As Co-Founder and Chairman of Techstars, David Cohen has spent nearly his entire career focused on helping entrepreneurs succeed. Aspiring founders and early-stage entrepreneurs from around the world apply to Techstars’ startup accelerators to get three months of hands-on mentorship, access to a worldwide network and a check for $20,000 in exchange for 6% of the startup. When I spoke with David for this episode back in 2008, the program was just two years old, part of a trend of structured angel investing and mentoring that was started by Paul Graham’s Y Combinator. At that time, two companies founded at Techstars had been acquired: socialthing!, which was sold to AOL, and Intense Debate, which was sold to Automattic (the makers of WordPress).
Fast forward more than a decade later, and David is a first-round investor in approximately 2,100 internet startups, including Uber, Twilio, SendGrid and Pillpack. Now running 40-55 accelerators during any given year, Techstars has funded over 2,600 companies that have gone on to raise more than $14.5B and create a market cap of more than $44B. In this episode, David shares his own stories of success and failure as an entrepreneur, how he decided to start Techstars and his advice for anyone thinking about starting up — or investing in — a new venture.
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Highlights from this episode:
“To me, the first year of every company I’ve done is the most fun.”
“I wanted to learn new stuff, so that was my motivation.”
“I just really wanted to do everything differently. That turned out to be a pretty big mistake.”
“I learned a lot from that failure, as I think entrepreneurs always do from failures.”
“I think that’s a good way to do your first deal, just sort of tag along and don’t try to set all the rules, and follow the crowd a little bit because your first deal as an angel investor is going to be about learning anyway.”
“It wasn’t so much about making money. It was about, here’s someone that I can help a little bit, be a little bit involved in the business and exercise my brain and think about it, and sort of live vicariously through her business. And that was so much fun, I started doing more of it.”
“Your first deal as an angel investor is going to be about learning anyway.”
“Most angel investors won’t make money.”
“There’s just a million things, like anything, that you learn as you get into it.”
“It was interesting, in that I got to play around with these companies early on, but I couldn’t really get hands on and help them.”
“Traditional angel investing is really about putting money in and then sort of reacting to requests for help, opening up your Rolodex and doing what you can, versus really getting involved in the early stage.”
“We’ve been able to do a whole lot with very little money.”
“That’s the line I hear a lot: Young entrepreneurs are told by people who are close to them, or some advisors, you know, you can start a company later, save some money. I think that’s a big fallacy. I think the earlier, the better. If you’re passionate about starting a company, go do it now. It’s only gonna get harder as you get older and you have more responsibilities.”
“If you’re doing Techstars to get 10 or 15,000 dollars, then you’re looking at it for the wrong reason. It’s really about the mentorship we can provide, the instant network, the access to funding.”
“So the pitch is, if you’re doing a startup: Would you exchange a little bit of equity for this sort of experience that our listed mentors brings to the table, the access to capital, the connections and Rolodex that they have?”
“I think professional investors understand that other professional investors will often invest by theme and in the later stages.” (On why it’s not necessarily a “poison pill” if he doesn’t decide to invest in the company.)
“I don’t think it’s enough anymore with most investors to just say we’re going to build something that people are going to love and everyone’s gonna come flock to it and we’ll figure out how to monetize it.”
“Make sure the company’s working in a place where there’s interesting things going on.”
“The model behind Techstars, to me, represents a very rare triple win.”
“I think the sure thing with a web or a software company is, you better have at least one true rock star software developer as a founder who is really committed and invested…Take it seriously and make it a priority to find that person. It’s like anything — if you focus on it, you can get it done.”