It’s been a little over a year since accelerator 500 Startups rebranded to 500 Global in an attempt to reposition itself as a venture firm. It also launched a $140 million fund to invest in later-stage companies for a total of $2.8 billion in assets under management, according to its website.
The new 500 fund has a strategy similar to Y Combinator’s continuity fund, which exists for growth-stage investments and contrasts with Techstars, which recently closed an $8 million pre-seed fund for startups too early for even its own accelerator.
This repositioning of 500 Global’s brand and priorities sets a fresh, broader tone for its new accelerator participants. This week, over a dozen startups in the firm’s accelerator program presented on a virtually held live demo day, which featured several moonshots, debuting weeks after Y Combinator’s demo day.
The demo day seemed a perfect time to check in with Clayton Bryan, partner and head of 500 Global’s accelerator fund, to hear how the accelerator program has evolved (and if there’s still a point to this demo day madness).
No summer breaks for startups
Bryan made the case that 500 Global’s approach to accelerator programs, while intensive on the back end, has really resonated with founders who apply.
The investor highlighted the effectiveness of rolling admissions, which its two main accelerator competitors, Y Combinator and Techstars, don’t do. Three years ago, 500 Global said it would decide on investments all year instead of just twice yearly. Demo days will still happen biannually, but startups can choose which demo day they want to be a part of.
“That change has really resonated with founders,” Bryan said. He compared the previous version of 500 Global to a school with an annual schedule: There are times when you’re doing homework, times when you sit back and recruit, and summer vacation. Now, it’s year-round, and he admits it’s more challenging to manage, “but at the same time, much more appreciated by the founders.”
“I do think it makes us more competitive,” he said. “We can more frequently talk to founders and they can start our program at different points in time. They don’t have to wait for that application to open or that deadline. Whereas [with] some other programs, they might say, ‘Hey, wait for a couple more months so we’re accepting applications again.’ I think that openness and flexibility gives us a bit of an advantage.”
Similar to others in the accelerator world, Bryan described demo days as an important motivator for investors and founders to hit deadlines.
“We’re helping facilitate a marketplace of equity buyers and equity sellers, and just creating that environment is helpful to the companies. It gives them the ability to understand if they are pricing their equity correctly,” he said.
This batch, 500 Global advised startups to start fundraising early, prioritize an 18-month runway and manage finances responsibly, similar to other conventional venture advice.
Currently, 500 Global offers accepted startups a $150,000 investment in return for a 6% stake. It also charges startups $37,500 to participate in its program, but the website indicates that the fee can be deducted from the startup investment.
In comparison, Techstars offers up to $120,000 in exchange for 6% of a business, which is around the same as 500 Global, accounting for the deduction. Y Combinator recently expanded its standard deal to offer upward of $500,000: Startups are offered $125,000 for 7% equity, as well as $375,000 in the form of an uncapped SAFE note — a simple agreement for future equity — with a “most favored nation” clause.
When asked if 500 Global will expand its check size to keep up with other programs or even spendy VCs happy to write bigger pre-seed checks, Bryan declined to go into details.
“We’re not immune to the changes that are happening in our ecosystem,” he said. “We can’t rest on our laurels; we’ve got to make sure that we have compelling deal terms.”