Wednesday, September 21, 2011

TechStars raises $24M fund, grows startup support

By James M. Connolly

Entrepreneurial organization TechStars has raised $24 million in a new fund it plans to use to boost its support of participating companies by $100,000 per startup, having extended its reach from the original site in Colorado to programs in Boston, New York, Seattle and the cloud.

TechStars today announced the $24 million funding, which was backed by Foundry Group, IA Ventures, Avalon Ventures, DFJ Mercury, SoftBank Capital, SVB Financial Group, RRE Ventures, Right Side Capital Management, TechStars alumni, and several individuals, according to TechStars founder and CEO David Cohen.

The additional $100,000 for each TechStars company comes in the form of a convertible note, and applies to all 2012 programs, which are expected to involve 60 companies. The maximum a company can receive is $118,000 total.

“Of particular note in Boston is the fact that applications are now open and our next program starts just around the corner, in January. So Boston area companies (or those that want to spend some time there) can take advantage of this right away,” said Cohen.

He noted that the additional $100,000 will help to carry companies through the three-month program, saying, “The goal here was to decrease the amount of immediate and burning need that many of our companies faced when entering the program. For many of them, it was a struggle to figure out how to make it to demo day and then a few months later while their rounds came together.“ He said that the early emphasis on fundraising was a distraction for participants.

The larger dollar amount is unlikely to change the type of company that TechStars attracts, said Cohen. “We don’t think this will change the types of companies that apply or the stage they’re in all that much. The average TechStars company goes on to raise $1 million plus, so this is just going to allow them to stay focused during the program and make product progress. We do hope that TechStars will appeal to an even wider side of would-be entrepreneurs who struggled to see how they could survive the program (and, potentially a temporary move) on fewer dollars,” he reported.



 

Editor's Note: The $100,000 funding is in addition to the potential $18,000 maximum a startup may receive from TechStars.