[This originally ran at INC.com here and my own blog in 2013. I have updated this post for all the right reasons.]
Some teams impress us by coming on strong. Some build their case slowly. But all the teams we invest in have certain things in common. At the time, I was running a Techstars-inspired accelerator in Durham, NC.
Five brand-spanking-new companies with very energetic and passionate founders started week one of our 12-week accelerator program on March 11. It’s a very exciting time for all of us at The Startup Factory, including our fabulous mentors, who volunteer their time to work directly with the founders. To celebrate our investment in their companies and to introduce them to the community, we hold an open house. It is one of my favorite events. Kind of like a debutante ball. Everyone smiles.
At our open house, I was asked why these companies, out of the 300+ that applied, made it through. It is a question we get all the time. There are really two different answers, reflecting two kinds of relationships.
Most of our founders are strangers to us until they apply. Then, in a matter of weeks, we run them through our process and methodology, some of which I’ve written about previously. There are three essential steps:
- Screen for individual and team entrepreneurial DNA,
- Screen for idea and market,
- Screen for our ability to accelerate their growth.
Each of the three steps serves as a gate with pass/fail implications. We are getting better and better at identifying key characteristics at each gate, and so we are getting happier and happier with the entrepreneurs and concepts we commit to.
The other way of getting into TSF is by developing what we call a drip, drip, drip relationship. Sometimes I really like this slower, more methodical way of getting to know a company, its people, and its product.
Last fall, a group from Washington, D.C. drove down to Durham to attend one of our applicant open house events. They followed up a few months later to schedule some time during our open office hours. Some emails went back and forth. Some time after that, they submitted a formal application.
Their product is a digital comment card, focused on restaurants for now. What, other than the fact that the market reaction to the product has been extraordinary, made us want to get into business with them?
- They asked great questions and listened to a few nuggets of advice,
- They made some product adjustments over that time,
- They acquired a minimum number of early customers and tested their application over a couple thousand users. (Yes, a couple thousand.)
During this period, they showed us that they are smart, passionate, willing to adjust their model, and able to create and respond to data–all of the things we want in a team.
So, are you ready to drip, drip, drip, or are you going to close em in one meeting?
Here is my added follow-up circa May 20, 2026. It’s now 13 years later. Dave and I invested in 35 companies. About 5 are still alive. We have had a few exits and the requisite number of fails. And this strategy prevails. Most investors invest in people they connect to. It doesn’t matter how they connect; they just do. Building meaningful connections takes time, but not money. EVERY startup without money can at least invest some time in getting to know the important people of their future.