Lessons from TechStars’ David Cohen on Building a Startup Culture: 7 Takeaways from the Xconomy San Diego Dinner
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the entrepreneurial community. Cohen describes TechStars’ mentors as “the best people with the best intentions. Nobody has any agendas. They just want to help these companies be successful.”
Of the first 10 companies that TechStars accepted in 2007, eight were from outside Colorado, Cohen said. “We found that people would come to Colorado, to Boulder, which is a town of 100,000 people, to get access to the best mentors who were available. It was very successful.”
Cohen acknowledged that entrepreneurs and investors might balk at a funding deal in which the valuations are so low. By providing $18,000 in seed funding for a 6 percent ownership stake, TechStars sets a valuation of just $300,000 for each startup that enrolls in the program. “Who would do that?” he asked rhetorically. “It turns out that really amazing people will do that if you give them access to what the really scarce resource actually is. It’s not capital. It’s mentorship and help.”
Of TechStars’ class of 2007, Cohen said, two companies were acquired that same year. As a result, TechStars used its proceeds from those deals to fund the program in 2008. As of today, Cohen said, five of the 10 companies in TechStars’ first class have achieved positive exits, three are dead, and two are generating “multi-millions” in annual revenue.
Such successes prompted TechStars to expand to Seattle, Boston, New York City, and the San Antonio, TX area, enabling Cohen and his partners to fund a total of 110 companies through TechStars so far. It also has enabled them to create a global accelerator network with other like-minded incubators. When asked why TechStars hasn’t launched its program in San Diego, Cohen answered, “relationships.” TechStars expanded into other cities because he got to know key leaders in each town who urged them to come, he explained. He simply didn’t know anyone in San Diego, at least not before last week.
With each move, though, Cohen said the main goal has been to start great companies and to build sustainable entrepreneurial communities.
“If you’re looking at it in cash and you’re calculating that $300,000 valuation, you’re totally looking at it the wrong way,” Cohen said. “We have fourth-time entrepreneurs coming to TechStars, people with multiple exits going through the program. We have mentors who have mentored in the program, [who are] starting companies and going through TechStars. Why do they do that? How else do you get an entire community wanting you to win?”
In other words, Cohen said, “You do it for … Next Page »