by Brad Feld
When I’m mentoring companies during Techstars, entrepreneurs often nail the first three items on the list, as these are the raw materials of a typical Techstars company. The difficulty is making sure that they recognize that having tunnel vision can be deadly.
Let me share a specific example—it’s dated now, but at the time was a cool company. Even so, the example is timeless. The founders of Boxee (boxee.tv)—a company I’m on the board of—had a vision and passion to bring the open Web to television. When they started the company, their vision for doing this was to develop an open source media application and tie it to a web service and a smooth user interface made for a TV remote control rather than a mouse and keyboard.
At first, they believed the best way to do this was to build a low-cost set-top box and integrate their application with the hardware. They raised a small amount of capital from friends and angel investors. They built a prototype of the hardware and software and allowed a small number of users to test the product. That was in 2007.
By 2008, they decided to seek venture capital to fund the company. When they came to see me, they believed that their hardware and software experience was the right way to go. But I didn’t see it that way. I suggested that they ditch the hardware and focus on the software and user experience. After my first meeting with Avner Ronan, Boxee’s cofounder and CEO, I told him I loved the vision, but that I wanted to invest in “Un-Boxee;” basically, Boxee without the box!
I wasn’t the only one who provided that feedback. They heard it from a few other VCs and a few of their trusted advisors. After a great deal of thought, the company decided to focus on software. They concluded it would be the fastest way to distribute their product and allow them to build a capital-efficient company.
While they were deliberate in this strategic change, they made the decision promptly. They then proceeded to distribute their application to hundreds of thousands of users quickly and at a low cost. They subsequently raised venture capital from my firm (Spark Capital) and Union Square Ventures.
Their user base grew quickly and Boxee was approached by a number of large consumer electronics companies about bundling the Boxee software with their consumer electronics hardware. At this point the Un-Boxee product (the software only) was receiving incredibly positive feedback, and Boxee was now in position to go back to their original idea of a hardware and software combination. But they wouldn’t have been able to get to this point if they had been bogged down by rigid tunnel vision. By having a perspective that not everything goes as planned, Avner and his team were able to get to a point at which they could realize their original vision for Boxee, just not necessarily on the path they had planned.
Chapter 14
Focus
Jared Polis
Jared Polis is the founder of BlueMountainArts.com and ProFlowers, among many other companies. He is the Governor of Colorado and was a five-term U.S. Congressman for the second district of Colorado. An active philanthropist, Jared founded the Jared Polis Foundation in 2000, which, among other things, donates more than 3,500 computers a year to schools and nonprofit organizations. He has founded two charter schools, one with multiple campuses across three states and a postsecondary school for at-risk students. Jared is one of the cofounders of Techstars.
Ideas are easy to come by. I have had many that I never had time to see through and heard many other good ones from flakes and drifters, but I believe the key to success is focusing on a good idea and implementing it well. In the case of ProFlowers, my idea was to disintermediate the supply chain by sending flowers directly from the grower to the customer, delivering fresher flowers at a better price.
From there, it became a matter of focusing on the implementation. I had to invent a system to get the orders to the growers. Since many flower growers were extremely low tech at the time and couldn’t be relied on for Internet access, we created a foolproof way of faxing FedEx labels directly to the growers right on sticky peel-off paper for them to affix to the boxes. We also had to become good at marketing and customer acquisition. It doesn’t do any good to be the best at something if no one else knows who you are. We needed strong marketing and customers to make this happen. So, after we raised capital, we hired top-notch direct marketers and became great at getting new customers. The company grew rapidly since I founded it in 1998, went public in 2004, and had over $250 million in sales when it was acquired by Liberty Media in 2006 for around $500 million.
Staying focused is critical but is one of the most difficult challenges entrepreneurs face. That’s one of the great benefits of the Techstars accelerators: You will have nothing else to focus on in your life other than your business. In ProFlowers’ second year, we decided that lobsters were just like flowers; fresh from the wharf was the same as fresh from the farm. Lobsters, like flowers, had to be delivered quickly, and our technology worked perfectly with little modification. However, we didn’t think through the fact that the U.S. lobster market is tiny compared to the U.S. flower market. In addition to lobsters, we decided to explore expanding to other countries, such as Japan. We ended up launching a Japanese subsidiary and I even went to Japan to watch focus groups of Japanese consumers to see how their flower-purchasing habits differed from those in the United States, which we were familiar with. While culturally interesting, our foray into Japan was a complete waste of time. In retrospect, we should have focused 100% of our time, effort, and capital capturing what we could of the $7 billion U.S. flower market. Maybe if we were a mature billion-dollar company with a large market share in flowers, we could have looked at other market opportunities. Fortunately, we reversed course quickly and limited the losses from our adventures with lobsters and Japan.
Jared is a remarkable entrepreneur. As the son of two entrepreneurs (the founders of Blue Mountain Arts, one of the largest and most enduring greeting card companies in the United States), he cofounded his first successful company—AIS—when in college and sold it to Exodus in the mid-1990s for $21 million. Working closely with his parents, he then created BlueMountainArts.com, the online version of Blue Mountain Arts. Brad and Jared became close friends after Brad moved to Boulder in 1995.
In 1999, BlueMountainArts.com was acquired by Excite.com for around $800 million. Ironically, Ryan McIntyre—one of Brad’s partners in Foundry Group—was one of the cofounders of Excite. Jared started ProFlowers while he was still running BlueMountainArts.com but started focusing on it 100% of the time after Excite acquired BlueMountainArts.com.
When David and Brad started Techstars in 2006, they approached only two other entrepreneurs to help fund the first year of the program. David’s previous business partner, David Brown, was one. The other was Jared.
Jared Polis, former congressional representative, current governor, and a phenomenal entrepreneur, gets ready to speak to founders.
Chapter 15
Iterate Again
Colin Angle
Colin is the chairman, CEO, and founder of iRobot,a public company (IRBT) valued around $3 billion that makes the popular Roomba vacuum cleaner robot. He is one of the founding investors in Techstars Boston and has been a Techstars mentor since 2009.
When we started iRobot in 1990 we had the vision that we would “Build Cool Stuff, Deliver Great Product, Have Fun, Make Money, Change the World.” To accompany that vision, we had an audacious business plan to launch a private mission to the moon and sell the movie rights. The surprising thing was how far we actually got! We created a launch vehicle (a robot named Grendel) and it was further developed and flight-tested on a very small spacecraft affectionately called a “brilliant pebble” at Edwards Air Force base. We had agreed to sell NASA the data collected to help finance the mission. We even recruited the producer of the Blues Brothers movie to be on our board of directors.
Although it was an interesting and bold idea, it didn’t work out in the end. But, we had found a way to get paid for the effort through government programs, we got to work on a very cool project, and we were far from
disheartened. We knew that there were going to be more innovative and unique ideas in our future, and we set out to try again. Next, we decided to pursue industrial cleaning robots in partnership with Johnson Wax, oil exploration robots with both Baker Hughes and Halliburton, and robot toys with Hasbro. In each of these cases we were able to enter a market with a partner willing to shoulder much of the cost, do some great work together, create value for each other, and ultimately exit the relationship with both our moral and financial positions intact. However, none of those business plans worked out.
We were doing more than treading water during this period. We were learning what our technology was both good and not so good for. More importantly, we were learning how to run a business and forge successful partnerships. We learned which intellectual property matters and when it gets in the way of progress. We learned that forcing people to do what you want may work when you have your own legion of lawyers, but for the rest of us, it is the interpersonal relationships that truly matter. We learned that very few people care how you accomplish something. Instead, most people care more about whether you create value for your end user.
Finally, we learned that a bold vision does actually make a difference. Ours, “Build Cool Stuff, Deliver Great Product, Have Fun, Make Money, Change the World,” kept us unified with a common purpose while gut-wrenching change surrounded us. It reminded us that our goal was to have fun and make money. Most importantly, it reminded us that our mission was not only to make money, but to change the world in the process. Our cause is worth pursuing, even if it means that we had to call our customers to tell them that (a) no, the robot isn’t done yet, and (b) please pay us anyway so we can make payroll.
A company that is well positioned to endure the hardships encountered during the early phases of its existence gives itself time to find success. In the case of iRobot, we may have been less successful at building toys and exploring for oil, but we were able to use that experience to build high-quality machines that cleaned in a cost-effective manner, with the industry’s most innovative artificial intelligence software. Also, we had survived long enough to reach a point when a fledgling robot company sounded like a relatively safe investment compared to many dot-com startups of the time. We were thus able to attract VC funding.
Under these circumstances, the Roomba was funded, designed, and born on September 15, 2002. We would have never reached this point if we hadn’t kept iterating, and we never would have continued to iterate if we didn’t have a bold vision to propel us through the tough times
It’s a good thing we did, because the world hasn’t been the same since.
While Colin’s story ends abruptly in September 2002 with the launch of the Roomba, that’s also the beginning of the next chapter of the iRobot story. Brad keeps a list titled “Companies I Regret Not Investing In.” iRobot is at the top of the list, as it is currently a public company with a market cap of around $3 billion.
Brad knew Colin from MIT—they were fraternity brothers and friends. Colin started iRobot in 1990 and was still iterating in 2002 when he spent some time at Brad’s house in Eldorado Springs, just outside of Boulder, Colorado. It was a beautiful day in the incredible canyon that Brad used to live in. They spent the day talking about iRobot, entrepreneurship, and investors. Brad gave Colin some suggestions about funding iRobot and in the back of his mind was privately excited about the idea of investing in the company.
At the time, Brad knew nothing about robots and when he mentioned it one of his partners at the VC firm he was part of at the time (Mobius Venture Capital) at his Monday partners meeting, it was immediately dismissed, since “the Japanese will crush all the U.S. robot companies.” Brad never dug in further, was happy when iRobot was funded and ultimately went public, but always secretly regretted not having more courage to step up and participate in the financing.
In this case, Brad also iterated—he realized that iRobot wasn’t really a “robotics company,” but, in the vocabulary of Foundry Group (his current VC firm), it is a “human–computer interaction” company in which the magic is really software, even though the software is developed in a mechanical device. While iRobot is on Brad’s list of “Companies I Regret Not Investing In,” he too learned from the experience, iterated, and doesn’t think he will make that particular mistake again.
Chapter 16
Fail Fast
Alex White
Alex was the cofounder and CEO of Next Big Sound, a company that provides online music analytics and insights to over 750,000 artists and bands with 30 million songs. Next Big Sound raised about $1 million from Foundry Group, Alsop-Louie Partners, and Uncork Capital after completing Techstars in 2009. The company was acquired by Pandora in 2015.
After my freshman year in college, I landed an internship at Universal Records in New York City and came up with the idea for a website that would let anyone play the role of a record mogul and sign bands to their own fantasy label. For three years, I couldn’t stop thinking about it but told virtually no one. During my senior year of college, I took an entrepreneurship course and formed a team to pursue this idea. We raised a seed round of funding, launched at the end of the summer, and moved back to Chicago, where my three cofounders were still seniors at Northwestern. I was supposed to start a consulting job in New York City but quit before I started to pursue the business full-time. I spent the year sleeping on couches, touring the country helping manage a band, and fighting my way to registering thousands of artists and users for our fledgling service. By the spring, we had been profiled in the New York Times, had several small investment offers, and were approached by many overqualified individuals who wanted to work at the company. We barely had enough money in our bank account to pay the streaming data costs we were incurring each month. This was when we applied to Techstars.
I tell you this background only to illustrate how much we had invested in this idea. I thought we had all the answers and would be able to figure out any challenge we came across. Millions of registered users? We’ll get there. Thousands of unsigned bands uploading demo tracks? We’ll figure it out. But I came to realize that even if we accomplished these goals, it wasn’t clear that we had an economically viable business.
We drove a thousand miles overnight from Chicago to Boulder, brainstorming ideas. We knew that the high-level concept of our first site still really inspired us. How does a band become famous? How does a band go from playing in their garage to headlining a nationwide tour? We also knew that if we wanted to have the freedom, excitement, and opportunity to run our own business, we needed to find something financially viable.
On the first day of Techstars, we decided to change our idea. Many people were surprised, but the decision was easy. We were tired of sugarcoating our status and deluding ourselves about the engagement and registration numbers. Making money off a streaming music destination site was a challenge that no longer motivated us to stay up hacking late into the night and jump out of bed every morning to start working.
We were nervous about telling our newest investors that we wanted to drop the idea we applied with until David Cohen made it clear on the first day that Techstars invests in founders, not ideas. This gave us explicit permission to fail with our initial idea without having to shut down the company and fire ourselves. At Techstars, we were given the opportunity to give it a second try.
We’d heard the statistics like everyone else. We all know that failure is the likely outcome of any individual new venture. However, with each iteration in the marketplace, you give yourself a better chance for success. You miss 100% of the shots you don’t take. You only truly fail if you stop trying. So, fail fast. Learn quickly. And start again.
Too many people take the phrase “fail fast” literally. It doesn’t mean that you should make sure that your business fails fast. It means that you should be happy about having a bunch of little failures along the path to success, because if you’re not failing, you’re probably just not trying enough stuff.
Next Big Sound did an amazing job of failing fast. Alex and his partners woke up on the second day of Techstars and immediately began exploring several new ideas that grew out of their interest in the music industry and independent bands. At the end of the first week of the program, they started working in earnest on what turned into their music analytics product.
At first, they organized the data they were tracking in a way that band managers would find appealing, but this made it difficult for a typical end user to look up information on a band. After showing this early version to a number of people, they kept getting feedback that they should model their user interface after popular web analytics products like Compete and Quantcast, which tracked similar data for websites instead of band mentions and song plays. They failed fast, scrapping their initial user interface and coming up with the one they use today.
During the summer, Alex and his partners listened attentively to all of the feedback they got, tried lots of different things, and continued to succeed by failing fast. On investor day, Alex completely nailed his presentation and Next Big Sound quickly raised a venture financing after the 2009 program ended.
Alex’s journey is quite common within Techstars: The idea will evolve and change. Remember, it’s rarely about the original idea.
Next Big Sound founders Alex White, Samir Rayani, and David Hoffman.
Chapter 17
Pull the Plug When You Know It’s Time
Paul Berberian
Paul is a serial entrepreneur, having cofounded multiple companies, including Raindance Communications, which went public in 2000 and was acquired by West in 2006. He is currently CEO of Sphero and has been a Techstars mentor since 2007.