Yes, this a great example of what not to do when you know your company is doomed, and the founders are killing their long-term prospects of future ventures with all this bad karma, but there's no need to drag Techstars into it.
Techstars and/or its affiliates would have taken equity in exchange for their services. They're part owners of the company as as such bear some measure of responsibility for its actions.
>> "Techstars doesn't market itself as some bastion of credibility to consumers."
Yes it does. It's consumers are small startups in need of seed money and strategic advice. Brand name is very important, and one of any incubator/accelerator's selling points. If a startup can associate itself with a highly regarded seed brand like YC or Andressen-Horowitz it makes its valuations much higher down the line. If Techstars becomes associated with shady ventures, it will hurt its ability to find willing participants.
Techstars may not market themselves as a measure of credibility, but i'm sure it is something they care deeply about. If an incubator constantly spat out startups making deeply questionable decisions like this one they would have far less startups knocking on their door.
Obviously Techstars can't force people to stop shenanigans, but I hope for a society where we expect more of each other, where behaving ethically is not more or less important that profits but simply completely necessary.
I'm not sure I can, in good conscience, condemn someone for expecting more of a renowned institution, however minor that renown is. I also think that the author of this post is in a place to understand what is possible and expected of investors, given she is an Operating Partner at Khosla Ventures.
From their website: "Techstars provides [...] intensive mentorship, and an amazing network of mentors [...]"
Seems like they are all about credibility.