David Cohen’s Techstars
The startup advocate, advisor and investor founded the seed accelerator to give entrepreneurs more than just a check
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. Listen now on Apple Podcasts, Overcast and Spotify. If you love it, please help more people find it by leaving a review!
“To me, the first year of every company I’ve done is the most fun.”
David Cohen is probably best known today as someone who helps other entrepreneurs succeed, but he’s also been an entrepreneur himself for basically his entire career. After just a few years at his one and only job working for someone else, he left to start his own software venture, Pinpoint Technologies, which was acquired by ZOLL Medical Corporation in 1999. He followed that up with several more of his own startups, including an online music service that he sold in 2006 and a consumer software company that failed, but taught him a lot in the process.
During that time, he also got his first experiences with angel investing. He was inspired by the opportunity to help out an entrepreneur as they’re just getting their venture off the ground — and he discovered that he loved doing it. As he told me, the decision to get into angel investing wasn’t driven so much by the potential to make money as it was by the prospect of getting to contribute to a startup during those exciting early days. Once he got a taste of it, he said it was so much fun that he wanted to do more of it.
“It’s like being a first-time entrepreneur. You just don’t know. You get into it and you learn.”
David shares some background about his first few angel deals and what he learned from that experience. And there was a lot to learn since he’d bootstrapped his first business and wasn’t familiar with all the ins and outs of startup investing. By the time we spoke for this episode, he had plenty of experience under his belt. He offers some valuable insight about how the angel investing process works, whether you’re interested in it as an entrepreneur or are thinking about doing some angel investing of your own.
I was curious to find out how things evolved into the founding of Techstars. While David had primarily been investing in companies in Colorado, he wanted to work deals in other areas as well. So he began to grow his visibility as an angel investor by blogging about the companies and the scene in Colorado. Before long, he was investing in three to five deals a year locally, but it wasn’t entirely fulfilling. He wanted to be more involved than just putting in money and reacting to requests for help. That’s what ultimately led to the idea for Techstars.
“Should I follow my heart and go do this thing that, you know, is calling me?”
David was inspired by models like Paul Graham’s Y Combinator in Boston and Charles Rivers Ventures’ QuickStart Program. The idea is to put in less money upfront and spend more time early on with promising entrepreneurs to get a lot of deal flow and then be able to select the best opportunities from the program to invest in. He joined up with partners Brad Feld, Jared Polis and David Brown, and in 2006 Techstars kicked off with its first ten companies.
Starting Techstars wasn’t a foregone conclusion, though. David shares that he had a few other opportunities at the time to join a startup as a founder or CTO, but he chose Techstars because he didn’t want to wait to do the thing he really wanted to do. He says the advice that too many entrepreneurs get — there will be time for that later — is really a fallacy. In fact, it’s only going to get harder. His advice: “If you’re passionate about starting a company, go do it now.”
“Most of the entrepreneurs who go through the program will tell you the same thing — they feel like they would have given more equity for the value.”
Techstars’ pitch is simple: Give up a small amount of equity — 6% founder stock with no special rights — in exchange for the experience the mentors bring to the table and their access to capital and connections. The initial investment Techstars makes (originally $10,000, now $20,000) essentially covers the entrepreneur’s time in the three-month program.
All of this is much less than what you could get if you just went out and raised money through a few rounds of traditional angel investing. But David emphasizes just how valuable the mentors are to the program. These are people you normally would never be able to get time with, let alone have them intensely focused on your startup for a few months. Over the course of the three-month program, the entrepreneurs really get to know the mentors and become part of their inner orbit. As a result, they’re able to build powerful networks that will carry with them through the rest of their careers.
In David’s view, the model represents a triple win: It’s a win for the community, because it means interesting things are happening there, which attracts more talent. It’s a win for the investors, because they get to really experience the company directly before putting in the big bucks. And it’s a win for the entrepreneurs, because it accelerates the company’s progress and growth. What they learn in three months could otherwise take them five years to figure out.
“Good companies are still going to get funded, so I think it’s just more important than ever to build a good company.”
The startup world has changed dramatically in the decade-plus since we spoke, and then we got hit with the Covid-driven financial crisis in 2020. So it’s interesting to listen back to this episode and hear David’s circa-2008 perspective on where things were headed as the economy struggled to climb out of the Great Recession.
It was a different time, but the worry over funding is still familiar, and David’s advice holds true regardless: “The macro economy has very little to do with how your startup’s going to do. If you build a great company, it doesn’t matter when you build it, it’s going to work.”
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