An Accelerator Grows Up

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Two years ago, when I first wrote about accelerator funds, they were something of a curiosity. Give a team of smart engineers enough money—usually between $15,000 and $50,000—to keep them in ramen and air mattresses, mentor them, and then put them in front of investors. 

Today, the model is attracting some serious money. This morning, Boulder-based TechStars announced that it had raised $24 million from a collection of VCs that includes the Foundry Group, DFJ Mercury, and SoftBank Capital. The upshot is that in addition to getting their normal seed stage investment, start-ups accepted into TechStars, which now operates in four cities, will have the option to take an extra $100,000 in the form of a convertible note. 

"This additional funding will allow TechStars companies to stay focused on making progress during the three-month program instead of spending that valuable time on early fundraising in order to make ends meet," says TechStars CEO David Cohen in a press release.

The deal puts TechStars companies on the similar financial footing as those of the accelerator pioneer Y Combinator, which announced a similar deal earlier this year whereby graduates of the program could opt to take $150,000 in funding from a consortium of angel investors that includes Ron Conway and Yuri Milner.

Senior contributing writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York. @chafkin