Reaching for the Techstars

David Cohen of TechStars recently took some time out to talk with Start Rocket Radio about the success of his group's initial class of startups, as well as the application process currently underway for the summer of 2008. Based in Boulder, Colorado, the group hosts startup teams for a summer of learning and growing their companies.

(Click here to listen to the 10 minute interview.)

Cohen launched Techstars because he was "frustrated with the traditional model" of angel investing. After a couple of successful startups (and one failed one that he says he "learned a lot" from), he "wanted to use my expertise and the expertise of my network and get involved." He decided to create something with less cash up front and more hands-on help.

Describing the effort as a "mentorship-driven investment model," Cohen explained that the 10 companies selected last year heard from more than 55 mentors over the course of the summer. In return for office space, mentorship, and a "small amount of seed capital," Techstars takes an equity stake equal to 5% of founders stock in each company. Cohen stressed that the investment carries "no special rights."

Techstars seeks early stage companies with "no limit to that as long as the value proposition we're putting out there appeals," according to Cohen. Founders must be willing to spend the summer in Boulder, though they are not required to work out of the office space provided. Mentors will come and make group presentations and offer individual advice over the course of the program.

Cohen says some have called Techstars a "hatchery" rather than an "incubator" because "we don't incubate over a long period of time ... we focus tons of resources on these companies for the 3 month summer period and after that they go off and run the company."

The goal is to find startup teams from all over the country (only 2 of 10 last year were from Colorado originally) and the emphasis is really on "team." All of the groups admitted last year had at least two founders, with the program including a total of 26 founders for the 10 companies. The individuals ranged in age from 19 to 40 and were heavily focused on consumer Internet applications.

The first class has experienced solid success already.  Of the 10 companies, 7 have already received additional funding (largely angel) and an 8th is already profitable and turning away potential investors.

Techstars seems similar to Y Combinator, another "hatchery" style program, and Cohen said that while "on the surface [it is] a similar program," Techstars focuses more on the broad-based mentorship approach.

When the program is done, Techstars still keeps up with alumni, especially since it maintains that small equity stake. In addition, some mentors may invest in the companies individually, though Cohen emphasized that is a case-by-case situation.

Cohen said if you're interested in Techstars don't wait to see if you get in before you move ahead with your idea. "We love entrepreneurs who don't wait for people to give them to permission to work on their ideas." He stressed that "the majority of the teams morphed during the summer" and are "doing pretty different things" than what was on their application.

The deadline for 2008 applications is the end of March. The focus will be on the "group of people that you've put together ... the team that's going to found the company," says Cohen and they will ask the question, "do they have the skills to pull off what they're proposing in their application?"

For more information or to apply visit http://techstars.org.

(Click here to listen to the 10 minute interview.)