Techstars’ David Cohen Talks Fintech, Managing Directors, and Growth
No, not at your cash or wallet. Look at your iPhone or Android.
Smartphones have replaced watches, cameras, planners, notebooks, landline telephones, some categories of computers—and, in the eyes of Techstars co-founder and CEO David Cohen, they’ll soon replace conventional banks.
“We’re all carrying around this supercomputer but we’re not really banking on it yet,” Cohen said Tuesday during an interview at the Techstars headquarters in Boulder, CO. “We’re starting to take pictures of our checks, we’re starting to look at our account balances, but the whole bank, I think, is going to be virtualized over time.”
Banking traditionally has been perceived as a conservative industry, although in the past decade or so technology has made its presence felt in the growth of high-speed trading and advanced risk modeling. Cohen believes it’s only a matter of time before the innovations end up in the hands of so-called retail banks that handle transactions like loans and savings accounts for customers.
“I think it’s a space you’re seeing a lot of innovation in. Look at things like Bitcoin. There’s crazy stuff going on right now. It won’t all be that crazy, but we have a belief that fintech is something there’s still a lot of room in,” he said. “There are a lot of companies going into that space that are interesting.”
Techstars and its new partner Barclays want to see that transition up close, and maybe forge links with some of the most interesting startups in the sector.
Barclays is not as prominent in the U.S. as its competitors, but it is a major bank in Europe and the rest of the world. By some measures it is the fifth largest bank in the world, with assets of $2.4 trillion.
Barclays will provide the startups with access to mentors, technical support, a place to work, and potentially could become a partner or acquirer. But as is standard with the corporate accelerators that are deemed “powered by Techstars,” Barclays will not have a stake in the startups or a say in management decisions.
“This will be at the Barclays facility, near their people, but our people will run the process, and it’s our investment,” Cohen said. Techstars takes a 6 percent stake in companies it incubates.
The London accelerator is Techstars’ second in the city. It also is the company’s 12th accelerator program overall and fifth that works with a corporate sponsor.
Techstars was founded in 2005 in Boulder, and its first class graduated a year later. In its first few years, it grew slowly, but in the past year or so it has added accelerators in Austin, Chicago, and London to its network, and launched three “powered by” accelerators.
I asked Cohen whether Techstars’ growth spurt could dilute the value startups get from Techstars. As one would expect, he said no.
“I think it’s anti-dilution. What we’re doing is we’re building a network. If you’re an entrepreneur, you want help from a network of people that have connections, relationships, and can do business with you,” he said.
The “powered by” accelerators also have avoided becoming “Techstars-lite” or overly influenced by the sponsors, he said.
“We’re not seeing whether one is better than the other, the traditional program or the corporate,” he said. “In many cases we’re attracting entrepreneurs to the corporate ones who wouldn’t have been attracted to the originals.”
Although corporate sponsors like Nike or the Kaplan educational publishing firm do not get direct stakes in companies, “they are acquirers or distribution channels for our companies, so I think of it as additive, and I think entrepreneurs should think of it that way,” Cohen said.
Cohen also does not believe Techstars is spreading itself too thin.
“We have a playbook for all this stuff, a real training process that people go through now. We certainly are not trying to be on every street corner, but we know how to roll these things out effectively. Where we’ve made mistakes we’ve figured out what caused those mistakes,” Cohen said.
One critical issue appears to be getting the managing director right. Techstars was the subject of some rare negative press over the past six months because of issues at its New York City accelerator. The biggest news was that managing director Eugene Chung was removed from his position shortly before demo day.
Cohen brought up the topic of managing directors before I asked, and we did not specifically address New York City. Alex Iskold, founder and former CEO of GetGlue, was appointed managing director of the program in November.
“One of the biggest things is getting the managing director embedded in the Techstars culture and spun up way in advance of actually launching the program,” Cohen said. “The cultivation of managing directors is happening across the system, so as we have these opportunities, we have people who are already indoctrinated in what we do and our philosophies, combined with a training process.”
The managing director of the new Barclays accelerator is the former entrepreneur-in-residence of the London accelerator.