Startups: Go Local or Go Global? (ArabNet Dubai, June 2014)

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slides from my talk on "Startups Going Global" at ArabNet Dubai (June 2014)

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  • Startups: Go LOCAL or Go GLOBAL? @DaveMcClure @500Startups #ArabNet Dubai, UAE (June 2014)
  • This Talk Is About 500 Startups Internet Seed Fund + Accelerator + >200 Intl Startups Assessing Global Markets (# users, by language/geo) * (avg $ GDP) * (% internet) = online spend by lang/geo growth of factors above ! ! Why You Shouldnt Go Global Youre a Crappy Little Startup with no customers, revenue, or funding You Dont Speak the Language (not very well, anyway) Your local market is >50-100M+ users, and nobody else is going after it Why You Should Go Global You Live in a Small Country / Startup Ghetto There arent [m]any local investors / they give you crappy valuations. There ARE local investors, but they are predatory, too revenue-focused, risk-averse Your customers and partners are in [X] (where X = USA, EU, China, Saudi, etc)
  • 3 Dave McClure Founding Partner & Chief Troublemaker, 500 Startups 00s & 10s: VC: Founders Fund, Facebook fbFund, 500 Startups Angel: Mashery, Mint.com, SlideShare, Twilio, Wildfire, SendGrid Marketing: PayPal, Simply Hired, Mint.com, OReilly ! ! 80s & 90s: Entrepreneur: Aslan Computing (acqd by Servinet/Panurgy) Developer: Windows / SQL DB consultant (Intel, MSFT) Engineer: Johns Hopkins88, BS Eng / Applied Math
  • 4 500 Startups Global Seed Fund & Startup Accelerator What is 500?! $100M silicon valley VC fund + startup accelerator! 30+ people / 10 investing partners! Locations: SV, NYC, MEX, BRZ, IND, CHN, SE Asia! 1500+ Founders / 200+ Mentors! Community + Content + Conferences! ! 750+ Portfolio Cos / 40+ Countries! Wildfire (acq GOOG, $350M)! MakerBot (acq SSYS, $400M)! Viki (acq Rakuten, $200M) Simple (acq BBVA, $117M) Twilio SendGrid ! Credit Karma Udemy
  • 5 500 Startups: Global Seed Fund Over 200+ startups outside US, in 40+ countries
  • 6 Silicon Valley Investor Ecosystem ! !Angels & Incubators ($0-10M) ! Micro-VC Funds ($10-100M) Big VC Funds ($100-500M) Mega VC Funds (>$500M) TrueFirst Round A16ZAtomico Y-Combinator TechStars SoftTech (Clavier) Felicis (Senkut) SV Angel (Conway) SequoiaGreylock Union Square Floodgate (Maples) Foundry Incubation Seed Series A Series B Series C+ Bootstrap, KickStarter, Crowdfunding
  • GeeksOnaPlane.com (my International road trip w/ geeky friends :) Travel The World with Startups, Geeks, VCs Meet MORE Startups, Geeks, VCs in other countries Learn about Intl markets, technology, people Socialize with friends all over the world ! 2009-2014: East Asia (3x), Europe (2x), LatAm (2x), India (2x), MENA (2X)
  • 8 Local vs Global? Emerging / Developing Markets! Global Languages: English, Chinese, Spanish, Arabic Critical Factors: Education, Mentorship, Capital Capital Availability: Incubation, Seed, Series A Positive Macro: SmartPhones, Tablets, Payments, Logistics, Growing Middle Class, Distribution Platforms Wealthy Global Users, Shoppers, Travelers
  • Global Languages English: 1-3B+ ppl, most online, high GDP, modest growth Mandarin: 1B+ ppl, lots online, med GDP, flat growth Spanish: 500M+ ppl, some online, med GDP, strong growth Arabic: 500M+ ppl, some online, low/med GDP, strong growth ! Others: Hindi, Portuguese, French, German, Japanese, Russian, Korean, Turkish, Farsi, Urdu, etc
  • Global Markets US/Can/UK/AU (400M+): big market, not much growth but lots of spend Europe (400-500M): not much growth, many lang, high GDP China / E. Asia (1B+): lots of ppl, growing usage / GDP, flat growth (pop.) LatAm (500M+): Brazil, Mexico, Argentina, Colombia, Chile; LOTS growth India/Pak/South Asia (1.5B+): lots of ppl, growing mobile, strong growth SE Asia (600M+): Indonesia, Vietnam, Thailand, Philippines; strong growth Middle East / Arabic (500M+): growing mobile, lots of future growth Africa (900M+): growing infrastructure, lots of future growth
  • How to Assess Global Markets 1) # of ppl / language speakers by geography 2) % internet usage (web, mobile, smartphone, etc) 3) $ Avg GDP / $ online spend / disposable income Online spend / lang, geo = (#ppl) * (%internet) * ($GDP) % Growth rates of ppl, lang, internet, GDP ! Currency, country, culture, etc Online disturb platforms (search, social, mobile, video, etc) Online payment methods / credit card distr Physical goods delivery / logistics Social media usage / behavior 3 markets in 1: rich, middle-class, internet poor
  • 12 Platforms 2.0 Search, Social, Mobile, Video, Messaging Customer Reach: 100M-1B+ ! Search: Google (also Baidu, Yandex, Yahoo-J) ! Social: Facebook, Twitter (also TenCent, Line) ! Mobile: Apple (iOS), Android ! Media: Video (YouTube), Photos (Pinterest, Instagram), Music ! Comm: Email, WeChat/WhatsApp/Line/Kakao, SMS, Voice !
  • Why You SHOULD NOT Go Global youre a tiny little startup, you dont speak the language, your local market is big [enough]
  • Why Stay Local? (Because its HOME) You dont speak English (well enough). Your solution doesnt travel well / you wont/cant localize it well. Theres not as many startups competing for your local market. Your local market has 50-100M+ users (ex: Japan, Germanu, Brazil) Your local market customers are REALLY RICH (ex: Saudi, Qatar) You have customers / revenue. You have a great living situation, family, kids, etc
  • Why You SHOULD Go Global you live in a small country, local investors are too conservative, dont write [enough] checks give u crappy, low valuations. ! or, you just love California :)
  • Why Go Global? (because California is *awesome*) Its BIG. (US, EU, China are huge markets also Saudi) All the [rich, online] customers are here. All the investors are here (Silicon Valley) All the platforms & partners are here (Silicon Valley). ! Because you watch too many action movies and rap videos. Because you love California / NYC. (we understand ) You really love Kim Kardashian, Jay-Z, JT, Beyonce, etc.
  • Angel* List: It Rocks. (angel.co) Startups & Investors Activity & Metrics Platform & APIs ! *ps not just for Angels, not just for USA
  • Critical Ecosystem Factors Optimism & Belief (Silicon Valley) Mentorship + Education (Knowledge) Universities + Companies (People) Capital, Legal, Finance (Infrastructure) Engineering + Design / UX (Product) Platforms + Distribution (Customers) Online Payments (Monetization) IPO / M&A Market (Exits) 18
  • Example Startup Ecosystem 1,000 Bootstrap Startups ($0-10K) 300 Accelerator Startups ($10-100K) 100 Seed-Stage Startups ($100K-$1M) 30 Series A/B Startups ($1-10M) 10 Later-Stage Companies ($10-100M) 1-3 Mature Company IPOs ($100M+) 19
  • Entrepreneur Education Business Plans Functional Prototypes Lean Startup Software Engineering / Design & UX Online Marketing / Unit Economics Monetization & Payments Customer Service + Support Fundraising & Pitch 20
  • Investor Education Startups are NOT Real Estate Most Startups Fail / Power Law Returns Portfolio Approach (10-20+ investments) Legal Structure, Financial Structure Syndication + Co-Investment Access to Downstream Capital Exits & Liquidity 21
  • How Big is MicroVC / Seed Stage Market? 5,000 microVCs invest 100,000 startups/yr @ $500K/startup = $50B/yr How many people are entrepreneurs? How many startups get started every year? ~1% of Humanity is Entrepreneurial (defn: can create a $10M rev/yr business) 1% x 7B ppl = 70M entrepreneurs, each of which starts 1-5 businesses lifetime entrepreneurs can create 1-5M new startup businesses every year ! How much capital is needed globally to get seed stage startups rolling? Assume 1M-5M startups/yr x $50K-$1M funding/each Low: 1M x $50K = $50B/yr High: 5M x $1M = $5T/yr ! How many metros? How many investors / metro? How many startups / metro? 1 microVC can fund 10-20 startups/yr * $50K-$1M = $1M-$10M annual budget 500+ global metros @ 1M+ ppl can generate ~100-1,000 startups / year guesstimate = min ~100K+ startups/yr across top 100-200 global metros 5-50 VCs / metro * 200 metros = 1,000-10,000 VCs globally FUTURE: 5,000 VCs deploy $10M->20 startups = $50B/yr -> 100,000 startups 15
  • Questions? Comments? More Info? http://500.co (our company) http://500hats.com (my blog) https://angel.co/500startups (our fund) Dave McClure, @DaveMcClure