Does 500 Startups invest in startup founders at the idea stage?
I.e., they don't have a product built yet?
4 Answers
Views • Upvoted by Dave McClure, Founding Partner, 500 Startups and Pankaj Jain
Most Viewed Writer in 500 Startups
The rare occasions where we've invested in a pre-product company is when we knew the founders really well and they had a stellar track record. (ex. had successfully built/run/sold companies, etc).
Regarding the accelerator specifically - what was once thought of as a program for companies that were "early" is now much broader than that. In the last couple batches, the bar has definitely increased. Many of the companies were already generating meaningful revenue, and some were even further along w/ millions of users or downloads. We also have a good number of companies that join who've already raised >= $500K in funding. So nowadays, it isn't as likely that we'll accept a pre-product company into the accelerator.
Regarding the accelerator specifically - what was once thought of as a program for companies that were "early" is now much broader than that. In the last couple batches, the bar has definitely increased. Many of the companies were already generating meaningful revenue, and some were even further along w/ millions of users or downloads. We also have a good number of companies that join who've already raised >= $500K in funding. So nowadays, it isn't as likely that we'll accept a pre-product company into the accelerator.
Views • Upvoted by Dave McClure, Founding Partner, 500 Startups and Shai Goldman, Venture Partner at 500 Startups
Most Viewed Writer in 500 Startups
Generally, we prefer to invest in companies that, at the very least, have a prototype with some users and usage. The users and usage numbers vary widely but we would like to see that there is some thought going to user acquisition and user engagement. Having a clear revenue model (even if not implemented yet) also is very important.
For example, the accelerator has had companies with millions of downloads and a few hundred thousand weekly active users, another e-commerce company was shipping just a few orders per day and another company that was already doing over $200k in revenue and profitable.
The premise is that it is much easier and cost effective today to build a prototype than it was just a few years ago. If a company can't build a prototype and gain some users and establish some usage trends, an accelerator and/or funding probably won't help them much (this is mostly applicable to Internet/Mobile companies and not hardware businesses).
It is rare, but we, sometimes, do invest in companies at the idea stage if the founders have a significant history of building successful companies.
For example, the accelerator has had companies with millions of downloads and a few hundred thousand weekly active users, another e-commerce company was shipping just a few orders per day and another company that was already doing over $200k in revenue and profitable.
The premise is that it is much easier and cost effective today to build a prototype than it was just a few years ago. If a company can't build a prototype and gain some users and establish some usage trends, an accelerator and/or funding probably won't help them much (this is mostly applicable to Internet/Mobile companies and not hardware businesses).
It is rare, but we, sometimes, do invest in companies at the idea stage if the founders have a significant history of building successful companies.
Views • Upvoted by Dave McClure, Founding Partner, 500 Startups and Christine Tsai
Most Viewed Writer in 500 Startups
When we were accepted into 500Startups two years ago (batch two... they're now taking applications for batch 7), I believe I remember them saying they'd consider people still in the idea stage. Back then, although the process of applying was much more ambiguous and arguably more difficult due to that factor alone, I feel criteria was more lax than it is today. For example, most of us in batch two were pre-revenue.
Notice I didn't say most of us were pre-product.
Even with a more lenient selection process (and my vague recollection that 500S would consider pre-product founders), none of my classmates were pre-product...
EDIT: On second read, I THINK Tinfoil Securities was and maybe Splitter. However, both were on a probation period (not initially accepted) and were later admitted into the accelerator (as were we).
Although I haven't confirmed this with Dave McClure or Christine Tsai, given the fact that 500S has definitely established itself as a notable and (dare I say) prestigious brand :-), I would be more than shocked to see them accept a pre-product team into the accelerator program. In fact, I'm quite sure that it's expected that you are already generating some sort of revenue before applying.
The truth is, there are a ton of teams that not only have a product but are also generating revenue that aren't admitted into the accelerator.
The bar has definitely been raised since we entered the program, the competition is tougher, it's easier to apply, and a simple idea with no product just won't get you noticed (if it ever did... which I highly doubt).
Get to work! ;-)
Notice I didn't say most of us were pre-product.
Even with a more lenient selection process (and my vague recollection that 500S would consider pre-product founders), none of my classmates were pre-product...
EDIT: On second read, I THINK Tinfoil Securities was and maybe Splitter. However, both were on a probation period (not initially accepted) and were later admitted into the accelerator (as were we).
Although I haven't confirmed this with Dave McClure or Christine Tsai, given the fact that 500S has definitely established itself as a notable and (dare I say) prestigious brand :-), I would be more than shocked to see them accept a pre-product team into the accelerator program. In fact, I'm quite sure that it's expected that you are already generating some sort of revenue before applying.
The truth is, there are a ton of teams that not only have a product but are also generating revenue that aren't admitted into the accelerator.
The bar has definitely been raised since we entered the program, the competition is tougher, it's easier to apply, and a simple idea with no product just won't get you noticed (if it ever did... which I highly doubt).
Get to work! ;-)
