In just a few years, TechStars has become one of the world’s leading startup accelerator programs.But as it heads into its fourth cycle in New York City, there are a lot of questions that need to be answered.
Founded by David Cohen in 2007, TechStars incubates startups, offers mentorship, and coaches founders on scaling companies and raising capital. The competitive program accepts between nine and thirteen startups per class, and it runs in multiple cities: New York, Seattle, San Antonio (TechStars Cloud) and Boulder.
Although the program was founded in Boulder, its most popular city seems to be New York, where former Managing Director David Tisch helped attract more than 1,000 applicants per class from all over the world.
Last summer, Tisch resigned to focus on his own fund, Box Group. TechStars hasn’t picked a permanent replacement and it’s unclear if the program can run successfully without Tisch and his contacts.
In addition to Tisch’s departure, startups are experiencing the “Facebook Fallout” — the negative effects of Facebook’s underwhelming IPO on new companies. Fewer startups are being founded and funded, which could hurt accelerator programs like TechStars.
Finally, TechStars has yet to see billion-dollar startups arise from its program, the way Paul Graham’s Silicon Valley program, Y Combinator, has. Can Cohen’s company compete at the same level and produce companies like Airbnb or Dropbox?
We met with Cohen and Nicole Glaros, who will be running TechStars NYC’s Spring 2013 program. Here’s what they had to say about the future of TechStars NYC.
About 1,100 startups have already applied to the spring program. Last spring, the TechStars NYC program attracted more than 1,600 applicants. There’s always a surge in applications during the final week, and TechStars could easily see the same number of applications this year as last year, despite Tisch’s departure and the Facebook fallout. About 30% of the applicants are international startups. One of the applicants is a 3-time Emmy nominee and another is a New York Times best-selling author. (Startups can click here to apply)
Many of the mentors are back, and more mentors are on board. TechStars has built its brand on the quality of mentors it attracts. Fred Wilson, Brad Feld and Dick Costolo have all mentored its startups. This year, impressive entrepreneur and investor mentors are still on board. Joel Spolsky of Stack Overflow, Alexandra Wilson of Gilt, Ben Siscovick of IA Ventures, former Associated Content CEO Patrick Keane and Jay Levy of Zelkova Ventures are just a few who are participating.
TechStars has narrowed Tisch’s replacement down to 5 candidates from 35. TechStars takes founding teams very seriously when selecting startups for its program. So naturally, Cohen wants to make sure he finds the right replacement for David Tisch. Cohen says he’s already met with 35 people about the position, most from New York and a few from California. He’s narrowed the search down to five candidates. No offers are currently on the table, but Cohen says he hopes to announce a new hire soon.
There some TechStars companies that could soon be worth billions. Most people believe ThinkNear, which was acquired for $22.5 million, is TechStars’ most successful portfolio company. But it’s just the biggest exit to date. Cohen believes one TechStars company, SendGrid, could be worth $1 billion soon. It isn’t a sexy consumer company like Airbnb, but it’s a fast-growing transactional email business that’s used by companies like Pinterest and Foursquare; it has more than 150 employees.
Yes, the Facebook Fallout could mean trouble for startup accelerators. But TechStars is a survivor. There are now about 700 programs like Y Combinator and TechStars that incubate startups. But Facebook’s botched IPO and Zynga’s struggling stock have spooked investors and founders alike. Many accelerators will take a hit. But Cohen says accelerators aren’t actually that expensive to run. The TechStars brand has grown big enough that it’s attracting applicants from all over the world, and it’s one of a few programs you can bet will survive.
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