4 ms·

6 out of 10 2009 TechStars teams funded and led by VC

56 points by andrewhyde 17y ago

yankeeracer73 17y ago
should this automatically mean these are quality companies because they've gotten VC funding? i'm sure all of us can tell a story or two about their favorite VC funded burnout. why does this continue to be the barometer by which start-ups are judged?
- andrewhyde 17y ago
  just an interesting trend to look at, VC's are getting into TS and more seed deals as accelerators mature (YC is seeing similar things from what I have read).
- petewarden 17y ago
  The only real way to judge a startup is to wait 10 years and see what the end result is. Short of that, there's a whole bunch of hard-to-fake indicators, including having significant numbers of users, bringing in revenue, profitability, and raising investment. Funding is a second-order indicator and so less accurate, but at least it shows there's a bunch of folks willing to bet money that you'll achieve those other business goals.
- webwright 17y ago
  Multiple anecdotes does not equal data. Sure there are plenty of burnouts. If you did a study of software startups, I think you'd find: * Startups that exit for an amount that returns meaningful $ for the earliest investors (YC, TechStars) are likelier to have taken additional funding. * Startups who exit for HUGE money (Google, etc) almost ALWAYS take Series A rounds. If those are both true, do you REALLY think this isn't an important milestone for TechStars, YC, and the founders (if a big exit is their goal)?
  - yankeeracer73 17y ago
    Couldn't I say the same about your facts? Do you have numbers to show that those companies who do take money are likely to be more successful than those who don't, or who pursue money via alternative means? Most VC deals fail and they don't get their money back or break even. The few that make many multiples are what make their firms.
    - zaidf 17y ago
      Do you have numbers to show that those companies who do take money are likely to be more successful than those who don't Sure, just look up the number of companies that have gone public without taking Series A. Not many. Thus, it wouldn't be far fetched to conclude that in order to be successful at that(IPO), you generally have to go through a VC. None of this means that going through VC route won't result in majority failures. But that point is completely irrelevant. Most startups fail--VC or no VC--so pointing out failure in non-relative terms is insiginificant.
    - webwright 17y ago
      You could, but that's the difference between anecdotes and data. Can you really look at my 2 bullet points and say, "I think the data would show those to be false?" There've been studies showing this stuff (PG actually mentioned one during YC, if I recall correctly). Don't have 'em handy. The truth (supported by data) is that large dollar exits are vanishingly rare without outside funding (but sure-- they've happened). Can you name 1 large exit or IPO that had no Series A round? Can you name 5? Note that I'm NOT saying that outside funding increasing your chance of survival (I'd GUESS that the funding path is a riskier one) "The few that make many multiples are what make their firms." Absolutely. For all I know, a Series A REDUCES your chance of business survival... But the data shows that it increases your shot at a big exit (which is what a lot of people are in the game for).
      - jacquesm 17y ago
        I wished I could disagree with you :) It's absolutely true, a series A is like a lottery ticket, suddenly you're a gambler, no longer working day to day to make ends meet, but the clock is running and you have to 'score' at a much higher level than you would have to score at without that investment. Your chances of 'scoring' just went up, but your chances of staying alive just went down about as much. It would be nice to see an analysis of how outside investment changes the sum total, in other words, is this a 'zero-sum-game' and are the 'funded' companies taking away as much by their much bigger chances at collapse than what they would have made if none of them got funded (keep in mind that lots of money gets lost not only because these businesses fail, but they also take their investors money down the hole with them) or is the capital injection a net gain ? Incidentally, I know of one very successful exit (and IPO) that was done without outside investments but it was in the mid-80's, not related to online business, and I know of one online venture that got bought out for a fairly ridiculous amount of money. But that's the total score.
petewarden 17y ago
As a founder of one of the other 4, I am impressed but unsurprised, it was an incredibly strong group this year.
- dschobel 17y ago
  Is it better (for some arbitrary definition of good) to get VC money than angel? I always figured that between angel and VC money, these incubators would bat right near 100%...
  - petewarden 17y ago
    I believe (not certain, Andrew may know better) the average for previous Techstars years was around half got funded. I've no idea on other incubators, anyone know YC's batting average?
    - andrewhyde 17y ago
      Will have to look at the data again after this year, roughly 70% are funded or profitable by the end of the session.
ksowocki 17y ago
Techstars was one of the most memorable (and rewarding) experiences of my life. It's great to hear this year's batch of companies are doing so well. Congrats to the 2009 teams!
quigebo 17y ago
I don't think it's a barometer by which start-ups are judged. Instead, use it as a single data point for each company and 6 data points (for 2009 alone) for TechStars
- webwright 17y ago
  "I don't think it's a barometer by which start-ups are judged." I disagree-- it's a great barometer for startups at this stage (though certainly not the ONLY one). It's certainly strongly correlative to liquidity (take 100 companies that had a meaningful-for-angel/seed-investor exit and count the ones that took ZERO investment beyond that). Or, closer to home... Look at the YC startups that are likely make YC a significant return. How many of them took no additional funding? Or, if you really want to ignore liquidity/return for the investors... Look at the YC companies that experienced the most growth. How many of them took no additional funding?
  - petenixey 17y ago
    You've got to decide whose return you want to measure - the investor or the entrepreneurs'. Look at the most profitable YC startups (Weebly, Wufoo (others?)) and one took no further money, one took angel. I can only think of two of the ones who raised big money which are making revenues of the same order that I believe Wufoo is generating and certainly their profits are a fraction thereof. Startups in the Valley are well optimised for Venture Capital but that's not the same thing as optimising for revenue or profitability.
    - webwright 17y ago
      Yaw, that's totally true. This is from the TechStars blog-- the only metric they ultimately care about is return on investment. So this is a big win for them. A huge exit/IPO just about NEVER fails to have a Series A. Given MY tolerance for risk, I'm probably prefer to own Weebly or Wufoo before most other YC companies... But I think it's unlikely that they'll be a HUGE win for YC (9-figure exit, that is). Entrepreneurs generally (maybe just sometimes?) get into the startup world in the hope that they'll see a multi-million dollar exit (to compensate for the risk and the lack of salary for a chunk of time). For people motivated that way, the Series A is a big deal. Wade through data of $5m+ exits and I think we'd find that the non-funded startup is pretty scarce. Wad through the $20m+ exists and I think they'd be functionally non-existent. Weebly took $650k according to CrunchBase, so they'd fall into the 6 out of 10 TechStars group, FWIW.
jacquesm 17y ago
You don't judge a startup in the year it was f(o)unded.
- trevelyan 17y ago
  It's the incubator being judged here, not the startup.
  - jacquesm 17y ago
    Being funded is not a measure of success, not for a start-up and not for the incubator that is associated with the start-up. Any significant exit of any of those start-ups would be.
pxlpshr 17y ago
Another star for TechStars in my book, I've been pretty impressed by their program and it continues to out do itself. Cool to see the Vanilla forum guys on the list because I've used their forum software for quite some time. They had a big reputation in the design world when they launched around 05/06 for offering a comparable forum that wasn't obnoxious bloat like vB. Congrats on the persistence and hard work, looking forward to seeing you guys grow.

56 points by andrewhyde 17y ago

should this automatically mean these are quality companies because they've gotten VC funding? i'm sure all of us can tell a story or two about their favorite VC funded burnout. why does this continue to be the barometer by which start-ups are judged?

andrewhyde 17y ago
just an interesting trend to look at, VC's are getting into TS and more seed deals as accelerators mature (YC is seeing similar things from what I have read).
petewarden 17y ago
The only real way to judge a startup is to wait 10 years and see what the end result is. Short of that, there's a whole bunch of hard-to-fake indicators, including having significant numbers of users, bringing in revenue, profitability, and raising investment. Funding is a second-order indicator and so less accurate, but at least it shows there's a bunch of folks willing to bet money that you'll achieve those other business goals.
webwright 17y ago
Multiple anecdotes does not equal data. Sure there are plenty of burnouts. If you did a study of software startups, I think you'd find: * Startups that exit for an amount that returns meaningful $ for the earliest investors (YC, TechStars) are likelier to have taken additional funding. * Startups who exit for HUGE money (Google, etc) almost ALWAYS take Series A rounds. If those are both true, do you REALLY think this isn't an important milestone for TechStars, YC, and the founders (if a big exit is their goal)?
- yankeeracer73 17y ago
  Couldn't I say the same about your facts? Do you have numbers to show that those companies who do take money are likely to be more successful than those who don't, or who pursue money via alternative means? Most VC deals fail and they don't get their money back or break even. The few that make many multiples are what make their firms.
  - zaidf 17y ago
    Do you have numbers to show that those companies who do take money are likely to be more successful than those who don't Sure, just look up the number of companies that have gone public without taking Series A. Not many. Thus, it wouldn't be far fetched to conclude that in order to be successful at that(IPO), you generally have to go through a VC. None of this means that going through VC route won't result in majority failures. But that point is completely irrelevant. Most startups fail--VC or no VC--so pointing out failure in non-relative terms is insiginificant.
  - webwright 17y ago
    You could, but that's the difference between anecdotes and data. Can you really look at my 2 bullet points and say, "I think the data would show those to be false?" There've been studies showing this stuff (PG actually mentioned one during YC, if I recall correctly). Don't have 'em handy. The truth (supported by data) is that large dollar exits are vanishingly rare without outside funding (but sure-- they've happened). Can you name 1 large exit or IPO that had no Series A round? Can you name 5? Note that I'm NOT saying that outside funding increasing your chance of survival (I'd GUESS that the funding path is a riskier one) "The few that make many multiples are what make their firms." Absolutely. For all I know, a Series A REDUCES your chance of business survival... But the data shows that it increases your shot at a big exit (which is what a lot of people are in the game for).
    - jacquesm 17y ago
      I wished I could disagree with you :) It's absolutely true, a series A is like a lottery ticket, suddenly you're a gambler, no longer working day to day to make ends meet, but the clock is running and you have to 'score' at a much higher level than you would have to score at without that investment. Your chances of 'scoring' just went up, but your chances of staying alive just went down about as much. It would be nice to see an analysis of how outside investment changes the sum total, in other words, is this a 'zero-sum-game' and are the 'funded' companies taking away as much by their much bigger chances at collapse than what they would have made if none of them got funded (keep in mind that lots of money gets lost not only because these businesses fail, but they also take their investors money down the hole with them) or is the capital injection a net gain ? Incidentally, I know of one very successful exit (and IPO) that was done without outside investments but it was in the mid-80's, not related to online business, and I know of one online venture that got bought out for a fairly ridiculous amount of money. But that's the total score.

petewarden 17y ago

As a founder of one of the other 4, I am impressed but unsurprised, it was an incredibly strong group this year.

dschobel 17y ago
Is it better (for some arbitrary definition of good) to get VC money than angel? I always figured that between angel and VC money, these incubators would bat right near 100%...
- petewarden 17y ago
  I believe (not certain, Andrew may know better) the average for previous Techstars years was around half got funded. I've no idea on other incubators, anyone know YC's batting average?
  - andrewhyde 17y ago
    Will have to look at the data again after this year, roughly 70% are funded or profitable by the end of the session.

ksowocki 17y ago

Techstars was one of the most memorable (and rewarding) experiences of my life. It's great to hear this year's batch of companies are doing so well. Congrats to the 2009 teams!

quigebo 17y ago

I don't think it's a barometer by which start-ups are judged. Instead, use it as a single data point for each company and 6 data points (for 2009 alone) for TechStars

webwright 17y ago
"I don't think it's a barometer by which start-ups are judged." I disagree-- it's a great barometer for startups at this stage (though certainly not the ONLY one). It's certainly strongly correlative to liquidity (take 100 companies that had a meaningful-for-angel/seed-investor exit and count the ones that took ZERO investment beyond that). Or, closer to home... Look at the YC startups that are likely make YC a significant return. How many of them took no additional funding? Or, if you really want to ignore liquidity/return for the investors... Look at the YC companies that experienced the most growth. How many of them took no additional funding?
- petenixey 17y ago
  You've got to decide whose return you want to measure - the investor or the entrepreneurs'. Look at the most profitable YC startups (Weebly, Wufoo (others?)) and one took no further money, one took angel. I can only think of two of the ones who raised big money which are making revenues of the same order that I believe Wufoo is generating and certainly their profits are a fraction thereof. Startups in the Valley are well optimised for Venture Capital but that's not the same thing as optimising for revenue or profitability.
  - webwright 17y ago
    Yaw, that's totally true. This is from the TechStars blog-- the only metric they ultimately care about is return on investment. So this is a big win for them. A huge exit/IPO just about NEVER fails to have a Series A. Given MY tolerance for risk, I'm probably prefer to own Weebly or Wufoo before most other YC companies... But I think it's unlikely that they'll be a HUGE win for YC (9-figure exit, that is). Entrepreneurs generally (maybe just sometimes?) get into the startup world in the hope that they'll see a multi-million dollar exit (to compensate for the risk and the lack of salary for a chunk of time). For people motivated that way, the Series A is a big deal. Wade through data of $5m+ exits and I think we'd find that the non-funded startup is pretty scarce. Wad through the $20m+ exists and I think they'd be functionally non-existent. Weebly took $650k according to CrunchBase, so they'd fall into the 6 out of 10 TechStars group, FWIW.

jacquesm 17y ago

You don't judge a startup in the year it was f(o)unded.

trevelyan 17y ago
It's the incubator being judged here, not the startup.
- jacquesm 17y ago
  Being funded is not a measure of success, not for a start-up and not for the incubator that is associated with the start-up. Any significant exit of any of those start-ups would be.

pxlpshr 17y ago

Another star for TechStars in my book, I've been pretty impressed by their program and it continues to out do itself. Cool to see the Vanilla forum guys on the list because I've used their forum software for quite some time. They had a big reputation in the design world when they launched around 05/06 for offering a comparable forum that wasn't obnoxious bloat like vB. Congrats on the persistence and hard work, looking forward to seeing you guys grow.