David Gardner (Cofounders Capital): We have a joke that if we don’t understand something in the first 2 minutes, we won’t invest.
30 Jul, 2021
Eamonn Carey is the Managing Director at Techstars London. He was previously MD at Techstars Connection in partnership with AB InBev in New York, and has been a long term mentor, advisor and angel investor in Europe, the Middle East, Asia and the US. In the past, Eamonn started, succeeded and failed with several startups in Europe and the Middle East – including Farmvillain – an app which some described as the ‘South Park of Facebook’. He first started building games (as an eight year old) to impress girls in the late 1980s. His efforts were unsuccessful. His love for games lived on in spite of that fact.
How it’s all started? How you decided to enter the venture investment business?
As many investors, I started as an entrepreneur. I think, it was 2004. I was always interested in business, startups, technology. So I created my own company, scaled it, hired people, acquired some revenue, expanded internationally, sold it and consecutive businesses as well. I loved the energy of the startup World, I loved the engagement I felt with technology. In 2013-14 I was thinking, what to do next. I started seeing many early stage companies looking for support, advice and guidance, I became engaged with their ideas, and I thought I could help them. And I ended up investing into those companies. So for me it was always about my passion to technology and engagement with interesting people, who move the world forward and change the way people interact with devices and technologies. So my first “a-ha” moment as an investor was actually the first moment I actually met a someone who was working on a technology very similar to the problem I had, solving it. This is what I always look for – businesses producing products either I, or someone I know, or a broader audience might be interested in. That’s how you decide whether or not you should take a conversation forward.
Are you satisfied with your current business situation? Or, maybe, you would like to try something new to apply you knowledge and ideas to?
I think, that one of the nice things about startup environment is that it is always evolving. I started investing into people building consumer applications on iOS and Android, or B2B SaaS platforms for enterprise customers, but my most recent investments include companies doing suit technology, or working on a supply chain for restaurants that want to get access to fresh fish. I’m investing in companies doing drones, and healthcare. Startup world is always changing, so you’re constantly learning, constantly developing your own skills, educating yourself. For me, it’s the most powerful thing: i’m constantly buying new books, listening to new podcasts, figuring out different concepts, and this is incredibly stimulating and engaging.
Do you invest into space exploration?
We took a couple companies. Actually, in Techstars we have two space focused accelerator programs – one is run virtually, the other is in LA. There is an increasing number of things happening there – cubesats, low-orbit satellites, orbital refilling stations, and we see a lot of companies drawn to space markets or remote operations, or objects on a Moon or Mars, or fabrication in space. There is a lot of exciting areas to explore, and we’ve just started. We are at very early stages of that particular ecosystem.
How you select ideas to support? What are your criteria?
We have a pretty straightforward set of criterias. We are looking for 6 things: team, team, team, market, traction, idea. Because of the nature of where Techstars invest – very early stage, pre-seed or seed stage companies, for us the people behind the business and teams are most interesting and important things. We are looking for very strong founders to fit the market characteristics, some fair advantages the team has, we are looking for the balance of skills – how you come up with an idea or how you pick up one is important, but it is also important can you build it, and execute. We are looking for teams that can withstand the pressure of starting and scaling the business. And only then we start looking on how big is the market, is this a niche market with the potential to become a wedge of a bigger market or is this a small project with a potential of covering a very large market and have we assert that. Traction is also very important, we are looking for the companies with some momentum behind the business – some initial test clients, some initial revenue, some great customer development even at the early stages. Techstars wants to invest in businesses already accelerating, having some kind of network, and capital and expertise to help them going even faster. Frequently the least important thing is the idea. Up to 20-30% of businesses will change in a course of Techstars programs. And you need to make sure that you have great people who can change their structure, their focus, if they need to. Those are our criteria. Of cause, we are looking for, say, does a company have referrals, connections, people we already know making recommendations to us – it is always good, but it’s not essential. Then the process is quite straightforward: we have an open application process – people can find information at out website, see, which programs are open. There is a simple form people may fill in about their business, the team, the market they go after, the traction they have so far, and what they want to achieve in the future. Then we start filtering those companies, interviewing them and gradually narrow applications till we have 10 companies for the program. We support those companies for 3 months of the program and far beyond.
Investors like to work with teams. But have you ever support a one-person startup?
Yes. I’ve invest in quite a few, actually. It’s a little bit harder to get a one-person startups into a program, just because an amount of work you have to do is pretty substantial. But a solo founder who hires a developer, a sales person, or marketing person, can start to build a team around them. The companies came through Techstars, like Banjo Robinson, Cledara or Faster Than Light had solo founders, but they were very compelling businesses I was excited to work with. The total idea, the teams they build around themselves are exciting. If a founder tries to do everything him or herself, it will be difficult, but if there is some work with contract developers done, or you find a great CTO who will join full-time when you raise fundings, we may think whether or not we’re going to engage with the project.
And what industries you’re interested in? Geography?
We work with everything from companies pretty much at the idea stage. At the last class we invested in a company named Noir Food – they were at the very-very early stage, but it was a really strong team. In 2018 we invested in 42Maru, it was a 35-person team from South Korea working at semantics QA and machine learning. We invested in everything from pre-seed to Series A. Geographically we look for companies from everywhere in the world; in the last few years we had companies from US, Ukraine, Bulgaria, Estonia, Korea, India – lots of different locations. But for our London class we want the companies who want either expand on the UK market, or it may be their first international expanding market. We are agnostic in terms of sectors and really open to any opportunity. Typically we don’t invest in farms and biotech, because those require different amount of funding. We had more than 50 programs around the world and had everything from spacetech to fintech, education to healthcare to oil and gas, mix of B2B and B2C. We have a big international footprint.
What a startup should have to propose to catch your attention?
There must be something exciting going on. We want to see a founder or founding team having some unfair advantage or some real passion toward a particular problem they want to solve. They need to prove they know this problem better than other people, or already got some customer development, or got some traction behind the product. They shouldn’t be just smart, but rather have already started a road of building a company. Also I want to see how they are connected to me or other managing director of Techstars, if they can find an introduction. Actually, this year I invested a several companies came through cold emails, so there is no pattern. I’m very easy to be found on Twitter or LinkedIn, so take time to write a one-paragraph letter of introduction about you and your business and, maybe, send a short pitch stack. Or just come through application process and find a program good for your business.
How big is a check you usually issue?
The check Techstars usually signs is up to $120,000, this is an initial type of relationships we develop within our program framework. But we have capacities to invest through the rest of their lives, so in some cases we invest hundreds of thousands and millions more. But in all companies coming to our programs our first investment is up to $120,000 in each one.
You said you like a sort of film teaser presentations of startups? Can you explain the point?
There are two points here. As a huge movie fan, one who likes to go to the movies, I really like trailers giving an idea about the whole movie coming in the future. And with the big movies, like Star Wars or Avengers, there is a very short clip, maybe 30 sec, that is so engaging and exciting, you want to go to a ticket shop and say: “Book me a seat right now!” They do something really provoking an emotional reaction in you. And a lot of startup pitches and emails act the same way. One of the usual mistakes I see is emails like 10 paragraphs, very long and boring. Investors get hundreds of emails every day, it is hard to keep someone’s attention till the end of a long email. I love very short and to the point emails. The way companies introduce themselves, the way they explain their topics and how they are connected to me can make me respond immediately. As my mentor used to say: “The goal of every meeting is to get another meeting.” And the goal of your first email is to start relationships, so you need to be sure that it is something there that will capture my attention and make me want to learn more about what you’re doing. And the more conversations you will get, the higher your chances to get investments. Send me a 2-3 sentence long email, but about the things that are really important – be smart, focused, targeted and make me think that you’ve done some research. So like those great movie trailers get you excited in 30 seconds, your email should get me excited in several sentences.
Who you would invest rather – George Lucas with Star Wars or Gene Roddenberry with Star Trek?
I’m a bigger fan of Star Wars, so, maybe, George Lucas. I think he can create an incredible company around himself. I’m not a fan only of the movies, but the games Lucas Films used to produce in 1990th, Yes, George Lucas, with apologies to Star Trek fans.
At what stage you prefer to enter?
I’m pretty open. Yet I like to see that the product exists, even at very basic or prototype stage, but you can already experience it a little bit. I understand that with some deeptech, or machine learning, or AI, or space technology it can be a little bit different, but even drawings for hardware product help to de-risk it a little. But we take everything, from ideas to already built products. The team behind it is almost always more important.
What is your due diligence procedure and how long does the process take?
We try to make it short. Applications typically open for three months, because we want to be sure that a lot of companies have chance to apply to the programs and come to events we’re running. We spend somewhere between 2 weeks to 3 months on due diligence, which is lots and lots of interviews. Companies may speak with half a dozen of Techstars people before we make an offer. We try to make it shorter, ideally it takes 4-6 weeks, but giving the number of companies we’re investing in, just getting all the legals and all into the right place takes some time. We need to be sure we’re making right decisions.
How many startup projects do you review per year?
It really depends. Across Techstars it is high tens of thousands of companies that apply to the programs every year. I personally speak to 500-600 companies every year, but we see even more decks, presentations, emails. So on a personal level it is thousands of companies every year, on a company level it’s close to a hundred thousands.
How startup team usually find you? What are the sources of all those applications/candidates?
We run big events around the world and visit many big and small events, so you can meet someone from Techstars there. We travel a lot to meet with startups. It is also easy to find someone else, who came through and asked to make an intro. We like to know that a company can make its own due diligence on Techstars, we want them to get some feedback on what program is alike and what people are alike. A lot of companies have mentors in other companies we work with, it’s very easy to get a referral. We are open on Twitter and other places. But at the end everyone gets filtered by application at our website, because every company has to register there, so it is also a good idea to start there.
How long does it take you to cover the whole way from the first meeting with founders to contact and check signing?
It depends. Sometimes it took us 6 to 8 weeks. Yet the last year I had a company when it took me 6 month from the first meeting to the final check issuance. Every case is slightly different. Also, say, in London we run one program a year, taking companies in from September to December. And if I meet a company in January, even if I want to write a check immediately, we still need to wait till a program starts.So it depends on many factors.
What qualities you are looking for in teams?
It’s a good mix of founders. Someone who has vision, someone good in sales and marketing, someone who can actually build a product. If you have just a bunch of sales people with no technical abilities or if you have a bunch of technical people who cannot sell your idea – you are in trouble. We look for good collaborators, open to feedback. The part of our program is meeting a hundred or more mentors who will give you a lot of feedback. You have to be coachable, willing to listen, to take advice. If you think that you are right all the time, it will be a very difficult process for you. We look for people who want to be members of community. We’ve invested in more than 2000 companies around the world, we have an incredible network of mentors and we want to have great members of that community ready first to learn, then give back over time. And we look for resilience as well. Team, who can withstand critics and challenges together, is extremely important.
Who you prefer to work with: Jobs, Wozniak and Chuck Norris?
I don’t know how Norris reacts to criticism. I’m not sure that Steve Jobs will well react, either, but at least he could collaborate to other people and create a new reality around himself. Steve Wozniak will be the first one we would pick. Then I will get some feedback from friends about Jobs and Norris, but my guess is that Steve Jobs may be a little bit better founder.
And what are your red flags?
I like to talk to companies several times to feel the progress they are making. And if I meet them month after month and feel like nothing really happened between our meetings, it would be a very big red flag to me. Momentum in startups is extremely important. Sometimes we have teams and realise that their relationships are not strong – it’s a huge red flag for us. Founders who are not coachable, who disagree with you all the time during the interview also a huge red flag. Founders saying very negative things about their competition, just negative people – for me personally it’s a huge red flag. Founders who talk too much and don’t listen enough… Last week we had a meeting. It supposed to be 3 minute presentation and then some conversation, instead they made 26 minutes presentation and didn’t even respond to our questions. At the end I felt like I don’t know anything about the business, just what the founder wants me to know. You need to be able to explain your business in very short and simple way, because (I know, it’s a cliché) you never know when you’ll be in an elevator with Sundar Pichai from Google or Satya Nadella from Microsoft and have 10 seconds to pitch your business. If you need 26 minutes, you’ll be standing in an elevator on your own.
Have you ever rejected a cooperation proposal and then regret it?
I think, a couple of times. Say, it was a company in the Middle East. I met a founder, liked him, kind of liked a business, though thought it has a lot of challenges and made my decision not to invest, and the company is now worth more than a billion dollars. So, it was a mistake. But I see it as a learning experience. Analysing what was wrong and what was right, I can improve my decision making. In Techstars I meet hundreds of businesses every year, but invest only in ten, so I need to say “No” hundreds of times. When you come to the final stage you may have very good relationships with the founders already, but still have to say them “No.” We try to get them connections with other investors to help them continue. So we say “No” and make mistakes, and I’m sure that there will be other very successful companies we will reject. I think it helps to reflect on the past, learn from it and try not to make those mistakes again.
What books, movies, blogs, events can you suggest to startup founders?
There is a lot of books. For example, Obviously Awesome by April Dunford, mostly about the positioning of your company, and it is a very interesting read. I like the book The Great CEO Within: The Tactical Guide to Company Building by Matt Mochary – again a very practical guide that will help founders to become better CEO. Those two books I particularly enjoyed recently. Elad Gil wrote a very good book High Growth Handbook that is an incredible essay on growing and scaling companies. Movies… too many to mention. Say, recent General Magic (2018), but still too many to mention. As an investor I’m listening TheTwentyMinuteVC, Invest Like the Bests, Recode Decode – there is a lot of great podcasts that get you insites of how investors think and what they’re looking for, what are the big news in startup ecosystem. I really like Stratechery blog by Ben Thompson, TechCrunch, I increasingly read AngelList. I’m subscribed to a lot of newslists – Benedict Evans, for example. There is a huge lot of information everywhere.
What was the most unusual startup you ever supported?
Maybe, a company named Pesky Fish. It is connecting fishermen with their customers speeding the supply chain. It helps to get fish from the sea to the plate much-much faster. Technically, when I invested the business was still running as a WhatsApp group. But the founders were incredible, they had very strong vision, very deep understanding of the market and just phenomenal people, we spent a lot of time together. So, when I was investing, I knew that they were incredible people, fishermen loved them, restaurants’ owners loved them and there was a real opportunity to do something different at that market. I invested, and they were growing and supplying more and more restaurants in London.
Can you name three most breakthrough startups in the history?
Both Google and Facebook were transformative in terms of internet industry and everything happening around us. And I’d like to mention Uber that changes the way we think about our mobility. Then I will go back a little. If you think about Tesla less as a car company, but more as a giant battery company, they have a potential to become one of the most substantial companies on Earth in times of climate crysis and everything that happening.