Entries for February 2007

How Many Founders Does A Startup Need?

I love my NewsGator and Technorati key word search feeds - they help me find the most interesting things. A NewsGator key word search on “Ryan McIntyre” picked up this post by Chan Chaiyochlarb titled If you are going to launch a startup, how many friends would you need?

It’s a neat table of the number of founders for Microsoft, Google Youtube, Yahoo!, Overture, eBay, PayPal, Skype, Kazaa, Hotmail, Ask.com, Excite (where Ryan’s name showed up), Napster, Lycos, Amazon, Apple, MySpace, Facebook, Netscape, AOL, Mirabilis, and Digg. The average number of founders � 2.09.

My first company � Feld Technologies (1987) � had two founders (me and Dave Jilk). The first company I funded as an angel investor (NetGenesis: 1994) had six founders that quickly dropped to four. The second company I funded as an angel investor (Thinkfish: 1994) had four founders. Another early angel deal I did (Harmonix: 1995) had two founders as did Email Publishing (1996). The range from 1994 � 2000 seemed to be solidly between two and four.

I just looked through the companies I’m currently on the board of. The number of founders range from 1 to 4 with a concentration of 2 and 3. The few companies that have single company founders paired up with an experienced entrepreneur as CEO early in their life.

When I look at the list of my successful companies, the distribution is very similar. Lots of two founder companies, a few threes, and a few fours. I can’t think of a success case that I’ve been involved in with greater than four founders (although my partner Ryan can since Excite weighs in as the exception with six.)

LivePitch Boulder on March 2

As part of EntrepreneurshipWeek USA, TechStars and FundingUniverse.com are presenting LivePitch in Boulder on March 2nd. Thanks to the kind folks at CU, the event will take place in the beautiful new Wolf Law Building from 9:00am to 10:30am.

The purpose of EntrepreneurshipWeek USA is to promote the importance of being entrepreneurial throughout the country. During The Week, events like this are happening all over the country.

Whether you’re an investor, a company who wants to pitch, a service provider, a student, or are just interested in the event, we hope you’ll register to attend. There is no charge, but advance registration is required. If your company would like to pitch there, please register your interest or contact me directly.

Attendees in the audience will receive $100 of play money that they will use to “invest” in their favorite company pitch. Both the audience favorite and the investor favorite will receive prizes from sponsors who include HRO, Silicon Valley Bank and ViaWest. The big picture is that this is a great networking opportunity for investors, service providers, and entrepreneurs. If you’d like to be a sponsor and donate prizes, please let me know.

Although TechStars is helping to put on the LivePitch event, these pitches will not be considered “applications” for this summer. This is completely independent of that process. If you want to apply to TechStars, you can do so until March 31.

I hope to see you at the LivePitch event. If you’re a TechStars applicant, please be sure to say hello.

Finding co-founders

By far, the most common question I get about TechStars from those interested in applying relates to finding co-founders.

I’ve addressed this briefly before, but I thought I’d add some more detail here.

First things first. You’re most likely to find a co-founder among your current friends or through your personal network. Start exploring it. Pitch your idea to your friends, their friends, and whoever will listen. Look for people who compliment your skills.

Many of you have asked for my help in finding you a co-founder. Although I’m happy to keep my eye out for you, this is a less likely route to success than what I’ve described above.

Another resource is the job board over at ColoradoStartups.com, which has a “seeking co-founders” area. You can even subscribe using RSS. The trend I’ve noticed is that those that are posting here all have ideas and are looking for people to help. I haven’t seen many where people want to co-found a company but have no idea what they want to do.

Building a good team is critical if you hope to be accepted into TechStars. Is it as important as your idea? Yes, at least as important.

If you’ve already applied, and you want to improve your team, please just reapply with updated information or contact us to let us know what’s new.

Recent podcast by W3W3.com

Larry Nelson of W3W3 recently interviewed David Cohen and me about TechStars. Listen here.

We hid a few easter eggs there for those of you thinking of applying.

Is TechStars Worth 5%?

I’ve been pleased to see that the reaction to TechStars has generally been very positive. We’ve been pleasantly overwhelmed with quality applications for the program � over 75 to date for the 10 spots. There are still 52 days to apply, so if you are thinking about it, I encourage you to give it a shot.

Of course, there has been some debate about whether or not TechStars is “worth” giving up 5% of your equity. I thought I’d take a crack at addressing this and further explaining what we are trying to do with TechStars.

The answer to this question depends on your situation. If your company is funded, or clearly worth millions today, then TechStars is probably not for you. Perhaps some people might think that their idea alone is worth millions, and so they won’t apply. I can tell you from first hand experience that your idea is not worth much until you execute in such a way that you create real value. On their own, ideas are usually not worth the napkin they’re scribbled on. I am exposed to thousands of ideas every year (and often have several each morning while I’m in the shower) � only a handful of entrepreneurs will successfully build something around their idea and create meaningful value.

Perhaps when you consider the opportunity presented by TechStars, you will calculate that the initial valuation of your company is between $100,000 and $300,000 (based on the share of equity TechStars gets for the cash it puts up.) Some entrepreneurs will naturally argue that this is a low valuation. Conversely, many investors will argue that it is quite high. In time, one will be proven right and the other proven wrong. But if you’re looking at TechStars and the only value you see is the seed funding, then you’re missing the point of what we are trying to do.

You can’t easily assign a value to what TechStars provides, but we believe it goes well beyond the value of the seed funding. The educational opportunities alone are potentially life changing. What’s the value you’d place on access to the mentors who are involved? How long will it take you to assemble the large investor audience that we’ve lined up for you to pitch to at the end of the summer? What’s the benefit of an experience like this really worth? Hopefully, the answer to each of these questions is “much more than the seed funding alone.”

The value of TechStars is even more compelling if your company will need to raise more money. You’ll be in a great position to pitch to investors at the end of the summer, due to the coaching, advice, and mentoring provided by TechStars. Investor day brings active angel investors and venture capitalists right to you, and maximizes your chances of getting further funding. Because TechStars is vested in your success, it’s in our best interest to help you obtain more funding. Our initial 5% equity will be diluted by this further financing because we don’t ask for any dilution protection, rights of first refusal, or special controlling provisions (we will have common stock, just like you.) But we’re ok with this dilution because it’s fair, equitable, and further increases your chance of success, which again, is what it’s all about for both parties.

Think of TechStars not as a source of capital, but as a co-founder that brings a little money to the table. TechStars will be successful if your startup becomes a huge success, adds value and meaning to the world, and creates wealth. In the end, your company will likely either be worth something or nothing. Once you start thinking about this in binary, you should quickly realize that the whole game is really all about improving your odds, especially early on. We think TechStars can greatly improve your chance of success.

Video from New Tech Meetup

Last night I spoke about TechStars at the New Tech Meetup in Boulder.

Thanks to Brian at OnSight Media for recording this and to ClickCaster for hosting it.

What makes for a good idea?

One of the common questions I’m getting is “what makes for a good idea?”

I’ve shared my thoughts on this in the past, but to summarize: Solve a real problem by making something valuable that people actually want.

Go and find at least ten people who want this problem solved. Make sure they’re in real pain and aren’t telling you they are because they want to be supportive. If you can’t, haven’t, or won’t, and you’re about to build a company around this idea, then you’re in serious trouble.