Launching an Upstate Accelerator
The TechStars Network has agreed to accept an Upstate NY accelerator as a member and UVC is helping to organize a Summer 2012 program in Syracuse, NY.
TechStars is a 12-week "seed accelerator" program for software and internet startups. 10-12 teams are selected from hundreds of nationwide applicants and offered $12-18,000 in return for a 6% equity interest plus a commitment to move to the TechStars location for the duration of the program. Teams build prototype solutions and craft their business cases with guidance from the Program Director and a large network of experienced entrepreneur mentors. The program ends with Demo Day, when each team presents to an audience of hundreds of angel and venture capital investors.
The first TechStars program was offered in Boulder, Colorado in Summer 2007. Since then, the program has expanded to Boston, Seattle, and New York City. Through Winter 2011, 81 companies had gone through the program, with 43 raising over $50 million in follow-on funding. 68 TechStars graduates are still active, 6 have shut down and 7 have already been acquired. In the meantime, nearly two dozen similar mentor-driven programs have sprung up around the world and are now part of the TechStars Network.
Upstate Venture Connect has been following TechStars' progress and believe that our region has the resources and will greatly benefit from hosting a similar program. Upstate residents and graduates have been part of nearly every TechStars cohort. We have experienced entrepreneurs spread across our region and access to hundreds more among alumni/expatriate populations.
By hosting such a program, Upstate will be attracting high value talent and nationwide attention from highly motivated entrepreneurs, investors and world-class mentors. The presence of the program and its participants will also help locally based entrepreneurs and mentors to "up their game" through interactions with high achieving teams and mentors. Last, but not least, investors in such a program will hold a small stake in dozens of high potential startups and have the opportunity to watch their progress closely before making a decision regarding additional growth funding.
Investor Proposition: Financing the TechStars model requires a group of accredited investors to contribute a total of $500,000 each year for four years of operations. The structure is similar to a venture fund where investors are considered Limited Partners and the primary investment management functions are the responsibility of the General Partner (in this case the Managing Director). About half of the funding is given to the selected applicants in return for stock, with the rest being used to fund year-round operations (expenses related to management team, facilities, marketing, mentor network, candidate selection and follow-on support for program graduates). The primary compensation mechanism for the Program Director is via carried interest on the profits generated from positive company exits (i.e., a percentage of the amount remaining after investor capital payback). Interested investors should contact Martin Babinec for more details regarding amounts and terms of investment.
