Startup incubator and network TechStars has raised $24 million in new funding from the Foundry Group, IA Ventures, Avalon Ventures, DFJ Mercury, SoftBank Capital, SVB Financial Group, RRE Ventures, Right Side Capital Management, TechStars Alumni, and several individuals. TechStars is actually already directly funded by over 75 venture funds and angel investors, but this new funding will be used to offer every single new TechStars company an additional $100,000 in funding in the form of a convertible note immediately upon acceptance into TechStars.
TechStars, which launched in 2007, is a “startup boot camp” for tech entrepreneurs in which selected startup receive up to $18,000 in seed funding (or $6,000 per founder up to three founders in exchange for 5 percent of the company), three months of mentorship from successful entrepreneurs and investors, and the opportunity to pitch to angel investors and venture capitalists at the end of the program.
One of the differentiating factors in TechStars is that it takes a mentor and community-driven approach to incubating startups and supporting founders. The company pairs at least 10 mentors in the local technology industry with each startup to give founders access to both seasoned entrepreneurs and venture capitalists.
The incubator has programs in Boston, Boulder, New York, Seattle, and recently launched a new thematically focused business kickstarter, dubbed TechStars Cloud.
Earlier this year, TechStars also open sourced its model, recently announcing the TechStars Network as part of the White House’s Startup America initiative to spur entrepreneurship. The incubator’s model is now being used by over 20 programs globally, including Chicago’s Excelerate Labs.
TechStars co-founder David Cohen says of the news “Acceptance into TechStars now means an additional $100k of funding from a diverse group of top tier investors. This additional funding will allow TechStars companies to stay focused on making progress during the three-month program instead of spending that valuable time on early fundraising in order to make ends meet. It’s also enough funding to entice a broader spectrum of would-be entrepreneurs to consider TechStars.”
The important message with this news is less about the funding for TechStars and more about the extra money each incubated startup will receive for participating in the program (which is on top of the potential $18,000 startups are given). Yuri Milner and SV Angel teamed up earlier this year to offer the companies housed in fellow startup incubator Y Combinator $150,000 in convertible debt.
Because of this move in January, the incentive to join Y Combinator was strong. But now TechStars has leveled the playing field somewhat for startups and it will be a harder decision to choose which incubator to join (not to mention the fact that TechStars has programs in a number of cities in the U.S.)
Similar to Y Combinator, TechStars has been able to produce a number of impressive startups via its incubator. We’re told more than 70% of TechStars companies go on to raise venture or angel capital after the program ends and 7 of the first 20 companies incubated have now been acquired. The incubator is also subject of a documentary “reality TV” show on Bloomberg TV, which debuted last week and will run six episodes through October 18th. We’ve embedded the trailer below.
TechStars is funding approximately 60 companies per year, and this additional level of funding applies to the incubator’s 2012 (and future) programs.