Boulder Bits: A New Spin On Starting Up

I’ve often said that startups are like snowflakes; they’re all made of the same components, just arranged in a different configuration. Like startups, startup studios — or venture-builders — are all unique and different. Because there are nearly as many variations of startup studios as there are studios themselves, I’m writing this post to explain as succinctly as possible, why and how Boulder Bits is configured.

Boulder Bits in Several Sentences
Boulder Bits seeks out problems that real people face. If the problem is good enough, we identify or create scalable solutions. We build experienced teams around only the best scalable solutions. If we can build an awesome team that has alignment with each other, the problem and the scalable solution, we found the startup, fund the startup and support the team. At Boulder Bits, we form four startups per year.

Beat the Odds
The startup studio model often achieves better success rates than other startup engines because we are purposeful and deliberate about how we create startups. We aren’t trying to fix startups; we’re building them correctly from the ground up. By starting with valid problem-solution alignment, Boulder Bits reduces the odds of failure due to poor market fit. We bring together cofounders who have the necessary skill sets, perspective, and experience. Boulder Bits reduces the cofounders’ burden by taking on HR, legal, office space, accounting, investor relations and more. As a result, experienced entrepreneurs can focus on what they do best — scaling startups.

While Boulder Bits is young and the stats aren’t there yet, other studios have attained 70% success, 30% major exit, and 5% unicorn. Those are great odds by any standard. Since Boulder Bits is so new, we are experimenting as we go, and applying lessons learned along the way. Each startup formed provides new learning opportunities which can then be applied in all future Boulder Bits processes. We appreciate our initial founders of Zizmos for working with us to build out our initial model. Phantom helped us refine our model, and now we’re about to launch Cubspot with most of the pieces in place. The future for our first three startups is very promising, and we are excited to see how the odds will improve with future startups.

How We’re Different
In designing Boulder Bits, we borrowed best practices from existing studios, but deviated in ways that best suit our local startup ecosystem. Brad Feld and others have documented Colorado’s unique culture of openness, honesty and giving first. At Boulder Bits, we’re building a unique space that engages our thriving startup community by mirroring these precious qualities. Our entire mission is to support twelve amazing entrepreneurs every year (three founders for four startups). We work with experts, mentors and investors who openly share in this fundamental goal. Boulder Bits’ mission aligns our community with a worthwhile cause — empowering entrepreneurs — in an achievable manner.

Family Network
While our startup founders are the focus for every decision — even scrubbing a project before forming a company — it takes a lot of people to turn a startup into a successful scaling company. We start with experts who know far more than myself about forming amazing startup teams. We surround our teams with advisors for legal, financial, operations and anything else they need. Each and every member of our network is aligned with the goal of helping our startup founders. As a result, our network feels more like a family than one might expect.

Outside Investment
At Boulder Bits, we encourage outside investment in our startups by angels, VCs and private equity groups. Investors can be as involved or hands-off as they want to be. Because Boulder Bits vets every startup thoroughly, investors can rest assured that their investment is on track. Boulder Bits invests in each startup that we form. We kill the other projects before we get to formation. This investment aligns our goals with those of outside investors. Because we have lots of eyes on the prize, we’re constantly monitoring the health of our startups. This helps both the founders and the investors.

Founder Equity
While some studios prefer the employee model for leadership, Boulder Bits encourages our founders to act as entrepreneurs. We work with an equity division template that clearly shows the tradeoff between founder salary and equity. Every dollar that we invest early on equates to a risky investment. As a result, early dollars dilute more than later dollars. Higher early salaries mean the founders get less. Founders earn equity by forgoing salary. Every dollar forgone earlier on equates to a greater equity share due to the riskier nature of their investment of time. Ideally founders would take home over twenty percent each.

Founders Fund
Founders rarely get an opportunity to diversify their investment. They may invest their time in seven startups over their life, which is far less than the average investor. At Boulder Bits we set aside ten percent of each startup’s equity at formation and place it into the “Boulder Bits Founder’s Fund”. Each startup founder joins the Founder’s Fund, and will receive a portion of future distributions. So, rather than owning just their own stock, a startup founder can gain from the success of the ensemble. Even if founders do everything right, their own startup may still fail. But even if everything goes south, every founder walks home with at least a little win. This also aligns all of startup founders with each other, encouraging them to help and support each other.

We have taken great care in building out Boulder Bits. There are many more details that I am happy to share at any point. We’re completely transparent. Ask us anything.

Fun BITS:

• The PlaySpace is a workshop event for entrepreneurs to come and “play” with project ideas. The concept is meant to be a fun way for entrepreneurs to roll up their sleeves and collaborate on a validated idea.
• “The Boulder Bits PlaySpace provides a fresh way to engage a business problem and interact with a group of potential co-workers. In an eight hour session broken into sprints we met our team members; learned about the business proposition; scoped out potential solutions; devised a proposal and presented it to a group of potential advisors, partners, and investors.”-Steve Juntunen
• Boulder Bits is founded on 4 core values: People Empowerment, Trust and Transparency, Creative Genius, and Regional Benefit.

Originally published on July 8th, 2016 on our previous blog.