Speaker Q&A: The Bear Market Playbook

May I have your attention please welcome TechCrunch senior climate reporter Harry Weber and Christine Tsai founding Partner and CEO 500 global Welcome so just a real quick note this QR code allows you to ask a question so We'll be taking questions through this QR code ask away and if it's a good Question I'll be I'll be judging Silently in the background if it's a Good question uh we'll certainly ask it And hopefully we have time for Everyone's questions But it's really easy so take a picture Of that and it'll the QR code will come Up again in a bit so just to recap my Name is Harry I'm a senior writer at TechCrunch I cover a lot of topics Including climate change and Venture Capital which intersect and it's an Interesting combination but um I'm uh Just super excited to be here to talk With you Christine obviously you run 500 Global I have some numbers here 2.8 billion dollars in assets under Management uh 2.6 or yeah 2 600 uh Companies is are these figures still Accurate Roughly yes roughly yeah roughly Accurate Um so so all right so you run 500 Um You were also at Google right that's Correct

Um yeah I also saw you were uh very Briefly an intern at Chevron And I was just curious okay I was just curious uh did you go in and Then you're like oh no I got to get out Of this I I was just curious do you have Any thoughts on that it's so long ago Oh uh so that was I think I was a summer Intern while I was at Cal and this is The late 90s early 2000s so my memory of That is is pretty fuzzy oh yeah I just I Saw it I don't know what I did go hey What's what's up with that but but it's Just very random yeah yeah well you know We we take these paths to get to where We are now Um and and it sure seems like 500 Global Is doing well Um I wanted to ask Um 500 really built its name as an Accelerator in the early days and it was Sort of synonymous with the mix with Accelerators Um but it's grown a lot since then A Lot's changed hasn't it Um you've been backing larger stage Companies could you talk a little bit About that At least so rather later stage companies Is what I meant but let's go ahead yeah Um no definitely I think so when when we So 500 was uh started we started 500 in 2010 and I think that was probably

Actually the last time I was here at Moscone West because we had Google The Google I O conference so it's a very fun Place to be I remember running through These Halls back when I was at Google And you were in that conference didn't You yeah yeah so it's it's it's nice to Be back here but uh you know we really Started in 2010 which if you remember Venture was such a different it was we Were in such a different point in time In that in that period of time so uh our Thesis was largely around betting on Seed stage seed stage companies needing Less Capital but more help in terms of Mentorship Running experiments on the distribution Platforms that I worked on back in the Day at Google and YouTube that were Starting to emerge if you remember the IPhone had just recently come out so all Of these platforms that we know today And of course are now nowadays a lot More Under Fire those were emerging at That time so we were really focusing on The early stage the term precede didn't Exist really helping these companies and Building a large Diversified portfolio Which is the 2600 companies and growing That you mentioned now 500 where we are Today 500 Global and looking out into The future is we have this basically This infrastructure that we've built Globally that's something that we have

Invested in for the past 12 years and Now we're really leaning in such that we Can not only continue to back Founders All Around the World in both mature and Emerging Markets but also expand our own Scope so we continue to back the early Stage that's our bread and butter but Also expand to follow the founder Journey to series a series B later stage All the way through pre-ipo and that's Something that we're really starting to Build our muscles in and expand into so We can be more of like a multi-stage Venture firm and that's that's both for The companies that you you get in early But also so perhaps some companies that You haven't hadn't been in before that Were much larger is that true backing Some some outside firms that are larger Our focus is more on the companies that We've established that relationship with Because I think that's where we can Really understand the company and keep Supporting them keep supporting them all Along the way so to date we haven't come Into a company at pre-ipo stage that's Not really it's not really an expertise For us it's really more all the Companies that we Um maybe are the First Institutional Investor into and then follow the Journey hopefully all the way to to Later stage exit sure I mean that makes Perfect sense so I imagine and and this

Is probably an understatement you see a Lot of deals crossing your desk I mean There's it was 2.6 uh or two 2 600 Companies Um You know many more Founders than that Have been involved in the program how Has that flow happened how's that deal Flow looked this year you know are you Seeing fewer deals across your desk are You or fewer uh or more deals across Your desk are you seeing like more Applicants fewer applicants just what's What's it like just in general I I think generally that I mean over the Years of course the the number of Founders or deal flow or applications And we kind of look at it all across the Board it definitely has increased Um I think nowadays especially with the Markets uh being in very volatile and Just kind of what's going on this year And even over the course of the last Couple years because you know there's no Shortage of some kind of Crisis Happening Um we we definitely still see a Consistently High number of applications Or Founders looking to start companies Um you know you typically would think That during hard times people are Obviously going to pull back risk-averse But actually we find and many investors Will see it's a great time to actually a

Great time to start a company in terms Of Um it's not going to be any easier of Course but more the opportunity to build Something that will be really game Changing and so that's been exciting for Us as early stage investors to see What's being built during the hard times Versus the the frothier times sure sure Would you say that the applications you Were saying they've grown yeah I would Say they grow yeah I would say they've Grown and one of the one of the things For us is that we run Um you know our Global program as well As as a global investor we have a number Of programs that are hyper local so we Have a program in different regions not Every region as well as just investing Directly into these companies so kind of Our tentacles are pretty wide into Different markets Would you rather uh just a question I've Been asking a few people since I got Here would you rather raise a seed or a Series a right now if you could put on Your Founder Hat Um I I just the point of the question is Just to get an idea of of Because because I imagine it's sort of a Different experience for people at Different stages I would probably rather raise a seed

Round right now That we're finding is that with the Um everyone's probably hearing Hearing about it's it's going to be it's Hard to raise and all this like VC dry Powder and yada yada I mean I think just On the in in you know in the trenches at Least what we're seeing with our own Portfolio and and Beyond is that At the at the different ends of the Spectrum it's it's quite different in Terms of Um how it's impacting them but generally The very early stage precede C depending On seed is pretty broad I guess but the Earliest stage is nobody is immune but There may be a little bit less affected Because there's not much there anyways It's you know a couple Founders they Building products they haven't hit Product Market fit so nothing really Changes per se at the late stage Obviously there's a lot of Carnage Evaluations being slashed um just a lot Of a lot of stuff going on but Oftentimes not always but a lot of times These companies may may have cash Reserves or ability to get cash so that They keep going it's really everyone in The middle the series a series B I think They are actually dealing with the most Uncertainty because they may have gotten To product Market fit they don't have The cash reserves typically like a

Unicorn later Stage Company and many of Them especially just because of what Um the you know how things have been Over the last few years they've always Tried to Push growth over profitability I'm sure They get that advice from their Investors and that's what investors are Looking for very investors who maybe Pull them back a little bit Yeah so it's Definitely been harder for the the Series a company is looking to read Series b or the late seed companies Looking to raise an a just because Investors are being much more cautious It's a this is a I started was I didn't Want to interrupt you there but yeah um Has the VC founder power Dynamic if you Know if there must be some Dynamic there Um and has it shifted this year does it Look a little different because there is Some talk about like a buyer's market Seller's market Um for for a little bit it was like ah We got to get term sheets real quick Because we want to get in on this cool Deal this Deal's so hot that we got a Think real fast we gotta has that has Has that changed this year has the Dynamic shifted Uh in general I would say that in in in Times where capital is more scarce and Of course it's more of an investor Friendly market in terms of getting more

Favorable economics I will say though That for there are still the the quote Hot companies and they're still they're Going to still be able to to command Whatever terms they want maybe there's Fewer of them because what is deemed as A hot company is is getting you know Dwindling a little bit Um but so I I definitely have still seen That happen but in in general though you Know a lot of companies who maybe were Trying to raise at a certain valuation Realize they just they can't command That or the companies that are in a much More Dire Straits are trying to raise Bridge rounds and they're raising either Flat or down rounds so it it in some of Those companies that may have happened Anyway but there's there's definitely More of that happening nowadays sure Sure and what's as you mentioned there Are still hot companies Um I'm not sure if you want to provide Specific examples but but what sectors Are are hot right now versus Um perhaps last year so one example that I've heard is that fintech isn't isn't As hot as it was blockchain isn't Um some areas like climate Tech plugging Plugging myself a little bit here but Some areas are are feel still pretty or Somewhat frothy because The crisis is so uh present

Um so I'm just curious What are you seeing a lot of or or what Do you think is is getting a lot of you Know heat yeah I mean I'd like to say That there's some Rhyme or Reason to This but you know you mentioned Blockchain or web3 I mean yeah you would Think that generally that sector is There's Um it's there's also a lot of Um crypto winter or what not going on But Um you know I have seen some blockchain Companies still raising at crazy amounts Um and I'm guessing that's largely Because they were probably very early And the founders have that pedigree They're able to raise so there's still Some anomalies like that but I do think That when you know when it comes to What's more interesting for investors Exactly like you said it's it's the Companies that maybe are solving very Hard problems I've seen some of these With the like AI or Um Uh AI or ml companies um certainly Things that are in uh sustainability Climate and health is still obviously Always going to be a problem and a big Big area to serve and Um with fintech I think there's certain Aspects of fintech that are Seeing a lot more pullback like all the

Lending companies by now pay later of Course there's less interest in that but Even with some of the fintech companies Especially just again from our vantage Point we see a lot of these companies Being built in emerging markets that are Those those issues are a lot different Than say the US those companies are Still there's still a lot of interest There Well Global is literally in the company Name now and so I I do Wonder as has the Downturn affected your interest in Companies Beyond San Francisco beyond The bay there's so much talk in recent Years about you know do you even need to Be here Um because of remote work because uh the VC industry's gotten so large Just I'm curious any thoughts on are you Bringing on more uh global companies are You are you Kind of focused more back on on the Areas you know you know best which Perhaps would be nearby Uh no definitely for us like it doesn't Change anything because we have been Investing you know in Silicon Valley but Outside of Silicon Valley since you know For the last 12 years before there were There was much funding in any of these Markets so it definitely doesn't change We are actually continuing to to press Forward in a lot of these different

Markets both new to us or newer to us And once we have deep deep roots in like Southeast Asia we've been investing There since 2011. Um Latin America is is quite active for Us Middle East North Africa sub-Saharan Africa Um Eastern Europe et cetera so it's it's Continued to be a focus but I think Because of the last couple years it did Open up a lot more interest from Investors to invest outside of Silicon Valley because there was really no no Choice everyone was doing zoom and got Comfort in doing diligence remotely but I think now both with the world coming Back as well as everything going on just A lot of a lot of volatility that risk Is now being pulled back where you know An emerging market for an investor in Sandhill Road might have been seen as It's higher risk for them they just Don't know you know they don't know Pakistan they don't know Malaysia they Don't know Singapore so Um because of that it's no surprise a Lot of investors are now pulling back Because they see those markets as high Risk but you know again for us our model Is built around investing in markets all Around the world so it doesn't it Doesn't stop us in any way I want to I Want to get to the accelerator and and

What you know that decision-making Process for Founders in a second but I Did want to ask just a little bit more About that the Um Do you think just as far as the VC World In general there is some pulling back Perhaps some investors are sticking to What they know is there I worry of what That means for diversity in in venture Capital and in the startup ecosystem Just because Um just sort of a sort of a A theory I have that if you if you're Pulling back you'd go back to what you Know and if you went to Stanford you're Going to maybe focus a little more on Those people it's so I'm just curious Um do you have any thoughts about Diversity Uh in in this ecosystem going forward Yeah I I would say that's definitely a Concern because if investors are pulling Back from investing in Emerging Markets Generally they're they're pulling back Into investing in what they know and at Least today It's it's still certain types of Founders sometimes their own networks Maybe have not been super diverse so Um that definitely is a concern Um I think the other issue is that for Maybe for some of the it's maybe it's Different for Angel Investors but for uh

Institutional Venture firms series a Firms you know actual Venture funds Right now they're likely not cutting as Many new checks they're taking longer Due diligence they're kind of there's a Lot of waiting and seeing and they're Investing that into their existing Portfolio companies so that does mean They're not cutting as many new Relationships or new checks and if their Existing portfolios are not super Diverse then it's just the money's not Going out into diverse Founders but um But I mean one of the you know this this Changes is is slow it takes a long time Unfortunately I do think that what has Been maybe a silver lining in this is That there are a number of diverse Managers that have launched their funds And continue to build their funds and Really invest and of course it's not all On them to be doing doing that work it Really should be the entire industry Um but I I'm excited to see many of them Raise their next fund raise larger funds So that has been exciting but I do think That that's also it goes back to the What what you're comfortable with and What you see as a risk unfortunately That's a risk for some people whether They want to admit it or not but yeah I Appreciate you speaking candidly about It I think that's just a very important Topic but this gets right into the

Accelerator side because I think an Aspect of what you're interested in or In doing with the accelerator is is Bringing people into the fold Um it's not easy to break into these Networks of VCS Um sometimes it's not even easy to find An email address for a VC I think it's Gotten easier in recent years but Um so so one of the advantages of the Accelerator program which which is still A big part of 500 is is bringing people In like do you have any I'm just curious Do you have any thoughts on that like When Um when should Founders be considering An accelerator today Um I I think there's there definitely are Still a lot of really strong benefits to Being part of a an accelerator or if a Firm calls in an accelerator just kind Of like a seed like a Founder program Because it it helps you get that Mentorship or access in in um in a way That's hence the name like maybe more Accelerated than if you're trying to go About it on your own but I think one of The biggest things for us is that Founders are able to connect with Founders going through the same Challenges and that's something that is Um can be built on your own to some Extent but being able to immediately

Just jump in and be immersed with other Founders that are early stage also Trying to figure out how they get to Product Market fit testing out different Things I think that's something that can Be really life-changing actually for Some companies and in terms of when to Apply I mean it's it really depends on Where you are what you're looking for You know for some if they're looking to They're thinking about raising or they Do want to raise you know we love Working with Founders who are at that Point where we can help guide them in Terms of growth running experiments Learning how to to pitch their business And Um I you know there are some programs That take companies Pre-product or pre-id I don't know if You have pre-ydia but idea stage and Then there are some that want to have Something to work with so it really Depends on which program we generally Like to have companies that have have Product and you know they're in a Position where we can help them figure Out how to how to grow how to build Functional you know channels we have Taken some companies that are earlier Than that maybe depending on the Industry Um so you know we also had Founders Who've applied you know more than once

If they just didn't make it the first Time and and we've brought them in so Um so it really It ultimately is like What is what is what is it that you're Looking to build for your company what Are the Milestones you're trying to hit Hopefully this program can help you get There faster I I you more or less Answered this question but I wanted to Ask let's say there are some Founders Out here who are interested in getting Involved in an accelerator but there are Several well there's I would say there Are several like Marquee accelerators I Would consider 500 part of that I'd Consider YC part of that Um and then there are also so many Important accelerators that are more you Know I for lack of better word local so There are some in Los Angeles that Aren't quite as well known but are Interesting I live in Los Angeles so you Know the plugging my my own weird town In the process there but Um but yeah what what How do you how did they choose what Would you advise someone if someone was Like Hey I'm looking into accelerators But how do I choose which I think the best way is to talk to other Founders that have been through the Program so it's it's very you can look At the website you can hear even you Know our team talk about it and it it

Can give you some sense but I think that Whenever we have Founders who are Wondering if it's if it's a good fit for Them or if it's actually useful we try To put them in touch with other Founders That have been through our batch because They can give them a much more candid Answer if it helped them or not and what What what it had what they wish it had Or what they you know whatever whatever Is useful or not so I think um you know My my two cents is if you are Considering different programs it Certainly doesn't hurt to just apply to Them but if you're getting closer and Trying to really evaluate because time Is so precious as an early stage founder You just don't have much time and money But you just don't have a lot of time so The best way to really get to that Decision Um is talk with other Founders that have Been through those experiences and and See if it if it resonates with you and And and go from there I I have a Question here Um Uh regarding you know who to talk to uh When you're in the process of Fundraising in a down Market Um so it you know we'll be jumping Around a little bit that's the nature of The Q a Um and in a down Market this person

Asked should early stage companies be Targeting Angels or funds for their Round Um not quite sure I understand that but But does it any thoughts on on on who Should who should uh these Perhaps first-time Founders be talking To First Um I would definitely gear towards People who can one accessible to can Make quicker decisions funds depending On the fund may or may not fall into That category but I think generally you Should be building your investor Pipeline Target investors who do invest At that early stage so let's say it's a First time founder I'm assuming there's Not much there it's kind of pre-seed or Angel seed stage then typically the Investors that would back those types of Rounds are Angel Investors there again There are some seed funds that back Found are super early there are Accelerators that will participate so I Would not go after sequoia or Excel or Anything like that just because they Typically don't back those types of Rounds except they you know many of them Are now coming into the pre-seed space By launching things like surge or Arc There's a few programs like that for Sequoia you know injuries and obviously Just has been doing some dabbling in the Accelerator space they announced

Something I think yesterday for crypto Specifically But if you're if you're trying to say it Pitch a firm that typically does series A series B I wouldn't spend too much Time there that that's maybe more Relationship building but the ones that Can write quicker checks it's going to Be the individuals What so on the relationship building Note has that changed has that process Does that look different now Um there's are people really coming back Together Um and and doing things face to face and And building their own networks that way Are you seeing a lot of Discord groups Um for people still being very remote I'm just curious as far as uh part of The part of the advantage of being Involved in an accelerator is you know Kind of being stuffed into a room with All of these interesting people maybe Not stuff maybe maybe it's nice and Spacious but uh like this yeah you know But but do you think that face to face Is really important I I think it is I mean although you know I will the last couple years have shown That that clearly remote work can can be Functional but I do think now that Everyone largely there's I mean this Conference is happening people I've Talked to several people who were just

Really excited to be here after two Years of no travel so there there is you Cannot dismiss the in person of course Um and I've talked to many of our own Portfolio companies that have been Trying to deliberate between the hybrid Model in person just staying remote Um I mean for 500 as a firm we've been Distributed since the beginnings and Have an office so we've always been a Bit hybrid as well and that that can Work but I do think that it you cannot Rely on 100 Zoom of course or 100 remote You are going to have to Um meet people in in real life Especially especially maybe key hires Your your own team I think that's Actually the biggest most important your Own working team your company certainly Investors Um you know I think again you you can Get come comfortable Initiating or building a relationship Remotely but that's that's only you know Half of that you know half of it to be a Really successful relationship I'm Seeing a lot of questions here about Valuations from the audience Um so if you don't mind me jumping back A little bit how are seed and this Person asked Howard seed and early stage Valuations affected by the down Market Um I'd imagine if they go down uh and and

They go back up and valuations can be Kind of a slippery thing onto its own But but Um Are you seeing uh you know we sort of Talked about this but are you seeing do Valuations really look so different now Because there's there's so many Different sides of of this and there's a Lot of Doom and it's in and you hear About Um you know all these uh you know smart Wealthy people uh talking about oh There's a recession we need to do this And that Um on the ground is do the valuations Look different At the so at the early stage if the Question is about You know like accelerator stage or Precede pre-institutional round Um I mean from my observations with the Founders that we've been talking to or Our own portfolio there isn't a dramatic Shift it's nothing like obviously like Series a series B growth stage Um if there is a shift it's maybe it's It's not again it's not significant I Think Um you know it may be like a Founder That was trying to raise at a 15 million Cap now they're they're maybe they raise Some there but then they maybe drops Down to to 13 or you know it's so in the

Grand scheme of things it's not a huge Shift and I think that the valuations Wise again a lot of the the real impact Is certainly at the later stage those Are much bigger numbers that are being Slashed sometimes in half or at the the Some people call this late stage for It's generally still early stage but Like the series a series B like there's Definitely Um changes in terms of how investors Value the companies whether it's on uh You know like as an example for a Marketplace company typically in in Good Times there may have been multiples on Their gmv but now gmv is is not as um You know not as exciting of a number They may wanting to look at your actual Revenue and counting that and for a lot Of marketplaces that's a pretty low Number so Um so the the multiples are changing but That I think you know you don't really Think about that as a very early stage Company Um but you know we've seen ranges of Companies trying to raise from anywhere From you know seven to Fifteen sometimes 20 20 seems high nowadays yeah well but The range is still very very it is wide Exactly yeah it's a very different world Even just 10 years ago that yeah those Numbers look I mean it all sort of It's almost difficult to keep track um

We got several questions that just come In Um Is it wise to go to and go into an Accelerator after you've already raised Pre-seed Yeah I don't think any signal like Negative signal there there's plenty of Our Founders have raised have raised Some money and then come be part of our Program so I think the valuation shift I Think it's not necessarily something That should be seen as a like it's not I Wouldn't consider that the equivalent of Taking a Down Round it's really more That if you're going through a certain Program or accelerator the terms are Obviously the terms that they set like Standard terms but it's really because Theoretically they are you know these The the accelerator is working very Closely with you and adding a lot more In terms of resources than you know an Angel investor would so that's it's Pretty I think standard and typical for All the programs out there so it's Really again it's ultimately what what You're looking for but you know we've Seen a lot of companies that have raised Funding and have gone through our Program they've gone through other Programs and I nobody really I mean in My minority bats and I I think Founders Are concerned it's going to um it's a Tough sell to their investors if the

Accelerator comes in at different terms But usually there are ways to to Navigate that this is sort of an Operational question for you Um well hold on where to go where there You are Um I thought this was interesting have Has uh 500 uh has have have your Corporate Partners changed their Behavior or strategic priorities lately So are your partners like you know still Kind of you know in the trenches with You Um pumped and participating or they sort Of have you noticed the the corporate Support and interest in in the early Stage pulling back Uh I Um If if I'm hearing that question if it's About corporates just generally Corporates in in the ecosystem it it can Vary Um as well like there's definitely Corporates out there that will pull back Their spend on Innovation or whatever it Is and I mean just from our observation They may have less they may be less Acquisitive than in the past if they Have some sort of CBC arm maybe they Don't invest as much and then there are Some that are actually Continuing as planned maybe it depends On the industry that they're in or how

They view their investment arm so it it It kind of it varies I think there are Definitely corporates who who need to Invest into to startups and Technology Because their legacy business is not Going anywhere Um but you know beyond that it's it's uh Like if I can point to some of our later Stage companies that have exited Um you know for some of them they are Like like the the ones I've mentioned They are also looking at their own cost Structures and they've had to go through You know they've seen it's been a little Bit of a bloodbath for for a lot of of Companies that have gone public and as You know in in certain sectors but Um but I would say like it's it varies Honestly like it's not like by and large All corporates are pulling back from Venture or anything like that sure sure So last question we're just about out of Time I just wanted to ask Um what's your outlook for the next year In the startup world and it's you know For the world in general and then for For 500. for the next year or two uh so For Outlook for for early stage for Founders um Early stage It's relatively immune or Relatively decoupled from the macros I Mean that's I I don't believe that Anyone is is completely immune but for The most part you know starting a

Company Um you know in those hard times it can Actually be a great thing just in terms Of if you can get through that then you Know that's that's that's actually Pretty exciting for for the company I Mean we look very positively on that but I do think that in terms of there's a Probably very common question is is it Going to be harder to raise should I Raise now should I raise next year I Can't tell you if it's going to be Easier next year like nobody knows but I Do think that if you can really focus on Making sure that how you position your Company is is Um you know it shows like you really are Solving a problem and and you you have The fundamentals investors are really Going to be looking for that a lot more Closely even at the earlier stages Obviously you don't expect you to be Profitable as a very early stage company But they do want to see that it's more Of a focus than just growth at all costs So I think that you know next year it's Probably going to continue to be pain But I also think for early stage Especially for us as a venture firm These are not you know one-year Cycles Right funds are 10 15 years there's Always going to be some blips in in or More than a blip in the market Geopolitical risks like we can't control

That sure but again because we are Playing for the long game Venture is not An in or out asset class we're going to Continue to invest and I think that's That's the same long-term view Founders Should take as well and you're feeling Good about your portfolio your Investments where you're where you're Placing your bets now yeah I'm excited I Mean because we we are very Diversified In terms of sector stage and and GEOS Like there's there's very different Um there are very different Trends and Behaviors we're seeing in certainly in Silicon Valley but in other markets Around the world so companies are going To continue to be founded and there's Still a lot of capital out there that is Not exposed to venture or Tech that Wants to be and so we're excited about That cool cool well thank you so much For being here thank you everyone for Listening and and uh in just a few Moments we got a break and then we'll We'll have another panel here but thank You again I really appreciate it thank You