Oct 28, 2015 · 27m · 20vc
20 VC 083: 500 Startups Week: New Funds, Startup Mentoring and Dave's Masterplan with Marvin Liao, Partner @ 500 Startups
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In this episode of The 20 Minute VC, host Harry Stebbings interviews Marvin Liao, Partner at 500 Startups, exploring his transition from Yahoo executive to venture capitalist. Liao discusses 500 Startups' rigorous investment framework, key startup traction metrics, best practices for mentor relationships, and the firm's mission to democratize global seed capital.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 25% of the talking time here. How this is scored →
Harry as informed peer 2.9 Guest teaching 3.0 Guest disagreement 0.9 Harry pushing back 0.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 21:28 Dismissing Yahoo's future prospects
Marvin pulls no punches regarding his former employer, bluntly declaring Yahoo is 'toast' and a '1.0 company in a 3.0 world' that he would short.
Hardest push from Harry ▶ 6:39 Challenging the service-VC dominance narrativeHarry pushes the premise that the industry is moving wholly to Andreessen Horowitz-style service platforms, prompting Marvin to clarify that traditional lean models like Benchmark remain equally viable.
Biggest teaching moment ▶ 9:05 Teaching the Rule of Two to ThreeMarvin educates Harry on an unwritten Silicon Valley advisory concept called the 'Rule of Two to Three', which Harry explicitly admits he had never heard before.
Harry holds his own ▶ 15:17 Listing 500's global micro-fundsHarry displays sharp domain knowledge and interview prep by rattling off exact fund amounts raised by 500 Startups across global markets including Japan, Southeast Asia, and Thailand.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Marvin Liao's Background and Journey to 500 Startups | 1 | 1 | 0 | 0 | Harry opens with a standard background question regarding Marvin's move into Silicon Valley and angel investing. Marvin candidly shares his early career losses and how volunteering as a mentor at 500 Startups led to his full-time partner role. | |
| Key Insights and Career Learnings from Yahoo | 2 | 2 | 0 | 0 | Harry asks about Marvin's takeaways from Yahoo and what mentorship provides an investor. Marvin explains the rise of operator VCs and highlights how mentorship benefits the mentor through continuous learning. | |
| Why Marvin Liao Joined 500 Startups | 4 | 3 | 1 | 1 | Harry references Andreessen Horowitz's platform model to ask if venture capital is shifting entirely to service-based offerings. Marvin gently reframes the proposition, noting that traditional lean models like Benchmark and Accel continue to thrive alongside service-heavy models. | |
| Navigating Startup Mentorship and Advisory Rules | 2 | 6 | 2 | 1 | Marvin introduces Silicon Valley's 'Rule of Two to Three' regarding free meetings, which Harry acknowledges he hasn't heard of before. Marvin also corrects Harry on 500 Startups' portfolio size (1200 companies, not 1000) and defends their selectivity against 'spray and pray' labels. | |
| Investment Metrics and Promising Growth Sectors | 3 | 4 | 1 | 0 | Harry inquires about pitch evaluation metrics and check sizes. Marvin educates on how traction requirements vary sharply across verticals, contrasting pre-launch fintech needs with strict $10k-$50k MRR requirements for enterprise SaaS. | |
| Global Scaling and Dave McClure's Masterplan | 5 | 3 | 1 | 0 | Harry demonstrates high preparation by listing specific new fund amounts raised by 500 Startups in Japan, Southeast Asia, and Thailand. Marvin elaborates on Dave McClure's vision of training local VCs internationally rather than just investing directly. | |
| The Humbling Reality of Becoming a Great Investor | 3 | 2 | 1 | 0 | Marvin reflects on how humbling venture capital is before moving into a fast-paced quickfire round. He offers candid commentary on former employer Yahoo being 'toast' and shares favorite tools, books, and recent investments. |
Statements from this episode (16)
Liao volunteered 10-15 hours weekly before 500 Startups hired him
“I was spending almost close to, I think, like, almost 10 to 15 hours, like, a week over there, because it was fun, and they felt guilty, and I guess they gave me a job when they opened up the San Francisco office.”
Liao admits he was a 'horrible' angel investor who lost money
“As an angel investor, I'll be frank, I was a horrible angel investor, so I've kind of, my wife is still kind of pissed off at me for all the money that I lost.”
500 Startups employs 80-90 staff, including 14 growth and distribution experts
“We have almost close to, like, 80, 90 staff, and, you know, we have a team of almost 14 distribution, sort of, like, distribution in our terminologies, like, sort of, online marketing sales experts who help our companies and accelerator and, sort of, in the po…”
Silicon Valley's 'rule of 2-3' limits free mentor meetings before compensation
“There's this rule in Silicon Valley called the rule of two to three. ... You know, your first, like, two to three meetings, your first two to three introductions are free, but, sort of, if you, if they want more than that, there needs to be some type of, sort …”
Founders should avoid mentors who advise startups as their primary income
“I worry about, sort of, like, mentors who do this as, like, as their job, where they're, like, advising, sort of, startups as, like, their, you know, like, their main, sort of, like, income. I do, sort of, worry about that, where I, kind of, like, you do it be…”
500 Startups has invested in over 1,200 companies across its funds
“1200, I think to be exact, the accelerator and the, and our sort of main fund and some of the micro funds. Yes, probably about 1200. I think it's a little bit over 1200 now.”
500 Startups evaluated 1,100 applicants to select 36 for Batch 14
“We looked at over close to 1100 companies to get down to 36 companies.”
500 Startups increased its average initial check size to $75K–$100K
“It ranges between 50,000 to about a 100,000 dollars, so it, there's a range. But I would say, right now, you know, before, probably about two years ago, it was probably average of a fifty-k check. We're probably doing about 75 to about a hundred-k check sizes …”
500 Startups takes board observer rights rather than formal board seats
“No, we have board observer rights, but we don't take board seats.”
Liao: Seed-stage startups are 'stupid' to form a board of directors
“And in this early stage, like, frankly speaking, like, I think you'd be kind of stupid to have a board at a company like this early, at least the stage that we're investing in.”
Liao requires $10K-$50K MRR before investing in enterprise SaaS startups
“Like, I won't look at a pre-launch sort of like enterprise SaaS company. I want to see something in the range of 10 to sometimes 50,000 dollars a month in recurring revenue.”
Liao made seven or eight digital health investments in six months
“I've probably made about seven or eight digital health investments in the last probably six months now.”
Emerging startup markets lack investor sophistication, not entrepreneurial talent
“I think the big, sort of, gap in many, many markets now is really on the investor side, like, investor education and sophistication,”
Liao: Investors who dislike science fiction should not be in venture capital
“Like, any investor who doesn't like science fiction, I think, should not be in the investing game.”
Former Yahoo executive Marvin Liao predicts the company is 'toast'
“If I'm honest, I think they're probably toast. It's a one point O company in a three point O world. I just, I'm very skeptical. And this isn't anything against Marissa, but I just think it's just, it was such a mess when I left and I probably take some credit …”
Liao: Using M&A as R&D fails for most large tech companies
“I mean M&A is hard in, in general. I think most big companies are not good at M&A. I think like Cisco used to have a good reputation for doing good M&A. Boy, Facebook I think has done a great job. I think in the last week they'll be done. But outside of that, …”