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TechStars Raises Fresh $24 M, Offers New Startups $100K Each

141 points| cienrak | 14 years ago |betabeat.com | reply

36 comments

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[+] sama|14 years ago|reply
The reason the Start Fund works is that the terms are so good--uncapped and no discount--that if you're planning to raise money at all, you should take it, and so the investors get a real index, including the potential home runs.

These terms are significantly below the mean for the last YC batch, and I'd bet that some of the best startups don't take the deal. It's a decidedly less clear strategy to invest in only the not-so-good startups in a batch.

[+] jot|14 years ago|reply
"Y Combinator started the year before us, and it’s the same genre, but under the microscope, we could not be more different," said Mr. Cohen. "The fundamental difference between us and the other accelerator programs is they have a black box, while we have open sourced our model."

TechStars and YC are certainly different but having read:

What Happens At Y Combinator: http://ycombinator.com/atyc.html

and the TechStars equivalent:

Do More Faster: http://www.domorefasterbook.com/

YC doesn't seem like any more of a black box than they are.

[+] mkrecny|14 years ago|reply
Cohen is referring to the fact that TechStars is essentially a franchise and YC is not.
[+] e1ven|14 years ago|reply
This is excellent news, and a good alternative to YC.

Because of the Yuri/Conway offer, YC had been a substantially more financially viable program for a lot of startups that need capital to get moving- This helps level the playing field.

While I love YC, competition in this space is good for everyone.

[+] sbisker|14 years ago|reply
It feels like the amount given to incubated startups is creeping up, both in YC and now in TechStars, as the programs have gotten more popular.

Do people no longer feel that "the amount a graduate student makes for three months" is enough to actually start a company? Or is this more reflective of the market value rising for the amount of equity typically taken by a top incubator? If it's the latter, wouldn't there be a new opportunity for an incubator to give grad student wages to willing companies for a much smaller equity stake?

[+] patio11|14 years ago|reply
So you know how startups are a star search with returns dominated by whether you invest in Google/FB/etc? This is apparently pretty true for YC as well: the AirbnBoxen/Dropboxes will swamp most everything. Given that everyone is trying to invest in that one best startup this year, the prior valuations of "we guess the best starup will be in this pool" are pulling away from the generic "two guys with a gleam in their eye" ones, as a consequence of market participants reacting to YC et al being ridiculously better at picking winners than previous screening mechanisms.

Yay capitalism, by the way.

[+] jefftougas|14 years ago|reply
One of the stated potential uses for the $100k is "help a team make a critical hire". I think this may be a result in part of rising market rates for quality developers.. It used to be a lot easier to get someone to come work on your startup for 1% equity + $30k salary than it is now.
[+] mrkurt|14 years ago|reply
The StartFund style money is entirely in play so investors can get in on "the next big thing". There's a pretty common belief that the next Google will go through a really good incubator on their way to world domination.
[+] 0x12|14 years ago|reply
Someone should do a side-by-side comparison of the batting averages of all these incubator programs and their respective terms.
[+] devongall|14 years ago|reply
The names on the funding aren't quite in the Ron Conway, Yuri Milner realm - access to that network is one of the most important pieces of Startfund for follow-on, BD, etc.

That said, it's still awesome to see expansion in funds available for early-stage companies.

[+] rglover|14 years ago|reply
It's great to see a lot of incubators really coming to life recently. What's even better is that entrepreneurs have options. If you agree with one ethos, you can apply there and if not, look for someone else. My only hope, though, is that this becomes a staple in business and not just a fad. I also hope that the quality of these incubators remains extremely high and that they continue to select companies with a fine tooth comb. Congrats to TechStars for moving forward.
[+] arthurgibson|14 years ago|reply
Its great for startup companies, now they just have to worry about executing in the first year. I do think they will miss a lot of the struggle and hardwork in fundraising, but as pg says thats just a time sink. One jab: Whats better than 100K...150K
[+] andrewhyde|14 years ago|reply
Great news for more quality startups to be founded.
[+] cienrak|14 years ago|reply
How are these terms different than what goes on with YC and StartFund? Better or worse?
[+] brlewis|14 years ago|reply
With YC/StartFund there's no cap, no discount. The terms won't be better than that, but there's nothing in the article about cap or discount, so we'll have to wait for more info to know whether the terms are the same or worse.
[+] webwright|14 years ago|reply
I'm going to guess that they'd be crowing about it if they tried to match the no-cap/no-discount awesomeness of the StartFund. Still, huge move for them... It's a nice time to be early-stage!
[+] jjm|14 years ago|reply
At this point what does a another 5% do to harm you? 10% of nothing is still nothing, but 10% of something worth while is well... you get the idea.
[+] kcurtin|14 years ago|reply
The discovery of these incubator models is one of the most interesting things happening in the startup community - in addition to giving aspiring entrepreneurs an opportunity to build great things, they are creating an even more tightly knit startup community. They are making it easier for new people to get involved in this network/community, who in turn give back because they have such a great experience.