Is Techstars Worth It and When Not to Join an Accelerator – Answered in Many Aspects

Techstars is a global platform for investment and innovation where founders can connect with other creatives, experts, alumni or even investors and corporations to thrive their business. The company includes three divisions of Techstars Mentorship-Driven Accelerator Programs, Techstars Community and Techstars Corporate Innovation. With the accelerator portfolio includes roughly over 2,000 companies, the company own its market cap of more than $32 billion.

What to Gain and to Lose?

Today, Techstars is backed by over 75 different venture capital firms and consistently rated among the best startup accelerators in the world.

The company was originally founded in a small town of Boulder, Colorado back in 2006. After starting several companies in Boulder, David Cohen convinced a high-profile investor Brad Feld and teamed up with his buddies David Brown and Jared Polis to start an accelerator, Techstars. They had very humble beginnings and ran the first year on $200k. Yet they decided to pursue a special route: using the power of a network. Today the entire city of Boulder stands behind Techstars.

It was all started from the recruitment of over 70 mentors from all walks of the startup life: digital entrepreneurs, angel investors, venture capitalists and CEOs. Techstars has a unique view of mentorship. In several conversations that we had with ‘Davids’ (Cohen and Brown) they keep stressing one hugely crucial point: when mentoring happens, both sides learn. That is very true, and many successful entrepreneurs do not realize how much they can learn by mentoring others.

Techstars has also nailed another aspect of mentorship. The world’s most successful entrepreneurs mostly have at least 2-3 or more mentors. Steve Jobs had them (even though he probably wouldn’t have called them mentors), Richard Branson has them and so do many others. Different mentors give you different advice, sometimes contradictory. It is up to the mentee to decide which advice he or she will take on board an implement. What Techstars does is they provide a large number of mentors that startup founders can choose from and consult with.

How Does the Techstars Startup Program Work?

Techstars runs an intensive 90 days, mentorship-driven program for startups and entrepreneurs. They select around ten companies for each program from a large pool of applicants. Techstars offers programs in seven locations: Austin, Boulder, Boston, Chicago, London, New York City, Seattle and a cloud infrastructure specific program in San Antonio.

Accepted companies receive $118k in seed funding, intense mentorship, free office space and access to a strong network of alumnus.

90 days or 3 months of twirling and learning include: The first month – for joining mentors in reverse engineering of the business in order to head for the right direction and more advanced framework. Which is, according to many seniors, an actual boot camp that is invented to take you in, beat you up and make you come out the other end as a savvier entrepreneur. In this period, you would be stunted with the famous Mentor Madness of hundreds “20 minutes” conversations with a collection of the most experienced and inspiring experts.

The second month – founders practice learning from last course and work with mentors on particular problems. The last month – both sides plan on action for after Techstars and getting ready for fundraising. What a crazy routine, but insanely valuable!

What Would Techstars Take from You in Exchange – Is It Worth It?

The collaboration with Techstars meant that we were not only getting the focused attention from financial institutions that we needed, but also the guidance and support from experienced experts in your field. Meanwhile, the company only enroll 10 companies per “cohort”, meaning that the Managing Directors’ focus is on you, product and technical associates are there to support, and mentors as well as investor are coming to speak to you.

In exchange, Techstars takes 6% of your company and provides $20,000 in seed funding until you are able to raise Qualified Financing of $250,000 or more. Besides, all accepted companies are offered a $100,000 convertible note.

So, the point here is what do you and your business value?

The program is there to help companies moving forward at the same time nurture founders, especially first timer, so if you are seeking financial support only then not only Techstars but any startup accelerators would be a bad idea!

Pros and Cons – When You Should Not Join a Startup Accelerator?

Collect from many founders walk out of Techstars there are a few highlights on pros – opportunities and cons – challenges they have experienced in common.

# Pros – the Power of Networking to Nurture Green Entrepreneurs

The most obvious benefit and might be mainly why entrepreneurs even choose accelerator programs is for the profound network it provides. As the most valuable aspect of an accelerator, these programs would introduce you to a wide range of successful entrepreneurs, investors and especially experts in related fields who could help startups quickly overcome difficulties they might have spent months trying to solve in their own. Besides, most seed accelerators have about 10 companies going through them at once, which means you would be companied with other founders. For entrepreneurship is a lonely journey, it is not a bad idea to have a built-in network of people who are going through the same hurdles as you. Not to mention the odds where this great networking could bring you many potential partners who, in future days, might make grand impact on your business – connections is where key strategic partners come from.

Second, “Demo Day” is also another plus you could found in such program. Demo Day is where participants pitch to a group of investors. For instance, at Techstars, your business would be exposed to a large audience of nearly 200 investors, rather individually, and not to mention the press coverage that allows further visibility that startups could not receive on their own.

Third, brand identification is another gain joining these programs. For instance, at house like Techstars, it is pretty difficult to get admitted. Therefore, when potential employees, other companies or especially investors see that you graduated from such place, it would set you apart from others which is really important for young startups like yours ­– to differentiated, to be recognized amongst others old oaks.

# Cons – When You Should Not Join an Accelerator Program?

In terms of cons, for seasoned entrepreneurs, seed accelerator perhaps is not a beneficial option as it could be repetitive while the program mostly structured to guide startups in early stages. Besides, if you are on a concern for capital rather than networking then accelerator would not be a good idea since its took from the equity would make it difficult for you to raise another round from angel investor and venture firm.

Secondly, to enter startup accelerators do not mean you will be granted with a sure-shot success. According to WSJ, 45% of startup accelerators have yet to produce a single entrepreneur who successfully raised venture funding after the process.

“Too many entrepreneurs think if they get into an incubator, they have accomplished something. They haven’t. It’s a false sense of confidence. Call it incubator inflation.” – Mark Cuban said in a 2014 Triangle Business Journal interview. As of now, it counts around 234 seed accelerators globally which indicates a brutal competition and different standards of quality.

Lastly, it might turn into a tragedy if you pick up the wrong program. Mikko Järvenpää, CEO at Infogram, wrote a book called ‘Speed up your startup’. In his book, he discussed the results of a survey that he did with 151 founders of startups who went through startup accelerators. One of observations from his survey was the mismatch between what startup accelerators offer and what startup founders expect.

Steven Lachance who went through a startup accelerator for his ridesharing platform, Liverides, shortly shuttered his startup because all the budgets was spent on developing the platform with little users to show for it, before the cash ran out. The Quebec City-based entrepreneur, Steven recalled how several mentors pulled him in different directions as to how he should lead the business. He felt with so many ‘experts’ coaching and encouraging founders, it can often lead to what ‘mentor backlash’.

Top Startups and Unicorns That Have Earned Major Success after Techstars

How Techstars Is Differentiated from Other Programs – Is It the Finest Model?

#1 Contrasting Philosophy

To name the biggest difference between the two – Y Combinator (YC) and Techstars, it must be their fundamental philosophy.

At YC, the core principle is in brief “Silicon Valley” – the center of gravitational pull in the startup universe. You have got to presence at the place for either build your startup or spend at least 3 months to blend in and learn the vibe.

In the other hand, at Techstars, its vision and philosophy was clearly stated in its founder – Brad Feld’s book “Startup Communities: Building an Entrepreneurial Ecosystem in Your City”, which is to nurture and stimulate startup environment everywhere. The company believes Silicon Valley have nothing to do with you to build a successful company. With a strong network and profound resources, Techstars over the years has contributed a lot to pave the foundation for many local entrepreneurial ecosystems around the American nation.

#2 Alumni and Connections within the Community

Obviously, as I have mentioned above to get accessed to the alumni network is probably the most valuable aspect in joining an accelerator program. In this area, both Techstars and Y Combinator have over 2,000 alumni.

For Techstars spreads across the nation, especially in major tech cities such as Austin, Boston, Boulder, Chicago, San Antonio, London, New York, and Seattle. Where its companies would be able to study in the same co-working space during the program and are more exposed to each other for a better interactions and experience exchanges between classmates. A batch at Techstars comes around 10 companies vs. 85 at Y Combinator.

Additionally, even though you are far away from the big city or tech center ­­and not having the chance to meet up the communities in person frequently, then not so worry. The company has developed an annual founders-only FounderCon conference – which is a great opportunity for anyone in the Techstars family to catch up and build connections.

For Y Combinator whose focus is only on the Silicon Valley, so as the result its band of alumni are mostly based there. During the program, you will get the chance to talk with many old oaks as early as your first day there. Besides, another signature at YC is its weekly Tuesday dinners, where you would be companied with successful giants all night. As Weiting Liu – founder of Codementor remember how Airbnb founder told him “the only difference between you and us, is 4 years”. Which, according to him, the greatest motivational speech! Having the opportunity to meet them up, of course, could be not a bad idea!

However, the downside of having a big batch for YC is that since its mainly individual work, you don’t get to know your classmate that well!

#3 Same Same, but Different on Demo Day

Approaching Demo Day quite contrast to each other, YC indeed does not stress much on practicing for Demo Day. In fact, the program encourages candidates to concentrate on the product until the very end and started practicing for pitches less than a week before the G hour, for it only grants about 2 minutes. Meanwhile, at Techstars, pitching takes a whole month of the program – for refining and practicing, probably because it grants participant around 6 full minutes.

Besides, both companies Demo Day is considered an event by itself. Which is very exclusive with everyone hustling around and doing real businesses. However, at Techstars startups were boosted to pitch during the process, therefore, besides being exposed – startups also got a chance to root for each other in such entrepreneurial community.

#4 Fundraising in Short

Over the years YC has grown from a summer program designed for college students to a transformative global powerhouse with a wide range of entrepreneurial experiences. In addition to the traditional young smart hackers, we’re now seeing successful repeat entrepreneurs and mature companies with real, substantial revenues applying to the program. YC’s brand and program structure make it an attractive fundraising platform even for the experienced entrepreneurs. With YC companies now consistently raising at valuations north of $10M post demo day, the equity you’d give to YC would almost pay for itself with the premium on the valuation that you’d get as a YC company.

Techstars isn’t too shabby when it comes to fundraising either. After all, over the years quite a few companies have emerged as great hits in the Techstars network: SendGrid, Digital Ocean, and GrabCAD to name a few. For Techstars, the going rate for post-demo day valuations usually starts from $3M and can be ~$6M+ for the top companies within each batch. For many local investors, these valuations seem less bubbly and a lot more digestible than YC companies. Techstars now also has its own $150M fund dedicated to funding companies in the Techstars ecosystem.

In brief, TechStars offers startups up to $18K in seed funding. Ron Conway and Yuri Milner offer $150K to every Y Combinator startup.

The Bottom Lines

Even though early-stage companies now are more exposed for the increasing number of accelerators, there are various programs differentiated in focus, organizational structure and value. Within this incredibly saturated environment, startups and creatives should be equipped with thorough knowledge and very careful in their selection to make sure you are not wasting valuable time, especially in such competitive race!