[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/. 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!

[prostoalex]

> 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/. Such free. Much hosting.

No, an exchange of equity for money should be reviewed purely as such.

It's certainly in one party's interest to cloud the judgement by throwing in a bunch of free stuff, but that's also what used car dealers do when they "throw in just for you" a free carwash, a full tank of gas and, heck, why not, some free floor mats to close the deal.

[nemanja]

Your point is red herring. TechStars and YC investments are actually structured similarly (with slight differences, e.g. YC uses safe instead of convert debt) and primarily to optimize for tax. Not a single sophisticated investor will look at the valuation implied by YC or TechStars initial seed as indication of value. In fact, there is a very recent example of an up-and-coming consumer startup that closed a small seed round at ~$3mm valuation immediately after they got into an accelerator and at much higher valuation post demo day. VCs simply don't view accelerator rounds as "down rounds" and understand that value is likely to go up along with their mark.

Unfortunately for OP, they miss on each point by about a mile, come across as bit inexperienced (even arrogant) and at the same time lost on an opportunity to learn about building and growing a high tech business.

1. No Large Exits. Large exits are few and far between in general. On the other hand, TechStars has very few (~10?) startups per batch in any given city which could be why they haven't seen large exits yet.

2. Progress Stats. Don't see how an accelerator can help you hustle growth and how this is a relevant metric for evaluating an accelerator. Hustle is something that will always be squarely in founders' court and while mentors can help you with advice and intros, the results will largely depend on founders' efforts. If you are B2B, then access to alumni company network could be helpful.

3. Raising Capital Does Not Equate to Success. No, but it is very important particularly at an early stage where your sole purpose is to build something people want and grow it as fast as you can.

4. Equity. Math is wrong. Also, see above on the implied valuation point.

5. Mentorship Is Not The Primary Focus. I have no basis to judge this but highly doubt that OP would have any basis either since they didn't actually go through the program. Focus on demo day makes sense, especially as you approach it. Raising funding and giving your business a runway to growth is important.

[rgbrenner]

> But even if you want to add pure money related perks, please review this: 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://www.microsoft.com/bizspark/

http://www.softlayer.com/catalyst

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.

[boulos]

Disclaimer: I work for Google on Cloud Platform.

Yep, TechStars is just one of many incubators and accelerators we've partnered with (and we're happy to take more):

  https://cloud.google.com/startups

[xiaoma]

Why is it you focus specifically on accelerators? It seems to me that this both fails to help the start-ups that could most use the help and misses many of the very best start-ups that eschew accelerators altogether.

[riffraff]

that is true of most of these programs.

I guess it's to avoid having to vet each request individually.

Accepting them without any check means I'd create a new "startup" for each random page I put on the internet just to get free stuff, but having to verify each request may become a pain point quickly. Being part of an accelerator means that the work has been done by someone else.

[rgbrenner]

That's true.. but Amazon and BizSpark do not have the accelerator requirement* . Considering that those are Google Cloud's direct competitors, it's a fair question why they have that requirement when their competitors don't.

* (both programs give addtl resources if you're in an accelerator though - amazon portfolio package and bizspark plus respectively)

[pla3rhat3r]

I agree this seems too be missing the largest percentage of startups who are no less deserving for this kind of help. Many good startups could use this help. It's not hard to figure out if it's a legitimate startup. Just make sure they're registered to do business (i.e., FEIN, tax ID, state license, etc.).

[hootener]

I know it's easy to view perks as window dressing, but some of the things offered by TechStars are game changers for a business's tech teams, particularly in the early stage.

Granted, these perks do eventually go away and you have to have ample business justification for technology costs. But at the outset it's a godsend to know your business has the financial headroom to address any early technical challenge.

Benefits like web hosting / services credits allow all that financial hassle to get out of the way in the early game so you can just focus on delivering the best product possible.

[korzun]

> things offered by TechStars are game changers

List them. If you are going to use words such as 'game changers', you should explain what the perks are.

> Benefits like web hosting / services credits allow all that financial hassle to get out of the way

For most early stage startups, hosting costs represent extremely low % of expenses. Let's just call this what it is.. cheap way to lock start-ups in your infrastructure.

Same as investing.. give them a year worth of 'funding' and hope they become a massive paying customer.

[hootener]

> List them.

They're linked in the parent to my original reply.

> Let's just call this what it is.. cheap way to lock start-ups in your infrastructure

Whose infrastructure? Perks come from Amazon, Microsoft, Softlayer, Rackspace, Digital Ocean, and others. That's a pretty wide swath of hosting providers, but I guess if you want to run your business from a couple of boxes under your desk, you're on your own.

> For most early stage startups, hosting costs represent extremely low % of expenses.

Cost is relative. $5k/mo for a year (citing the BizSpark Plus credit directly here) can make a big difference early on when you're pre-revenue. In the case of TechStars, this is particularly true if you decide not to take the convertible note.

[korzun]

> They're linked in the parent to my original reply.

Okay how are they a game changers? How did they impact you?

> That's a pretty wide swath of hosting providers

They are still trying to do the same thing I described. It's a marketing play.

> If you want to run your business from a couple of boxes under your desk.

Been there, done that. Things were different ten years ago. Now you can get a VPS for a price of coffee.

> Cost is relative. $5k/mo for a year (citing the BizSpark Plus credit directly here)

It's $5K a month for a reason. They either have no traction or most start ups will never hit that limit or even come close to that price tag within the first year.

Sure there are exceptions, but if you are really pushing $5K /month on BizSpark at an early stage you should step back and figure out where you are now and where you want to be in a year after that credit runs out.

[hootener]

> It's a marketing play.

I hope there's no one in this thread naive enough to think otherwise. Of course it's a marketing play. That doesn't mean it can't benefit you.

Your initial point concerned vendor lock in and how this was a cheap way for companies to impose it. My response to that was "lock in to whom?" due to the diverse hosting providers on offer. Granted no mom and pop VPS provider is amongst the perk list (to my knowledge), but you have a several serious options to choose from.

In terms of my company the perks provided did anything but impose vendor lock in. I put parts of my infrastructure where it made the most sense for our business. This actually ended up being multiple providers amongst the list of those offering perks. If anything the benefits on offer from TechStars (and YES other accelerators that join these incentive programs) led to a more diverse and robust infrastructure setup which I hope will benefit us more in the long run.

But yes, fine, I acknowledged in another response lower down on this page that I should have qualified my original statement. The perks on offer were a game changer for my business because it gave us the freedom to choose providers and technologies that made the most sense for the product. For us this was crucial at an early stage and benefitted us immensely. I would assume our company was not necessarily unique in this regard, but perhaps I'm wrong.

In either case, who cares? You either were or weren't going to join TechStars or some other accelerator because the accelerator's terms made sense for your business when weighed against the benefits. Perks are just that...perks. Not fundamental lynchpins upon which you hope to run your business. My only initial argument was these perks are substantive and helpful, and shouldn't be dismissed outright. Apologies if that initial argument was not well-formed enough to get that point across to you effectively.

[kordless]

> if you want to run your business from a couple of boxes under your desk

Now there's an idea.

[rgbrenner]

> but some of the things offered by TechStars are game changers

You're really going to need to elaborate on this. Some of those perks (maybe even all of them) are not things TechStars paid for.. they're things that other companies chose to give away to startups in an accelerator (of which TechStars is one).

I really don't understand why I should give TechStars kudos because they slapped Amazon's logo on a page and a short blurb about a program that Amazon has for startups.

This is a serious question: if Amazon (and Microsoft, SoftLayer, Paypal, and others) setup a program for startups, give the services to startups, and pay for those services from their own pockets... What did TechStars do to earn a share of the credit for those programs?

[hootener]

> Some of those perks (maybe even all of them) are not things TechStars paid for.. they're things that other companies chose to give away to startups in an accelerator (of which TechStars is one).

Of course they aren't. Many are conditional against being enrolled in an accelerator. However, like I said in a previous post, the linked article relates to turning down TechStars. Full stop. Not turning down TechStars for some other accelerator that offers many of the same perks.

> This is a serious question: if Amazon (and Microsoft, SoftLayer, Paypal, and others) setup a program for startups, give the services to startups, and pay for those services from their own pockets... What did TechStars do to earn a share of the credit for those programs?

They were a participating accelerator in that program, that's all (to my limited knowledge).

In relation to these perks being "game changers" it isn't about TechStars having better perks than Accelerator X, it's about TechStars allowing me access to benefits I didn't have before joining an accelerator that ended up being enormously helpful to my startup.

The "game changer" in my company's case was the peace of mind that comes from knowing that for a full year we can shave at least $5k/mo (once again quoting the BizSpark credit here for convenience) off of our operating expenses. That's a technology hire for us in the city where we are based. So, for us, it means a lot.

I apologize because I obviously colored my original statement through the lens of my company's own experience.

This statement:

> but some of the things offered by TechStars are game changers

should have been qualified by stating that it was coming from personal perspective. So, in the short term, these perks meant a lot to the technological freedom of my company based on our technology needs and the other places we could put those savings to work based on our business needs at the time. For my business, the perks made a difference and were a big help early on, they may not do anything for your business or others.

[pla3rhat3r]

I just want to say that I completely agree with all the points you made. I just finished attending the Techstars' Patriot Boot Camp. And while this program isn't meant to be a traditional accelerator program, I really got a sense for what Techstars does and how they operate. Even though this event was highly condensed I learned a lot about my business and got a tremendous amount of value from the program.