"Seventy percent of the companies that are in the program will go on to either have outside venture capital, or become profitable quickly," says TechStars cofounder David Cohen. Like most accelerators, TechStars invests a relatively small amount of money ($18,000) for a small stake (6%) in each company. I caught up with Cohen in New York last week as he was wrapping up TechStars' first program in New York. Here are the six things he looks for to become one of the chosen few:
- A motivated team. "We're primarily focused on the team, much more so than the idea," says Cohen. "And we also believe the entrepreneurs do stuff, not just talk about doing stuff. In our case we invest mostly in Internet software companies, so the people we invest in will have already done something about their ideas, like start to build a prototype, or gotten something out to the world even if it's ugly and early."
- Raw talent. "We're looking for talented people that can create beautiful software quickly," says Cohen. "In the TechStars environment, you get so much feedback that you have to try a lot of things very quickly, so we look for the ability to do more faster."
- Passion. "You have to be passionate about what you're doing," says Cohen. "We want to understand why you're doing what you're doing. We've found that when people are passionate about their business beyond just doing it for the money, they're much more likely to be successful. We try to understand what's driving you -- what happened in your life that's really going to make you work for 20 hours a day and care that much. When that's missing, we often will just pass on a company."
- Commitment. "At TechStars, you're going to be challenged and it's going to be long hours for three straight months," says Cohen. "Often, you're moving for the program. So you have to be willing to subject yourself to that. And you also have to be open to many mentors who are going to have so many different ideas about your company. You need to have a commitment to learning and to making your company better."
- Coachability. "If you know as an entrepreneur exactly what you're doing and you have full confidence about it and you're really not open to the feedback, you may be right," says Cohen. "But TechStars is probably not the environment you want to be in because it's all about getting feedback and making sure that the arrow of your business is pointing in the right direction."
- An attractive market. "We're less concerned with the scalability of the idea," says Cohen. " We find that about 40% of the companies that we that we work with won't be doing what they described in their application anyway. And those that do often make pretty significant pivots or changes to their business plan during the program. We find that when we over-focus on the idea and try to analyze scalability that we miss opportunities. So we try not to do that. What we do look at is the market. Is it interesting and growing? Is it big enough?"
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