Featured Network Partners: Microsoft BizSpark

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Featured Network Partner

Company: TechStars
Interviewee: David Cohen, Executive Director

Q: What is TechStars?

TechStars is a mentorship driven, seed-stage investment fund. We’re passionate about helping early stage start-ups and as investors we want to invest in unique and interesting ways. Each summer, we sponsor a few companies with a small investment and run a boot camp for start-ups. At the end of summer our goal is have the founders leave with a better idea and concept of how they’re going to deliver their product or service.

Q: Why did you start TechStars?

I’ve done angel investing in the traditional way - you meet a person, learn a little bit about them, and then write them a check. I wasn’t too thrilled with the way that worked and wanted to explore new ways to foster growth. I watched what was happening with Charles Rivers Ventures and their QuickStart program, and observed the movement towards small amounts of money up front, with very hands-on investment. I started TechStars to spark new companies in and around Boulder, Colorado. We wanted to have more interesting things happening here and import some new ideas and talent. It’s just a better way to angel invest.

Q: What happens in the summer program?

Each year companies apply to TechStars. Last year 400 companies applied and we accepted ten. We bring those companies to Boulder for the summer and surround them with top serial entrepreneurs from all over the country and really work with them in a very hands-on way for the summer. The TechStars mentors help the new founders to develop their business model and market strategy and provide coaching specific to the start-up and the kind of company that’s being built. We also provide office space, legal advice and free hosting, and lots of other things to make their life easier, including seed funding to help them stay alive during the summer they’re in Boulder. At the end of the summer, it’s really up to the people around the program, the investors and founders to determine how they want to continue the relationship. A group of mentors may fund the company and/or take a board role. I personally have taken three or four board roles out of the 20 companies that have come out of TechStars. 14 of the 20 companies that have gone through TechStars have now been angel or VC funded, or are already profitable.

Q: Who should apply to TechStars?

If you’ve got an early stage idea and you’re passionate about it and you’ve got a great team, you should consider applying to TechStars. You’ll be surrounded with top mentors in the space, amazing serial entrepreneurs who’ve done it before, and you’ll gain access to an incredible network for further funding.

Q: How does TechStars evaluate potential invitees?

There are really three key things that we look at: • The skills of the founding team. • The people, in combination. • The market. We’re looking for the right people who make a great founding team that will ultimately get to the right idea and the right software product.

Q: What are the advantages to participants in TechStars?

The big advantage for companies who go through the program is the instant network. Just add water, and now you know everyone. TechStars provides credibility that’s very hard to get in that short a period of time. It’s a network that you really couldn’t hope to build in ten years on your own and you get that after a summer. TechStars also provides a very small amount of capital. Generally it’s $12,000 to $18,000 per team. Most of the companies that go through TechStars get to the point where they are ready to do a true seed or an A round after the summer. Most do exactly that.

Q: What’s your outlook on the current market and investment trends?

With what’s going on in the economy… people are talking about the capital sources drying up. I don’t see that so much. I see VCs focusing a little more on the deals they’re already in. Getting that first round may be a little harder. But the reality is it’s always been hard to do a start-up, and always will be. The trend in the venture capital industry is to try to get into deals earlier. And TechStars is certainly one model that works that way. I think the model’s proving out that if you can really be hands-on with companies in the very early stage, you learn a lot about them before you put big dollars in. It’s hard for VCs to do that because they have so much money to deploy. So they’re partnering with organizations like TechStars that do similar things at their early stage.

Q: Do you have any advice for entrepreneurs?

There may be fewer capital sources for early-stage companies, but if you have a good idea, passion, and a great team, anytime is a good time to do the start-up. It’s also important to network early. The best way to approach a venture capitalist is through people that they know and trust. If you can find one or two extremely passionate people that are investors in the early stage, that love your idea and will walk you into that venture capitalist, that’s the way to go. It’s the quality of people that are helping you, not quantity.

Q: What are the advantages to participants in TechStars?

Microsoft does an amazing job of supporting start-ups. Microsoft BizSpark is a great program that helps startups use their software early on without having to pay a lot. They also spend a lot of time with startups and investors. Specifically in our community, Dave Drach and Don Dodge are ever-present. These efforts are incredibly helpful to the early stage companies.