TechStars “Entrepreneurship Boot Camp” Comes to Boston: An Interview with Co-founder David Cohen
You lose some, you win some. Less than four weeks after Paul Graham’s unceremonious announcement that his formerly bicoastal startup school Y Combinator would be taking up permanent residence in Mountain View, CA, ending a tradition of summer sessions in Cambridge, MA, a new startup program is coming to town: Boulder, CO-based TechStars.
Founded in 2006 by software entrepreneur David Cohen, venture capitalist Brad Feld, entrepreneur and education advocate Jared Polis, and David Brown, founder and president and CEO of Broomfield, CO-based ZOLL Data Systems, TechStars is an investment fund and “entrepreneurship boot camp” that provides seed funding and mentorship for early-stage technology companies—mostly Web companies, so far. The operation selects 10 companies each year for its summer sessions in Boulder, and starting this year, it will pick an additional 10 startups for a concurrent session in the Boston area.
Like Y Combinator and Philadelphia’s Dreamit Ventures, TechStars is an intense, three-month program (I’d call it an “incubator,” but Cohen says the group avoids that term—see below) that provides participants with dinners and talks, meeting and working space where teams can collaborate, and one-on-one mentorship from established investors and entrepreneurs, in return for a small slice of the founding stock in each company. It’s a 6 percent slice, in TechStars’ case, in return for which companies get $6,000 in financial support per founder, up to $18,000. (Teams interested in applying need to move fast: the deadline is March 21.)
In short, for the companies that get in, the TechStars program is a pretty sweet deal, and a powerful stepping stone to commercial success. The founders say that 12 of the 20 companies that went through the program in 2007 and 2008 have obtained angel or venture backing. Two are profitable, and two have been acquired.
Shawn Broderick, the founder of Waltham, MA-based reputation broker TrustPlus (which I profiled last April), has been named to direct the TechStars Boston session, which will run from May 26 to August 21. As Boston-based mentors, TechStars has signed up a who’s who of local entrepreneurs and investors, including Colin Angle, co-founder and CEO of iRobot; Don Dodge, director of business development for Microsoft’s Emerging Business Team; Eran Egozy, co-founder and CTO of Harmonix Music Systems; Chris Heidelberger, CEO of Nexaweb; Will Herman, founder of Viewlogic; Nabeel Hyatt, founder of Conduit Labs and former COO of Ambient Devices; Warren Katz, founder and CEO of VT MÄK; John Landry, managing director of Lead Dog Ventures; Rich Levandov, general partner at Avalon Ventures and Masthead Ventures; Bijan Sabet, general partner at Spark Capital; Ronald Schmelzer, founder and senior analyst at ZapThink; and Bill Warner, founder of Avid Technology.
According to Cohen, TechStar’s executive director, it was Warner who provided both the inspiration and the funding behind the cloning of the Boulder program in Boston. Cohen says TechStars has been in talks with Warner about expanding to Boston since last October—it was “the next logical step” after the program’s success in Boulder, given the Boston area’s wealth of entrepreneurial activity and high-profile universities, Cohen says. But the plans were laid well before Graham announced Y Combinator’s departure, so it’s just coincidence that TechStars will be helping to fill that vacuum.
In an e-mail interview this morning, Cohen filled out more of the story. (See the very end of the interview for his thoughts about Boston versus Silicon Valley as environments for startups.)
Xconomy: Why expand to Boston?
David Cohen: The decision to expand and create the Boston program was promoted by Bill Warner, founder of Boston-based Avid Technology and Wildfire Communications, who had been interested in the TechStars model for some time because of the community-oriented mentorship-driven model that it employs. He visited the TechStars’ Boulder operation last year, got involved, and ultimately invested in one of the companies. Coupled with Bill’s enthusiasm Boston became the logical next step for TechStars.
Those of us who started TechStars here in Boulder have deep East Coast roots as well. Brad Feld is a MIT graduate who built, operated, and sold his early businesses in Boston. David Brown and David Cohen sold their first company to ZOLL Medical Corporation in Chelmsford, MA in 1999. [Subsidiary ZOLL Data Systems, which Brown now leads, is in Colorado.—Eds.] Many TechStars mentors such as Howard Diamond, David Hose, Neil Robertson, Eric Marcoullier and Seth Levine are also very connected to the Boston entrepreneurial community.
X: What are some of the practical changes involved in doubling the size of the program? Did you have to line up more funding?
DC: We’re essentially mirroring the approach and program we have in Boulder to Boston. TechStars is unique in its mentorship-driven approach—check out our list of mentors. Yes, we took on new funding—the majority of the funding comes from Boston-based investors such as Bill Warner who pushed to bring the program to town.
X: Will the program run the same way it does in Boulder? What’s the basic shape of the curriculum?
DC: It won’t be identical for logistical reasons, but it will work fundamentally the same way. Again, we’re replicating our great experience in Boulder. You can expect it to be very similar. Obviously, the mentor set in Boston will be focused more locally with the great new mentors we’ve added such as Colin Angle, Dan Bricklin, Don Dodge, Eran Egozy, Chris Heidelberger, Will Herman, Nabeel Hyatt, Warren Katz, John Landry, Rich Levandov, Bijan Sabet, Ronald Schmelzer, Bill Warner, etc.
We run about 30-40 “sessions” per summer which are intended to closely connect our founders with the mentors. Beyond that, the mentors work hands on with the companies for the summer. At the end of the summer, we organize Investor and Demo day and typically hundreds of investors show up.
X: How long has this been in the works? If it wasn’t a response to Paul Graham’s decision to leave Cambridge, how do you think Y Combinator’s departure changes the environment here for TechStars?
DC: Bill Warner first approached me in October of 2008, and continued to be the instigator when he first came out to TechStars in December of 2008. However, we always thought Boston would be a great next logical step just because there’s so much going on there, and so many great schools and entrepreneurs around. TechStars co-founder Brad Feld went to MIT and built and sold his early companies there. It’s where he started investing, and so he’s funded many successful companies around town.
Regarding Y Combinator’s departure—I am unsure of the mood or the effects of it. All I can say is that we believe our model is a substantially different approach—one of extensive community involvement. I hope that this model is welcomed in Boston the way it has been in Boulder.
X: Most incubators of this type (Dreamit, Y Combo) have a bias or preference for Web-based teams or companies, either because that’s the background of the funders or because those types of companies are easier to start fast. Is that also the pattern at TechStars, and why or why not?
DC: We think TechStars is different from “incubators” because of the mentorship-driven community involvement approach that we take. The top entrepreneurs and investors from the community get very involved from day one, and this is what makes TechStars work vs an “incubator.” To date, we’ve funded various software companies. Because of the applications we get, you will see that most of them are Web companies as you suggest. We do expect that most of the businesses we are going to fund in Boston and in Boulder are going to have a heavy software component—it’s what we know and we focus on. However, I suspect we’ll see a more diverse set of applications and I think that’s a good thing.
X: Are you confident there’s still time to get the Boston session organized and attract strong applications, with the application deadline just over a month away?
DC: Yes. Last year we received nearly 400 applications to the program. Remember, this is not a local draw. In Boulder, only four of 20 companies we’ve funded have been from Colorado. So this is going to bring exciting new companies to Boston, and our mentorship-driven approach has proven to cause a high percentage to want to stay after the program. While we don’t require that, it’s sort of our “evil plan”—TechStars wants to make the community we’re in better. It happens naturally because we’ve been effective at building enormous and useful networks for the founders who participate, and have a great track record at getting seed funding done for our companies. This tends to cause them to want to stick around.
Back to the application flow. Typically, more than half the applications come in during the last 10 days. Our network of mentors and publications interested in the region will help get the word out fast. This is a great opportunity and good news travels quickly. In fact, thanks for being a part of that!
X: When Paul Graham announced that Y Combinator would be leaving Cambridge, he made it clear that the main reason was that he and his wife wanted their kids to attend schools in the Silicon Valley area rather than Cambridge. But he also said that the gap between Boston and the Valley was “huge,” in terms of the opportunities available to startups, and that it was probably a net disadvantage for the participants in the summer sessions to be located in Cambridge. So my last question for you is this: Why choose Boston over Palo Alto or Mountain View? Do you see something in this area that Graham doesn’t?
DC: Regardless of the endless debate about Silicon Valley being better or, for extremists, even the “only place to do a startup,” we all know that Boston and the East Coast in general is obviously rich with opportunity. The reason we picked Boston is because of existing deep ties there, coupled with enthusiastic interest from the community in the form of investors, mentors, etc. TechStars is very much about the communities that it exists in because it employs a mentorship-driven model that is unique and has been extremely effective in Boulder.
Regardless of the “noise”, it’s painfully obvious that Boston is one of many great places in the country for startups. TechStars simply hopes to help make it even better, and our community-oriented mentorship-driven model, we hope, will help get the early stage community involved and integrated in the process.