One of Dave's stated investment principles is to invest (at a lower valuation) BEFORE product-market fit or traction.
I think it's normal in incubator/accelerator programs for some startups not to launch their product publicly before demo day.
Admission to the accelerator program is based on strong recommendations from the 500 Startups mentor network, and then a meeting with the 500 Startups core team.
Which further tells me they don't have 'traction' or any of the metrics Dave McClure usually looks for (pirate metrics, http://www.slideshare.net/dmc500hats/startup-metrics-for-pir...). Would that be 'Idea stage'?
I could be 100% wrong and then some, but would very much like to know, and how they got funding...