Published by San Francisco Chronicle
It’s Thursday night in the heart of Miami’s financial district. At Novecento, a buzzing bistro, salsa and flamenco music blast while waitresses circulate Malbec and mojitos. Businessmen in fitted European suits survey the scene.
In walks angel investor Dave McClure, fresh off a flight from San Francisco. People rush to shake his hand as he makes his way into a private room packed with bankers, programmers and executives.
After a welcome from the mayor of Miami-Dade County, McClure, clad in jeans and a wrinkled blazer over a faded red T-shirt, takes the podium to talk about his impending tour of South America. Foreigners, he tells the audience, like to complain about their countries’ lack of Silicon Valley-like entrepreneurship.
“Bull-!” thunders McClure. “You’re the one that’s full of s-! You’re the one not investing in your entrepreneurs.”
“Right on!” yells a guy in the back of the room.
So began the latest installment of the 3-year-old traveling venture capital show McClure calls Geeks on a Plane. After dinner and a night of partying in South Beach, the 50-person delegation, which includes entrepreneurs, techies, attorneys and investors, flew to Mexico City, Sao Paulo, and Buenos Aires for 10 days of mixers, lectures and a competition to find Argentina’s best hacker. Along the way, McClure hoped to discover a startup or two to invest in.
30 cities in 3 years
Over the past three years, the Geeks have visited 30 cities, including New Delhi, Shanghai, Amsterdam, Prague and Honolulu. McClure “is becoming an entrepreneurship rock star in countries like Brazil and India,” said Vivek Wadhwa, a former software developer who has lectured at Duke University. Over the next 18 months, they will descend on Tallinn, Estonia; Berlin; Moscow; Dubai; Istanbul; Tel Aviv; and Amman, Jordan, as well as cities in sub-Saharan Africa.
“We’re one of the few VC firms to get outside a 30-mile radius of Sand Hill Road,” said McClure.
The tour is an offshoot of McClure’s Mountain View fund 500 Startups, whose letterhead lists the 45-year-old as its Sith Lord. The fund provides early-stage startups – those just trying to figure out how to convert an idea into an enterprise – with $10,000 to $250,000, along with hand-holding from its global network of 175 mentors, including tech executives, venture capitalists and intellectual-property experts.
McClure gets paid as a general partner and collects a cut of the fund’s profits. He would not disclose the fund’s returns. Punchd and TeachStreet, which were acquired by Google and Amazon.com, respectively, are among 500 Startups’ winning investments.
The fund has invested in 300 companies, including Farmeron, a Croatian startup that makes software to help farmers organize data on their livestock, and Mexico’s Ovia, which lets companies set up video interviews of job candidates. Both got the chance to operate out of 500 Startups’ 10,000-square-foot Silicon Valley work space, where they learned from other companies in residence.
“Working with Dave gets you both generosity and adventure,” said Demian Bellumio, chief operating officer of Senzari, an online radio service that received $1 million in May from a group of funds led by 500 Startups. “It’s like joining a global family of mentors, with relationships you keep building as you grow.”
In April, McClure filed with the Securities and Exchange Commission for a second fund, the $50 million 500 Startups Fund II, to follow the original $30 million fund started in 2009.
“Dave gets it,” said Steve Blank, a professor of engineering at Stanford University, explaining why he invests in 500 Startups. Blank says McClure has a knack for finding and nurturing companies that are too small to command attention from traditional VCs.
Seeding numerous small investments around the world makes sense, McClure says, because at least 75 percent of tech startups don’t survive longer than three years.
“Some folks will call this ‘spray and pray,’ ” he said. “But we call it going global, and not wasting money at failing. Fail on a small budget and you save a lot of money and heartbreak.”
He says the recent shift toward cloud computing, which eliminates the need to buy a lot of expensive computer hardware, has helped drop the cost of creating a tech startup by a factor of 100.
Wadhwa says that while McClure has the right approach, he may be spreading himself too thin.
“In some of the places he is investing, the ecosystem for entrepreneurial support and success doesn’t exist,” says Wadhwa. “What is needed is more mentorship and hand-holding. Dave can’t possibly provide this to the large number of startups he is investing in.”