Dear Partners of 500 Global,

Rather than recap the macro state of the VC market, I’ll point you to a couple of reports that show a recovery in US valuations and total deal value at an eight-quarter high (Q2 2024 PitchBook-NVCA Venture Monitor) with global deal sizes growing 17% in 2024 YTD vs. the average in 2023 (CB Insights State of VC Report Q2 2024). Instead, today I’ll reflect on 500 Global’s journey and the founders we’ve partnered with as we celebrate our 14th anniversary!

Since we launched in 2010, we can count 35+ portfolio companies valued at a billion dollars or more and 160+ companies valued at more than $100M¹. In addition, we’re proud to say our portfolio companies in aggregate have a cumulative valuation of $300B+².    
 

As we look at the current technology-driven productivity gains, we believe this is an exceptional time for innovation and growth. History demonstrates that challenging economic periods, coupled with significant technological advancements – like AI – often lead to the emergence of some of the most successful and groundbreaking companies.   
 

Regardless of when a founder builds a startup, it is both an exhilarating and challenging endeavor. Thanks to the democratizing nature of cloud and AI technologies, founders are entering an environment with lower barriers to entry, which also brings heightened competition. While primary seed valuations and round sizes are rebounding to near 2021/2022 levels, navigating the competitive landscape and securing funding remains a daunting task, and founders need robust support to stay competitive.   
 

Pre-AI playbooks are losing their effectiveness. As a rising tide enables everyone to build better and faster, the opportunity cost of mistakes increases. Everything from go-to-market strategies to operating cost structures, technical stacks, and competitive moats needs to be rethought to stay competitive. Fortunately, we've seen over 3,000 founders in our portfolio over the past 14 years adapt and innovate in dynamic environments like the one we're currently experiencing, across industries and business models. We leverage these collective learnings to help our founders learn to secure new customers, understand the milestones that de-risk their next fundraise, and develop product and distribution strategies that provide a durable edge against competitors.   
 

You can read more of my thoughts on our anniversary here, and be on the lookout for more posts from our team. In short, our latest updates to our Flagship Accelerator include a revamped mentorship structure with Alumni-Founder Coaches (AFCs) and Entrepreneurs-in-Residence (EIRs), who provide real-world insights and hands-on support.  This deeper connection between alumni and new founders fosters a practical, experience-based learning environment. Our refined curriculum emphasizes customer discovery, product-market fit, go-to-market strategies, pitch development, and fundraising. All of this is with the same goal - to help founders grow efficiently, develop into exceptional leaders, navigate today’s challenges, and seize the opportunities ahead.   
 

We’re committed to building a community where meaningful, long-term relationships thrive, and we’re excited to see the impact of our updated program on the next generation of innovative companies.   
 

Vertical SaaS is one of the more interesting opportunities we’ve been investing in, seeing traction as well as renewed and growing market interest. Bessemer Venture Partners published their State of the Cloud 2024 report in June and highlighted that the top 20 US publicly traded vertical SaaS companies now hold a combined market capitalization of ~$300 billion. And one more privately held SaaS startup could soon join the ranks of publicly traded companies, with reports of ServiceTitan reviving preparations for an IPO.    
 

These companies can create deeper business value because they specialize in a specific vertical where there are fewer competitors. Historically, they also achieved greater market share, securing 40%+ compared to leaders in horizontal software markets getting to 20% market share. That said, we believe there are a few reasons why there may be even more opportunities here. 

• There’s a generational shift with younger leaders taking over as owners and operators of family-owned businesses across various industries (many of them family-owned) who expect modern, tech-savvy solutions. Consider that 97% of American adults between 30-49 own a smartphone and have become accustomed to a user-friendly experience.
• Outdated legacy systems are increasingly difficult to maintain due to burdensome costs, or because relationships with the 3rd party vendors who built these systems no longer exist. This creates a gap that vertical SaaS can fill with more innovative solutions. 
• Vertical SaaS has the potential to create an AI advantage. Whether it’s Generative AI to field customer queries, or machine learning algorithms to cross-sell products, the output of any AI is directly proportional to the data quality input. Many large organizations are realizing this in real-time and paying the price for siloed data, data quality and more. However, in many vertical SaaS cases, founders are not trying to upgrade existing workflows but are digitizing new workflows. The creation of these workflows from the ground up allows founders to architect for AI from the beginning.
• Vertical SaaS companies have the potential to eat away at the professional and business services market, which was measured to be $3T in the US in 2023 – more than 5x larger than the software publishing market at $528B for the same period. We’ve already seen examples of vertical SaaS companies that start with a niche product and then extend through the value chain (e.g. Procore). We think it’s logical a similar expansion can occur through services via copilot, agents, or AI-enabled services.

Our long history of investing in this space includes portfolio companies like Shippo and ProducePay in the supply chain and logistics industries, PlanGrid (now part of Autodesk), and VTS in the construction and real estate industries. Our bullish thesis continues with more recent investments which include companies in the trade finance, legal, used auto dealer, travel, and equestrian industries within recent Flagship Accelerator Program batches.

• SmartHR, a cloud-based human resources and labor management software startup, announced that it has raised $140 million in a funding round led by KKR and Teachers’ Ventures Growth, an investment arm of Ontario Teachers’ Pension Plan.
• BillionToOne, a cutting-edge molecular diagnostics company, announced that it has raised $130 million in an oversubscribed, upsized Series D funding round. The funds will be utilized to expand and scale BillionToOne's prenatal and oncology businesses.
• Kin Insurance, a direct-to-consumer home insurance company, announced $15m in financing to take its value past $1 billion and to accelerate its expansion efforts, including entry into multiple new markets and the introduction of innovative products.   
   

• COO and Global Managing Partner Courtney Powell, joined the Conversations with Loulou podcast to talk about her journey from entrepreneur to venture capital leader, the origins and global investments of the firm, our accelerators, and strategic expansion into emerging markets. 
• Global Managing Partner Vishal Harnal spoke at the SUPER AI conference on a panel entitled Navigating AI as a Venture Fund and also connected with e27 about how he’s thinking about investing in AI. 
• After joining the FII Priority Brazil Conclave on the subject, Courtney Powell also shared her perspectives with the FII community on how to tackle climate resilience in emerging markets.
• 500 Global in Eurasia Partner, Pedro Santos Vieira was interviewed on the Checkpoints TV show about the sixth batch of the 500 Global Accelerator Program in Georgia.    
   

The 500 Global Flagship Accelerator Demo Day for Batch 35 will take place on October 8th alongside SF Tech Week in San Francisco. RSVP here. We hope you can join us!

Questions or thoughts to share? We’d love to hear them. Please reach us at ir@500.co.

Thank you,   
 

Christine Tsai

CEO and Founding Partner, 500 Global