David Cohen didn’t found TechStars with the intention of being a social entrepreneur, but it’s hard to deny the social change his company has initiated by growing and mentoring countless startups in the United States. TechStars, one of the premier startup accelerators worldwide, leverages connections with VC firms and angel investors to provide members with seed funding and mentorship from some of the most successful entrepreneurs in the world. Ryerson professor and DMZ mentor Sean Wise interviewed Cohen for The Naked Entrepreneur on his advice for budding entrepreneurs.
Learn from the best
Cohen’s first few startup attempts taught him the value of having an experienced mentor. During the dot-com era of the mid to late 90’s, he founded his first company called Pinpoint, a mobile communication system used for ambulance dispatch systems. Within a couple years, the company valuation was upwards of $50 million. They started speaking with investors and soon got acquired. Five to six years later, the CEO of the acquiring company admitted they had “left half the money on the table,” and could have gotten twice the value of the offer they accepted. This may have been prevented if he had a mentor.
“What is a mentor worth?” Cohen asks. “A five minute phone call could be worth millions of dollars.”
When you are given advice, take it
Cohen also talks about the importance of “closing the loop,” which means actually taking the advice your mentors hand down. Learning is essential, especially among founders. The Startup Genome Report, a 67 page analysis on data collected from 650+ web startups, says “startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise seven times more money and have 3.5 times better user growth.”
Work with the right people
“You want to surround yourself with contradicting ideas, people who think differently,” says Cohen. “[What differentiates successful startups] is founders who hired people better than them, enabled them to do their job, chose the right investor, and the right people.”
Robert R. Ackerman, Jr., founder and managing director of VC firm Allegis Capital, believes building the right startup culture is fundamental to success.
“If you’re building that culture in the early days, it’s essential that every new employee that comes in can fit into it,” says Ackerman. “That means the CEO is interviewing every new hire up until a certain threshold.”
Know when to quit
Success stories like Cohen’s are great motivations for aspiring entrepreneurs, but not all ideas are destined for success, which Cohen has experienced first-hand. Knowing when to quit is half the battle, and Cohen says mentors at TechStars never tell an entrepreneur that it is time to quit. According to the Harvard Business School, 30 to 40 per cent of startups end up liquidating their assets, and investors lose most or all of their money. The instability of entrepreneurship can be daunting, and the rewards that are impossible to monetize play a big part in the decision to quit.
“You have to ask yourself, ‘Am I waking up everyday excited about what I’m doing?’” Cohen says. “There will always be bad days, days you don’t want to get out of bed, but if that is happening on a consistent basis, it’s time [to take a hard look at the company].”
Love what you do
After selling his first company, Cohen was on track for an early retirement. While relaxing on a beach at age 30 may seem like a dream to some, Cohen wasn’t done quite yet.
“Staying on a beach is cool, but [entrepreneurship] is what I love to do. It’s stimulating. It’s creative,” he says.
“Entrepreneurship isn’t a conscious decision. It’s just what you do.”
The Naked Entrepreneur hosted by Sean Wise is an online program that features entrepreneurs at the top of their game. They discuss success, failure and the tumultuous life that is entrepreneurship. Full videos of these interviews will be available online in November.