Below is a post by Moisey Uretsky, Co-Founder of Digital Ocean, a company that participated in the Boulder 2012 TechStars program. This content was originally posed as a question on Quora and we’re re-posting it here because it’s a frequently asked question and Moisey gets it right.
We interviewed twice as a Finalist before being accepted to TechStars Boulder 2012.
Here are the three biggest things to keep in mind:
3. Market Size = Potential Investor Interest
The Story of our Interviews
I. TechStars NYC
When we attended TechStars 4 A Day in NYC, David Tisch told us that he wasn’t familiar with our space. The cards were basically stacked against us. This is because the managing director wants to tap their social network to help your company succeed. They prefer to pick an equal company whose space they are familiar with because they can leverage their network to get mentor, investor and advisor interest.
That being said, the interview isn’t as long as you think and it’s easy to walk away feeling like you were under the gun and you didn’t put your best foot forward. Spend less time talking about the things that work about your space and instead addressing their specific concerns.
With that in mind: prior to the interview speak to investors, advisors, mentors, anyone in your space to understand why someone would think you would fail and why your company is a bad investment and be ready for the same questions.
For us it was how are we different from Amazon AWS and Rackspace Cloud (Differentiator) and how could we possibly hope to achieve the kind of scale and growth that would make investors interested in us (Market Size)? This is the first time that we encountered these questions because we weren’t looking for any investors at the time, so we hadn’t yet engaged in these conversations.
All throughout TechStars, each mentor (investor or otherwise) had the same initial questions. It wasn’t until one week before demo day that we had finally nailed our pitch. We hadn’t changed our position, it just took us that long to succinctly explain it so that other people wouldn’t ask the same questions. Not being prepared for what were obvious questions from any investor meant we were one step behind and ultimately we weren’t chosen for NYC.
II. TechStars Boulder
When we were selected as a finalist for Boulder, Nicole brought in Jason Seats (Managing Director of TechStars Cloud) to help vet us, because he had an exit in our space (Slicehost) and could vet us both on a technical level (Team) and also from a business aspect (Differentiator). We should have spent the time between being selected for TechStars NYC and TechStars Boulder to work on answering the main questions we got from David and Adam but unfortunately we didn’t. So, once again, we found ourselves one step behind.
Nicole was unable to attend the scheduled interview so we spoke with Jason Seats first and felt once again that we had bombed the interview. We were again fumbling our answers to the same basic questions, albeit they were difficult enough that it took us three months in TechStars to eventually answer them with some measure of authority. Luck was on our side because we had another follow up interview because Nicole was unable to attend the first and then halfway through we finally spoke about our experience in the space. Each of the founding members had already built something of a rather decent scale in the space. That was when the conversation shifted from can we do it, to ok, these guys can pull it off technically, but how will they fit into this already crowded space.
We’d answered the Team question.
Now that Jason felt that we were a team that could execute in this space, he was on our side because he wanted to see how a company similar to SliceHost could enter this space. This is where we began to talk about how we could Differentiate, except now Jason was actually already advising us and helping us answer this question during the interview.
In our case the Market Size was already well known so there wasn’t much of a question of how big it was, but rather could we really hope to capture enough of it. But for any investment to be ultimately worth it there have to be a few remaining questions and although we may not succeed, it wouldn’t be because the market wasn’t large enough.
So with a couple of still-big questions:
- How are we different from AWS?
- And can we capture enough of the market?
We were selected to be part of TechStars in Boulder in 2012.
Putting it all together it helps to break apart the interview into those three categories and understand what each is about.
Team is first and foremost. Even if you have the market figured out, they need to believe that you are the best team to execute in this space. Here, is where you can talk about traction, how awesome you are and why you will rock it out. But this part is also vetted pre-interview with how often and how well you have communicated with them during the selection process; what traction you’ve put together and overall how hard you are hustling. Send regular short updates via email, make sure to respond to every email that you receive, and show them that you are on top of your game at all times.
If you don’t have your elevator pitch nailed, that explains your differentiator prior to the interview. You haven’t spoken to enough people (investors, advisors, mentors).
If you don’t have it, you can still get selected but just know that this will be the fist question you will receive from EVERYONE you talk to at TechStars.
III. Market Size
If you are selected, remember that TechStars is also an investor in your company. They probably won’t select you if they feel that other investors won’t invest in you because the market opportunity is too small. Figure out how you are going to make your business appealing to VCs that want a $1B exit for their investment to be worthwhile.
Just going through the process helps to solidify your position and vision. And remember even if you aren’t selected, you can always apply again. We weren’t selected in our first go around, and many other TechStars companies weren’t.