writes copy 18 Sep 2018

12 years in TechStars doubles down on corporate relationships

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The goal of any accelerator is to back startups that are reaching exponential growth. Sometimes, though, the accelerator itself hits that inflection point.

TechStars, which was founded in 2006, has expanded aggressively over the past twelve years. Once a single accelerator program for a handful of early-stage startups in Boulder, the program now encompasses 44 separate programs covering six continents and a large number of industry verticals. The firm has hundreds of employees across its headquarters and member programs, and more than 1,600 portfolio companies.

Along the way, the mission of TechStars has evolved, from purely accelerating a cohort of startups to championing a culture of 'œentrepreneurship anywhere.' Co-CEO David Cohen, who co-founded TechStars along with Brad Feld, David Brown, and Jared Polis, said that 'œTechStars is the worldwide network that helps entrepreneurs succeed,' adding that 'œthe product we are offering is really not an accelerator, but a network.'

The key insight for TechStars was that startups needed to talk to large companies in order to drive sales and ultimately revenues, while at the same time, large companies were looking to talk with startups in order to learn more about innovation and take advantage of it in their operations.

TechStars is looking to intensify that synergy through two new programs the company is announcing today. The first is a Network Engagement Program that offers new concierge-style connections for corporations looking to build relationships with startups. The other is a 54-hour Innovation Bootcamp that will teach corporate employees innovation skills in a rapid learning environment with involvement from TechStars alumni.

The larger story here though is how TechStars is increasingly leveraging startups and corporations together to improve both. TechStars runs a number of corporate-backed accelerators with companies like Barclays, Rakuten, MetLife, and Comcast NBCU, with each accelerator focusing on areas relevant to their sponsoring companies. Barclays, which has sponsored accelerators in New York City, London, and Tel Aviv, focuses on fintech, for instance.

These companies accrue a number of benefits from the relationship. They get to meet startups that might not have otherwise shown up in their milieu, allowing them to build early relationships. Those early connections can then lead to new purchases and possibly even an investment.

Cohen provided the example of Sphero, which launched out of a Disney co-branded TechStars accelerator and led to the startup's famed BB-8 product, which drove 'œ$100 million in sales.'œ Every company approaches the network differently he said, and 'œpart of the beauty is that they have that choice.' Disney has since parted ways with TechStars, however.

Beyond investment and sales growth from corporations, startups can also use their relationships to help with finding an exit when they are ready for one, helping them get through the corporate development gauntlet. Cohen says that 'œwe have an M&A group of 6-7 people' whose full-time job is to maximize the value of a startup's return.

Beyond these transactional components though, TechStars hopes to change the culture around companies and how they interact with startups. Cohen says that 'œfor our corporations, one of the meta impacts we are learning is how to help them behave better'¦How to give first to the startup community, versus the classic corporation, how do I take advantage of a startup.'

Obviously, there are a lot of positives when building connections between incumbents and upstarts, but there is also a dark side '” challenges around stealthiness and conflicts of interest. After all, some of the startups in TechStars almost certainly want to dislodge the incumbents who may be sponsoring their very program. Cohen even brought this up in the context of the company's mobility accelerator and the benefits companies receive: 'œNext time an Uber comes along, Ford isn't surprised by it.'

Cohen argues against this line of thought in a couple of different ways. First, all decisions are 'œalways up to the startup' and emphasized that 'œour large company partners don't have the rights to invest in companies'¦they don't have the right to acquire them or frankly do business with them.' Plus, even when co-branded, accelerators are exclusively run by TechStars staff, and the plethora of programs allows startups to avoid potential competitors. 'œLet's say you want to go up against Ford, you can still be in the TechStars network, but not in the Ford program,' Cohen explained.

For startup founders, the key ultimately is to be mindful of who they partner with and what information they share with them. That is true as much in TechStars as it is in any other context. As TechStars continues to spread its message of entrepreneurship far and wide in the enterprise world through its new programs, the benefits of closer cooperation '” and its attendant downsides '” should be thoughtfully evaluated on that well-trodden road to exponential growth.

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