Everyone knows the winners. Very few know how they were picked. Dave McClure explains how 500 Startups built one of the best-performing seed portfolios in venture capital, why investing in hundreds of companies was the strategy everyone mocked, and how patience turned a $2.5 million fund into one of Silicon Valley's biggest success stories.
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What David McClure said
Written from the verified transcript and checked against it. Every figure links to the moment it was said.
David McClure, former founder of 500 Startups, discussed his early angel investing days and the origins of his 'lots of little bets' strategy. He said he was laughed at when he named 500 Startups, and that his first 15-20 investments mostly failed. He credited the decreasing cost of computing and the influence of investors like Ron Conway and Paul Graham for the shift to small tickets in many companies. He described his approach of investing pre-product-market fit and doubling down on evidence of traction. He cited Twilio, Lyft (then Zimride), SendGrid, Credit Karma, and Life360 as successes from his Founders Fund portfolio, which returned 60-80x. He invested $2.5 million and returned $180-200 million, with four unicorns at valuations below $5 million. He noted the long feedback loop, with some investments taking over 10 years, and mentioned still waiting for the Canva IPO after almost 15 years.
Key takeaways
McClure's Founders Fund portfolio returned 60-80x, with $2.5 million invested returning $180-200 million.
He made 40 investments at Founders Fund, yielding four unicorns (Twilio, Lyft, SendGrid, Credit Karma) and a 10% hit rate to unicorns.
All four or five unicorn investments were made at valuations below $5 million during the 2008-2010 nuclear winter.
He still waits for the Canva IPO, almost 15 years after investing, showing the long time horizon for returns.
2:33How much did you look at the volume as a strategy game, as almost experiments from one perspective?
4:42This may be a weird question, but is it kind of frustrating in the moment that the feedback loop is that long?
6:47I think what you just heard from Dave is the internal validation, the motivation of being with the founder, seeing how they think, how they work. It's the process, right?
I used to get laughed out of the room a lot of times when I said the name. Literally people would laugh in my face when I said 500 Startups. I think the thinking came out of the early days of my angel investing and then later when I worked at Founders Fund a little bit. I kind of started doing angel investing the last few years I was at PayPal. We had made a little bit of money from the IPO. Folks like Peter and Reed were very active angel investors. There's a whole bunch of us at PayPal who kind of followed in their footsteps and started doing angel investing really when we didn't know what the hell we were doing. I had a background in engineering and programming and then a little bit in marketing. So I kind of felt like I had some insights that were interesting and that got me into some deal flow. I really did not know very much about investing or the structure of deals and certainly screwed up a lot of the early investments that I made. Gradually I started investing alongside some other really great people. Got to get into some deals with Ron Conway and Josh Capman at First Round and Jeff Clevy and Aiden Senit and some others. You learn by doing in many cases. But my first 15 to 20 investments, most of them failed. And even when I was working at Founders Fund, although I had a really great portfolio that returned 60 to 80x, I made a lot of investments that didn't work. And so my takeaway from a math background was, well, I need more shots on goal. You do see outliers, but you see them very infrequently. And so I felt like most people's early stage portfolios were just really undersized. I started to see what Ron Conway was doing at SV Angel and Josh Koffman at First Round and then Paul Graham at YC and later Naval at AngelList and they all kind of independently came to this idea of doing lots of little bets. Part of that was also because the cost of computing and doing startups was coming down and that happened with the advent of AWS and open source computing and just a lot of other models that happened between say 2005 to 10 maybe. And so the cost of building startups was coming down and so the ability to do small tickets into a large number of companies was actually a lot more doable than it had been ever in the past. So kind of all those things happened around the same time and we came up with a name. It's kind of funny actually, Katon Shaw was actually a friend of mine who helped me come up with a name. I helped name his company which was Kissmetrics at the time. He helped name my company because I'd been doing 500 Hats. But it really was just like, yeah, let's make a lot of bets and we know that only a few of them are going to get to the next level.
How much did you look at the volume as a strategy game, as almost experiments from one perspective? Like, oh, these are all companies and I guess they are, but when you're starting out anything, it's a pretty small experiment that you're...
Well, I think the idea was, if you're familiar with the term product-market fit, which kind of got started around that day, there was a lot of us who were doing metrics-related thinking. Eric Ries in particular, Steve Blank, Katon Shaw, several others. We actually did a conference called Startonomics way back in the day, I think 2007 or 2008 or something. I ended up teaching a class at Stanford. We taught a class on Facebook apps, which is kind of crazy, strange also. But it was all about thinking about distribution and lots of experiments. But specifically we decided, hey, we would make a lot of bets on companies and people pre-product-market fit when we could see a little bit of the product and maybe some users and maybe some revenue, but often not much. And then if they got to sort of product-market fit evidence based on usage or retention or monetization or growth in any one of those areas, then we would double down on it. And that was kind of the basic idea. Lots of little bets, probably a few of them will scale up and work, and then we'll double down on those. And that was kind of the idea.
Twilio, Lyft, which at the time was called Zimride, SendGrid, and Credit Karma, and then Life360, which took a longer road to get there. Basically did about 40 investments when I was working with Founders Fund. About 2 million of their money and a little bit more from Excel because I had run the Facebook fund program for a little bit. But out of those 40 investments, we got four, eventually five unicorns. Kind of crazy returns. I invested about 2.5 million and returned about 180 to 200 million. Okay, just depending on the math. Took a long time. You didn't know at the beginning, but we kind of got lucky that hit rate of 10% seed stage to unicorns was pretty good, over 100x returns on four of those.
McClure, D. (2026, July 21). The Seed Fund That Returned 60x: How Dave McClure Found Twilio, Lyft, and Credit Karma [Interview transcript]. Run the Numbers with CJ Gustafson. CEOInterviews.AI. https://ceointerviews.ai/interview/1116066/
MLA
David McClure. "The Seed Fund That Returned 60x: How Dave McClure Found Twilio, Lyft, and Credit Karma." Run the Numbers with CJ Gustafson, 21 Jul. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/1116066/.
BibTeX
@misc{mcclure2026_1116066,
author = {David McClure},
title = {The Seed Fund That Returned 60x: How Dave McClure Found Twilio, Lyft, and Credit Karma},
howpublished = {Interview transcript, Run the Numbers with CJ Gustafson. CEOInterviews.AI},
year = {2026},
month = {jul},
url = {https://ceointerviews.ai/interview/1116066/},
note = {Speaker-attributed transcript with timestamps}
}
