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Keynote: 12 Tips Learned From Doing More Faster at TechStars
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Keynote: 12 Tips Learned From Doing More Faster at TechStars
by David CohenThe keynote by David Cohen, founder and CEO of TechStars, at Rails Conf 2012 focuses on key lessons learned from his experiences in the startup ecosystem. Cohen discusses how developers have transformed into primary decision-makers in the venture capital world, influencing which companies receive funding based on their preferences and talents. He outlines several critical observations and actionable insights for entrepreneurs and developers, emphasizing the importance of execution over mere ideas. The talk highlights the following key points:
- Developers as New Investors: The relationship dynamics in startups are shifting, with developers now having significant influence over which companies are successful.
- TechStars Overview: TechStars has become a leading accelerator, with a very competitive acceptance rate, emphasizing mentorship and community support.
- Community Importance: Building a startup at TechStars means having an entire community behind you, which fosters a supportive environment for entrepreneurs.
- Mentorship Network: Establishing a robust mentorship network with successful entrepreneurs helps startups navigate their challenges.
- Important Takeaways:
- Ideas are often worthless without execution; who you work with is more important than your initial idea.
- Passion for the work is crucial; one should love what they are doing to succeed.
- The success of a startup often depends on the quality of the team and their ability to pivot when needed.
- Effective mentorship can dramatically increase a startup's success.
- Recognizing market demand is vital to avoid building products that no one wants.
- Engaging with potential users early and often is essential for refining ideas and ensuring they meet market needs.
- Investors look for commitment and focus within the team, especially when it comes to refining product ideas and market strategies. Cohen concludes by encouraging entrepreneurs to reflect on their failures as learning experiences and to share these stories to inspire others. His advice centers on the principle that community, mentorship, and strategic execution are critical elements in the startup landscape.
00:00:10.820
Thank you.
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I was always looking for ways to make people smile. Since we get hungry every day and have to cook daily, cooking can be fun, but doing it every day turns it into something we have to do. We want to inspire people to enjoy cooking more.
00:00:46.020
We have this evening keynote, and I guess I won't beat around the bush. I'm excited to introduce David Cohen from TechStars for our Valentino today.
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Cool! Hopefully, this is on. You can hear me okay? What's up, RailsConf?
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It's kind of weird being here. It's not South by. I just flew in from Boulder, and this feels like a weird déjà vu moment, but I'm psyched to be here and hopefully get to talk to some of you tonight.
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For those who don't know me, I'm David Cohen, founder and CEO of TechStars. I've been an investor, angel investor turned I guess dark side VC through TechStars and a couple of funds that I run. Through TechStars, we manage about 80 million dollars in capital and have funded about 140 companies.
00:01:37.259
We've seen lots of pattern matching around startups and early-stage companies. I'm here today to talk to you guys about some general observations we've learned from TechStars that may be applicable to you.
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I tried to make it not all about startups but to share insights that can apply to what you guys do every day, even if you're not currently an entrepreneur.
00:02:08.220
One thing I want to start by talking about is a thesis that's happening right now. Everything goes in waves. What we're seeing in the angel community and the VC community is that developers are becoming the new investors.
00:02:19.860
You guys are actually deciding more than we are which companies get funded and which companies are started. Developers are picking the companies they want to work for, which means their talent goes into those companies that end up having something special and eventually getting funded.
00:02:39.540
That's a dynamic we see going on, which is pretty cool. Investors aren't making decisions, and developers are in a lot of cases. It's definitely one thing we've observed.
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I want to give you a bit of background on TechStars, and then I'll share 12 things that I hope you can take away from our experiences in founding startups over the last six or seven years.
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You may know TechStars as the accelerator that's more selective than any Ivy League school. We receive about 4,000 applications a year from companies, and we fund about 50, giving us about a 1% acceptance rate. You may know us as the one that was recently ranked the top accelerator in the country. You might picture us as a place where startups hang out for three months, and you may think they're all young people. However, the average age of a TechStars founder is actually well over 30, and we have funded founders from ages 16 to 60 and beyond.
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When you think of TechStars, I hope you think of mentorship. We've built a powerful mentorship network with some of the best and brightest internet entrepreneurs and investors on the planet. They dive deep with your company and spend real time for three months trying to help you get it right.
00:04:03.480
We have amazing mentors, like Matt Mullenweg here, who helped Foodsy by placing the first live order ever, which unfortunately failed. As Matt, being the best product guy, pointed out, if you're going to charge my credit card, you really should ship me some food!
00:04:23.040
We fixed that, which was great. We also have mentors like Fred Wilson helping companies like Matt Gallagher's, who founded a social thing that AOL bought, and now is working on something called Circa. We're creating serial entrepreneurs, and we're really excited about that.
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When you start a company in TechStars, you have a whole town behind you. It's a broad network with programs in New York, Boston, Seattle, and Boulder. We also have a program in San Antonio. You get the whole community's support when you build a TechStars company, and it makes for a pretty intense three-month experience.
00:04:52.139
During this time, some of you may know that I usually dominate in ping pong, and I just like to throw that in because I'm pretty good at it! Of course, when you think about TechStars, you might associate us with Demo Day. We typically have 500 to 700 investors show up to see 10 new companies, and about 80 to 85 percent of them go on to raise meaningful venture capital post-program.
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So of the 120 to 130 companies we've funded, they've collectively raised about 250 million dollars. Although that's not the goal, it's a nice milestone along the path. We've had some exceptional visitors at our Demo Days, such as Mayor Bloomberg. You might even recognize Grimlock from Transformers, who interviewed me at South by Southwest about the new and old internet.
00:05:30.060
Texas was also featured on a reality TV show across six episodes. We didn't do anything fake; it was all real. If you're interested, you can watch that show to learn more about it. A little background on TechStars: Brad Feld and I, who is one of the co-founders and a great VC, co-wrote a book called 'Do More Faster.' It's really a collection of lessons we've learned from our experiences at TechStars.
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I was asked to pull out a few lessons from the book that you might find interesting. This is stuff we say all the time at TechStars, and I hope it can help you think about your own work.
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So, when Brad and I decided to write 'Do More Faster,' we chose to write it about what's special about TechStars. The founders and mentors around the program should contribute, and we'll simply edit and curate it. You'll find this book has contributions from our entire community.
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Without further ado, here are 12 tips learned from doing more faster at TechStars that hopefully you can apply. Number 12, Tim Ferriss—does anybody know Tim? He wrote the first chapter of the book. He's been a TechStars mentor for a while and has worked with many of our companies.
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His advice is simple: Trust me, your idea is worthless. Many of you have likely been in situations where you have a great idea and you're trying to convince everyone that it’s great. Tim emphasizes that execution is what truly matters.
00:07:01.560
When we look at companies, we assess five things in this order: team, team, market, idea. We're primarily focused on the people behind the idea. Ideas are actually last on the list of importance. It's essential to realize that simply having an idea isn't enough; you need to build a great team to execute it.
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There's even a well-known website where you can supposedly list ideas, like a marketplace for ideas. You've probably heard of it, but here's the thing: it doesn't exist. The reason? Ideas are worthless.
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Number 11, turn work into play. Raise your hand if you love what you do. (A lot of hands go up.) Great! But I'd like to ask the opposite question. If you don't love what you do, you need to change your situation. Howard Lindsen, who works for StockTwits and is a great investor, points this out: you almost can’t be successful if you don’t love what you do.
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I recognize that you guys are in high demand right now, so if you're not doing something you love, change it. We look at companies and want to understand the source of their passion. If a founder's passion solely revolves around making money, then it probably won't work. Startups are challenging, so being able to do what you love puts you in a better position for success.
00:08:11.760
Brad Feld, who I mentioned earlier, is an excellent seed-stage investor and a friend. He works across the hall from me in Boulder. He says, 'Do or do not; there is no try.' You may have heard that from Yoda. This is about mindset. It’s essential to have the frame of mind that you're going to accomplish something, rather than merely trying your best.
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Language matters. When tech startups say, 'We're raising an angel round of a million dollars,' there’s a strong belief when they claim 'we're going to accomplish it.' They've set the intention versus saying, ‘We're looking for a million dollars.' That mindset can strongly affect outcomes.
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Number 9, Jeff Powers, the founder of Occipital, often shares his experiences with the app RedLaser on iPhones and Androids. They had some fantastic success, but initially, after TechStars, they struggled to raise money for their ambitious vision related to augmented reality.
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Instead of giving up, they decided to stay lean and bootstrapped. These apps I mentioned sold millions of copies and funded their growth based on revenue. They learned the value of bootstrapping, showing early on that it’s not only about trying to raise money but also finding sustainable growth through revenue.
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We also have SendGrid here, which went through TechStars in 2009 and has seen tremendous success. They built an incredible team, and Isaac, one of its founders, wrote a chapter in our book titled 'Look for the Pain.' Isaac experienced the problem that SendGrid solves firsthand as a developer across multiple projects.
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Number 7: Bijan, a mentor from Boston's Sport Capital, emphasizes the importance of avoiding tunnel vision. I was a software engineer too, so I understand this well. Developers can get so focused on what they think is right that they overlook the need for data to prove their direction.
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It's critical to be aware of tunnel vision. At TechStars, 40% of the companies pivot significantly during the three-month program. Those that are open to changing their direction and adapting tend to make great entrepreneurs.
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Number 6, engage great mentors. Everyone can benefit from having mentors, whether you're starting a company or working on a project. Having mentors who have experience in your field is crucial for success.
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I didn’t take advantage of mentors in my first ten years of my career. I had two successful software companies, and one massive failure, but all three were without mentors. In hindsight, if I had mentors during that time, I could have avoided some pitfalls and doubled or tripled the value of acquisitions.
00:10:59.040
Finding mentors isn't difficult. Everyone here is a potential mentor. If the entire room is honest about their expertise, you'll find those who are willing to help. Don't overlook local community figures,. They can offer incredible insights, and many want to help if you just ask.
00:11:16.800
Number 5: The guy on the left is Howard Diamond, who has sold more than $14 billion in software. He emphasizes the importance of assuming that you are wrong. If you approach life with the mindset that you're wrong and need data to prove you're right, you'll find it beneficial.
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Being in this mindset means continuously questioning your assumptions. Howard often discusses this point, guiding entrepreneurs to validate their hypotheses through data.
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Number 4: Be open to randomness. Many of you may have heard of TechStars, but here's how it got started. Brad Feld is a scary VC I pitched during a 15-minute meeting that took months to schedule.
00:12:02.280
I had a tri-fold brochure that I pitched to him. Ten minutes in, he said, 'I'm in for $25,000.' That opportunity came only because he was open to meeting anyone for back-to-back sessions.
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I now host similar 'random days' to meet people. You never know who you'll meet or what opportunities can arise, so take the time to engage.
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Number 3, 'Show, don’t tell'—a principle from Brad. When pitching an idea, it's vital to show the product rather than just talk about it. Demonstrating your product captures interest much better than verbal descriptions. For our demo days, we don’t allow bullet points; you must show what you're building.
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Number 2: Quality over quantity. Daily Burn was a company that embodied this. The founders built something high-quality, and their success illustrates that everything produced must be of excellent quality. TechStars has been approached by 200 cities to bring our program to them, but we've turned it down every time because we believe we must deliver a high-quality product.
00:13:16.560
Finally, number 1: Matt Mullenweg, the creator of WordPress, shares the lesson that usage is oxygen for ideas. He often mentions that the dark year for WordPress occurred when they didn't engage their community enough. Now, they release updates multiple times a day to garner feedback.
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Ideas don't come alive until feedback is received. This is the vital lesson that Matt shares with our companies: get your ideas into users' hands quickly for validation.
00:14:06.180
That's a little bit of what I wanted to discuss today. This is the book titled 'Do More Faster,' which is authored by our community. I've brought four copies with me from Boulder.
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Now, I would like to take any questions you might have about entrepreneurship or startups. Please try to avoid questions related to programming languages as I'm currently out of touch with that.
00:14:39.360
Happy to chat with you about anything else, and for the first four awesome questions, I have four books to give away. Thank you very much for having me!
00:14:55.200
And I just can't hear myself. Okay, so I have a microphone. I'm going to walk around and hand it to someone to ask a question. Since I saw Michael Hartl, he gets to go first.
00:15:03.120
You mentioned several of the cities you're working in but nothing in the Bay Area. I was wondering if that's partially because of Y Combinator or part of your strategy.
00:15:51.560
So why aren’t we in the Bay Area? The origin story of TechStars is about creating an entrepreneurial ecosystem. We started in Boulder, where I live. People ask why I chose Boulder, and I say because I wanted to improve my community.
00:16:19.440
Boulder has emerged as an entrepreneurship hub, and TechStars has played a role in that. We select communities that have a chip on their shoulder, where entrepreneurial density exists but aren’t primarily in the Bay Area.
00:16:37.020
I guess investment theory has shown that secondary ecosystems, like Austin, New York, Boston, and Seattle, offer better pricing and better returns.
00:16:56.820
At the time of TechStars’ inception, Y Combinator wasn't based in the Bay Area; they were in Boston. Our approach is rooted in origin, community, and ensuring we cater to those with a chip on their shoulder.
00:17:19.680
You often hear that the idea itself is worthless, but the team and execution matter. Have you considered taking teams without ideas?
00:17:42.600
It’s really challenging to instill passion for an idea into another team. While it's possible to have a general market sense, we prefer to work with high-energy teams that have specific ideas. Teams without defined ideas aren't a fit for us.
00:18:11.940
Seeking opportunities is often done based on pitching to investors and others. How can developers assess which companies to engage with or join?
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I believe it comes down to the people you work with. Engaging with founders, understanding their ethos, and witnessing what they stand for is crucial in deciding whether to collaborate.
00:19:06.720
The team is often the most important factor. Moreover, remember that the journey for any startup is uncertain; the initial idea might change significantly as the product evolves.
00:19:28.440
As for identifying strong startups, can you share what founders should produce before turning to investors?
00:19:51.360
The best approach is to validate the idea before seeking a substantial amount of funding. Building a great team and showing execution capability adds considerable weight to your pitch.
00:20:17.460
You should produce something tangible before seeking investment, especially in a competitive landscape where investors want to see prototypes.
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Is there any chance TechStars or a modified version will expand into emerging markets?
00:21:04.560
Yes, it’s inevitable that we’ll see something in emerging markets. The accelerator phenomenon is on the rise, and our methodology has been shared with others.
00:21:20.640
We've been invited to participate in various initiatives and will continue to support those looking to build mentorship networks.
00:21:42.360
A solid entrepreneurial ecosystem is necessary, which involves attracting the creative class and fostering community. The challenge of filling entrepreneurial ecosystems lays in nurturing the environment.
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What advice do you have for smaller communities wanting to cultivate entrepreneurship?
00:22:24.720
You need to focus on creating an environment that attracts the creative class, ensuring entrepreneurial density and ongoing collaboration.
00:22:46.560
As leaders in tech, our responsibilities extend to improving local communities through education and innovation.
00:23:05.640
You speak about being open to Randomness, but how do you discern between a company adapting to better ideas versus one spiraling out of control?
00:23:27.060
You have to recognize that you may be wrong. A product may change even if it seems like chaos. Trust your gut but be mindful of potential tunnel vision as well.
00:23:49.320
Do you believe we are currently in a bubble of sorts?
00:24:12.060
I don’t think so. We’ve seen companies funded, but I believe we have not reached the irrational exuberance we did in 1999. We're vigilant in identifying any potential corrections.
00:24:31.440
Could you share your personal experience from a failure? What can young entrepreneurs learn from them?
00:24:48.900
My own experience has taught me that team dynamics and market awareness are crucially impactful in determining a startup's fate.
00:25:12.570
I’ve seen many startups fail due to team dysfunction or market lack of market demand, so knowing what to watch for is fundamental.
00:25:28.800
Thank you, David. Would you like to take a couple more questions?
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