There’s never been a better time to start a consumer Internet company in Silicon Valley: the place is hot with incubation programs for early-stage startups.This morning, Dave McClure’s 500 Startups unveiled details of its accelerator program, which has been quietly underway for the last few months.
The program offers between $25,000 and $100,000 funding in exchange for 5% equity (with some exceptions), and lasts for three to six months. That’s more money than is available through Y Combinator — perhaps the best-known such program — but doesn’t match the additional $150,000 Yuri Milner and Ron Conway offered each Y Combinator startup on exceptionally entrepreneur-friendly terms.
I talked to McClure earlier this week before the announcement, and asked him if there was a bubble in early stage funding, as some have complained.
“Maybe, but what’s the big issue with that? A bubble in early stage funding means maybe there’s $300 million at work when maybe there should be $150, as opposed to a bubble in late stage funding which means there’s $20 billion at work when there should be $3. The Valley’s not going to explode because there’s a bubble in early stage funding.”
The current opportunity is too great to ignore, he says: “I think it’s a wonderful time to be investing in consumer Internet ideas, the macroeconomic picture for goods and services around the world is growing dramatically. In the US because of iPad devices you’re adding lots of young users and old users who weren’t in the market before.”
In addition to funding, the 500 Startups Accelerator program also offers access to 120 mentors, sponsorships from infrastructure providers like Microsoft, Rackspace, and Amazon Web Services, and office space at 500 Startups headquarters high over downtown Mountain View — with an amazing view of the entire Bay Area. They also get a chance to participate in a demo day on April 6 and 7, where they’ll present their creations to potential investors.
Currently, 12 startups are participating in the 500 Startups accelerator, including a dating service for food lovers called Spoondate, email management company Baydin, and a “super secret” startup being built by former Mint.com marketing VP Stew Langille. The program has no open application process right now — startups must be referred by somebody who McClure and fellow principal Christine Tsai know and trust.
McClure also talked to us about what’s really driving the current round of investment, huge valuations in late stage, and his opinion that Facebook is actually UNDERVALUED at $50 billion.
We’ll post more from the interview tomorrow. In the meantime, check out this video showing off the great space 500 Startups companies have to work in: