The premier session of South by Southwest's "Lean Startup" track was a frank discussion between Lean Startup guru Eric Ries and Dave McClure, founding partner and "Sith Lord" of investment firm 500 Startups. While the talk covered material fairly similar to what Ries discussed in the October issue of Inc. and his Friday SXSW panel, was able to catch up with McClure and discuss his investment strategy, how the lean strategy affects his investments, and his support of female CEOs.

McClure is a magnet for entrepreneurs at SXSW. In navigating the hallways between his panel room and a nearby corridor, he was approached four times by people seeking a moment to do an elevator pitch or ask how to apply to his fund. While I was talking with him he was approached twice more. At least in Austin this week, it seems everyone wants in to funding from his 500 Startups firm.

And lots of companies have obtained that initial funding here. The team of five has invested in more than 250 companies over the past two years. A typical investment is between $25,000 and $100,000. Of the investments, he says, "twenty-five have hit their stride, another 25 to 50 might do so." I asked if he's doing better than other angel investors, and he said: "We have a much different model—we have a larger volume most angels can't match, and we are also willing to do follow on [investments.] Our first level of checking [for potential] may be as poor as other firms but our second or third is better. "

In discussing the lean start-up model on the panel, McClure said, "With seed investments, we're able to test for the entrepreneur's learning behavior quickly…so we're learning about them before we invest further. Lean means shorter cycle time, less money raised, which limits the entrepreneurs time for experimentation." Also, employing his own special breed of VC vernacular, he said: "We can identify if they're doing stupid sh-t and they can fail on a smaller budget."

McClure's investment thesis is revenue model focused. He's looking for transactional, subscription or lead-generation type businesses, or other growth-focused strategies. "An example is 955 Dreams. It is creating an innovative music player for the iPhone and iPad, which has been featured by Apple. It's really a music magazine experience, currently monetized by affiliate revenue, but there are other potential models in the company's future. It has more than 500,000 downloads, with several hundred thousand active users, which is a very good ratio.

Another example is MyGengo from Japan. It is an enterprise-focused cloud based crowdsourcing platform for language translation. Really, it's a very straightforward monetization model. "On both of these investments we have written more than 3 checks each, and we are in for more than $500,000," McClure says.

McClure is also focused on female entrepreneurs. "There are a lots of smart women in the market who don't as much attention as they should—the growth of female entrepreneurs in last 2 years exploding and there is better quality," he says. "We have one of the largest investment portfolios of women. 45 of our CEOs are women and we have over 70 woman co-founders."

In discussing how he advises companies around the lean model, McClure was candid on the panel: "Hate is closer to love than indifference—you can't iterate around indifference, but you can around hate." If customers care enough to hate your product, you can change it, and McClure and Ries agreed that a lack of feedback was a sure sign a company is in trouble.

If you're a start-up looking for an investment from 500 Startups, you'd be well advised to find someone who knows them well. As McClure says: "We have 175 mentors and 400 founders, and those folks help crowd source our deals. Since we only have five investors, we get most of our deals pre-filtered through that network."