How Is London Implementing Techstars‘ Values: „Give First“, „Founders First“, And „Network Over Hierarchy“?
Max Kelly is an entrepreneur, founder of Virgin Insight and Managing Director at Techstars London. He visited Slovakia in December 2016 for Startup Awards. It was not his first Slovak trip, though. In the past, he was invited to a friend‘s wedding who was marrying a Slovak girl, and he also enjoyed time at Pohoda festival. „I went to stay at Silvia‘s [bride] mom’s house, and I ran to Pohoda festival, which is great. I really enjoyed it.“
Several weeks after the Startup Awards, out of the blue, an email landed in my inbox. „Apologies that we didn’t make this happen. If I can help in another way, let me know.“ Max wrote. What a nice gesture from a person that is hundred times busier than me. I was sure he had forgotten my request for the interview at all. Luckily, I was wrong.
We set up a call to discuss all the topics we could possibly go through: his studies, the Virgin experience, his switch from entrepreneurial career to supporting startups, the Techstars London life, and much more. After the first minutes, it seemed that the interview would end fast – Max was going through a harsh day, having been robbed of his personal bag.
Yet, he insisted.
Techstars is an international network of accelerators spread around the globe. It started in Boulder, Colorado, in 2007 by a number of entrepreneurs. They created a space in which entrepreneurs could come and get mentoring. In 2009, Seattle and Boston branches opened up, followed by London in 2013 as the fifth location and the first one outside the US. Today, there are 25 Techstars locations all over the world.
Big corporations realize they need to interact with the innovation space; one of the options is a cooperation with hubs and accelerators. As a result, so-called consortium Techstars hubs began to pop up. Microsoft was the first to approach Techstars, Nike and other brands followed.
To draw a picture, there is Detroit with car manufacturers including Ford, Honda, Chevy, and Verizon. In New York, you can become part of the IoT accelerator in cooperation with Bosch, GE, SAP, and PWC, or there is a retail consortium in Berlin called METRO Accelerator.
As Techstars London just recently opened a new round of their program, we delved with Max into that topic. For the lack of time, we did not manage to go through all the other engaging stories of his life. But we‘ll definitely fix that in the future. So stay tuned.
If your project is in the phase that an acceleration program can be a big win for you, consider sending your application to the Techstars London. Our interview provides all the reasons why that could be a a really good idea. The applications are open until April 9th.
Please, welcome Max.
Max, you opened a new round of Techstars London acceleration program. When is the deadline for the applications?
We opened the 2017 round in the second week of January, and we are encouraging companies to apply. The application phase is open until April 9th.
How many projects are you taking up for the program? What is the process like?
About a thousand companies apply, mostly from Europe. Our job is to take that amount down to ten 🙂 Well, the target is ten but often we find one or two extras and give them a wild card.
The process starts with a desk review. Then we set up two-three sets of Skype interviews. At the end, face to face interviews take place. After the final 10-11 companies are chosen, we run a due diligence. If everything goes fine, we enter a contract and are ready to go.
It is a very intense process both for startups and for us, but it’s also a fascinating experience. Every single person building a company is pouring their life into it, so the level of passion and engagement is high.
Who is responsible for the final cut? Who makes the decision about those ten startups?
The first set of interviews is with a handful of people. It’s me, my program manager, and last year one other person was helping me on that. We had narrowed the field down to 80-100 companies. Each of us called those companies and run them across our criteria. When we picked 16 of them, I invited them to come to the UK for a face to face interview.
The way the Techstars London is organized is that I have a small fund, and there are some investors. I invite them to help me in my decision-making. There would be 6 or 7 people in one room and 6 or 7 in another, and the companies will spend 20 minutes with each. We really want to understand the team, the dynamics, what people have done before, their resilience, their ability to run through walls, to make the company work.
What are the criteria? Is there a specific stage you are aiming at?
Our criteria are team, team, team. Then market, traction, idea. It’s all about the people as we are quite early in the evolution of a company. We normally say it’s pre-seed, seed, and series A. The reality is that series A companies coming in tend to be more focused on the corporate partners’ Techstars. I’ll look at companies that run the pre-seed, seed round or some FFF money.
In terms of size, it’s somewhere between 2 and 20 people. Two is an important number because we only look at people who are co-founders. We don’t really look at sole founders. A lot of data shows that companies with co-founders are much more successful versus a similar group of self-founded companies. And because we are all about the people, we do focus on the team.
Just recently I read Tim Ferriss’ criteria for investing and one of them was that the founders should be technical people, not only a sole founder who is a business person. You have a similar point.
Generally, I agree. There has to be a CTO on the team. You shouldn’t outsource the technical talent. You can outsource part of your technology, but you need a core technical person on the team, otherwise you are out of control of your own destiny.
The reason I’m very interested in the Central and Eastern European region is that the quality of STEM education from 15 or 20 years ago was incredibly high, which means that the quality of engineering talent and the technical capability of people is really good. But people can’t build companies.
A fantastic model is to have a founding team that is either CEE entirely or has a CTO from the region but then also have CEO with an exposure in a developed western country. Such person is close to two things.
One, it puts them close to the daily use of their products so they can design it well, based on the feedback. Two, if the company is B2B, they can consult the clients because they are in the same country. Whether you are in Germany or in Britain, it gives you the opportunity to expand quickly and get some traction.
What are the specifics you need the team or founders to have?
First of all, resilience, perseverance, and the idea of the grid. There’s a lot of people who just fall in love with the idea of doing a startup rather than making heaven and earth move in order to get their thing done. An entrepreneur’s journey is a challenge.
In theory, it’s a nice straight line, everything goes well, everything is done. In reality, everything goes wrong at the same time. All the founders’ relationships are broken down, they are not speaking to one another. Therefore you need people who are resilient.
I want them, ideally, to have spent some time together before working together. Knowing each other in difficult situations so they know how to get through them. It’s great if they are serial entrepreneurs, particularly in the CEE region because it’s quite difficult to get people into the mindset that there needs to be a commercial entity and needs to be properly scaled.
We are going to be in a room with these people for 13 weeks, it’s a very intense period. I want to make sure that those people are people I want to spend time with.
How does the Techstars London program work?
It’s a 13-week program. At the end of that first month, we pair five mentors with each team so they have a team of mentors around helping them on a weekly basis as they build their business. The first week is introductory where we spend two hours with each company where they tell us everything they hid from us during the selection 🙂
What are your tactics to make them tell you?
We build a lot of trust by fulfilling two of our brand values. „Give First“ means to help people and „Founders First“ makes sure that founders are looked after. That’s very important to us. One of the things we are trying to do in the first week is we are trying to build trust and, thus, get people to be bold.
What about the next weeks?
On the second week, we invite ten mentors in and each of them meets one of the companies for 20 minutes. It goes on through Tuesday, Wednesday, Thursday, Friday. The third week we put out content and get some people to come in and talk to the companies about everything that startup needs to know. We call it our mini-MBA, covering such topics as branding, financial models, running a board, pitching, whatever.
What is going on later on?
More mentors and more of mini-MBA. At the beginning of Month 2, a consolidation phase takes place because the teams have met 120 people who tried to help them actively. They need to process all the ideas and meetings and stay in touch with everyone, build relationships. They will need to answer questions such as „What is the business that we are doing here?“ That’s one thing I love doing – workshops and helping the teams understand what their business is about.
I assume there is also a Demo Day by the end of the program.
Right, the program ends on Demo Day where they get up in front of 600 people, a lot of them potential investors. They pitch for five minutes and it will be the best pitch of their life. The reason I know that is that they will pitch in front of me every day for five weeks ahead of the Demo Day. I invite mentors in and the mentors give feedback as well.
Do they also raise capital on Demo Day?
They are not cashed immediately, they need to raise a round. About 7 or 8 out of 10 will raise in the following six months. According to Pitchbook, Techstars has globally the best results for the companies raising after an acceleration program.
What is the Techstars London’s offer to the companies?
Our standard offer is that we take 6% of the company for the program, for enabling them to be Techstars For Life, and cash worth of 20K USD. There is also 100K USD as a convertible loan that companies can choose to take or not, depending on their funding situation.
What are some of the most successful case studies of Techstars London?
Techstars companies have raised on average around 3 mil USD since they have been through the program. That means that they have raised more than 3 billion USD altogether. Some of the big ones in the portfolio as a whole are ClassPass, Digtal Ocean, Sendgrid, Sphero, the guys who did the BB-8, the little robot from Star Wars, or PillPack.
If we are talking about London, we started in 2013 and there are some great businesses in there as well. Things like Lingvist, Quantumplay, or Unmade, which allows you to do personlized knitting effectively. It’s like 3D printing for knitting.
How does the Techstars alumni work?
We call it Techstars Connect, everyone joins it after the program. All the mentors and investors are in, too. There is information about investors, information about mentors, you can reach out to the mentors, you can discuss, ask questions and get responses.
Then there is the FounderCon. Every year, all of the companies are invited to the event where they meet in person. A BizDev Day is about 50 to 100 large companies with whom our alumni would like to do deals and Investor Day for people raising funds.
We also run Second Thursdays which means that once a month we invite all the alumni to get together, investors and mentors come each quarter.
One thing I like is getting the alumni back and mentor as they understand the journey that these people are on. Once people have been through Techstars, it’s a kind of life changing experience.
Last but very practical question. What do we need to do to establish a Techstars accelerator in Bratislava?
Good question 🙂 We move towards the model of consortium. That works best for companies and the economy of it is quite good. That means looking for a group of companies that would establish an accelerator with us and we’d run it. That’s the best way to go.
Photo: Max Kelly & Techstars London