Boulder is in the middle of…
It’s a non-descript modest building on 11th street, just south of Walnut in downtown boulder. You can just make out the roar of the traffic on Boulder Canyon drive over the tranquil quiet of the city. In the lobby are nameplates for some popular start-up brands, Twitter, Foundry, and the group I was visiting, Techstars.
Boulder is situated in a beautiful part of the world, plush sunshine and green-patched mountains. At the same time, it seems to be in the middle of nowhere, and a bit of a retreat from the world. It’s a micro-culture, a unique place where you can still find hippie communities going strong along pale dirt roads, abutted against hiking trails that disappear into the trees. You expect a herd of cattle to rustle through with the echoes of “Stampede” somewhere belted by a town crier.
Even so, there is a lot of intellectual and monetary capital stationed along this ancient valley. It’s an auspicious precinct if you’re a tech entrepreneur, a Mecca of sorts. I was entering the core, in this simple building, which was also the churning engine of innovation and disruption.
I was meeting with two of the partners at Techstars, David Brown (also a co-founder) and Ari Newman. Both share an electric vibrancy that buzzes in the intensity of their eyes and the stillness of their postures. They are deep listeners, with algorithmic-process brains, they are living in the future, their machinations are intricate…the film canisters of their brains were capturing more frames-per-second than the average brain. Plus, they were both positively charming, and modest. Their energy was infectious and they were generous with their time. We spoke for over an hour about entrepreneurism even though we were supposed to meet for 45 minutes.
Core values matter, call it Karma
Ari started, “Well first of all I would say the founder focus is one of our core values. ‘Do what is right for founders.’ Another key core value is to ‘give first.’ Which means we don’t have to be transactional. We’re not charging you for this interview (Ari and David laugh) we just try to help and there’s a sort of karma that comes along with it, and things come back and founders that we work with are appreciative of that culture. Because we help them thrive. I think about it like rising tides. We just fundamentally ask ourselves ‘How can I help?’ Or ‘Is it good for the company?’ Not ‘What’s in it for me.’”
I pause. It’s hard to believe, but it is their model. Somehow they are Karmic-ly driven, and it works, and keeps working. Techstars now has over 20 accelerator programs with dozens of successful graduates of their programs having raised millions upon millions of dollars.
“And how do you chose which start-up fits within this culture and these programs?” I ask. David answers.
“Our criteria, only half joking, is team-team-team-market-progress-idea. And so the point there is that the people matter more than the idea. All of those things matter more than the idea. So at Techstars 15,000 companies each year that apply to our various programs, and then through that default criteria that we just described, we narrow it down to 10 companies for each of our programs. That’s about 200, out of the 15,000. So it’s just over one percent and it’s the same dynamic. If you think about some of the most successful companies in the world, the original idea they started with isn’t the thing that made them the most successful. It was the founder’s and the team’s ability to read customer feedback, look into the future, and adapt. Amazon didn’t become Amazon because the founder was so stuck on selling books.”
I began to do an audit of the companies I could readily name, and wondered if their success was based on the team or the idea. Team’s are usually unseen, what’s seen is the product. I think of the company names I saw in the lobby.
The point there is that the people matter more than the idea.
“Twitter…” I begin.
Ari jumps in, “Twitter was a podcast platform originally.”
What it takes to succeed, it’s not about the money
David adds, “And so today, the tech ecosystem almost makes a joke out of pivoting. ‘If it doesn’t work just pivot.’ Like that solves all. The companies that did something are realizing they’re not solving a big enough problem. Or it’s too hard to attract customers or the tech isn’t going to work. They can adapt to what they’re doing. It’s about the team’s ability to execute it and listen to feedback, and make opportunities and move quickly. That makes a difference between a fast growth company and one that sort of can’t get out of their own way.”
This clarifies the chatter about Twitter, such as the leadership change (Dorsey’s return). Do they have the right team to get them to the next level. It’s not about what the product is now, its what it needs to become.
Ari reiterated that the accelerating cycles of tech actually create new problems born from new innovations (such as not being able to connect to Wifi on a plane) while in parallel some of the old problems don’t even exist anymore (sharing files wirelessly), “We always think we’re almost done, and then in hindsight, we are only just beginning. I have no reason to believe it’s not still that. Which is that technology is really a forcible multiplier, and every two to three years, the problems that we are trying to solve at the beginning of that cycle have become known and solved, than we as humans get to go on the next order and work on problems. So there are lots of analogies for that. The stuff that David and I were working on 20 years ago was basically brute force launch entrepreneurship and stand up physical servers, buy hardware and spent most of our time working on problems that are non-issues today and are literally a check-box. An entire company use to have to spend a year doing something today that is a checkbox and configuration. Hiring ten people, spending a million dollars, building a bunch of stuff. Now you just download a library.”
We always think we’re almost done, and then in hindsight, we are only just beginning.
20 years. I can’t imagine the volume of innovations these two fellows have seen and been a part of, and the thought that so many of the problems that would have once seem insurmountable now don’t exist. I wonder is there is a part of the innovation process that might be more attractive than another. I ask Ari and David for their POV. Ari responded first.
“I don’t know if we at Techstars, or David or I think about it that way, because there’s opportunities as an investor and opportunities for supporters of startups to be on that journey regardless of where you are in that cycle. So if it comes to voice driven interfaces or AI, we’re looking for companies that are disrupting and doing interesting things, applying the tech to different industries weren’t looking for the tech today. We can’t sit on the sidelines until it becomes some future point where it is known.”
David adds, “A similar take to how Ari answered that, if we were entrepreneurs building a company, we would have a tough dilemma, would you want to build the next level thing that Ari is talking about, that a whole bunch of people are working on and you want to bet that you’re better than everyone else, that’s Option A. Or do you want to guess what the next level thing is after the next two things have been built? And it’s hard to make that guess because you’re dependent on these next two interim steps happening at the hands of somebody else and do I do the unique thing but is dependent on somebody else so do I do the thing that somebody else are doing. Another way that we think about it is based on outcomes, so you look at 10 companies; part of the mental capacity is that if these companies are successful and they completed their vision, what do they win? What is the outcome of their success as something big? With the future of telecomm, the future of gaming, the future of transportation - those become incredible opportunities and even if they fail, the learning and the growth that happens through them pushing the innovation cycle is really valuable in of itself. So predictors try to predict that and the pace things are going to happen and place their bets accordingly. I think you can just try the marketplace stuff, or you can just find companies that are working on those huge disruptive ideas and get in before somebody else owns that space.”
David mentioned a key point I’ve heard in start-up circles…do I try to invent something brand new that no one is working on, or do I try to solve a problem that other people have been working on already. I think of Uber and Blue Apron solving a problem that others were already working on, but becoming the market leaders. Apple too, they didn’t invent the tablet or the smartphone.
David continues, “A great example is healthcare IT. We don’t necessarily need disruption, we need people to get their care without problem. Telemedicine has the promise to fix a lot of that. We’re not trying to put doctors out of jobs with telemedicine. We’re trying to enable the patients faster and better with better care. So that’s a system where we are not trying to eliminate the system, we’re trying to fix their inefficiencies. I think for a lot of agencies, disruption equals displacement.”
“Can you tell me more about team dynamic, indicators of success?“ I hope to further understand the pathways to success.
Indicators of potential success
David weighs in, “Yeah there are positive indicators and then there are negative indicators. Actually caring deeply about the problem that you’re solving is one of the biggest positives. Meaning, ‘I suffered, I couldn’t stand the how, treated this bank, or how I had this experience with taxis or whatever it is.’ Just something that woke you up and said ‘I was born to solve this. I had a personal relative that suffered from this thing that I think is preventable with better technology.’ And that is a huge predictor of success. Being mission driven.”
Ari then adds what not to do, “I want to work my own hours; I don’t want to have a boss. Those are counter indicators. Because that is not life in a startup. That’s not someone we would invest in.”
David adds, “Yeah something that you love, but that no customer cares about, is not a good idea.”
Ari continues, “Some investors love entrepreneurs that build a business because they are scratching their own itch. They’re solving their own pain point. Others hate it, because you might be solving a problem that no one else has. If they were inspired to quit their life, take all their risk in the world, sign off on a decade of torture so they can solve their own… they’re highly motivated. People are using that problem to solve a pain point that hundreds of millions of people also share, than that is a significant pain point and a great motivator to go start a company.
“But it is true,” Ari elaborates, “that many people who start companies may just assume that they understand what the customer’s pain points are or may assume what their pain points are shared by millions of people. It does take work in many cases to push entrepreneurs out the door to go talk to customers and make sure that the pain points are real and usually what they find is even if they’re real they’re not exactly what you thought in most cases and need to be tweaked around the edges and that’s okay.”
David adds, “What we look for is sometimes an X Factor? You just have the talent and the natural ability and not only do you get things done quickly, but you get the right things done. There are lots of companies that have a huge vision and a pretty good team and they look good on paper, and they have a good prototype, but it really comes down to getting things done; closing deals, shipping product, things to get out of their own way. There are people who are really good at making sound and hype, but when you get down to the thing that creates enterprise value, is never there. And it’s a combination of soft skills and reading people in real time and figure out if they can execute it the right way. You can take a PhDer who’s incredibly bright, has a Harvard MBA and a technical degree from MIT. And if they are very analytical and prophesize too much then they can’t get anything done. They’re just going to spend a lot of money. And you can meet someone who’s relatively dim, but they got a monster executer of getting things done? But if they’re doing the wrong things, if they’re putting the wrong kind of building up, and not building the right kind of foundation, it won’t matter either. So there’s a sweet spot between these profiles and personalities and how these cofounders play off of each other and what they bring to the table no matter how they are, is often a huge indicator of success.
And if they are very analytical and prophesize too much then they can’t get anything done.
David continues, “Our process is very collaborative, it’s very much you’re the entrepreneurs, we’re the mentors. I’m a mentor talking about your business,’ have you thought about this? Have you thought about that?’ It’s a really Socratic way that Ari is talking about. If you disagree and want to stay the course than that’s totally fine. There are what, 700 companies that went through Tech Stars? So we have a way to think about that it’s 700 companies that are in our investment portfolio. While we have economic interests in those companies, we don’t mentally think of them as our companies who belong to us. It belongs to the founders and we are here to help. What we are here to do, is help companies avoid the landmines that we have experienced in our careers, so they can execute faster and there’s less drama. And the dynamic you don’t want to create is ‘Ok we’re going to tell you what to do,’ and then you’re going to be stuck telling them what to do the rest of their lives.
“Look I’ve been an entrepreneur my whole life, I never wanted someone to tell me what to do. I wouldn’t have taken that advice. Someone can come in and be collaborative and help me? That sounds awesome. I don’t need more people telling me I’m an idiot that don’t know what I’m doing, I have my parents for that.”
(We all Laugh)
David continues, “So yes, I think the collaborative way is much more effective and the entrepreneurs that we work with will tell you the same thing.”
Ari picks up David’s point and directs it to Techstars “It comes from why Techstars was created in the first place. If you go back to the origin story from David and David, and you look back at the history of Techstars, you have a bunch of entrepreneurs that wanted to spend more time with entrepreneurs and wanted to do a better more efficient job. But from day one, the concept was ‘we’re only going to do this if it’s good for founders.’ We’re not here just to, you know, buy chunks of companies for the sake of it. It’s in the DNA of the company, in the culture, in the original mission, the people that got involved donated time and money; because they wanted to support other entrepreneurs.
…from day one, the concept was “we’re only going to do this if it’s good for founders
“Our whole platform is based on mentor-led acceleration. The mentors are not compensated. Other successful business leaders exited entrepreneurs. If you ever participate in our network, you do it because you want to be helpful, because you want to see other people find success. And so, the people that are in and are out, and also to the employee. Part of the magic is that the staff and the team here is super mission-driven. A lot of people here can be off doing other stuff. Maybe even for better salaries. But everyone really believes in supporting entrepreneurship. It creates a positive impact for the communities that we operate in and it’s good for society as a whole. It allows people to create their own destiny. So people here sort of really live and breathe the mission. And when any one of our companies wins, we all feel it. That’s our feedback loop. It’s sort of baked into this organization from the start. The people who were involved in the early days really felt like they were here just to help other entrepreneurs. Nobody had their hand out for anything.”
Maybe this type of operation could only have started in an enclave like Boulder, similar to how Silicon Valley sprouted in the nurturing light of Stanford. That said, the intense yet “give first” attitude of Techstars is unique, and welcome, given the pressure these entrepreneurs have chosen for themselves. As I exited the building and reentered the outdoor clearness of mountain air I couldn’t help but notice the quiet. I expected to hear the hustle of a city street after visiting such an intense place. I expected to see helicopters taking off and landing from the roof of this building. Instead, I saw what I assumed were grandparents pushing a stroller. The grandma wore a black t-shirt with roses and a skull on it. It read, “Make America Grateful Again.”