Venture Voice – interviews with entrepreneurs

Entertaining Entrepreneurship

VV Show #53 – David Cohen of TechStars

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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.

Show sponsor: FreshBooks – an easy online invoicing provider used by Venture Voice

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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