About David Mcclure
Dave McClure, founder of 500 Startups and now Practical VC, has been discussing his past investment strategy and current views on venture capital in several recent appearances. Reflecting on his early angel investing and time at Founders Fund, McClure said he invested about $2.5 million across 40 investments, which returned an estimated $180–200 million and produced four to five unicorns including Twilio, Lyft, and Credit Karma. He attributed this success to a strategy of making many small bets, stating, "I need more shots on goal" and that most early-stage portfolios were "just really undersized." He also noted that the feedback loop for such investments is long, with winning companies often taking more than 10 years to exit.
In more recent commentary, McClure has focused on the secondary market and the challenges facing traditional venture capital. He described the current environment by saying, "I think the equation has shifted from it's probably better to be an entrepreneur right now than an investor." McClure's firm Practical VC targets secondary transactions, which he said offer a "shorter time to liquidity" than typical VC funds that now take closer to 15 years. He identified a "secret stallions market" of companies with $50–100 million in revenue that are not widely known but are on a path to exit, calling it a "bigger than a trillion dollar market." McClure also predicted a "10x increase in alternative assets over the next decade," while cautioning that the lack of transparency and stale valuations in venture capital make it a "wild wild west" compared to public markets.
Source: AI-verified profile updated from David Mcclure's recent appearances.
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Transcript (4 segments)
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David Mcclure0:00
Tether is the largest global stablecoin operator, probably more than half the overall market. What's the news about Tether this week, Alan?
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Alan0:10
The interesting new information on Tether is that they are now over 500 million users, which struck me as a huge number given that they are the primary issuer of stablecoins in the world. As you said, they basically allow anyone to invest in the US dollar. You think about the US dollar and how many Americans there are; there are only 340 million Americans. So how does Tether get 500 million users when there are only 300 million Americans? Well, most of their users are primarily outside the US. There are a ton of people in Latin America and Southeast Asia who are looking to hedge against their currencies and basically buy US dollars to hedge against devaluation and to create a stablecoin investment that allows efficient cross-border payments. It's actually very good for the US dollar, at least in the short term, because all this money going into savings accounts that then go into US dollars means there's more liquidity and stability in the US financial system. Most of this comes from outside the US. The other interesting thing that Tether revealed is that they are very profitable, which we knew. They made over 13 billion in profit last year, which is twice as much as BlackRock, the biggest asset manager in the world, which makes 6 billion. These guys make 13 billion. So in terms of hitting these milestones for a tech-enabled company doing this kind of financial inclusion, these are huge milestones set in record time frames.
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David Mcclure1:43
My guess is probably a good bit of those users are coming from Asia. I think stablecoins are very popular out of East Asia, probably Southeast Asia, East Asia, China, Korea, Japan, Philippines. I don't know how much of that is actually legal in China. And then maybe another big chunk is in Latin America. So if I look at some numbers from ChatGPT, about 45% of Tether's global volume is coming out of Asia, another 18% from Latin America, only 11% from the US, Europe maybe 14%. It doesn't really solve much of a problem if you're an American or in a Western European euro-denominated country; if you need to buy US dollars, it's not that hard to do. But the places you mentioned plus Africa, there's a massive opportunity in Africa where the number of bank accounts is still very low and financial inclusion is still a real problem. People cannot buy US dollar-denominated assets easily through banks or brokerages, but this makes it trivial. If you can earn a 4% or 5% yield on your US dollars and hedge against your currency devaluating, I think it solves a massive problem in those parts of the world. That's a tremendous benefit for financial inclusion globally.
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Alan3:14
Well, I'm not sure that's always such a great buy given the US dollar has dropped against the basket of global currencies fairly substantially this year. But in terms of brand recognition and consumer psychology, they probably still think of the US dollar as the stable global currency. Even if that's not completely true, I think we're going to see massive growth and adoption of stablecoins, which also implies massive adoption of the US dollar as a global currency. I think people forget or don't connect the dots on stablecoins being tied to the US dollar. Each one of those stablecoin users is essentially making a bet on or buying US treasuries or some kind of security connected to the US market. That's mostly what Tether does today. In the short term, that's right. I suspect what'll happen is Tether will start to do things like, to the extent that the US dollar is easy and liquid, start there. But then a gold-backed Tether fund or maybe a Canadian dollar-backed fund, or a yen-denominated fund, or tied to some basket currency. The US dollar is the gateway drug and opens up a lot of other possibilities, but for now it's definitely benefiting the US financial system and the liquidity from the dollar. So that's good for the US too. All right, one more story we're going to cover here. This is a smaller AI story happening in Japan. A company called Sakana, which is a rival to OpenAI but only in the Japan market, is raising about 100 million at a 2.5 billion valuation. Two and a half billion doesn't sound like much compared to OpenAI's 500 billion valuation or Anthropic at maybe 300 to 500 billion, but it's interesting that we're seeing regional AI companies having their own great stories in Japan, not necessarily known as a huge AI development center. Still, for a country with 100 million people in a fairly advanced economy, it's interesting. They're still top 10 and because of their own unique language and culture, you'd think they'd have AI LLMs happening. That makes sense. I think every country will want their own technology more relevant to their native language and culture, so it's good that development is happening. On a relative scale it's still not where OpenAI is, but 2.5 billion is still pretty healthy. Nvidia is the big investor there, continuing the theme of putting themselves at the heart of the AI gold rush by being involved everywhere there's AI LLM development going on.
