From Nashville to Boston: How A Startup Accelerator Changed Our Lives

By Dharmesh Shah on August 19, 2011

The following is a guest article by Nick Francis, co-founder of Help Scout, a customer support application.

When looking back at successful companies, you can always point to a series of defining moments that changed their business for the better. If a critical decision wasn't made or a specific shift in the market didn't happen, the company would have never made it.

For myself and my Help Scout co-founders Jared and Denny, the opportunity to join a local startup community and participate in TechStars was a defining moment that changed the course of our business forever. In 90 short days, we found a new home in Boston, made life-long friends, learned about building a successful business and made unbelievable progress on our product.

A Little History

As the title suggests, our team is from Nashville, Tennessee. We spent over five years in the consulting business, creating websites for companies of all sizes. We learned a lot and did well, but found our true passion was in building products of our own.

In Nashville the only option for a startup is to bootstrap a successful business, so that's what we tried to do. The consulting work funded our product ideas on nights and weekends. We failed a few times and succeeded once (our first product, Feed My Inbox), but our team was hungry and getting better at our craft every day.

In late 2010, we started working on what soon became Help Scout. We're passionate about solving online support for small businesses and got great early feedback from customers. However, we couldn't sustain any momentum. Splitting time between client projects and Help Scout meant we couldn't move fast enough to launch and gain traction in a competitive market.ts office

We thought long and hard about our options. Help Scout needed 110% focus from all of us to have a chance at success. I talked to some friends and mentors that were willing to help us fund the business for up to a year, but it was risky to bet the company on being profitable in a year with such little funding.

This was about the time I read Do More Faster by David Cohen and Brad Feld, co-founders of TechStars. I was inspired by the stories in the book, and was convinced the startup accelerator model made perfect sense for us. We could work full-time on our product for the first time ever, learn what it means to build a company from people that have done it before and engage in a local startup community of like-minded people. Most importantly, it gave us three months to launch the product and figure out the next steps.

How We Got In

As it stands in 2011, less than 2% of applicants get into TechStars. Being from Nashville, we had no relationships to boost our chances, so we knew it would take a near miracle to stand out enough to be accepted. I believe we got in because of three important factors:

1. Team. My guess is that the actual product accounts for 20% or less of TechStars' decision. The rest is all about team. Do you have people that fill the critical roles needed? What's your track record together? Is the team ready and willing to do whatever it takes to build a great business? Our team's 5-plus years of history set us apart in this regard. We paid our dues together, which helped us build a very strong relationship.

2. Progress. The TechStars application process goes on for several weeks so they get an idea of how much progress you can make in a short period of time. Every week we had to show measurable progress with the business and keep them in the loop. The days of getting accepted to TechStars with no more than a great idea seem to be history.

3. Persistence. We got rejected for the Winter 2011 NYC class, but kept pressing on, determined that it was the right path for our business. Our team's persistence and desire to be part of the program was clear to the decision makers. I communicated regularly with anyone at TechStars that would listen. I was respectful of their time, but took every opportunity to show progress and sell our team as being a great fit for the program.

After a very long and anxiety-filled process, Katie Rae and the Boston group gave us a shot. By March 2011, we were in Boston working on Help Scout full-time.

As a side note, the application process was great preparation for fundraising. Raising money for your startup comes down to the same three factors. Having those factors going for you and being able to sell the vision is what raising seed money is all about.

The Experience

A moment I will never forget happened on the first day of the program when we sat down with David Cohen. The meeting was a train wreck. He questioned every aspect of our business; the messaging, the vision, the pitch ... and he even laughed at our website. He's got a great gift of being able to tell you when things suck (and be absolutely right), yet do it in a way that's humble and caring. He truly loves to help. We walked away from that meeting overwhelmed, but certain we were in the right place.

The first month of TechStars is all about questioning the product. Really smart people challenged our assumptions on a daily basis. We considered 100 different directions to take the product and talked to customers every day. Although we didn't make any major pivots, we got the certainty and validation needed to build the business with confidence.

In month two, we launched Help Scout and made huge progress. From that point on, we had about 25 people intimately involved in the business. These people were asking critical questions and helping us understand challenges that lie ahead. There's no way we'd be in the same position today without them being involved.

The final month was constant preparation for demo day and growing the business to a point where we could make a great investor pitch. Our team learned a ton and I personally became a much better public speaker because I was forced to present in front of people almost every day.

All in all, TechStars gave our startup a fast-forward button. In three months, thanks to the mentorship, a close peer group of other startups and pressure from every angle, we accomplished what a normal company does in a year. We worked harder than ever and loved (almost) every minute. The program has tremendous personal benefit as well; even if the business doesn't work out, we learned and experienced things that will benefit us forever.

The Community

TechStars wouldn't have been a life-changing experience without the people; specifically, the Boston startup community. They came out of the woodwork to give advice, use the product and help us meet potential customers. Every time I met someone, they would introduce me to another three people.

Sharing the TechStars experience with 11 other startups fostered life-long friendships, as well. We spent 18-hour days together in the same office (at least one person actually lived there) for three months, so a pretty strong bond was inevitable. We collaborated, gave feedback, held each other accountable and promoted each other constantly (still do). Early stage startups need that kind of support to manage all the ups and downs.

Being surrounded by a community of like-minded, smart people on a daily basis makes our company and team exponentially better. Our business clearly has a better chance to succeed in Boston, which is why we've decided to make it our permanent home.

Fundraising

The hardest decision we had to make was taking investor money. We believe that bootstrapping has a ton of value for a new business and for more than half the program I didn't feel right about raising any money. However, the reality was that we didn't have the cash to keep working solely on Help Scout for much longer.

One thing in particular changed my mind about funding: good investors are incredibly helpful to your business. They make intros, give advice on request and keep you accountable. As a first-time CEO, I wanted people on our team to keep me in check, to make sure we didn't miss the next defining moment. If seed funding and the people behind the funding give us a better chance to succeed as a business, that's what we need to do.

The best decision we made was to take money on our own terms. We structured the deal to give ourselves the option of whether to raise another round or not. Each one of the 15-plus angel investors in our round are indifferent to whether there is ever a series A. We have enough money now to be profitable in less than 2 years, at which time we will make a decision on hitting the gas with more funding or continuing to grow organically.

Raising money would not have been possible without TechStars and the platform they provided. We never questioned the 6% equity they receive; it was a bargain. And for the record, we didn't ever feel pushed by anyone in the program to take money. It was our decision. Bootstrapped startups are still a great fit for an accelerator.

Could an Accelerator Change Your Life?

For us, the answer was unequivocally YES. We got everything possible out of the program because this type of network and community didn't exist for us in Nashville. It's a great way to get plugged in, get an education on every aspect of building a company and make a ton of progress on your product.

The program seems well-suited for an early stage company with traction, a lean startup that's open to feedback and doing a 180 if necessary (which all of us should be open to). Team size is important—2-5 people seems ideal. Whether you want to raise money or not, it's a great springboard for a growing business.

TechStars was a game-changer for our company. We plan to deliver on our side of the investment in the coming years. Words can't express the feeling I have waking up every day and focusing 100% on making our product everything we know it can be. We have TechStars to thank for the opportunity.

Anyone out there considering joining an accelerator program like TechStars?  Or, have you been through one of the programs already?  What was your experience?

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Raising Money On AngelList: 21 Tips From Two Active Angels

By Dharmesh Shah on August 10, 2011

The following is the result of a collaboration between Ty Danco and Dharmesh Shah. Ty is an angel investor and startup mentor (you should be reading his blog). Dharmesh is founder and CTO of HubSpot, runs OnStartups.com and is an advisor to AngelList. [Note: All the smart useful stuff in the article is Ty, all the feeble attempts at humor are Dharmesh]

AngelList (AL) connects promising startups to a sterling network of early stage investors. AL has been getting a blizzard of well-deserved press of late after Venture Hacks released the networks 18 month statistics. But not a lot has been written for startups on how to best use the service. Here's our take in small, bite-sized pieces.good egg

1. The Fundamentals Still Apply As Time Goes By

AngelList may be a game-changer, but most of the same rules are still in place. Angels still look for the same elements in a startup as always: a strong team; meaningful milestones; a differentiated product in a big potential market; capital efficiency and so on. Therefore, the excellent advice listed in OnStartups, Venture Hacks, AVC, Ask the VC, Both Sides of the Table, and the like still applies. What for now is unique to AngelList is the speed and efficiency with which they can harness an all-star network of active investors in front of a breathtakingly large, qualified stream of startups. Whereas B.A.L. (Before AngelList) you could mess up a presentation in front of an investor group and not worry too much (there's always another potential investor around the corner if you look,) putting in a half-baked effort on AngelList is a cardinal sin. First impressions count, so make sure you crush it!

2. There's a great primer already

"How to Hustle with AngelList", by Brendan Baker is the definitive how-to guide discussing how to make it onto AngelList, how to set up profiles, etc. It covers all the basic mechanics and throws in a few proven tactics. If you have time to read only one article on AngeList, that's the one.

3. Talk to People Who Have Had Success

With over 400 companies having raised money on AngelList in its first 18 months, this is easy. As Alex Cook of Rentabilities mentioned in this Boston Globe article, there's a learning curve involved, so make a point of talking to entrepreneurs who have previously used the site before you list. Who has been successful? Here are a few notable companies.

Quora has many dozens of questions on AngelList, as does OnStartups Answers and of course Venture Hacks, whose founders run AL. By the way, there is a high overlap between people who are active on Quora and the community of investors you want to attract.

4. Get a champion first

The first anchor investor is the hardest. Always has been, always will be. And for Angel List, it is important enough to be ranked #1 in Nathan Beckfords excellent post entitled Hacking Angel List. For instance, Rentabilities already was a winner of the 2010 MassChallenge, but they waited until they had won over Dharmesh as an investor/endorser before tackling Angel List. Nivi of AngelList will argue that it is not necessary to have a champion if one has a great team and traction, and he has several examples of this. But we respectfully disagree: just as your odds of success drop dramatically if you pitch to an angel group without already having a champion in the room, the same applies here. So don't launch prematurely. And, even if Nivi is right that you don't absolutely need a champion if you have enough traction and an awesome team, it can't hurt.

5. Don't wait too late in your rounds fund raise before you apply

Localmind is a company I invested in which had no trouble raising money, but they wanted to attract a few more angels with domain expertise and geographical diversity. Within days of listing on AngelList, they had identified 8 strong, deep-pocketed angels, all of whom could have strengthened the company. With only limited $dollars left in the round space left, they could only squeeze in 2. When I asked Lenny Rachitsky, the CEO about what he learned from the experience, he said he had wished he had started working with AngelList earlier.

Whens the best time? Others may disagree, but Id suggest getting your application in when your round is anywhere from 20% to 40% subscribed. With that head start, it should attract interest pretty quickly. If you get oversubscribed, thats a good problem to have.

6. Before launching on AL, mentally assemble your dream team of investors

If you cant dream it, you cant build it. Your ideal team may be 100% angels, you may wish to have some local micro-VC or it might be as simple as a pair of massive VCs and an industry insider. But rRegardless, the majority of investors should already have complementary holdings in your sector.

More importantly, assess what elements you need besides money, because the AL membership has their tentacles everywhere. Knowing what you need but dont yet have not only helps you get it, but it also sends a strong positive signal to angels that you understand your needs. Approaching investors who clearly dont invest in your sector is the telltale sign of a rookie.

7. Research the network, and target your angels

You can use filters to look for angels who have invested in your sector or in complementary companies. I invested in HealthRally because its CEO did just that and found me. While I don't always monitor the AngelList feed (just as you might not stay current with Facebook traffic or a Twitter stream), I got a very targeted letter from Zach Lynch, the CEO of HealthRally. He noted my investment in GreenGoose and other health tech firms, and then made the connection that one of the other GreenGoose co-investors, Esther Dyson, also had committed to HealthRally. Besides showing excellent progress to date on a shoestring budget, Zach demonstrated to me the type of targeted, "rifle not shotgun" marketing discipline that his company will need to land a few strategic partners and megaclients.

8. Get Personalized Intros

Ask all of the angels who are backing you to endorse you to their own followers. If they are not already on AngelList, ask them to sign on and do so. Helping syndicate a round is what angels do, and AL has found that personalized intros from an AL investor get opened far more than a generic profile. This is the original angel skill, (after all, Howard Lindzon calls his fund "Social Leverage" for a reason,) but now it's so simple it can be done to all of an investors AL followers with one mouse click. Using the Rentabilities example, Dharmesh has many people watching his recommendations, and when he gave the company a thumbs up, more than 100 people followed the company, and over 30 asked for introductions. Clout (and Klout) matters.

9. Spend a few calories (and maybe dollars) a good name.

For many of you, AngelList might be one of the biggest initial exposures your startup will have. And, theyre some very powerful people. Its worth spending a little bit of time and energy getting it right (it gets harder to change it later). This is particularly true if you have a consumer (B2C) startup. I guarantee you that folks like Jason Calacanis care a lot about your brand and domain name. I do too. Here are some quick tips on naming a startup. Dont obsess over the name, but its worth investing a little time on this.

10. A video is worth 1,000 slides

No one can tell your story better than you. Make a short killer, video and include it in your profile. I made my first AngelList investment in UpNext after I saw the link to the companys interview on Untethered.tv. If you can, include one. Especially if it can showcase a quick demo.

11. Get your website right first

This should be obvious. Even if you just have a well-done landing page with a good design and a good URL name, it's a plus. Every angel is going to click through, and most won't go further if your website sucks.

12. Remember Inbound Marketing, baby!

Yeah, I know that going through AngelList qualifies as traditional outbound marketing, but sophisticated angels will check on their own to assess your knowledge of the basics. Do you show up in Google search results at all? Do you have mentions in social media? Do you own the company name on twitter and have you tweeted recently? Do you have followers? Do you have an engaging blog that tells your story and has a point of view? Have you checked out your traffic graph on Compete.com and made sure its pointing in the right direction? Face it: AngelList exists because of the Net. You may be able to get away with a sloppy web presence and strategy at a traditional angel group presentation, but that won't fly with the AngelList crowd.

13. Advisors are huge.

Social proof is hugely important in Angel List. I invested through AngelList in Saygent. Why? Not only did I like the schtick, I really liked that they had sought out and won Sid Viswanathan (co-founder of CardMunch and a master at using Mechanical Turk) as an advisor. Currently Im doing due diligence on a company which landed Jason Calacanis as an advisor. Having an advisor like Jason, who is an indefatigable promoter of his portfolio companies (via his interests in the Launch Conference, Open Angel Forum, and This Week in Startups, he sees a TON of companies), shows instant credibility and is a harbinger of future success.

14. Clearly list your price

If you haven't figured out what you want to raise at what valuation, do so now. If you're going to raise convertible debt (although I'm personally not a fan,) say what your cap is going to be. There's no upside in wasting both your time and that of the investor if you're asking a price where the investor is unwilling to go. If you're unsure and you haven't already figured this out with the anchor investor, the AL team can help point to some comparables. Speaking of comparables, if this is your first startup and you're a rookie, try not to over-reach with respect to terms. Just because everyone you talked to so far thinks you are brilliant and your idea is spectacular, don't push for a really high cap on your convertible note. Going from a $4 million cap to a $8 million cap might seem like a 100% increase in valuation, but the math doesn't work that way. Such a move might decrease the number of investors interested in your deal.

15. Use a standard termsheet

Resist the temptation to introduce clever, non-standard terms into the termsheet — even if you think you can get away with them. Two reasons for this: 1) You'll come off as naive or greedy. 2) Even if you somehow manage to sneak these in now, you'll have issues when you need to do your next round. Save your creativity for your product and keep your termsheet clean. If you need an example, you could do worse than the standard financing docs that Y Combinator provides. But, there are others. Ask around.

16. Be ready to pitch on short notice via videoconferencing

This could be via Skype, Gmail video chat, Go2meeting, etc. But you should have perfected all of the logistics and have accounts and slide share materials ready on quick notice. With investors no longer being local, you need to find ways to let them see you and your pitch. Insider secret: Some investors have found a strong pattern that suggests entrepreneurs that respond to late night emails quickly have an edge over those that don't. Lets save the “but work-life balance is important” debate for another article. Meanwhile, you better be working your butt off.

16. Think one round ahead.

Listing on AL now will give you a giant head-start on your next round, as investors who aren't ready for this round may step up for next round. As Mark Suster says, VCs invest in lines, not in dots. Establish the connection for the next round now, and rethink if there are others you may wish to add to your initial target list.

17. Use the AngelList team

Who is more wired in than Nivi and Naval? Who's seen more pitches and knows what works? Once they accept you, get their advice and give it great weight.

18. Know how investors will use AngelList

Here's a similar list of techniques investors use that work especially well via AngelList.

19. Get your backers to register on AL

You want them to comment on you and endorse you. Any angel should volunteer to do this for the good of the company, and they get to build their brand too.

20. Don't game the system

You're smart and love to hustle. We get that. You should do all manner of hustling to make sure your startup gets the visibility it needs. But, don't abuse the community or take advantage of it. It's a shared resource. Just like you, there are many other entrepreneurs looking to connect with great investors on AngelList. Many of them are just as deserving. It's fine to stand-out, but make sure you are adding value to the group, not taking away from it.

21. The best thing you can do is get traction

You should invest time in your fundraising process — it's important. The basics don't take that long. But, don't get too obsessed. Your primary goal is to build a business not build this phenomenal profile and network on Angel List. The most helpful thing you can do to get the right angels on board is to make measurable, meaningful progress with your business.

I'm sure a few of you that are already in the Angel List process are likely reading this.  What other tips would you like to share with the community?  What questions do you have that haven't quite been answered yet?  

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