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The Right Way: 500 Startups is Rocket Fuel for the Tech Explosion

By: Daryl Bernstein / Wednesday, June 20, 2012

Our new series “The Right Way” profiles RightSignature power users, revealing their success secrets and the technology tools they use every day.

George Kellerman - 500 Startups
An accelerator and funding engine for early-stage companies, the hot 500 Startups is making waves in the tech world by “blowing up startups with design, data, and distribution.” Put simply, this firm is giving new companies the guidance and cash they need to grow fast. RightSignature's Steve Stormoen caught up with George Kellerman, Venture Partner & Fire Chief (yes, that’s his real title), to understand 500 Startups – past, present, and future.

What’s the story behind 500 Startups?

George Kellerman: Our founder, Dave McClure, spent 25 years in Silicon Valley. He worked at PayPal, he was an active angel investor, and there was a period of time when he ran the FacebookfbFund REV social incubator. He also managed the FF Angel seed-stage investment program for Founders Fund for about a year. Dave saw a better way to invest in startups to empower entrepreneurs more, so he decided to directly leverage what he learned as an angel investor. The end result was 500 Startups, which has a very different philosophy from traditional venture capitalists.

Most venture capitalists give out very large checks a couple times a year, but we prefer to give lots of little checks throughout. This lets us watch the companies we fund progress—and when we see a company get traction, we double down and up their funding. Because of our model and the scale of our involvement, we’ve been able to invest in over 300 companies in less than two years—just a ridiculous number.

What would you identify as the 3 main keys to your success?

GK: First and foremost, it’s about the network we’ve developed. We have a mentor network of 175 mentors, and now that we’ve invested in 300 companies we have a network of over 600 founders. This network allows us to give the best possible support to the companies we fund while staying cutting-edge in the tech business world. As we invest in more and more companies, we grow our network every day. This gives us access to lots of great people and great opportunities, and we’re able to leverage our network to find the best deals out there.

The second key to our success, I would say, would be our international focus. A traditional venture capitalist will only invest within 30 to 50 miles of their own office, but we are willing to get on a plane and go anywhere. We’ve made over 50 international investments, and we’ve got portfolio companies in Croatia, Italy, Brazil, India, Japan, China, Hong-Kong, Taiwan, Australia, and more.

Our third key to success would have to be the conferences and events we put on. They’re a great way to get our brand out there, but also to meet people and bring people together—leaders in emerging areas, who can then collaborate and create. So we do the SMASH Summit online marketing conference in New York, we do Warm Gun, a design conference in San Francisco, and we do Geeks on a Plane, where we take 40-50 investors and entrepreneurs to developing markets—we’ve been everywhere: Australia/New Zealand, South America, East Asia, this summer we’re going to Eastern Europe.

What would you say is the biggest risk you’ve taken?

GK: I’d say that our entire investment model is our biggest risk. Look, our investment model is not a proven model. We really are bucking the system. Traditional investors have not invested like this—300 companies in 2 years is just unprecedented. We don’t know yet if the long term returns from these investments will pay off. We’ve seen a number of early exits and we believe that our model is tracking, but we’re not entirely sure how it’s going to end up yet.

That said, our attitude is: we’re going for it. We believe in the model, we’re seeing early successes, we’re tracking in the right direction, so we’re doubling down. That early traction, that early success gives us the confidence that our risk is paying off, so we want to go further—expand our number of investments even further, engage in even more activities overseas, organize more caucuses and events.

Ok, last question. Name 5 tech tools that you can’t live without.

GK: Well, first would have to be RightSignature.

Good answer.

GK: (Laughs) No, really. With all the fundraising we’re doing right now, e-signatures are essential to getting it done. We started out using EchoSign but it didn’t have the flexibility we needed. Somebody introduced me to RightSignature, and the product was just so much easier to use, so much more flexible in terms of setting up the forms. I send out RightSignature packages maybe 20 times a week.

My second tool would be ToutApp. These guys are a 500 portfolio company and they’re really fantastic. It’s a tool for making email templates. For fundraising, there are a lot of steps I have to go through: first I send out the investor presentation, then the term sheet, a copy of the agreement, and an electronic signature page. It all has to be in that order. After they sign the contract, I send them a receipt, and once we’ve received the funds I send them a follow-up note. All of these emails go to a number of people on a regular basis. ToutApp allows me to create these powerful email templates and has great integration with Google Apps and Gmail.

Third, I would say, is Google Docs. I find the versatility of Google Docs to be amazing—it makes it very easy to share documents in real time. When we work with lawyers, for example, to keep track of 300 investments, we can have a spreadsheet open with everyone working on it making changes in real time and discussing it. I’ve stopped using Office and now use Google Docs exclusively.

Fourth is Adobe Acrobat Pro. I spend a lot of time with many, many PDF files. I often have to combine and edit PDFs, and that’s something you can’t do with your basic Acrobat Reader. I use this one a lot.

My fifth tool would be... you know, there really isn’t a fifth. These four tools probably account for about 90% of the work I do.


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