500 STARTUPS ROLLER COASTER AND BEYOND, INTERVIEW WITH VU HOANG ANH, CO-FOUNDER AVOCODE
How did you get into 500 Startups as a foreign startup? Why did you apply to 500?
We didn’t think about applying to 500 Startups at all. We applied to Y Combinator first, but they decided not to fund us. So we decided to try raising our seed round from VCs. But that didn’t go as expected either, so Vincent Jacobs from Kima Ventures suggested applying to 500 Startups. They even gave us a direct intro to one of the partners at 500.
That’s how we skipped the application process and went directly to the interview process. That’s also how 500 Startups prefers to get applications — through their network. That’s the first advice I’d give if you want to apply to 500 — try finding someone in your network that could give you an intro to 500!
What is the interview process like?
The interview process is different compared to YC. YC will meet you in person and give you exactly 10 minutes, and that’s it. I’d say that’s not enough time to get to know the founders. And I think 500 Startups takes a better approach at this.
In total, we did three one-hour long interviews over Skype with three different partners from 500 before we got in. On these calls, we had to convince the partners to fund us. Our strategy was simple — just show traction. None of us founders has an Ivy League degree, so demonstrating our growth was crucial. At that time, we were already generating some revenue, and we had lots of metrics that we could show. This strategy worked out, after the third call they told us that we’re in.
What was the main goal of applying to 500?
We got into 500 Startups to learn how to grow our company faster, and how to fundcraise. And I think 500 delivered that. Plus, you will probably become friends with the founders from your batch, and that’s priceless. Go Batch 17!
Should you drop out of Stanford University or Charles University to get into 500 startups?
We actually went through the accelerator during summer so maybe someone (probably a superhero) would manage both. But if you have an opportunity to go through 500 and you cannot manage both at a time, then the answer is YES. I’ve never learned so much in just 4 months in my life.
Additionally, I’ve seen some people who went through 500 and also had a degree from Stanford or MIT presenting during the Marketing Hell Week — the opening conference of the program. They all had the 500 Startups logo next to the ones of MIT or Stanford in their first slide as a reference of their education. That just shows you how much that means, especially in the Silicon Valley circles.
However, universities are usually very good for making friends and meeting potential co-founders. So even if you do decide to drop out, you can still keep in touch with your former classmates. You never know!
You must have sent a lot of pitch decks since 500 Startups. How boring should the deck be to get investors interested?
Pitch decks are like online ad banners, they should invoke the interest of investors to schedule a call with you. So if you put in numbers that demonstrate rapid growth, you will surely get many calls with investors. Are big numbers boring? I think you know the answer.
How do you tell a VC, “yes” without losing FOMO?
“We’d like to accept your term sheet, but another investor wants to give us a better deal. Can you give us an even better offer?” You should always aim for investors to bid each other.
How do you tell a VC “no”?
There’s often no reason to give a direct “No” until the very end of the process when you’re selecting the right term sheet. And even at that point, you can always save that investor for your later round. The process of getting to know each other is going to be a lot easier. So the answer, in this case, would be “Later”.But if you still want to tell the investor “No”, and not have them invest in a later round, then be honest and explain why.
After demo day at 500 Startups did you buy a ping pong table, champagne and Patagonia swag for the team?
All the companies in our batch collectively bought a ping pong table that remained at the 500 Startups office after we left. That’s the Batch 17 legacy. But we also wanted to buy our own ping pong table, but I think we forgot about it because we were so focused on growing the company. But I’ll make sure to propose this in the next meeting with our office manager.
But having fun is definitely a part of the acceleration process. That’s also why we take the whole company on a team retreat twice a year. Our next team trip is to go surfing in Portugal!
You’re a legit startup founder, Avocode is not your first company? Was your first startup a total failure?
Our first company was called Source. With this company, we’ve built 13 products for designers and developers. Avocode is built on top of some of the technology we’ve built before. By selling these products, we’ve made about $1M in total. We used some of that money to bootstrap Avocode. So I wouldn’t say it was a complete failure, but it was rather a part of our journey.
Avocode is competing with InVision. How do you kill a monster unicorn?
Big companies tend to innovate more slowly and you can use that to your own advantage. You should focus on their weaknesses — like the inspect mode in the matter of InVision or their design upload technology. Until they can fix those weaknesses your company can grow far more rapidly so that at some point, you’ll be able to match them.
Can you build a fast growing company outside of Silicon Valley?
You should be where your customers are. But that doesn’t mean your entire team has to be there. And I think it’s an advantage to keep your dev team elsewhere, because of lower cost and easier access to talent. There are plenty of examples of great companies that have teams in Vietnam or Ukraine because of significantly lower costs.
So yes, you can build a fast-growing company outside of Silicon Valley. But you should probably consider having your sales or marketing team in Silicon Valley if your customers are there. And you should consider coming there for fundraising purposes.
What do you think most foreign founders get wrong about Silicon Valley investors? What do founders get wrong about investors?
Investors will often say things like “That looks amazing!” or “Wow, great progress”, and that may sound like they’re interested, and you’re about to close the round. But in reality, they’re just being polite. That means you don’t have a deal until the term sheet is signed.
What do you think VCs get wrong about founders?
Founders don’t always need money from VCs to succeed.