Christine Tsai is convinced that one of the biggest reasons startups fail is because they don't focus enough on distribution and acquiring customers.
"Our accelerator is a great fit for a company that has launched and has paying customers, but is need of distribution and growth" said the 500 Startups Managing Partner at Startup Grind Global Conference. "We have a team in-house focused on growth and retention" she explains, "we've even coined our own term for it - Distro."
The 500 Startups portfolio has done a strong job of distribution, in its own right: with 1300 investments in 40 countries, and adding 40-50 new startups into the premiere 500 Startups accelerator program about 4 times a year, the fund is one of the most diversified early-stage investment houses in Silicon Valley. Together, founding partners Christine Tsai and Dave McClure have been working with startups most of their careers, and kicked off a startup of their own - namely, 500 Startups - in 2010.
The Next Step After Product Is...
Tsai cites the number one killer of startups after building the wrong thing as not knowing how to sell it. Too many founders don't realize the importance of acquiring and retaining customers as part of a company's success, says Tsai. "They think that a good product will just attract customers," she says "but it turns out that you have to go out and get them. And that's actually really hard work."
That's why, when asked what differentiates 500 Startups from other accelerators, the first thing she mentions is the strong in-house resources for growth and distribution. In an ecosystem where accelerators rarely do much to help portfolio companies beyond throwing around product feature ideas, 500 offers a critical service by assisting a company's growth stage with resources that make all the difference.
500 Startups: Global Network & Scaling Expertise
Look at the 500 Startups Partner list and you'll see another of the fund's strengths: a vast global network. With presence in over 25 countries, "we're only a couple degrees removed from any given company" Christine proudly declares. She notes that a couple years ago, their international presence was seen as a reason to see 500 Startups as a tier 2 accelerator. "We invest in volume, not concentrated bids" she says, and part of this broader investment philosophy includes not limiting investment to one specific location.
And by all accounts, this strategy seems to have paid off. Christine uses the example of 500 Startups' portfolio company GrabTaxi, the "Uber of Southeast Asia", as an example of this. "They're basically a Unicorn in Southeast Asia" she declares.
Not only does 500 Startups have a global network to leverage for the benefit of their accelerator companies, but with the sheer volume of investments they have also acquired a great deal of expertise on how companies should approach fundraising strategically. The advice 500 gives their startups is granular down to the level of where and when to meet investors for coffee and what to say.
How to Get Into 500 Startups
Christine admits that for the first few batches, it was hard for her to tell whether or not 500 Startup's accelerator companies were doing any better than their seed investments. But after some time it became apparent that the accelerator was having a measurable impact.
So, what do you have to do to get in?
1. Have at least one technical founder or full-time technical person. Not having a technical side to the team will make it tough to get in, say Christine.
2. Have a minimum viable product and paying customers. Companies not yet at this stage should focus on gaining traction before applying.
3. Diversity is a plus. Christine says diversity is something 500 Startups is passionate about, in at least two senses of the word. First, "we like to invest in things that aren't sexy or trendy, but solve real problems" and that no one else is looking at, says Christine. So having a unique or unorthodox product idea is likely to be a big help in getting you in. And second "we're passionate about diversity" when it comes to founders who don't fit the typical demographic mold of startup entrepreneurs.
It's clear given some of 500 Startups' successful portfolio companies, including startups like Ipsy, Sprig, and Homejoy, that Christine and her team are doing something right. With their expanding global network and ballooning investments, their future prospects look even more exciting than their past successes.