How We Make Startup Ecosystems #500STRONG

At 500 Startups, we often get asked how we are different from Y Combinator. There are many differences, but for me personally, there is only one very important one.

While Y Combinator invests in founders from all over the world, they require their founders to come to Silicon Valley for investment (at least for their program). I remember hearing a Y Combinator Partner say something along the lines of, “If you want to be an actor, go to Hollywood. If you want to work in finance, go to New York. If you want to build a technology company, go to Silicon Valley.” There is a lot of truth to what he said. But Silicon Valley isn’t just a place, it is also a state of mind. Masayoshi Son of Softbank, Jack Ma of Alibaba, Anthony Tan of Grab, and plenty more have built incredibly valuable companies without moving to the Mecca of startups.

So at 500 Startups, we have a totally different approach. Instead of having founders from all over the world come to us, we go to them. Our team of 150 people are based in 20 countries, and manage seed investments across 60.

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But because we look outside Silicon Valley, we also have to help build up the ecosystems in which we invest. It is not just about writing a check. We have to make sure that the communities around the startups also grow to become more supportive of entrepreneurs.

Over the last year, we’ve worked hard on this from multiple fronts, all of which essentially involve education. Education not only for entrepreneurs, but also for local co-investors and governments.

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It started out with something very simple: publish Silicon Valley insights on our blog in Japanese. Despite all the content that is published online, you’d be surprised how much knowledge is missing in Japan due to the language barrier. We cover everything from fundraising and marketing to hiring and founder’s dilemmas. We also created standardized financial docs for seed rounds, working with KPMG and Masakazu Masujima to publish the J-KISS. It is a template for anyone to freely use, just like the ones we’ve been using in Silicon Valley for years.

Our biggest project to date for entrepreneurs, however, has been our Pre-Accelerator program. In partnership with the City of Kobe, we ran a condensed version of our Silicon Valley accelerator (now called “Seed Program”). Over the course of 6 weeks last summer, we flew in 20 partners, mentors, and entrepreneurs to share Silicon Valley best practices on growth hacking, startup finance, data driven sales techniques and more. 20 companies were selected among a pool of over 200 applications, mostly from all over Japan.

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500 team with the Mayor of Kobe

Education for entrepreneurs is just one piece of the puzzle for a robust startup ecosystem. Since most of the money for startups in Japan comes from corporates, we’ve put together content and programs to help corporates succeed as well. Last September we hosted a one day event with Mizuho Bank and NEDO, inviting executives from some of the largest corporations in Japan to learn about how to engage with startups.

Although we’ve made a lot of progress, we still have a long way to go. Startup investment in Japan is still between $1-2 billion a year, compared with about $70b in the US. Our hope is that with our efforts, and with the support of the local community, we can get this number up to $10b!

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