Business Incubator Series: An Interview With David Cohen, Founder And CEO, Startup Accelerator TechStars – Boulder, Colorado (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: How do you conduct your due diligence?

David: With 600 companies, and you’re picking 10 and investing little money and mostly time, diligence is mostly about the people. Again, we know half of them are going to change their ideas. So, we don’t really get into much market or product diligence. We look at the people, the references of the people, the past work of the people. A lot of it are gut [feelings] about people we would like to work with.

Irina: What is the next step once they’re accepted to the incubator?

David: They generally have a little over a month. They will relocate to the community, depending on which program they’re selected for.

Historically, anywhere from 20% to 50% of them will already be from the area. In the case of Boulder, it’s more like 20%. In the case of a big city like New York, it’s typically about half. They move to that city. They can run their office out of our space, if they want to. They don’t have to.

The next formal thing is the orientation to the program, which starts on the first day. Before that, we help them with specific requests they have.

For example, looking at the structure of the company, we might get a head start on making sure that their cap table’s correct and their documents are correct and things like that. We introduce to them resources.

Once the program starts, it’s 13 weeks of intensive mentorship, and that’s what it’s all about. The way that we can think about TechStars as three 1- month programs.

It’s a three-month program, but we break it down at a high level. This is how we explain it to the entrepreneurs: The first month is about mentor dating. It’s about getting away from the keyboard and the coding and engaging with the mentors and getting feedback on what you’re doing.

The goal of that first month is getting the arrow pointed in the right direction and not going a million miles an hour in the wrong direction. That’s when a lot of companies change their focus, change their market strategies, and change their entire ideas. Those things all happen.

The second month of the program is less about mentor dating and more about working with your lead mentors. Each TechStars company ends up with about five to ten lead mentors. The way that happens is naturally. You’ve met so many people. Not only have you met the mentors, you’ve met Google, Amazon, Microsoft, Yahoo!, Twitter, Facebook, all of these companies that come through, in that first month.

So, when the second month begins, we formalize those relationships and say, “Who are your lead mentors?” We ask the lead mentors, “Are you willing to do that for this company?”

We encourage each mentor to take only one company. Although some take more, we encourage them to take one.

Month two, therefore, is about working with your lead mentors on specific issues that your company has about getting your product to market, about customer introductions from those mentors, partnership opportunities, whatever. Get it out there in month two.

Month three, generally, is about the story, the funding and what comes after TechStars. We spend a lot of time on the pitch. We spend a lot of time on, if you’ve already raised money, what will you do, in terms of strategy, after the program?

How will you launch the product? Or how will you make the market bigger? What are the things that you’re going to work on next? For most companies in TechStars, that tends to be about fundraising.

Irina: What are your thoughts about early stage bootstrapping?

David: I’m a bootstrapper turned angel investor. So, it’s a funny thing, but the first thing I always tell entrepreneurs is if you can bootstrap, you should.

You already have, through TechStars, a unique advisory network. That’s going to last you for life. Once you get in, this is a family, and you have access to people who will help you throughout your career.

The best way to raise money is from your customers. So, we teach them, if you can build a product that customers will buy or use or pay for, that is obviously the best way to build your company. It’s how I built my first company, which is my most successful company.

If not, then there are other forms of capital. Some is angel and venture capital, but there are other forms. You can raise money from your customers. You can do creative financing. You can do royalty-based financing. We try to expose entrepreneurs to the broad range [available].

This segment is part 4 in the series : Business Incubator Series: An Interview With David Cohen, Founder And CEO, Startup Accelerator TechStars – Boulder, Colorado
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