Marvin Liao, 500 Startups: “There’s too much of this bullshit cult of product”

Marvin Liao, 500 Startups

Last year at the Lisbon Investment Summit there was one story that got quite famous within the Beta-i team. I mean, for all this time that we’ve been organizing the Lisbon Investment Summit, we’ve been saying that our main goal is to bring entrepreneurs, investors, and executives together in a surprisingly informal and slightly unexpected environment, and, finally, last year we got undisputable evidence that it really did happen.

Marvin Liao, Partner of 500 Startups, was one of our invited speakers at the Lisbon Investment Summit 2016, and Infraspeak, was one of the startups pitching from our accelerator Lisbon Challenge. Marvin got to meet Infraspeak’s co-founder, Felipe Ávila da Costa, in our sunset cocktail on a yacht. A couple of months later we get a message from Felipe saying that Infraspeak is moving to San Francisco and will receive funding from 500 Startups, one of the best startup programs in the world. 

We were proud matchmakers back then, and we want to do it all over again. The thing is Marvin Liao is coming back to speak at the Lisbon Investment Summit in 2017.

We have interviewed Marvin last week to learn more about 500 Startups, to understand what kind of startups and industries he is looking at, to talk about fundraising, Trump, Snapchat, and what, in his opinion, makes startups successful.

Read the whole interview below and make sure you register here for the Lisbon Investment Summit 2007, on June 6-7.

How are you looking at Venture Capital investments in 2017? Especially in the US, in 2016, you had some cuts in investment, fewer IPOs.

The reality is that from a startup fundraising situation, it’s a lot more challenging than it has been in a long time. But, when you look at the overall numbers, compared to even 4-5 years ago, the numbers are still relatively high. The reality is there was just a lot of money that came into the ecosystem, about 4-5 years ago, I would say probably particularly 4 years ago, so just a lot of stuff, frankly, that shouldn’t have been funded, a lot of stuff that didn’t have any metrics, a lot of stuff that didn’t make any sense, there was just overfunding you could argue. Right now, there is just a lot more rationality in the market at every single level, whether it is like at the billion dollar level to the one or two million dollar level. It’s just a very different environment and a much more rational environment, so that means that only the best companies and the best teams are being funded right now and that isn’t necessarily a bad thing.

What do you think about Snapchats’ IPO?

I have lots of opinions. First of all, great, that’s a great signal. Whereas last year was really really terrible for tech IPOs. There are a lot of tech companies going public this year. Is that a good thing or a bad thing? That’s probably a good thing for investors, but the reality for Snapchat is that you are seeing the engagement numbers go down. Instagram is trying to take a lot more market share from them right now, so who knows. And going public as a company, I just feel like they are going public way too early than I sort of expected. But I guess investors want their money out.

Do you think the same thing can happen to Snapchat, as we’ve seen with Twitter over the last couple of years?

That is not a great case study. Based on Snapchat’s revenue numbers I’m really surprised, their revenue numbers and the maturity of the organization in general. Going public is brutal because now you are under a glare and you are on a quarter to quarter basis, so it becomes really hard to manage a company. I’m just really surprised. For them to go public strikes me more as Twitter and less like Facebook.

And what are your predictions for the Trump Presidency? What do you think can happen in the tech industry?

No, it’s all bad. It’s just bad on all fronts. I mean, just what he is doing on the immigration front, what he is doing for the brand of America, it’s just all bad. The reality is that the tech industry is very much not in favor of this so, we hope the 4 years go by very quickly. Well, I can’t speak for the tech industry, I am speaking for myself. But, I don’t think it’s a good thing.

You’ve been at 500 Startups for more than 3 years now. Which companies have impressed you the most?

The first batch I ran here, I came across Shippo, a startup co-founded by Simon and Laura. Like super young founders but, super successful. Now, they’ve recently raised a Series A, and they are growing tremendously. So, for it was Shippo, which is an API for shipping companies, mainly for e-commerce companies. They’re just an awesome team, awesome business and just good people to work with.

At 500 Startups you’ve invested in companies from all around the world, and you have a huge portfolio. Do you keep in touch with the startups that you fund? How do you manage that relationship?

Yeah, it’s really determined by them. We expect at least a quarterly report from them, but typically, our engagement is determined by them. Some founders I talk to on a regular basis, other founders I never hear from and most founders fall right in the middle. I don’t hear from them regularly, but when they need something, they want advice, they want to talk about fundraising, they have some sales issue, whatever it is, that’s typically when they reach out and that’s the time I engage with them.

During the 500 Startups program, you focus a lot on growth, marketing, and sales. Why is that, why don’t you focus on product instead?

The reality is that most companies fail, not because they have a bad product. In my opinion, in our opinion, in the firm’s opinion, the main reason companies fail is because they don’t get customers or they don’t know how to get customers. That is actually the main reason, and that’s a huge gap. There’s too much of this bullshit cult of product, like build it and they will come right, all you need is a good product, and it is patently wrong.

How exactly do you help startups to grow?

We have a lot of staff, I have 10 full-time/part-time entrepreneurs in residence, so these are all ex-founders. We also have a team of 15 full-time/part-time online marketing and business to business sales experts that work with our companies, help them with metrics, help them basically with figuring out what their growth channels are.

Have you been looking at any particular industry?

I can only speak for my team. We do a lot of Fintech and Digital Health, a lot of marketplace businesses a lot of enterprise sales and SaaS. So those are probably our forte.

Quite recently you had a Portuguese startup there, from Lisbon Challenge, Infraspeak. Can you tell us how you got in touch with them and how that worked?

I was at the Lisbon Investment Summit last year, so I met the Infraspeak team and got to spend some time with them and really liked what they’re doing, so, asked them to join the program. I’m really glad it worked out.

Were you there at 500 when TalkDesk, another Portuguese startup, was there?

Tiago Paiva, the founder of Talkdesk, is a good friend of mine, but unfortunately, that was probably 5 years ago, so way before my time. But he’s a friend actually.

Richard Werbe, CEO of Studypool, says that to get funded by 500 Startups it all comes down to the numbers. “Know your Metrics (KPIs, growth rates, CPA, LTV). Be able to speak analytically about your business at a high level. If you don’t have major revenue and hockey stick growth – don’t apply. 500 looks for traction based startups.” Do you agree? Do you have any tips for startups that want to join 500 startups?

Yeah, I would strongly agree with that.

At 500 you’ve invested in companies from all around the world. Why? How do you find these startups?

From our portfolio, we’ve invested in companies from all over the world. Why? The reason we do that is because we think that there is great talent in every corner across the world and the reality is that, and as long as you are solving a real problem, we think there are opportunities. I think, from a funding perspective in a lot of countries, I mean it depends on how you look at it. I would say half the international companies are focusing on a local problem, funding can be a little more challenging there, but we think that in the long-term that market is going to develop and there will be funding down the road for them, or at least you can help them get to some business model and some level of breakeven or profitability faster. So, that’s sort of our thesis, both supporting startups that are solving problems in local markets and solving problems for customers in local markets, as well as international companies which are solving problems for a global market. And we think both are valid and worth investing in, and I think the ones that are focusing on the global, I am definitely much more interested in because we can see the results much faster and we can be way more helpful in the earlier days. I think it’s a little bit more of a longer-term bet for the international companies who are focusing on local markets, but obviously, we think there’s an opportunity and a good arbitrage opportunity and we think that’s where the world is going anyway.

What do you think about the Lisbon Startup Scene? Do you think we will be seeing more startups from Portugal at 500 Startups?

Yeah, definitely. That’s the reason why I’ll be there in June, for the Lisbon Investment Summit, right. So, we’ve done some investments. Like, for example, there were 2 or 3 other Portuguese companies that I’ve been talking with, one ended up joining Techstars in Boulder, called Attentive (also from Lisbon Challenge), but we think there are awesome founders there so, I’m obviously going to be looking.

What would you recommend to an entrepreneur that wants to reach out to you at Lisbon Investment Summit?

Don’t pitch me from the beginning, I just want to get to know them. Don’t harass me, don’t pitch me because that just makes me angry.

I’ve read your short bio on 500 Startups website that you have a book buying addiction. Which books have you bought recently? What do you recommend to an entrepreneur?

It’s a huge issue. It’s so bad. That’s probably my biggest sort of like problem. But as problems go, it could be a lot worse. I’ve been recently reading a lot of science-fiction because I think that is highly relevant if you’re trying to get a pointer to where the world is going. I’ve been also reading, just because of the recent political stuff, I’ve been reading a lot of geopolitical things. There’s a new book I’m in the process of reading, it’s called The Complacent Class by Tyler Cowen, which is really good. Another one, which is The Absent Superpower, these are all the geopolitical stuff, right. Another one I’m reading, which is called Stealing Fire by Steven Kotler, so it’s just like how we’re reaching this level in society where a lot of like, some of the latest cutting edge things, whether it’s through drugs, whether it’s your training, how people are able to reach peak performance. Another one I’ve been reading is called Hit Makers, it’s basically, the subtitle says signs of popularity in an age of distraction. So, how hits get made, that’s highly relevant for my business.   

Want to be the next startup to join 500 Startups? Apply to pitch at the Lisbon Investment Summit. Want to meet Marvin Liao? Make sure you register here and join us for another edition of the Lisbon Investment Summit this June 6-7.

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