Mexican VC co-founder César Salazar tells me in a phone interview that you can think of the deal like an acquisition of his firm, but he also didn’t disclose any financial details of the deal. The press release announcing the move jokingly calls it a “hostile takeover.” The partnership will be 500 Startup’s first international accelerator.

The model of partnering with a local team in a developing market makes sense for 500 Startups. The team — which is looking to invest small amounts into literally 500 startups all over the world — can’t fly everywhere all the time or know all the little details of every market.

Mexican VC is a small accelerator, which was founded last year, and Salazar had been working on raising a $5 million fund. The firm has invested in startups that 500 Startups has later worked with, like virtual phone system called Fontacto (like a Google Talk for Latin America), and educational game maker Yogome. Mexican VC has also backed NuFlick, a Netflix for Mexico, and Conekta, a Shopify for Mexico.

The two groups seem to share a similar culture: Entrepreneur-focused, a little counter culture, and an emphasis on enthusiasm. “We [both] believe in starting small, proving that your product doesn’t suck through quantitative data and making sure that you know that everyday you can fail but you can keep going and prove to the world that you’re solving a big problem,” says Salazar.

The investing model will continue in Mexico, too. McClure’s investment thesis is to do a Moneyball type of strategy, playing the odds, and backing a lot of companies in under served verticals, and by under represented entrepreneurs, like women.

McClure seemed particularly interested in the Mexico startup market during the Geeks on a Plane trip. The country has a lot of the Internet and mobile growth potentials as other hot markets in Latin America, but it doesn’t have the investing bubble of a country like Brazil.

At least that’s the pitch — it’s still very much a developing market. More than anyone, a Mexican venture firm called Alta Ventures, led by Paul Ahlstrom, has worked tirelessly to develop a venture community in the country.

Expect 500 Startups to back more startups outta Mexico, and greater Latin America. In the release on Tuesday, 500 Startups says it will announce another ten investments in Mexico next week.

Read my (longish) profile of Dave McClure and 500 Startups here.

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Investments in the smart grid in Brazil are supposed to hit $36.6 billion by 2022, according to a report from the Northeast Group. That report says that Brazilian utilities will use smart grid investments to reduce electricity theft, improve grid reliability and simply to build out electricity infrastructure. Brazilian utilities are also investing in smart meters, and the government and the Brazilian regulator ANEEL want to deploy 63 million AMI meters by 2021.

U.S.-based smart grid companies are looking to sell into this potentially booming smart grid market. Silver Spring Networks is working with Brazilian utility AES Eletropaulo to install a wireless-based smart meter and grid pilot project in Sao Paulo. Electropaulo has installed 60,000 smart meters to date, which is the largest smart meter installation in Brazil, reported Bloomberg recently, and Electropaulo’s smart grid project will include 80,000 customers.

Brazil is the leading market for smart grid in Latin America, and tech companies across the board are using Brazil as an entrance into the rest of the continent. The Utilities Telecom Council’s (UTC) recently held its first America Latina Summit on Smart Grid in Rio de Janeiro. Brazil already also has substantial clean power, with 77 percent of its energy coming from hydro-electric resources, according to Smart Grid News.

I recently spent a couple days in Sao Paulo through the Geeks on a Plane trip, and met with many tech entrepreneurs and investors in the region (none specifically focused on smart grid). While the smart grid market is less traditionally an area for startups and entrepreneurs (this space is largely dominated by big companies and utilities) it still could offer some potential opportunities for startups, innovation and entrepreneurs, particularly for software, big data and analytics companies.

Image courtesy of gaby_bra.

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Gaston Gorali, Director General Creativo, Catmandu studios

Behind the doors of Catmandu studios, on a quiet street in the Capital Federal district of Buenos Aires, Argentina, dozens of young animators stare intently at their computer screens in a couple of low lit rooms, obsessing over the way a blade of grass bends or a character’s hair swishes as he moves. Some of the team, which hail from all over the world, have spent days, and weeks, animating a few seconds where bird crap falls on the face of a statue.

This is the crew, which has now blossomed into 120 people after five years in production, who will be responsible for whether Argentina will be able to produce a smash success out of its first real attempt at making a 3D computer animated feature length film. Picture what Pixar and DreamWorks are doing, but on a fraction of the budget, using a scrappy team and a startup mentality, and a decidedly Latin American flavor.

Of course the movie has to be about football (soccer, for you Americans) — the national past time, obsession and massive money-generating industry for much of Latin America, and the world. The movie is called Foosball, and it’s the tale of a young boy and a team of foosball characters that come to life and play football on a grand scale. The walls of the studio are covered in various misfit football characters that are running, dancing and playing, what else, football. (The team asked me to not photograph the characters directly as to keep some of the mystery hidden).

Dark rooms for animation at Catmandu studios

When the movie arrives in theaters next year, the creators, which include world famous, award-winning writer and director Juan Campanella, and executive producer Gaston Gorali, hope that it will be able to spark a “virtuous cycle,” and the beginnings of an Argentinian animation industry, says Gorali in an interview with a the Geeks on a Plane group in Catmandu’s studios last week. Gorali knows the risks, too. “If you make a bad movie, it really effects the next films,” that could follow, he says.

The project has the makings of a hit. Variety has described it as “the biggest film currently coming out of Latin America.” Before Foosball, Campanella directed and produced the Oscar-winning The Secret in Their Eyes and is the most famous Argentinian director of the past few decades. Gorali, who previously worked on an animated show for Fox Latin America, managed to convince Campanella to not only write Foosball, but direct it, too.

So what’s the problem then? Well, Argentina had no animation industry. At all. Gorali likens developing Foosball, while also building the Catmandu studio, as driving a train full speed while putting the rail road tracks down in front of it. The studio had to recruit and train new animators, some of which had little track record, but who all had the desire to work on something brand new.

Essentially the studio had to operate as the startup, scrappy version of the big animation houses. While DreamWorks might have a couple thousand people working on several different animated computer-generated films that cost hundreds of millions of dollars to make each, Catmandu is making just one film, Foosball, and on a budget of $14 to $15 million.

Gorali says that to do this, the studio totally eliminated the various layers of management and executives that usually exist at the large animation houses. And while labor costs in Argentina have gone up a lot over the last two years, the salaries that the animators are paid are significantly lower than what American animators would normally bill for. The animators use basic software and the team has developed many of their own tools to be able to develop their own techniques.

If 3D computer-generated foosball characters don’t sound like a safe bet to you, you’re probably the wrong audience. The film isn’t targeted at American, or even English-speaking viewers, though it’ll be released in both Spanish and English. It’s distinctly being created for Latin America and Spain, as well as Europe. The first pre-sold territories are Russia, the Middle East, Europe and Latin America.

The world will just have to wait for 2013 to see how well Foosball is received by its fans. If it manages to score some level of success, the movie could become the gateway for an entirely new creative and technical industry for Argentina’s students and developers. And that would be a huge feat for the scrappy, young team, and would also would make them not unlike the band of misfit foosball players that they’ve spent years animating.

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The e-commerce behemoth is one of the winners of the web 1.0 world, and managed to survive the dotcom bust and thrive into a massive player and public company. Now it’s dominating the Latin American market that is starting to rapidly move online, use credit cards and buy stuff. But it only really started a targeted social strategy in recent months.

A couple years ago when Facebook and MercadoLibre first starting talking about integrating more closely, Rabinovich says he and his team were worried about Facebook directly competing with them in Latin America. They were also concerned about sharing all their data with Facebook, unsure of how effective the upside would be. “We were just plain stupid,” says Rabinovich. While MercadoLibre has gotten about 30 percent of its traffic from Google, it was getting almost no traffic from Facebook.

Fast forward up to a couple months ago, and the MercadoLibre team went back to Facebook and told them they were ready to work more closely together. About a month and a half ago, Rabinvich says, MercadoLibre Argentina launched the company’s first deep integration with Facebook, and the results were nothing less than “amazing.” Days ago, the company launched it in Brazil, too.

In about 25 days, MercadoLibre had gathered 1.2 million Facebook Connects, which was an e-commerce viral explosion that surprised even Facebook, says Rabinovich. While the Facebook Connect pop up only has a 15 percent conversion rate, MercadoLibre went from having no social sales to having “a couple points in our gross merchandized volume coming from social.”

We previously missed how viral it can be if one of your friends suggests or notes that they bought something, says Rabinovich. The recipient of your message has the same nature as you, and the social viral network has to be between buyers — not between sellers and buyers.

Part of the reason for this recent social success is that Argentinians and Brazilians are avid Facebook users. Brazil is Facebook’s second largest market in terms of users after the U.S., and Brazil is also MercadoLibre’s largest market by revenues.

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All of the above processes at the Sorocaba plant are used to clean water for industrial applications, not for human consumption. But similar principles could apply for cleaning drinking water. The type of industrial applications that GE commonly sells some of its clean water tech to include the sugar cane ethanol industry in Brazil, which uses processed water for cooling, pretreatment and for the ethanol mix itself.

GE’s Brazilian site manager Geraldo Menezes says that GE can assemble and ship the containerized mobile filter water device in days to industrial companies that have an urgent need to use clean water. GE’s customers rent the equipment on a weekly basis and GE has a handful of them ready to ship at all times to different parts of Latin America.

Reverse osmosis water cleaning works by pushing water through membranes at a high pressure, which captures all the contaminants, particles and salts from the water. The water that comes out of GE’s mobile unit is far too pure to drink, and would actually make you sick, says Menezes.

The one part of the tour I couldn’t take photos of was the chemical focused part of the plant, where the GE workers mix raw materials to make chemicals that can be used for water treatment. These types of chemicals could be used for ethanol production for cooling towers and the pretreatment process. Because the chemicals are flammable, cell phones and electronics are not allowed near them.

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Sao Paulo, Brazil

There seem to be almost as many foreign entrepreneurs and investors — Americans, Germans, Spanish — looking for opportunities to make money in Brazil as there are Brazilians building companies and investing.

Brazil’s booming economy and its population’s interest in new web and mobile services (hello, e-commerce) make it a market that’s already exploding.

But the challenges are many — the taxes are ridiculously high, the traffic is non-stop and crime is rampant in Brazil’s big cities like Sao Paulo and Rio. I’ve experienced these all first-hand as I’ve been traveling with the Geeks on a Plane group through Latin America this week.

Here are 10 things you should know if you want to build, buy, invest in or work at a tech startup in Brazil…

1). Whoa, taxes!: It’s one thing to complain about Brazil’s high taxes, but it’s another to crunch the numbers and see the real differences. Brazilian entrepreneurs told our group that it’s not uncommon to pay about 100 percent to 120 percent in taxes on things like employee salaries, company revenues and goods and services. So, for example, a startup hiring a new top notch engineer or exec could typically pay in the $300,000 range including taxes. The same types of taxes go for buying gadgets and goods — the iPhone costs around $1,000 here. If you want to do business in Brazil, this is just the reality, so get ready to spend.

Entrepreneurs in the region are worried that the economy will stop growing so fast if the government doesn’t become more business friendly. For example, all employees have to be members of unions.

2). e-Commerce is booming: E-commerce in Brazil is like if one morning everyone woke up with a broadband line, a new credit card, disposable income and a desire to spend, according to local entrepreneurs. And there is also tons of room for growth. Out of the 200 million population, 34 percent of Brazilians have internet access. And there are projected to be 15.4 million smart phones sold in 2012. Some of the top (and growing) e-commerce sites in Brazil include Peixeurbano, Netshoes.com.br, Nova Pontocom, and B2W. Investor Niklas Zennstrom, who founded Skype and Kazaa, told me that e-commerce is what’s working for web startups in Brazil.

3). Here come the clones: Like most new international markets that are rising after the initial internet boom in the U.S., a lot of sites are looking to copy the e-commerce models of the U.S.. Entrepreneurs regularly exclaim their companies as “the Groupon of Brazil,” “the Zappos of Brazil” or the “Amazon of Brazil.” Foreign entrepreneurs are moving to Brazil to start these types of companies, too. It’s a natural way to create the web here — look for what has worked before. Others, like Zennstrom, are hoping that, some day soon, there will be more original and uniquely Brazilian e-commerce ideas.

4). Close to a bubble: Entrepreneurs building web businesses in Brazil say that the Brazilian tech startup market is “dangerously close to being a bubble”, because of the large influx of entrepreneurs and capital going into the market.

5). Infrastructure problems: Brazil’s economy and population are growing so fast, particularly in cities, that there is a real problem with infrastructure. The Geeks on a Plane group spent hours in traffic commuting to get to meetings with startups and investors. Entrepreneurs told us that their employees regularly start working much later hours because the traffic is so bad.

6). It’s cool to be Brazilian: Adding to the potential of a bubble, there is the cool factor of setting up and building a tech startup in Brazil. Back in 2006 and 2007, entrepreneurs say, Brazil was just another South American country. But now Brazilian companies are starting to be seen as hip, cool and novel. That will only grow, with the Olympics and the World Cup both set in Brazil in the coming years.

7). Equity uncommon: It’s not that common in Brazil to offer new members of tech companies equity in their companies. Entrepreneurs say, legally, it’s very complicated to set up the equity structure, and Brazilians also aren’t asking their companies for shares when they join — they prefer cash up front to shares. But the downside of that is that when there’s some blockbuster exit, like a Facebook IPO or when eBay bought PayPal, there won’t be a new wave of angel investors created, like there were for PayPal.

8). Economic changes in Brazil: While well-off consumers make up a large portion of the e-commerce boom in Brazil, the economics of Brazil are actually changing and the middle to lower class of consumers is quickly rising. Seven years ago, people that earned up to $1,000 a year made up a large percentage of the population but not of the consumer population with a disposable income. But that’s changing and increasingly this group of consumers is becoming much larger. The future of e-commerce and mobile startups will lie with this population.

9). Basic phones to smart phones: Mobile-focused entrepreneurs say that the growing power of the smart phone in Brazil is an important trend. While only 14 percent of cell phones in Brazil are currently smart, smart phone penetration is growing rapidly and smart phone owners are actually buying a lot of things on their phones.

10). Foreigners in Brazil: Many of the startups in Brazil are being created, and invested in, by non-Brazilians. At this point, the Brazilians don’t necessarily seem to mind, according to many of the entrepreneurs. Companies run by Americans or the Dutch are seen as interesting, not as a threat to the local Brazilian population. The trend just continues the multi-cultural aspect of Brazil’s cities like Sao Paulo. Down the road, I could see that changing.

Image courtesy of JorgeBrazil.

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The group is a frat-style collective of developers, artists, journalists, photographers and videographers that work (and party) out of the same house, collaborate on projects, and share bills, as well as a hacker sensibility. About a hundred people work out of the space, according to two members of the group, journalist Felipe Jannuzzi and photographer Gabriela Barreto, and the group have created projects like the wikileaks-style Publica, and the Arte Fora do Museu, which is a Google Street View-based site for street art in Sao Paulo.

The collective is a place for like-minded and creative entrepreneurs to inspire each other, make connections and share office space. Check out my photos from the house on our visit this week:

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Back in 2005, Ahlstrom, who was running a successful venture fund in Salt Lake City, Utah, asked himself and his investing team the question: if you could invest in any country in the world, where would it be? The group started collecting and crunching data points, like it needed a high growth potential, a large market size of over 50 million people, a GDP per capita of under $14,000, political stability, a decent history of human rights, and it needed business and entrepreneurship indicators like a small number of days needed to start a business.

At the end of the analysis the country that was spit out was Mexico. “We didn’t believe it. We were completely shocked,” says Ahlstrom, who told his team to go back and scrub the data and recrunch it. But again, the answer fell on Mexico. “Our image of Mexico was dusty, sombreros, drug problems, immigration issues. Not high tech,” says Ahlstrom. Nevertheless, a few years later Ahlstrom led a private equity growth fund in the region, and opened up Alta Ventures, based in Mexico City.

Alta, and Ahlstrom’s efforts, have really been one of the first major pushes to create an entrepreneur and investing community in Mexico. The ecosystem is still tiny compared to the Valley or even its Latin American counterpart Brazil, but it’s now growing. On the Geeks on a Plane tour through Mexico we participated in a Startup Mexico Weekend, which included a dozen teams pitching interesting ideas like RockMob, a Rockband for regular instruments, and Legal U, a startup creating online legal documents for landlords and small businesses. 500 Startups plans to focus more on the region, founding partner Dave McClure tells me.

Ahlstrom has worked tirelessly to kick start the industry. One of the problems with Mexico has been that pension funds were only recently able to invest in venture firms, and Ahlstrom began working on that problem as soon as he identified it. He also personally helped organize a conference in Mexico’s city of Monterrey in 2010 that he says was “a watershed moment and the launch of the venture capital industry in Mexico.”

Ahlstrom has done so much work that he has essentially helped clear the barriers for everyone else to come in. The pioneer is the man with a lot of arrows in his back, face down in the mud, says Ahlstrom.

For Ahlstrom, bringing his family down to Mexico, was actually more like coming home. His great great grandfather was a polygamist Mormon who brought his family down to Mexico to be able to keep the family together, and Ahlstrom tells a group at the U.S. Ambassador to Mexico’s house that the Romneys lived down the street (not exactly sure if that was a joke or not). Ahlstrom’s family (no longer polygamists) were driven out of Mexico for various financial and political reasons a couple times, but continued to return to Mexico over the years. Ahlstrom says creating the venture capital community in Mexico is “huge for my family.”

Image courtesy of Arturusoft.

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Sao Paulo, Brazil

Following that realization, Zennstrom said that when he started Atomico in 2006, one of the theses he had was that he wanted Atomico to be an international firm, which could help its portfolio companies move into international markets. “We thought Brazil would be one of the key markets that we would help them [our portfolio companies] expand into. But after we were in the market, we realized there were quite a few good entrepreneurs there and we started to get inbound opportunities to invest in companies in Brazil.” Atomico’s Carlos Pires, former Skype general manager, heads up the Brazilian market for Atomico.

Zennstrom noted that now the Brazilian Web market is growing very rapidly, Internet penetration has doubled over the past four years, consumers seem very keen on trying out new services, the economy is pretty stable, and it’s a very entrepreneurial country. “It’s a good time to invest here and find companies,” he said.

If there’s one thing that Zennstrom isn’t exactly keen on, it’s clones. He said:

A lot of the playbook that you’ve seen for the last ten years here [in Brazil] has been to see what is happening in the U.S. and do a local version of it. Which typically works really well. But there is no reason why there isn’t thinking here that’s bigger than that. And I think you will see that.

Here are a few bullet points from Zennstrom’s thoughts from the panel discussion:

On pitches: If you need a 25 page PowerPoint presentation to explain your idea, it’s probably too complicated.

On the eBay and Skype deal: What eBay did was they were looking for new companies to grow and when they acquired us they thought there would be some synergies, but it turned out that there weren’t that many synergies. So from an integration point of view it didn’t work out. But it turned out financially to be a good investment because when eBay sold the company they made a profit.

The lean startup: It’s a better time to start a business today, because when we started our businesses [Skype and Kazaa] we had to go out and get servers and infrastructure and it was so much more costly. Today if you do an online service you don’t need to spend money on infrastructure, you can use cloud services, and social media or viral media for spreading services.

Advice to a Web entrepreneur: If you’re not an engineer, you should probably become best friends with some smart engineers and make them co-founders.

On international markets and clones: Online companies need to go international much more quickly than they did before because otherwise you will get cloned if you have a good business model. Sometimes that’s OK, because sometimes if you get big you can acquire them. But the copy cats are getting much more sophisticated and may actually outperform you.

On spending on talent: Programmers are the most valuable people in the company, and they should always be the stars. Don’t be cheap when it comes to getting the right programmers. Really good programmers can really make miracles, and not-so-good programmers will create problems for you.

How good are Brazil’s programmers? Brazil is one of the biggest contributors to the open-source software community and typically open-source software developers are good. There is a lot of talent here, you just have to convince them to come and work for you and make them co-founders.

Missteps: I always knew I spent too little time on recruitment. The team is the most important thing.

Go international: I’d like to encourage entrepreneurs here [in Brazil] to think about not only the Brazilian market, but also think about building a company that can be successful internationally. The Internet is borderless. I would also encourage innovators to think of new business models instead of taking a playbook from someone else and making a copy of something else. It’s much more fun to be an originator of ideas and it’s a much bigger opportunity.

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Dave McClure speaking at the US Embassy in Mexico City. Photo by David E. Weekly

It’s around 8:30 on a warm Friday night in Mexico City, and we’re all milling around a podium set up in the lobby of the private residence of the U.S. Ambassador to Mexico, Earl Anthony Wayne. Dozens of Mexico’s tech entrepreneurs and investing elite are mingling with more than 40 members of Geeks on a Plane, a traveling tech-revue of sorts organized by the Silicon Valley investment group, 500 Startups. Just outside the lobby, an expansive manicured lawn leads up to a massive, high rock wall. Guards with bullet-proof vests ushered the group through the fortress gate only about an hour before.

The Ambassador gives his polished remarks, followed by one of Mexico’s rare venture capitalists. Now it’s time for Dave McClure, the investor behind the two-year old fund and accelerator group 500 Startups, to say a few words. He is decidedly non-descript – glasses that are thick, jeans that sag, a t-shirt that says “500 Startups: We’re kind of a big deal,” flip-flops, and a black blazer as a gesture to the formal occasion (“hiding his hillbilly” as he calls it). McClure is a throwback to a Silicon Valley of the time before the brogrammers.

McClure thanks the Ambassador for the special night and starts to speak. He throws down his first salvo:

“For the last two heads of states that I met with I was also wearing flip-flops, so please don’t take it as any slight. If it’s good enough for the President of Chile and good enough for Hillary Clinton, it ‘s damn well good enough for Mexico.”

McClure is trying to do something a little bit different. What Billy Beane is to baseball, McClure is to technology startups. And like Beane, he is willing to go anywhere in the world to find a slight edge to beat his richer, bigger and fancier rivals on Sand Hill Road. He is quirky, offbeat and unconventional, which is one of the reasons why entrepreneurs love him, and he’s also a marketing machine that can turn out slogans and brands like a finely-tuned copy shop on Madison Avenue.

He’s more like a man with a mission or a preacher with a sermon than an investor trying to make a living. 500 Startups partner George Kellerman describes McClure as being so driven it’s as if his bucket list has just one item: to find the undiscovered entrepreneurs across the furthest reaches of the globe.

These principles are also where Geeks on a Plane comes in. The group brings together dozens of entrepreneurs and investors on a jam-packed, brain-jolting tour to meet with the local investors and innovators in cities throughout the world. Little sleep is had and much geeking (and partying) is done.

Geeks on a Plane Latin America kicked off last Thursday night in South Beach Miami — where the Mayor of Miami-Dade County, Carlos Gimenez, presented McClure with a plaque for tech industry excellence – and continues through Mexico City, Sao Paulo, and Buenos Aires over the next week. I’m traveling with the group (yeah, I have a rough life) and will be reporting on tech innovation across Latin America.

Moneyball for startups

So how exactly does McClure plan to disrupt tech investing? The group is starting out with what McClure calls a more “scientific” and “systematic” approach: essentially, it’s a numbers game. Instead of making a few several million dollar investments into promising early startups, 500 Startups is making smaller — $50,000 to $250,000 – investments into a lot more early stage startups; hence the “500 Startups” moniker.

The idea, as McClure puts it, is to fail more cheaply. And with more bets, the odds of hitting a winner is higher. The not-often talked about dark reality of the tech entrepreneur ecosystem is that it is wrought with failure. Some 70 to 80 percent of software startups fail, but if they fail cheaply and quickly, the heartache is a bit less.

For the 20 percent of companies that do hit some kind of stride or scale, 500 Startups offers follow-on rounds. For the couple of startups that are able to break out, 500 Startups helps usher them along to the venture stage, where more traditional venture capitalists step in. McClure points to a company like TaskRabbit as an example of a company that broke out and went on to raise successive venture rounds.

500 Startups’ first fund was for $29 million and I’ve heard that the group is currently raising another larger fund. By the end of 2013, 500 Startups will likely hit its namesake and will have backed about 500 companies, estimates McClure. Already they’ve closed on almost 300 companies.

Platforms & international markets

Part of the reason that more, smaller bets could work is because $50,000 is now enough to test out a Web or mobile idea and begin the scale-up process. Five to 10 years ago, before cloud computing and Web and mobile distribution platforms like Google, Facebook, Apple and Android, the costs to build and scale a tech startup were significantly higher.

McClure’s investing thesis is all about the low cost of building on these platforms. For example, Wildfire sits atop Facebook, SendGrid is about cloud-based email, and 955dreams is a product of iOS. He once taught Stanford students how to tap into these new Web and mobile platforms through his now famous Facebook class and later went on to make investments in the Facebook Fund.

International – and underserved — markets are another investing thesis. 500 Startups is one of a few firms that is willing to go more than 30 miles away from Sand Hill Road to find a deal. The truth is that the more traditional venture guys are scared to pursue this global strategy – the lifestyle is hard (constant travel). McClure, who is married with two children, says he spends close to three to four months on the road traveling. Geeks On a Plane is a large part of this international strategy.

Of course, 500 Startups isn’t all about McClure. His partners travel, hustle, party and forgo sleep (almost) as much as he does. Paul Singh somehow is able to keep up with McClure’s exuberance for entrepreneurs and is leading the fund’s work in India. Bedy Yang, who tells me that she “has the best job in the world,” can speak Chinese and Spanish and is heading up investments in Latin America. Newer partners include Christen O’Brien, who leads all of the Geeks on a Plane trips, conferences and corporate partnerships and Kellerman, who has a long history with the tech industry in Japan and was once a firefighter (really).

A marketing machine and a cult of personality

500 Startups is also as much about Moneyball as it is about marketing. McClure’s partners say his penchant for naming things and branding ideas is one of his invaluable skills – 500 Startups, Geeks on a Plane, the family-tech focused Mama Bear conference, the designer’s Warm Gun conference. As a marketer at heart, McClure is able to help companies think through growth better than pretty much any investor.

He’s also honed a cult of personality around a profanity-fueled, take-no-prisoners character that yells and swears when presentations get boring and writes brightly-colored rants on the company’s blog and Twitter feed. One of the most memorable scenes from the Geeks on a Plane India trip in December was when McClure shook up a startup demo event in Bangalore by telling the unpolished, young and earnest Indian entrepreneur presenters to “stop being so f*cking boring.”

The created personality is the branded Dave McClure. The real Dave McClure is much more mellow and thoughtful. He’s also first and foremost entrepreneur-friendly. In international markets like Mexico City and Delhi, McClure likes to tell local investors that it’s their fault if the tech ecosystem isn’t producing many quality startups — it’s not the lack of entrepreneurial talent in the regions, says McClure.

Will it work?

McClure can be entrepreneur-friendly to a fault. Kellerman described him as bordering on altruistic. That’s one reason why he doesn’t have a shortage of deal flow, but that could be another reason why a Limited Partner might feel more comfortable giving funds to a more cut-throat crew.

Another question is whether or not the return on the fund’s breakouts will be high enough to make back the desired amount of money. The traditional VC model is that one or two companies out of dozens can make back the entire fund. But if the fund’s stake in the firms that make it big is too small, 500 would need many more hits to collectively win big.

McClure acknowledges the risk, but says they’ve helped solve that problem by having 500 Startups do follow-on investments as well as the initial seed stage. And McClure can point to some breakouts that they’ve ushered along through that process like TaskRabbit, Twilio, SendGrid and Wildfire. His most famous exits were personal investments including Mint.com and SlideShare.

Another potential downside could be the pace of the investments. While globetrotting, red-eye flights and constant networking and mentoring can be exhilarating, they come with sacrifices, like being away from family and mental and physical burnout. Such a rapid pace could also cut down on the time for a decent amount of due diligence. Yes, many of 500’s first seed investments are experiments, but the partners need enough time with the entrepreneurs to make a somewhat smart bet.

From here to there

McClure grew up in West Virginia and about two decades ago joined the ranks of Silicon Valley as an engineer and programmer. He ran marketing for job search engine Simply Hired and joined PayPal as its Director of Marketing in the early 2000’s, which he describes as a time where “everything was going to crap but Google and PayPal were doing pretty well.” PayPal doing pretty well meant that when he left he had some funds to use to experiment with angel investing.

In 2007 McClure gained fame when he taught a  Facebook platform class, and then went on to manage two small funds for the Founders Fund and the Facebook Fund. While he had less than $3 million to play with, he made about 43 investments. And that’s where he says he began to hone the idea of the 500 Startups model.

The bigger question is why. Why does McClure have a burning passion to scour the world for undiscovered entrepreneurs? McClure says:

“It’s because I f8cked up. I was Billy Beane. I spent 20 years in the Valley and didn’t make it. Then I discovered I was a lot better at helping other people make it.”

Today, 500 Startups is just two years old, so it’s got a bit of time before it will prove out whether its model will become the future of tech investing. But the coming Facebook IPO could actually become a transformative act for the group.

In the late 90’s, Ron Conway was just another Silicon Valley angel investor. But with the Google IPO, he was transformed into the godfather of Silicon Valley start-ups. Likewise, Facebook’s IPO could act as an accelerant for McClure’s group.

As Facebook grows and also seeks to fill the positions of departing execs, it will look around to buy companies. It’s already started to increase its acquisitions. 500 Startups has backed companies with some of the top product and design people in the Valley, and many of their companies have the Facebook platform baked into their DNA. It doesn’t hurt that McClure spent years teaching and investing in the Facebook platform effect either.

Perhaps next week’s Facebook IPO could turn out to be the fund’s undercover lynchpin to remaking the landscape of tech investing.

Disclosure: Dave McClure was compensated by GigaOmni Media with stock and cash for his consulting efforts during the early days of the company. We have not had a business relationship since the end of 2006.

Image courtesy of Steve Nagata.

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