Jun 27, 2016 · 26m · 20vc
20VC: Techstars Founder, David Cohen on Scaling Techstars Ventures and Investing In Uber, Twilio and Sendgrid
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In this episode of The 20 Minute VC, host Harry Stebbings interviews Techstars founder David Cohen about scaling early-stage venture funds, maintaining strict valuation discipline, and identifying early iconic investments in companies like Uber, Twilio, and SendGrid.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 30.5% of the talking time here. How this is scored →
Harry as informed peer 2.0 Guest teaching 1.8 Guest disagreement 0.9 Harry pushing back 1.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:20 David rejects uncapped convertible notes
David takes an absolute stance against a common market practice, stating he did one uncapped note in his life and plans to do no more because retrospective data shows a fivefold drop in returns.
Hardest push from Harry ▶ 7:21 Harry challenges valuation sensitivityHarry directly challenges David's valuation discipline by citing the common VC counter-argument that valuation shouldn't matter if you're getting on a rocket ship.
Biggest teaching moment ▶ 7:38 David explains the math behind valuation disciplineDavid educates the host on fund economics, showing that doubling pre-money valuation directly halves fund returns regardless of upside narrative.
Harry holds his own ▶ 10:50 Harry cites peer solo GPs to question scalingHarry demonstrates high industry knowledge by naming specific solo GPs like Manu Kumar and Michael Dearing to push David on why Techstars chose to scale assets rather than remain small.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Launching Bullet Time Ventures and Techstars Funds | 1 | 1 | 0 | 0 | Harry introduces the episode and asks how David transitioned into VC via Bullet Time Ventures and gauged early product-market fit. David amiably walks through the early days of Techstars and how quick exits led to formalizing a follow-on fund. The dynamic is polite and informative without friction. | |
| Fundraising Fund One and Early Investments in Twilio and Uber | 3 | 2 | 1 | 3 | Harry presses David on valuation sensitivity, bringing up the common industry adage that valuation does not matter as long as you get a seat on a rocket ship. David defends his low valuation strategy by emphasizing simple return arithmetic where doubling entry price cuts fund returns in half. | |
| Portfolio Diversification and Avoiding Hot Deal Pitfalls | 2 | 2 | 1 | 1 | Harry inquires about rigid check sizes and managing LP support and time across growing portfolio companies. David explains that discipline prevents over-concentrating in hot deals that frequently underperform, noting that Techstars scales through its large network rather than just partner time. | |
| Moving Upstream: Scaling Capital to $300 Million | 4 | 1 | 0 | 2 | Harry demonstrates domain expertise by naming specific solo GP managers like Manu Kumar at K9 and Michael Dearing when asking why Techstars decided to scale capital to $300M. David details their positioning as syndicate partners capturing pro-rata rights across their massive ecosystem. | |
| Evolving Decision-Making and Balancing Instinct with Due Diligence | 2 | 2 | 1 | 1 | Harry asks how David's decision-making and pattern recognition have evolved over time. David cautions against heavy due diligence process that talks investors out of great investments, emphasizing initial 5-to-10-minute conviction. | |
| Crowdsourced Questions: Uncapped Notes and Big Boring Industries | 2 | 3 | 2 | 1 | Harry asks crowdsourced questions from Techstars colleagues regarding uncapped notes and big boring industries. David strongly rejects uncapped notes, stating retrospective portfolio data shows a massive performance hit when omitting valuation caps. | |
| Inefficiencies in Venture Capital and "Seed at Scale" | 1 | 1 | 0 | 0 | Harry asks about venture capital inefficiencies and the origin story of the seed investment in Uber. David details meeting Ryan Graves at a bar in Boulder and investing $50k on the spot into UberCab. | |
| Quickfire Round: Books, Industry Concerns, and Productivity Hacks | 1 | 2 | 2 | 0 | During the quickfire round, David criticizes the venture ecosystem's trend toward VCs seeking fame and volume over quiet execution and helping founders. The exchange remains friendly as Harry guides through standard closing topics. |
Statements from this episode (19)
Techstars portfolio has 762 companies with over $2B raised
“They have a total of 762 companies, of which 90% are active or have been acquired, and they've raised more than two billion in funding.”
Three of Techstars' first ten companies were acquired within a year
“Within a year of the first program in 2007, there were three acquisitions, and they were all relatively small. So out of the first 10 companies, you know, social thing was picked up around ten million dollars and a couple other companies had been bought in tha…”
Cohen: Five or six companies from Techstars' 2007 cohort reached exits
“In fact, there's still one company today, you know, from that original class in 2007, that's operating, you know, some have failed. I think there've been five or six exits out of that first 10 companies.”
David Cohen raised $2.5M for Bullet Time Ventures Fund 1 in weeks
“I raised two and a half million almost instantaneously a couple of weeks.”
David Cohen: Twilio and Uber were Fund 1's first and fourth investments
“The first investment I made was in a company called Twilio. Fourth investment I made was in a company called Uber.”
Cohen: Consistency in investment strategy matters more than the strategy itself
“It's about having a consistent strategy and just sticking to it. You know, it almost doesn't matter so much what the strategy is as that you're consistent about it and stick to it.”
Cohen: First Bullet Time fund had an average pre-money valuation of $2.8M
“So the average pre-money valuation of an investment in my first fund is 2.8 million dollars, which is quite sane.”
Cohen: Concentrated angel portfolios statistically fail
“You have to have enough portfolio diversification to where, you know, if you're concentrated in just a few companies as an angel, I mean, the stats are pretty clear. You're going to lose.”
Cohen targeted 50 fund investments with $50k initial check sizes
“I had a certain size fund, right? I, it was 50 K per check with a double down. So that's 50 investments, right? That's what I wanted in terms of diversification.”
Cohen: Hot startup deals often turn out to fail
“But you know, it turns out that the hot deal, something I've learned is, is often the one that doesn't work. And when you see Uber for the first time, or you see, you know, a company that ultimately didn't do well, you're just as excited about both of them.”
Cohen: Techstars manages over $300 million with 150 employees
“Today, you know, so we went from that five million dollar fund today, we're over three hundred million dollars in, in managed capital, but, you know, we have a 150 people in the organization.”
David Cohen: Best investments come from instantaneous 5-to-10-minute instincts
“Most of the best investments I've ever Had have been that five, 10 minute instantaneous, you know, like I'm in reaction, right?”
Techstars requires approval from only one partner for seed investments
“We've maintained, even though we have four partners now working on the larger investments, we've maintained this idea that if somebody gets excited, that's all you need. Go make the seed investment.”
David Cohen vows to never invest via uncapped convertible notes again
“I've done one in my life, and I plan to do no more.”
Cohen: Techstars returns would be 5x lower if using uncapped notes
“Had all the investments we've done been uncapped notes, it's something like a five X, you know, lower return.”
Cohen: Traditional VCs frequently fail at seed-stage investing
“The VC is trying to do seed. You know, you see so much failure there, right? You see, it's just a different game.”
David Cohen invested $50k in Uber after asking for a $100k allocation
“And I said, I was in sitting on that bar stool. I think I asked for a 100,000 dollars. And, you know, cause at the time I think that was the sort of up leveling that we were trying to do in that fund. And I got 50. It's fine. I took 50.”
David Cohen: Tech industry rewards loudness over performance
“I'm very concerned about the health of the long-term dynamic where entrepreneurs and investors value fame and boisterousness over shut the hell up and do a great job and help the company, right? I think most industries evolve towards rewarding performance and,…”