Christine Tsai is a Founding Partner at 500 Startups, a global venture capital fund and startup accelerator. She has invested in over 150 companies including ipsy, Sprig, Bombfell, and Storefront, and also oversees the Accelerator and Distribution Teams.
Prior to 500, Christine was in product marketing at Google and YouTube for many years. She worked on Developer Platforms and Google I/O, Google’s annual developer conference. She also worked on Google AdSense, Analytics and YouTube syndication. Before that, Christine held roles in international sales at OSIsoft and ChevronTexaco. Christine has a BA in Cognitive Science from the University of California at Berkeley. She is also a ballet dancer of 25 years.
Christine Tsai joined Startup Grind to share the story of 500 Startups as a startup, the companies they support.
Read our highlights below or watch the full video here.
The Venture Capital Corner is presented in partnership with Pivotal.
Karlie Kreiger, Startup Grind Global Events & Partnership Director: I think almost everyone in the room knows 500 Startups, but for anyone who doesn't can you tell us about the program?
500 is a venture capital fund investing primarily in pre-series A, mainly seed and pre-seed. We invest both directly into companies as part of a round, or through our accelerator - and that's probably what we're known for, all the companies that go through our accelerator.
We have about $200 million under management at this point. We've been around for 5 years with more than 1,200 investments over the 5 years. So that's a lot - and it's only going to grow bigger.
Our team is about 100 at this point, and that actually doubled just in this past year, with a mix of both full time and part time. And that's not all in Silicon Valley or even in the US - a lot of it is international. We're based in Mountain View and San Francisco, but we have people all around.
So the people who are "all around," what cities do they help 500 Startups focus on?
We have a lot of team members. We have a sizable presence in Southeast Asia, and even there they're actually spread out a bit. There are some folks in Malaysia, Kuala Lumpur, there are some in Singapore, in Thailand - et cetera.
We also have a lot of folks in Latin America. They may go back and forth, but specifically Mexico - and Brazil, one of our managing partners spends a lot of her time there. We've also set up a presence in Miami, still targeted at Latin America.
We have a few folks in East Asia, one in India, couple of folks in the Middle East, a couple of folks in London.
I'm missing a lots of countries, but we definitely have people in a lot of different parts of the world.
Can you tell us about the size of your current fund?
We actually have a number of different funds. People may have seen announcements we have made over the last few month about launching a fund in a certain markets. I think the most recent was our fund for the Nordic Region.
We have three main funds: the one that we recently closed was at $85 million.
How the structure works is, we have what we call Main Funds, which are the like the bigger flashy fund. The accelerator investments tend to come out of there, as well as general seed investments.
But we also have regional funds that are smaller, maybe between $10 to 15 million. They focus on a particular region and in some cases are vertical. We have one fund that is called the Mobile Collective that focuses purely on mobile investment, but there is a relationship between these smaller fund and the main fund.
Right now we are focused on raising Fund 4, but it's definitely non-stop.
How many companies are in your current portfolio? What batch are you on now?
So overall across all of the funds and the micro fund as well it is definitely exceeding twelve hundred and maybe actually more than that but it is definitely more than that. In the current fund right now or fund 3 which we just closed, I think it's definitely exceeded 600 so we invest in a lot of companies and I think with fund 4, we are anticipating it will, not actually drastically increase we are not going to go invest in 2000 companies or anything like that, but it will probably be like around 500 to 1000.
We're currently on Batch 15, which just kicked off in October, and we've already opened applications for 500 Startups Batch 16.
Tell us about Batch 15.
We run batches in both the Mountain View and San Francisco offices. The next batch, which kicks off in January, will be San Francisco.
In the meantime, Batch 15 is really interesting because it is our largest batch ever, with about 40 companies. Batch sizes have usually been around 30 or so. We're not trying to push the envelope a little bit, so we accepted about 40 companies. It definitely covers a wide range of verticals and business models.
We tend to have a preference for companies that have a very simple, clear way of making money - so through things like various transactions or a market places - but asides from that, there is certainly a lot of different directions companies are taking.
We also have a preference for companies that have tractions to show. We don't usually invest in pre-launch or even pre-product - that is way too early for us - but companies that have launched, have a product, and have several months of data are a great fit, because they are in a position to improve and figure out how to grow their business.
So, for some samples of companies from Batch 15 - Trivio is a very interesting business that helps you essentially pay your parking ticket - or penalty fees of any kind, really. It's usually a really annoying process on the consumer, because you get something in the mail, you lose it, and you get charged over and over - but it's also a huge loss for the city in terms of revenues from unpaid parking tickets. They've hacked a lot of things together to make it doable online. They're especially interesting because they actually bootstrapped their way this entire time. It has been going great for them for the last year or so, and they've join our program to take the business to the next level. The company is from New York City.
Another company in a very different space: helping with post-partum care for new mom, in terms of nursing, breastfeeding their newborn, and so on.
We also have a lot of SaaS companies, with a number of B2B companies. These are just a few that I thought of, but it's definitely very diverse in terms of business and revenue model.
With applications open, what are you looking for in 500 Startups Batch 16?
In Batch 16, our general investment criteria still applies: we like to see companies with a very clear business model and with some traction.
In terms of companies, the whole batch won't focus on a particular vertical, but one thing we're starting to introduce in Batch 16 of 500 Startups is having some type of "pocket of specialty." It won't be a different program, with some companies are cordoned off from the rest of the batch, but since we do want to encourage certain companies, we may bring in speakers or mentors targeted at that vertical.
For Batch 16, one of those examples is FinTech. We do have someone leading the charge on that particular specialty, but whether it's payments, mobile finance, insurance, banking - as long as it's FinTech, if you're doing something interesting in it, 500 Startups is something you might want to consider.
Backing up a bit, I want to talk about your background, and how you got here in the first place. You started off at Google and YouTube, right? What gave you the VC itch?
The itch started around 2004 or 2005, when I was thinking a lot and started reading various blogs. There weren't a ton of VC's that blogged back then. I think Fred Wilson was one of the only ones, and I definitely liked reading about his insights, his investment strategy, and how he was thinking about startups. He was probably one of the first VCs to be so open. I became very interested because I thought of venture capital as being able to work with very early stage businesses, and to help them build their product.
During my time at Google, I had a lot of interactions with startups - mostly from the vantage point of helping them using our product - and it was very fascinating. I didn't even think about the investment side of things, which it is something that is a big strategy for us in terms of who we hire.
Through the context of startups, I met Dave McClure, my business partner at 500 Startups, while I was at YouTube. We were both working with a startup, and kept in touch. In 2010, I decided I was ready to leave Google, but I didn't really know what I was going to do. I had thought of venture capital as something down the road - not now.
Dave was one of the folks I met up with to get advice and thoughts on what I should do. The timing worked out really well because he was starting to think about raising a fund, and the early structure of 500 - super, super early. One thing lead to another. We had a lot of conversations and then a few weeks later I put my notice in, and jumped into what is now 500 Startups as soon as I left. I definitely did not know that 500 was going to be where is is now, but it has been a very interesting experience in terms of funding startups as well as being a startup ourselves.
What's it like working with Dave?
We are very, very different in many, many ways - in terms of how we operate and our skill sets - but in other ways, we've very similar. You know, jokingly - like, our sense of humor - is probably pretty similar, as I'm actually pretty low brow in terms of my humor, so it works out great. We don't offend each other, and it's actually very complimentary.
I tend to be trying to make things organize and bring in structure, and figure out how we make things scalable. I want to make sure the team is optimized to run efficiently. David agrees with it, but it's not necessarily his strong suit - nor is it even mine. Neither of us have run a fund of this size, or one at all, so it's a very new thing for us. Neither of us have run a company of this size, either, so I'm sure many of the founders are out there going through same thing. You learn as you go, like making the parachute as you're falling out of the plane. It hasn't been an easy five years, but I think that we definitely balance each other well.
When we talk to investors or accelerator partners like yourself, the number one question is always about fit and admission. So, who is 500 Startups for, and how do we get into 500 Startups? What are your mission, your values, your expertise?
If you're already considering taking outside capital, and are thinking through what you want for the business and what would help you get there, joining an accelerator should be something you consider from the perspective of "How will this help my business?" In that case, 500 Startups may or may not be a fit.
But I can tell you what we can really help with is growth. We have our own term for it - we call it distribution, and shorten it to distro. But essentially, we focus on growth marketing, how do you grow your business, how do you track all that very religiously and routinely engage your user. So that is a big focus for us in the accelerator and the fund as a whole: helping companies grow. If that's where you need help as a company, we may be a good fit.
The other areas certainly include fundraising and getting access to a strong network. Our network is very strong, and not just in Silicon Valley. It's a global network: we have 12 000 companies, we have 200 or 300 mentors - I can promise if there is anyone you want to get connected with, in almost any region, we're probably one degree removed just based on the sheer size of our network.
Last, the other thing to think about is, what are the terms of the investment that the accelerator offers? What is the commitment? There are some accelerator that are super hands off - maybe you don't necessarily get access to the staff or the network as much. Then there are some accelerators that are super hands on, much smaller and intimate, potentially to the point where they might try to help you run your company - which you may or may not want. We are sort of in the middle: we offer a lot of resources every week during the 4 month program, with one interaction every week with the 500 Startups staff and with our Growth Team, but nothing is forced on the company. Some companies take advantage of it more than other,s and some I don't see in the office too often, while others have to travel back and forth a lot for whatever reason.
If you know you want your company to grow, you want that hands on help and resources, you want help with fundraising, and you want to be part of the #500Strong culture, then we could be a good fit.
So given all the mentors, resources, and relationships, what are you specifically doing for the companies?
There's a lot of mentorship in the accelerator from our staff. In the early days, we were more hands off, thinking companies would come by our desks if they needed help. With feedback, we started doing a "point of contact" model, almost like a coach or advisor you are with every week, and that has been very successful in terms of companies actually getting guidance in fundraising and all the random things that come up with running a company - plus growth.
We do a lot of talks every week with speakers on a both tactical and high level. We try to keep it focused on growth or fundraising, so we don't become a distraction.
The mentor network, beyond us, includes a lot of people who have experience running companies and very specific domain or functions. Obviously, they are all volunteers, but they will come during office hours, during pitch prep, and advise founders on presentation styles.
Though they aren't formal 500 Startup mentors, we do a lot in terms of trying to bring in investors and venture capitalists to your office hour. Sometimes if helps the companies practice their pitch, but there is another side to it in terms of the VC getting exposure to our companies early, and vice versa.
I'd also add something else that makes you guys stand out: how awesomely diverse you guys are, both in terms of team and portfolio. And tips for founders trying to build the same kind of culture?
Define if it's core to your culture or not from day one. If it is, do it intentionally from day one, as it just gets harder as a company grows. Make sure you don't run into problems like, after getting to several hundred people, you look around and you realize there's no one of color, or few women. I think it is good for companies not to just think about it and say that diversity is important, but actually do something to make that happen. Some common cop-outs include, "Oh, well, you know, no women, or people of color, or LGBT folks apply to jobs here." There's probably a reason why they aren't, and a lot of it means being proactive.
Your business will operate a lot better if you have these different perspective and connect with people, in different demographic or even geography. Think broadly: even age is another aspect of diversity. I think looking at not just the candidate but also he or she affects company culture is important.
So what are you guys doing to find deals?
We do get a lot of deals from our network. Not just our own portfolio of founders, who refer other founders and mentors, but also people that we invest with - our limited partners.
We are also very active on recruiting especially for the accelerators. We try to go out to events and meet ups all around different geographies, and actively ask for companies from people who see a lot of great talent. We also have an application process. Companies apply on Angels List.
The first batch was very different. There was like 12 companies, and we had to beg them to be in our batch. They had no idea who we were in 2010 or 2011. The first couple of batches were definitely all referrals - we didn't even do an application. Later, as the program grew bigger, we realized referrals are very valid, but we wanted to open it up to more people who don't have that Silicon Valley access.
What are the top three characteristics you look for in founders as you look to make an investment?
One is definitely that they are very passionate about what they are building. I should be able to tell in the meetings or the interviews that they are very passionate about making this like their life for the next 10 years - that they are not going to give up after a year because it's not interesting. I look for a sense that they are really committed to this business - and not just the business, but this industry, and being successful.
The second is an interesting point: that they are coachable. A lot of people think that great founders are assholes and they are super stubborn because they know they're right. There's some elements of that. But we've actually found in the last several batches the companies that end up actually doing the best and having the most longevity both in terms of their business as well as fundraising and growing a company - those founders are actually the ones that were most coachable. The ones that were the most stubborn actually went the other way and either their company tanked or they just didn't do as well. But I think coachable doesn't mean that you just do whatever people tell you, it means that you are open to feedback especially when it is coming from a valid source - like the 500 point of contact, who has worked with lots of companies and has seen what has worked and what hasn't. So that they take that feedback into account, they try things they are constantly wanting to testing especially when it comes to growth.
The third is also how focused they are on growth and distribution. On one hand some companies will come to us and they really are just a huge mess when it comes to knowing their metrics. They don't even have analytics set up. So in some sense we do help them with that. But founders who already have a good sense of their metrics, know what works and what doesn't work even if it's a little bit rough, that they have at least been testing that actively - that's also something we look for.