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.