The countdown has started. The 2014 Techstars Seattle class is about to begin, and I'm getting really excited to work with another batch of excellent companies.
This year was our fifth application round. Every year since the beginning in 2009, it has been getting increasingly harder to select the companies. This year was no exception. The quality of the applicants has never been higher, and the competition was fierce. We received a record 600 applications for only 10 spots. The selection committee has spent the past three months reviewing applications, doing interviews with companies, and ultimately selecting the 10 companies we believe are tomorrow’s winners. While I can’t reveal the names until August 11, I can give you an insight to the selection process and how we selected the Techstars Seattle class of 2014.
Selecting 10 companies from 600 applications is no easy task, and to be honest, it is not an exact science. We can’t predict the future, but we can apply years of experience in selecting the companies that we believe have the greatest chance of defeating the odds. We assess the companies on three main parameters: team, market, and product.
The most important parameter is the team. Why the team? The main reason is the dynamic nature of early stage companies. Startups tend to pivot a lot in their initial stage, until they find their product market fit. Ideas which look great on paper, don’t always work in real life. Often, it is impossible to say if something will work until you have tested and tried it. If it turns out there is no need for your product, it is time to pivot - new product, new market, or both. The only element that tends to stay somewhat constant, is the team. A great team will learn from its failures quickly, adjust to a new situation, and push on in a new direction. If you only invest in a great idea, the investment is lost if the idea turns out to only work in theory. A great team will find find justification for its existence, one way or another. This is the reason we invest in teams and not just ideas.
The second thing we look for is the market. Some of the questions we ask ourselves include, how big is the market? Is the market growing? and what is the competitive situation? Ideally the applicant is targeting a growing market which isn’t crowded by numerous competitors. The market doesn’t have to be large right now, but ideally the potential is. All new markets start at zero, and with an investment horizon of 8-10 years, it is difficult to predict the markets of tomorrow, for this reason we let trends guide us, such as for instance the emergence of the internet of things. Unlike what many think, we don’t necessarily look for spaces where there are no competitors. Some entrepreneurs tell us, “nobody has done this before”, which indeed can be a good opportunity to be a first-mover, but one should remember to be critical and ask the question, “Is there a reason why there are no competitors?”. Competition can be good for many reasons, one reason is that it indicates a product market fit, or in other words, a need for your product. No competition is therefore not inherently a good thing.
Finally, we look at the product. Some applicants actually get into the Techstars accelerators despite their idea, not because of their idea. If the team is great, it is less important what the idea is. That said, you won’t be surprised to hear that we prefer great ideas over mediocre ones. I personally like the ideas that are “painkillers” not just “vitamins”, the “need-to-have” over the “nice-to-have”. Basically, is the product solving a real problem? We are open to all kinds of ideas, and do take “vitamin”-companies, but the startups that solve real problems will have an easier time selling and generating revenue. The ideal position for a company is to create a product, which your customers cannot live without, one they will keep even when the market is in recession, one that will make them more successful. Create a product that gets you on top of your customers priority list, when you call them, not last.
The last thing we look for is harder to explain. It’s the x-factor. Its the intangible traits of a founder, a company, a person, that makes you believe that this team will make it big. Often you can’t put your finger on what it is exactly that persuades you, your gut just determines that the team should make the cut.
Most of the companies we have selected this year, but not all of them, tick off all the boxes. Some have rough ideas that still need to be tested, some will change their idea, some will pivot completely and end up pursuing a new market opportunity. They are all doing very different things, but they are all exceptional teams with that x-factor that gives you the gut feeling that with a bit of guidance, investment, and luck, they can achieve greatness. I, for one, can’t wait to introduce them to you. Stay tuned.