Announcing “Silicon Valley Secrets for Investing in Asia” with INSEAD

We’re excited to announce that applications are now open for our newest course, “Silicon Valley Secrets for Investing in Asia.” We’ve teamed up with INSEAD, a leading global business school, to offer investors a one-week deep dive on how to apply Silicon Valley investing expertise to Asia-based startups.

After the huge success of our VC Unlocked programs in the Bay Area, this marks the first time we’re taking one of our programs outside the U.S. The course will be held at INSEAD’s Asia campus in Singapore from November 6 – 10, 2017.

For AIPAC investors, that means the same unrivaled access to our Silicon Valley network, investing know-how, and extensive Asia knowledge, minus the 12-hour flight and jetlag.

Sound good? Apply today to be part of the inaugural class in November 2017.

Course Overview

During the course, participants will work directly with INSEAD faculty and 500 Startups partners to explore startup investing trends across different markets in Asia. The program will explore topics relevant for venture capital, such as honing and evaluating investment theses, structuring early stage tech investments, and raising your next fund.

As part of the course, participants will also meet with top VCs from China, India, Japan, South Korea, and Southeast Asia. Admission also includes exclusive access to a special DemoDay, where participants will have the chance to evaluate real startups from the 500 Startups portfolio.

Other key benefits include:

  • Connecting with other Asia-focused startup investors as well as INSEAD alumni
  • Getting feedback on your investment thesis from world-renowned INSEAD faculty specialized in VC and entrepreneurship and 500 Startups Managing Partners
  • Getting fundraising tips and tools for structuring a fund from top VCs in the region
  • Improving your ability to identify and evaluate top startups for your portfolio
  • Building your deal flow
  • Earning a Certificate of Completion from INSEAD

 

VC Unlocked 2016

500 Startups in Asia

Here at 500 Startups, we pride ourselves on helping build viable startup ecosystems around the world. Since our inception in 2010, we’ve invested in over 1,800 companies and 3,000 founders in more than 60 countries, including Southeast Asian companies like Grab and Viki, which was acquired by Rakuten in 2012.

Geeks on a Plane, East Asia, Tokyo 2016

With $36B invested in startups and tech deals last year, Asia has emerged as a new hub of VC activity. Our decision to launch the first VC Unlocked program outside of Silicon Valley in Singapore is yet another example of our commitment to the Asian market.

We recently doubled down on Southeast Asia with a new $50M Durians Fund, launched a new $10M fund in Vietnam, and appointed a new head of business for China

About INSEAD

With three campuses (France, Singapore, Abu Dhabi), 145 faculty members from 40 countries, and 1,400 students in their PhD and degree programs, INSEAD is one of the world’s top graduate business schools.

They recently earned the top place in the Financial Times’ “Global MBA Ranking 2017” for the second year running.

INSEAD Asia Campus

Details & Logistics

We accept qualified candidates on a rolling basis. Space is limited so we encourage you to apply as soon as possible before the deadline of October 18, 2017.

The program fee of $9,800 USD covers tuition, course materials, most meals, admission to DemoDay, and transport to any site visits. Accommodations are not included but can be arranged for an additional fee.

If you have any questions about the program or would like to set up a call, feel free to reach out to Newton Davis at newton [at] 500startups.com.

 

Are there ghosts in your convertible notes?

Guest blogger – Adam Sterling is the executive director of the Berkeley Center for Law, Business and the Economy, co-founder of Startup@BerkeleyLaw, and a former venture capital and startup attorney.

Are you investing in convertible notes or securities? Do you know what a phantom liquidation preference is? Did you know it could cost you hundreds of thousands of dollars? Let’s illustrate how with a simple example…

Sally purchases a convertible note with a valuation cap of $5 million in Tuber Corporation for $100,000. Six months later, Tuber closes its Series A with a pre-money valuation of $10 million, selling new shares at $1/share. Thanks to its valuation cap, Sally’s convertible note converts at $0.50/share and she receives 200,000 shares of Series A stock. Sally’s very happy about this outcome.

Source www.billionbackrecords.com

A year later, Tuber is acquired. Unfortunately, the acquisition price is not enough to trigger a conversion of the preferred stock. Series A holders will just receive their liquidation preference. Assuming the Series A investors negotiated a standard liquidation preference, each Series A holder should receive the “original issue price” of their Series A stock. The question for Sally then becomes, is the “original issue price” of her Series A stock $0.50 share or $1.00 share?

Assuming Sally’s convertible notes were silent on this issue, Sally would most likely be entitled to receive a liquidation preference of $1.00/share in the above example or $200,000 (an outcome that greatly benefits Sally). This benefit to Sally, getting $1.00/share as opposed to $0.50/share (which ends up being worth $100,000), is known as a phantom liquidation preference.

While most investors would prefer to keep this phantom liquidation preference, many companies are drafting convertible notes to avoid it. Their argument is that investors are double-dipping — benefiting from the discount/valuation cap when their security converts and again with the liquidation preference. This argument may be valid, but as an investor you should at least be aware of it. As some investors successfully retain the preference, it could be worthwhile to fight to keep it. 

Understanding nuanced concepts like this can provide investors with a critical edge in the crowded venture capital space. To this end, UC Berkeley will be partnering with 500 Startups at Venture Capital Deal Camp in February to breakdown concepts like this and explore other mechanics of early-stage deal making. Deal Camp also features VIP access to 500’s famous Preview Day and simulated negotiations with real companies. Check it out and consider applying!

Thank you to Adam Sterling for contributing to the 500 blog. For more insights from Adam, follow him on Linkedin or Twitter.

From “Here, Take my Money” to Investing with Vision

We just finished up our 3rd investor training with Stanford Center for Professional Development and we are on a roll!

The highly diverse mix of participants spent two weeks unlocking the secrets of venture capital investing and refining their investment theses.

They participants finished the program with a much clearer vision of where they are going and how they plan on getting there.

They also left with a certificate from Stanford, a maroon baseball cap and a crazy, fun group of friends and future co-investors that were very excited about their new investment theses!
VCunlocked2

The Venture Capital Unlocked program ran from July 25th – Aug 5th and was held at Stanford University and the 500 Startups accelerator in Mountain View.

Diverse Geographies + Diverse Investment Backgrounds = Magic

Even though 500 Startups purposely designs its program to attract diverse participants, this time we actually had at least one representative from every continent except Antarctica (maybe next time?).  

Of the 28 participants, 70% came from outside the United States and 40% of the class was made up of female investors.

Participants came from a variety of investment backgrounds, including angel investors (30%), representatives of existing venture funds (26%), accelerator fund managers (18%), family offices looking to expand into tech investing (16%), government funds (5%), and investors with a social impact focus (5%).

Screen Shot 2016-08-16 at 11.25.16 AM

Before joining the program, most participants had executed somewhere between 0 and 20 deals, with the average person having made 5 deals. As a class, they already have over 100M raised and ready to invest.  

Most of them plan on raising more and deploying about 150M over the next 3 years, with an average of 30 deals per person.

200% Increase in Confidence in Investment Thesis

During the program, 500 Startups investment partners and Stanford professors helped participants rethink their investment theses and strategies.

At the beginning of the program, only about 25% of participants reported feeling confident or very confident about their investment theses.

They started the program with investment theses such as, “I invest in companies referred by trusted friends.” Another participant said, “To date, my investment thesis can be best described as ‘here, take my money’. In the future, it’ll be ‘you can have my money only if you fit my investment thesis’.

However, throughout the two weeks, many people took the time to really ask themselves hard questions about their investment strategy and the strengths they bring to the table.

By the end of the program, 73% of class had significantly changed or refined their investment theses, and 70% reported feeling very confident about their new thesis.

Participants presented their Investment Theses to 500 investment partners, Stanford professors and fellow participants
Participant Investment Thesis Presentations to 500 investment partners, Stanford professors and classmates

Strengthening Investors’ Opportunity Assessment Skills

The program’s agenda was packed with back-to-back activities in which participants developed their opportunity assessment skills, interacted with founders at 500 Startups’ Preview Day and Demo Day, and engaged in lively debates among themselves about the merits and drawbacks of startup deals.

They dove into cap tables and term sheets, analyzed the legal and financial considerations of running a fund, and looked at how to help founders with M&A and exit strategies.  

The investors also got to hear from some of the top VCs in the Valley. Their favorite session by far was a shark tank-like session in which Jason Calacanis, one of the most active angel investors in the world,  interviewed 2 founders from our current batch. He asked the founders many tough questions and revealed in a “sportscaster” style side commentary how their answers sounded to investors.

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Jason Calacanis and Dave McClure share their words of wisdom with program participants

What Participants Had to Say about the Program

Participants said the program helped them structure their previous knowledge of venture capital and increased their investing confidence.

They left the program with an incredible network of friends and partners who will help them on their journey as new VCs and angel investors.

Here is what some of our participants had to say about the program in their own words:

- Bonnie Lo, Partner at NewQuest Capital Partners, Hong Kong
Bonnie Lo

VC Unlocked is a great introduction to Silicon Valley startup investing.  Its an opportunity to access some of the top investors in the community and hear from them their experiences first hand.  For those who are interested in raising a fund to invest in start-ups, this is a great introductory course. Touches on structure and considerations of fund raising, as well as investment approach. Helps those who have some idea on their investment thesis to hone in on their thesis and strategy.  The class is very diversified and helps to build bridges with like-minded investors across the globe. There are almost 50% women and 12 countries represented!

– Bonnie Lo, Partner at NewQuest Capital Partners, Hong Kong

Sharif El-Badawi, Partner Lead, VCs and Startups at Google, Mountain View, CA
Sharif El-Badawi

VC Unlocked brings together the brightest emerging investors from around the world for an intense immersion into the intricacies of academic and real world venture capital. Students learn from Stanford professors, industry legends and evolve their investment theses in real-time while getting a chance to engage with real startups and founders at Demo Day.  

– Sharif El-Badawi, Partner Lead, VCs and Startups at Google, Mountain View, CA

JP Duque, Founder at Cantera Capital, Mexico
JP Duque

VC Unlocked delivers a powerful mix of world-class academics (Stanford) and insightful, actionable advice (500 Startups and many notable guest speakers) – in a candid, off-the-record environment. Learning from and building a network with my classmates, a global and diverse group, was equally rewarding. I highly recommend VC Unlocked if you are serious about VC.

– JP Duque, Founder at Cantera Capital, Mexico

Kenza Lahlou, Co-founder of StartupYourLife, Morocco
Kenza Lahlou

VC Unlocked was a truly unique and valuable experience for me. I learned a lot and met incredible people both on the team and participant sides. It helped me clarify my vision and investment thesis, answer the questions I was asking myself and double my confidence in what I want to achieve.

– Kenza Lahlou, Co-founder of StartupYourLife, Morocco

The Career-Changing Impact of Learning How to Invest

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

APPLY HERE

Getting the Inside Scoop

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

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

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Program Impact

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

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

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

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

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

New Syndicates and Funds

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

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

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

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

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

The Network Effect

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

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

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

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

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

Better & Stronger Investment Theses

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

Stanford professor Michael Lepech with the May 2016 class.

Learning Directly From the Portfolio

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

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

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

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

How to Join the Next VC Unlocked 

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

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

APPLY NOW

Despite Corrections, India’s Startup Environment Is “Business As Usual” — 500 Kulfi’s Pankaj Jain on Risks & Rewards

Editor’s Note:

The following post is the third of a 3-part research series from Walter Thompson, 500 Startups Journalist-in-Residence, covering the India ecosystem.

More India coverage here:

Before Pankaj Jain became a 500 Startups Partner in 2012, he lived in India for seven years, first as an entrepreneur, then as co-founder of Headstart Network Foundation, a nonprofit that leads efforts to cultivate a startup ecosystem for native entrepreneurs. Breakout startups like Ola Cabs and Flipkart made early-stage demos at Headstart events, which are now held on the second Saturday of each month in 16 different Indian cities.

Now based in New York, Pankaj invests in startups across the US and India, where he’s helped build a portfolio of 54 companies, “probably about 40 or so that are active today,” he said. “We’ve had five exits out of our India portfolio already, and most of those were pure B2B businesses. There were two that were pure consumer businesses. So, there’s another 40 or so I’m watching actively.”

Last week, 500 Startups announced 500 Kulfi, a $25M fund focused on India that Pankaj will manage. “Last year we did over 20 deals in India. However, we don’t think that’s enough,” he said.
Pankaj Jain
I reached Pankaj in his NYC office, where he spends most of his time; every two months, he flies into Bangalore and Delhi, where he works closely with our India team and continues his efforts to foster the startup community. In a wide-ranging conversation, we discussed myriad issues, including the current state of India’s startup environment, how investors can address cultural differences, and how his experience as a foreign entrepreneur informs his work as a 500 Startups partner.

There’s been a lot of buzz about a more austere environment for startups in India. Is the startup market in fundamentally poor shape, or is this a correction?

Journalists and bloggers need eyeballs, and there are some stories going around in tech about things that weren’t going well, some layoffs and stuff that turned into a story, and then that turned into a theme, and that’s what people have latched on to.

Are things tougher today than they were a year ago?

Most definitely. Is it harder to raise money today? It depends on what you’re doing and where you are. If you were in fintech and you have some traction and a revenue model, you can probably still raise money relatively easily.

If you are a food delivery business, good luck, because you’re never going to raise money from anybody. It really depends on what you’re doing, what stage you’re at, and how much you’re trying to raise. It’s just common sense, more than anything else.

Why isn’t food delivery a viable sector?

Labor is very cheap in India, but even then, once you add on the cost of hiring somebody to run around and deliver stuff for you and the wear and tear on the motorcycle, it adds up. And you start thinking, how are you going to make money when you have these costs? You’re only providing a service, you’re not really building any sort of IP anywhere, and there’s no barrier to entry you’re creating for other people.

What’s made investors more conservative in recent months?

Many of them put money into some pretty bad deals, so they’re being more cautious in the businesses that they’re putting money into now. I think that’s great for B2B businesses and pure consumer businesses that have actual revenue.

So, if you are a startup that has no revenue model and you’re playing the valuation game? Yeah, you’re screwed. If you’re trying to build a real business, it’s business as usual.

I think part of what happened last year was that you had foreign investors who were pricing Indian companies according to their local markets, and that created a huge run-up. And then, a lot of Indian investors realized, that if they didn’t start writing checks, they were going to lose their deal flow to these guys.

You’re from New York, but you moved to India to found a company. It’s a completely different world, so how did you adapt? Was your American background particularly helpful?

I thought I would be negatively looked at for not being a local. I realized after a while that no, I could be myself, that I could speak like a New Yorker and just let people know that my ancestors came from India and I’m from NYC.

Americans get access that you don’t get when you are from India. When you’ve lived there and went to school there, you’re treated very differently. Immediately, [Indian-Americans] get access to people that they wouldn’t have gotten access to very easily anywhere else. There is that advantage.

The disadvantages are that you really don’t know the Indian market. And the Indian market, like you said, is a completely different world. And if you’re not ready to learn and adapt to that market very quickly, you will fail.

So, Indian-American entrepreneurs get access, but native Indians are more likely to get traction?

If you look at most of the companies that have done well in India over the last five to ten years, they’re mostly companies where the founders were Indian, may have moved to the US or Europe for 5 to 15 years, may have been college educated in the US, worked in the US for a couple of years and then they took their learnings back to India, where they started pouring those things into businesses that they started.

I can’t think of any company in India that has done well that has an NRI founder. I know a lot of NRI [non-resident Indian] founders, myself included, who moved to India in the last 10 years and started up, but the truth is, we didn’t know what the hell we were doing. We were trying to figure it out as we went.

Given the chance to do things over, what would you change?

I were to go out and start something up again in India, I wouldn’t even dream of doing it unless I had a local co-founder that I had known for a very long time.

Do you think a local partner is essential for foreign investors?

Indian-born investors definitely have some sort of leverage over people who’ve been there once or twice. If you want to invest in that market, you need to have an understanding of that market. Either you acquire that understanding by hiring somebody or you acquire it by moving there and diving in head first.

If you want to be an active investor, get on a plane.

Photo credit: Subith Premdas, Flickr

 

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500 Investors

We recently wrapped up our first-ever investor training in partnership with Stanford Center for Professional Development.

Our full class brought together 34 impressively awesome participants — 16 women and 18 men from 14 countries around the world.

500 Invest stats on global investor reach

Participants’ backgrounds included prominent existing tech investors looking to break into new global markets, family offices getting ready to launch into tech investing and accelerator-building, multilateral organizations looking to set up venture capital as asset class, young entrepreneurs setting up funds in universities, and active angel investors looking to sharpen their existing investment thesis and scale the volume and reach of their investment activity.

Our 50/50 Scholarship brought 16 women to the table, making up a class that was almost 50% women investors. We see this as a huge win and step forward in changing the gender ratio in venture, and want to extend an extra thanks to the community — and to Stanford — for supporting the scholarship initiative.

500 Invest angel investor meetup
We covered a LOT of material during our two week program, with every day including classroom time, meet and greet sessions, pitches, and in-depth and heated startup assessments following 500’s Batch 12 Demo Day. The course was taught by Mike Lyons, Mike Lepech, Pedram Mokriam, Dave McClure and Bedy Yang with several guest speakers such as Jason Calacanis, Mari Baker and James Currier.

This course will allow you to wrap your your head around why and how this asset class works in the Valley, thanks to top notch faculty with libraries of knowledge.

— Fares Ghandour, Investment Manager at MENA Venture Investments

I was really fortunate to be in this first batch of the program. I found the course the be very relevant for many reasons; it was conducted jointly with Stanford whose faculties are themselves industry practitioners and have been in the industry for a long time. Then, there is the additional appeal to the program, as half of the participants are from outside the US and almost equally, were made up of women. It was a good mix of angel investors, VCs and even a university professor! Then there is a good mix of lectures as well as real-life experience thrown in for us to engage with real companies and real issues faced by them. We even attended 500 Startups Demo Day for its Batch 12!

Well done 500 Startups and Stanford!. I don’t think I can find the same experience elsewhere in the world.

— Jalamudin Bujang, CEO at MAVCAP

Participating in IGSVI gave me more insight into investing in Silicon Valley and has extended my network further not only with VC’s in the US but also with VC’s and angel investors around the world.

— Sigurdur Arnljotsson, General Partner at SA Framtak VC

The IGSVI program brought clarity to how I can most effectively run a Venture Capital Firm, more so than any blog, book, mentor, or past experience ever could. By bringing together the brightest emerging early stage investors from around the world to Silicon Valley for a jam-packed two week experience, IGSVI provided us with the opportunity to build a professional network that will work together to fuel entrepreneurship on a global scale.

— Elizabeth Galbut, Founding Partner at A-Level Capital

The IGSVI program hosted by 500 Startups at Stanford has been extremely valuable and worth-while in the critical stages of building the foundation of my investment career. In 10 days, I learned more and gained more Silicon Valley insider connections than I would have in 6 months or more on my own. 500 Startups has truly found a way to “accelerate” the work of emerging fund managers much like they’ve done for hundreds of startups. The teaching staff was top notch, no logistical detail was left to chance, and instructors were hands-on and available. Our class was made up of people from every corner of the earth, and made the experience more enjoyable than I could have ever imagined. I have made some life-long friends, and learned a ton in the process.

— Arlan Hamilton, Founding Partner at Backstage Capital

I came in wanting to invest in every angel investment deal that came my way. I left with an understanding of my area of expertise and a clear investment thesis.

The highlight for me was the commitment that Dave, Bedy and the the entire 500 team had for each of the participants to get significant value. In fact at times I caught myself thinking that how could Dave reveal all his secrets and learnings gained from his experience of investing in almost 1000 startups. The diversity of the 35 participants was equally impressive with only 20% from the U.S. and the balance from all over the world. Needless to say that it was a very valuable 2 weeks and it’s for sure saved me a ton of money which I would have wasted in investing outside my area of competence and outside my thesis.

— Piyush Chawla, Angel Investor

We walked away with new connections and new friendships — people we’re excited to support not just as investors but as friends.

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IGSVI was a huge success, and, in classic 500 style, it’s something we’re doing again — probably sooner than is sensible or sane.

From short workshops in your region to the NEXT IGSVI later this year, learn more about 500’s upcoming investor training programs at http://500.vc

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