HOW MUCH DOES TECHSTARS INVEST?
Techstars is more than just a startup accelerator; Techstars it's a global ecosystem that empowers entrepreneurs to succeed. Founded in 2006, Techstars has emerged as one of the most prestigious and influential startup accelerator programs worldwide. It operates on a simple yet powerful mission: to help entrepreneurs succeed by providing them with the resources, mentorship, and network they need to thrive. - Read more about What Techstars is here
Techstars' primary investment is at the accelerator stage, and they also have a dedicated follow-on fund to continue to invest in portfolio companies as they grow.
How much does techstars invest?
Techstars makes a first investment of up to $120,000 in each company at the time of the accelerator program: a $20,000 equity investment for the right to 6% in common shares, and an optional $100,000 convertible note.
$20,000 Equity Investment In Common Shares: Techstars purchases the right to 6% of the company’s Fully Diluted Capital Stock at the Qualified Financing (as defined below) and provide $20,000 upfront.
Techstars will be issued 6% common shares immediately before the Company’s next equity financing of $250,000 or more (the “Qualified Financing”).
Optional $100,000 Convertible Note Investment: If the Company elects by the start of program to take the Convertible Note investment, Techstars invests $100,000 USD in exchange for a Convertible Promissory Note (“Note”), payable in or around the first week of the accelerator program and subject to the Company’s satisfactory completion of their due diligence and a fully executed investment agreement
Maturity: Techstars’ Note has a 2-year term and will convert in the next equity financing resulting in aggregate proceeds to the Company of at least $250,000 USD (a “Qualified Financing”). If a Qualified Financing has not occurred prior to the Maturity Date, their practice is to extend the Note for another 1-year term.
.Interest: Simple interest shall accrue on an annual basis at the rate of 5% per year.
Valuation Cap: Their Note has a standard valuation cap of $3,000,000 USD. This cap is only increased if a company has closed greater than $250,000 USD in funding prior to receiving the Techstars Letter of Intent through either (a) an equity round with a pre-money valuation greater than $3,000,000 USD, or (b) convertible notes/SAFEs with an automatic conversion cap greater than $3,000,000 USD. If that's the case, the valuation cap on their Note can be increased to match the higher valuation/conversion cap, up to a maximum of $5,000,000 USD.
Techstars will also receive 6% of the Token Reserve if a company is conducting a Network Launch using distributed ledger technology (an ICO, SAFT, token event, etc). A description of their standard deal terms is here.
Is techstars investment worth it?
100%. It was worth every share of equity. Zero regrets.
I founded a company called Gondola (formerly Demoflow) in 2020 and we went through Techstars Boulder that spring. We opted to take both the $20k equity investment and the $100k note. We felt the program and Demo Day alone, provided that much value. Techstars has been great about continuing to provide value post-program. They’ve been eager to invest more capital when the time is right and continued to be a support to our team.
As we went through our acquisition, they were extremely supportive in helping us find the right type of company, deal dynamics and ensured we got the deal across the finish line. I only have glowing reviews about the Techstars program and feel their investment was 100% worth it.
