
We Got Accepted into Techstars and Turned Them Down - paulhoweyjr
http://talkroute.com/got-accepted-into-techstars-turned-it-down/
======
tptacek
This is a surprisingly good post. The title made me think it was going to be
yet another startup flounder crowing, but it's actually a pretty thoughtful
critique of the whole Techstars Chicago program.

The "100+k for 7-11% equity" analysis is particularly damning.

I think they're taking the "Techstars accepts 1% of applications" thing much
too seriously. Presumably, only a tiny fraction of the inquiries they get are
from serious teams.

Also: I've been to 1871 a couple times, and I got exactly the same vibe these
people got. I know some people with solid companies working out of there, but
the space is practically the archetype of the "startup playing house" idea
Paul Graham likes to write about. It's particularly sad because it's located
in Chicago, where it's _easy_ to get an inexpensive office lease.

 _Later: the equity math is apparently not as damning as it sounds, or,
perhaps, not damning at all._

~~~
angersock
I was initially put off by the "Well, in 8 years, why haven't they had a big
(>100M) exit?" in the beginning; I figured it was more of the kind of silly
entitled bubble talk I've been seeing elsewhere.

The equity analysis you pointed out as well as the description of the LoI
stuff made me reconsider that position, and by the end of the article I was
glad I read it. It wasn't quite the muckraking I was expecting, and instead
was a decent exploration of when a fit with an accelerator just didn't exit.

Matasano never did the incubator/accelerator thing, right?

~~~
seats
Specifically on the exit stats GrabCAD (Boston TS company from 2012) was
acquired for 100 million -

[http://betaboston.com/news/2014/09/16/product-design-
startup...](http://betaboston.com/news/2014/09/16/product-design-startup-
grabcad-acquired-by-stratasys-for-100-million/)

And the real answer to this is that getting large exits takes a long time.
Unless I'm mistaken YC, which is older than Techstars and has 50% more
portfolio companies, has 3 exits over 100 million, OMGPOP, Heroku and Twitch.
Granted the last one was a big one.

~~~
mjffjm
Techstars should see some other big exits over time with SendGrid (couldn't
find actual current valuation) and DigitalOcean ($153M Valuation in 3 years)
to name a few

~~~
LogicX
Also Localytics (TS Boston 2009) is well positioned for a big exit or IPO:
[http://www.crunchbase.com/organization/localytics](http://www.crunchbase.com/organization/localytics)

(Disclosure: Hackstar in 2009, Founder in 2010)

------
michaelhoffman
> Troy sent over a Letter of Intent and explained that it needed to be signed
> and returned by Monday. I was very frustrated by this. You don’t send a
> legal document to someone over the weekend when their is no time for a
> lawyer to review it and demand it back by that same Monday. Whether it was
> the intention or not, this was a high pressure sales technique and just one
> more red flag.

This says it all to me.

~~~
janson0
I was a founder of a company in the TS Chicago class this summer.

I can tell you that this letter of intent was one and a half pages long,
contained a simple, bulleted list of documents required for due diligence, and
explained the structure of the funding and program.

Additionally, there is a very clear line that indicates that they are willing
to extend the deadline provided you give a reason.

Finally, this document is not the formal acceptance of anything related to the
program.

I would suggest that "demand[ing] it back" using "high pressure sales
techniques" is a strong overstatement.

~~~
Balgair
Ok, sure, fine, it was not technically demanding for a half sober lawyer to go
over. Still why not on a Monday then, why not a 2 week horizon? Why do I have
to give a reason, why do I have to skip dinner with my wife on Saturday, a
plan I have had all week? If it's not formal, then why send it at all? Why
send a 4th grade Valentine's day card? Etc.

Basically, it sent a message, at least to these guys. I think they read it
correctly.

~~~
janson0
The challenge in equating our two experiences is the perspective from which
the LOI was received. For them, it was a message in the form of another low
blow from this high pressure accelerator trying to wrest away 50% of their
business. With that mindset, a week probably would have been too short. Who
knows.

Ours, on the other hand was, "Awesome! Troy called and invited us to the
program! We finally get to quit our day jobs and go after this business full
time like we have always dreamed about, and TS is facilitating that! Let's go
over this LOI, which is simple and straightforward and doesn't legally bind us
to do anything other than say we understand we are continuing the process and
wont tell anyone publicly about it and gets us one step closer to Chicago and
the success of our business!"

Looking through an LOI and getting it back to them was a joy for us, not a
burden.

~~~
jasonwocky
> Let's go over this LOI, which is simple and straightforward and doesn't
> legally bind us to do anything other than...

How do you know that until you've had an attorney review it?

------
seats
Im an MD for Techstars in Austin and happy to answer specific questions on
this for anyone about our programs and results.

I don't know the details of this specific company, so I won't comment on any
of those particulars, but I can for sure comment on the structure of our
terms.

As I mention in another reply on this thread, the OP appears to have
misunderstood the note terms as presented. Currently the 100k note offered is
a 3mil-5mil cap note, 20% discount. What causes it to be 5 vs 3 is whether or
not the company has had a prior financing event. In other words the cap by
default is 3, but it'll float up to 5 if a prior financing is above 3 for a
particular company. Those terms are written in stone for all time, but as of
this exact moment that's what they are and that's what the were at the time of
this blog post.

One other thing I'll point out that wasn't covered in the post, likely due to
the timing of the event, is our first >= 100 million exit, which happened in
the last month.

[http://blogs.barrons.com/techtraderdaily/2014/09/23/stratasy...](http://blogs.barrons.com/techtraderdaily/2014/09/23/stratasys-
grabcad-deal-gives-new-revenue-source-says-rbc/)

~~~
digitailor
Is requiring the signing of an LOI over the weekend typical of TechStars?

~~~
seats
Nope.

Sam Altman had a great post recently about YC's indictment of timing pressure
tactics on accelerator offers. We completely agree with that position and try
very hard to not give that impression. Clearly sometimes that pressure is
still felt even if it's not intended.

One issue that is relevant to us given our fixed class sizes is getting a
definitive answer from an offer as quickly as we can so that we know if should
move down the list and give an offer to the next team instead. Having 10
offers out and finding out that only 8 want to accept would mean we are giving
out 2 offers potentially much later than the others.

Purely as a practical timing matter we hope to have a set of offers out around
the same time and have everyone accept or dismiss them pretty quickly so we
know who the class will be.

There was good discussion of this on a prior HN thread when @sama posted that
blog piece. If I can dig it up I'll add it here.

EDIT: found it -

[https://news.ycombinator.com/item?id=8285994](https://news.ycombinator.com/item?id=8285994)

~~~
tptacek
There's a goalposts-moving thing happening here. The claim in the post isn't
simply that there was a time-limited offer made. The claim was that a
complicated legal document was presented just before a weekend, with a demand
that it be accepted or rejected by the following Monday.

I have no idea if that actually happened or not, but this thread isn't really
addressing the claim in the post.

~~~
seats
Not evading here, just don't want to go into unnecessary detail, but here it
is if you are interested -

Our LOI is not a complex document. It's one page long and covers 7 points.

1- agreeing to supply an official version of the cap table 2- representing
that documents supplied to us are are accurate to the best of their knowledge
3- acknowledging that the team must relocate for the duration of the program
4- committing to fully participate in the program (show up and not have
another job outside of their company) 5- agreeing to the dates of the program
6- agreeing to our equity exchange 7- confidentially clause regarding the
offer

And a final clause states that while signing the LOI executes your agreement
to our terms that "your acceptance of our offer is subject to your review and
satisfaction with the formal contract provided". In other words signing the
document is merely signaling your intent to participate in the program, but
you aren't held to any specific clauses by signing.

This is not a document that is meant to be negotiated, there are really no
terms here that we'd debate on, it's more of an outline of the deal so that
you get it all in one place and have it in writing up front.

~~~
Balgair
Still, why Friday? Why not Monday? Why not a week time horizon? Yes it may be
industry standard, but you aren't looking for industry standard people here.
Why send such a thing to begin with? If it's not legally binding, negotiable,
or really anything other than a 4th grade valentine's day card, why do it?
Yes, again, the authors may have misread the boilerplate, but those are the
people you are looking for, the ones that aren't 'normal.' If you want to do
business with people, then do it. This isn't love notes in lockers stuff.

------
leelin
It looks like your convertible note math is off. Given the $1M minimum
trigger, the $100K note will not equal 10% of the company unless we plug in
absurd numbers ($100K premoney Series A with a note discount).

Based on this Quora answer, the cap is $3M with a 20% discount.
[http://www.quora.com/What-are-Techstars-convertible-notes-
te...](http://www.quora.com/What-are-Techstars-convertible-notes-terms)

Say you raise $1M on a $3.9M pre-money. The $1M investors wind up with almost
20% (a little less because the note investors pay the $3M price), the note
investors about 2.6% (they get $130K worth of Series A plus interest), and the
remaining ~77.4% is your former cap table, including TechStars, diluted by the
$1M and note conversion.

~~~
tptacek
Is the point here that Techstars "7-11% equity" claim is accurate given the
range of possible valuations for their convertible note? Or is it just that
it's not _as inaccurate_ as the post claims?

~~~
seats
The quora post is correct (note is a 100k convertible 3 mil - 5 mil cap, 20%
discount). It appears that the OP misunderstood the terms.

------
startupstella
I was part of the first Excelerate class with FeeFighters (acquired by Groupon
in 2012) and was an EIR with TechStars Chicago a few summers ago.

I thought this post was well balanced and obviously everyone should make their
own decisions based on their startup's particular situation...incubators, just
like financing, are not a panacea that guarantee success.

Troy, Sam, Steve and all the folks involved in Techstars Chicago all do TS
because they are extremely passionate about developing startups and building
the types of outcomes YC has produced.

One of the stark realities of the Chicago startup ecosystem is the capital
available to tech startups is really tiny compared to other places. As a
startup founder, I've both raised money and failed at raising money...one of
the biggest challenges of being a founder here are the sheer financing odds
you have to beat which are necessary to even have a chance to achieve YC
outcomes.

That's why 1871 looks the way it does- it's meant to attract entrepreneurs but
it's also meant to attract money. It's a symbol of the growing tech community
in Chicago and a way for potential investors who have not invested in tech
previously to see tangible proof of a burgeoning ecosystem. That's the
truth...while office space is cheaper in Chicago, 1871 provides the
connections and "accelerated serendipity" early stage founders might need.
Again- I worked out of there for a year and left because it was too
distracting...it was the right place for the right phase of business.

When it comes to Troy, he is just about the most founder friendly person I
know. I'm sure if the founder had spoken to Troy about his discomfort with the
exploding LOI, I can't speak for Troy, but it's hard to imagine him not
understanding.

I look forward to seeing the big outcomes- GiveForward, SpotHero,
SimpleRelevance, SocialCrunch, etc. in the future.

------
maxdemarzi
Don't know enough about Techstars to comment, but the location (1871) is a
problem. It's incredibly noisy and crowded. I personally can't get anything
done there, so it's quick meetings and I'm out, working at home in peace. One
upside however is that there is a good food court at the merchandise mart and
I love those habanero burritos.

Lots of co-working spaces are popping up all over Chicago, if you're in the
market for space... pick a quiet one.

~~~
tptacek
If you've got 2 people in your team, I don't think the math on spaces like
1871 works out; it's cheaper just to get an office. If you're just one person,
you probably don't need any space at all.

We're shopping for offices right now for the new company, and Chicago offices
are cheap.

~~~
driverdan
I can't speak to Chicago because I don't know the market but in general you'll
get a lot more out of working in a space with other startups and freelancers
than you will working alone in a cave, er, your own office. Networking alone
is worth it. Once you grow to a large enough size that getting your own office
offsets the lost opportunity cost of networking sure, get one.

~~~
tptacek
I can speak to a career in startups when I say, respectfully, that I think
this is horseshit. Compare outcomes. The most successful companies do not
predominantly emerge from coworking spaces.

~~~
balls187
It seems like using "most successful" companies as a rubrik for decision
making doesn't make a lot of sense, given how unlikely it is that any company
will make it to the "most successful" categorization.

There are some tangible benefits from working out of a coworking space (I'm
not sure you are advocating an opinion one way or the other regarding them):

\- easier access to networking events. Certainly you can make the trek from
your office over to where the event is, but there is an extra level of
convenience.

\- Access to other people. I was the only technical founder on our team, and
just being able to talk shop with other engineers had real value. For the
business guys, they were able to talk with other business guys and swap ideas
and information.

\- Manufactured Serendipity. This one is a bit of a stretch, but if you are
around other startups, there is a small chance that something lucky can
happen. Is it going to move the needle? Dunno, certainly more likely to happen
than if you were alone in a garage.

None of these things should take away from what I think is the important
aspect of an office: allowing people to work productively. If that part isn't
there, then no amount of perks and benefits will matter.

~~~
tptacek
There are tangible costs to working in a coworking space:

* It's significantly more expensive.

* It's distracting.

* It creates an endless font of excuses to "network" and "talk shop" instead of powering through the schleps.

* It colocates serious companies alongside fundamentally unserious ones, leaving the serious ones to filter requests, drama, networking, &c.

For me, cost is dispositive. Put burning cash up against abstract benefits
like "serendipity" and "talking shop" and I don't have a hard time making that
decision. Last company, we wanted to talk shop too. We started a meetup. It
worked fantastic. Do that!

Erin and I are signing a lease on the office for NewCo today. The space is
depressing. We're in Oak Park to begin with, a 35 minute walk from my house,
and you'd have to look to find an office with a window staring out onto a
brick wall. We have two of those. It's perfect.

There's a time for spending some cash to make your work space pleasant. But
not in the early days. Unfortunately, that's what coworking spaces optimize
for.

~~~
driverdan
> It's significantly more expensive.

When it's only the founders it isn't really more expensive especially when you
factor in cleaning, food, coffee, etc. If you're growing beyond the founders
then it probably makes financial sense to get your own office.

> It's distracting. > It creates an endless font of excuses to "network" and
> "talk shop" instead of powering through the schleps.

Only as much as you let it be. Put on headphones and get work done.

> It colocates serious companies alongside fundamentally unserious ones,
> leaving the serious ones to filter requests, drama, networking, &c.

To a certain degree but you're grasping at straws here. Don't want to talk to
someone? Tell them you have work to do and don't talk to them. It's really not
that hard.

Of course I can't speak for everyone. Some people simply can't adjust to
working with other people around. Personally I prefer it, I find it inspiring.

~~~
tptacek
No. It is significantly more expensive. I'm not saying this in the abstract. I
just got a 2-person office for my new company, and I know what 1871 costs.
1871 is _expensive_. Office space in Chicago is _not expensive_. I'm actually
paying slightly more to be walking distance from my house in Oak Park, and I'm
still cheaper for 2 people than I would be at 1871. The difference would be
even more stark if we had gotten an office in the Monadnock, where the company
I'm leaving next week is. And the Monadnock is a historic landmark building
with an Intelligentsia on the first floor.

------
alain94040
You made the right decision based on incorrect thinking.

Your math about dilution is completely wrong. That's a major issue right
there. Then your math about expected success rate (claiming that TechStars has
a negative impact on startups) is also completely off.

You did come to the right conclusion because you do not want to raise VC
funding. That's it. That program is not for you, since your goals differ. From
the tone of your post, you have your own way of thinking, fairly black and
white. You naturally detected that there was a disconnect between your way of
operating and TechStars'. So you didn't take the offer and my guess is
TechStars is happy you didn't join either.

Good luck to your startup though. You are free to run your company whichever
way you want (that's one of the beauties of startups).

------
arikrak
> The national rate of failure for startups is 75-90%... This means for every
> [Techstars] company that is acquired, there is a company that fails. For a
> program that is picking the best startups, this is not that impressive.

A 1:1 ration is actually very good. The failure rate for pre-VC startups is
actually much higher than 90%. 75% of VC-funded startups fail [1] but only a
tiny minority of startups ever get to that stage. If Techstars really keeps up
a 50% success rate that would be amazing (though I assume it will go down over
time).

[1]
[http://online.wsj.com/news/articles/SB1000087239639044372020...](http://online.wsj.com/news/articles/SB10000872396390443720204578004980476429190)

~~~
ntenenz
This^^^

------
Mithaldu
And another article styled by people who need to read and comprehend this:
[http://contrastrebellion.com/](http://contrastrebellion.com/)

------
joeblau
There is one thing that I've learned as I've been in Silicon Valley and tried
to work with partners. Everything is a two way relationship and a two way
street. If you're smart and you know what you're doing, you can't say "yes" to
every opportunity because then you'll most likely miss the _right_
opportunity. This is a great example of a team doing their due diligence and
realizing that they weren't ready to get into a long term relationship with a
parter that wouldn't be able to help them. Even though the OP didn't make it
in, I still think the experience was a success because of the learning. Thanks
for sharing this with the rest of us as well.

------
tonydiv
We turned down TechStars for Alchemist. 3x better terms, better network, 6
month program, incredible mentor network, largely tied to Stanford.

Since 2012 Alchemist Accelerator has advanced 64 companies according to
CrunchBase. Of these, 29 companies have received more than a 1M raise and of
these, four have raised around $5M at a $25M pre-money valuation.

[http://alchemistaccelerator.com](http://alchemistaccelerator.com)

[http://bizjournals.com/sanjose/news/2014/09/26/ten-b2b-inter...](http://bizjournals.com/sanjose/news/2014/09/26/ten-b2b-internet-
ofthings-startups-pitch-at.html)

~~~
orky56
Have only heard of Alchemist second-hand and not seen anyone pick it over
YC/TC. Would love to chat with you more on it: sjigjinni at google mail

------
janson0
Disclaimer: TS Chicago 2014

It's hard to choose where to start, as this blog post just misses it on so
many levels. So, we'll just pick "Mentorship Is Not The Primary Focus."

This summer, we had over 150 mentors complete over 650 30m-1hr long mentor
meetings with our cohort. On top of these meetings, each company was assigned
a super mentor who worked closely with each team for at least an hour a week,
throughout the summer. These mentors hail from companies like Groupon,
GrubHub, Walmart, etc. and are not just random business people. On top of
that, we spent countless hours with Troy, Steve, and Sam throughout the
summer... often late into the night. The passion and care these people and
this program exudes towards mentorship and entrepreneurial development is
unmatched and, frankly, unquestionable.

Second, the assertion by the OP that "the focus on raising capital is just too
strong" is curious and reveals a fundamental misunderstanding of the program.
I concede that if you plan on doing an accelerator, you should most likely be
planning to raise further investment capital after the program at some point.
(As PG puts it, "A startup is a company designed to grow fast" and from what I
see, usually this growth will be accelerated by the injection of capital.)
After going through this program, however, I would say the focus in TS Chicago
is not mainly on raising capital at all. Rather, it is squarely on building
you as an entrepreneur in order to empower you to build your business, equip
you to hustle up more traction, and provide you with the tools to raise money
to continue accelerating your growth if you want. The leadership goes above
and beyond to make themselves available to you throughout the program
regardless of the business or personal need.

Third, the dilution math is just so bad. Other folks have addressed it in this
thread, so I'm not going to go into detail. But geez.

Fourth, looking purely at the "valuation" you get for 6% for $18k is an
incredibly short-sighted way to understand the value you are getting out of
the program. Mentorship, the network, deep friendships, and core business
knowledge are just a few pieces of the value added. But even if you want to
add pure money related perks, please review this:
[http://www.techstars.com/program/perks/](http://www.techstars.com/program/perks/).
Such free. Much hosting.

Fifth, demo day. At first, I was under the impression that demo day was all
about pitching investors my business in the hopes of drumming up some interest
in our next round of funding. After going through that process, my view
changed drastically. I am more equipped to explain my business, our purpose,
our plan, and the landscape of what we are doing than I would ever have been
without it. Not only do I deeply understand the story of my business, but I
can articulate it to investors, mentors, customers, and our team with a
clarity like never before. I wouldn't trade that insanely challenging demo day
prep process for anything.

Sixth, asking someone a pointed question about the specifics of your business
in hopes that they have the answer to it off the cuff with (based on where
that point in the interview would have happened) 30 seconds to consider your
query is a poor way to judge the quality of their ability to contribute to
your business over the lifetime of their involvement.

Finally, I'll end this discussion with these remarks:

TechStars is about relationships and equipping entrepreneurs. If you come into
the program with a teachable spirit and are willing to listen and learn from
the incredibly knowledgeable and generous people in charge, then you will come
away with invaluable experience and tools to apply to your current startup, as
well as to other businesses you may start throughout rest of your life. That
is truly the offer on the table. Paul and co. missed out, but hey... maybe we
were company 11? If so... thanks guys!

~~~
rgbrenner
> But even if you want to add pure money related perks, please review this:
> [http://www.techstars.com/program/perks/](http://www.techstars.com/program/perks/).
> Such free. Much hosting.

Some of those are programs that are open to any company in any accelerator.

[http://aws.amazon.com/activate/](http://aws.amazon.com/activate/)

[http://www.microsoft.com/bizspark/](http://www.microsoft.com/bizspark/)

[http://www.softlayer.com/catalyst](http://www.softlayer.com/catalyst)

[https://blueprint.paypal.com/](https://blueprint.paypal.com/)

Not really a reason to pick techstars over another program

~~~
hootener
> Not really a reason to pick techstars over another program

When was this a debate about picking techstars over any other program? The
article relates to picking nothing as opposed to joining TechStars. I think
these perks are a little harder to come by when you turn an accelerator down
for the no op as opposed to "I picked accelerator B instead of accelerator A".

I'd tell you that if you wanted to do an apples to apples comparison of
accelerators we should save that for another thread lest we get too off topic,
but that hasn't stopped others in this thread from turning the article into a
TS vs Other Accelerator debate, so why should it stop you?

~~~
AndyNemmity
It is always a debate about picking from the choices available. Just like the
equity portion, it's all baked into the decision even if it's discussing the
specific equity offer.

Not sure why you feel so passionately about this.

------
DanBlake
DigitalOcean and Sendgrid (both techstars companies) probably have valuations
exceeding 100m at this point.

~~~
tptacek
Were either of those companies part of Techstars Chicago?

~~~
troybetz
No, they both came up through the Boulder branch.

[http://www.techstars.com/program/locations/boulder/#3](http://www.techstars.com/program/locations/boulder/#3)

~~~
balls187
I think the point being made is that you can't 1:1 compare TechStars
locations.

A true measure of comparison would be to see the performance of companies that
participated in TechStars Chicago, and not just TechStars as a whole.

~~~
650REDHAIR
Sure you can.

Your access to the TS network is the same regardless of your location and
that's the important part.

~~~
tptacek
You're saying that if I join TS Chicago, I'll have access to the same "mentor
meetings" as someone in TS Austin or TS Seattle would? That the same people
will come speak to my Chicago cohort as would Austin? That TS will round up
comparable groups of investors?

------
SEJeff
This is more or less a guaranteed way to never get accepted into a program
like this ever again however. I don't see any serious upside to a company who
might want to do this.

~~~
digitailor
After hearing this story, I would be more likely to invest in this startup.
The LOI pressure over the weekend was unacceptable. The fact that the founders
held firm and did not fall for it is an indicator of future success for them.
This was responsible, wise, business behavior. If the startup continues to
operate like this, their chances for success are high, market allowing.

~~~
billions
How to get investor attention: 1. Write about a controversial topic relevant
to Hacker News 2. Show off traction 3. Say you are not looking for $$$ (Bonus:
get more customers)

~~~
techgen
Lol, you are probably right. I bet these get money thrown at them from
investors that don't respect accelerators (there are lots of them). They have
over 40k users (probably more now) and charge 20$ per month. Close to 1m a
month in revenue. They don't need investment or an accelerator at this point.

I think it was a brilliant self marketing tactic. And then they have the balls
to post it here, lol... Love it. I think we are all witnessing a genius
marketing stunt that is going to be the topic of discussion in the future.

------
malanj
My understanding is that Techstars is a "franchise model" of sorts. So
Techstars Chicago, as described in the post, could be quite different from
another city's Techstars?

If anyone on HN have been through any Techstars programme and are prepared to
comment on the experience that'll be super valuable.

~~~
mrkurt
Yes, that's accurate. Techstars Chicago is an incubator called Excelerate that
joined the "network". I think they're all run similarly, but Excelerate didn't
magically become a premium accelerator by slapping the Techstars label on.

~~~
joelrunyon
Excellerate was close to #3 or #4 incubator (depending on how you count) in
the country before joining the TechStars crew.

~~~
tptacek
How do you count this? What's the rationale for saying that Excellerate was
the next-best incubator after YC and 500s?

~~~
andrew_r_cross
Forbes put together an analysis in 2012 (the last year Excelerate was still
Excelerate) based on companies' exit price or price of most recent round.
Excelerate came in No. 6.

[http://www.forbes.com/sites/tomiogeron/2012/04/30/top-
tech-i...](http://www.forbes.com/sites/tomiogeron/2012/04/30/top-tech-
incubators-as-ranked-by-forbes-y-combinator-tops-with-7-billion-in-value/)

------
chrisduesing
I am an Excelerate Labs (now TS Chicago) grad whose company just did a 2.5M
Series A. I consider the accelerator program to be an enormous component in my
success. We still bug Troy and Steve on a weekly basis and they have never
hesitated to help us out on anything. My classmates have turned in to war
buddies who I can talk to about things that no friend or family member
understands. I learned way more than I ever needed to know not only about VC
but about the fundamentals of a healthy business. I wouldn't trade my
experience there for anything in the world.

------
georgespencer
If you map the raises of post-accelerator/incubator startups in Europe, you
see a fascinating trend which suggests that the vast majority raise almost no
money of any consequence (to the point where there's just one, Transferwise,
in Europe which has raised significant external investment to my knowledge).

Capital clearly is not the best proxy for success or trajectory, but it's a
visible and widely available (usually) metric.

Could be that Techstars are smart about picking startups which have low
working capital. More likely is that the best startups in London and elsewhere
are run by people who have access to mentorship by hustling in their own
network, and raise money by being good at execution.

------
kolev
Off-topic, but, I'm sorry, what is difference between Talkroute and Line2...
outside of Line2 costing 50% less, allowing multiple in-bound numbers, and
also supporting toll-free numbers and free existing number porting?

------
lacker
I'm not affiliated with Techstars at all. But this seems a bit tasteless. How
would you feel if someone from Techstars had rejected you, and then posted a
long explanation of "Why I Rejected Talkroute"?

------
nickpersico
TS Austin 2014

Techstars Austin was an invaluable experience for our team. It seems like the
founders did not factor the opportunity for personal growth when they made
their decision. Some may argue that the company's growth comes first, but
sometimes that can only happen when the founders are growing too.

We were the youngest company in our class. We actually used the Techstars
investment as a means to incorporate and set everything up. Another factor is
that all of us were first time founders. Come to think of it, I'm pretty sure
all 11 companies in our class had first time founders.

The Austin program was broken into three phases:

Month 1 - Mentor Meetings: For the first four weeks we had dozens of meetings
with the program's mentors. The mentors were a healthy mix of past Techstars
founders, angels, VCs, and biz dev partners. It was exhausting at the time
(5-6/day, 4 days/week), but definitely worth it. We used the meetings as pitch
practice, and iterated how we described our business along the way. I also
learned a lot about my co-founders in those meetings. Seeing them describe our
business to other people was very revealing about how they felt about things.
Super valuable.

Month 2 - Development: The second month was all about taking the first month
of endless feedback and getting to work on advancing our business. We used the
second month to build our MVP, speak with potential customers, and build
partnerships. The Techstars staff was hands off, but were a big help whenever
we asked for it. We accomplished a lot in our second month.

Month 3 - Fundraising/Demo Day: The Techstars staff started to get more hands
on in the last month to help us with our Demo Day pitch and fundraising plans.
There was more structure, but we had the absolute freedom to do what we
wanted. It was a bit distracting from our business the last few weeks, but the
experience of Demo Day was amazing and completely worth it.

I highly recommend Techstars for any company with first time founders. We were
able to go from polished idea to MVP within three months, and achieve a high
level of personal growth at the same time. It's also worth mentioning that I
now have 50+ amazing new friends that went through the same experience I did.

------
balls187
YC has distinct advantage of being tapped into a very powerful network, in
what is arguably the strongest startup market in the world.

TechStars are in #2 and below markets, each of which is easily dwarfed by
Silicon Valley. So while TS (and other accelerators for that matter) don't
have as much success as YC, I'd love to compare the stats of local companies
that were in TS relative to the expected performance in their respective
markets.

------
pazimzadeh
This is unrelated to your decision to turn down Techstars, but do you expect
people not to notice the resemblance of your introductory video to this ad by
Apple?
[https://www.youtube.com/watch?v=VpZmIiIXuZ0](https://www.youtube.com/watch?v=VpZmIiIXuZ0)

------
jgeerts
Why do I see so many similar posts? Is it cool to turn something down other
people want and make a blog post about it?

The internet these days is much like McDonald's, instant gratification and
quantity over quality.

------
bambax
Can't read clear grey on white background (#7a for font color?? are you
kidding me??!?); maybe TS or another accelerator would have taught those guys
a thing or two about legibility and testing.

Also (without reading the article) why did they apply if they knew they didn't
like the deal in the first place? Aren't they wasting everyone's time,
starting with their own?

------
fyolnish
What's crazy is that you think using light gray as a text color is a good
idea.

~~~
sgustard
In Safari, "Show Reader" corrects all styling sins.

------
brayton
For the effort put into this you probably could have gotten your 150k users

------
graycat
Okay, after reading the OP, explain something to me, because so far I just
don't _get it_ :

That is, from all I can see, the situation in the OP, admittedly only from an
accelerator, is much like that in essentially all early stage VC firm equity
funding. That is, as in the OP, I'm failing to see how "both sides of the
table" ever have much chance of shaking hands.

Why? From all I can see, and as mentioned in the OP, to be considered for any
funding at all, even via an accelerator, the startup needs to have a product
that has traction in the market with that traction growing.

Before that traction, the guys with the checkbooks are not interested. With
that traction, like the guys in the OP, I wonder why the heck the founders
would want to take the term sheet, deal details, check, Delaware C Corp.,
Board of Directors, etc. instead of just growing, as in the OP, "organically".

Sure, I can imagine some exceptions, but the OP company was just two guys.
Moreover, in the currently running Stanford course by Sam Altman and YC, the
strong advice is to have 2-3 founders for a long time and be very slow to add
anyone else.

So, the OP company had two founders, traction significant and growing, and,
thus, qualified for some funding but with so few founders likely had expenses
only at the Ramem noodle level and had some revenue and maybe free cash flow.

So, why take an equity check and all that comes with it instead of just
continuing to grow _organically_?

Or, net, in simplest terms, it appears that by the time a startup, based on
information technology and software where the product exists and has traction
and was developed by a team of just 2-3, qualifies for funding, it will rarely
still need or even want it.

So, I'm losing just where the guys with the checkbooks expect to find startups
they want to fund that will take the funding.

Yes, I can think of some exceptions, but otherwise, again, I'm not _getting
it_ on how anyone could expect the two sides of the table to do a deal?

Two more points:

First, all across the US, Atlantic to Pacific, border to border, in
crossroads, villages, up to the largest cities, the US is just awash in
successful small businesses with 1-3 founders, often just 1, who do well.
Indeed, from all I've seen, most of the nicer houses, 50 foot yachts, full
tuition checks at private schools and colleges, late model luxury cars, etc.
are paid for by such small business people.

These successful small business people rarely went to business school, never
watched lectures on business such as the current YC course at Stanford, never
went to an accelerator, and never got VC funding.

For being an information technology startup with a product just software and
written by just 1-3 founders and with revenue, that should be one heck of an
advantage compared with nearly all the rest of these millions of successful
small businesses. If those millions of US small businesses can get to a good
_life style_ business, then the founders of a good information technology
startup should be able to, also. And for further growth, a successful
information technology startup should be able to generate plenty of free cash
flow -- some software on a server can run by itself and make money sending ads
24 x 7 but for a guy with a successful pizza shop, or 10 such, each pizza has
to be made by hand.

Then, with that nice start as a lifestyle business, maybe that information
technology startup could continue rapid growth to be a major company.

I know; I know; there is a PG essay that a _startup_ is intended for explosive
growth and, thus, needs equity funding. Okay, but I'm missing just why the
founders won't be happy with $20 million or $200 million and, instead, want to
take on a lot of financial risk and burdens shooting for $2 billion to $20
billion. A rich guy can easily say, "I wouldn't walk across a street for
another $1 million.".

But in all of this, I'm missing just where the accelerators or early stage VCs
have a meaningful role to play. The VCs look like the Drawback on a football
team, a third person twiddling their thumbs in a two person canoe, a fifth
wheel on a wagon, mammary glands on a boar hog, or someone who wants to buy a
ticket on an airplane after it has already left the ground.

Second, I have to be reminded of the Mother Goose story _The Little Red Hen_
who found some grains of wheat but discovered that no one wanted to help her
until she already had on her own built a bakery and had hot, fragrant loaves
of bread and a line of eager customers and didn't need any help.

~~~
lmm
Sometimes people want to get to retirement money quicker than they could
through organic growth. Or sometimes they want to push this idea to
success/fail fast so that they can move onto the next project if it doesn't
work out. Sometimes the organic lifestyle business approach is just boring.

The whole point of an "accelerator" is you do the same thing but faster. You
get your business to where it would naturally be in five years time (whether
that be success or failure), but you do it in one year. To some people that's
valuable.

------
korzun
> So regardless of our startup’s position on raising VC, we were obligating
> ourselves to months of preparation for the pitch.

This is also a big one. Your time as a founder, especially in a new start-up
is invaluable.

~~~
abstein2
It's also invaluable to be able to stand in front of a group of people
(whether VCs, the press, other startups) and be able to clearly communicate
what your startup does.

Viewing Demo Day as a tool that's only useful if you're fundraising on the
back of it is incredibly shortsighted.

~~~
korzun
That's not my point. There is no need for this to be mandatory. When company
is ready they should be able to present at another demo day, etc.

I also think the founders know better where the time needs to be spend and at
what stage they should focus on PR.

Cookie cutter approach does not work for everybody.

~~~
abstein2
> I also think the founders know better where the time needs to be spend and
> at what stage they should focus on PR.

If that were the case then accelerators wouldn't exist and the "national rate
of failure for startups" wouldn't be 75 to 90%.

------
OnyeaboAduba
Really Really good post. Look forward to the next post.

------
rekoros
The math is feverishly wrong, but that's not the point.

Techstars is a NETWORK. For us (Boulder 2013) it was a window into a world we
only saw through occasional blog posts. Techstars is a NETWORK of crazy people
who risk everything to start companies. Some of those companies are absolutely
amazing, and we have access to their founders, we know them personally. We
never even dreamt of such honor.

Before Techstars, we had access to our desks.

For first-time founders, Techstars is truly an opportunity of a lifetime.

If you get accepted, do it. Don't listen to these fools.

~~~
antr
You can't call someone with a well reasoned argument a 'fool'. These guys
explain very well the 'why not', and they aren't advising first time founders
to turn TS down.

