What went wrong at Techstars
founderscoop.com
founderscoop.com
Not that I'm an expert on spotting those of course. But as it turns out, my skepticism was justified as there were no investments at the end of the program and few of these companies (if any) survived very long after. I was kind of sad about that because there were a couple of founders I really liked there.
Several of the companies actually died early in the program because of the usual founder issues, or the lack of coherent plan. Apparently, none of these issues came up during screening.
I've stepped back a little from mentoring (at least for them) because it's kind of time consuming and I got the vibe that Techstars took my time a little too much for granted. You get invited to some events and I got the hoody (which is a nice one) and that's about the extent of their appreciation or engagement. The promise of a great network (to both mentors and founders) is hard to live up to if you don't nurture that network. And there's not a lot of that nurturing happening lately.
If not, a mechanism to let the other participants anonymously vote and rate and comment such things, and then administrators can look at that data - and see what specific admin(s) was/were responsible for inviting them in, and then address the issue as close to the core as possible might of helped?
I also think that the Techstars staff members were not adequate. Every single staff member had left by the next year. And when I would email the subsequent MDs about anything, I'd get no reply.
If the only investments available are unprofitable, you don't invest.
I don't see why you'd introduce a reality-TV-style backstabbing mechanic, just to get the 19 year old founders to do the work the rich, sophisticated investors were supposed to be doing but weren't.
However, Techstars always had an adverse selection problem : the best companies usually prefer to join YC.
Well, yes, this is exactly what someone who sells this kind of service would say. Where is the skill, though? Just spray and pray. Eliminating survivorship bias, is it actually successful, on average? Can it beat the S&P?
The upside is certainly not unlimited, and you can lose all of your money before you find a big winner.
>the best companies usually prefer to join YC.
If they are already the best companies, what does YC add? Besides, most of the best companies don't join any incubator.
100's of competing accelerators popped up but none could match these results : https://www.ycombinator.com/topcompanies/
Check out VCs Congratulating Themselves twitter feed.
Only now am I starting to see smaller web companies be product focused instead of funding focused.
Probably bc ZIRP ended.
> it's kind of time consuming and I got the vibe that Techstars took my time a little too much for granted.
The Give First ethos applies here. If you approach TS with this mentality, you'll get more out of it.
> The promise of a great network (to both mentors and founders) is hard to live up to if you don't nurture that network.
I agree that, perhaps, there should be more, consistent events to bring the network together. For instance, in Seattle, we had regular mixers that were just at Startup Hall--swing by, grab a beer from the keg, and have a chat. Events pulling the network together don't have to be a heavy life.
But I think you also get out of it what you put into it: Again, give first, and follow up with folks and you'll get more out of it.
That's the theory. I gave quite a lot of time to them first. There's just not a lot coming back in kind. Techstars seems a bit complacent about people giving them their time. But they are not a charity. So they've been cutting on giving back. From having talked to other mentors, the quality of the network used to be better when they were more engaged. Even the networking events seem to be very infrequent at this point and frankly the last few ones weren't great. Somehow that never recovered after COVID.
I still mentor BTW. Just not via Techstars.
Does that apply to TechStars themselves, or just the people donating their time?
What were you expecting?
Overall, I had a blast, made some great friendships, and did most of my angel investing in companies I worked with through the program. One died, a handful were acquired, and the rest are still operational.
That said, I don't think that Techstars problem was only chasing the cash. I think it came down to the problem they were solving disappeared and they didn't shift.
Rewind to 2008 and the number of operators who had "been there, done that" successfully and were willing to share their time was exceptionally rare. By 2013 when they came to Austin, it was still uncommon but there were a few pockets here and there. Techstars was exceptional at collecting and coordinating them. Fast forward to 2018/19 and the sheer volume of people who had useful experience and the ability to share it was massive.
One of the things the article nailed is the need for a good Managing Director (MD). If you had a good one, they were able to leverage those local (and some remote) ecosystem to help validate ideas, streamline the founders' thinking, and focus them on the goals. If you had a weaker MD, sucks to be you. Techstars HQ's only role in that was picking the MD. Beyond that, you were on your own.
When covid hit, that ecosystem shifted and suddenly the number of people with experience and the ability to share it exploded, money flowed like water, and people's mindset shifted. The Techstars program didn't iterate and even lost the camaraderie that they'd fostered for years. When they took strong political stances for and against different groups, a bunch of mentors drifted away.
On the other side of covid, now we have way more people with experience, way less money, and way fewer social bonds. Techstars doesn't address those needs.
Out of curiousity, could you could elaborate on this a bit? I'm not that familiar with Techstars aside from being generally aware of them as a large accelerator for many years.
Being part of both networks has been an interesting experience in culture.
YC culture fosters an extremely strong network of founders, even outside the bay area. In London we're constantly pinging each other for advice - it really helps.
Techstars does not have this and makes little effort to do this. I remember speaking to some Techstars people in London trying to see if they might Foster more of the community here, but they had no interest in it unfortunately.
It's a real shame because some Techstars programs with the right MDs had YC quality (Shoutout to Connor), it's just the quality wasn't distributed or cultivated uniformly. It's heavily dependent on the MD of the program.
Sounds positive to me. Fuck your “world changing” startup idea. That’s just religion. You want me to work hard, treat me with respect and pay me (in that order).
edit: mark my words, there will come a time when you lose a highly valuable employee because you thought it was easier to treat people like a kubernetes configuration.
People entering this environment SHOULD know what they're signing up for. Its not like startups are the only jobs out there.
While this is still generally true for founders, it hasn't been true for early employees in over a decade. VCs decided to capture all of that surplus for themselves.
Startups should be accessible. It's a fault & a problem that so many possibilities have been winnowed away. The glory of 120 hours a week is not the only path.
Only VC-backed startups need to "take over the world" because the VCs need their 10x rockstar.
A company doing $50 million per year with a handful of employees is going to be way more profitable for everybody than a VC-fueled rocket that has a 99% chance of flaming out. Remember MP3.com? Lots of San Diego tech people still do ...
I view the original assessment as "San Diego tech workers understand the reality of their value and can't be taken for a ride by venture capitalists--woe is me."
I found that San Diego tech workers generally have higher clue than most geographic areas.
The less experienced are very solid workers and learn really quickly. However, they're not 4 year Stanford students with filthy rich parents who can afford to go bankrupt multiple times. They're coming from community colleges and state schools, and they need to earn money. In return, they'll work their ass off for you.
In addition, there are quite a few very experienced greybeards scattered in that scene (tech in San Diego goes WAY back--Linkabit spawned a bunch and computers were huge early--Silicon Beach Software and PC Power and Cooling for example). However, they are going to demand appropriate compensation and will not put up with bullshit. I love working with them.
Don't like the San Diego tech scene? Your loss--my gain.
My memory (a little misty) was that they started as ByteBuyer and then renamed to ComputorEdge. At least in 92 they were called ComputorEdge.
I did have a stash of them somewhere but haven’t seen them for a long time.
Nice to reminisce!
I'm only half-surprised.
I had a great experience, we learned a ton, and if anything was going to set us up for success it was our time there. Companies are mostly doomed to fail, but our time in Seattle was pretty transformative for me personally. It allowed us to refine our focus and dedicate ourselves wholly to building something people wanted (which, turns out, wasn't that many people obviously). The support and guidance we received from Aviel, our Amazon partners, and fellow cohort members were unparalleled. Say what you want about VCs or Amazon or startup founders (and yeah there are many things to be said), but I really have nothing but great things to say about all of the individuals from our time there. Admittedly, my opinion doesn't carry any particular importance.
On the other hand, I'm not surprised at all when I reflect on the actual Techstars program. Techstars, as an organization, seemed totally in the periphery for much of the program. The lion's share of valuable advice and resources came not from the organization itself, but from everyone else.
Echoing another's sentiments, the value of Techstars seems heavily influenced by location and the mentors involved. We were lucky to only be thinking about two great programs, Seattle and NYC. If we had ended up somewhere else maybe I'd be completely unsurprised.
We went through Techstars Chicago in 2016 and found the network to be top-notch. We met so many incredible people who helped connect us to resources we could not have gotten otherwise.
I think Techstars' inability to pivot, go back to basics, and learn from their mistakes all contributed to their downfall. Now, I know they're not completely shutting down, but I don't know how they'll come back from this. They spent so many years touting that they were the anti-YC. Focusing on areas like the Bay Area means they're going to be competing with other programs and resources that have been part of that community for years. It's going to be an uphill climb for them and I don't think it's going to work.
I felt proud going through the program until I learned about the branded programs emerging "Techstars Disney" and "Techstars Barclays". It felt like the prestige was vanishing, and I rarely mentioned it on my CV afterwards.
Funny though, I raised about $1M through the Techstars program, and over $10M through other VCs. The Techstars VCs were the least helpful (but this could have been the London ecosystem at the time. London, these days, is quite good when it comes to early stage, especially some of the syndicates like Ventures Together. I digress).
Result is that there is a low volume of content and participation.
The end result is ~nobody would choose Techstars over YC. In a power law business, that's a death sentence.
Techstars didn't seem appealing not for the concept, but because it smelled funny. I think there is room for a robust global YC-style program. I see a lot more opportunities outside of SFO than inside, and especially in significantly different markets (and especially in ones with lower cost-of-labor).
I've done multiple successful startups, have a pretty good record of securing funding, customers, and exits, so I'm confident I'd be an easy bet for YC, simply based on track record. I'm also confident that I'd enjoy YC and learn a lot (even though I expect I'd be older than most of the kids there).
However, I've mostly cut out travel since I've had a family. I turn down speaking engagements and conferences, and limit to a very small number of trips a year. It's worth it.
I'm certainly wouldn't advise anyone to try explaining to their child why they won't see Daddy or Mommy for three months.
If I were to categorize the mistakes in my life, most involved prioritizing work over family. Older people always tell younger people that, and younger people never believe it.
You have no idea who is competing for whom.
I'd enjoy YC, and I'd learn from it, but it's definitely not something I need to do. Have a quick list at the ages and backgrounds of people who started large companies.
Another life lesson, this one for you: Don't be a dick. There's no upside, and a lot of downside.
That's fine? I'm not criticizing that path: it's more pleasant, enjoyable, and probably better for almost everyone.
You're coming at me with a level of hostility that is unwarranted.
> Another life lesson, this one for you: Don't be a dick. There's no upside, and a lot of downside.
You're the one being patronizing and talking down to me for no reason.
YC is simply not interested in people who's goal is to earn a "reasonable salary." It doesn't fit their business model.
That doesn't make YC bad, and it doesn't make you bad. It just makes you a poor fit.
That's where the hostility, ignorance, and arrogance came in.
Startup incubators are interested in people who are able to build billion-dollar startups. That's the business model. Full stop.
Random hazing rituals might, perhaps, be a good prediction of how vested someone is, and with no track record, you look for sharp, teachable, willing to work hard, and committed. However, a track-record of having built successful businesses is a much better predictor of being able to do so again than some hazing ritual about being willing to make absurd sacrifices for no reason. Indeed, being willing to make that sort of compromise is probably a good indicator the person has poor judgement, since if there's one thing startups need to do is aggressively prioritize.
> You're the one being patronizing and talking down to me for no reason.
Reread what you wrote, and you'll see the reason. It's for your benefit. You have no idea who I am, and you decided I'm a "poor fit." Assume much based on zero information?
Figure out how not to be a dick. It will hurt you in the long run, more than you imagine.
The days where VCs just fund anything is over and thr effects of post-ZIRP are kicking in with the closure of these funds.
Time for all startups to make a profit instead of trying to go from round to round and gamble and then inevitably shut down or get sold for scraps (if lucky)
You might as well work at an existing business rather than waste investors money when you know it's an expensive endeavor and you know there is no route for investors to get their money back.
Especially in this market where money isn't cheap anymore, not everything is investable.
A double negative.
But say you want to make a new gadget, yeah you would find it hard to bootstrap unless you are already a multimillion dollar company.
Zipline looks cool, tough space to compete with Amazon though. The other two I've never heard of.
What makes these "billion dollar" successes? It looks to me like like Remitly is public, and down 60% since IPO. Who won here, besides insiders who cashed out? Certainly not current shareholders.
The tech world has a strange way of measuring success. The author is conscious of (and mentions) ZIRP implications, but doesn't tie it to the their own work. VCs trading insider shares at escalating valuations isn't real value.
Edit: I think my comment sounded harsher than I intended. These companies are successful, in that they exist and are delivering product to consumers. That's great. But "billion-dollar" outcome is a stretch in the face of ZIRP. How much value is there net of investment?
To be fair, this is your thesis, and you are free build your portfolio around it.
VC’s portfolios are built around a different thesis, and a big part of that is preferred shares and valuations.
Note that both you and VCs can be “correct” (i.e. profitable) simultaneously, you’re just trading on different things.
They are not in "here's your hamburger" business only.
YC is there to make money for its investors. And the way to do that is to invest in the best startups and make them huge.
The only source of conflict then comes from YC vs. the startups. For example, do you enforce strict legal structures on all companies. And here the dominant priority is of course YC itself. But this is expected, and given the rationality also easy to work with.
My only experience of Techstars was a chance introduction in 2015 to Jon Bradford, who iirc built Techstars Europe. Back then I ran a 5 person startup split across London and Serbia, targeting enterprise with an observability tool for data science / data engineering teams.
It was mid-2015 and we were a couple of years in, boostrapped, and had just landed our first sale (to a big 6 energy provider in the UK). One day, as I was walking back to Waterloo Station from our WeWork on the Southbank, I struck up a random conversation with someone who also happened to be headed in the same direction, incidentally also ran a startup, had been through Techstars' programme and was very impressed with their experience. They suggested I speak to Jon, made the intro that evening, and I ended up speaking to him a day or two later.
When we spoke, I opened on autopilot with the usual who/what/why/how elevator, explaining that I ran the commercials out of London but that the rest of my dev team was based in Nis, Serbia.
"Oh Nis, yeah I know it. On the way from Belgrade to Sofia, right? Yeah, I know it well."
I remember having to check myself. For context, Nis is a little known city of 200k people in Southern Serbia, dwarfed in popularity by Belgrade or Novi Sad. It's also my home town, where I spent the first 10 years of my life. I'd lived in the UK for 20 years at this point, and had told my origin story to probably a couple of thousand people, yet this random VC bloke was the first one to not only have heard of the place, but to take a genuine interest in it and the local tech scene (it turned out that he knew it because one of Techstars EU's first successes, Petcloud, also had a presence there).
Pretty early on in that conversation, it was clear to Jon that we were far too far along in our journey to be interesting to Techstars, and he told me as much. It didn't stop him from talking to me for almost an hour though. He gave me a bunch of advice and offered to introduce me to a number of very relevant contacts (which looking back I could have taken way better advantage of had I not been obsessed with our sales pipeline).
I know this post has ended up like some kind of weird eulogy, but of the hundred or so VCs I must have spoken to in my life, 'Jon from Techstars' still stands out as the most memorable and genuine by some margin - a very atypical VC in my experience. I'm not sure how beneficial those qualities were for the long term success of Techstars, especially reading some of these comments, but I do remember feeling almost disappointed that I finally had customers because it meant we weren't eligible for Techstars. I still feel a little disappointed almost ten years later, so I guess they must have had something there.
“It began with an effort to extract “sponsorship” dollars from local service providers: the lawyers, accountants, recruiters and PR firms that cater to startups.”
The YCombinator strategy was to give founders money and get them to focus on building a product.
Techstars, on the other hand, sought to extract money from founders to support their sponsors to nickel and dime dreamers and bog them down with time wasting distractions like articles of incorporation and formal business plans and commercial bank accounts and press releases —- because these are the vanity services their sponsors provide. You feel like you are building a company when you consult a lawyer and accountant creating an S-Corp and delegating shares.
But Y Combinator has had direct access to the unlimited fount of free money created by zero interest rates so they only needed to appease the vultures capitalists with pump and dump schemes.
Both methods are flawed, even if the stated aims of the organizations are noble.
Enshittification strikes again!