[davemc500hats]

actually yes, many of our companies generate revenue, and a good number are profitable. in fact we probably have a slight bias for revenue over growth.

btw, our initial investment at accelerator or seed is more like $50-100k, and follow-on investments at Series A/B are between $100-500k. in about 10 companies we hold aggregate basis positions of between $500K-$1.5M.

500 Startups Fund I has ~256 companies, and currently Fund II has ~220 companies (and will likely be around 275 total). out of each of these funds, we aim for perhaps 50+ companies to get to Series A/B rounds led by institutional investors (in which we will also continue investing as well), and from these perhaps 10-20 may achieve larger exits of $100M or more.

as to performance & exit model expectations, our rough model expects that 5-10% of portfolio (~10-25 companies) will do 20x or better, and perhaps 10-25% (25-60 companies) do 3-5X. at a median initial entry valuation of ~$4M, 20x would be an exit of $80M, and 3-5x would be an exit of $12-20M.

so far, 500 Startups Fund I has had about 10 exits in the $5-30M range, and 1 exit at $350M (Wildfire). still private and growing are 5-6 companies that are valued around or above $100M (Twilio, Sendgrid, Taskrabbit, Makerbot, Viki, Smule). we also have about 25-30 companies valued at between $25-$75M that look promising. with luck, hopefully some of these companies will find exits at or above current valuations (tho likely not all of them).

also different from the earlier SV Angel portfolios, 500 Startups doubles down (& triples down) selectively on our top 20-30% of portfolio companies in later rounds. we believe this enables us to weight our portfolio more towards winners, rather than a pure scattershot index strategy.

in any case, it will take a few more years to see if our strategy works, but so far it looks like it's not completely irrational.

(ps - altho they are usually higher valuation, about 10% of our portfolio is YC companies. since median valuation at YC demo day is more like $7-8M, you might have to double the target exits noted above... however we also have many of our own accelerator companies where our entry valuation is more like $1-2M to offset)

[mattbarrie]

Thanks for the clarification on the numbers, I guess only time will tell on the distribution of exits and what the actual returns back to you would be on them look like (20x @ $80m ignores liq pref and dilution). How many are in your team now looking after all the portfolio companies?

[davemc500hats]

indeed there will be some further dilution, but typically there is not dramatic liquidation preference on winners, at least that we have seen thus far. if you like, you can double the exit targets I mentioned, but regardless we are looking for ~10-20 companies that exit north of $50-100M, and 25-50 that exit at between $10-50M.

overall 500 is currently about 22 people. of those, we have ~10-12 investment professionals, each of which is making 10-25 investments per year. if we are lucky, 1 or 2 of those might be larger wins, and 3-5 might be smaller wins.

since we generally do not sit on boards, most of our team is not spending the majority of their time in future years managing a large # of investments, altho they do spend time in the first year or so helping some of them get financing from downstream institutional investors.

hope this helps explain our strategy.

[mattbarrie]

Great overview, thanks.

[gregcohn]

noting that this has almost no correlation whatsoever to the OP's list....