10 challenges for emerging market startup ecosystems (cairo)
Post on 11-Apr-2017
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1 0 C H A L L E N G E S F O R E M E R G I N G M A R K E T
S TA RT U P E C O S Y S T E M S
@ D A V E M C C L U R E @ 5 0 0 S TA R T U P S 5 0 0 . C O
Dave McClureFounding Partner & Troublemaker, 500 Startups
00’s & 10’s: • VC: Founders Fund, Facebook fbFund, 500 Startups • Angel: Mashery, Mint.com, SlideShare, Twilio • Marketing: PayPal, Simply Hired, Mint.com, O’Reilly
80’s & 90’s: • Entrepreneur: Aslan Computing (acq’d by Servinet/Panurgy) • Developer: Windows / SQL DB consultant (Intel, MSFT) • Engineer: Johns Hopkins‘88, BS Eng / Applied Math
• What is 500? – $200M under management – 100+ people / 30 investing partners / 18 Countries – 2500+ Founders / 250+ Mentors
• 1300+ Portfolio Co’s / 50+ Countries – Wildfire (acq GOOG, $350M) – MakerBot (acq SSYS, $400M) – Viki (acq Rakuten, $200M) – Simple (acq BBVA, $117M) – Credit Karma (~$3.5B) – GrabTaxi ($1B+) – Twilio ($1B+) – Ipsy – SendGrid – VivaReal – Udemy – Zozi – The RealReal – Virool – BarkBox – Tradesy – Wuzzuf :)
500 Startups Global Seed Fund & Startup Accelerator
1 ) T H E R E A R E N ’ T M A N Y I N V E S T O R S . M O S T O F T H E M A R E E V I L O R S T U P I D .
• low valuations and crappy terms: “51% for $100K”
• supply vs. demand problem; fewer investors than startups, lack of competition = no urgency,
• NO to business plans / revenue projections
• YES to mktg plans, expense projections
• wins & exits => FOMO, competition increases
2 ) T H E R E A R E N ’ T M A N Y E N T R E P R E N E U R S . M O S T O F T H E M A R E C L U E L E S S .
• more mentorship, more founder experience
• product management, design & UX, growth hacking & marketing
• changes after 1st gen founders exit -> 2nd gen startups
3 ) T H E R E A R E N ’ T M A N Y C U S T O M E R S . M O S T O F T H E M D O N ’ T PAY.
• no longer true; 3B+ smart phones; massive mobile market
• increasing internet availability + rising consumer GDP
• improved payment & logistics
• local/regional markets are BIG
• access to global markets easier
4 ) S TA RT U P S D O N ’ T H AV E T R A C T I O N , A N D N O I D E A H O W T O G E T I T.
• Growth Hackers -> DISTRO
• STOP building product features; START growing customers (via online platforms)
• unit economics: CAC vs. CLV, timing of revenue & expense, conversion metrics
• find profitable, high-volume customer acquisition channels that convert to KPIs, learn how to grow them
5 ) T H E R E A R E N ’ T M A N Y E X I T S . M O S T O F T H E M A R E S M A L L .• where are the unicorns?
• acquirers crossing borders to find talent (US, EU, China, Japan, etc)
• non-tech companies acquiring startups for innovation
• global companies looking for emerging market footprint
• local -> regional -> global growth
6 ) I N V E S T I N G I N R E A L E S TAT E I S B E T T E R B E T T H A N I N V E S T I N G I N S TA RT U P S• startups aren’t real estate!
• real estate doesn’t go up forever
• most startups fail completely
• but a few startups grow up to be unicorns
• use real estate to lower risk, drive liquidity
7 ) M O S T A C C E L E R AT O R S S U C K . A N D T H E Y ’ R E G O I N G T O D I E . S O O N .
• Accelerator economics are tough.
• Most startups fail. Most wins are small. Big wins take time (5-10 years).
• Most accelerators are under-staffed, under-capitalized, short time horizons.
• Accelerators should verticalize, focus on industry-specific expertise, get corporate / academic / govt sponsors
• Create operational capital via investment; use real estate to hedge risk, be creative
8 ) E M P L O Y E E S D O N ’ T U N D E R S TA N D E Q U I T Y. F O U N D E R S D O N ’ T G I V E I T T O T H E M .
• equity should be distributed widely among team (not just founders and management)
• when exits happen, a thousand angels are born
• US: PayPal, Google, Facebook
• CHINA: Alibaba, TenCent, Baidu
• MENA: Souq + ?
• create equity culture, angel investor culture
9 ) M O S T S TA RT U P S N E V E R G O G L O B A L . M O S T T H AT T RY W I L L FA I L .
• startups have to start SOMEwhere
• some local & regional markets are BIG India, Turkey, Brazil, Indonesia, MENA
• 50-100M customers good place to start
• hard to jump to global markets without local market MVP, product/market fit
• you don’t need to go to Silicon Valley, get Silicon Valley to come to YOU.
1 0 ) M O S T F O U N D E R S & I N V E S T O R S D O N ’ T T H I N K T H E Y ’ R E A S G O O D A S S I L I C O N VA L L E Y.
• Silicon Valley isn’t a place, it’s a State of Mind.
• Most startups in Silicon Valley came from somewhere else (PayPal, WhatsApp, FreshBooks)
• The biggest problem isn’t lack of experience, it’s lack of confidence (for both investors & founders)
• You’re Good enough. You’re Smart enough. Get Going!
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