For the last 15+ years every city that had a core group of leaders focused on upping their entrepreneurship game as an element of their economic development strategy pined for a Techstars Accelerator to land in their backyard. The cache of landing Techstars was a proverbial feather in the cap for those leaders. It was akin to days of old when economic development executives convinced a new factory from a branded car company or well-known manufacturer to set up shop in their region.

Let me be clear, I am/was one of those leaders. With the help of David Cohen and Brad Feld in 2009, I stood up 2 non-Techstars branded local accelerator programs (42 investments of 8 cohorts) in my region of Raleigh Durham (LaunchBox Digital and The Startup Factory with Dave Neal). Even with our own accelerator, I had dreams of convincing Techstars to come to my town one day.

As of 2023 I believe Techstars was operating about 50 programs across 45 cities around the world (the specifics are not exact or that important to this post). Last week, Techstars announced a huge shift (Techstars 2.0) where they will cease operations in many of those same cities to focus programs in the largest, most mature venture capital cities in the world.

I feel like this changes the model from the 1 of 45 cities to migrate to eventually the 1 of 15? Maybe 10? Cities where you will be surrounded by a full stack of investors. Cities that have a mature community and ecosystem. I love the shift. And, at the same time, I feel really bad for many of the leaders in the now-discarded cities. But they brought this on themselves. You see they bought into a self-created fallacy of Techstars as an economic development tool.

I spent the better part of 5 years with Techstars (2017 – 2021) standing up an ecosystem development consulting practice to help many of those same cities and their leaders with their entrepreneurship initiatives. My model – think more like what do we do before our city is ready for a Techstars accelerator. I sold more than $7M worth of hands-on consulting over those 3-4 years across 15 global cities. I had deep discussions with another 50+ cities and their leaders. I wrote a book (field guide) about these observations and experiences in 2023.

That is where I saw the huge gaping flaw in the Techstars accelerator as an economic development tool mindset.

The fundamentals of Techstars are very clear if you listen carefully:

  • Founders and their startups are front and center (we help entrepreneurs succeed).
  • 1 cohort of 10ish startups per year in a geographic city (lately adding a 2nd cohort in many cities) over a 12 week period.
  • We are investors through a locally managed investment/mentorship program (4K+ portfolio companies who have raised over $26 Billion dollars. (messaging all about the dollars)
  • A series of $150M+ post-accelerator funds focused 100% on Techstars portfolio companies (what we care about the most, identifying the high flyers and doubling down on those).

What you might not see or understand:

  • From Techstars POV, the Techstars accelerator was never an economic development tool. The Techstars business is and always has been about investing in the best startups.
  • Many of the new accelerator programs over the last 5 years are themed (media, ecommerce, retail, music, finance) and funded by large entities that only care about startups in those sectors. (The chances of a local startup operating in that sector are minimal).
  • The cohort model puts a lot of energy and activity into a 12 week program then disappears for the rest of the year (i liken it to the circus who shows up, puts up their tents for a week then packs up and moves to the next city).
  • My observation identifies a conservative 8 of 10 companies in each cohort as coming from out-of-town from the host city. A great majority of those companies then return to their home city or migrate to a more robust venture capital city post program.
  • The majority of those cities do not have a deep enough venture capital bench to really support the majority of the startups. (the capital comes from the national and global bench of investors in the Techstars family).

Outside of the 5-8 of the largest cities, Techstars portfolio companies have almost zero impact on the economic development of the host city.

I spent many years (as a consultant) trying to weave an alternative message: build a solid startup community foundation first, then consider a Techstars accelerator (or another accelerator program) as icing on the community cake. But that potential announcement was not sexy enough. That strategy had little brand lift. Building a solid community foundation took considerable effort and time. No one wanted to do the hard work. Many wanted the express train to the top of Everest. That train does not exist. You have to go through all of the base stations to get to the top.

So, what to do as an emerging startup community with this recent Techstars announcement?

Do what you should have been doing all along:

  1. Focus local leadership on consistent and authentic collaboration.
  2. Look internally for entrepreneurs and entrepreneurial leaders and find ways to support their efforts.
  3. Instill a mindset of “this will take 10-20 years of effort” and stop looking for quick wins.
  4. Develop activities that really support your local founders (not what you think they need).
  5. Build an investor network of local high-net-worth individuals.

This playbook works if you give it a chance and put the effort in.  Good luck.