View from the ‘Loo: Right at home with Techstars’ David Cohen Anthony Reinhart April 24, 2014 Communitech, View from the ‘Loo It didn’t take long for David Cohen, head of the self-described No. 1 startup accelerator in the world, to feel at home in Waterloo Region. It remains to be seen whether Cohen, who visited the region on Wednesday, will add it to his seven-city network of Techstars locations. But it certainly can’t hurt that the place reminds him of his hometown of Boulder, Colo. That’s where Cohen, under the mentorship of fellow Boulderite, investor and author Brad Feld, launched Techstars with a 10-company cohort in 2006. Today, Techstars boasts locations in six American cities and another in London, England, which collectively accelerate 120 companies a year, chosen from about 12,000 applicants. Cohen’s whirlwind tour Wednesday, which included stops at the University of Waterloo, the Communitech Hub and a handful of startups, followed a day spent exploring Toronto’s startup community, and a similar visit by Feld just over a year ago. Like Feld, Cohen was struck by the dynamism and quality of the Waterloo Region ecosystem, and his remarks during a sit-down interview at the Hub hinted at the beginnings of a deeper relationship. I’ll post video of a portion of our chat in the coming days, but for now, here’s a taste of how it went. Q – You’ve described this as an exploratory visit for a possible Techstars expansion. What have you learned about the Waterloo Region startup community today? A – Being from Boulder, Colo., a small town of 100,000 people, I’ve discovered it actually feels a lot like home. Boulder has really evolved over the last five or 10 years. When I started investing there, it wasn’t on the map, speaking about venture capital. Today, it’s the No. 4 venture capital community in the U.S. I feel a very similar tone and vibe here in Waterloo. It’s really an amazing community and there’s a lot going on. Q – What would need to happen in order for Techstars to locate here? A – I think Techstars itself is figuring out how to grow, and do it efficiently. We want to do everything we do at very, very high quality. That’s more important to us than high quantity. So, we just expanded to London in the last 12 months; we’ve learned how to do things differently in different cultures and more environments, and I think we’ve gotten a little better at that. We need to gain more confidence about the community, the legal requirements, and just how the whole ecosystem operates. We need to build real relationships here. We don’t like to go somewhere where we just land and say, ‘Ta-da, we’re here.’ We really like to go in with the broad support of a community. So we’re just trying to meet some people and learn about the ecosystem. Q – What will you tell your Techstars associates about your visit to Waterloo Region? A – I have to write up some bullet points. They need bullet points; they always tell me that. I’ll tell them that there are a lot of similar dynamics to Boulder. It feels further along in many ways, but in some ways it’s sort of getting up to speed and becoming noticed, as was the case in Boulder five or 10 years ago. There’s incredible technical talent. The University of Waterloo is mind-blowing in terms of the programs they have and the talent coming out of it. That talent appears to want to stay here. There are companies moving temporarily to build connections in the Valley or New York or wherever, and then coming back, very consistently. That tells me they want to be here, that it’s a community they want to be in, and I think they need more support in this community. They have a ton, but they could always use more. Q – Did Brad Feld tell you about this place after he came here last year? A – No. He blogged about it, but we didn’t have a conversation. I’ve heard about it from a million different people. I mean, you see companies getting into other programs; you see talent that you hear about and companies that are here and are starting to be known. That, to me, said I need to get up there. Seeing companies getting funded, and attracting larger Series A and Series B rounds here; it’s not the BlackBerry thing that attracted me, it’s really the companies that people have heard of that I’ve been able to see on this trip. Q – How do you see the accelerator space evolving in the next few years? There seem to be so many trying to do the same things. A – I actually think that it will continue to accelerate. I don’t think we’ve seen the end of that. It’s pretty inexpensive, for someone who’s very motivated to make their community better, to go ahead and do one of these things. It doesn’t mean it’ll be great; it doesn’t mean it’ll be financially successful. They say it takes 10 years to kill a venture capitalist. I think it might take longer to kill an accelerator. It’s just not that expensive, and if you’re a successful entrepreneur, and you want to put money into 10 companies and do a summer program, you can do that. It’s a small part of your net worth, potentially. I think you’re seeing a lot of community leaders doing that, who are entrepreneurs, and then the governments are coming in and sort of trying to copy that. Those will go away more quickly when they’re not financially successful, because leadership will change, et cetera. But the ones that are driven by entrepreneurs will be around a long time. I think you’ll see specialization and verticalization. That’s what we’re doing with our corporate partner programs. So with Nike, that was digital sport and quantified health; with Disney it’s digital media, entertainment and Kaplan EdTech. That’s our way of doing that with a partner that makes that powerful. I think you’ll even see that model evolve for us; we’ve figured out some things about it, but it is powerful to get a broader community that just fully understands a particular space, and focus on interesting companies. That will attract companies from all over the world if you do that. Q – What factor more than any other explains the success of Techstars? A – Brad Feld. Techstars had Brad Feld as a secret weapon from Day 1. Brad leveraged his network and brought that to the table, helped me build a brand early on, helped me understand how important it was to focus on quality. Just 10 companies; don’t try to scale it up. Everything you do has to be very, very strong, as opposed to doing a lot of it. We’ve seen others struggle with that dynamic and do too much, and now there’s a bunch of noise in the system. I learned a lot about business early on, and certainly a lot of the development of Techstars has very much the fingerprints of Brad; he’s been an incredible mentor to me. Q – What has been your darkest moment as an entrepreneur, and what did you learn from it? A – Probably the first time I ever raised money. My first company was bootstrapped, was successful and did well. With the second company, I raised money from some of the customers from that first company, and that company did not work. So, we lost some of their money, and the lesson I learned when I shut that company down was about how important distribution is on the Internet. If you have gatekeepers in your ecosystem as a company, it’s very, very difficult to be successful. That’s why we all love the Internet, because we can create software that’s used all around the world 10 minutes after we create it. I was in a space where app stores didn’t exist. We were creating a mobile product and distribution was a big challenge. I lost money for people – not a lot; half a million bucks or something like that – and luckily I’d made money for them in the past. I also lost some of my own money. But, really, just failing as an entrepreneur and realizing this was not a good business concept, that’s the lowest moment I remember. Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo is a weekly look at the issues, people and events that shape Waterloo Region’s technology sector.