Three messages before we get started.
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And remember Patrick Buckley who I interviewed? He came up with an idea for an iPad case. He built a store to sell it, and in a few months he generated about a million dollars in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up your store on Shopify.com because Shopify stores are designed to increase sales. Plus, Shopify makes it easy to set up a beautiful store and manage it. Shopify.com.
Here’s the program.
Andrew Warner: Hey, everyone. My name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. Big question for today: How do you build a tech startup? David Cohen is the co-founder and CEO of TechStars, a seed stage investment fund that offers startups a lot of mentorship. TechStars helped launch SendGrid, DailyBurn, Intense Debate, and so many other companies whose founders have come here to do interviews thanks to David. Thanks for introducing me to them. David is also the co-author of, and I’m going to ask him to hold up his book. Don’t be shy, let everyone see it. The book is “Do More Faster,” a book that compiles TechStars’ lessons for accelerating your startup. There it is.
So David, I thought I was being smart by having guys like you come here to Mixergy and talk and create incredible content, content I couldn’t come up with myself. But you’ve one-upped me. You’ve had people write your book chapters for you. Can you tell people who some of the writers are who you got to write your chapters?
David Cohen: Sure. Absolutely. First of all, thanks for having me back. I’m a big fan of the show. “Do More Faster” is a compilation of first person stories. It’s written by a lot of the mentors and past founders that have been through the program, so some of the folks from the companies you mentioned and a lot of the founders in the program . . . sorry, a lot of the mentors in the program. Folks like Fred Wilson and Matt Mullenweg and Eric Reese and many, many more. There are about 85 contributions from mentors and past founders in the book, and we’ve tried to put that together in a cohesive way so that it can help everyone.
Andrew: Tim Ferriss, Ben Ha. Tim Ferriss is not an easy guy to get to do stuff like this.
David: Tim writes the opening chapter, and it’s called “Trust Me Your Idea Is Worthless.” It’s a great little read, and he’s definitely said that a few times around TechStars. Don’t get too hung up on how great your idea is. It’s about doing it and making sure that you’re listening.
Andrew: So my idea for this interview is to use the seven themes in your book as my outline for the conversation, starting with, first theme is idea and vision. And David, here’s the thing. A lot of people, including me, sitting here watching all these incredible companies launch from TechStars with ideas I never would have thought of before, like SendGrid. What a great business. I never would have thought that we needed a new way to get email delivered into inboxes. If we want to come up with an idea like that, how do we do it? Where do you come up with these ideas?
David: Well, it’s interesting because Isaac actually writes a chapter in the book called “Look for the Pain.” It’s in the idea and vision theme. Isaac had been a founder of two or three previous startups. He’s still pretty young but he had done a few. And I don’t think they had been huge, but in every one of them he had had the same problem, which was that he was sending email from the application and it wasn’t getting through about 20% of the time. And he realized that most people just didn’t know that. And so he just really went to where his own pain point was in that case. As he started to talk to folks from other organizations, he saw a very clear pattern, which was that (a) they don’t know they have the problem but (b) they do. And so SendGrid just solves that problem in a very elegant and simple way. So I think that’s one way. Isaac just went to where he saw pain and he focussed very specifically on that one thing and being really good at solving it.
Andrew: How do you even begin to notice these little pain points? I feel like delivering email has been an issue for me and for other people for a long time, but we just didn’t pay much attention to it because you accept it’s one of the problems with dealing with multiple email providers. And so you don’t really notice it. It doesn’t bother you every day. It just feels like another challenge that you have to deal with. How do you become aware of it?
David: I think it’s going to be case specific of course. But I think, again in Isaac’s case, it was just noticing that he wasn’t getting the response rate that he thought and just paying attention. And he was very data driven and that’s how he recognized this. As he went and talked to folks, he found a study actually by a major retailer that we all know that said that for every 1% of email that doesn’t get delivered, they’re losing $15 million in sales. So it’s a big, big problem for a lot of large companies but for small companies too. When you sign up for a service and your registration email isn’t received, that’s a lost user and it’s a real opportunity cost. So I think it’s just really having a passion about something that either you identify closely with or that you’re familiar with and just keeping your eyes open and being data driven.
Andrew: Do you have another example of another TechStars company maybe that discovered a problem that could help us figure out how we could identify issues to solve?
David: Sure. I’d go back just picking one at random almost. There’s a company called socialthing! that was in the first year of the program. Matt Galligan who’s now one of the founders of a company called SimpleGeo. Again, Matt recognized a frustration that he and his friends were having around social aggregation and was one of the pioneers of the idea of social streaming and wanted to figure out how can I solve this problem of there are 25 networks out there that I use but I don’t want to go to all of them all the time. So Matt just focused on a problem that he and his friends were having. I think that’s a common way to identify pain, but I would say it’s not the only way. I often tell the story of my first company that was a public safety software company. So it did dispatch, things like that. I wasn’t an ambulance driver or an ambulance dispatcher, but I was passionate about the problem because I could help save people’s lives. So I think it’s important to have a source of passion. Sometimes that comes from a problem that you have or you identify with and sometimes it comes from something external.
Andrew: You’ve given me examples of ideas that are the basis for a business. But you said earlier Tim Ferriss keeps telling your entrepreneurs, “Trust me, your idea is worthless.” Why is the idea worthless then?
David: I think the context there is that on its own it is. Many people try to protect their idea and they don’t share it early, they don’t get it out into the world early. They’re afraid that someone will steal it and they ask for an NDA. We get that a lot around applications for TechStars, and of course getting thousands of applications a year, we can’t promise that. But we have a good reputation and no one thinks that we’re doing that. And so I think we’re credible and you can share your idea with us. I think that’s true of most people. And you actually get an amazing amount of benefit from sharing your idea with smart people and getting feedback and that’s what Tim talks about.
Andrew: Okay. So if it is about people, how do you find the people? How do you find the person that you’re going to partner up with? In fact, I have a list of people who I know you want to have in an organization. Why don’t we start with the co-founder? How do you find the right co-founder?
David: Well, I think more often than not, and we do have a section of the book called “People,” and the chapters are things like “Don’t Go It Alone” and “Avoiding Co-Founder Conflict.” There are some great things in there as well. But most often when I see great co-founding teams, it’s just people that are meeting other people that are already in their close network. So there are events like Founder Dating, we put on things like that that are similar around TechStars. We have some really interesting stories about how some of our past founders met online and worked virtually together for a year. But those are rare. In most cases you’re going to find a co-founder in your close group, someone that you know and respect or that is one degree from you that maybe you met in college or it’s going to be someone that is introduced to you by a close friend. But it’s usually not just the randomness of the universe of posting something on Craigslist. Those are hard. And we know that, while it occasionally works, one of the big startup killers is just teams that blow up. That’s why we spend a lot of time on that in this book.
Andrew: When I was dating, I didn’t want to happen to meet the right girl on my way to the train or just because I happened to be out. I said, “No. Where am I going to find the hot girls? What parties? Which clubs do I need to go to? And how many nights do I need to go and how many girls do I need to talk to in order to get a phone number?” I want that kind of plan here. If I want to meet a partner and I don’t want to happen to have someone in my network but I want to really make it happen, what do I do for the next day, week, and month to try to manufacture that luck?
David: The advice I often give around this is obviously you’ve got to get out there and you’ve got to tell people what you’re doing. Again, if you hold your idea too closely, no one else is going to get passionate about it. I think it’s really important to find someone that isn’t just joining you and going to be a coder or a businessperson but really cares about what you’re working on because it’s a long-term project. A startup is going to take five to ten years, most likely, to see any real progress. Making it visible what you’re working on, talking about it, blogging, tweeting, sharing your passion so that the world knows you’re passionate about that. Hanging out where other people that are passionate about that topic are and then having a focused effort. If it’s important to you to find this co-founder or this person to work with, it’s something you have to make a priority and just work really hard on. You’ve got to get out to the events and get in front of people and share that vision.
Andrew: So find a bunch of tech events or a bunch of startup events, a bunch of events where there may be developers or entrepreneurs and just be consistently out there.
David: Absolutely.
Andrew: And if you don’t yet have the idea, what is it that . . . I guess it makes sense, right, from my interviews I’ve seen this. Guys who don’t have the idea yet but have some idea will just start blogging about that idea, looking for people to partner up on that, and then that might lead to the big idea.
David: That’s right. There’s a chapter in here from Niel Robertson called “I Never Need to Have Another Original Idea.” It’s because he’s just talking to people. People have great ideas and they’ll share those ideas with you. Another great reason to get it out there and be talking about it, because as you talk about it, you will get feedback and you will get new ideas from that. So many, many companies that have gone through TechStars have come in, I think our data’s about 45%, those companies have left the program working on something different. So it’s often just a general passion around the market. One of the great stories about that is Next Big Sound. They went through the program in 2009. Came and dropped their idea on the first day, but they ended up doing something in the music market which they were very passionate about that’s very positive.
Andrew: Okay. What about advisors, people who are going to help shape your idea? Where do you get those? Before you’re ready to hand out shares, before you’re ready to hand out responsibilities, when you just need smart guys who have experience to give you feedback, where do you go and get those guys?
David: I think most people assume that the mentors or the advisors that they really respect and think highly of will not respond to them, will ignore them. I actually think it’s generally not true as long as you approach it intelligently. “Engaging Great Mentors” is another topic in this book. I think if you give someone a specific ask and you’re looking for advice, so often these are investors that you’re talking to, don’t be looking for money early on, be looking for advice, often they’re just great entrepreneurs that you want to approach. I think the key to that is to make it really easy to engage with you. So I get about 15 requests for coffee or tea a day. I don’t drink caffeine. I haven’t had coffee in 15 years. I don’t want to have coffee. It’s not the way that I like to engage initially. Instead what I love is when someone says, “Hey, here’s a product I’m working on with a link. This is what I’m excited about, and I have a specific question for you. I know you have specific experience with X. I’m thinking about this issue. What do you think of this issue?” That gives me a really easy thing to look at, to engage with, and to quickly answer your question. Over time you build a relationship with that person. I think you’d find that if people approach it that, way more often than not the entrepreneurs that they respect and that they’re looking for advice from will engage with them.
Andrew: So a link to something that’s already up and then a specific question. I get a lot of questions like, “Give me feedback on this,”‘ or “What do you think of that?” That’s obviously not a specific question. Can you give us a few examples of specific questions that you’ve gotten?
David: Sure. I get them every day, because usually when I get a vague one I say, “What can I help you with?” But I’ll tell you earlier this week I got a question about, there’s a lot of Groupon-like sites being pitched to me these days or things that look something like the Daily Deal, and I got one that really wanted to make it clear how they were different from all those other ones. And he sort of just asked me, “Here’s the difference. Here’s the nuance and here’s why what I’m doing is more interesting. Can you help me describe how I would talk to customers, partners, and investors about that?” So it was a really easy thing for me to help him craft some wording or a way of presenting it that people would understand. Those are easy things to help answer and engage with. And then over time, as I see that product developing, I might become more interested in engaging on a deeper level or maybe even being an investor.
Andrew: I understand why you might do this because maybe you’ll be an investor, maybe this person will build up their business and come back and be a mentor. You’re also in the habit of helping companies because that’s what you do. But take a guy like Ben Ha who’s one of the mentors at TechStars. He’s running his own business. He’s got a lot going on. He’s doing speaking engagements. What incentive does he have to respond to somebody who says, “Hey, I’ve got a Groupon aggregator type company. Can you give me feedback?”
David: I think that people generally who are entrepreneurs love to help other entrepreneurs as long as it’s easy to engage with. What’s the incentive? It’s karmic. I think a lot of people out there just believe that you give more than you get. And that’s what we believe around TechStars. That’s one of the reasons we wrote this book. It’s not a book that we wrote to make a bunch of money. It’s a book that we wrote to share the ideas and the lessons that we’ve learned. And I think someone like Ben has a wealth of knowledge. He’s probably much more likely to engage with you if you’re doing something that he knows something about. So not to say that he wouldn’t know anything about a Groupon site, but certainly he would know a lot more about how to make people laugh or about content networks and things like that. Pick the people you’re engaging not based on their name recognition but based on what they can really bring to the table and what they know about what you’re doing.
Andrew: Okay. Next big theme is execution, and that’s where I think the chapter “Do More Faster” comes in. How do I do more faster?
David: The book is really full of one liners that we use around TechStars. I could flip the camera around and show you that over my door there’s a sign that says, “It’s about doing. Do more faster.” The founders often jump up and hit that sign on the way out of my office after a meeting because I always tell them, “You’ve just got to do more faster.” There’s a couple things about this that I would point out. One is in the context of TechStars, which is a 90-day program, it’s really important to be doing more faster. It doesn’t mean doing everything and not having any thoughtfulness about what you’re doing, but it does mean trying a lot of things and iterating quickly. So it’s important in general, but it’s doubly important in the context of TechStars. The one competitive advantage that all of us who are doing startups have over the big guys is the big guys are going to lumber along, it’s going to take a long time, big decisions are politically costly. That’s the big advantage we have is we can do a lot more much more quickly than bigger competitors. And if we don’t do that, we’re really starting from a disadvantage as a startup.
Andrew: Do you have an example of a company that did more faster? I feel like a lot of the companies that come into TechStars are small groups of people, maybe one or two guys, that there’s only so much they could do but they do seem to do a lot more than you’d expect.
David: Yeah. Those are the companies that always turn out to be the most interesting. They’re thoughtful about what they’re doing. Some of it works and some of it doesn’t. But the pace at which they do it is just mind boggling. So I’ll give you two specific examples. So from the first year of TechStars we had a company called J-Squared Media that’s a great company in Philadelphia now. It’s grown very nicely without raising any money. I think they had a million users from zero at the start of TechStars. They had a million users at the end of the program on Facebook. They were the guys behind Sticky Notes and a bunch of other really popular Facebook applications. Their servers were always on fire. They were figuring out how to deal with it. They scaled incredibly quickly. When I tell that story you say, “Wow, that’s a lot for 90 days.” But they didn’t actually have the idea for 45 days. They spent the first 30 days figuring out what they were going to do. So in 45 days they went from zero to a million users. Another story is SendGrid that we talked about earlier.
Andrew: Actually, let’s stop and just stick with the first company. So you’re saying they have 90 days, but in the 90 days is not when they programmed. They programmed within 45 days. So how do you get that much done in 45 days?
David: I think it’s focusing on the right things and being data driven and not assuming that you’re right about what you’re doing, being open to change and just being . . . obviously a part of this is just having a lot of talent. And I think with the right plan and the right mentorship and the right advice you can see companies that just . . . they appear to be moving 100 times faster than other companies. And you say, “Wow, how do they do that?” One of the cool things in the context of TechStars is that it inspires the other nine companies to go that quickly and get things done in a quick time frame. So that’s why we say, “Do more faster.”
Andrew: All right. And you were giving another example, SendGrid.
David: SendGrid, this company has been growing at an amazing clip. And they came into the program, I think they were sending a few thousand emails a day. They were signing up probably three to five customers a day during the program. They were able to scale their technology to millions of emails a day, and they did that in a matter of a month or two. So the rate at which they were able to go and sign up customers and on-board them and scale their service to where they’re now sending . . . I think they’ve not sent three or four billion emails on behalf of customers in just a year. That’s a massive scale in a short time frame. You just look at those guys and you say, “Wow. They get so much done.” They’re focused on the right things. They’re very talented. Those companies have a huge advantage over their competitors.
Andrew: All right. You mentioned earlier data. When you’re just launching, you don’t have millions of people on your website and so you can’t see data for . . . it doesn’t feel like you can get meaningful data. How do you make data useful when you’re just starting out and you don’t have a lot of users?
David: Obviously it depends on the kind of business you’re talking about. But for consumer Internet or things like that, I like to think about the construct. I think a lot of people misunderstand. You hear a lot, “Get it out there early. If you’re proud of your product when you release it, you’ve waited too long. You’re doing it wrong.” That’s what Matt Mullenweg talks about in the book. I think it’s just important to think about the difference between a marketing launch and an early product small launch. So think about expanding circles of users. Start with your friends and your mom, and then expand that once you have a little bit of understanding of what’s going on to wider and wider circles. It doesn’t mean that you have to go out and make noise and be on TechCrunch and be pushing for everyone in the world to use it. Start small and then build from that. And I think if what you’re doing is interesting to people, you will be able to add users over time. Make sure you’re capturing the data from the beginning. That’s the other mistake a lot of startups make is that they have no metrics, no understanding of what’s actually occurring in the business until they’ve made a lot of noise about it. They built it and nobody came.
Andrew: All right. I want to go on to the next theme which is product and ask you about something that you just mentioned earlier. You said, “Don’t wait till it’s perfect. Just launch it.” But we all get to see lots of new companies and lots of new websites. And the ones that don’t look like they’re fully baked, the ones that look like they’re still confusing, isn’t it easier to write those off and focus on the ones that feel like the idea is there and it’s solid? And isn’t that the reason why entrepreneurs want to often wait till they have a solid functioning idea before they take it out there to their users? So that they don’t come across as just another wannabe guy with a website that’s never going to go anywhere.
David: So just summarize that for me real quick because the Skype cut out on me for just a minute.
Andrew: I’m saying that users are quickly looking to make decisions about whether a product is going to work or not. And if they see the first version and it stinks they’re much less likely to have a favourable impression of it in the future and try it again and trust it.
David: That’s right. Again, I talked earlier about expanding the circle of users over time. I think that that is an overrated phenomenon or thought. Sure, if a million people come and look at it and it’s a crappy flash page or just the GoDaddy landing page and doesn’t have something that’s interesting, they might have a negative association with that brand. But I think the phenomenon that usually exists is that the people who are most excited about using your product, those early adopters, they’ll actually put up with a lot because the only reason they’re there is because they either really, really want the problem that you’re solving to be solved or maybe they know you and they’re close to you and they want to help and give you feedback. So I think starting with that small circle of users is really key. But getting it out there and getting that data going is critical.
Andrew: Do you have an example of a company that launched with something that most people would be embarrassed to launch with and would be a good example of how you just need to get it out there because it’ll be better in the future?
David: Pick any TechStars company and I would tell you they probably launched something that was slightly embarrassing. They didn’t market launch it with a bunch of marketing material and campaigns, but they put it out there. Any of them. I will tell you that socialthing! as well as it did, they were acquired by AOL, did great, I mean their early products were terrible and Matt would tell you that. He actually blogged about all the problems he was having with his product. But he had 5,000 people early on that really wanted the thing he was building, and they would wait 30 seconds for it to refresh and they would put up with the wrong picture being next to the friend and they would give him the feedback. They wanted it. It’s important that there’s an audience for what you’re doing and the market cares about it. Otherwise you don’t have that effect.
Andrew: How can you isolate what that one thing is that people love so much that they’re willing to put up with a bad overall experience to get that one thing?
David: Take it away from them. You’ll hear them scream. We actually have used that technique, again, with a small circle of people. One of the folks that’s around the program is Dave McClure. He talks a lot about, “Kill a feature.” That’s one of his mantras. Just start taking things out. If nobody’s screaming, it didn’t belong there in the first place. So you can split test those kind of things, and I remember this with Intense Debate very clearly. When they added the ability for the blogger to reply to an email to post a comment on their blog, the thing just took off. And I think if you took that away from someone, they would scream. They would say, “That’s why I’m using this thing.” So it’s just having your eyes open.
There’s actually another really great story in the book from Darren Crystal, who is one of the founders of Photobucket. The way that company got started, the story’s in here. It’s amazing. It was a photo social network. It wasn’t what it became, and he just kept his eyes open and noticed that a lot of people were embedding photos off of Photobucket onto other sites, which was not the intended use. And his first instinct was, “Let’s not let them do that.” He shut that feature down and people screamed. And then his second instinct, which was the right one, was, “Let’s make that even easier.” And that’s what Photobucket became.
Andrew: I see. By the way, I love books that are written like this where there are tons of examples, tons of stories, and they come from people who aren’t just theoreticians, who aren’t studying the industry but are doing it and maybe taking a moment out of their day to talk about it or to write about it.
David: We saw that in the market with books. There were a lot of books that were consultant books. “You may become great like me if you follow my five steps.” And this book has plenty of failure in it too. One of the things we wanted to do with “Do More Faster” was just make it real first person accounts of both success and failure. It’s important to learn from that. So I think it’s interesting in that you’re meeting someone new every chapter in a lot of cases. Get new stories from real life from what they’re really doing.
Andrew: People with great personalities. I love Ben Ha’s section about “Free.” That guy’s cheap. His whole little community in Seattle are people who sit around at dinner and talk about how they out-cheaped each other. What did they get for 50 cents less than their friends got. But it’s such an exciting environment to be around.
David: Yeah. I mean, here we are, we’re using Skype. Right? That’s what Ben talks about in his chapter. It’s not our core competency. It’s not what we’re good at. Let’s let somebody else do it who’s really good at it. He tells the story of why he used WordPress and used their hosting because they’re really good at that, and he could focus on what he was good at. So using what’s free and available is really important for startups.
Andrew: Next big theme is fundraising. By the way guys, you don’t even have to read the book after this. I’m giving you every theme and we’re digging deep into it. Actually, what I’ll do maybe if we have time at the end, I’ll read some of these chapter headings. I bet the chapter headings alone are going to get people to read the books. Who wrote that by the way? Who wrote the titles?
David: So Brad and I when we first started working on this book . . . so Brad Feld my co-founder in TechStars and he has his own fund, the Foundry Group, as well, we were up at his house in Keystone, Colorado about a year ago and we had this crazy idea to do this. And there’s a video on DoMoreFasterBook.com that talks about why we did this. We actually just sat down and said, “What are the lessons we learned? What do we say all the time?” We thought there’d be 10 or 20 things, and we came up with about 100 and we ended up killing about15. But in the book are 80 some phrases that we were saying all the time. These are just things that we say and we find ourselves saying over and over again, and we wanted to write about them. The great inspiration that we had was that what’s special about TechStars is all the people that are involved, the founders that have been through the program and the mentors. Let’s get them to talk about it, not just us, and I think it’d be more interesting. I think it turned out that way.
Andrew: Here’s a title, “Turn the Knife After You Stick It In.” These are great titles. That’s from the fundraising section. What does that mean?
David: Obviously, a key part of any pitch is to explain the pain that your solution is going to solve. And if you’ve ever seen a TechStars company pitch, hopefully they do a good job of turning the knife. They don’t just stick it in and say, “See. It’s painful.” They go, “Look how painful it is,” and they keep turning that knife. That’s a key part of the pitch is to make people clearly understand how big a problem it is that they’re solving and how annoying it is to those customers or those users. So that’s where that phrase comes from. When I see a pitch and I say, “Yeah, there’s pain there but I’m not feeling it yet,” that’s what turn of the knife is all about.
Andrew: I see. Okay. What about meeting people? How does somebody get to meet the first potential investor?
David: We talked earlier about engaging mentors. I think it’s the same thing. I think too many entrepreneurs view, especially angel investors, as too similar to VCs. I think a lot of angels invest for reasons other than just pure financial reasons. So building that relationship is key. There’s a chapter in the Fundraising Section called “Focus on the First One-Third.” We teach that around TechStars where if you can find a third of the money, the rest of it usually follows pretty quickly. So rather than trying to go deep with every investor you ever come across, it’s possible to really pick investors that you think are going to have an affinity for what you’re doing, some experience with it, and really get it and then build a relationship with them. So the old adage, “If you want money, ask for advice. If you want advice, ask for money,” it applies. You’re after money so you want to build a relationship that’s two-way that’s going to take some time. Fundraising is hard. It usually doesn’t happen immediately. And so just reaching out to someone that you respect, that knows a lot about what you’re doing, engaging them and getting them involved in what you’re building and trying to become as a company, and then down the road when you have that relationship, moving it towards the funding discussion.
Andrew: It’s hard usually. But from what I hear you had a pretty easy time getting funding for TechStars. Can you tell people that story? How did you get money from Brad Feld to invest in this business?
David: So I had had three companies before. Two of them had been acquired. So I had had some luck and some success as an entrepreneur. So I started with that base of credibility. I walked into Brad’s office on what he calls a random day. And this story is in the book as well a little bit where he just takes 15 minute meetings with anyone. I had never met Brad. I had just been heads down as an entrepreneur building companies, and I had done some angel deals and I’d seen his name on a few documents that I had signed, and obviously, I had read his blog which is amazing and got that meeting. I think it took me three or four months to get that meeting, to get on his calendar. And I literally just walked in and said, “Hey, I have this idea.” This is five years ago now. “I want to do this mentorship driven thing. I want to engage the whole community. I want to attract new talent.” It was a ten minute meeting. And Brad said, “I’m in. As long as you’re not a flake, let’s work on it some.” And so I think another part of that was I was putting a lot of my own money in, so I had that base of credibility and I was willing to put up my own money. And Brad introduced me to a lot of the great mentors around the program early on and our other co-founder, Jared Polis, and it went from there.
Andrew: Let’s stick with this and talk about two different scenarios here. One is somebody hears you here and says, “I want to apply for TechStars. I want TechStars to do a lot of the heavy lifting for me, introduce me to their mentors, their investors and walk me through the process.” And the other is somebody who doesn’t want to go through TechStars and just wants to meet investors on their own. So let’s start with the first one. I’m listening, I want TechStars to fund me, I want to do it intelligently. How do I do it well?
David: I’ll give you all the pro tips for how to get into TechStars. So as you know we’re now in four cities. We’re in New York, Boston, Seattle and Boulder. Applications as we’re speaking are open for the New York program, but at any given time they’re open for one of the programs. I would say that it’s critically important to build a very talented team that’s balanced, not just tech but has some sort of business skill or domain expertise. That is the key thing. When you apply, that’s the key thing we’re looking for. The second thing would be what is the talent of this team and how can we see it in that application? So that doesn’t mean you have to have a lot of progress on the idea you’re working on, but it does mean that you should show us some of the things you’re capable of doing as a team. So that could be a personal website. It could be a past project. If we don’t see a really strong team and some demonstration of talent from the application, it’s a pass for us. It’s a filter. And so I think getting through that filter is critically important, and people need to understand that. So focus on those two things.
Andrew: Stop right there. I want to make sure that I understand every bit of this. I decide I want to be part of TechStars. I say to myself, “I need to find a partner. Well, I’ve been working with this one guy pretty well. We want to apply and really have a good chance.” Maybe we go back and put a list together of all the projects that we’ve built and make it easy for you to find. Or if we haven’t done that, we might say, “Hey, let’s go heads down mode and let’s see how many projects we can knock out just to show our talents, just to see if we could gel as a duo, and then we can take that to David.” That’s what you’re saying.
David: That’s right. And it’s fine if that progress is on the new idea, or it’s fine if it’s stuff you’ve done before. I have this theory that entrepreneurs do stuff. And so I think people with ideas are a dime a dozen, and if we can’t see a sort of demonstrated ability to get it out of your head and into the world, we’re much less likely to take that application seriously. Beyond that, there’s obvious things like what we do. Many folks have applied to TechStars with flower shop, and that’s not what we do. We’re focussed on technology and Internet software. So that is a filter for us as well obviously. We don’t care too much about exactly what you’re doing. We know that half of the companies that go through the program are going to change what they’re doing. So we do care about your passion and the source of it. And we do care about your talent, and we do care about the market that you’re interested in. But we don’t care about exactly what you’re doing. Many people go too deep and think, my idea is worth a million dollars on its own, and have that bias. That’s for us a bit of a turn off. We’d much rather see someone that says, “There’s something here. We’d really love help figuring out what it is.” Those are the companies that can really get the most out of TechStars, leveraging this broad mentor network that’s seen so many things and will help evolve the idea.
Andrew: Okay. Is there an advantage that I could get by maybe contacting past people who’ve been through the program?
David: Huge. I’ll give you a big secret for people that are watching your show, only available on Mixergy. Don’t tell anybody. Every TechStars company that’s ever been through the program can be reached by emailing Founders@ that domain. So we have 100% referencable past company base just like you would say about your customer base. We want you to reach out to those people and ask them anything. There’s a list on the TechStars website. Just shoot them an email, Founders@ that domain. Or tweet at them. They’re all pretty accessible. Most of them would love to tell you about their TechStars experience. A lot of them have blogged about it. So yes, approaching us through someone that’s been through the program, that you built a relationship with, like any investor, through someone we know is a great way to get our attention.
Andrew: This is good for me to know too if I just want to meet any of these guys. If I want to get a hold of the guy who founded SendGrid, I just email Founders@SendGrid.com? DailyBurn, Intense Debate? Even Intense Debate which was sold a long time ago?
David: If a company has been integrated into a larger company, you may get a bounce. But generally speaking, that’s how it would work. And I would encourage anyone who wants an introduction to any TechStars company to just reach out to me. I’m David@TechStars.org. I’m happy to connect you directly to that company.
Andrew: And you’ve done that for me so many times. I’m really grateful. Especially around big news. When DailyBurn sold, I said, “Let me ask David if he can make an introduction to the founder of DailyBurn. But maybe the guy’s busy. He just sold his company.” Nope. David you were right on it and the founder of DailyBurn was right on it. And man, I’m so grateful to both of you.
David: The past founders consistently love to talk about their experience in the program. We obviously do exit interviews on the way out. Many of them have the idea coming in, we’re too far along, or we’re not a fit, or our network is big enough already, or whatever. And after the program, the quotes they give us universally is, “Man, that was totally worth it. The help we got, the network we were able to build, the access to funding and other things that we needed.” So I love it when people reach out to our past founders.
Andrew: So what’s a good thing to say when you’re reaching out to a past founder? Because to just say, “Hey, I’m going to apply to TechStars. Do you have any advice,” is going to get a generic response. How do we get a response that’s going to build a relationship that’s going to be so strong that an introduction from them will be meaningful?
David: I think it’s what we talked about before. I think you view them as mentors in a specific context and ask them for specific help. What I’ve seen a lot of people do successfully . . . and I’m trying to think. There have been plenty of examples of companies that have gotten into the program because of a reference from a past company. Send them the application and say, “Here’s what I’m applying with. What do you think they’re going to think of it?” Ask them a specific question. “I’m struggling with the answer to number four. What did you guys say? How did you position it?” But I would also say don’t get too focused on the application, because it is a filter for us as a pass/fail and then we engage with companies that are interesting. It’s important to apply early. But just reaching out and asking them for something specific that they can quickly answer and then you might find a fan. They might like what you’re doing and they might get in front of it and start promoting it.
Andrew: Okay. I can see some people might say, “Andrew is just shilling here for TechStars. He’s obviously a good friend of David’s and he’s trying to promote this program.” Let’s take . . .
David: No, I don’t even like you.
Andrew: No one’s going to believe that. How could anyone not like me? Ask my mother. She’ll tell you. Let’s say someone is sitting there saying, “I don’t want TechStars. I want to do this on my own. I want to get investors.” What’s a good way for them to approach investors?
David: I think it’s largely the same, which is just engaging them in the same way that I’ve been describing. There are great blog posts out there today, and there’s so much more information from entrepreneurs about how to do this that now, when I meet someone that hasn’t taken the time to research these things, it’s a signal to me that they haven’t made fundraising important. Things like AngelList that are out there and your show and others that have blogged about this. Folks like Chris Dixon and Fred Wilson and Brad Feld have written amazing things like this. And when I’m approached by somebody that says, “Hey, before I talk to you I need an NDA and I’m doing uncapped convertible notes,” it’s clear that they’re not really understanding what the market is today and how investors think about these things. So just use the tools that are out there. There are plenty of great blogs out there to help you understand this stuff. But approaching them and engaging them with specific things and building a relationship is extremely key especially in angel investing.
Andrew: All right. Let’s move on to the next point which is “Legal and Structure.” Form the company early on. How early?
David: Really, this chapter talks about as soon as you’re doing any sort of business. So when you know it’s going to be real. It doesn’t mean you have to spend a lot of money and we spend a lot of time talking about that. People avoid forming the company or doing any sort of legal early on because they don’t have the money to do it. There are plenty of great lawyers that will help very affordably, and there are lots of great, practical pieces of advice in the book around how to avoid things like co-founder conflict by agreeing to vesting and agreeing to what will happen in certain situations. That doesn’t have to be written up in legalese, but it just needs to be talked about and agreed to and ideally written down. So forming the company early, it’s a liability protection for whoever the founders are. It’s important to do things right from the beginning, especially if you’re going to raise money down the road or if you have some kind of success. Not doing that can really cost you because you end up not having agreements with the people who are writing your code and ownership is unclear and all these kind of problems that emerge. That’s what we talk about in that section.
Andrew: Are there standard documents that people can download and maybe fill in a few blanks, like over how many years their stock will vest, sign it and be good?
David: There are. I generally recommend reaching out to a lawyer locally that has done lots of these because they’ll generally help you incorporate the company and jot these things down in really simple agreements without it being very expensive. Oftentimes they’ll defer that cost if they think the startup is going to be interesting. But there are things like that out there. You have to be a little careful because anytime you take a generic legal document and try to apply it, you may not be protecting yourself or doing it right according to the laws of your state. A great example of that is TechStars is open source. The seed documents that we use for financing a lot of people are now using those documents. But we’re really cautious to say, “That gives you a head start. Work with a lawyer to make sure it works for you.” And I think those that don’t do that are asking for trouble. Those kind of documents are great because they drive down the cost of doing it to where it’s very affordable, but you still need advice from counsel.
Andrew: Let’s see what else there is. Actually, here’s a practical question. You and I decide we’re going to start a company together. We don’t even know exactly what the company is going to be. Maybe we decide what we want to do is make it easy for people to respond to email. We fool around, we come up with a few plug-ins for Gmail because that’s an easy email program to build on. We don’t yet have anything that’s necessarily going to be a company. We keep building. At what point do we know we have something that’s strong enough that we’re really going to continue with it and we need to go and incorporate?
David: First of all, I obviously will have written most of that cool code, so it’s mine.
Andrew: That’s an interesting point. Right.
David: Having not talked about that and not having a company and having that documented is a potential source of conflict, right? I would say that as soon as you know that you’re serious about that being a business, that you want to be in business with me, we should just write down a simple agreement between us that talks about how our stock in the company will vest or what will happen if you decide to leave or I decide to leave or what will happen if we raise funding. And how much money are you putting in versus what I’m putting in? And how will that affect our ownership and what will our ownership be? These are all the issues that Dharmesh Shah talks about in “Avoid Co-Founder Conflict.” So I would say very early, as soon as you know you’re serious.
Andrew: Just with a quick email to each other so that it’s all written down, continue to build, and then go and formalize it?
David: I think that’s better than nothing. Get help from mentors. That’s a key thing you’ll hear around the book. There are a lot of people to help you with this that have done it a million times. They don’t have to be lawyers, but they sort of know what’s important. And as you have a little bit of funding or a little bit of money or a lawyer that’s willing to help, I think go ahead and do that.
Andrew: Final big theme in the book is work/life balance. Is there really such a thing as work/life balance?
David: Absolutely. It’s one of the things we’re really proud to have included. There are some great stories in here about practical ways to maintain that balance. On day one of TechStars we say, “Hey, this is going to be 90 days of hyper productivity. You’re going to do more faster. And what we’re encouraging you to do is not sustainable for the long term. We don’t want to teach you that this is the method.” We’re careful about that. It’s important to have balance in your life. You will burn out over the course of five or ten years of working the way that all of us as entrepreneurs do work. You have to have practical ways of finding balance in your life, and that’s what we spend time talking about in this section.
Andrew: Would you get to ten years if you don’t spend the first three years so obsessed, so committed that you don’t have any time for family or anything else?
David: Look. I’m incredibly obsessed and committed to what I’m doing. Yet I make sure to go for a walk with my wife twice a week, and I make sure to spend time with my young kids. And I set that apart and I make it important. And I think lots of bad things can happen when you don’t do that. It’s just important to have those conversations with the important people in your life or the things that are important to you. Tennis is also important to me. I don’t play enough but I love it. I play competitively. I don’t get to play as often as I’d like, but I make it a priority. It’s definitely after family, but those things keep me sane. I have some of my greatest ideas when I’m on a walk with my wife or when I’m just on the tennis court. And if you don’t do that, I think even early on find a way to have that balance. And of course there are going to be periods where you go 100% and you’re not thinking about anything else. One of the techniques that Brad Feld uses is this quarterly off the grid. He goes away on a trip and he puts away all his technology and he’s not allowed to use it. He talks about that in the book. And that keeps his relationship with his wife really solid. I think people undervalue the importance of work/life balance. You can work really hard and be totally dedicated and still have balance.
Andrew: Do you have an example of someone earlier in their career? You and Brad I feel have already made it. You’ve got the freedom to take some time away. Do you have an example of an entrepreneur who’s earlier on who has the ability to spend time away?
David: First one that I can think of is a guy named Josh Fraser that started a company called EventVue that I think you guys interviewed.
Andrew: Yes, thanks to you.
David: The company failed. It had raised angel money. It was a high flyer and didn’t work out. They did a great job, gracefully shut it down, returned a little bit of the money I think but it was a failure. And they blogged about it and it’s talked about in this book. Josh, rather than jumping into the next thing, decided he wanted to spend a few months just traveling. And he went and did that. And I could see in him the difference when he came back. So that was how he figured out how to do it. He’s now off on his new startup, which is a stealth thing that he hasn’t talked about yet but hopefully will soon, and I think he’s better off for having found that balance and spent that time on himself.
Andrew: What about the founder of DailyBurn? I think Andy told me he was married and had at least one child when he applied to TechStars. I was surprised by that.
David: He wrote a chapter in the Work/Life Balance section called “Stay Healthy” and talked about how valuable it was for him to be going on a hike during TechStars when he was here with nine other companies. They all went out and walked for half an hour because it’s really close to the mountains here. And, of course, that ties in to what his startup is, which is a fitness social network that, as you mentioned, is now part of the IAC network. He managed to do that and he managed to find not just family balance but exercise, which is really important to him personally as a thing that he balanced in his life. The way that he did that is he just made it a priority just like it would be a priority to make your company successful. And he would balance them, and it would ebb and flow based on what was going on and how important things were in the company versus what was happening in his family’s life.
Andrew: IAC didn’t buy all of his company, right? They bought a big share of his business and he still owns the rest?
David: I don’t know the exact details, and I would tell you it’s probably not my place. But I believe they still have ownership and upside in the company, but I think IAC definitely controls the company at this point. I know Andy’s in New York, has moved there and is working for the company.
Andrew: And they have the right to buy the rest of the company?
David: I’m not intimately familiar enough to be sure about that.
Andrew: Really? You have so many companies that you can’t even know this kind of detail on them?
David: I could look it up. I think also it’s probably not my place to really talk about exactly what the deal was, but it’s along those lines. And I think they still believe that the company’s going to grow and be even bigger and they have more upside. But as an investor, I think that was our exit.
Andrew: Oh, that was your exit? You guys aren’t invested anymore? Okay.
David: We’re invested in Andy and Steven who are the founders. We’ll always be big fans and I’m sure they’ll do a lot more things. But in terms of that particular deal, we’re out of it.
Andrew: Okay. What about pain? Do you have a pain right now that you want someone to build something to solve?
David: Yeah. The automatic pitch watcher. That would be awesome. I have plenty of my own startup ideas, but it’s not what I’m doing today. I think there’s still huge opportunities around a couple of areas that I’m personally interested in. Things like human computer interaction and web infrastructure. I invest in a lot of companies that I put into that infrastructure category. They take something hard on the web and make it easy.
Andrew: Like what?
David: SendGrid and things like Twilio, SimpleGeo, iSocket. I’m an investor in a company called BigDoor, which is virtual economies and game mechanics as infrastructure. These are all things that are pretty hard. You have to be pretty good and companies like a Twilio will make doing telephony so easy. SendGrid will make sure your email getting delivered is so easy. It just allows people to build on top and become sort of the plumbing of the Internet. So I’m a big fan of those sort of things.
Andrew: What’s the big pain that BigDoor solves?
David: If you are looking to put a virtual economy and game mechanics around what you’re doing, you can learn everything that there is to learn about that but it’s probably detracting to your business. BigDoor is providing infrastructure that makes that really easy to define that economy and administer it and to track it and to plug in the rewards and things on the back end of it so that you just focus on what you’re doing, but they enable it to become more viral and more social pretty quickly and easily.
Andrew: Finally. You guys are in Boulder, Boston, Seattle, New York City. Did I miss anyone?
David: No. Those are the four cities we’re in.
Andrew: Why no Southern California? Why no California?
David: No specific reason. There are stories in this book around how the other cities came to be, and largely I will tell you that it was a concerted effort on the part of that city, the thought leaders, the investors, and the entrepreneurs there to bring us to their city. I spend a lot of time in LA. I know it’s a really interesting market. I was just there on the book tour that we’re doing. And I know there’s folks like Mark Suster that are doing amazing things there with LaunchPad and other programs. I think we want to be in the four markets we’re in. It’s not that we view L.A. as not a good market, but we’re running one program a quarter and that’s what we’d like to do. We’re very supportive of other things that sort of use this mentorship and community model, and I think I would expect there to be great programs there in addition to the ones that are already there.
Andrew: Actually, I take it back. I need one other last question. And let me read a few of these chapter headings like I promised people. One of them is . . . sorry. Do you have any that you want to read out?
David: No, go ahead.
Andrew: The one that I wanted to ask you more about is the one sticking out in my head right now – “Don’t Suck at Email.” How do you do email well? I feel like all relationships now either start or die with email.
David: It’s funny. The whole email’s dead and we’re all on Facebook now, that goes around a lot, especially in the Valley. Those people aren’t living in the real world where most people are still living and breathing in email. In the tech world, maybe it’s a little less so but everywhere else it’s not. And if you come into TechStars and you suck at email, you’ve got a big problem because that’s how all the mentors communicate on a regular basis, the companies communicate, we communicate, and that’s how your partners are going to want to communicate. And so we actually spend a little time teaching the companies not to suck at email. And we teach them about things like the inbox zero approach and getting things done from David Allen and just how quickly they need to respond and how to prioritize and how to keep things short. There’s a lot of really practical things about email in this book. And we’re big believers that you can’t suck at that or you’ll have a really hard time as an entrepreneur.
Andrew: I’ve got to do a whole interview on just email alone, because it’s so critical and because I have so many tactical questions about it. “Trust Me Your Idea Is Worthless.” I love that. I think it’s the first chapter in the book. “If You Can Quit You Should.” That’s another one. What else do we have here? “You Never Need Another Original Idea.” “Don’t Plan Prototype.” “Forget the Kitchen Sink.” Do this guys. At least go over to Amazon.com and hit that “look inside” button and you can read a ton of chapters for free. I don’t know why, but you can read a bunch of chapters for free. And if you want any more, I suggest you go and buy it. The Kindle version for your book costs almost as much as the paper version. What’s up with that?
David: This is a complete mystery to me how any of the things are priced at any level. The publisher, Wiley, has been amazing. We sort of go with what they think. It’s available on every platform, and I think they all have different prices. And I don’t really know how that stuff works. It’s sort of a mystery. We think it’s worth the 15 bucks or so that it costs, so hopefully you’ll get that much value out of it.
Andrew: I did a very good job of shilling for TechStars in this interview, so maybe David will send me a few books . . . no. We talked before the interview. He’s going to send me a few books. We’ll find a way to give them out.
David: I can send you some for your viewers and hopefully they’ll enjoy them.
Andrew: All right. Thanks for doing the interview again. I hope to have you back over and over and over again. One of my favorite guests. David Cohen, TechStars. The book is “Do More Faster.” “Do More Faster.” All right. Thanks.
David: Thank you.
Andrew: You bet.
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