500 Startups: Scaling Early-Stage Investing

500 Startups: Scaling Early-Stage Investing

By
Robert Siegel, Yin Li
2014|Case No.E528| Length 31 pgs.

This case focuses on the investment strategy employed by 500 Startups, an early-stage investment firm founded by Dave McClure. McClure, an outspoken personality in Silicon Valley, believes that the venture capital industry is not innovating quickly enough to adapt to large-scale changes. The cost of starting a company has plummeted over time, enabling investors to write smaller and smaller checks. The exit options for companies have expanded, allowing investors to realize returns earlier than in the past, though typically at lower valuations. Major customer acquisition platforms are enabling startups to disrupt traditional businesses. Finally, opportunities for investment abound overseas in rapidly growing emerging markets, in McClure’s opinion. Though not everyone in Silicon Valley agrees with all of McClure ideas, he seeks to scale 500 Startups into the first “guild-based” international venture capital firm.

Also see E528B: 500 Startups (B): Expanding the Footprint in 2016.

Learning Objective
Understanding major trends in startups and venture capital.Contrasting 500 Startups’ investment strategy with that of more traditional venture capital funds.Identifying key risks to scaling 500 Startups.Discussing how an entrepreneur’s personality can help or hinder achieving their vision.
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