A Conversation with Elizabeth Yin of 500 Startups
We asked Elizabeth a few questions about raising venture capital as an early-stage startup.
Elizabeth Yin is a Partner at 500 Startups, investor in seed-stage companies, and runs 500’s Mountain View Accelerator Program. She’s the former CEO and Co-Founder at LaunchBit (acq ’14) and marketer at Google. She has a BSEE from Stanford and MBA from MIT Sloan.
Talked about: Raising seed capital, networking with investors, building a brand, and how to get into 500 startups.
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LawTrades: So Elizabeth, when someone applies to 500, what are some of the signals that immediately help your team weed through all of the applications?
Elizabeth: It depends a lot on the category, but there are generally 4 categories that a company will fall into. (see more here)
1) Super high tech companies
2) High infrastructure companies
3) Free consumer apps
4) Everything else — aka companies that can make money immediately
For most companies, i.e. companies in categories #3 and #4, we’re looking for products that already have launched and have at least some level of usage or traction. And, that is an immediate filter for many applications and whittles down the pool considerably.
Other filters we have include things like: is the team working on their business full time? Is the business in a category that we invest in? (For example, we don’t invest in brick and mortar companies or consulting businesses)
However, after applying all of these filters, we still need to look through a LOT of applications and do a lot of interviews!
LawTrades: For companies that are having little success with raising money or getting into an accelerator, what would be your one piece of advice?
Elizabeth: In general, for *most* (but not all) businesses, I’d recommend being heads down for another 1–2 months to focus on traction. Very often, a blocking point for investors is that a company is too early. There are of course other reasons a fund might pass, but traction generally solves a lot of problems.
LawTrades: We know there’s a lot, but what is the biggest mistake entrepreneurs make when raising their seed round for the first time?
Elizabeth: The biggest mistake entrepreneurs make when raising their seed round is probably not being aggressive enough to get lots of meetings packed together in a short time frame. There are lots of reasons for this including:
- Not timing all first meetings around the same time to get all investors to ‘progress’ in their decision-making at the same time
- Not reaching out to enough investors or spending the time to create a healthy funnel of potential investors
- Not being persistent enough in following up with investor outreach
If entrepreneurs can’t meet with enough investors in a short period of time, then it’s going to be really really really difficult to create urgency and close a round.
LawTrades: How can entrepreneurs create meaningful connections to investors when they don’t live in startup-hubs like Silicon Valley?
Elizabeth: Ultimately, building connections with investors is still a relationship-game. So if entrepreneurs want to raise from the Silicon Valley, really it’s impossible to build many of those connections remotely. To a certain extent you can do this maybe with a handful of people, but to really do fundraising right, you need to be meeting with a ton of investors. So, to this end, probably the easiest option is to get into a well-connected accelerator based in the Silicon Valley. 500 Startups, for example, connects its startups with both angels and VCs in the seed program, and we invite 100–200 investors to do office hours with our companies in each batch.
Outside of that, however, you can also build your own network of relationships by spending a few months in the Silicon Valley networking.
LawTrades: How has 500 been able to keep such a distinct brand/culture despite the massive expansion efforts into other countries?
Elizabeth: Culture is really really important to 500 Startups. Our mission is to help build startup ecosystems everywhere, and our business model is VC. To this end, it means that we value diversity and collaboration, and it’s really important for us to be open and receptive to all entrepreneurs globally. So even though every country has different norms, at 500, we have the same mission regardless of where we are.
LawTrades: What trends are you noticing in the startup seed investing?
Elizabeth: With regard to areas that are particularly popular: fintech, healthtech, big data / AI / machine learning are all hot areas people may have heard being tossed around a lot. If you have a startup in these areas, it’s probably a bit easier to raise money than if you’re in an industry that is down in the dumps right now. (such as ecommerce or adtech) But trends come and go, and things could change in the next year or two.
LawTrades: Thanks Elizabeth! This has been great.
Elizabeth: Sure thing!
Elizabeth’s Suggested Resources:
Bringing Transparency To Seed Investing Blog
What types of investments she’s looking to make.
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