500 Startups founding partner Dave McClure took the stage at Startupfest in Montreal on Thursday to chat with festival co-founder Phil Telio, and while a lot of what he covered was the McClure Classic Hits playlist you might recognize if you’ve ever seen him speak, he also shed some light on what he sees as 500 Startups’ competitive advantage in the field of high-profile fund/accelerator combos that also includes Y Combinator.
McClure said that 500 now have about 1,500 investments spanning 60 countries, with a full third of their staff now both not born in the U.S., and working outside the U.S. McClure says that they’ve been making investments internationally since the very start, which is why over a third of their portfolio companies actually reside outside the U.S.
That provides part of its advantage over big competitors, including YC, which McClure, whose metaphor-making ability may have been impacted by the Harambe debacle, called “the big gorilla on the hill.”
“It’s tough,” he added, describing how he feels about the inevitable constant comparisons between 500 and YC. “It’s hard feeling like I’m Seabiscuit all the time.”
A lot of startups at the festival were interested in some guidance around what 500 is looking for in portfolio companies, and McClure provided some pretty clear guidance. They’re basically looking for functional product, early customer traction and revenue “evidence that you’re not completely fucking stupid and that you’ve been able to execute on something,” McClure says. And that also means having numbers to back that up.
“[It’s] not what do i think of your product, but what do your customers think of your product,” he said, and how can you show that in a quantifiable, numbers-based way, instead of by qualitative pitches and customer stories.
On the other side of the funnel, what does success look like to 500? McClure said that an ideal case, rather than the ultra-rare unicorn, is a $10 million business that employs 100 people (the real goal, he said, is to contribute to the overall health of the economy by growing businesses that can hire), a valuation of between $50 and $250 million. This ideal case happens around 5 percent of the time, based on their current numbers, he added.
In terms of Canada-specific numbers, he said that 500 currently has made about 40 investments over the last five years in the country, and added that they’d like to do more like 20 to 30 per year (using their newly announced $30 million micro-fund). They have people in Toronto, Montreal, Waterloo, Vancouver and Calgary keeping an ear to the ground to help hit those numbers.