Interview with David Cohen
David Cohen, Co-founder and Executive Director of TechStars, explains how the TechStars program identifies entrepreneurial talent, nurtures success, and crams a ton of mentoring and business essentials into just a few months over the summer.
An Interview with David Cohen Executive Director, TechStars
Date: January 5, 2009
David Cohen: TechStars
Lucy Sanders: Hi, this is Lucy Sanders, the CEO of the National Center for Women & Information Technology, or NCWIT, and welcome to the next segment of the new interview series that we're conducting with W3W3.com. It's called the "Entrepreneurial Toolbox Series." We're very excited about this series because it allows us to address a very wide range of issues that are associated with entrepreneurship, all the way from networking and how to survive and learn from failures to today's topic on business plan competition. With me is Larry Nelson from W3W3.com. Welcome, Larry.
Larry Nelson: I'm so happy to be here. I'm really excited about this interview. It's certainly one that is coming from experience.
Lucy: Absolutely, and it's with our good friend, David Cohen. Welcome, David. We're happy to have you here today.
David Cohen: I'm glad to be here. Thanks.
Lucy: David is the Founder and Executive Director of TechStars. It's a mentorship driven seed stage, investment fund located in Bounder, and we're very excited to have it here in Boulder. It's really taking entrepreneurship to a new level here. Of course, everybody's hope is that Boulder will quickly become one of the country's top startup hubs. So, David, you started a few companies of your own, and you have a soft spot for technology startups. Why don't you tell us a couple of the companies that you started?
David: Sure. I started three separate companies here in Colorado, two of them worked pretty well and one didn't. The first one was a public safety software company that started back in '93. It's still going in Broomfield, Colorado. It's a couple hundred employees now. The second one was a startup around mobile special networking which I think we were a little early on that one five years or so ago. The third one was around music and RSS which was sold to a Silicon Valley company a few years back.
Lucy: A lot of startup entrepreneurial experience and real world pragmatism led you to start TechStars, and this is the program that we really want to ask you some questions about today. Why don't you give us just a bit about TechStars, and then we'll get right into the interview.
David: The thumbnail of it is that it's mentorship driven with seed stage funds. So, we invest a small amount of money in about 10 companies every summer who come to Boulder, Colorado, for a three month period. We surround them with some of the best and brightest mentors in the web and software space, and at the end of the summer they pitch their ideas to investors and hopefully keep going. It was started based on my own experiences and what I wished I had done back when I was starting my first company.
Lucy: We had, as part of this series, too, we interviewed Brad Feld on his failures and what he learned from them. He's involved with TechStars as well.
Larry: By the way, David, you didn't mention Colorado Startups.
David: Colorado Startups is my blog, my personal sort of angel fund, I guess you'd call it, which is independent of TechStars.
Lucy: Well, let's start off with the big question first. I think we all know that many technology startups fail, especially in the early stages of their life cycles. How does TechStars really help with that? How does it help early stage companies succeed?
David: You know, I think TechStars is primarily about mentorship. I mean, that's really in a nutshell the value, and I think companies that go through a program like TechStars really they can experience what would otherwise take them two or three years and a while to figure out in that three month period. The reason for that is because they are surrounded with expertise and people who've been there and done that, made those mistakes and had the successes and really give them some critical feedback in a very compacted time frame. So, what otherwise might take you years to figure out on your end can figure out quickly, and often when you hear from a lot of people you respect that what you're working on doesn't make sense or might have certain problems, you can take action to correct them much earlier than you would otherwise. I think it's all about the mentorship and the feedback you can get.
Lucy: Well, I've experienced a few of the sessions where the people are presenting their pitches and practicing, and it's very compact and very high impact, I think.
Larry: Not only have those presentations really done a fabulous job, a number of your companies that has gone through TechStars actually has raised significant amounts of money, and I want to congratulate your whole team.
David: We've had pretty good luck sort of getting our companies to the next level. We funded 20 or so. Actually, I guess, it's exactly 20 at this point. Two of those have been acquired, and I think about 12 or 13 more have raised angel and venture capital are sort of companies with a chance. So, that's the whole goal.
Larry: All right. Well, I hope this makes this next question even more exciting. When you take a look at your 10 companies per year and their founders, what are the qualities that you look for when you make your selection?
David: We focus very heavily, Larry, on the team, and so we're really looking for: is there a combination of people here that brings the skills necessary to really get this thing off the ground? In a lot of cases, that's going to be technical talent combined with some business and/or marketing talent. So, first and foremost, it's a team but within the individuals we're looking for passion and commitment to their idea, the willingness to take the risk and really do it, lots of energy and realism. Those are some of the qualities that we look for in great founders.
Lucy: How do they show that to you when they apply? So, they're applying from all over the United States, not just from Boulder or from Colorado. How does that come across to you in their application? What are some hints you could pass along to interested people?
David: You know, I don't think you can fake any of that stuff. We actually get applications from all over the world. We get about 10 percent from international abroad.
David: It's a challenge for us to screen through the very simple application that we take on the web, looking for hints of that. We'll obviously miss some companies that are going to be great. That's part of how it is in the venture world. As we talk to them on the phone we look to be impressed. Usually, it's one of those things on the first phone call that we'll be impressed by, either their commitment, their willingness to quit a job or relocate the board just for this opportunity for the summer, their passion and their energy. We're just looking for hints of that, and we'll only actually meet about 50 to 75 companies in the end. From there, it's very much about gut feel and experience based on the things we've done in the past and what we've learned.
Lucy: So, it's a combination of written application and in-person interviews and some phone interviews.
David: That's right. We get about 400 companies that apply every year and take about 10, so it's the process of the written apps, the quick phone call, a longer phone call and an in-person meeting.
Lucy: Once you select these companies and you have 10 and they arrive at TechStars, what areas do you work with them in and what sort of order?
David: Well, they're all going to be typically pretty young companies that have some sort of a prototype, so we're heavily focused on, once they get in here, what is the right idea. We spend about the first month of the three month program really trying to get them to stop working on what they're working on, and that's a challenge. We really try to get them in front of as many of the mentors as we can so that they can get a lot of critical feedback in a very short amount of time. It's very much about: OK, this is what we're doing, people giving them feedback and then ending up with something, maybe, a little different; in some cases, completely different based on that feedback. From then on, in the second and third months it's about what's the good market approach? Can we get a prototype in the customer's hands? Who might the investors be here, early partners and things like that? We help with all that sort of stuff.
Lucy: It's pretty interesting that these companies, in fact, morph over time, and they become totally different.
Larry: At W3W3 we've had an opportunity to interview some of your star companies, and I have to tell you I was kind of blown back when the first company that we interviewed. They said, "what we came here with is not what we're doing at all now".
David: In the first year we had, I'd say, four or five of the 10 companies almost completely change their idea in the summer based on feedback, and if you think about it, you're meeting with all of these people that you respect and have seen what they've done in the past. If you start hearing the same things from a lot of them, it makes you think critically and be intellectually honest about what your idea is. A lot of them did change that first year. The second year we had less of that, I think, because of some of the success we had in the first year in companies getting acquired. I think the second year we had, in general, the companies be a little bit more baked fully when they came in and not too many in the second year totally change their idea. But they definitely morph, which is the case of startups in general. Almost any company you can name, you know, today probably didn't start with that exact vision and that exact idea. So, you have to be flexible.
Lucy: Exactly. That's a key characteristic of a successful founder, flexibility. I've had a chance to participate in what I would call some of the surround activities surrounding TechStars, and there's a lot of valuable networking and other educational opportunities that you provide these companies. Why don't you say a bit about that?
David: During the summer the companies that are selected get a chance to go to some sort of event two to three times a week. We call them sessions, and we do somewhere around 40 during the summer. They're usually dinner and get together with some of the mentors or some of the entrepreneurs. Sometimes, it's a field trip out to a company like Photobucket or NewsGator that's local here. The topic of the session varies from market strategy to technical stuff to how to talk to an angel investor. They're all over the map, and the purpose of the sessions that we do is not so much to be a school, although they learn a lot from that, it's to create meaningful interaction and meaningful relationships between the founders who go through the program and the mentors because the networking is just incredibly valuable. It's not just that you've met someone like a Jeff Clavier. He's a great example. He came out this year, a Silicon Valley angel investor, talked about what his fund looks for and how he thinks about this stuff. He had ended up establishing close relationships with a few of the companies and ended up investing in one. So, that's the sort of connections and relationships that we're trying to build by doing those sessions.
Larry: That's fantastic. You know, one of the things that... I've done some mentoring in the past with different companies, but I've never been a part of a huge team like you've got. You've got absolute experts there. And it's probably a good thing because what this brings to mind is: what are some of the biggest challenges that these new companies and the founders face, and then how does TechStars help them?
David: I think some of the early challenges I think we're interested to help with, and a lot of cases, or in some cases, these companies figure out that they are building something that's either not viable or that there's no market for. That's, I think, the number one startup killer, is working on something that nobody wants to buy or pay for or use.
Lucy: Other than that, it's a great idea.
David: Lack of marketing is a big killer, so we hope to identify that. Another big area is how they do message the right product and think about taking it to the market and really helping them understand and connect to early customers that makes sense for their product. Through the mentor network of TechStars we can usually find the right people to give them that early critical feedback. Another big challenge a lot of them face is that they have such big, long-term visions and they just don't know where to start. We help them figure out a sort of early approach to the company.
Lucy: It's a great program, and I think I speak about innovation in the country for a moment. This type of program is critical because entrepreneurship is such a critical part of innovation in the creation of jobs and everything else. So, this type of program is absolutely essential. I also want to put a plug in for really attracting more women into this type of program. I know you've done a great job of that. You had several teams this year with women on. You want to say a bit about that?
David: Sure. The first year that we did TechStars we had about 27 founders of 10 companies. If I remember right, not a single woman on any of those teams. We went back and looked at the applications the first year, and of 302 applications, and we only had 10 or 11 that even involved a single woman as a founder. At the end of the first year we made a concerted effort working with NCWIT and other organizations to try to get the word out about the opportunity presented by TechStars. Yeah, we did well. We had, I believe, five or six women in the program in the second year, and some of those companies, like TravelFlyer, a few there that are now well funded and doing great, are the ones that those women were involved in. From my perspective, it was nice to have them around because they brought a different perspective in some cases, or just made the experience more balanced and better. So, it was great that we were able to accomplish some of those goals this year and, hopefully, I think it's a great opportunity for women who want to get involved in early stage companies.
Lucy: Well, we're going to continue to work on distribution channels for the next year. We have some new partners, like Women 2.0 and others that I think we can start to get the word out even more broadly.
David: That would be great work. I'm excited about that.
Lucy: What have we not asked you that listeners may want to know? What does the future hold? How can people help TechStars? That's three questions in one, isn't it?
Larry: Yeah, right. Well David can handle that.
Lucy: That was three questions in one.
David: Well we're entering our third year. For anyone who is thinking of doing a start up and thinking that now actually is a great time, people talk about economic issues and the macro picture that is going on, but I think it will be a good time to be selling your startup in three to seven years. There's lots of advantages to doing it now, so if you're going to do a startup next summer is a good option. Our applications open January 19th for the summer of '09. But even if you're not thinking about a program like TechStars, the key to being successful is just doing it. And the number one piece of advice I like to give people is just surround yourself with experience and mentorship as best you can because that's really the thing that can help you as an early stage entrepreneur.
Larry: Well, you mentioned January 19th, a good starting date for people to really start getting ready to submit to TechStars. Tell us some of the other things that you see coming up. It seems like you learned a lot from year one to now, year two and now you're going into year three.
David: We're making mostly minor tweaks. One of the examples is that we're not fixated on taking exactly 10 companies anymore as we did the first two years. We're open to taking every company up to a reasonable number beyond that that we're excited about. If we're not excited about 10, we'll pick less. So, we're being a little more flexible about that. We've tossed a little bit more money into each company that we fund. So, again, the money is not what it's about, but we did toss a little bit in there based on some feedback. We've attracted some new mentors this year as we seem to do every year, people that want to get more involved. So, yeah, we've had some good success with the program, and I think it's mostly tweaking it. We don't want to mess with it too much.
Lucy: Well, I agree with that. It's a great program, and we're really excited about it here locally and certainly nationally as well. I guess now after the interview internationally, too.
Larry: You betcha. By the way, we really do consider TechStars a local diamond mine right here in Boulder, Colorado.
Lucy: Absolutely. So, David, thanks a lot for spending some time with us. We really appreciate it. Let us know when the applications open, and we'll do our part to get the word out.
David: OK, thanks. It's my pleasure.
Larry: Have a good one.
Lucy: I just wanted to remind listeners that you can find this interview at www.ncwit.org, as well as w3w3.com. Thanks a lot, David.
David: You're welcome.
Larry: By the way, you listeners out there, pass this interview along to others that you think would be interested so that they can really get a better handle on what the TechStars program is all about. They can download it as a podcast and listen 24/7.
Lucy: Absolutely. Transcription by CastingWords