Startups: Go LOCAL or GLOBAL?

(Do BOTH!)

@DaveMcClure @500Startups #startupgrindMountain View, CA (Feb 2014)

This Talk Is About…• 500 Startups

– Internet Seed Fund + Accelerator + >100 Intl Startups

• Assessing Global Markets– (# users, by language/geo) * (avg $ GDP) * (% internet) = avail online spend by

lang/geo

• Why You Shouldn’t Go Global– You’re a Crappy Little Startup with no customers, revenue, or funding– You Don’t Speak the Language (not very well, anyway)– Your local market is >50M+ users, and nobody else is going after it

• Why You Should Go Global – You Live in a Small Country / Startup Ghetto– There aren’t any local market investors worth a famn.– There ARE local market investors, but they might be predatory, too revenue-

focused, risk-averse– Your customers and partners are in [X] (where X = California, NYC, London, Beijing,

Brazil, etc

Dave McClureFounding Partner & Sith Lord, 500 Startups

00’s & 10’s:• Investor: Founders Fund, Facebook fbFund, 500 Startups• Companies: Mint.com, SlideShare, Twilio, WildFire, SendGrid• Marketing: PayPal, Simply Hired, Mint.com, O’Reilly

80’s & 90’s:• Entrepreneur: Founder/CEO Aslan Computing (acq’d)• Developer: Windows / SQL DB consultant (Intel, MSFT)• Engineer: Johns Hopkins‘88, BS Eng / Applied Math

500 StartupsMountain View, CA – Founded 2010

• Seed Fund & Startup Accelerator– $90M under management– ~30 people / 12 investing partners– 10,000 sq ft / Silicon Va– SV, SF, NY, MEX, BRZ, IND, CH, SEA– 1000+ Founders / 200+ Mentors– Focus: Design, Data, Distribution

• 650+ Co’s / 200 Intl / 40+ Countries– Wildfire (acq GOOG, $350M)– MakerBot (acq SSYS, $400M)– Viki (acq Rakuten, $200M)– Twilio– SendGrid– other shit

GeeksOnaPlane.com (my excuse for an Intl road trip w/ geeky

friends)• Travel The World with Geeks & VCs• Meet MORE Geeks & VCs in other countries• Learn about Intl markets, technology,

people• Get drunk & eat great food with friends

who don’t speak your language ☺

• East Asia (3x), Europe (2x), LatAm (2x), India

• Next: Middle East, India, SE Asia, Africa

Global Languages

• English: 1-2B+ 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, 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 (700M+): 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

Distribution PlatformsCustomer Reach: 100M+

• Search: Google (also Baidu, Yandex, Yahoo-J)

• Social: Facebook, Twitter (also TenCent, Sina, vKontakte)

• Mobile: Apple (iPhone, iPad), Android

• Media: YouTube (Video), Blogs, Photos, Music

• Comm: Email, IM/Chat, SMS, Voice

Why You SHOULD NOTGo Global

because ur a tiny little startup, you don’t speak the language,

& your local market is big enough

Why Stay Local? Because it’s HOME.

• You don’t speak English (well enough).• Your solution won’t travel well / you won’t localize it

well.• There’s not as many people competing locally.• Your local market has 50M+ users.• You have customers / revenue.• You have great living situation, family, kids, etc

Why You SHOULDGo Global

Because u live in a tiny little country, local investors are too conservative,

don’t write[enough] checks and/or give u crappy, low valuations.

Why Go Global / US / China?(because California is *awesome*)

• It’s BIG. (US, China are huge markets)• All the [rich, online] customers are here.• All the investors are here (Silicon Valley)

– also: Local Investors Screw You / Don’t Invest / Low Val$

• All the platforms & partners are here (Silicon Valley).– NorCal: Google, Facebook, Twitter, Apple, Android, YouTube

• Because you watch too many action movies and rap videos.

• Because you love California / NYC. (hey, we understand ☺)

Angel* List: It Rocks.(angel.co)

• Startups & Investors• Activity & Metrics• Platform & APIs

• *ps – not just for Angels,not just for USA

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” (def’n: “can create a $10M rev/yr business”)• 1% x 7B ppl = 70M entrepreneurs, each of which starts 1-5 businesses lifetime• 1-5 startups / 75 yrs avg life = (~1 startup/25 yrs) * 70M = ~3M startups per year

How much capital is needed globally to get seed stage startups rolling?• Assume 1M-3M startups/yr x $50K-$500K funding/each• Low: 1M x $50K = $50B/yr (*this is the LOW end estimate)• High: 3M x $500K = $1.5T/yr (that’s “T” as in “Trillion”…)

How many metros? How many investors / metro? How many startups / metro?• 1 microVC can do 10-20 startups/yr * $50K-$500K = $500K-$10M/yr budget• 100-500 global metros @ >1-2M ppl can generate ~500-2,000 startups / metro / yr• guesstimate = ~100K-200K startups/yr in top 200 global metros• 10-50 micro VCs / metro * 200 metros = 2,000-10,000 microVCs globally• EST: 5,000 microVCs can deploy $5M/yr each, or $50B/yr in ~100,000 startups

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