When Is Your Startup Ready for an Accelerator? A Conversation With Techstars and OneSeven Tech – Part 1

For early-stage startups, a company’s success depends on identifying the right problem, providing the right solution and serving the right customer — at the right time. Participating in an accelerator program can be an invaluable aid to that process. JP Ferro, vice president in Bridge Bank’s Technology Startup Banking group, spoke to Malte Witt, managing director of Techstars Boulder, and James Sullivan, founder of OneSeven Tech, to gain insight into what companies need to know about the Techstars accelerator programs. 

BRIDGE BANK: At what stage do companies typically participate in Techstars? 

TECHSTARS: Most of our startups have raised small angel-round funding, and some have even raised a pre-seed round before participating in the three-month Techstars program. We invest up to $120,000 in every founder company that participates, with each accelerator investing in 24 companies per year, divided into two groups.

BRIDGE BANK: How does Techstars determine the verticals you invest in?

TECHSTARS: We have a variety of programs focused on different verticals. Techstars Boulder has historically been vertical-agnostic. We invest primarily in B2B software and B2B enterprise software, and we’ve done some consumer investments as well. We also have several vertically focused accelerators for health tech, energy tech, fintech, web3, ag tech and clean tech, to name a few. (See all of Techstar's accelerator programs.) 

One of the unique differentiators of Techstars compared to other accelerators is that we’re a mentorship-driven accelerator. We have found that the greatest way to mitigate some of the risks at the earliest stage is surrounding founders with subject matter experts, investors and former founders who likely have expertise in the space. If you’re considering Techstars specifically, we have an expectation that you’re ready to receive lots of feedback and get lots of perspective. We are a very high-touch program. 

BRIDGE BANK: How does a startup considering an accelerator know if they are ready?

TECHSTARS: We look at startups from four perspectives: team, market, company and idea. Techstars will invest in founders at the earliest stages, while they just have an idea. But most founders coming into our accelerator have a product or product and market. Some companies have early customer traction and are looking to scale, while some are looking to iterate their way toward product-market fit. The accelerator can help with that.

One of the first things I look at is a concept known as earned insight. Do you, in your past experience, have experience — ideally lived experience — that gives you a unique point of view into the problem you’re looking to solve? Rather than hearing first about the solution, I want to dig into how well they understand the problem. I’m more intrigued by founders who are deeply committed. 

BRIDGE BANK: What are you looking for in terms of the team? 

TECHSTARS: Do you have an early team established? This may include a more business-oriented founder and a technical founder — someone who can execute on product vision, hiring and fundraising and someone who can execute on building the solution. I also ask how the founding team knows each other and whether they have worked together before. A lot of early investing is oriented around whether the team has the conviction and the dedication to one another and whether they’ll stick with it when things get challenging.

Also, many founders I work with are not working full-time on the startup when I meet them, but there is a requirement that you are fully dedicated to this company by the time the accelerator starts. Not all accelerators operate this way, but as soon as you enter Techstars, you have stepped onto the path of building a venture-backed company, which requires the team’s full-time dedication. 

ONESEVEN TECH: I would add that if you are still at the point where you’re working a full-time job, you need to bring in the right people to run the day-to-day. You may need a project manager who can give you a quick briefing in the morning, where you can point them in the right direction or realign objectives, and they run with it throughout the day and give you an update of what was accomplished. That’s especially important if you’re managing multiple outsourced vendors.

BRIDGE BANK: How much progress should a company have made before joining an accelerator? 

TECHSTARS: I’m looking more at velocity than progress over a certain amount of time. I’m most curious about when you really started focusing on it and what you’ve achieved. 

BRIDGE BANK: Is there a typical outcome for Techstars startups in terms of timing to fundraise?

TECHSTARS: Techstars is pretty bespoke for each of our companies. Some founders will raise in the program, some have raised before the program, many will raise after the program. I advise decoupling fundraising from any accelerator that you’re doing — raise money when it makes sense for your business. You’ll have a partner to help you raise whenever you are raising, and we put building blocks in place to maximize your chance of success. The average raise post-Techstars is just over $1 million.

BRIDGE BANK: What else should founders consider in regard to fundraising as we head into 2024? 

TECHSTARS: The capital markets have shifted, and it is a harder market to fundraise. Everyone is aware of this. We describe it this way: Before, you might have gotten VC dollars by being good enough. But being good enough isn’t going to get you capital these days. You have to demonstrate a unique value proposition and a unique team composition. I used to advise founders that an effective pre-seed or seed raise might take three or four months, but that trajectory is longer now. So when founders have nine months of cash in the bank, they should be looking at fundraising probably sooner than they expected, and they are likely going to get fewer dollars. That makes it important to consider not only the dollar amount you want to raise but how much you actually need to raise to achieve your next milestone. Investors aren’t excited to extend your runway — they’re excited to fund you so that you achieve your next business milestones. 

BRIDGE BANK: With fundraising being so important, should the whole team be involved? 

TECHSTARS: It is the CEO’s job to be leading the charge in fundraising. They may need to bring other cofounders or technical leads into the conversation at some point in the diligence process. The only way to raise a round more quickly is to make fundraising your full-time job, and 90% of that job is in the preparation. Investors are going to give you homework: “Come back to me once you’ve reached XYZ milestone” or “Come back once you’ve done a financial model.” Progress on your business will generally slow as founders are dedicated to the round, but you cannot outsource your fundraising.

With 40 accelerators across the globe, Techstars is one of the world’s most active pre-seed investors, with a portfolio comprising over 3,600 companies and a market cap of more than $100 billion. OneSeven Tech is a Digital Product Studio for startups. Empowered by a global team, it helps companies plan, design, build and support high-quality digital products. Its portfolio of clients has raised over $55 million from top VCs and accelerators like Greycroft, Techstars, Visible Hands and Lerer Hippeau.

Read Part 2 of this conversation: How to Get Started With Minimum Viable Product (MVP).