By guest authors Irina Patterson and Candice Arnold
I am talking to David Cohen, the founder and CEO of TechStars.
Irina: Hi, David. Let’s start with a brief overview.
David: I’m the founder and CEO of TechStars, which is a mentorship-driven startup accelerator for Internet companies. Tech Stars funds 10 companies at a time in each of four cities each year. The cities are New York, Boston, Seattle, and Boulder. The mentorship program is three months long. At the end of the program, the companies get to pitch their ideas to investors. About 70 percent of the companies go on to raise outside capital after the program.
Irina: What year was the program started?
David: We ran our first program in 2007. We’re in our fifth year now.
Irina: What is the structure of TechStars?
David: TechStars is for profit. We’re just like most investors who are ultimately looking for return. It’s also for ecosystem benefits. TechStars started as a better way to angel invest but also as a way to improve the entrepreneurial ecosystems in which we exist.
Irina: Do you have an industry preference?
David: TechStars primarily funds software and Internet companies. Within that, no, we’re just very opportunistic. We generally talk about the opportunities we find. It’s focused on team because it’s traditionally so early stage.
About half the companies we funded have ended up doing something else. It’s important for us not to overfocus exactly on what they’re doing. So, “team, team, team, market, idea” is the mantra in the order.
Irina: Within the Internet, is there any particular segment you prefer?
David: I would say no. It’s actually somewhat broader than just Internet. We’ve done a robotics company. While most of it is Internet or software, generally, it is slightly broader than that.
But, no, there is no specific focus, just where we think there are interesting opportunities. TechStars has a goal to create a pipeline of interesting people who are going to do multiple companies in their careers. It tends to be opportunistic around exactly what the company is trying to achieve. Often, the company doesn’t know what that is yet.
Irina: Do entrepreneurs have to come to one of your physical locations?
David: Yes. They physically have to be in the city where the program is running. They’re not required to work out of our office, although most choose to. Because we’re a mentorship-oriented program, where we have 50 to 100 mentors per city working with 10 companies, there’s a very high ratio of mentors to entrepreneurs. It doesn’t make sense for that to be virtual. It’s important for them to be around to get the physical interaction that occurs.
Irina: At what stage of development should companies be when they apply for your program?
David: It’s interesting to watch the distribution of stage. In my view, as an investor, most of the companies that have been through the program have all really been at the same stage. You have to get it under a microscope to understand that one is further along than another.
We’ve had companies come into the program with $1 million in funding or $1 million in revenue. We’ve also had companies come in with literally nothing. That’s the spectrum that we’ve seen in terms of appeal to the market. Generally speaking, in order to get into TechStars, you would need some sort of prototype and a great team. If you have those two things, you increase your chances dramatically.
Irina: What’s the ideal company that would benefit from your services?
David: Obviously, the markets that we exist in are outside Silicon Valley and the Bay Area. We believe that great Internet companies can be born anywhere.
There are many companies that have just a great amount of talent, solid overall team of founders who are passionate about what they’re doing, but it’s difficult for them to get noticed. There’s a lot of noise out there.
We view TechStars as a great accelerator for a company that really has the makings but through mentorship, could be even better. And through exposure, which is one of the great things we do for them, [they] have the ability to get noticed.
The ideal team, is one that has hyper-talent and interesting ideas but still needs help with shaping exactly how they’ll deliver that to the market or getting noticed in that market. Those are two things we’re strong at. Obviously, the funding element is a third, helping them get product funded or the company funded.