Famous accelerator group Techstars announced This week saw a number of changes to operations, including the closure of some city-based programs.
Criticism of that decision from former members has led to the famous startup accelerator losing focus on the very thing that has historically made it successful: operating urban hubs in areas where other similar programs are less dense. It sparked criticism on social media channels that claimed to be And one former Techstars managing director (MD) told TechCrunch that moving away from local funding for city-based accelerator programs was a mistake.
Future closings will be that boulder and Seattle Accelerator comes after the group has decided what to do next Pause Austin-based programan event reported by TechCrunch at the end of 2023.
Given Techstars' global footprint and long history of investing in early-stage startups, changes to the way Techstars operates will impact founders and local venture ecosystems around the world. Masu.
local connection
Following Techstars' decision to exit certain markets, former Managing Director of Techstars Seattle Chris DeVore wrote a long note He criticized the group's strategic choices, including centralizing its fundraising efforts and building its programs around corporate sponsors as the financial backbone.
Maëlle Gavet, CEO of the organization jumped into the discussion and engaged publicly I'm communicating with him.
But others privately echoed at least some of DeVore's sentiments to TechCrunch. One former managing director (MD) said having local limited partner investors in Techstars means more people in those cities can participate in the company's local programs. Later, as TechStars' capital came from a centralized pot, the incentive for locals to ensure the success of their backyard startups diminished.
DeBoer made a similar argument in his post, saying the choice to centralize funding from local cities will also impact the talent TechStars attracts.
The results were “dismantled” after “it became clear that many of the new programs and M.D.s were having trouble raising their own local funding,” he wrote.[ion of] This incentive system attracted high quality managing directors to run the program and connected investors and leaders in each regional market. ”
In an interview with TechCrunch about the changes announced this week, Gavet said the local funding model has come to an end because it no longer works. Over the past six months, Techstars has tried this model “again in three markets to raise local funding to see if we can get back on track,” but the experiment has shown that “it doesn't work as well as it did before.” “We have confirmed that this is not the case,” she says. ”
The same former MD also criticized Techstars for working with corporate partners to fund the program, telling TechCrunch that it has high client churn rates.
The MD said city-based boosters and founders were no longer central to Techstars' focus due to the shift away from local capital and increased focus on corporate funding. DeBoer has a similar view, saying that Techstars has gone from a “passionate commitment to founders and their entrepreneurial journey” to a system focused on generating cash from paying corporate customers. He wrote:
In an interview with TechCrunch, Gavet again disagreed with those sentiments, saying that enterprise programs are and will continue to be a “key competitive advantage” for organizations.
future
One unanswered question for Techstars is its own funding status.company Raised large round in 2019and $150 million fund closed in 2021. however, SEC filings in the 2023 era The second $150 million vehicle has not been updated since the initial application. Has there been any progress on the new fund? Mr. Gavet said nothing, but implied that all was well. She told TechCrunch that she “can't comment on funding,” but that she wished she could comment in part to “set the record straight.”
TechCrunch heard from people familiar with the matter that the 2024 fund has raised some money, but could not confirm how much or if it would reach its $150 million goal.
Evolving a company is never a tedious process, but Techstars' renewal and new path is easy to scrutinize in time. Does the accelerator group support startups that grow quickly and go public or sell for large amounts of money? If so, is it more or less frequent than before?
And to be fair, its biggest competitor, Y Combinator, has also restructured its business in recent quarters. Exiting late-stage investmentsand Reduce cohort size while returning to an in-person model. Still, Techstars faces competition not only from the domestic Y Combinator, but also from other accelerator programs in the U.S. and around the world.
At least Gavet seems confident that Techstars' best days are ahead.
“Last year, we made about 700 pre-seed investments. This year we will make about 800 investments and are growing in the U.S. and abroad. The pipeline looks strong,” she said. .