Dave McClure has one advice for Indian startups – don’t go anywhere, stay here.
The founder of 500 Startups, an accelerator-cum-venture capital fund based in Silicon Valley, also feels India’s large domestic market offers plenty of opportunities to entrepreneurs.
“I don’t think you need to go to Valley to be successful,” he said in his keynote address at Nasscom Product Conclave in Bangalore on Thursday. “You don’t probably need to leave your own large tier 1 or tier 2 cities to be successful.”
McClure said there are customers everywhere in India and that most of them have access to the internet, at least on an intermittent basis, and more and more are getting web access. “It is probably one of the biggest domestic market opportunities. Just being in India is a big global business,” he added.
500 Startups has been an active early-stage investor in India. It has backed companies including TradeBriefs, Instamojo, PriceBaba, Sheroes.in, OnlineTyari, gazeMetrix and ZipDial, which was acquired by Twitter.
McLure also urged Indian entrepreneurs and investors to create an ‘equity culture’ in the startup ecosystem. “Building an equity culture is still a challenge in India,” he said.
He recounted how his stock options from PayPal helped him invest in many startups. He said that initially he didn’t know what he was doing. “I knew nothing when I invested $300,000 in 13 different startups in two years. I was fortunate. Three of those outcomes were over $100 million. I wouldn’t have been able to do without the equity in PayPal,” he said.
He advised investors not to launch an accelerator unless they were in for a long haul. “It is a really tough bet. I would not advise you to do it unless you really love it,” said McClure. “In our accelerator, just now four years in, we are seeing a few companies get to $200 million plus valuation. We still haven’t exited,” he said, adding that it might be five to seven years before 500 Startups sees returns from some of its early startups.
About choosing startups, McClure said that asking early-stage startups to submit business plans and projections is almost like asking them to lie to you. “I don’t want to see your business plan because business plan is a long succession of probabilities we are going to project on startups. All I want to know is if you got a product which customers might want to use and give me some data around that.”
McClure said that when the VC fund started investing in India three to four years ago, it had a lot of questions from industry about the historical exits. He was told that there aren’t many, but he didn’t pay much attention to it. “You should not try to predict the future based on the past when there are fundamentally different things on the ground,” he said. “There are big companies, rising number of customers, rising internet penetration, payment getting better, logistics getting better and rising spend. It (India) is one of the fastest-growing markets now.”