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Comment by suking | Hacker News Reader

I'd love to know how their spray and pray is working in terms of returns.

Based on shear numbers, "spray" is probably accurate. But I don't think "pray" is the right word. Obviously Dave cannot give every company a substantial amount of attention but he is ridiculously attentive, has partners and has mentors.

What makes you think their approach is spray and pray?

Because you can't do the due diligence a VC firm does when you invest in 250 companies.

They aren't investing VC level money either. The same criticism applies to YC as well doesn't it?

I'm not criticizing, I'm wondering what their returns are. We know YC has had some huge hits... has 500?

they've had some great exits (Backtype for one) and are in on some great companies like Twilio, Fitocracy, Sendgrid, Wildfire, and TaskRabbit.

Honestly, 10 have already exited, and they have at least half a dozen impressive companies in the pipe.

Are these companies AirBnB or Dropbox? Probably not, though Twilio is legit.

nothing like DropBox or AirBnB as yet, however hopefully a few Herokus on the way;)

looking good so far: Twilio, SendGrid (TechStars), Wildfire (fbFund), MakerBot, TaskRabbit (fbFund), Smule/Khush, Viki, Medialets, Zozi, ElaCarte (YC), 9Gag (500), ReadyForZero (YC), several others @ Series A/B/C doing pretty solid.

smaller but growing well: MindSnacks (DreamIt), 955 Dreams (500), PicCollage (500), Kiwi Crate, Visually (500), AppStack, MyGengo, Erply (SeedCamp), GinzaMetrics (YC), Farmeron (SeedCamp), ZenCoder (YC), Fitocracy (500), StyleSeat.

10+ modest early exits to Google, Twitter, LinkedIn (x3), Amazon, Groupon, Cisco, Facebook, ReturnPath, DemandForce, etc.

(apologies to any juggernauts or others i left out!)

DMC

MyGengo has built a fantastically useful tool which has saved me a ton of time and money. I don't know anything about the addressable market size, but they have <i>nailed</i> the product.

Cool - thanks.

due diligence is much better in the rear-view mirror, IMHO.

our 2nd check is a great confirmation of whether we were right or not... happens ~20-30% of time after 1st check.

"500 due diligence = mentor filters + quick 1st check, followed by thoughtful 2nd check based on metrics"

So what are your thoughts on the "signaling" issue if you only follow on in 20-30%? What do you recommend the other 70-80% tell investors?

1) we are quite clear with our companies that we are aligned in the goal that they need to perform to receive future funding from 500 (as well as others)

2) 500 is usually a minority investor in following rounds, so decisions still likely made primarily be lead investor

3) if companies and follow-on investors are more worried about our decisions & subjective assessments rather than the company fundamental business metrics, then there is already a problem.

we are in this business to be successful and make money. much as aim to help all of our founders, we sincerely hope they are too.

This is pretty interesting. It's kinda like high stakes online poker where you take luck out of the equation by playing thousands and thousands of hands.

Basically, you're going to have a run of bad cards (companies) and a run of good ones. But if your decisions are consistent, and adjust to migrate towards successes, you'll end up ahead no matter what... assuming you're moving in that direction.

It's really not spray and pray, just as high stakes poker doesn't really have anything to do with luck.

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