabarrica

“I force people to constrain and use the smallest amount of time to explain what’s most interesting about their company,” she explains. It’s rewarding, but like any effective conditioning process, no pain, no gain.

The 120 Second Investor Pitch

Now coaching her fourth batch of founders for 500 Startups, Barrica has continually shaved the amount of time they have to present at Demo Day. Instead of 3.5 minutes, each team now has only 120 seconds to make its case.

Investors are more excited and engaged, Barrica said, and founders have gained a deeper understanding of the value they’re offering.

“I was working with a technical founder who said, ‘I need at least 10 minutes to explain my technology, it’s too complex,'” Barrica recalled. “I told him what Einstein said: ‘if you can’t explain it to me in a minute, you don’t understand it well enough.'”

That upset them “a little bit,” she admits, chuckling. “But by the end of the session, they really understood that what they were doing wasn’t that hard from a market standpoint.”

Googling the right investor deck templates and talking your way through for ten minutes is easy, said Barrica. “Why? Because you don’t have to choose what’s important or exciting,” she explained. “You just put everything in and people pick what they like. It doesn’t take any skill to do that type of presentation.”

“What you need is for the investor to know is that this a great market, and you can do that in 30 seconds.”

“What you need is for the investor to know is that this a great market, and you can do that in 30 seconds.”

Part of Barrica’s value to founders lies in her outsider’s perspective. “People don’t really know what they’re doing, they don’t know what they’re building, or why it’s awesome or differentiated,” she said.

Too many founders start with a sales mindset, building pitches around customer value and delight.

A memorable startup pitch is “an exercise in empathy and storytelling,” not salesmanship, said Barrica.

[In a monotone]…this is my market, this my product, this is the problem.” I’m not about that. I’m about, let’s tell a story.”

Differentiate Your Startup Pitch, Or Don’t Bother

One of the exercises Barrica uses to give founders a better perspective on their own companies is to ask how they’d explain it to “an outsider, like their grandmother or a 10-year-old niece.”

During a 12-week batch, Barrica meets weekly with founders. Each receives highly tailored advice, but all are encouraged to find ways to differentiate their pitch, even from each other.

“People sign up for a pitch session with me and they sit down ready to pitch, but typically, I don’t let them,” said Barrica. “Instead, I’ll ask, what are the three reasons why someone shouldn’t invest in your company?

Most founders reply with negative feedback they’ve already received, such as problems with their team or product.

“Once that’s in their head, you find that they don’t start with the same words the next time,” she said, because they’ve started to anticipate their audience’s needs and wants.

“Once you get people in that mindset, they typically don’t do the super-boring, generic precut pitches I get when I don’t prompt founders with anything,” said Barrica. “So many people don’t understand why they’re going to win. They can’t connect the dots very well.”

She advised adding a single metric to a tagline, or taking the time to identify traction benchmarks that are sector- and product-specific.

“Whose lunch do you eat when you succeed? That’s what most people can’t tell me when they come in,” said Barrica. “If you’re successful, what happens in five years?”

For pre-launch companies, relating current strategy to future outcomes can go a long way toward building credibility with investors, she added. “Be able to talk intelligently about what in your industry will be interesting to investors or customers.

“Whose lunch do you eat when you succeed? That’s what most people can’t tell me when they come in.”

Quiet Power: “A Very Compelling Pitch Style”

Not all entrepreneurs are, as they say in the restaurant industry, “front of house” people, but Barrica said introverts and unlikeable folks can also pitch effectively.

“I tell people that quiet power is a very compelling pitch style,” she said. “Sometimes, founders avoid me like the plague because they think that I’m gaining to make them be really gregarious and loud,” she said, but that’s the opposite of her strategy, which stresses authenticity.

“You don’t have to be something you’re not, but you have to be brilliant, brave, and effective,” said Barrica. Discomfort with public speaking “isn’t an excuse to be boring or verbose,” she offered. “I would say if you don’t like pitching, you have to be even more brief.”

When Pitching Investors, Screen Your Trailer, Not The Movie

Before we wrap up, Barrica refers again to deadly Power Point decks packed with minutiae investors won’t remember after the pitch concludes.

“Those details are better for a Q&A in a one-on-one meeting,” said Barrica, “and if you want to get that one-on-one meeting, you keep it simple.”

“Your pitch is going to hurt you,” she warned. “That’s why coaching is so important, and that’s why my job’s so hard – it’s hard to templatize what I do, when it’s more of an art than a science.”

Barrica admits a bias, but “I hate other [accelerators’] demo days because they’re just robots, one after the other. [In a monotone] this is my market, this my product, this is the problem. I’m not about that. I’m about, let’s tell a story.

Presumably, without opening, “in a galaxy far, far away?”

“I love that example,” said Barrica. “No, we’re just looking for the teaser trailer.”

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.”

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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

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.

Unconventional Investing Promotes Innovation & Empathy — Interview with 500 Startups EIR Tristan Pollock

500 Startups Venture Partner and Entrepreneur-in-Residence Tristan Pollock is open to new experiences, and he hopes you are, too.

500 Startups EIR & Venture Partner Tristan Pollock
500 Startups Entrepreneur-in-Residence & Venture Partner Tristan Pollock

“My focus is, ‘I’m really excited about this thing, so let me share it with people who are also excited about it,'” said Pollock.

Tristan’s bio describes a person who has a strong interest in ecommerce, but conversation reveals that creating and sharing are his passions. After opening up, he confesses what he calls his “hidden agenda:” the ongoing search for products, services and people who combine novelty and value.

“Behind the things I do, there’s usually some passion about why it’s interesting or cool and how it might help people or open their minds,” he explained, “but I also want to reduce judgment and increase empathy.”

Building Startup Brands Offline

To Pollock, one of the surest ways for entrepreneurs to connect with consumers is also one of the oldest ways: open a store.

“In startups, offline channels are often overlooked, but they could actually be higher converting and a lower acquisition cost than some of your online channels,” said Pollock. When someone enters a physical space, “you can more closely target people to have that one-to-many effect you get online.”

Pollock validated this theory when he co-founded Storefront, a platform that connected brands, makers, retailers and artists with listings for brick-and-mortar spaces that were ready to receive customers. The service closed earlier this year, but it matched customers with hundreds of pop-ups that rolled into millions of square feet that generated tens of millions in revenue.

“We created it for designers and brands that wanted to put on more experiential things, instead of just doing retail as a commodity, which is basically Amazon,” said Pollock. “If you’re going to a physical space, you’re going for the experience — there’s a show, a whisky tasting, you’re meeting the maker, you can try on the clothes.”

Sharing space with another person creates a connection, no matter how tenuous. Even a novice seller knows that the simple act of eye contact can be all it takes to tip a customer into your sales funnel.

“Psychologically, you build this relationship with someone when you meet the brand or the maker offline,” said Pollock. “With that channel, you can really focus and make the relationship stronger.”

Offline marketing isn’t new, he acknowledges. “Thousands of years ago, the markets in Morocco were temporal retail; people were going there because it was a one-day experience where they could go out and purchase all these things.”

Pollock, who hails from a family of makers, said today’s consumers seek connection and authenticity. “People don’t want to go to McDonald’s or Starbucks,” he said. “They want to go to Four Barrel and buy products made by artists in their neighborhood and people who care about what they’re doing.”

“It’s like people suddenly remembered how important it is to be human,” he concludes.

A Day In The Life Of A 500 Startups Entrepreneur-in-Residence

As an EIR, Pollock works directly with founders in 500’s accelerator, “mentoring and coaching the companies that we have on-site for the 4-month program.”

Early in the program, he meets with members of his “core squad” weekly, “and then ad hoc after that.” The EIR role at 500 is different than traditional VC firms, “where they pay you be around and ask for first dibs on whatever company you start next as you vet new investments,” said Pollock.

“They also want me to share my time and knowledge with the companies going through the accelerator,” he said. “It’s good to have a variety of people you can turn to for advice who are a couple of steps ahead of where you have to go down certain paths, whether it’s revenue-generating, talking to VC, or whatever.”

Beyond his primary EIR responsibilities, “I’ve been doing some seed deals in the experiential space, including a couple of cannabis companies,” said Pollock.

Vicetech: It’s About Social Impact, Not Partying

Editor’s note: the following reflects Tristan’s personal theses and opinions, and not necessarily those of 500 Startups.

Marijuana legalization is likely to be on the ballot this fall in California, and if early polling is any indication, it’s going to pass.

For progressive investors in a state with almost 40 million consumers, a change in pot’s legal status could create opportunities.

“Coming from a social impact background, what I think is interesting about vicetech is that I’m very in tune with these types of founders,” said Pollock. “With anyone I’m investing or supporting, I’m looking at those sorts of people who understand the impact of what they’re doing.”

I look at vicetech and see people who are increasing open-mindedness.

In his experience, vicetech entrepreneurs are largely empathetic risk-takers with high EQs who care about others.

“When you go to festivals or Burning Man, some people look at it as partying, but it’s also a huge opportunity to open minds up about different types of people,” said Pollock.

“In vicetech, ‘sex drugs and rock & roll’ is the subject line, but the body is what’s really important,” he said.

12993339_10100975636942879_444379968365392335_n

What sort of investments is he looking for?

“I’m looking for things that are more paradigm-shifting, which is why I like the experiential vicetech stuff and what has been called ‘frontier tech,'” said Pollock. “I’ve also been exploring spacetech through industry events.”

As a creative person with varied interests, “I’m kind of tinkering,” said Pollock.

What won’t he invest in?

“Anything that I think is boring. There’s a lot of people pitching ideas that are only marginally better than some other idea,” he observed.

Why have a slightly improved bus or a somewhat fast train when you can build a hyperloop?

Although he’s seen technical products and development tools that made him “excited,” he’s more interested in maintaining an optimum life-work balance.

“I don’t need more excuses to sit in front of my computer, so I made a conscious decision to stay away from that stuff,” said Pollock.

Although Pollock recognizes that most VCs and entrepreneurs are wary of backing unconventional plays, he said embracing bold, new ideas promotes both innovation and empathy.

“A lot of people aren’t willing to put themselves out there because they don’t have the leverage,” said Pollock, “but I’d like to see more people take that risk and for us to be more accepting of them.”