The maturity of Bulgarian startups has been really impressive. I see this huge growth and the long-terms are very optimistic.
Earlier this month, at one of the biggest annual start-up events – StartUp Conference NEXT, we enjoyed an impressive line-up of speakers, mentors and successful start-up stories from around the globe. One especially memorable presence was none other than Marvin Liao. A recovering exec from Yahoo and a venture partner at 500 Startups, Marvin’s mission is finding raw talent from all around and helping diamonds in the rough reach the next exciting levels of their ventures. We had the chance for an exclusive seat-in with Marvin, talking about the progression of the CEE ecosystem, the formula for successful startups and the importance of metric tracking.
For the complete story check out our audio discussion on Soundcloud:
Could you please introduce yourself? What are you currently involved with?
Marvin: Hi, my name is Marvin Liao. I am a partner at 500 Startups, which is a Global VC Fund and an Accelerator program.
Could you tell us a bit more about your entrepreneurial story?
Marvin: Well, I am not really a true entrepreneur. I started at an e-commerce startup back in 1999. I was very fortune to join Yahoo, at around mid-stage, when it was probably around 3000 people. When I left, and I had nothing to with it, it was around 14500 people, so you learn a lot of stuff. I’ve been a mentor for a startup accelerators across the globe for several years and being involved with 500 startups and running their accelerator programs. We are running one in San Francisco. I feel like I know a little bit about this and you see a lot of interesting stuff.
You’ve mentioned in your presentation that you have been coming here (Bulgaria) for a couple of times. What do you think in general about the Bulgarian startup ecosystem?
The maturity of the startups has been really impressive. I see this huge growth and the long-terms are very optimistic.
Marvin: I’ve mentored at Eleven and I am good friends with the guys at LaunchHub and I love what they’re doing. I think compared to at least since my involvement here in 2012, there has been a huge change in the startup ecosystem in Bulgaria. The maturity of the startups has been really impressive. I see this huge growth and the long-terms are very optimistic.
You’ve mentioned that you are right now a partner at 500 Startups. Could you name a couple of factors that you consider when you decide to pick a startup and work with it?
We look for companies that have some initial traction, because traction shows that there is some need.
Marvin: Yeah sure. First, there has to be a working product already, we don’t fund Power-Point-ware and we don’t fund, so called, science projects. Another thing is initial customers, like users or like paying customers if it is B2B. Growing market is of course a criteria, or a market that we can understand very well like e-commerce or enterprise apps. We have a fairly big portfolio and some expertise. We look for companies that have some initial traction, because traction shows that there is some need. If somebody tells us “I have this great idea!” yeah, awesome, in order for me to judge if it is a good one or not, I look at what kind of traction you have or how you think about the problem you are trying to solve.
In 500 Startups, you don’t always work with US based startups, you also work worldwide, right?
Marvin: 25% of our portfolio is international. We have startups from Brazil, all across Latin America. We also have an accelerator program in Mexico City that brings in 20-30 companies every six months from across the Latin America Region.
What about Europe?
Marvin: We actually have quite a lot of companies in Estonia, a couple in Germany, in Turkey and in France. I would say that this is one piece of the portfolio that we would like to bulk up more. We are very interested in the European market and we do have companies, probably not as many as we have in Asia or Latin America, but we expect that this is probably going to change.
Maybe you can mention a couple of obstacles that European startups experience compared to US startups? Is there maybe a pattern?
Marvin: You know, there are awesome startup founders, startup ideas and businesses coming out of Europe in general. I think that the biggest challenge, compared to Silicon Valley, is the lack of investment. There are a couple of problems. Number one is investors, there are not as many of them in Europe. There’s also lack of follow-up on funding, if there is an early stage funding, there is no Series A or B or C. There is already a huge gap of series A funding in Silicon Valley and there is a huge in general gap all around the world. The lack of people with expertise at scaling, you know the product market fit is a big challenge, but a bigger one is how you scale this company. In Silicon Valley there is so much expertise from people like me who have been through this growth from a small or medium sized company to this massive company like Yahoo. So there is a big pool of talent and expertise there, but there are not as many of them overseas. That is going to change, it is just you don’t learn this stuff from a book. You learn it by experiencing it.
In your presentation you mentioned that companies and, more specific, startups need to do a lot of metric tracking. Could you mention a couple of metrics that you think are most crucial for an early stage startup?
Marvin: The answer really depends on the startup. Is it a B2C or a B2B startup? They are essentially really different. But generally speaking growth needs to be measured. What is the monthly average user growth over a period of time, is the amount of daily active users growing? You ought to look at engagement levels, are the sticking with your product? Retention levels are really important and that is relevant for both B2B and B2C. So a lot of the answers depend on what the startup is really doing.
Are there going to be any specific startup trends in 2015? Will the companies be focusing on becoming the next Facebook or Google or they are going to try doing something more local?
Marvin: Look, I observe trends, but I don’t invest based on trends, because I think by time the trend is really obvious it is already too late to invest in the early stage. I think that digital health is interesting and e-printing is interesting, but I wouldn’t invest in it just because everyone says that this is going to be next big thing. I look at both the team and the market.
After dealing with a variety of startups, if you were to choose between two factors: having a great team or having a great idea. Which one would you choose?
Marvin: Great team. In reality just an awesome idea is worthless. There is no original idea in my opinion. There is original execution. The idea that you start with, this is based on my company’s sample size, you end up talking to a lot of customers and get some initial feedback or some initial traction and based on feedback you say “Oh wait a second, that doesn’t make any sense.“ The reality is that the idea is going to change and the execution is way more important. I think having a strong team is more important. I would bet on a team over an idea any time. Even in 500 Startups, yearly stage is way more important to bet on the team. We bet 70% more on the team, rather than the idea.
Any final comments or message that you would like to leave for the Bulgarian ecosystem?
Marvin: The message that I would probably give to the Bulgarian ecosystem is that startups right now are kind of sexy and cool and if that’s the reason you’re doing it then don’t do it. This is a thought game so do it if you are deeply interested in the problem or the market. That is really hard to figure out, so my view is: Do something because you are deeply interested in it and not simply because it is cool. You are not going to last. The reality is that most startups die. You can look at the numbers. A lot of it is not because people don’t want to work hard. You need to be flexible and open minded, but in the same time determined and that’s a tough mix. For example, being too determined and not listen to feedback is stupid, because you think that this will waste your time. On the other hand, if you change your idea based on the last person you talked with is pretty stupid too. How do you find that, sort of, in between? That is hard.
*Special thanks to Vlad Muntean for conducting the interview and being an active part of this project! Cheers!