Business Incubator Series: An Interview With David Cohen, Founder And CEO, Startup Accelerator TechStars – Boulder, Colorado (Part 5)

By guest authors Irina Patterson and Candice Arnold

David: One of the things that is I think unique about TechStars is our incentive structure. We are like a co-founder. So, the pitch to the entrepreneur is, If you could have a co-founder for 6 percent of your common stock who had this sort of network and this sort of access to capital, would you do it? That’s what we are. TechStars takes common stock.

Because of that, we’re always on the same side of the table as the entrepreneur. We’re not trying to push them down a path of venture capital. We want them to understand those options. Now, for many companies, it will lead to angels, and that’s the typical way a TechStars company is funded. I think the average funding of a TechStars company is somewhere around $600,000, after the program. That’s obviously angel-scale capital.

Irina: What are your metrics for success?

David: TechStars is, first and foremost, about long-term development of an entrepreneurial ecosystem. That’s very hard to measure.

That’s mostly just a sense of, Is the community we’re in getting stronger? Are people working together more? Are there more interesting early-stage companies? Are there more angel investors than there were before? Is there more capital coming into the region from outside? Those are all things we look at. We know we have an impact on that, but it’s hard to measure it directly.

Obviously, another metric is the success of the companies that go through the program. Is the company able to sustain itself with either funding or profit? That’s an early indicator of success.

We publish – again, another unique thing about TechStars is that we’re very open about this – we publish the results of every company that’s been through the program.

We wait a year to do that, but we put it out there. Was the company funded? Is the company dead? Is it still alive? How many employees does it have? So, looking at what companies go on to do, and what those entrepreneurs go on to do in their careers are the real metrics we are interested in.

A smaller story is, Do they get funded? They get funded at the rate of about 60% to 70%, depending on how you think about it, after the program. That’s an early indicator that most of the companies are going to be interesting. Then we look at how many have died over a defined period. That’s all stuff that’s on our results page. We like to be transparent about it.

Irina: Would you talk about some success stories?

David: Sure. They come in all shapes and sizes. Six of the first 20 companies that went through the program have now been acquired. So, you have companies like Socialthing, which sold to AOL; and Brightkite, which sold to a company called Limbo that then re-branded back to Brightkite. You’ve got Filtrbox, which sold to Jive Software. There are lots of those examples on the [TechStars] results page.

Then you have other companies that have been successful but aren’t at exit. One is Occipital, which created RedLaser, the bar code scanning thing technology that was very popular. They sold that technology to eBay, but didn’t sell the company. So, the company has the equivalent of a giant VC round with no dilution from that sale. They’ve gone on to do 360 Panorama now and really want to do more in the augmented reality space.

Over time, you have companies like SendGrid. SendGrid has raised about $6 million. It’s growing at a very nice clip in the e-mail industry. You also have examples of some of the founders of those companies coming back and doing angel investing in the ecosystem.

They have an affinity for TechStars. They want to invest in the next TechStars companies. So, people like Mack Allegan or Jeff [Wilcox] and Vikas [Reddy] from Occipital, you see them now taking those resources and becoming new angel investors in the community, which is the ecosystem development dynamic that I talked about.

You also have companies that have failed, like EventVue, that we’re super proud of. We’re proud of the way they talked about their failure and what they then went on to do next and have been great.

This segment is part 5 in the series : Business Incubator Series: An Interview With David Cohen, Founder And CEO, Startup Accelerator TechStars – Boulder, Colorado
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