After announcing it will close its accelerators in Boulder and Seattle and recently closing its Austin program—which TechCrunch was the first to report on in December—Techstars found itself under fire for some of its choices and execution.

Spencer Rascoff, a co-founder of Zillow, stated on X, for instance, that the Techstars memo terminating its Seattle program was a "brutal takedown" of the startup community in that area. Alum Liz Giorgi of Techstars Boulder also expressed her displeasure on X, saying she was "surprised by how poorly this was handled."


Maëlle Gavet, the CEO of Techstars, was questioned by TechCrunch about internal affairs and the perspectives of her detractors. To make it clearer and more concise, this interview has been altered.

TechCrunch: There are others who argue that entrepreneurs have not benefited most from the shift from local to more centralized modes of fundraising. How would you respond to such critiques?

Maëlle Gavet: When Techstars was founded 17 years ago, it was almost like a franchise; a managing director would go into a location and raise money under the TS name. However, that would only be a small, isolated bubble.

This initially aided in the company's growth. It was a very innovative strategy that operated incredibly effectively at the time, with the majority of the funding coming from local investors.

From a return standpoint, the franchise model has its limitations. Its extreme narrowness makes it extremely volatile. Institutions are typically uninterested as well. As a result, we've seen time and time again that the model essentially no longer functions. Particularly in the US, where every major city now has its own ecosystem. Over time, we came to understand that, due to our size, our strength was in the infrastructure we could offer founders — not only during the program but also beyond.

We made three more attempts at local fundraising over the course of the last six months to see whether it would catch on this time. However, it proved that it's not functioning as well as it once did, so we gave up on that test.

So, what is TS's current position with regard to obtaining fresh funding?


I am unable to remark on fundraisers. As I wish I could, believe me. I would really like to correct the record.

I can tell you that, broadly speaking, we have two kinds of finances. They're all pre-seed. Our flagship and largest fund, TSA 2021, is our macro or institutional fund. It is supported by institutional investment funds, endowments, and several LPs, and we are wrapping up its deployment this year. This $150 million fund has no industrial concentration and is also universal. If anything, our goal is to have an extremely well-balanced and highly varied industrial portfolio. We forecast low volatility and very predictable results in this way. You receive 800-900 seats across the board in a certain fund.

Next is a fund for solo LPs. A little over $80 million is allocated to the Advancing Cities Fund. These corporate partner funds concentrate on the particular ecosystems in which they operate. In terms of industry, their investing strategy is rather limited. In order to gain access to innovation for future M&A or commercial alliances, the companies seek specific relationships with the startups. A distinct risk profile exists.

We completed over 700 pre-seed investments last year. Approximately 800 investments should be made this year, increasing both domestically and internationally. The pipeline appears robust.

Some claim that because there was less local fundraising, local MDs had to work more and receive less money. To that, how would you respond?

We don't discuss pay, but considering the benefits package, hiring MDs has never been particularly difficult. Although we are unable to comment on the opinions of current or past employees or MDs, the new remuneration appears to be highly appealing to a whole new class of MDs.

Some contend that when a corporation has corporate partners, the corporations become the client, not the founder. In response, what do you say?

That isn't consistent with our statistics. I'm not quite sure why. Even while this may be a simple story to tell, the corporate program's applications and acceptance rates show that these students perform well. and highly sought-after, with partners that entrepreneurs genuinely want to be a part of, like NASA, eBay, and Ecolab. As a former business owner, I would have cherished having access to eBay when I was working on e-commerce projects.

Also, we choose our partners very carefully. I believe that occasionally people have the misconception that we will accept everyone.

We are, first and foremost, the world's busiest pre-seed investor. The returns we generate for our LPs determine our life and death. With partners, there is no motivation to reduce return in exchange for a few fast bucks. To be honest, there's also a risk to one's reputation.

How is the Advancing Cities Fund, which focuses on DEI, doing?

To be clear, that was brought up by many wealthy people, and it was on the JPMorgan wealth platform. It's neither a JPMorgan fund nor JPMorgan money. To get that money, we had to spend a lot of time fundraising. They acted as the fund's placement agent. There appears to be some misunderstanding there.

Out of that $80 million fund, which was created in May 2022, we have deployed two thirds of it, and things are going well.

In response to claims that your company has been lacking focus, how do you respond?

I'm not aware of that. We're such an unconventional investment company that many people find it somewhat unsettling from the outside. I suppose many of the folks who place us in the venture capital box see us and ask themselves, "Wait, so you have programs in how many cities again?" To be clear, this year will see us invest more money than in previous years. By 2024, we plan to have 50 accelerator programs operating in over 30 sites worldwide.

We have more partners and mentors than we have ever had, but I am sorry that I am unable to provide you with the financials.


How many central employees does the corporation still employ? Have you experienced layoffs? What happens to employees in the cities where you no longer run programs?
 

A little over 300 people work for us. Workers are engaged in programming for ecosystem growth, which creates deal flow for accelerators, or they are managing accelerator programs.


A recent restructure resulted in the departure of a few individuals. We attempted to reallocate employees to other roles and jobs in other markets when we decided to quit operating accelerator programs in other markets.

There seems to be a lack of comprehension or a reaction along the lines of "If you're not in a city anymore, that means you don't care" behind some of the reactions this week. It's odd to think that Techstars must physically exist in an ecosystem in order to participate in it. Other investors are not being asked that. It appears that we are the only company subject to this requirement, requiring us to establish an accelerator in a city and a physical crew. For instance, we make massive overall investments in the United States. We Midwest people are highly busy. However, it's not necessary for us to have a physical crew everywhere.

We also have infrastructure personnel that manages marketing and fundraising because we use social media extensively. We participate actively in numerous summits and events held worldwide. They are the ones who construct the technological infrastructure.

One aspect of Techstars that is often overlooked is the requirement to develop a sizable tech stack in order to oversee a portfolio of more than 4,000 firms as well as all of the graduates, mentors, shareholders, and investors. Our hybrid model is exclusively available at Techstars. We want entrepreneurs to benefit from our global infrastructure and all that we're doing, but we also want them to have that very intimate, hands-on in-person experience. We're always attempting to strike a balance between the hyperlocal and the global.

Some claim that you're concentrating on markets with the least need for you.

As investors, we frequently acquire six to ten percent stakes in businesses. Our role is to identify exceptional, unstoppable founders and assist them in achieving greater success. Our prosperity and the success of our LPs both depend on their success. Some people have a very strong belief that using an accelerator to be physically present in the market is the only way to establish an ecosystem. We are stating that we are unrelenting in our search for entrepreneurs worldwide and that we have backed more underrepresented founders than anybody else, including women, people of color, Midwesterners over 50, and people of color.

4,500 mentors are actively engaging with us globally.

Furthermore, there are places where it is actually simpler for founders to succeed, whether we like it or not. We urge them to do so as they may always return to the habitat they came from. However, we would like them to be connected to Silicon Valley, Los Angeles, New York, and London.


Furthermore, just because we're not holding accelerator classes in a certain area doesn't mean that we're giving local events and businesses in that environment our continued support. This is not a market withdrawal. In 2024, I venture to say that we will be supporting a significant number of entrepreneurs from Texas and Washington state.

To what extent did the decisions made by LPs like Silicon Valley Bank and Foundry Group impact your own operations and choices?

LPs weren't all they were. They own stock as well. Furthermore, considering that the LPs were generally quite little in our budget, that element is far more significant than the LP piece. Brad Feld, a representative for Foundry on the board, sent me an email approximately an hour ago. From that angle, nothing has altered.


SVB is currently going through more of a transitional period as they continue to attempt to decide how to proceed with the business. Our representative is still on the board.

Regarding Techstars 2.0, what excites you the most?

Making a new curriculum to be more effective excites me much. We're working on a lot of different things. However, building something akin to this "masterclass for entrepreneurs" excites me the most. I can't believe how much knowledge we have gained over the past 17 years, especially when I consider our list of mentors. Unfortunately, a lot of stuff was compartmentalized in the past.We have at last devised a method via which entrepreneurs can obtain our complete body of knowledge and mentorship network.