Update: This post has been updated to reflect the scope of Techstars Ventures’ investments. The fund will back not only graduates of its accelerator program, but also companies founded by mentors and former mentors.
Techstars has raised $150 million for its latest vehicle, Techstars Ventures (formerly known as Bullet Time Ventures) as it expands from seed into Series A investment.
“The $150 million third fund is focused on seed and Series A investments around the Techstars ecosystem, alumni that have been through the past companies, and by the 1500 or so mentors [in Techstars],” David Cohen told me.
Techstars Managing Partner David Cohen
In all, more than $5 billion in financing has been invested in companies that are in the Techstars ecosystem, Cohen says (although about $2.8 billion of that could be attributed to Uber alone). This ecosystem includes companies founded by Techstars mentors (or former mentors) as well as the fund’s affiliated accelerator.
Graduates of the accelerator have raised roughly $1.1 billion.
As part of the firm’s expansion into more and larger deals, it’s also added some new partners including Jason Seats, the founder of Slicehost and a manager of Techstars Cloud and Austin accelerator programs; Nicole Glaros, who has worked for the accelerator in Colorado, New York and Texas; and Ari Newman, the founder of Flitrbox, which was acquired by Jive in 2007.
Still it’s a hefty chunk of change for the companies which emerged from the now 7-year-old accelerator program.
Around 60 of those companies have been acquired in M&A deals, pointing to strong returns, but both Cohen and his partner Mark Solon agree that the best is yet to come (again: Uber).
And the accelerator’s venture fund is growing in tandem with its accelerator program. From the two initial programs that the accelerator launched, Techstars has now grown to include 15 programs run entirely under the Techstars brand or in partnership with some of the world’s biggest companies.
“TechStars was only one or two programs a year til 2010,” says Cohen. “The broader ecosystem is only a few years old.”
Over that time the firm’s venture capital fund has expanded from just $5 million in 2009, to $30 million for the second fund in 2012.
Now, with eight partner programs and its seven Techstars locations, the venture fund needs additional capital to make more investments and follow their companies through later stages of growth, according to Cohen and Solon.
While the investments from the accelerator program remain unchanged, at a 10% equity stake for a $120,000 investment, the venture fund will be able to commit significantly more capital.
“Traditionally, we’ve made investments between a couple of hundred thousand and $1 million at the seed level. Now, at the Series A we’d be between $1 million and $2 million,” Cohen says.
Techstars Managing Partner Mark Solon
The latest Techstars Ventures vehicle has already made investments in three companies: Distil Networks, Conspire, and Ello.
Meanwhile, the new funding comes at just the right time for seed-stage companies who are having a harder time raising capital.
The woes (which are not confined to the US alone) could be an indicator that the venture capital industry is heading towards an inevitable downturn even as a proliferation of accelerators flood the market with early stage deals.
“Cycles are inevitable. As a private equity investor as long as you continue to invest the same amount of capital year in and year out you should be fine,” says Solon. “For the most part, the companies that we’re invested in are largely uncorrelated to the public markets. We try not to get distracted by the gyrations of the media or the public markets.”