McClure Delivers Harsh Truths, Advice to Begin Denver Startup Week

Dave McClure isn’t interested in being a cheerleader. If you were at his speech that kicked off Denver Startup Week on Monday, you didn’t get a pat on the back, but rather a kick in the ass—and maybe other parts of the anatomy.

“There’s a lot of rainbows and unicorns bullshit that goes on, and I think we have to temper that with some reality,” said McClure, a prominent tech investor and founder of 500 Startups. It was a bracing message to deliver to an audience of several hundred entrepreneurs, investors, and government leaders eager to talk about how exciting their startups are and how great Denver is.

While McClure was blunt, he didn’t seem out to rain on anyone’s parade. He’d probably even call himself an optimist. But he was conveying a truth he’s seen investing and as the founder of 500 Startups, the California-based incubator and seed fund.

“Most entrepreneurs fail,” he said. “Stick with it. I believe in you. At least one-out-of-ten of you.”

Here are some observations from McClure’s speech.

Long odds: McClure kept coming back to an unavoidable truth that entrepreneurs and investors often try to avoid, especially at events celebrating startups: The overwhelming majority of them will fail, and investors repeatedly will lose money backing companies that flounder.

That’s not just an observation from an observer on the sidelines. McClure has invested in several hundred startups at this point, and he expects at least 80 percent of them to fail or at least not return an appreciable exit. And those are the startups that are perceived to be promising enough to catch the attention of a well-known early stage investor or enter a highly regarded incubator.

The long odds have consequences for entrepreneurs.

“Most of you are going to screw it up, but try and learn, fail fast, start again, and start over,” he said.

Also, perhaps paradoxically, don’t be paralyzed by the fear of failure because it happens to almost everyone, including brilliant people.

After all, McClure isn’t afraid, he said. Otherwise he wouldn’t be risking money on all those startups. The chances of finding big winners—even those elusive billion-dollar unicorns—only fall to zero if you never invest or try.

“Most things fail. Ninety percent of everything is crap! Why am I optimistic about this? Because 10 percent kind of works,” McClure said.

Easier than ever: At the same time, it’s easier than ever to create a company, he said.

Several technological and business trends have made it the “age of the lean, little cockroach startup,” instead of “the era of the big fat dinosaur startups” that ended when the dot-com bubble burst. For example, the cloud has ended the need to purchase expensive servers, development cycles are faster than ever, there are more potential customers than ever, and investors are emerging almost everywhere and can be found through AngelList.

“The chances for entrepreneurs are better than ever. They may be only 10 to 20 percent, but they’re better than ever,” McClure said. “It’s easier by a large margin to be able to build startups, reach … Next Page »

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