VV Show #53 - David Cohen of TechStars
The title financier conjures images of mahogany desks and million dollar checks for most. But for anyone pitching to David Cohen's TechStars, the outcome is getting accepted to what's essentially a summer camp for entrepreneurs in Colorado and being offered a check of $18,000 or less in exchange for 6% of the startup. This two year old program is part of a new trend in structured angel investing and mentoring that was started by Paul Graham's Y Combinator. Two companies founded at TechStars have already been acquired: socialthing! was sold to AOL and Intense Debate was sold to Automattic (the makers of WordPress). David tells his own stories of success and failure as an entrepreneur, and his transiton to becoming an angel investor.
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2:30 Entrepreneurial beginnings
3:00 Pinpoint Technologies, sold in 1999
5:10 First foray into angel investing: "To me, the first year of every company I've done is the most fun."
6:05 Angel Investing 101: "Your first deal as an angel investor is about learning."
9:30 Evolution of an angel: "Wanted to see more deals... and invest outside of Colorado."
11:30 Typical angel investment: "Pre-revenue is the norm."
12:50 Birth of TechStars
14:25 Original Investment in TechStars: Under $250,000, "I was just doing it for the equity."
16:15 "The earlier the better. If you're passionate about starting a company, go do it now. It's only going to get harder..."
17:00 The TechStars pitch: "TechStars is not about the money... it's really about the mentorship we provide... we like to be viewed as a co-founder."
19:15 Why 5% equity: "It felt right and it's proven right."
21:10 Response to the low valuation argument
22:15 Seed funding and geography: "You can't do it anywhere, but you could do it in any reasonable start-up community."
23:55 The TechStars experience
27:00 Current state of TechStars
28:10 Status of the first class: 10 companies, 2 acquisitions (Social Thing, Intense Debate), others doing well (Filtrbox, Brightkite), one defunct
31:50 Hidden benefit of TechStars: free/streamlined legal services
37:05 How to justify an angel round after TechStars: "I don't think it's enough anymore, with most investors, to just say we're going to build something that everyone's going to love... and we'll figure out how to monetize it."
38:30 Trends in team composition: "The sure thing with a software company is you better have at least one, true rockstar developer who's really committed and vested."
40:40 How to find rockstar techies
42:00 TechStars and the current economy: "Good companies are still going to get funded. So it's more important than ever to build a good company."
45:14 Applying to TechStars: Applications opened January 19th, close March 21st. Simple application with 15 questions. Video submissions now accepted.
47:30 "The model beyond TechStars, to me, represents a rare triple-win."
49:25 Closing thoughts: "Just do it. Surround yourself with great people. Good things will happen."
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My wife and I applied to TechStars for the past two years, and although we weren't accepted into the program, it was well worth the effort to apply. We've met David Cohen (an awesome guy) and many of the other people in the Boulder entrepreneurial community. Everyone we've met has been kind, helpful and encouraging. It's a wonderful group of people.
Posted by: David Duey at January 29, 2009 11:00 AM
Greg, great interview.
A summer in Bolder sounds like a fun time.
But is there any natural light in The Bunker?
Posted by: Robert Lancer at January 29, 2009 12:59 PM
@Robert - Yes, there is some actually. We have some skylights in the lounge that get light from the side of the building. It can be quite bright at times. The Bunker is just one of the nicknames that the founders have given our space. They also call it the subterranean party lounge. ;-)
Posted by: David Cohen at February 1, 2009 12:48 PM
Great Interview! I heard about TechStars last year but was too late to sign up. I will be applying this year. The mentoring and exposure alone is worth so much. I've owned a small business for over 25 years, however I'm now starting a software company that is related to my business, and I find I need so much help to start up and operating what can potentially be a much larger company. Hope I can get in!
Posted by: Jim Lipsey at February 18, 2009 9:40 AM