David Cohen is the Founder and Chairman of Techstars, one of the largest venture capital operations in the world. Since 2006 they’ve been on a mission to help entrepreneurs succeed and have invested in over 2,400 companies.

What began in Boulder, CO is now a global network of entrepreneurs, investors, corporations, and cities. You know innovation isn’t far behind when Techstars comes to town!

During our convo we discuss the inner workings of Techstars, tips for entrepreneurs on how to get admitted into their programs, and the most valuable entrepreneurial lessons David has learned along the way.

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Transcript

MPD: Welcome David 

David Cohen: [00:01:43] Mark. Good to see you. 

MPD: [00:01:45] They are. All right. Um, I'm going to start by doing your bio for you because I'll probably say stuff you would be too polite not to say. And then we can also spend the rest of the time diving into some insights about the industry.

So David Cohen doesn't need much in the way of an introduction folks. He's the founder and managing co-founder and managing partner of Techstars. He co-founded Techstars 14 years ago and has built a behemoth by the numbers. There's 2,400 companies that have gone through the program. They've received 11 and a half billion dollars in funding and are collectively running a market cap of 30 billion.

And I have a feeling that's outdated at this point with all this back setting. Um, David has also been an active investor through Techstars ventures and as an angel, his investments have included 15 unicorns, 15 such as Uber, Twilio, and SendGrid. He's the co-author of do more faster, which has been translated into not one but five languages.

What more is there to accomplish, uh, his best w uh, the best way to find David and get kind of connected in with what he's doing is his website. David G cohen.com. You can find him on Twitter at David Cohen. So, David, I don't know what I missed here. I think I got the high level. Yeah. 

David Cohen: [00:03:07] You forgot. Super good tennis player.

Uh, no test. That's the only thing I can think of marquee nailed it. Otherwise. Thanks. 

Okay. 

MPD: [00:03:15] Right on. Anyway, it's great. Obviously awesome background. I'm sure a lot of people were excited to hear you. So, um, if you're cool with that, let's jump in. Maybe we start at the top. Would you mind giving us an overview of Techstars just in case someone happens to not know what that is?

David Cohen: [00:03:31] Sure. Yeah. So Techstars is the worldwide network that helps entrepreneurs succeed. So the way we think about it is that's the product. We want to build a network that we deliver to entrepreneurs in order to help them be successful. And, uh, we do have a venture capital platform attached to that. Most people would know us, uh, because of the accelerators that we operate.

And if you like the term accelerator, you can thank my co-founder Brad Feld, who coined that term. If you don't like it, you can blame the same person because he came up with that word. And now of course they're resilient accelerators, but, um, Techstars is the original mentorship driven accelerator, which means we get the community, for example, in Boulder, uh, where it started.

Of experienced entrepreneurs to help a new generation of entrepreneurs. We fund 10 per year per city, uh, in a batch, a class. Um, and we put them through a mentorship driven program, helped them raise capital, and then they work with us for life. So we do that now about 50 times a year. Um, so that's 500 companies a year in dozens of markets around the world.

I think 16 or 17 countries now. And that's where the, the portfolio of, I never heard it said is 2,400. That's an awesome way to say it because now that you know, such a big number, you've got to have a decimal point in there. Um, and it's, it's, uh, an amazing, I wrote it down 

MPD: [00:04:56] as 2.4 K you're in the K. 

David Cohen: [00:04:59] Awesome.

You may also know about it startup weekend, uh, which is another, um, um, event that we run about a thousand times a year around the world. Uh, that's on the Techstars platform as well. So really just trying to help entrepreneurs be successful in the business that we have is one of invests. 

MPD: [00:05:16] Got it. And you're investing through the accelerator, obviously for folks listening.

When those companies go through the program, you're investing in them and that's the, that's the business model. 

David Cohen: [00:05:26] Uh, yes. So that's, uh, the first strategy we have as investors is we invest through the accelerator and that's got this 14 year track record of highly consistent performance because it's so diversified as compared to typical venture activity.

It tends to perform really consistently. Uh, and very well, uh, because of that diversification and the stage that we enter at, it's essentially angel investing at scale globally. And then we have a second strategy which follows on and companies as they mature and grow, which is, you know, quite a scalable strategy.

MPD: [00:05:57] So the, the fun on the back Techstars ventures, um, how large is that fund at this point? And what rounds do you guys typically invest in? 

David Cohen: [00:06:05] Yeah, so we have two strategies, as I mentioned, the accelerator fund, which we raise every three years or so. Uh, right now, the scale of that'd be about 150 million, uh, every three years or so.

And then we have a faster growing, uh, and larger, um, follow on strategy. So, you know, the way that we do that is not your typical sort of small portfolio approach, where again, highly diversified investing into the follow on rounds of many of our companies that are led by other investors. So. Uh, if a well-known firm or someone comes along and funds, one of our companies will participate in that because we have a pro-rata.

So last year our portfolio raised about 3 billion. Uh, we are, uh, about, you know, typically six to 8% shareholder. So, you know, we're able to deploy a hundred or $200 million a year at this point that that's awesome. 

MPD: [00:06:59] Coming back to the accelerator side for a second. And I think we'd be remiss not to have this discussion for the benefit of listeners.

Why should entrepreneurs apply to tech stars kind of underhand, lob pitch, so people can get the right answer here. 

David Cohen: [00:07:13] Yeah. Thank you for the softball. Yeah, no, it's look, uh, it's a massive accelerator. Hence the name, uh, at the early stage. And you know, I think it's to surround yourself with amazing people, right?

When we invest in, you know, this it's so much about the people and so who can you get around the great people that are starting the company? You, you know, you want to have many people that are well connected to capital customers and talent, and that's what the network brings to you. So it's this, you know, three month experience of really getting two or three years of stuff done.

Uh, even if you knew these people, it'd be hard to get so many concentrated meetings with them and so much concentrated feedback. Uh, you're obviously building your network. Techstars as compared to another, uh, programmer accelerator, you know, very global. So, you know, if you're need to do business in Singapore, South Korea or Berlin or Toronto, that's no problem through the network.

Right. We have the same mentor and alumni presence in those locations. And I think just the track record of being able to attract capital to the companies that go through the accelerators, as you mentioned, you know, it's, it's a very, um, sort of, lots of VCs hanging around the hoop. If you will. Uh, looking for deal flow.

And I think the stat is we're somewhere around one in 20 series, a start with Techstars. So, so investors know to look at Techstars for the next generation of interesting companies. I think those are some of the reasons primarily about that network value. 

MPD: [00:08:41] That's awesome. Um, what percentage of companies coming out of the program?

Uh, receive venture funding, I assume it's quite high. 

David Cohen: [00:08:48] Um, yeah, about 80%. There's, there's some that don't work and there's some that, um, you know, choose to bootstrap. Uh, and of the 80%, you know, some of that is, is smaller angel rounds, quarter million, half million. So in the way that you and I would think about it, sort of, you know, leading towards a real series, a with strong, um, investors, it's more than that.

MPD: [00:09:11] Okay. Right on. That's fantastic. Um, and I, I know a lot of people are interested in the program. How hard is it to get in? So someone's thinking about applying. 

David Cohen: [00:09:22] So they get their hopes up. Well, yeah, I hope they do. I mean, we, we running again 50 of them a year, so that's 500 companies a year. We're going to find in the world.

A lot of them are virtual right now. And you know, that's a dynamic that's shifted in the world and an opportunity, uh, which has been great for getting more people involved, uh, from around the world and being more inclusive. There's some really good things associated with that. Um, the hack, I would say is if you apply.

Uh, to not just apply. And if you don't get into the first thing to stop it, it's very rare. Actually, the first time somebody applies, it they'll get accepted. And, you know, Mark Schuster famously said, you know, lines, not dots. Right. And so that's the same thing we're doing. We're following you and understanding how the business is evolving.

Um, so don't be disheartened. If the first program you apply to says no, uh, there are many opportunities, both virtual and in-person every year. 

MPD: [00:10:16] Any tips for people applying and what they should do with their application is stand out. What's worked best. 

David Cohen: [00:10:23] Um, yeah, I would think about the application as sort of a binary, you know, or is it interesting or not?

And so I don't, I think sometimes people can spend a little too much time, you know, trying to get that perfect. Um, you know, I think just saying what you're doing, what your real advantages, maybe helping us understand the market size. And most importantly, the team, uh, we, we talk about the six things that we look at at tech service to get into the accelerator and it's team, team, team market progress idea team is so important.

We say at three times, Right. Right. And so, uh, at the, at the very earliest stages, right? So much about the people and what, what their intrinsic motivation is, uh, what insight or unfair advantage they might be bringing to this market, what experience they might have, that, that drives them beyond the spreadsheet that they put together that says it's going to be big.

Um, and then we look at market, you know, is it, is it changing, shrinking, growing all those are good. Uh, static markets, not so interesting. Usually. Uh, and then progress. You know, we, we believe that entrepreneurs actually do stuff. So to just talk about doing stuff, but not actually have done anything is a bit of a red flag for us.

And then idea, we put last, just to show that it's last. So I would focus on the team, uh, in the application, uh, as well as why the market is interesting and show us the progress you're making. I think those are the key elements. 

MPD: [00:11:51] So, uh, I met you if you recall, in 2008, And at that point, you were already knee deep and on your way with Techstars.

So I didn't know your anything about your life before that point. So I had to go scrub your LinkedIn before this conversation. So tell me if I'm getting this wrong, but you're an engineer by training. And if I'm not mistaken, you were running a development shop called ear feeder, which you sold in 2006 before starting Techstars.

Can you explain the name of your feeder? 

David Cohen: [00:12:20] Is that right? Sure. Yeah, so I, I went to school to be a software developer and that was like the first wave of my career. I, I would explain my career as, um, you know, software engineer, right? Turned entrepreneur, turned investor, um, maybe first angel then VC investor.

Um, so yeah, my background is in technology. I still love to code whenever I get a chance, I was never amazing at it, but it, to me, it's art. Uh, it's creating something from nothing, which is the same as what investing in startups is or creating a startup. So I love that, um, IR feeder was actually, uh, uh, my second company.

Uh, it was a, it was not a development shop. It was a actual product company. And it would, um, if you remember back in the day, you would have, you know, your iTunes feed and you would have the music that you listened to. Uh, you would download the physical song. So I built a piece of software that would scan your computer.

Understand what music you loved. And then deliver you like concert tickets or new song releases is in the very early days of RSS, right? So you could subscribe to a feed. So I was feeding your earmark that's. That's why I called it your feeder. It was after my first company, which we had sold to a public company.

I would starting to angel invest in that timeframe. Uh, and then do one more before Techstars. 

MPD: [00:13:39] That's awesome. That's awesome. I love that. And so why did you decide to start Techstars? 

David Cohen: [00:13:46] Um, you know, David Brown, who is one of my co-founders and I were talking about what we want to do to need to do next. And we knew we wanted to do something together.

Um, today I've been working with David Brown for almost 30 years. So, you know, this is at a point halfway through that, where we had done some stuff together. Uh, our first 

MPD: [00:14:07] prior ventures together. 

David Cohen: [00:14:09] Yeah. We had built a company called pinpoint technologies, which we sold to a public company and had a great outcome and, and wanted to do a new thing together.

And so we're brainstorming, you know, what, what would we love to do? We had had some luck and, you know, some, some good outcomes. So, you know, we, we knew we wanted to do something that we'd enjoy. Uh, and we just started brainstorming and, you know, we w w we ended up with was this idea of Techstars, which would have to.

Kind of primary benefits from our perspective. Um, one, we really wanted to see Boulder where we lived to be a better startup community. Um, you know, it was pretty nascent at the time and not a ton of activity. And we thought, what can we do to, to increase the activity here? Uh, because we were doing some angel investing and, you know, getting on planes all the time and wanted to have more here.

Right. And the other was, I thought, we felt like at that moment, that. There was probably a better way to do angel investing. You know, you've heard the old adage that angel investing is a great way to turn a small fortune into an even smaller one. Um, most people don't succeed at angel investing. Um, it turns out the trick to succeeding in angel investing is paying attention to where you're entering and doing a lot of it.

Um, and so, you know, we thought by funding 10 companies a year, this would be really fun. We'd have a cool summer job. And you know, the rest of the year, we could chill out and not, not do much. Ironically, today I get on lots of planes, not, not this year, but normally, uh, to travel to, you know, help invest. Uh, but the Boulder startup community is a lot better.

So I think that part worked out really well. 

MPD: [00:15:45] I had a Bradfield get involved. 

David Cohen: [00:15:49] David Brown. Um, yeah, my other two founders are Brad Feld, um, and Jared Polis. So Jared, uh, if you, if you might know that name as the governor here in Colorado, we don't, we don't see him a lot. He was five terms and Congress before that.

Uh, but if terrific entrepreneur, um, you know, blue mountain greeting cards, if you remember those as well as many other companies, um, and you know, Brad was someone that I had co-invested with in a couple of angel deals. And so I'd signed the same paperwork. I'd seen his name. I was falling his blog, uh, felled thoughts.

Um, yeah. He's he was writing about how this stuff work. I was just a fan. And I happened to see that he lived in the same town as me. So when, when I came up with the idea for Techstars, I asked for a 15 minute meeting with Brad and I was given that meeting just four short months later, just four months later, I was able to get on Brett's calendar.

And I was like, what? Who is this guy? You know, like, and now I get it, you know, you do too, but back then I didn't get it. Um, and I went in for that meeting and I remember Brad was in a suit. Which since that time is the only time I've ever seen him in a suit, I guess he was doing, dealing with LPs that day or something.

So Brad's a terrific early stage investor. Um, you know, very well known for, for that activity and has a firm called Foundry group. And I said to Brad, in that meeting, here's a piece of paper. I slid a half folded piece of paper across the table and had about eight bullet points on it. I said, this is Techstars is what I want to do.

Um, in a David Brown and I are putting some money on and we'd love for you to be involved. And about 10 minutes into the meeting, Brad said, I'm in, uh, I'll invest as long as you're not a or a flake. And I said, I don't think I'm a crook or a flake. So great. Uh, so we got to, I know each other over the next few months and he called up Jared Polis and said, Hey, I just met these two guys.

I'm investing. You should too. Jared said, okay, I'm in, by the way, what is it? I just said invested in that's how Brad's network works. It's awesome. Uh, If he asked you, you better do it before someone else does. And so it was a random meeting where he was just open to randomness and ended up, you know, doing more than just investing.

And co-founding the company with us. 

MPD: [00:18:07] Yeah. And Brad was a very big name already at that point, right there. Back then the, the main social media account was your blog subscribers. And he was always in the top one, two or three per VCs, nationally. 

David Cohen: [00:18:23] Right. Or the felt thoughts. Yes. Uh, if you were reading, you know, ABC by Fred Wilson and, you know, you probably were also reading felt thoughts at that time.

And he was very scary to me, you know, I thought, Ooh, venture capital is scary person. Uh, but he's just the biggest Teddy bear when she gets no. 

MPD: [00:18:40] Right. So I met him once, but I don't know him that well, but yeah, the, I even on the East coast everywhere, nationally big name, uh, and he's kind of, he's been a godfather in many ways, I think to the industry, right?

Like. I think he's, um, his you're doing 

David Cohen: [00:18:55] go ahead. Yeah. The whole notion of the whole notion of, of give first, I mean, really, you know, it's, Brad would say I didn't invent that either, but if you go into any Techstars office, you know, give first as is on the wall, that's the hashtag and it's the value that we try to carry.

And Brad, Brad really lives that, right? I mean, just again, the random meeting he'll meet with anybody help get started. He didn't know who I was. Um, but he did. Right. And so. You know, he's, he's just someone that can really, um, give first in a very genuine way and not expect anything back. And that's been huge and the industry, cause I think it's, it's inspired a lot of others behave that way.

MPD: [00:19:33] When you guys started this, did you expect it to become what it is today? It sounds like it was a couple of buddies doing some angel investing. What happened. 

David Cohen: [00:19:44] Yeah, well, I, this is the story of every company I've ever started. I mean, David Brown wrote a book about our first company, which was a public safety software company, and it was literally called no vision I'll drive.

Um, because one day w when, when we were starting to have some success, we said, I think we could get to 10 employees and a million dollars in revenue. I think we could do that. And that was like now mindblowing scale to us. And, you know, Techstars is a similar, I mean, it, it ended up a $50 million a year company, right.

That were sold to a public company. So, um, in Techstars was similar. It was really a fun thing to do in the summer to, you know, have an organized way to angel invest with some kind of advantage to bring the talent to Boulder. And, you know, I thought. I could have a lot of freedom the other nine months. Um, and then we started getting calls, you know, is what we called pole.

Right. We weren't pushing Techstars anywhere, but Boston, you know, w Y Combinator was there, started around the same time, abandonment for the Bay area. Um, now has a story that you have to start your company in the Bay area, which I find ironic since they didn't. Um, but you know, Boston was hungry for something, so they call it and pulled us in Seattle, pulled us and.

New York pulled us. And, you know, we, we really just felt like, Oh wow, this is a thing people want. And so we just leaned into that, uh, investing activity and, and building the mentorship across the network over the years. And today, you know, there's 50 of those occasions. 

MPD: [00:21:10] I think you've had the impact you intended to have in Boulder.

And a lot of cities, I think, you know, New York had been building for a long time, but when you and I first connected you were scouting New York, deciding whether or not you were going to do it there. Um, and I feel like tech stars showing up in New York, wasn't the beginning of the taxi tech ecosystem by any means it was 20 years in the making at that point, but it was a turning point.

It felt like the inflection moment where they gave an additional level of legitimacy to what was already happening and attracted more talent, more capital. So I think you've probably had this very positive impact, you know, they say it's like, uh, you know, countries get to a certain point of McDonald's shows up or that's a way to measure.

You know, progress, there might be some Techstars equivalent. 

David Cohen: [00:21:54] Yeah. I mean, it reminds me of Matt Mullenweg of WordPress has said, you know, WordPress is an overnight success that took 20 years before anyone knew it existed. And that that's true in any startup community too. And New York was definitely already super vibrant, but 2011, uh, when, when we launched there and I lived there for four months during that period.

So it was probably just before that, that we first were chatting. And, you know, getting people like you involved, right. And helping out and mentoring, and, you know, we, we actually made a TV show on Bloomberg, right. That showed off the, the tech community of New York. Um, uh, you know, I think it wasn't, it wasn't the catalyst, but it was a thing that might've contributed to sort of people's awareness of what was going on there.

And, you know, you had companies that, that, you know, got funded through that activity, right. Class pass many, many others, right. That were, were sort of what we're seeing today. Uh, right, as sort of the digital oceans and companies like that, that are IPOing now, right? That the New York tech scene is now known for.

It's not unusual anymore, but in 2011, there was less of a pace of that. And so maybe we helped put a little bit of a light on it, but it certainly was just, you know, one, one little contribution to the community. 

MPD: [00:23:06] What's the main focus of the business now. Right. Uh, I know you guys on the, on the incubator accelerator side, um, you guys work with a lot of corporations.

I think you have a Barclays accelerator out here. How do the corporations fit in with the program? Because when you guys started, it was just, um, you guys, probably some outside capital, I would assume. And the program, how did the corporate, how did the corporate, does the corporate 

David Cohen: [00:23:31] piece fit in? Yeah, so our, our business model is that we're investors and we happen to have an operating business.

That's somewhat, somewhat substantial. Um, you know, closing in on a hundred million a year revenue business, right. That supports the large team we have around the world. And a lot of that is working with corporate partners. Um, but we think about it as investing activity. So when we work with a corporate partner, we're not consulting with them.

We're building an investment program with them. Typically, whether that's with Amazon or, you know, Barclays, like you mentioned, there's, there's about 80 of them that we work with now. Uh, and so what we're doing is adding more of a footprint to help more companies be successful right through the acceleration program and attaching those corporate partners to that network.

Because again, the entrepreneurs, as you know, well needed talent, capital, and customers, right. So that can bring some, some capital, it can bring some customers and occasionally some talent. Uh, and you know, it, it is an additive thing to the network and that's the reason we do it is to scale that first wave of investing activity.

So of the 50 accelerators, we weren't running around the world. That's that's half the activity or more at this point. And so that's really allowed us to grow with a model that's repeatable, but we're really think of them as, as invest in investing partners. They're not quite LPs, it's more sponsorship oriented investing, but they do have an economic upside in it that we manage for them.

So, you know, without that business, we would just be a bit smaller, but we'd still be scaling then accelerator platform and the following platform for the same reasons, because fundamentally we're, 

MPD: [00:25:10] what's the corporate, um, what's the motivation for the corporations to be involved. Right. Um, is it innovation box?

It's some guy showing his boss that they did something creative or is it, are they getting, um, uh, you know, are they getting real innovation that they're acquiring? How was it. What's the motivation. How is it impacting them? 

David Cohen: [00:25:31] Yeah. So there's, you know, an economic motivation and that this actually works, right.

I mean, we, we invest in these startups and they produce returns and that's sustainable and valuable. Uh, but that's probably not their primary motivation in most cases. They want to be around innovation. So, you know, we're fortunate to be, you know, first round angel round investors in Uber, for example, and for, you know, working with them, they said, you know, we don't want to miss the next one.

We want to be friends with the next Uber. Right. Not sort of discover it when it's worth, you know, $16 billion. Um, and by being, you know, by, by sort of giving first, right, as a corporation by, by saying, you know, Hey look. Maybe we can be a distribution channel for you as Microsoft did for SendGrid early on, for example, right?

Because of that relationship, uh, that's helping that startup, it's staying close to them. It gives you the opportunity as a corporation to invest, to acquire, to partner right with those companies. And I think even when those things don't work, um, you know, that that talent, uh, inside that startup could be relevant to what you're doing.

Doing it with Techstars is another level of interesting because it's not just an isolated one-off accelerator that you're building. If you are, you know, Amazon and you're interested in voice, right. Or AI, guess what that's happening in Berlin and Singapore and you know, Toronto and Atlanta also. And so now you have exposure to, again, this global network of, of the startup net, this early warning system for.

You know, what is the next big thing that you can be part of as a, as opposed to being pitted against? And I think that's the primary motivation of many of them. Now there are cases like Cox in Atlanta, where there are not as interested in that stuff. They just want Atlanta to be awesome. They want to be a steward of their community and they want to see more startups and they want to help more of them succeed.

That's really mission aligned for us. And so partners like that are super amazing, but their variety of motivations, they have. 

MPD: [00:27:33] That's very cool. That's very cool. Um, how do the programs differ when there's a corporation involved that the same thing at their guts and the, the format, or is there a different structure to them?

David Cohen: [00:27:46] They tend to be what we would call verticalized or thematic. Uh, and so, you know, again, I keep using the use Amazon as example, but, um, pick any of them, you know, they're interested in, in certain specific things. Uh, and so, you know, you're going to have a lot of somatic focus in a program when it has a core partner, because that's going to be their interest.

It'll feel mostly the same. There were still, you know, we run it. It's our team, it's our managing director. We're bringing all the same, you know, capabilities to the, to the accelerator itself. But the investors that are going to be interested are going to be thematic. The other companies in the program are going to be thematics.

It's just going to feel a lot more. Uh, oriented towards that particular vertical versus say, Techstars New York or Techstars LA or Boston or Boulder. Right. Which you just going to see internet software company is, you know, very broadly, very diversely in that. Right. Like 

MPD: [00:28:42] Greg great company check you're in my great team.

Great company. Check your end versus yeah, it doesn't 

David Cohen: [00:28:47] have the assessor in a space, right. 

MPD: [00:28:49] Yeah. Right. Okay. And how do you guys manage the program at this scale? How many, how many, uh, you said there's 50 programs. How many said is that. That 2030 cities or is there one program per city? 

David Cohen: [00:29:02] It's about 35 to 40. I don't know, somewhere in there.

Um, and in 16 or 17 countries, you know, some places like New York or LA right. We'll have multiple programs, but a lot of them just have one. Um, and you know, we have a centralized team, the teams, you know, 300 plus at this point, Uh, globally and, and a lot of the services, right? W the way we think about it is those managing directors are closest to the customer, the entrepreneur, and we're just there to support those managing directors in those markets.

Uh, and we want them focused on finding great companies and helping those companies. We don't want them doing due diligence. Um, you know, background checks. We do all that stuff. Centrally, you know, social media, um, sales, obviously business development. Uh, they're really focused on the entrepreneurs and the customer and helping them be successful.

So it's, it's a support structure for them. Are 

MPD: [00:29:58] they, um, w where do you guys select, which companies get in? Is that at the hub at HQ, or is at each, at each local managing director? 

David Cohen: [00:30:07] So there's a S there's a centralized global sourcing, uh, component. We, we're seeing 20 to 25,000 companies apply a year. Uh, and so, you know, that is somewhat centralized so that we can help the entrepreneur again, have a good experience with that because you don't want five different programs reaching out and saying, You know, come to my thing.

Uh, and so we coordinate that centrally and then, um, the managing directors are super involved, but mainly with the quality sort of deal flow elements. So, you know, when it gets down to 50 or so for 10 spots, uh, they're meeting all those companies, they're going super deep with them. Um, they have a local team, uh, we call it a selection or, you know, committee it's, it's helping them decide.

Uh, the managing director will ultimately make that choice of which 10 companies get in, because again, they're closest to that activity and they are investors. Um, we do have, you know, as a, a company and as a platform, there are things that we don't want to do, uh, obviously. And so we, you know, we make sure to see what they are, but primarily that power is pushed out to the individual nodes.

MPD: [00:31:15] When you guys are running the program, um, how consistent are those programs across location? Right. If someone goes into Techstars, Berlin versus Atlanta, are they having the same experience or is that something that, you know, there's, there's a little bit of a fingerprint of the local MD in each of those.

David Cohen: [00:31:34] Yeah. I, I hope that if you were a mentor, for example, your experience would be fairly similar, but you'd be using the same systems. You'd have, you know, a similar experience, but for the companies that are there day to day, they're going to feel the local market dynamics. Um, that could be anything from language, right.

To customs, uh, just how things are done in a market. And so it's not, you know, it's not McDonald's. Yeah. And that we say, you know, the French fries have to be exactly this long and the salty, but you know, the logo is green. The amount of money is consistent that we invest in every company. The deal is the same globally.

Um, the playbook is the same, but, but you know, we, we want those managing directors to. You know, do what's right for the entrepreneurs in each market. And so it'll feel a little bit different, but I think you'd say it's, you know, 70% the same, right. So there's going to be some local flavor. Great. Helpful.

MPD: [00:32:28] Thank you for all that color. Could we switch over to the capital side? How do you, how are you guys operating that? Right? It sounds like, is it mainly pro-rata or are you guys looking at looking to lead rounds? Um, outside of just, you know, following on where the accelerator has rights. How do you think about the D the allocation strategy?

David Cohen: [00:32:49] Yup. So we have two fund structures. Um, we have an accelerator fund and that accelerator fund does one thing. It invests at the accelerator stage and our standard accelerator deal. Um, you know, it it'll do 500 deals a year right across the system. Uh, it's highly diversified. Um, and. You know, that is the first index 

MPD: [00:33:15] entrepreneurship.

David Cohen: [00:33:18] If you consider the top one or 2% of what we see in index. Sure. Uh, cause we're pretty selective in the ones that get through, but yeah. Yeah. It's, it's broad exposure is a good way to say it too. You know, if you're interested in, Hey, I, as a bucket, right. And so we have LPs that see that, that performs really well.

And unlike most venture funds really consistently. Um, there are three year funds. And so you're getting three year vintage exposure. And if you look at, you know, a typical venture fund, it's like one fund is really good. The next fund doesn't right. This is just, Hey, it looks like this. It performs really well, really consistently.

So that's the first investment we always make. Um, and we don't fund any companies that don't start that way. Right. Because that's our advantage. That's our deal flow. It's a lot of companies. It's thousands of companies that are raising follow on rounds. The, the second strategy is the sort of pro-rata capture fund.

And so, uh, we're never leading, we're never funding something random that didn't start inside. One of our accelerators, we're looking at our accelerator companies who will naturally go on and raise more capital. And in a three-year window, there will be, you know, hundreds of rounds a year, right. That occur.

Uh, as I mentioned last year, you know, $3 billion went into the company, into the portfolio. So we're doing, uh, just taking our existing ownership and maintaining it in the companies that are raising additional capital. So that product really, for our LPs is more of an access product. If you're. A high net worth investor that wants to get exposure to a broad swath of venture.

That is co-invested with good funds. That's a good way to do it. Maybe you can't go around and meet every manager and don't want to have so many relationships or you can't get into the very best funds we can get you co-invested with them. And how do you 

MPD: [00:35:08] guys filter, uh, within the pool of companies that have come out of the Techstars program?

How do you select which ones you guys do? The pro-rata in, what's the, what's the 

David Cohen: [00:35:18] internal machine for that. Yeah, machine is a good word. I mean, we w so we're pretty different in that we think of that as a system. So, you know, we're not, we're not a manager who's picking, we're a system that you can sort of invest through.

And so we look at a few specific, uh, criteria. So one is, um, you know, if there is, uh, around happening, right, who is involved in that round, Right. Is there, uh, you know, interesting capital involved that round by interesting. What I mean is it doesn't have to be lead investor, but the set of investors, we can see their track record in investing in Techstars companies, across thousands of data points.

We can more broadly see their track record generally. So, you know, am I going to follow on in a couple of angels putting 200 K into a deal? Or am I going to follow behind a w a well-known set of venture funds with plenty of downstream capital? We're going to prefer the latter. Um, so that's one criteria.

Another is, uh, we can see the objective data. Um, how are they doing as compared to 500 other companies that we're funding this year? You know, what's the revenue growth rate. What's the usage growth rate. We can just objectively compare the portfolio. Um, we don't have to do down rounds, bridge rounds. You know, we're a small investor we're against six to 8% of the company.

It's not going to harm the company if we participate or not. And so we let somebody else make that decision, uh, which, which really means that we never have to do these sort of save the company rounds. Uh, we don't have good money flowing after money. That's not working. So we're always looking for sort of up rounds and good dynamics.

Um, and so it's, it's metrics like this that we're looking at and it really just scores the company and says, is this one we want to do? So a typical investor would look at the system and say, how do I get the top 10% of this system? We're more interested in like the top half, because our belief is if you aim at the top 10%, you'll miss a bunch of the big ones.

Right. And we have the data to see that the top half looks really good, right. Longterm. And so again, your, our LPs are really investing in a system and an approach rather than someone who has a crystal ball and can pick the winners. 

MPD: [00:37:38] So it sounds like it's highly automated to the extent possible, which makes sense.

Given your background, um, how big is a team? How many people does it take to actually do this? Cause you're still operating a huge scale. Yeah. So involved on this side of the house. 

David Cohen: [00:37:55] So, so the investment strategy team is really where the magic happens. Um, you know, Jason seats and Nicole, Glarus our chief investment officer and his team.

Right? That's that's how do we do this? Um, but really it doesn't work without, you know, sort of legal finance, you know, the back office piece. So, you know, pick your favorite law firm, Wilson Sonsini Cooley, wherever you want to pick. Um, w we, we do more financings a year than they do. So we've got our own back office.

That's pretty substantial. Granted, our financings are typically smaller dollars. Right, but in terms of sheer volume, we've got the machinery to manage all of that and built our own systems. And so we have an amazing legal team and amazing finance team. Um, and, and then we have investment managers that work with the portfolio that are sort of centralized to help that managing director as those companies mature.

Uh, we're generally not taking board seats. Right. We let the other investors do that work. Um, we're really just there to support early and then continue investing as we can. So it's. It's a substantial kind of infrastructure play, uh, which is what I think prevents others from being this diversified.

MPD: [00:39:08] Thank you for that. Now you've moved on. Uh, not to say you're still not involved with those pieces, but you've layered on a philanthropic component, right? If I'm not, if I'm correct, there's a Techstars foundation. Yep. Can you tell everybody a little bit about that? What you guys are doing? 

David Cohen: [00:39:24] Sure. So, um, About five years ago.

Um, we created the Techstars foundation, uh, you know, like, like a lot of people, you know, seeing sort of the moments that were happening and, and sort of the inequities, um, in venture capital and with entrepreneurship, lack of access, lack of opportunity, you know, seeing the talents equally distributed, but the opportunity is not w what can we do?

And we're big believers and just sort of staying in our swim lane. Right. So, You know, rather than trying to do something to, you know, impact, uh, you know, diversity more general generally, or, you know, police reform. That's not what we're good at or what we do. So we sort of decided no, there aren't a lot of nonprofits that are trying to do this.

And we had spun out a few, um, Patriot bootcamp, which helps, uh, military veterans, you know, be successful as entrepreneurs. Good example. Um, And we had been funding a few, just, you know, here and there, right. Either personally or through the, through the company. Uh, and what we decided is what if we could accelerate the success of other nonprofits, you know, we're pretty good at spotting things with potential that are really young, right?

That's that's our swim lane. And so we created techstars.org, the Techstars foundation, which is a way to accelerate equity. Uh, that's how we talk about it. So if, if there is a nonprofit that's attempting to. Impact, uh, in a scalable way, you know, access and inclusion in technology. Um, we want to help them be successful.

So here's how we do that. Whoever wants to make a grant to that organization can make that grant through the Techstars foundation, which is a nonprofit. We then amplify that to our 8,000 mentors, you know, tens of thousands of, of entrepreneurs around the world. Uh, you know, everyone in the network and say, Hey, will you match this?

And then we add 5% to that, right. From our own sort of foundation. And so it's sort of a no-brainer. And then when those non-profits get to a certain level of fundraising, which is just $50,000 total, we accelerate them for a year. So they then can audit our fundraising classes that are happening in accelerators.

We introduce them to specific mentors in the network that can help them. They get an employee who's there, you know, sort of guide to the network. And that then helps them kind of amplify beyond just the capital, uh, which as you know, is a big part of the value and early stage stuff. So it's, it's been really cool.

We've, we've sort of, I think there's 20 or 25 grantees now that, uh, you know, sort of been through that process and really cool things like the parent preneur foundation, right. Just they're making grants to, you know, black entrepreneurs of really, they can spend it on whatever they want, just trying to help them get through stuff.

Um, and they're just great organizations to five ventures. You probably know about them and, and others that we've supported pretty early on that have been able. 

MPD: [00:42:25] That's awesome. So this has all been wildly successful, and as you alluded in the beginning more than you had expected, and it's not just Techstars, that's been successful, you've been successful.

How has this journey changed your life, your perspective, your perception on things. 

David Cohen: [00:42:45] Um, well, that's a good question. I, you know, I do it for the love and it's been that way for awhile. Um, you know, I'm now chairman of the company, and so I'm not an active executive, uh, recently, um, led a search for a new CEO, which has been with us for about three months as we're talking today.

My I'll give a who's dynamite comes from compass, uh, been involved in companies that have, are going public or have gone public in the past. And so now I just think of it as I'm supporting her, but it's the same, it's the same love, right. Which is okay. We're helping 500 new companies a year. Uh, you know, be successful, hopefully, how do we make that thousands?

How do we make that tens of thousands? Right? Is there a model? Uh, because the venture model really looks for the few unicorns a year that are born, but a lot of our companies, you know, end up selling for 20 million or 50 million or, you know, smaller numbers and they're very successful too, right. It's life changing for those entrepreneurs.

And they go on to found the companies that change the world later. And so, you know, it, for me, it's allowed me to really focus on, uh, the things that have impact and not the day-to-day, um, which has been really awesome having her in place. And, you know, I get to work on big business development stuff, you know, capital formation stuff.

I'm doing more of this kind of stuff. Just talking about what we're doing and trying to be helpful, uh, on clubhouse or other, you know, podcasts, et cetera. Um, and, and I, you know, I'm able to take it a little bit easier as honest answer. I I'm looking forward to being able to start traveling again, but I'm still full time and I'm super engaged.

I love nothing more than sitting down with an entrepreneur who is early and saying, what if we did this right? How would that look? How would that work? And that to me is just joy and always will be 

MPD: [00:44:39] the space. This has given you in your life. I'm reading a little bit between the lines. What are you filling that with?

David Cohen: [00:44:45] I'm playing tennis three times a week. Uh, there you go. You know, I've lost probably 40 pounds, um, that as also due to not traveling during the pandemic, you know, um, uh, you know, I get, I, I'm getting a little more time with my kids, but it's, it's, it's 20%, right? It's it's, you know, an 80% of the speed. I was.

Because there's still plenty to do, but it's just not a hundred percent every day. Right? Yeah. And, and so, you know, I, I took half an hour and shot hoops with my kid this morning and the driveway. Right. That's awesome. I was able to do that during spring break. So, um, you know, I think, I think that's the way I feel it.

MPD: [00:45:27] Have you thought about what's next? Where do you see David Cohen in 10 years? 

David Cohen: [00:45:34] Yeah, this is it. Um, I don't really have any desire to do anything else. And so I just want to keep helping build the platform and helping entrepreneurs. Uh, I imagine I'll end up on some boards. You know, I, I do some of that now.

Um, and those have been good experiences, but you know, I, I have no desire to retire ever. Uh, I just want to work a little less every year. Um, but this is, you know, this is the thing I want to do, uh, for the rest of my career. If I can. 

MPD: [00:46:03] That's a great story. Uh, before I let you go, you've worked with way too many companies.

You've seen too much. What's the most important thing you think you've learned about entrepreneurship that you could impart for the audience? 

David Cohen: [00:46:20] There's so many Mark, but, um, I guess if I had to pick one. Uh, like the, the sort of team I, I, I mentioned earlier team, team, team. Right. And it's so often repeated and so easy to say, but, you know, I even see it in my own company.

Right. Um, you know, not being afraid to, to bring in the expert, to have someone smarter than you in a certain area, that, to have that experience. And I think I watched so many founding CEOs do that five years later than they should. Um, especially when you're early in your career and you, you know, you're, you're still learning, right?

Uh, you could bring someone on and learn from them. Still be really involved in your next company is just going to be that much better. Um, and that goes down to the executive team because to your board, I mean, a lot of CEOs just want to be the smartest person in the room, especially if they're the founder and.

I think that's the opposite of what you should do. You shouldn't want to be the dumbest person in the room, right. In that sense, um, right. That the sort of replace yourself notion doesn't mean you have to leave. I watched Isaac seldom at SendGrid, beyond the board all the way through IPO with two other CEOs coming in, in the intervening time.

It can be done. And I just, just think you just have to be aggressive with having the most amazing people you can get involved with, with, with what you're doing. Be part of that team. 

MPD: [00:47:43] That's wonderful. Great advice. Thank you so much for taking the time today. 

David Cohen: [00:47:49] Yeah. Good to catch up with you. Thanks for having me

MPD: [00:47:55] huge. Thanks to David Cohen for being on the show today and sharing all of the magic behind Techstars. It's a fascinating story and it's an incredible journey he's been through. If you liked what you heard, please look us up with a like, or a five-star review and feel free to share with a friend. You can find me on Twitter at MPD.

And to hear more of my conversations with innovators, subscribe on YouTube, Facebook, or any major podcast platform. Just search for innovation with Mark Peter Davis.

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