

6 out of 10 2009 TechStars teams funded and led by VC - andrewhyde
http://www.techstars.org/2009/11/17/6-of-10-boulder-companies-rounds-led-by-vcs-in-2009/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TechstarsBlog+(TechStars+Blog)

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ksowocki
Techstars was one of the most memorable (and rewarding) experiences of my
life. It's great to hear this year's batch of companies are doing so well.
Congrats to the 2009 teams!

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petewarden
As a founder of one of the other 4, I am impressed but unsurprised, it was an
incredibly strong group this year.

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dschobel
Is it better (for some arbitrary definition of good) to get VC money than
angel?

I always figured that between angel and VC money, these incubators would bat
right near 100%...

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petewarden
I believe (not certain, Andrew may know better) the average for previous
Techstars years was around half got funded. I've no idea on other incubators,
anyone know YC's batting average?

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andrewhyde
Will have to look at the data again after this year, roughly 70% are funded or
profitable by the end of the session.

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yankeeracer73
should this automatically mean these are quality companies because they've
gotten VC funding? i'm sure all of us can tell a story or two about their
favorite VC funded burnout. why does this continue to be the barometer by
which start-ups are judged?

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webwright
Multiple anecdotes does not equal data. Sure there are plenty of burnouts.

If you did a study of software startups, I think you'd find:

* Startups that exit for an amount that returns meaningful $ for the earliest investors (YC, TechStars) are likelier to have taken additional funding.

* Startups who exit for HUGE money (Google, etc) almost ALWAYS take Series A rounds.

If those are both true, do you REALLY think this isn't an important milestone
for TechStars, YC, and the founders (if a big exit is their goal)?

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yankeeracer73
Couldn't I say the same about your facts? Do you have numbers to show that
those companies who do take money are likely to be more successful than those
who don't, or who pursue money via alternative means? Most VC deals fail and
they don't get their money back or break even. The few that make many
multiples are what make their firms.

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webwright
You could, but that's the difference between anecdotes and data. Can you
really look at my 2 bullet points and say, "I think the data would show those
to be false?" There've been studies showing this stuff (PG actually mentioned
one during YC, if I recall correctly). Don't have 'em handy.

The truth (supported by data) is that large dollar exits are vanishingly rare
without outside funding (but sure-- they've happened). Can you name _1_ large
exit or IPO that had no Series A round? Can you name 5? Note that I'm NOT
saying that outside funding increasing your chance of survival (I'd GUESS that
the funding path is a riskier one)

"The few that make many multiples are what make their firms."

Absolutely. For all I know, a Series A REDUCES your chance of business
survival... But the data shows that it increases your shot at a big exit
(which is what a lot of people are in the game for).

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jacquesm
I wished I could disagree with you :)

It's absolutely true, a series A is like a lottery ticket, suddenly you're a
gambler, no longer working day to day to make ends meet, but the clock is
running and you have to 'score' at a much higher level than you would have to
score at without that investment.

Your chances of 'scoring' just went up, but your chances of staying alive just
went down about as much.

It would be nice to see an analysis of how outside investment changes the sum
total, in other words, is this a 'zero-sum-game' and are the 'funded'
companies taking away as much by their much bigger chances at collapse than
what they would have made if none of them got funded (keep in mind that lots
of money gets lost not only because these businesses fail, but they also take
their investors money down the hole with them) or is the capital injection a
net gain ?

Incidentally, I know of one very successful exit (and IPO) that was done
without outside investments but it was in the mid-80's, not related to online
business, and I know of one online venture that got bought out for a fairly
ridiculous amount of money. But that's the total score.

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pxlpshr
Another star for TechStars in my book, I've been pretty impressed by their
program and it continues to out do itself.

Cool to see the Vanilla forum guys on the list because I've used their forum
software for quite some time. They had a big reputation in the design world
when they launched around 05/06 for offering a comparable forum that wasn't
obnoxious bloat like vB. Congrats on the persistence and hard work, looking
forward to seeing you guys grow.

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jacquesm
You don't judge a startup in the year it was f(o)unded.

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trevelyan
It's the incubator being judged here, not the startup.

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jacquesm
Being funded is not a measure of success, not for a start-up and not for the
incubator that is associated with the start-up.

Any significant exit of any of those start-ups would be.

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quigebo
I don't think it's a barometer by which start-ups are judged. Instead, use it
as a single data point for each company and 6 data points (for 2009 alone) for
TechStars

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webwright
"I don't think it's a barometer by which start-ups are judged."

I disagree-- it's a great barometer for startups at this stage (though
certainly not the ONLY one). It's certainly strongly correlative to liquidity
(take 100 companies that had a meaningful-for-angel/seed-investor exit and
count the ones that took ZERO investment beyond that).

Or, closer to home... Look at the YC startups that are likely make YC a
significant return. How many of them took no additional funding?

Or, if you really want to ignore liquidity/return for the investors... Look at
the YC companies that experienced the most growth. How many of them took no
additional funding?

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petenixey
You've got to decide whose return you want to measure - the investor or the
entrepreneurs'.

Look at the most profitable YC startups (Weebly, Wufoo (others?)) and one took
no further money, one took angel. I can only think of two of the ones who
raised big money which are making revenues of the same order that I believe
Wufoo is generating and certainly their profits are a fraction thereof.

Startups in the Valley are well optimised for Venture Capital but that's not
the same thing as optimising for revenue or profitability.

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webwright
Yaw, that's totally true. This is from the TechStars blog-- the only metric
they ultimately care about is return on investment. So this is a big win for
them. A huge exit/IPO just about NEVER fails to have a Series A. Given MY
tolerance for risk, I'm probably prefer to own Weebly or Wufoo before most
other YC companies... But I think it's unlikely that they'll be a HUGE win for
YC (9-figure exit, that is).

Entrepreneurs generally (maybe just sometimes?) get into the startup world in
the hope that they'll see a multi-million dollar exit (to compensate for the
risk and the lack of salary for a chunk of time). For people motivated that
way, the Series A is a big deal. Wade through data of $5m+ exits and I think
we'd find that the non-funded startup is pretty scarce. Wad through the $20m+
exists and I think they'd be functionally non-existent.

Weebly took $650k according to CrunchBase, so they'd fall into the 6 out of 10
TechStars group, FWIW.

