Techstars closed a $150 million early-stage fund, a much larger pool of money than it previously had, that will enable the firm to capitalize on the global network of startup founders and advisers it has built out in recent years.
Techstars launched its first startup accelerator in Boulder, Colo., in 2007. Since then it has spread around the country and internationally. Nearly 500 startups have gone through its programs. (Venture Capital Dispatch recently looked at the performance of these companies.)
Its accelerator graduates went on to raise about $1.1 billion in venture capital. Techstars’ larger network, including the companies in which its 1,500 advisers have been involved, raised even more capital.
The network, for example, includes Uber Technologies Inc., the private company with the most venture capital ever raised, at $2.8 billion. Early Uber employee Ryan Graves was a mentor at Techstars advising its accelerator startups. Techstars invested in one of Uber’s earliest rounds in 2009 through the connection with Mr. Graves, according to Techstars co-founder and Managing Director David Cohen.
But the firm didn’t have much money to capitalize on the successes. Its 2009 fund was just $5 million, and a 2012 second fund was $30 million. The Uber investment came out of the first fund, according to Mr. Cohen. He called the first fund a “rocket ship,” but declined to specify return figures for either fund.
The new fund, Techstars Ventures 2014 LP, will likely make about 100 seed deals and between 20 and 30 Series A investments. That is a different strategy from other seed firms and accelerators, such as 500 Startups, which is making many more deals, albeit with a larger investment team.
The new fund will invest across a broad swath of sectors, as opportunity appears, Mr. Cohen said. It already backed Web-security startup Distil Networks Inc., ad-free social network Ello, and Aireum Inc., which operates as Conspire and is a Web-based service to help reach business contacts.
Mr. Cohen cited marketplaces, human-computer interaction technologies and vertical search as areas of particular interest for this year.
Techstars Ventures won’t be leading rounds, rather it will co-invest with other venture firms, its managing directors said. Techstars will invest between $100,000 and $300,000 in seed rounds that total $1 million or more. And it will invest roughly $1 million to $2 million in Series A deals, Mr. Cohen said.
All of the limited partners in the new fund are institutions, such as pensions, university endowments, and foundations, according to Mark Solon, a managing director. That is in contrast to funds raised by some other accelerators. 500 Startups, for example, started by Dave McClure has had trouble attracting U.S. institutions to its current fund, as VentureWire recently reported. Mr. Solon declined to name Techstars’ limited partners.
Last year was hot for venture fundraising overall. Funds collected some $32.97 billion, the most since 2007, according to Dow Jones LP Source. Early-stage funds raised $13.04 billion last year.
That influx in capital has also resulted in rising valuations across the board. That problem is especially pronounced in Silicon Valley, and that is where Techstars is least involved.
“We believe we are in some of the most important startup markets in the world, mostly outside of Silicon Valley, which have seen more efficient pricing,” said Mr. Solon.
Techstars’ runs accelerator programs in 11 U.S. cities, as well as in London and Berlin. It also has employees in the San Francisco Bay Area.
The venture capital funds from Techstars previously were labeled Bullet Time Ventures. Now the company is rebranding them into Techstars Ventures to align with the brand and the name of the accelerators.
It added three partners, who were already heavily involved with Techstars, to help make investments: Nicole Glaros, Ari Newman and Jason Seats. Ms. Glaros and Mr. Seats will continue running accelerator programs.