500 Startups, The Venture Fund and Seed Accelerator

Founded in the year 2010 by Dave McClure and Christine Tsai 500 Startups was designed to act as an early-stage venture funding organization and also as a seed accelerator. In its first group accelerator program, it admitted around 12 startups in its breeding place which is located in Mountain View, California during February 2011. The expansion of its classes started thereon, with its second group session admitting around 21 startups in June 2011 and a third group session admitting around 34 startups in October 2011. 

The prime role this venture capital group was established with a mission to unearth and assist the most talented entrepreneurs in the world and also aid them in creating successful firms at a larger scale and also build superlative ecosystems. And also to add to the fact, it is one amongst the venture capital groups in this world which are most active. 

Five hundred startups have taken charge of discovering over 2,200 companies with the support from its 15 thematic funds and four global funds ever since the year it was founded. Moreover, it dedicates all its fund activities to specific geographic verticals or markets to create a more significant number of different startups. The main reason behind this is to extend its base and investments to more than 74 countries. The team strength of 500 startups encloses 100+ members with its offices located in more than 20 countries in the world, which always comes to the support of creative people.

Some of the remarkable companies 500 startups produced are Twilio, SendGrid, Credit Karma, Udemy, Canva, GitLab, Grab, Bukalapak, Talkdesk, Ipsy, Intercom, MakerBot, Viki, and Wildfire and out of these some are already acquired by some prominent companies.

Five hundred startups not only provide seed capital to the startups but also provides support to them with the help of its Seed Accelerator Program which focuses attention on customer acquisition, digital marketing, fundraising for companies which are pre-seed and lean startup practices. Its prime agenda is to extensively reinforce the innovation ecosystems by developing them to the core. These factors can be achieved by assisting the startups and investors through presentations, conferences, sponsorships, partnerships, corporation, by infusing educational programs and also getting support from governments around the world.

The significant achievements of 500 Startups are as follows:

significant-achievements

Five hundred startups acquired the Mexican VC, a Mexico City accelerator in the year 2012. The reason was to double up its investment in Mexico City considerably. It has also invested in Alta Ventures, which has showcased its plans to have better deals and access in that region. 500 Startups have invested in more than 1,200 companies as of August 1, 2015. In these 1,200 companies, 60% of the companies have been acquired, 20% of them have taken part in other incubators, and 20-30% of them were international companies. 

The exits of these companies were estimated to be around $1070M as per many reports. Also, they announced a three-month growth program in the year 2015 in London and even a pre-accelerator program in Oslo, Norway. Its fast East Coast U.S. outpost was chosen in Downtown, Miami in the year March 2018.

Recent reports give conclusive evidence that 500 Startups have invested in more than 1500 companies accommodating in more than 50+ countries. Its growth has been so immense that it receives more than thousands of applications in every quarter from various startups to compete for 30 spots in their accelerator program. The mentor network and investment team of 500 startups enclose an operational experience of working under different prominent companies such as Google, Apple, YouTube, AOL, Yahoo, PayPal, Facebook, Twitter, and LinkedIn.

The seed fund of 500 startups is unique and creative as it invests between $25K-$100K while performing its 1st check and between $100K-$500K on its tests followed.500 Startups accelerator is a fast-paced program which is held for four months in San Francisco and Mountain View. The standard terms of this accelerator program are $125k in exchange for 5%, and a participation fee charge of $25k in the accelerator program.

The benefits of getting into the 500 Startups accelerator program:


Having access to mentors who are knowledgeable and experienced can be classified as one of the boons when you join the 500 Startups accelerator program. The most significant benefit by going through the program is that you will get premium access in meeting all the 500 partners of the organization, experienced investors, seasoned entrepreneurs, and individuals who have immense expertise in their field who offer you creative feedback and healthy guidance free-willingly. Top domain experts are also included along with these mentors who are quite good into a discussion on significant subjects like data, distributing, fundraising, area acquisition, and many more.

In each week, you will be guided and prepared by people who lend several amazing speeches, events and office hours guidance, and also a first-hand mentorship in customer attraction, distribution, metrics, design and fundraising, public relations, research and development, business development and many more.

A briefer look at the essential events which happen in the Accelerator Program of 500 Startups:

•    Roundup Meetings are held weekly, which aids in giving reports to all wins and losses situations.
•    The partners in 500 Startups will help you with direct contact points necessary for your startup or an equipment identity registrar for mentorship and advice at any time.
•    A lot of brainstorming sessions, collaborative breakouts, and weekly outings down the fireside.
•    Founders and CEO’S of prominent technology companies will enlighten you with their inspirational journey through weekly talks.

The most significant exits to happen in 500 Startups to date are: 

– Wildfire Interactive
– MakerBot
– Viki 
– Crocodoc 
– BrightNest 
– Lexity/Vurve 
– Behance
– ZenCoder 
– MoonFruit 
– Rapportive 
– TeachStreet 
– FeeFighters 
– Versly/TaskDoc 
– Backtype 
– Punchd 

The main reasons why 500 Startups was successful:

reason-success

1. Capital Efficiency – 500 Startups possessed the ability to bring in $1M in capital funding.  It supported most startups to raise their funding’s in series A, by aiding them to build more amount of money depending on their situation. While most of our startups will raise a Series A, having the ability to decide as to whether you want to raise more money or not, is a great situation to be.

2. Revenue Model – The main reason everyone started to look up to 500 Startups was its ability to conceive the right revenue model. It used to reconfigure the whole revenue model of the startup which started bringing success to most of the startups, though only a few numbers of exceptions were seen regarding this.

3. Team – As already stated before, 500 Startups boasted of a team around 100+ creative and enthusiastic individuals who had prior work experience of operating with prominent companies of the world.

4. Product – 500 Startups helped every startup in realizing which product has to be showcased by them to get the maximum number of profits and efficiency. It made sure that each startup should enclose at least one functional product at a minimum because of these most of the majority startups they invested started bringing them lots of customers and high revenues

5. Global – This is the key to success in 500 Startups. They invest anywhere in the world. Till date, 500 Startups have invested in around 35+ countries, which includes almost every continent except Antarctica. Their focus primarily relies on startups who have a job with significant languages, mainly English, Arabic, and Spanish. They have investment partners in almost all corners of the world, which includes U.S., South East Asia, China, Brazil, Mexico and India and they are going to expand next in the Middle East and Europe.

6. Expertise in several areas of interest – The truth with 500 Startups is that it doesn’t confine itself to a single field and instead concentrates on startups belonging to many areas of expertise such as family technology, food technology, development, real estate, e-commerce, and various other marketplaces.

7. Valuation – Most of the investments in 500 Startups happen at the seed stages only, and the reason behind this is the unique fund model of the organization which is focused on getting returns to the limited partners in their smaller exits. So, here, the initial evaluation holds the key as most of the startups have their seed investments low in their particular region or country. 

The way of investment in 500 Startups:

investment-ways

1. 500 Startups are efficient in doing both priced rounds and convertible notes or convertible securities, and it does in either case mostly with a cap. The structure of 500 Startups is flexible, but in some specific situations, they may prefer one form than the other.

2. However, the structure is,500 Startups always request for the information and pro-data rights. This helps them in understanding the work of the company, which will enable them to invest more in the future if the rate of progress of the company gets exponential.

3. 500 Startups aim to optimize for searching a high number of founders and companies and also has excellent speed and flexibility in getting the job done at the right time. It also aids in limiting the cost and complexity of a project. These regulations of 500 Startups help legally in finding and funding creative startups and even prevents many troubles. 

4. 500 Startups invests carefully in the follow-up rounds of a startup acquisition only if they do not lead in the majority investor rounds or roles which is considered rare due to their highly efficient work process. The prime reason they succeed in acquiring most of the startups is that they invest 10-20% less than required in the overall round, which gets them at least the role of minor investor for the startup in case they succeed. This step of the organization also helps in overcoming the signaling issues but still necessitates the primary decision-making process.

5. 500 Startups rarely lead in the starting rounds of the investment process, to analyze the working process and to quote reasonable prices in the subsequent series, which guarantee the startup acquisition. This is because they believe that the elementary business models are far more significant than the opinions of the investor.

6. Last but not least, almost in all cases, 500 Startups modify to achieve maximum efficiency by getting most of their deals done swiftly and efficiently. These deals are done predominantly at lower costs, and for doing this 500 Startups approach with the people and companies rather than pressing for a specific form of documents. It is done because they believe legal documents and forms should never be a hurdle while investing in a creative and innovative startup.

Conclusion:

Five hundred startups are not probably considered as direct competitors by most of the investors, as they do differ in their region of focus and at the same time invest in a lot of companies which enclose of similar consumer interaction and goals. But, 500 Startups always try to comply with the beliefs of startups they are going to invest and also at the same time they never do share or disclose any confidential information which might bring harm to their companies. They believe in the fact that benefits can easily outweigh the negatives of the startup. 

Yes, the reality of 500 Startups do lie in their investments in similar startups which include email communication, event management, kids and education, digital payment and many more, but still, they look for startups which provide them 5x more than what they invest on them later. 

As they invest in a lot number of companies, it is very strenuous to keep away from legal troubles. But because of their investment themes and focus areas, they do try to steer away from organizations which compete directly against each other in the same area of specialization at the same time. 

But if you considered the whole scenario, 500 Startups were created only to help and support the startups. They enclose of like mindsets who share the same with their customers and similar industry friends, which is better for all those who are involved. They always assure you that they give in return for the money and favor you bestowed on them.

Vineet Chaudhary
Vineet Chaudhary
Vineet Chaudhary is a content writer with computer applications as his background field. His interests range from writing and photography to going out for trips and rides on weekends.

Leave A Reply

Please enter your comment!
Please enter your name here