How to Get into Techstars: Q&A Part I with Ari Newman
This article is based on the Codementor Office Hours where Ari Newman, Partner of Techstars Venture, talked about how to prepare for the Techstars program, the application process, and how to get into Techstars.
The Techstars program is a three-month mentor leverage accelerator. Hundreds of companies apply and they only take about ten companies per city. These companies get $18,000 in seed funding and are offered a $100,000 convertible debt note by a group of prominent VCs immediately upon acceptance into Techstars.
Don’t go through the accelerator if you are just looking for the easy hundred K. There are much better places to find the money. The value of the accelerator is to be a part of the Techstars network, the mentorship and relationships you’ll build. It’s like joining a worldwide network, and there’s a ton of value there.
Preparing for Techstars
If you have two years to prep for Techstars, what would you start doing today?
I’d probably start by doing some soul-searching while figuring out what the market problem I want to solve. One of the things I realized over the course of my career is you want to wake up everyday passionate about what you’re doing, because you’re going to have good days or really bad days. And through the good and the bad, you’ve gotta love the mission, you’ve gotta love what you’re doing. If you going to commit yourself and your professional life to this world and this company in the long haul, make sure it’s a problem you really want to solve and to work on. When you get there, I think it’s important to find people that you truly want to work with.
I know how hard it can be to find a co-founder sometimes. Entrepreneurs just go for it and then work on finding a co-founder later, and that’s great. But if you have two years to prep, find the thing that’s going to be a disruptive idea that can someday be a billion dollar company if everything goes right. Find people you really want to work with and surround yourself with the right people.
Prior to applying to Techstars, set yourself up so you can have a story that demonstrate consistent and material progress. Two years is almost too long. If you are getting ready to apply Techstars for two years, I might look at the application and ask things such as why did it take you two years to get this point? It’s worse if that point doesn’t prove the product market fit or prove there’s an ability execute a functioning product I can play with. So, keep in mind the pace of execution and the ability to get things done and a reasonable amount of time for the business to make sense.
If you’re building something that requires tons of backend, start building it ahead of time 6 or 9 months before you apply to Techstars. This way you’ll start proving you have the product market fit and you’ll get early data feedback so you can say this thing really works.
Should You Find a Co-founder Before Applying?
I don’t think there’s a black and white answer─it’s not that a solo entrepreneur can’t get in. However, it’s just difficult for a sole person to manage all the tasks (e.g. come up with an idea, do the market research, the customer discovery, code, work on the design, etc.)
I’d say if you’re actively looking for a co-founder, and you think you’re close to finding one then, yes, wait. If the business is at the point where it’s ready for an accelerator, and you are solo founder and getting into the accelerator or some extra traction that can help you attract a co-founder, then absolutely apply.
The benefit of applying is you’d get on our radar. Even if you don’t get in that current class, you will end up have some knowledge of your application, and we will know who you are. So if you apply as a solo founder to the current group of programs coming up the summer, and you don’t make it to the selection process but reapply the fall with a co-founder, we’ll understand exactly what’s going on and you’re already known to us.
What Techstars is Looking For
First and foremost, Techstars looks at a startup’s team.
It’s easy to have awesome teams with rockstar developers, but it’s more important to have a team that makes sense for the market opportunity or the business they’re going after. A team not only has to have the background & skillset that makes sense, but the team members has to be able work well together and execute well. They need to be receptive to feedback, since Techstars is a mentorship-driven accelerator. This means you’re going to get a lot of input about issues about problems you may not see yet, but we’ll highlight them for you and help you get through them quickly.
All in all, we want to see a team that can respond to change quickly and that has the skill to implement decisions – these are the teams that will benefit the most from the program. We’re also looking for a team that is thinking big and planning big.
What Market Sectors are Techstars Interested in?
I’d love to tell you that we are only interested in X or Y or if your app doesn’t have viral coefficient of 1 to apply, but it’s just not true. We have companies that are in mobile healthcare, that are hardware or software IoT, B2B SaaS, infrastructure plumbing, in shipping optimization infrastructure, etc.
There’s a company just came out of our London program that has figured out how to hack commercial knitting machines to allow people do run small production runs in the fashion industry. So, it’s really about great teams playing in big industries and applying technology to disrupt the status quo. So whether you’re in a block chain, banking infrastructure, payments platform, medical device business, B2B SaaS, etc or you’re the next Sendgrid or Twilio that will provide an API that will change the world, we’re interested in all of it.
What would make a good team?
The key is if you can work together. My experience in Techstars during 2010 was a good example. I met my co-founder while I was starting the discovery process for the last business filter box.
I’ve never worked together with my co-founder Tom─David Cohen introduced us. However, after working together for 4 or 6 weeks, we managed to build a functional prototype and architecture, and we put the entire business model together in a couple weeks. This proved we can work together and trust each other.
Applying to Techstars
Application Success Strategy
I’ve been the managing director who runs various programs and runs their filtering a little bit differently, but we look at the videos, products, existing customers, etc. We get our hands on whatever we can, and it depends on how far along the company is.
Any given program can have thousands of applications in a tech company. So when you think about the success of the application itself, in terms of how much information you can provide is to be as concise and clear as possible. You need to quickly let Techstars know why you’re the right team in solving a big problem in a big market, and that sufficient thought has gotten into your approach.
The other big thing is having demonstrable traction or demonstrable execution as a team. Identify what you have accomplished in the last 90 days or six months, what your growth rates are, what kind of progress you’ve made, etc. In your pre-product or pre-launch, help people reading the application understand the execution pace the team is on.
All in all, the magic formula is having a team with the right skillset and background, demonstrating you can actually execute and get things done, and proving you are thinking big and thinking strategically about solving big problems.
Is it required to submit a business action plan and revenue projection?
I haven’t seen anyone write a formal business plan in years─no one does it anymore. I think the key is to convey to us that you have fully thought out this business. We understand that anything past 18 months is fuzzy, but if you have no idea of how you’re going to make money and no idea of how much money you’re going to spend to run the business and all you focused on is your functionality of your mobile app, then the red flag would be “this is a really cool technology but we have no idea if this is a company or business.” So, we don’t need detailed business plans, but we’d like to see high level revenue or expense projection or a working business model that will walk us through how you going to make money.
Would Techstars Accept Companies that Take Longer to Grow?
Yes. To be honest, I can’t speak for any other accelerator, but in terms of Techstars, we’re not just looking for a company that will go viral, or a company working on consumer social apps－we are not in the unicorn-hunting business. We invest in great entrepreneurs with big, destructive ideas in big markets. A lot of great business take a decade to become serious, ongoing concerns. We are not only invest in or looking for things that seem like obvious flips.
A lot of business models today take a lot of time for that for that fly wheel to get up to speed, and our job at the accelerator is help you avoid as many landmines as possible and accelerate the speed of your fly wheel so you get to the place of your ongoing concern faster. Do not be turned off because you think what you’re doing is too difficult and is going to take a bunch of years to figure out.
Recommendations for Pre-Seed Startups
This is my own personal opinion, but how much money you’ve raised is not the leading indicator of success. I think the Tech press and the tech ecosystem puts too much weight on how much funding a company has raised and equating that to success.
Certainly, it’s validation that they’ve got some traction because they’re doing something interesting, but since the beginning of the time, the company with no resources and no money has gone up against the biggest players to disrupt the market. Therefore, if you’re pre-seed, and you have something that’s interesting and disruptive, and you’re thinking differently about the market, we would absolutely want to look at that. In fact, that’s why we provide the 100K convertible note facility as an option, because a lot of companies haven’t raised money prior to going on the accelerator. The accelerator helps them accelerate the business, solidify the strategy, put together and pitch in a vision that really make sense, and then they can go out and raise money after becoming solid.
Companies in Private Beta vs. Publicly Launched Companies
Techstars does not have a preference in this matter. If you successfully launched the product publicly, that’s a huge indicator that the team can execute and it’s much easier to get your hands on the metrics in the business to understand what’s really going on.
There’s a preconceived notion where if you’ve already raised money and you’re an experienced entrepreneur, then you’re not fit for an accelerator. Those thing are both not true. I was on my third company when I joined Techstars in 2007, and there’s a lot of cases the company have already raised seed round or even a small A round for the company accelerator.
One example that comes to mind is Orbotix, the company that makes Sphero, which originally went through Techstars’ older accelerator. When we launched our Disney media accelerator in LA, it went through that accelerator two years later. So, they have already been in the market for one product, had another product in development, and raised two rounds funding. Getting access to the media network, Disney mentors, and being able to expand their network & professional ecosystem to the domain relevant to them was of a huge value for them.
My company would be a great example for the opposite situation. Filtrbox was a social media monitoring analytics & engagement platform similar to TweetDeck, but we were processing the entire social app in real time and it was gonna take us years to build up the backend and functional requirements. We had written a prototype UI with a static database, and there was no live processing code when we applied to Techstars ─we were very early.
While we were writing code in the background, what we focused in the program was the value prop of the target market, figuring out what part of the market fit we met. We worked on pricing, user experience, how much functionality to build on the front-end vs. the back-end, feedback on the competitive landscape, introductions to early customers, etc. We were able to do a lot with customer development while we were checking the way for an “iceberg” app, where only a small portion is visible above the waterline, but there’s actually a huge part that’s invisible. I think a lot of the heavy technology SaaS application are like that, for example a mobile app that only seems like it does 2 things but there are a lot of heavy-lifting underneath.
Even if that’s the case, it’s absolutely worth it. Entrepreneurs all have a massive opportunity cost starting businesses. It takes blood, tears, sweat, and money, and you’re giving up all the other potential things you could be doing.
Wouldn’t you rather know if you’re onto the next great idea or the next market disruption sooner than later? It’s harder than watching someone put everything they have into a business for three years only to realize that it was the wrong strategy. It’s just part of the business. It’s part of the startups, it’s a beauty of the journey, but it all comes with a massive opportunity cost, so I think accelerators are a phenomenal way to shorten that cycle and to figure out whether or not you are doing the right thing at the right time in the right order, because the opportunity cost is huge.
I have a Popular Open-Source Github Project
Would Techstars Take Me In?
The fact you’re on Github and that you can ship code to people to user, or deliver a product that works are all awesome things that could help you write a compelling application. There has to be at least a stake in the ground around the potential business model or a way to leverage what you’re currently doing in the open-source community and turn it into a business.
There’s lots of ways for us to help you to create commercial success, leveraging open source work, but the application has to have at least some concrete thinking about the the vision is, particularly the thing that clearly has a product market fit, and turning it into a business. Just having a successful open-source project is not enough. We want to know the entrepreneur has enough business acumen in addition to their coding skills to understand where the value is and how to turn that into business.
Should You Have a Marketing Team from the Start?
I’m a marketing guy, so I’m biased. But marketing and customer acquisition are super important. Does it happen to be on the founding team? I don’t know if that’s true. We are not going to not let someone in because they don’t have a CMO on the team, but if you have three engineers and none of them are business or product-oriented people, where everyone loves to develop code and everyone is super geeky and nobody understands or wants to talk to customers, market, evangelize, or run social media accounts, you will eventually get a bunch of technology and you don’t really understand the market.
In addition, there will be no way to prove your have product market fit because no one want to do the sales. So at some points you need somebody really to own those responsibilities of customers acquisition, branding, marketing, etc. Unless you’re building developer tools and your entire marketing is just pushing your Github link.
Reasons Companies Don’t Get into Techstars
There isn’t a single answer to this. If you have a deck of aces and you are trying to decide which one to play, there might be a strategic reason that you play one or another when all of them score the same in that hand. Therefore, it’s hard to say there is one reason or another. Sometimes, a company doesn’t get in not because they’ve done anything wrong, but because of the level of competition. Sometimes it’s because of the perception among the selection committee, since we may think a company is more coachable or can be helped a little more, or our mentors are perfect fit for this company. Sometimes it could just be intellectual interest in the problem based on someone’s end.
That said, given the number of applications we see and how extensive our filtering is, we’re pretty good at reading between the lines. The traction, the execution, the product progress…it all has to be authentic.
Authenticity and validity is important, but since the competition level is high, the way you break out is to have demonstrable traction. You need to de-risk aspects of your business and prove that your company is adept. You need to show you can take input from customers from the market and adapt to change quickly.
Want to know more about what sort of mentorship you can get from Techstars? Read Part II of the Techstars Q&A