Santiago Zavala, 500 Startups | Why 500 Went from $80k Checks to $300k [Ep. 2]

The audio and video are in Spanish. These notes are a translation.

In 2011, at just 24 years old, Santiago Zavala founded Mexican VC, one of the first venture capital funds in Mexico, which eventually merged with 500, the Silicon Valley accelerator. In Latin America alone, 500 has invested in more than 100 startups, including companies such as Konfio, Clip, Jüsto, and Conekta.

Santiago was my first guest on the podcast in 2021, but since then, a lot has changed in the startup world and at 500 itself.

Youtube Timestamps*

[5:25] - Investment Model

11 years ago, 500 Startups launched in Latin America as an accelerator and, recently, there was a significant change to the model.

Why did an accelerator model make sense at that time, and why was it necessary to change the model today?
What have been the biggest changes in the profile of founders evaluated today, and has that changed the “bar” for investing in an early-stage founder?

The percentage of startup investment relative to Latin America’s GDP, and how it is multiple times lower than in the US and on other continents.

It seems like an arbitrary comparison because they are different markets and there are many reasons behind it, such as the economy, politics, inflation, poverty, and so on.

Why are there not more funds investing in technology in Latin America? Is there a structural reason that prevents it? Why are there not more 500 Startups?
Is venture capital the right financing model for technology entrepreneurship in the region?

[37:50] - Building with Artificial Intelligence

What have been the biggest changes in how new startups work, in terms of team formation, product creation, and so on?
Has Santiago observed any foundational mistakes (technological, cultural, process, and so on) that new companies make when they are born, which later make it harder for them to take full advantage of the potential of artificial intelligence?
How does AI affect the capital needs of new startups? Does this mean they need 2X, 3X, 5X less capital? Will they skip rounds? How does Santiago expect this to shape the venture capital industry?

[50:21] - Investing in Artificial Intelligence

Santiago started programming in the 2000s, in the post-internet world and just before the rise of the last great technological shift, which was mobile devices and smartphones.

Does Santiago think that having lived through those platform shifts, such as the internet and mobile, and now AI, leaves him better prepared to invest because he knows some of the historical precedents for how these things have developed, or, on the contrary, does it lead him to a certain level of cynicism?

There is a lot of talk about “wrappers” on top of ChatGPT:

For Santiago, is there a distinction, or questions he asks, between a wrapper on one side and a new application that could create significant value?
How would Santiago describe the state of talent’s knowledge about AI and data in Latin America?

The mission of 500 Startups is to promote the creation of technology-based startups in Latin America.

What does Santiago think are the most important natural impediments to the creation and growth of these startups in Latin America? Which impediments can he not control that keep him awake?

[1:20:00] - Final Questions

What are the most important questions Santiago Zavala does not have answers to today?
When he thinks about his work, what is something people are trying to disrupt that Santiago thinks will actually never change?
What is the hardest part of Santiago’s job?
What makes Santiago happy today that did not make him happy 10 years ago (before 500)?