Pranay Srinivasan's Blog

Before I get into the meat of this post, this is the 500 Startups map of investments:

Also: Apply for BATCH 10 today! But before that, read this:

So here’s the well known stuff:

500 Startups loves International Startups.

They’re probably the most prolific International Investor from the Valley.

They fund diversity as a rule, not an exception.

They love India and Pankaj Jain is passionate about finding awesome startups from India.

They’ve funded a bunch of startups from India - both through their Seed Funds (Zipdial, Kartrocket) and through the Accelerator (Pricebaba, Instamojo, Gazemetrix, Tushky, Tradebriefs).

But here’s the not so well known stuff:

500 Startups doesnt fund bad companies. Just diverse companies.

Of late it’s gotten tougher and tougher to qualify as a startup for the accelerator. The bar has gotten higher, and the filter is sharper.

International Companies, esp Indian companies that get through to the Accelerator have 5/6 figure runrates, fully formed teams, great products, and are far more mature than their US Counterparts.

Why this injustice, you might be asking?

Here are a few reasons why:

1. There’s a difference between the Silicon Valley and the Indian ecosystem: Fanciful as it sounds, Valley investors are loath to invest in an overseas company. A lot of the international companies “flip” to the USA because they have access to easier funds here, and because US investors have a far higher risk appetite. That’s mostly because exits take an average of 2-4 years here as opposed to 12-14 years overseas. The cost of liquidity is more important as the cost of the opportunity. So they would take a bet on a half baked SV idea rather than a partially formed Indian idea. Because someone might just snap up that SV startup for a decent return even if it flops.

Case in Point: Justdial received its first Venture Institutional funding 8 years after being established. It went public 7 years after that. But it went public *15* years after it was started. That timeline is just UnAcceptable to a Valley Angel / VC. (Please correct me if I’m wrong).

Until the Indian ecosystem can deliver consistent, predictable, decent value exits, VC’s aren’t going to bet on early stage startups that have a long way to go. Thats why you’ll see more and more 2-3 year old profitable “startups” make it to 500.

2. Time / Effort Cost: Bringing a company to the USA costs time, effort and money. A US company makes a lot of sense when you’re targeting the US / International Markets. If you’re not targeting the US market, there’s got to be significant advantages / benefits for both 500 and you to access the Silicon Valley ecosystem for you to value the Accelerator program (aside from the great press, awesome people and the wonderful weather). 

On the flip side, even if you’re targeting the Indian market and have grown significantly, 500 Startups will help you round out your team, your skills and help you with a world class network to find customers, vendors, mentors, investors, partners, and peers who are strong sounding boards.

3. Competition for Spaces: 500 Startups has doubled the number of Accelerator batches it runs during the year to 4 now - 2 in Mountain View and 2 in San Francisco. But the number of applications is now 5-6X what it used to be 3 years ago. And a fair bunch of them is international. That means that you’re not competing with a fledgeling US startup with 2 founders in a garage - you’re competing with sophisticated, well-run, Brazilian, French, Australian, Swiss, Malaysian, Mexican, African and British Startups.

4. There is a difference between an Incubator and an Accelerator: In the true sense of the word, An Incubator is a Kindergarten that prepares you for the world. An Accelerator is a finishing school. Due to the strong focus on execution, and the short time frame foreign startups are faced with while at 500 Startups, there’s no time to learn from scratch. You’ve got to be fundraising from Day One. You’ve got to be selling / hustling from Day One. You’ve got to be building your product from Day One. Your operations have to be ship-shape to take complete advantage of the program. 14 weeks pass by in the blink of an eye. Only mature, well led companies can leverage this time period and they too have to work their butts off to keep pace with the demands of balancing Indian operations (up all night) and US hustle (meetings all day).

I wish you all the best. Ping me if you want more information.

Thanks,
Pranay