As Techstars retools, some former employees say it has lost focus on what made it successful

Renowned accelerator group TechStars announced A number of changes have been made to its operations this week, including the closure of some of its city-based programs.

Its decisions were criticized on social media channels by former members, who argued that the renowned startup accelerator had lost focus on the very thing that has historically made it so successful: city-based operations in areas where other such There are no programs. And a former Techstars managing director (MD) told TechCrunch that the move away from local fundraising for city-based accelerator programs was an error.

upcoming closing of this is boulder And seattle accelerator comes after group decision making put its Austin-based program on holdAn event that TechCrunch reported on in late 2023.

Given its extensive global footprint and long history of investing in early-stage startups, the change in the way Techstars operates will impact founders and the local venture ecosystem around the world.

local connection

In the wake of Techstars’ decision to withdraw from some markets, former managing director of Techstars Seattle Chris DeVore wrote a long note Criticizing the group’s strategic choices, including centralizing its fundraising efforts and creating programs with corporate sponsors as financial anchors.

CEO of the organization Malle Gavet joined that discussion and engaged publicly Back and forth with him.

But others privately told TechCrunch they echoed at least some of DeVore’s sentiments. A former managing director (MD) said that having local limited partner investors in Techstars means more people from those cities have a stake in its local programs. When Techstars’ capital later came from a centralized pot, there was less incentive for locals to ensure that startups in their backyards succeeded.

DeVore made a similar argument in his post, adding that the choice to centralize fundraising away from local cities also had an impact on the talent Techstars could attract.

After it became clear that many of the new programs and MDs were struggling to raise their own, local funds, he wrote, the result was an “exhaustion”.[ion of] Incentive systems that attracted high quality managing directors to run the program, and tied together investors and advisors in each local market.

In An interview with TechCrunch about the changes announced this weekGavett said the local funding model has reached its breaking point because it is no longer working. Over the past half year Techstars had “tried the model again in three markets for local fundraising to see if it was going to take off again,” an experiment which they say “has Confirmed that it is not working as before.”

The same former MD also criticized Techstars’ work with corporate partners to fund programs and told TechCrunch that customer churn rates were high.

The MD said that the move away from local capital and a greater focus on corporate dollars meant that city-based boosters and founders were less central to Techstars’ focus. DeVore had a similar view, writing that Techstars “has shifted from a focus on passionate commitment to the founders and the entrepreneurial journey, to a system focused on generating cash from paying corporate clients.”

Gavett again disagreed with such opinions when speaking with TechCrunch, saying that corporate events have been and will continue to be “a significant competitive advantage” for the organization.

Future

An open question for Techstars is its own fundraising status. company Raised a big round in 2019And $150 million fund closed in 2021, However, a 2023-era SEC filing The second $150 million vehicle has not been updated since its initial filing. Has there been progress on the new fund? Gavett would not say this, although the implication is that all was well. She told TechCrunch that she “can’t comment about the fundraising”, though she said she wished she could “to really set the record straight”.

TechCrunch heard from a source with knowledge of the matter that the 2024 Fund has raised some capital, though we weren’t able to find out how much, nor whether it is on track to reach its $150 million goal or No.

While corporate growth is never a fool-proof process, it will be easier to reflect on Techstars’ improvements and new paths over time. Do accelerator groups support startups that grow quickly, and either go public or sell for large sums of money? And if so, more often than before, or less?

And to be fair, its biggest rival, Y Combinator, has also retooled its operations in recent quarters, Withdrawal from late stage investmentAnd reducing the size of your group Going back to the individual model. Still, Techstars face competition, not only from Y Combinator domestically, but also from other accelerator programs in the US and around the world.

Gavett, at least, seems confident that the best days are ahead for Techstars.

“Last year, we made around 700 pre-seed investments. This year, we should make about 800 investments – the pipeline looks strong both in and out of the US,” he said.