Matt Kozlov from Techstars

Welcome to the Puck, Venture Capital and Beyond. A show that explores the evolving landscape of the Venture Capital world. We'll have candid conversations with today's VCs and entrepreneurs who are shaping those changes. I'm Jim Beer, managing partner of Bier and Troff and president of CMG Advisors. This podcast brings change makers to the table to discover the inner workings behind decision making strategies and ultimately how they got to where they are today.

We we use this philosophy called give first, which is if you pull together enough potential energy for people who wanna help other people go through this entrepreneur's journey, it creates this karmic feedback loop that just keeps growing and building and building. Today, I'm excited to sit down with Matt Koslov, Managing Director at Techstars, one of the leading global accelerators with programs focused on helping innovative entrepreneurs develop and grow their businesses across a vast network of investors and markets. So, Matt, I wanna welcome you. And can you tell us a little bit about your background and how you eventually hooked up with Techstars? Sure.

So I'm Matt Koslov. I've been at Techstars for about two and a half years. I've been the managing director. Originally started our health care program with Cedars Sinai here in Los Angeles. It's gone through a bunch of name changes, but it's now officially called the Cedars Sinai Accelerator powered by Techstars.

The cohort has run three times. We've invested in 28 companies collectively, co invested between Techstars. Actually, I recently just decided to take a break from health care, and I'm working on pulling together a new as yet to be announced, so I can't share yet what the vertical will be, but it'll be another program here in Los Angeles, hopefully, which we'll be able to announce in the short term. But prior to that, I've worked in a lot of different industries. Actually, had no health care experience whatsoever other than as a patient before joining this program.

Started my career after I graduated Harvard College. I moved to San Francisco to work for Bain in their tech practice. I was mostly working with tech clients, although I had a couple randoms outside of technology. Actually, one interesting one was working for a marine terminal operator here in Los Angeles in Port Of Long Beach. From there, I went to Yahoo, moved to Los Angeles in 2006 to work in our corporate strategy group at Yahoo.

Fascinating time to work at that company. Right before, really, every single entertainment vertical was completely changed. YouTube was still independent at that time. Facebook was still college only. It's a fascinating time to be working at a major Internet company.

Did m and a and new product launches and then eventually moved into product development at Yahoo. Left Yahoo in 2008 to run the web and mobile teams for Sony Music, building that time between New York and LA. We ran all of the artist websites, Facebook pages, Myspace pages, and mobile websites, which at the time were WAP. Probably nobody even remembers what WAP sites were, but we took that to HTML five and then the iPhone launched. And we put out the first ever artist branded iPhone app.

It was for Pink. We had over a million downloads in the first month. And then we decided to invest heavily into the mobile ecosystem, started doing games with our artists, and some of those games wound up making us a dirt chunk of change. In particular, a suite of pinball games we developed with a Ukrainian developer Yeah. Pairing in some of our artists like Slayer and ACDC.

And then I started a mobile gaming company with Qualcomm and CAA called Moon Shark, which we ultimately sold to another publisher. And after that, I decided to maybe take a break from the consumer Internet space and actually started started working with another one of your prior guests, Jim Armstrong over at Clearstone Venture Partners, which eventually became March. And we were looking at a company called TeleSign together, which is a enterprise security firm here in Marina Del Rey. Company was going through major growth and was interested in bringing on head of product. So I joined them as head of product and then ultimately raised a pretty sizable series b.

And I started doing corp dev again, buying up small companies that we could bolt on to our company. We had incredible and still do have an incredible roster of clients who are for new solutions to prevent account takeover and improve the security of their users. Throughout all of this, I've been advising different startups and working with all sorts of different industries and have been watching the growth of the LA tech ecosystem and been a part of that in various capacities and actually got involved as a mentor for a Techstars program with the Disney accelerator that we used to run. Actually, a former colleague of mine, Cody Sims, who worked with me at Yahoo, was running that program as managing director. And I started working with these companies and I was blown away by how quickly they they were working.

I've worked at a lot of different startups, but week to week, they were accomplishing what I've seen a lot of startups take months to do. And coming in versus where they left three months later is like looking at completely different companies. And these were companies that were quintupling, 10 x ing their revenue, signing major deals that were wildly increasing their enterprise value. I think the most famous example of that is a company called Sphero that actually had gone through our Boulder program of Techstars prior. It's a connected toy company, really awesome toy.

It's a connected orb that you can control with your phone. And they went through the program expand their pipeline and think through how they can build new toys and put creativity into their development process like Disney does. And they wound up within the first week getting the license to do the BB eight droid for Star Wars, which was wildly successful. It became one of the most popular toys of all time, and then they subsequently started doing lots of other connected toys for Disney. Raised, I think, a $25,000,000 series b.

But that's something they got just through the program itself. And so I had the opportunity when Techstars told me about the health care program we were building to throw my hat in the ring. And even though I knew nothing about healthcare, I figured I'd learn as I've done with a lot of other industries and here I am. So tell us about Techstars expansion and where it's going because one of the things that I've seen is people are nervous about where the jobs gonna come from, how are we going to keep so many people busy. And what we're trying to do is see where the puck is going in terms of how is the world evolving.

And when I got involved in tech as a lawyer and as a restructuring guy, tech was really focused in Silicon Valley. LA was really this small environment. And there were built ROS and Idealab where Jim Armstrong started at Idealab Capital Partners. In terms of where it started and kind of now where it's going in all the different markets you're going in, how does that tie together and how did Techstars get to where it is today? Yeah.

You can almost think of the evolution of technology in the world through the lens of Techstars and how we've evolved over time. We started about eleven years ago back before the word accelerator meant anything in the world of technology in Boulder, Colorado. So our founders were Brad Feld, David Cohen, David Brown, and Jared Polis, who's actually now running for governor of Colorado. And they were very accomplished entrepreneurs and seed investors who were not happy with the state of the seed investment business and the angel investing business. At the time, they were going to these Denver based meet ups where entrepreneurs would have to pay to get on stage and pitch in front of a room full of angel investors.

The angel investors were, you know, drinking bad wine, eating cubes of cheese, and and they thought there had to be a better way. So they pulled some of their capital and some of their friends' capital together. They found 10 local startups that they thought looked promising. Instead of charging the companies, they said, we'll actually invest in you. And then they brought all of their entrepreneurs and executives from their network in to actually work closely with the companies all in one location and then help them just grow their business as rapidly as possible through their networks and their experience running and building companies.

And at the end, they brought together 100 or so investors and said, like, let's see if we get these companies funded. And that model, we now all recognize as an accelerator, but at the time that word wasn't a thing. I think, actually, they were thinking of calling it a hatchery. And fast forward today, I think there's, like, over a thousand accelerators in the world. We're one of the biggest three.

Our model has been rather than than bring several 100 companies all at once into one place a couple times a year, we've distributed it. So we now run 41 accelerators around the world in different flavors and different industries. We run two kinds of programs, city programs, which can invest in any kind of technology company. Run them in Boulder, Boston, Austin, Seattle, New York, Chicago, London, Berlin, Atlanta, Kansas City, Los Angeles, Toronto, Paris. We're in India now and Adelaide, Australia as well.

And every other week, it's hard for me to keep up with them because we're adding them. It's such a incredible clip. And the reason is it's because there are incredible technology ecosystems everywhere. And I didn't mention the Bay Area and it's not that we're anti Bay Area. It's just that we're pro everywhere else.

And that community has so much infrastructure and so many resources, we haven't felt a pressure to go there. But what we found is that we can go into ecosystems, catalyze them, bring in mentors, bring in investors, bring in incredible companies, and help them grow and build the ecosystem, create jobs to your point. Our whole philosophy is called we use this philosophy called give first, which is if you pull together enough potential energy from people who wanna help other people go through this entrepreneur's journey, it creates this karmic feedback loop that just keeps growing and building and building. And each of our programs is built around that philosophy. We usually bring in 10 companies per cohort and a 100 mentors.

And those 100 mentors are usually extremely experienced executives growing. And we call ourselves a global network that helps entrepreneurs succeed, but, really, it's almost a movement. We have invested in 1,500 companies. They've raised over 5,000,000,000. We have over 10,000 mentors in our network, and we have over 50 corporate partners, Fortune 500.

So I mentioned our city programs, but the other flavor of programs we run are vertical focused, where we go deep in a specific industry that we want to double down in. And we'll do it typically with a partnership with a major Fortune 500 corporation or sometimes a government organization actually, where we usually co invest in the companies. We jointly mentor the companies and usually our corporate partners looking to commercialize with those companies and get a relationship going with them to disrupt their own organization. And so we now run three fintech accelerators with Barclays Bank in New York, London, and Tel Aviv. We run a retail focused accelerator with Target in Minneapolis.

We run a ag tech focused accelerator with Hargill and Ecolabs, also in Minneapolis. Here in LA, I've been running our CDER Sinai Accelerator powered by Techstars, which is a health care focused accelerator, specifically focused on provider focused technology companies. We run an Amazon Alexa Accelerator. We run a energy focused accelerator with stat oil. We run a program with SAP.

We have a media and entertainment accelerator with Comcast. I can go on and on and on. Almost every industry, we still have a lot of room to grow. But we've planted a flag with a lot of our partners to really grow the ecosystems, not just in geographies, but in sectors that are ripe for disruption. So I do wanna talk about Southern California because we do wanna understand how this market is evolving and so forth.

But I can't help but ask you, when you have accelerators in the middle of the country like in Kansas or otherwise Mhmm. From a technology perspective in terms of new products or new industries that are coming out, the programmers, a lot of them, for instance, people writing code, are whether or not they're in Russia or they're in India or they're in the Bay Area. How are entrepreneurs competing in a level playing field in places like the middle of the country? How is that working? And are we gonna see the next Google or Snapchat or Facebook come out of some other place in the country or world where historically that hasn't been the case?

I wouldn't necessarily agree that historically that hasn't been the case. I think that there are lots of billion dollar companies in the middle of the country and in other geographies. I think we tend to maybe only look at what's in our backyard. I mean, our first IPO actually was a company called SendGrid, which is based in Denver. It's the first accelerator company, I think, predated Dropbox to ever come out of an accelerator in IPO.

That was a huge success for us. I could go down the list of all of the billion dollar unicorns that are in in one of those prime geographies. And the reason is because they are rate resource. It may be the capital isn't there per se, and typically what we've seen is that a lot of the companies in the non prime geos do have to go raise from more traditional Silicon Valley or New York or LA based funds. But, you know, Steve Case has this whole rise of the West, and there are lots of venture funds that we're seeing in the Midwest who really want to focus on finding the best and brightest companies and scale them up outside of the usual suspects where, frankly, access to talent is competitive.

Cost of living tends to be quite high. And you're seeing a lot of entrepreneurs, especially, you know, in their forties, fifties, who can be very successful in building companies in their own backyard and don't necessarily need to go where the hot streaks are. Well and it's interesting, and I appreciate you pushing back and saying that that's not the case. We've been traveling a fair amount. And one of the things that I've seen change in the last twenty years is that you could go to New York or you could go to San Francisco or LA and you could find nice restaurants and you could find a hillstones.

But when you go into Atlanta or Denver or Nashville now, it is amazing to me how homogeneous these neighborhoods have become. The infrastructure is starting to be there. The money is starting to go there. The kids coming out of the schools are staying there. You do see these, quote, virtual hubs starting to come up all over the country.

And I guess for our listeners that don't necessarily get out and travel as much and haven't been to these cities, whether or not it's a Berlin or it's a Denver. Cincinnati. I mean, Cincinnati is one of the hubs. We actually don't have a Techstars program there right now, but we're very deeply involved with an organization called Centrifuge. And what they've done is take all of the giant corporations in their community, P and G, all the hospitals there, and they've brought those major corporations around an initiative to support technology and innovation in Cincinnati.

And so they are doing great work in driving innovation. We have a program in Detroit focused on mobility and transportation with Ford, Verizon, Honda, Michelin, Munich RE. I think triple a is in there as well. And we're attracting incredible companies that are moving out to Detroit, sometimes for just the three months of the program, but some of them stay put. There's a lot of revitalization work that's happening there.

We actually had two programs in Minneapolis, and one of the companies that actually Jim invested in through March, a company called Branch Messenger, moved from LA to Minneapolis to work with Target for that program and wound up relocating their entire company thereafter their a round. When you look at these entrepreneurs coming in and you said there's this high degree of success rate and mentoring them and their ability to then get outside financing. Historically, there has been a large percentage of these companies that get funded, but that they're not successful because not everybody can carry the football. And so much of what VCs will tell you and based on their experiences, it's execution. So an idea is important, but how you execute is important.

What do you think Techstar does differently that really changes that paradigm so that there are so many more successful exits? Yeah. I I think when you look at our model, we have three things working in our favor. One is because of the global awareness of our brand and the prestige that comes with it, we get very high quality applicants that apply to Techstars. And in any given program, we'll have several 100 companies apply and we'll take 10.

I think our acceptance rate is less than 2%, which means that we are attracting the best of the best and then we're able to select the best of the best, especially when we have a corporate program where there's going to be the added benefit of a commercial partnership commercial partnership that a company may be able to get in place. And sometimes that's a life changing corporate partnership in health care where the average sales cycle is twelve to eighteen months and most hospitals don't wanna work with a start up because there's too much risk associated with it. Sometimes that first deal may never happen. And so being able to get a commercial relationship with the major referenceable health system like Cedars Sinai can literally open the door to 10 more clients who are gonna fast follow, and we've seen that happen quite a few times. So, you know, our first advantage is we're getting great companies.

The second is we can give them an unfair competitive advantage both with our corporate partners and then with the entire Techstars network. 10,000 mentors, 40 accelerators, 1,500 alums. Our 1,500 alums also believe in this give first philosophy of helping without without expecting anything in return and just creating this karmic energy loop. And so a lot of our companies get help from those who have come before them, and that's a huge wind in their sails. We think that with that network, you're probably one or two degrees max away from the person or the organization that's gonna change your life.

Maybe that's an investment, maybe that's a hire, maybe that's a sale. And then the third is, you know, we have the opportunity to work with our companies for three months in-depth. And then they become our alums and we continue to work with them and the network continues to work for them. We run these biz dev days where we'll bring in lots of major corporations and do round robin style meetings, kind of a matchmaking process. And a lot of our companies get very, very valuable relationships even after they've gone through our programs.

And as a managing director, I'm I'm also meeting regularly with all of our alums. And we have a venture fund, and so we also sometimes invest in our companies as they scale. And we have this wildly massive network of investors that we help bring in. I think of the major venture funds, there's probably not one that hasn't invested in Techstars company. And so we have very high connectivity into the venture capital community.

That was gonna be one of my questions, which is, it's one thing if you're a company that's being accelerated in Silicon Valley or in LA and there's numerous VCs in your community that can fund your company, but in some of these outlying areas, do you actually help introduce them to the quote smart money that's appropriate for that company? Yeah. All the time. And the way I usually think about the investor ecosystem is by geography and then by industry. And so if I'm running any a vertical focused accelerator like health care or property tech or retail, you know, the first job of that managing director is to get to know all of the appropriate investors, that ecosystem.

In two and a half years, I've probably met at least 80% of the health care focused venture funds, which helps me source companies into my program because they know that our program is gonna be a good accelerant for their portfolio or companies that they're considering or might be too too early for their portfolio. But then also they come meet our companies and often invest in them. And then the other segment is geography. And so similarly, I've been in LA for twelve, thirteen years now. I don't think there's many funds in LA that that I don't know.

So I probably have 80% of health care covered, and I probably have LA 80% covered in terms of the venture community. But I'm one of 40 nodes in the Techstars network because there are 40 other managing directors that have similar approaches. So if I want to meet the health care investors in Kansas City, I'm going to call up Lisa Mitchell who runs our Kansas City program. If I'm wanna recruit companies in New York, I'm gonna talk to Alex Siskel and all of the other managing directors out of our New York programs. And so similarly, if Alex, who's the managing director of our Textures New York program, has a company that might be a good fit for one of our LA investors, I'll help them make that connection.

And that give first philosophy, help blow wind in all the boats, really helps us scale our entire companies. Like, at any point, there's probably 400 companies going through Techstars in a given year. So just because I I've never asked this question, but I'm curious. When I started out as a VC lawyer in LA, everybody was doing c corporations and they had a certain set of documents with investor rights agreements and co sale agreements and everything was modeled on the Silicon Valley model of doing it. There were certain things that were done a little different.

It was coming out of Boston. Has Techstar standardized its approach in terms of when a company gets funded, whether or not they're doing a convertible note deal or they're doing a preferred stock deal or a Delaware c corp? Mhmm. And then that's on the domestic front. But then internationally, how does it apply as well?

I'm just curious. Has there been any standardization in that area? We try to get every company coming into our program as a Delaware C Corp. It makes it a lot easier for us. And the advice we give any company is, especially if it's an international company, if you ever wanna raise funds from a US venture firm, flip now.

So most of our companies, when they do a US based program, will flip into a Delaware c corp. In some of our international programs like Paris, which have a program in Dubai as well, we have a program in Singapore with Rakuten. We're a little more flexible because most of those companies probably aren't gonna be raising from US venture funds. And whatever makes sense in their local ecosystem, we typically meet them there, especially for any of our US programs where the company expects to raise US venture financing, we expect them to flip. One of the things also just for our lawyers that are listening and otherwise, one of the things I think that really has changed is, are you seeing the commoditization of these legal documents such that firms like Cooley and the Gunderson's and the other firms doing these documents are essentially giving these companies a free set of documents and deferring their fees across the board?

That's not music to ears of lawyers. But in the twenty years I've been doing this, that's one of the things I've seen is that entrepreneurs will come in and they'll say, what does it cost to set these things up? And they are because they're getting funded not with $3,000,000 checks like they used to with the Series a round. They are starting with a smaller budget, and yet they need to have a strong foundation so that they can scale. Are you seeing that phenomenon across the country?

Because again, you've got the Silicon law firms like Cooley and Gunderson and Fenwick and Wilson that are deferring fees. But is that happening all across the country as well? Yeah. It's a good question. On the document side, we have a standard set of documents for our investment that we put into the companies, and that's the same deal across every company that's ever done Techstars.

And so most law firms have gotten pretty familiar with the 6% common stock transaction we do in our $100,000 convertible note. Occasionally, especially in companies that are coming from smaller geographies where their law firm may not even have a strong tech practice, and we've definitely seen several of those. Eyebrows get raised, and we have to do some education. But if the company we're bringing into our program has Cooley or Fenwick or Wilson Sonsini or Reed Smith, chances are they've seen a Techstars deal and they know what the value is and we don't have to do a whole lot of education. In terms of how law firms will typically actually work with companies in our program, we do have actually a network wide relationship with Cooley where they do defer fees and come in, mentor our companies, and work closely with our founders while in session and beyond.

And some of our founders then go full time with Cooley. We've seen lots of our companies switch firms once working with them. I would say most law firms that I've worked with or that my companies have worked with who do wanna take on seed stage companies put in some kind of fee deferral program and realize that they're investing in these companies too. Yeah. That's one of the biggest changes that I've seen.

And again, it's creating this infrastructure. It's giving people the right foundation. It's being standardized. And then whether or not they've deferred 25,000 or 50,000, if there's an exit or an M and A deal or financing, they catch up. But they're really throwing their backpack over the wall and making an investment in these companies as well.

They are. And some are actually even starting venture funds. Right. So two follow-up questions which is, when should a company actually apply to the Techstar program? And then once they're in the Techstar program, what is the beginning, middle, and end look like for them and from a cycle perspective?

Great questions. Each program has slightly different focuses and attracts different stage companies. Our city programs tend to be a little earlier and our vertical programs tend to track slightly later stage companies. From my experience, there's a bit of a sign curve where you can plot time versus appropriateness for our program. Or if they're too early, maybe the incubator would be more appropriate where they don't necessarily have a product built.

They have a good concept, but nothing really to accelerate. They need to really build something before you work with them to grow their business rapidly. Then there's the Sage which attracts some lion share of our companies where they've maybe raised a little bit of seed funding. They built their product. They have some early traction.

Maybe they even have revenue in health care. You can actually have a company that's raised 20,000,000 and still have no revenue. So pre revenue is still fine for most of our health care programs. But maybe they have a pilot or maybe they have just something that shows that this product actually works and if we were to pour fuel on the fire, it would go big. That's where Techstars is at a sweet spot.

Then there's the next phase which is companies doing well. They have raised some capital, maybe a couple million. They have a deep pipeline of clients. They have a rich product road map, and they just need to execute. To be honest, those aren't great companies for Techstars because sometimes we can just be a distraction and they just need to focus.

But then we find that it swings back up where potentially the company is thinking about their next stage of growth, new markets that they're considering entering, strategic relationships that they're looking to enter into with major corporations, a new product that they're trying to build. And so those later stage companies often get a lot of value out of Techstars. And I mentioned Sphero that went through our Disney program. That's a great example. I've had a few companies that have raised tens of millions of dollars before joining us.

We had a company called Lumion that came out of The UK that did our last health care program. They had raised $12,000,000 prior to joining us. They had over 60 employees. They were doing several million in revenue a year, but but all of their customers were in The UK. And so they used our program to kick start a US go to market strategy.

We did another company that did our program first year called Silver Sheet, really strong traction with the ambulatory surgical market, but wanted to build a new product around health systems and physician group. And so they used our program to work closely with Cedars Sinai to build the right product and then eventually commercialize with them. And Cedars actually wound up leading their a round after they came out of the program. So that's sort of the general, is your company too late, too early, just right answer that I tend to give companies who are considering our program. And then the other piece is, is there a relationship with our major corporate partner for our vertical programs that would move the needle for you?

So even if you are quite busy and focused on executing, there still might be something really strong that you can accomplish by working with our corporate partner that would move the needle for the company and be worth the distraction, so to speak. And then the other question you'd ask is, you know, what does it even look like to go through a program? So first, you have to apply. Our application process is pretty straightforward. You fill out an online application, then go through a couple of rounds of interviews.

And then if you are accepted into our program, you move to the city that that program is in. Then we have three one month sprints. The first month, we focus on mentor madness, where we bring in our 100 mentors. We work closely with the corporate partner as well, and we help the company just narrow in what they wanna accomplish. Usually, it's scoping out the commercial relationship on the corporate side, and then it's working with the mentors to find the three to five executives that they really wanna dig deep with and hone their business with, and effectively act like an ad hoc advisory board for the rest of the program.

The second month is focused on execution. So use the Techstars network, use the mentor network, use the corporate network to just get stuff done, build your business, travel the world, close deals, whatever you need to do. And then third month is usually focused on fundraising. That's where we bring in a lot of investors to meet with our companies. We work with the companies on their fundraising strategy.

We match make them to the best funds. We use the Techstars network to facilitate the right meetings. And then it culminates in a big demo day where we invite several 100 investors, potential customers, potential partners into an auditorium and showcase the companies where each founder gives a very honed four minute pitch of of what they do and the attraction they've achieved. And then that usually kicks off a fundraising process when they graduate, which we continue to help them with. And then they're alumni, and we host lots of events for them to continue engaging with the Techstars network.

We do something called FounderCon. We do something called BizDevDay. We host local meetups in each of our cities. We have a proprietary online network that the companies use to connect with each other. It is a very active and vibrant network.

So I do have a follow-up question with respect to accelerators versus an incubator. When Bill Gross started an incubator years and years ago and they would take these companies, there would be no product. There would just be an idea. And it was easy from a valuation perspective because whether or not you put a million dollars into it or $2,000,000 into it, there hadn't been a previous round. You were basically just seeding the company and taking a big percentage of it.

You talk about having standardized approaches with the convert and taking equity. How does that work when these companies are already in existence, may have raised some money? How do you fit into that? We make it easy. We take 6% common stock in exchange for participation in our program.

Doesn't matter what the stage is. If they're a later stage company, then we would expect that the value of the program to them would be higher because the opportunities they're pursuing and the ability for them to get more done is expanded. And so we would still say, hey. Listen. If this program isn't worth 6%, no matter where you are in your scale, then it's probably not a good fit for you.

And we give them, you know, a small amount of capital to cover living expenses. We have this $100,000 convertible note that might not be appropriate for a lot of those those companies. We try to make the note terms relatively flexible so that it can work for as many companies as possible, but the note is optional. So in the two and a half years you spent doing the CDARS accelerator, can you give us some insight into the types of companies that got funded and came out of that partnership? Yeah.

The great thing is almost all of our companies have gotten funded. The roughly 90% across all of Techstars, about 1,500 companies we invested in, 90% are still active or acquired, and that actual number applies pretty nicely to our program as well. I think one or two have closed shop. Since our first program in the beginning of twenty sixteen, I think our companies have raised something like a $100,000,000 collectively. And in terms of the types of companies that we have been investing in, again, because our partner is Cedars Sinai and they are a health system, we have not been looking at companies that are going direct to consumer or selling directly to payers or even directly to pharma.

We've been focused primarily on companies hospitals. About 80% of those have been software and the other 20% have been medical devices. We've generally only done class one and class two devices. I was actually surprised. I was concerned about hardware and the speed of iteration on those types of companies and whether we'd be able to actually move them forward in a three month accelerator enough to warrant the investment.

And the actual reality is that some of our companies there have been thriving incredibly well. One of our companies, an LA based company called Stasis Labs, makes a small, very cost effective, effective continuous vitals monitoring platform, hardware and software. Group of incredibly talented engineers from USC. Incredible company. They are in market in India and soon to be in market in The US.

And they have publicly announced they raised a seed round coming out of our program of $5,000,000 and they'll be raising another round shortly. There's another company that came out of our program that they frankly weren't doing really any meaningful revenue. It's a messaging platform that HIPAA compliant connects patients to all of the administrative communications that they would need to deal with on a daily basis dealing with their health system. So new patient enrollment, filling out forms, reminders not to eat or drink or take their medication before, procedure, all of the back and force that a administrative office typically has to do with the patient before they come in, they've automated all of that. And they came in, they were doing about 5 k a month in revenue.

They left our program doing over 80 k a month in revenue. They're now 25 employees. They relocated to Santa Barbara. They're actually split between the Bay Area and Saint Louis. So, you know, another great example of them coming, working with the major health system, figuring out their product market fit, how to sell, raise a round of funding coming out of our program, which included Cedars Sinai as an investor, and then relocated to Southern California based on the traction they had here.

So most of our companies are software companies and occasionally will invest in a tech enabled service as well. Another thriving company based here in LA is a company called Cerebro. It's helping solve the nurse staffing shortage. There's a federally mandated requirement of nurse to patient ratio, but nurses are in short supply. And so it's one of the biggest cost centers and challenges for any health care system administration fluid marketplace for contingent nurse staffing and more predictive software to help figure out who's going to maybe not be calling into a shift and try and fill those before hand, and they're doing incredibly well here too.

One of the things that I saw in health care because I actually was the outside general counsel for Marina del Rey for seven years, which got bought by By state of Spanish. Yes. And actually is the pilot site for our nurse staffing company, Cerebro. Well, I I was very instrumental in the union contracts there in dealing with all the nursing issues and also the staffing companies that provided nursing to these companies. One of the things that I saw is that when you stay at a hospital, how you code a surgery and how you code a plate of knives and how a patient is treated and then how it's submitted to the insurance company and the distance between the $100,000 bill and the $10,000 check you get from the insurance company is a great opportunity for lawyers to make a lot of money negotiating back and forth and trying to close that delta.

Are any of your companies working on simplifying the coding and the ability for these hospitals to bill insurance companies? Because, again, as a lawyer looking in at these things, the insurance companies will offer 10, and they ultimately over three years settle for 40. But is there anybody dealing with that inefficiency? There are a lot of companies trying. I mean, this is one of the largest sources of inefficiency driving health care costs in the the entire country.

I mean, there's a reason we have a $3,000,000,000,000 a year health care problem, I guess you would call it. And this has been probably one of the hardest things. And I don't know if you can fix it without completely destroying this whole entire health care industry and rebuilding it from the ground up with a new government. Like, I don't know if we can fix it in little chunks, but a lot smarter people than I are are working on that. And that includes new companies trying to rethink what insurance even is, and you see companies like Oscar trying to re invent the whole notion of insurance.

And I've seen a couple other interesting upstarts trying to redefine it. We've invested in a company called Health Tensor, which is a artificial intelligence company that is trying to solve a slightly different problem. And I alluded to it before, but about half of a doctor's time is spent coding up every visit they do. And in order for a doctor and the health care system they're part of to get paid, they have to include all of the billing codes that are relevant to a patient. But at the same time, a doctor doesn't wanna spend any more time than they need to coding up a patient visit.

And so usually, there's a health record holding up my hands four inches deep. The doctor's not gonna look through every single page of that every time they put every single entry into the system. Our company, HealthTensor, is helping to surface all of the relevant information from the record to the physician at the time of coding to make it much faster and easier and efficient for the physician to code it faster and to be accurate and to take advantage of all of the deep patient history that's in that record. So switching gears a little, we all see new stories and everybody's talking about AI and everybody's talking about self driving cars and people are talking about underground tunnels that are gonna get built where cars are gonna get whooshed across and stuff. Are there things that people aren't talking about that you're excited about that may or may not come to fruition, but just that are concepts that we haven't even seen that your entrepreneurs are dealing with?

Whether it's in health care or any other fields, aerospace, anything particularly that you see that will be talked about like cryptocurrencies now. Because again, one of the things we're trying to do is push the envelope in terms of where the industry is going, where the puck is going, so to speak. And just curious, without so many markets out there, one of the things things as a kid that I always found interesting was you go to Europe and you'd see an espresso bar. And then you have a guy like Howard Schultz who comes back and says, So you have an ability because you see what's going on all over the world to see what people are starting to do that we in LA haven't even thought about. So are there new ideas being discussed that you're excited about?

So you mentioned aerospace. It's actually an area that I'm particularly interested in and an area where I feel like LA has had a competitive advantage in for pretty much the entire history of aerospace, but venture is only just starting to wake up to it. And we've had a couple companies go through Techstars that are doing really interesting work there, but look at the recent heavy launch from SpaceX and the rapid growth of SpaceX. I know Elon's got a lot on his Elon probably is thinking about all of the things you just mentioned and more, but what SpaceX has built in a very short amount of time and the excitement they've brought to the aerospace industry, I think, is something we should be paying a lot of attention to. Because with privatization of aerospace and with the reduction in cost of putting a cube satellite or cube sat into space, we open up all sorts of new applications and interesting questions around how we regulate and what's gonna happen with more CubeSats in orbit and what the increased bandwidth is gonna mean.

But we have a company called Kepler that went through our Seattle program that put their first CubeSat into space. I think all in for under 3,000,000. So you can literally, like, build a company, build a satellite, get it into orbit for a very capital efficient process. We have another company here in Los Angeles called Slingshot Aerospace that went through our Techstars LA program, and they are performing downstream imagery analysis using AI on all of the high res satellite imagery. Implications of that are incredibly profound across so many different industries.

You can literally get resolution to the square foot. You can see what oil canisters throughout the country are filled and at what line. You can see if there's a natural disaster, what the level of water is. And so insurance companies are finding that very valuable when they're of water is. And so insurance companies are finding that very valuable when they're processing claims.

You can start predicting where there might be increases or decreases in prices around commodities because you can see how crops are doing around the world. You just saw an announcement with SoftBank and Bill Gates and Airbus that they're working on doing a live stream high res satellite video feed of the entire planet. I mean, that the security implications of that are and privacy implications of that are profoundly concerning, but I'm sure we'll be hearing a lot about that. But I think that the applications that will be open to us as this becomes more realistic and as more companies are thinking about aerospace are gonna be quite profound. So, Matt, you talked about your background in security.

And we know most of us that have cell phones that when we order certain things now, we're often being given a code that we type in. And everyone is focused on the data leaks that we've recently seen with some of the most well known companies in the world. And obviously, Facebook has been in the news Mhmm. And gotten killed on this recently. Because of your unique background in healthcare where because of HIPAA and because of the sensitivity with health records, what steps are being taken in terms of assuring the general population that the records will be secure, so to speak?

That's the billion dollar question there. So I'm gonna separate it out and actually tell you how I got into the security space in the first place. I was actually as a victim of identity theft. So my Twitter handle is Koz, k o z. Guess I was really early on Twitter and somehow managed to get that three letter handle.

My last name is Kozlov. Koz is short for Kozlov. Kozlov is actually like the Smith or Jones of Russia. There are lots of Koslovs in the world. And so there are lots of Koslovs who actually want the Twitter handle, Kaz.

And Kaz is actually a, nickname for lots of other names, like all sorts of Japanese names, Thai names, French guy that goes by Kaz. And so my Twitter handle has been a vector for attack very many times. And my credit card information and social security numbers and all of that information is basically, at this point, public record. And so I've had to protect my own accounts as much as humanly possible. And by the way, when your name is Koslov and you're a target for Russians who want your handle, that puts you in the target of Russian hackers, and nobody wants to be a target of Russian hackers.

And so I became a huge proponent of two factor authentication, which is the concept of password is not sufficient. That's something you know. You should also have something you have as a token that allows you to access your accounts. And the most common something you have factor of authentication is your mobile phone and specifically your mobile phone number. You know, we all have a social security number.

Those are never designed to be a security identifier. They were created seventy years ago, and we've way outlived the notion of a social security number as a unique identifier for a person. Phone numbers are much better because you can actually change it if it's ever compromised. It's usually attached to a device that you have on your person at this point twenty four hours a day. And if you ever forget it, I challenge anyone in this room to go an hour, let alone a day without their phone, without realizing it.

And then the last piece is that since you started being able to port port your numbers over in, I guess, 2006 from carrier to carrier, everybody keeps their number. You don't change your phone number unless something wildly weird has happened. You move to another country or something like that. And so your phone number is a great identifier, and there's a company in LA called TeleSign that's using your phone number to protect your account and also protect all of the services that fraudsters might wanna create accounts on from identity theft and fraud. And so TeleSign has become the industry standard for that.

They actually own patents around two factor authentication that give a market leader position. And so when we talk about security, I think it's important to realize that there's targeted individual account takeover, and then there's the system wide breaches that happen. And it's usually not a hacker trying to take over one person's account. It's trying to get in into the actual infrastructure of the company, whether it's through social engineering like what happened with the Sony Pictures leak and actually find a person who's a weakness and then tunnel into the backdoor that way or through the technology itself. And there are lots and lots of companies going after both of those segments, individual account takeover and then system wide breaches.

My experience has been mostly on the preventing fraud as well as preventing individual account takeovers. In health care, it's been a complicated space because you've had hospitals who are using relatively because you've had hospitals who are using relatively old software and in some cases, connected hardware for life critical purposes that may not have been built to be as hardened from a security perspective as what banks and defense organizations might have in place. So you have had some banks and defense organizations might have in place. So you have had some hospitals taken by surprise and you've seen some pretty high profile ransomware scenarios and the worst thing that can happen is taking over an EMR. Because if you take over the EMR for health system, the organization shuts down.

The entire organization is highly dependent on it. It's also a pretty nasty thing for someone who has no intent to target a hospital, I think. Pretty low and pretty disturbing. And so you are seeing hospitals harden their security approaches. And at Cedars Sinai, I can't speak on their behalf, but cybersecurity is one of their absolute top priorities.

And they've had a pristine record, actually. They have one of the highest quality technology teams that I've ever come across, and they take this extremely seriously and have backup redundancy plans, and they've not been hit. But there are other smaller community health systems that have been. And so that's when we talk about system critical infrastructure, but then you have the individual accounts and you have things and you talked about HIPAA, and the interesting thing about HIPAA is HIPAA was never meant to actually protect your data. It's meant to allow you as a patient to port your data.

And interestingly, I feel like most often it's the reverse. So today, HIPAA does, I think, a pretty good job at protecting your data and is actually not great at allowing you to port it because the EMRs make it really difficult to do that. And since it's a whole another question and conversation we could have around data portability and whether that's good for the consumer and when we're gonna eventually see more openness around your health data. But there are some really interesting companies trying to prevent unauthorized access of personally identifiable medical data. And there's one company that's out in Baltimore called ProTennis that's using AI to detect unauthorized access of HIPAA compliant data.

And I think we're gonna see a lot more. The reality and what I've seen just looking at cybersecurity companies is that health care sales are hard and that most cybersecurity companies are targeting lots of verticals where health care might be one of them as opposed to really diving in and building entire businesses just around health care. And I'd like like to see more. I think there is a huge opportunity. I think that the health systems are very alert to the opportunities for health security companies, and I do think that's an opportunity.

So, Matt, in terms of your role with Techstar, are you helping source companies for the program, or are you mostly mentoring those companies and helping them move them through the program? All of the above. Okay. So the managing director's role is when you look at the cycle of building a program, at first, it's finding great companies, convincing them to apply, selecting the best ones, the ones that we want to invest in as an organization. Then when we're in the program, it's working hands on in the trenches with these companies day in, day out to help them solve their problems, whether it's team issues, scaling issues, strategy issues, connecting them to other tech stars, individuals, mentors, investors in our own network.

I like to think of the managing director's role as basically an extension of the company itself. So I like the founders to think of me as a cofounder who is deeply invested, and then it's running the program itself. And then when they graduate, it's continuing to help them. So I continue to have I try to do monthly, at worst, quarterly sync ups with all of my companies. The further they've been out of the program, usually, the less frequent I'm meeting with them.

But in some cases, I have, you know, a very, very close relationship So in terms of the companies that are applying, how many of them and, obviously, just trying to get an idea. How many of them have a relationship with a sophisticated investor like a VC and they're really just relationships that you have that you bring to the table in the mentoring, versus how many of them are really pre raising money from sophisticated people? Mhmm. It's a good question. Probably, if I had to guess, at least using my own portfolio, about a third of them have raised capital from a sophisticated institutional venture fund prior to the program.

Interesting. K. This has been fantastic. Again, it's amazing to me because being immersed in this environment, you can't keep up with everything. And I'm trying to and I'm I learn new things.

I mean, I've been a tech lawyer for years and I'm learning new things every day. Everything is accelerating. It is. And Techstars is a great from personal perspective, it's a great way to learn a lot rapidly. Yeah.

I feel fortunate that in two and a half years, I've gotten over 28 really interesting health care companies. And have not worked in health care is an incredible educational experience for me. And I love tackling new industries, and I love learning. It's a really fun way for me to really go deep fast. Join us next time as we meet with Rahul Sanad, CEO of Tesloop, a company with a new approach to autonomous ride sharing.

Rahul brings his insights behind the Tesloop intersection of luxury and advanced technology to create the ultimate car experience.