On a warm October afternoon, before the weather turned, Betabeat was following David Tisch’s lead up and down University Place in search of an empty-ish coffee shop. Mr. Tisch, the bright-eyed, foul-mouthed managing director of TechStars New York, an incubator for young startups, shuffled along in his standard get-up: jeans, a hoodie, and a backwards baseball hat. His unruly black hair flipped out from underneath.
It’s a fitting uniform for Mr. Tisch, who in person can come across much like the founders he invests in. The grandson of self-made billionaire Laurence Tisch, his speech is peppered with the words “fuck” and “cool,” he burrows his fists in his hoodie, and, once we find a place to sit, jostles the glasses on the table when he crosses and uncrosses his long legs. “I’m pretty shy in groups. I don’t like big crowds. So being on TV is weird for me,” he said, referring to the Bloomberg TV cameras that followed him around for months to document the TechStars New York’s inaugural class.
Just 48 hours earlier, clean-shaven and in shirtsleeves this time, Mr. Tisch stood in front of the Cedar Lake auditorium in Chelsea, rearranging the paper nametags on reserved seats like an anxious dinner party host, albeit to maximize the free flow of funding rather than conversation.
By the time he introduced Mayor Bloomberg to the packed house of more than 500, including the haut monde of investors and entrepreneurs who make up TechStars’ list of mentors and backers, Mr. Tisch had a hard time wiping off his grin.
“David, thank you. Good morning, it’s good to be here at Demo Day!” the Mayor said, before glancing at the iPad-cum-teleprompter he placed on the podium. “I also wanted to welcome all the VCs and angel investors who have flown in here from around the country. I think you’re proof positive that the TechStars is going to change this world and certainly change America and this city.”
Two years ago, Mr. Tisch, would have been lucky to get a ticket to such an affair, much less license to arrange the wedding table. While his last name may be synonymous with New York industry, aside from a handful of angel investments, Mr. Tisch was a relative unknown in tech circles before his appointment at TechStars.
“He seemed to sort of fly in and take over this avuncular role, but I don’t really know what qualified him to do that,” said one New York entrepreneur familiar with the TechStars program. “Besides the obvious family history, I have no idea what he did before.”
That kind of sentiment might explain why Mr. Tisch, who had a few fitful attempts to launch a startup after graduating from NYU law school in 2006, attacks his current role like a man with something to prove.
Since launching last October, TechStars, a program originally founded in Boulder in 2006, has fast become part of the Silicon Alley firmament. On the heels of its success, Mr. Tisch’s tenure, which was initially greeted with a tweet questioning his entrepreneurship chops, last month yielded a spot on Mayor Bloomberg’s first-ever Council on Tech.
Mr. Tisch even boasts the ultimate status symbol: a satirical Twitter account, this one run by two VC employees and an entrepreneur. After the pitches had finished, @fakedavetisch, which comes out to play every Demo Day, tweeted, “And that’s our show! Come find me in the check-writing area later. I’ll be the one offering you money without knowing your name.”
It was a joke without real fangs. A year ago one might have heard established investors grumble under their breadth about angel investing as the new rich kid vanity project and bringing in dilettantes with the last name Pritzker, Kushner or Tisch to round out a deal. (Josh Kushner, part-owner of Observer Media Group, also does seed stage tech investing through Thrive Capital. Adam Pritzker is a co-founder of General Assembly.)
Nowadays New York’s clubby class of venture capitalists and angels, who have access to the best deals and cooperate on financing rounds, seem to have closed ranks around Mr. Tisch. Such was the open landscape for seed stage funding when Mr. Tisch arrived on the scene where hustle, good instincts, and a passion for the culture can earn you industry cred.
“I mean it’s like everyone’s brand new and from five minutes ago and they’re doing cool stuff and Dave’s doing cool stuff,” said Ben Lerer, co-founder of Thrillist whose firm, Lerer Ventures was launched in 2010, and invests in TechStars New York. “Dave’s an investor in Lerer Ventures. We invested in him, he invested in us. It’s like aaaall in the family.”
And just in time, as the bubble around seed stage investment in New York is beginning to deflate. “The first people to recognize that there is an opportunity are the ones that are seeing success. Period,” added Mr. Lerer. “If you’re just realizing now that New York tech is interesting, you’re a little late to the game.”
“I TAUGHT MYSELF NOT HOW TO CODE, but how to talk code. So I could know if someone was bluffing,” Mr. Tisch says over iced coffee once we settle into Pop Up Burger, a restaurant he suggests for the virtue of being almost always empty. Mr. Tisch was discussing the last six months of his year-long stint at Vornado Realty Trust, his first job after graduating NYU. “I thought that I could get tricked into believing people could do stuff that they couldn’t, so I needed to be able to vet somebody I was going work with and to be able to call bullshit.”
For Mr. Tisch, attending law school a few blocks from Tisch School of the Arts was a different experience than the one he had growing up in Scarsdale where, he says, “I don’t think I quite understood how well it was known or anything.” The “it” in question being his family fortune.
Brooklyn-born brothers Larry and Bob Tisch, Mr. Tisch’s grandfather and great uncle, respectively, parlayed a string of hotels in the Catskills and Atlantic City into ownership of the Loews Corporation, which held $70 billion in assets by the time of Larry’s death in 2003. Larry’s takeover of CBS network, where he served as president and CEO until selling it to Westinghouse Electric for $5.4 billion is perhaps best told in his biography, The King of Cash, which compares him to his good friend Warren Buffet. For two decades, the noted philanthropist also headed the board of trustees at NYU, the school he graduated from at age 18.
“Yeah, were there moments when a professor would call on me and be like, ‘Is that the same Tisch?’ You sort of smile and move on,” Mr. Tisch explained. “I don’t take all that so seriously, because it’s not doing stuff for you on a minute-by-minute basis.”
Before graduating, Mr. Tisch completed summer associateships at Skadden Arps and Wachtell Lipton–white shoe firms where most law students would kill to work. But like most entrepreneurs, the-path-less-chosen is point of pride. “Wachtell said I was the first person and only person to turn them down within an hour. . .which was cool.”
So why go to law school at all? “My grandfather phrased it as ‘learning how to think,’ which I think is something you probably do in the first six months of law school and the next two and half years you realize you’re in a vocational school,” said Mr. Tisch.
That kind of candor should come as no surprise of fans of the “TechStars” reality show who watched Mr. Tisch welcome finalists to the program with the words, “Don’t blow this fucking opportunity.”
“His style is much more outgoing and aggressive, which is probably kind of a New York thing,” said David Cohen, one of TechStar’s four co-founders, who moved his family from Boulder to New York to help launch the first class. “My style is much more subtle and Socratic…I like to help entrepreneurs find the way and he likes to aggressively say: ‘Here’s what I think.’”
But before Mr. Tisch could trade barbed one-liners on screen with tech luminaries like Fred Wilson and Mark Suster–two of TechStars’ mentors with at least a decade of experience on him–there was another career path to avoid. “I’ve been pretty adamant my whole life about trying not to work for my family,” said Mr. Tisch. In fact, it’s something of a tradition. Mr. Tisch’s father, Daniel Tisch, was the only one his brothers not work for Loews. Of course in the Tisch household, paving your own way meant running the risk arbitrage team at Salomon Brothers. “I looked at what my father had done. He had worked at Salomon Brothers and worked his way up there and left to start his own thing and never really worked under the family umbrella. I thought that was really cool. And I think my grandfather respected my dad for that and I looked up to him,” Mr. Tisch added before trailing off. “And I don’t listen well.”
Mr. Tisch attempted to launch a couple startups on his own before trying his hand at angel investing. There was LightsOver, an ill-fated group buying startup he and a couple friends worked on from Mr. Tisch’s West Village apartment after leaving Vornado. That idea never got past building a deck, or PowerPoint presentation, like the ones flashing across the giant TV screen at Demo Day from the startups he mentors. Mr. Tisch’s next attempt was to launch Knowmore out an in-house incubator he ran at KGB, a New York-based directory assistance company. In that case, the product pivoted from “alive” web pages based on KGB’s local data to a personalized content aggregator similar to News.me. But battles with management left it dead in the water.
His first angel investment, which happened in-between the two ventures, was a startup called Boxee, which he discovered through a friend at Wachtell.
“From life,” Mr. Tisch responded when we asked where he got the money to start backing startups. “I made the money doing a lot of different things. I bought stock when I was younger. I took my bar mitzvah money. I sold baseball cards on eBay and AOL. I played poker. I had an ability to take risks with money I’d made from being in a fortunate situation, so I decided that that was something I was going to spend my money on.”
The easy assumption is that Mr. Tisch used his situation to buy his way into a good deal. But in the risky early stages of a startup, founders are looking for investors who can do more than write a check. Young companies with an eye towards growth seek out backers that have the connections and insight to help them scale. Among sought after startups, reputation trumps cash in hand. Of course that may have been less true a few years ago when Mr. Tisch began. Since then, the seed stage market has been flooded with micro-VCs, venture capital firms who want to get in earlier, or accelerators like betaworks.
“I think some people do it professionally to get rich,” Chris Dixon, a serial entrepreneur who invests personally and through the Founder Collective said of angel investing. “They’re entrepreneurs who sell their company, they like startups and want to make modest to hopefully good returns, but a lot of it is to be involved in the community–that’s my motivation.” If you’re looking to cash in, there are easier alternatives, said Mr. Dixon, “I used to work at a quant hedge fund.”
Mr. Tisch met Boxee CEO Avner Ronen because the friend from Wachtell was working at a hedge fund where the CFO’s husband was one of Boxee co-founders. “He got asked what to do and he didn’t know, so he asked me: Is this interesting? I’m like,Yeah! So we had three dinners with Avner and I decided that I’d make an investment.”
Soon after, he set up Box Group, which describes itself a “boutique angel fund,” but is run by Mr. Tisch, who also invests on behalf of his two younger brothers. There was a bit of a learning curve. “I didn’t know enough about the finances behind angel investing,” he admitted. “I didn’t know what pro rata rights were to the point where I protected myself and things like that.”
MR. TISCH WASN’T THE ONLY CANDIDATE UP FOR THE TECHSTARS POSITION. As the now familiar narrative goes, the wheels for TechStars New York program were set in motion at an Angel Boot Camp in Boston in the spring of 2010. Mr. Tisch approached Mr. Cohen with a question: Why isn’t TechStars in New York? “I didn’t know who he was, really. But he seemed like a nice guy,” Mr. Cohen said on the phone from Boulder. On the Bloomberg show, he tells it a little differently: “I thought, who is this arrogant dude?!,” he says with a laugh.
TechStars had actually been considering a New York program for six months, but from their experience launching in Seattle and Boston, the co-founders knew they were missing the pivotal ingredient: a native to get the locals on board. Mr. Tisch wasn’t necessarily auditioning.
Rather, he named a few other candidates who might fit the bill, including Buzzfeed’s Jon Steinberg, who was running the incubator Dogpatch Labs at the time, First Round Capital’s Charlie O’Donnell and New York Tech Meetup’s Nate Westheimer. “It was people who were really connected in the community,” said Mr. Tisch. Back then, that didn’t mean him.
The decision to open a New York outpost and to hire Mr. Tisch to run it happened concurrently, said Mr. Cohen. Along the way, he interviewed three or four other people. “I don’t really want to say who because I don’t think all of them would want that information to be out there . . . that they were maybe looking to make a change,” he explains.
The conversation between Mr. Cohen and Mr. Tisch was followed by a beer at a Times Square hotel and then a visit to Boulder. “I sort of observed him coaching the companies that were in the Boulder program at that time,” said Mr. Cohen. “ Once we started getting to know David, that progressed pretty quickly. There was one other candidate that stayed on the list for awhile. Most of them were ‘one or two coffees’ kind of thing and then there were David and one other person that we spent a lot of time with.”
During the interview process, Brad Feld, another of TechStar’s co-founders, asked Mr. Tisch what his network was like with entrepreneurs, developers, and VCs. By that time, he had six angel investments under his belt, including Flavors.me, CollegeOnly, StackSheet, TroopSwap, and GroupMe. Currently, his number of investments is between 45 and 50. “I’d met a ton of developers because at KGB we’d hired 20 people and I’d probably interviewed 500 developers, so my developer network in New York was weirdly strong. I’d met a decent amount–but not a huge amount–of startup CEOs and VCs. I’d never went out to raise money so I didn’t know a lot of them,” recounted Mr. Tisch. “Brad said, ‘Well, fix that.’ I spent the next month after that meeting every VC I could and then at some point along there, Techstars and me decided to click.”
One of those VCs, Union Square Ventures’ Fred Wilson, Mr. Tisch met for the first time last May. “I was pretty awkward at first, totally nervous,” said Mr. Tisch. “We chatted about the NYC tech scene, what I was thinking about in terms of TechStars versus doing a startup.”
Mr. Tisch, a hockey fanatic who played through college, had been toying around with the idea of a sports gaming startup. In fact, three days after taking the TechStars gig, Mr. Tisch actually found himself presenting it at a Find a Tech Co-Founder event. “I only pitched that night because I had committed and didn’t want to leave them with a hole and I wasn’t allowed to disclose TechStars,” he said. The pitch itself “was embarrassing. People gave me good feedback, but it was a terrible pitch. Looking at the pitches we expect out of TechStars, I would not have rated myself very highly,” he said with a grin.
As managing director of TechStars New York, Mr. Tisch gets a cut of the six percent equity in the startups chosen for the program. In exchange, the finalists were given $18,000 in funding. After raising a $24 million round in September, however, that amount was raised to a $100,000 convertible note. (In January, Y Combinator, the mothership of all modern-day incubators out in Mountain View, announced that Russian billionaire Yuri Milner and SV Angels, Ron Conway’s investment fund, pledged $150,000 a pop to every YC grad.) Mr. Tisch said he wasn’t permitted to discuss the terms of his financial arrangement and whether the job required a buy-in. But, he noted, “We have outside investors who we share the upside with.”
While the decision to hire Mr. Tisch may have clicked for the guys in Boulder and fellow investors, others in the tech scene were left wondering. The tweet questioning Mr. Tisch’s startup cred was immediately and vociferously shouted down on Twitter with investors and entrepreneurs rallying to his defense. But privately some still wondered who, exactly, he was.
“It was a legit question. Almost no one was like, ‘Hey, Dave Tisch is a douchebag.’ In fact, most people said positive things! But there were a lot of people who were wondering privately, afraid to ask,” said one startup entrepreneur. “It’s a natural question, ‘Who is this guy? Where did he come from?’ The issue was totally unaddressed.”
“There’s a bro network for investors, they protect their own because it’s an incredibly small world and deals are sensitive,” said another New York founder who wanted to remain anonymous. “You break a tacit rule if you shit on one of your own in public because chances are, that person isn’t going to go away and you’ll have to deal with them again a couple months later.”
For his part, Mr. Cohen wasn’t worried. “A lot of David’s wisdom is very instinctual. He had invested in a bunch of companies so he has a lot of experience in watching startups evolve. He’s worked in big companies, he’s been around startups that have failed … One of the things I say about him is that he’s almost always right.” Besides, he added, “He seemed to be a really good networker; I’ve never met anybody that works harder. ”
“It was fantastic that the first program was as much of a success as it was, but it was also wasn’t jaw-droppingly surprising because you knew he hadn’t slept in four months, really,” said Union Square Ventures analyst Christina Cacioppo. “Then there was that thing last summer when the mentor list came out and it was majority male. There was that whole uproar and he went out and talked to everyone who got angry about that and took their suggestions.”
“I don’t think any of them gave me any credit until the end of our first program and then it was like, Hey, do it again,” Mr. Tisch acknowledged. “It’s crazy. Look, I agree. . . there’s not a second that I don’t think—a year and a half ago, I didn’t know any of these people that well.” It seems to be partly what inspired his single-minded devotion to TechStars.
One entrepreneur who met Mr. Tisch before TechStars official launch said, “He struck me as fratty and what I remember is he had an idea about our company that was off the map.” But through the course of running TechStars, which, in a manner of speaking, is Mr. Tisch’s most successful startup, he seems to have come into his own. “You could see when he does his first intro to the first class, he hasn’t had as much experience being on stage and just to see him grow into the role of being super comfortable, he’s absolutely positively matured,” said IA Ventures Roger Ehrenberg, who is both a TechStars New York mentor and investor in the accelerator.
The startups that come out of the TechStars incubator are, naturally, fiercely loyal to Mr. Tisch. “He knows this space fucking hands down cold, he knows startups ranging back 15 to 20 years,” said Reece Pacheco, founder of Shelby.tv, which graduated from TechStars’ first class–the one whose program was filmed by Bloomberg. “Yes he’s a harsh New Yorker who is going to tell your idea fucking sucks–the show showed some of that negative bullying. But he lives and dies for his startups.”
Indeed, they came to his defense even as they complained about the integrity of the reality show. But the idea for the show actually preceded Mr. Tisch’s involvement. Mr. Cohen said TechStars had been approached by several networks over the years. “Other cable channels that you might see other reality shows on,” he said with a laugh when we asked about the other networks. “They were, to me, not a good brand fit. We weren’t trying to be a TV show, we were trying to be investors and show what we did. I thought: Bloomberg, serious news channel, it’s gonna be a fair representation, that was the goal.”
FOR A MAN WHO WAS SHORT ON INVESTOR CONNECTIONS, post-TechStars, Mr. Tisch’s angel dance card now seems full. “I think if you just look over the past year or two there’s a group of people who have tried to establish themselves as independent angel investors with varying degrees of New York startup experience and I think Tisch is at the very top of that group. It’s not like it was handed to him, there’s a lot of work involved,” said Ms. Cacioppo.
“Tisch is on my short list,” said Chris Dixon. The angel investor was referring to the list of people he calls up to join him in startup funding rounds. “We write a hundred grand checks, it’s a very cooperative environment,”more so than VCs, he said, in terms of establishing the most helpful syndicate for a startup.
The open playing field is also a factor. “Because we don’t have a Google mafia, we don’t have a Facebook mafia. We don’t have people who have spent a few years at a place have that on their resume and have cash at large or at the same relative scale,” Ms. Cacioppo explained.
“There’s become a fraternity, or a whatever, a group of people that are leaders within this world that were sort of the early adopters to New York being a hot spot for this. And so in the last year you see Thrive and you see Lerer and you see TechStars and Founders Collective and you see First Round and you even see some of the West Coast guys putting stakes in the ground here like SV,” said Mr. Lerer, who as an undergrad at UPenn was in a rival frats, actual ones, with Mr. Tisch.
With angel funding, an investor’s track record is typically established within a five year time frame. Until that happens, New York’s new arrivals to seed stage funding are often judged on their network and their ability to make connections and help the startups raise additional capital.
When GroupMe was acquired by Skype, Mr. Tisch penned a blogpost titled “Invest in People,” talking about his first meeting with the co-founders. Betabeat mentioned that some local scenesters implied that Mr. Tisch followed other investors into the deal, but talked as though he hadn’t. During our entire conversation, it was the only time, Mr. Tisch seemed visibly upset. He even claimed to be amused by @fakedavetisch. “I DISCOVERED GROUPME. no big deal,” the mock account, which is run by two women and one man, tweeted last month.
“At the end of GroupMe? No. Ask Jared and Steve. I can’t imagine, I would go ask Jared and Steve, we were pretty early,” said Mr. Tisch. “If I was last, let me know, I’ll readjust my mind.” Later on, he added, “I’m not helping or being a good investor, they can give me my money back or I can bow out, I’m really not trying to be something I’m not.”
Co-founder Jared Hecht confirmed that Mr. Tisch was GroupMe’s first yes. “David Tisch was always very involved, got us a lot of great product feedback and has always been a massive supporter,” said Mr. Hecht. “Tisch represents the startups he’s passionate about more than almost anyone. He wears them on his sleeve like a badge of honor. Literally, he’s always walking around in a t-shirt of one of his portfolio companies.”
Those kinds of reviews from entrepreneurs also play into deal flow. And Mr. Tisch is getting more of them from his vantage point at TechStars where he’s been known to respond to applicants at all hours of the night. “Today, entrepreneurs seem to be more likely to be the ones putting their deals together and deciding how much each person/fund ‘gets,’ rather than a lead investor or VC firm,” said Ms. Capaccio. “So in the past, if you were an angel, you might have had to be ‘blessed’ by the VC firm to get a piece of the hot deals. Today, it’s the entrepreneurs who give the blessings.”
Skepticism around Mr. Tisch has morphed into something else entirely. “I have a lot of people who have expressed interest in giving me their money to manage,” Mr. Tisch said. “I find it a huge responsibility in investing someone else’s money. I try to invest with my gut and my heart and I think that trying to do that with someone else’s money is harder than doing it with your own.”
Although he said the next logical step for him would be to raise a small fund. “I haven’t taken steps to do that at this point. Diving deeper into something is a constant temptation, it is for anyone around this space… But I am really happy doing what I am doing.”