In two and a half years, 500 Startups has invested in over 425 companies in 20 countries. India is one of the largest regions in which the venture firm is interested in now. Paul Singh, of 500 Startups spoke at the 6th Edition of UnPluggd held last month. For those who missed the talk, we bring you the video.
Early stage startups have already changed.
- Startup costs are lower than ever. The cost to scale the company is rising though. Once you hit the product market fit, the costs are higher because the acquisition channels are saturated.
- As the web gets bigger, the world is getting smaller. Raising money from investors have become tougher as more and more entrepreneurs come up in different parts of the world. Internet penetration gets you more potential users but also gives investors more companies to invest in. Its no longer good enough to be the best in your neighbourhood, you need to be the best in the world.
- For most tech startups is traction is almost the only intellectual property that matters.
- Transparency is driving the change. On Angellist, Quora, Linkedin etc, there are many different data points available to investors. Money is increasingly data driven and that’s why you should focus on traction.
Venture Capital Industry is Changing
- Early stage investing used to be very fuzzy. That’s changing. There is an unbundling of advice, control and money.
- Differentiation in venture capital is now about the access to the deal. We all want to invest in the best company. But the best companies will be able to generate a market. Paradox is that the best companies don’t need me.
- Increasingly, VC industry is switching to a checklist based format. You need to be solving a problem, be capital efficient, have a primarily Internet based distribution model, functional prototype, and a good cross functional team.
- Early stage financing is changing with more standardized terms. We are seeing more deals that have no fixed amounts or closings. They are turning into convertible notes.
If you want to raise more money, focus on traction, learn to communicate and inspire. Pick your words carefully.
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