Nov 03, 2022
Your acceptance to a Techstars accelerator kicks off a sprint between you and our legal team where we collect and review due diligence and finalize our investment in your company. This summary is qualified in its entirety by reference to the definitive investment agreements and may be varied to accommodate local law and custom.
$20,000 Equity Investment In Common Shares
Techstars = Opportunity
Techstars runs one of the most selective startup accelerators globally. Our three-month programs have put many founding teams on a fast track, saving months or even years of time and increasing the odds of success. We select only the applicants with the most potential and help them to:
- Build their business faster. Techstars startups get connections to a network of more than 6,000 mentors, hands-on support by the local accelerator teams and access to several thousand alumni companies that can serve as customers.
- Get more funding faster. Techstars startups not only get access to an unrivaled network of more than 18,000 investors, but we also teach them how to pitch to investors and close favorable fundraising deals.
- Succeed in the long-term. Techstars startups statistically have higher chances of success than industry standards and are supported by lifetime access to our worldwide network and benefits of more than $400,000 of cash equivalent hosting, accounting, and legal support—plus other credits and perks worth more than $5 million.
Joining Techstars is like bringing on an operating partner who has walked in your shoes and will be by your side for the lifetime of your company.
We invest up to $120,000 in each of our accelerator startups. We purchase the right to 6% of the company’s Fully Diluted Capital Stock at the Qualified Financing (as defined below) and provide $20,000 upfront. We will be issued our 6% common shares immediately before the Company’s next equity financing of $250,000 or more (the “Qualified Financing”).
Techstars for Life
Each Company also receives:
- Access to Techstars resources for life.
- Acceleration in a 90-day Techstars program with intense, hands-on mentorship from Techstars mentors.
- Connections to the Techstars network of over 10,000 founders, alumni, and mentors globally.
- A wide selection of perks to grow your business.
- Access to office space at our accelerator locations.
- Demo Day, and access to future Techstars events.
Many investors ask for pro rata rights, and we are no different. We aren't just investing capital, but also investing the time and resources of our entire organization, and we believe those resources help set the stage for your future success. As a result, our pro rata rights become even more important to us as they allow us to continue to invest in subsequent investment rounds of your company. This right is assignable to allow our venture fund to participate in seed or later rounds. Our preemptive right terminates when we are granted the same or substantially similar preemptive rights issued in connection with a Qualified Financing, or upon the Company’s IPO or sale, if earlier.
If the Company proposes to sell, issue, sponsor, create, distribute, mine, or reserve any Tokens for the Founders or the Company (together, the “Token Reserve”) on or after a Network Launch, it shall issue to the Purchaser a number of Tokens equal to 6% of the Token Reserve.
Techstars and Advisor waiver and indemnification
Our equity investment agreement includes an indemnity to protect mentors, program managers, Techstars and our managing directors from claims resulting from their participation in the program (unless their actions constitute gross negligence or intentional misconduct). Ultimately, it is the Company’s decision to take, or not take, any advice offered during the program. Without this protection, we could not provide the high level of mentorship needed to support our programs.
Code of Conduct
We expect companies and their employees to adhere to our Code of Conduct.
Quarterly operating metrics, cash position, revenue, burn rate, runway, financial statements, and a current cap table.
Techstars can invest in companies incorporated in over 20 jurisdictions. We reevaluate this list annually, and our managing directors can discuss the current list of supported jurisdictions.
Optional $100,000 Convertible Note Investment
If the Company elects by the start of program to take our Convertible Note investment, we invest $100,000 USD in exchange for a Convertible Promissory Note (“Note”), payable in or around the first week of the accelerator program and subject to the Company’s satisfactory completion of our due diligence and a fully executed investment agreement.
Our Note has a 2-year term and will convert in the next equity financing resulting in aggregate proceeds to the Company of at least $250,000 USD (a “Qualified Financing”). If a Qualified Financing has not occurred prior to the Maturity Date, our practice is to extend the Note for another 1-year term.
Simple interest shall accrue on an annual basis at the rate of 5% per year.
Our Note has a standard valuation cap of $3,000,000 USD. This cap is only increased if a company has closed greater than $250,000 USD in funding prior to receiving the Techstars Letter of Intent through either (a) an equity round with a pre-money valuation greater than $3,000,000 USD, or (b) convertible notes/SAFEs with an automatic conversion cap greater than $3,000,000 USD. If that's the case, the valuation cap on our Note can be increased to match the higher valuation/conversion cap, up to a maximum of $5,000,000 USD.
Conversion at Qualified Financing
The Note will automatically convert upon a Qualified Financing into the same shares sold in the Qualified Financing at a price equal to the lesser of (i) a 20% discount to the price paid by the other investors in the Qualified Financing, or (ii) the price obtained by dividing the valuation cap of $3,000,000 USD by the number of outstanding shares of the Company immediately prior to the Qualified Financing calculated on a Fully Diluted basis.
Maturity Date Conversion
If a Qualified Financing is not consummated prior to the Maturity Date, then we may elect to convert the unpaid principal and accrued interest on the Note into shares of the Company’s preferred stock (or common stock if preferred doesn’t exist) at a conversion price equal to the valuation cap of $3,000,000 USD divided by the outstanding shares of the Company on the election date calculated on a Fully Diluted basis.
Conversion at Network Launch
Upon the occurrence of a Network Launch, the Holder will have the right (but not the obligation) to convert all outstanding principal and unpaid accrued interest into Tokens issued by the Company in such Network Launch at a price per Token equal to a 20% discount on the lowest price paid by third-party purchasers.
Conversion at Change of Control
If the Company is acquired prior to the Qualified Financing, the Company will pay the Holder the greater of (i) a cash repayment equal to the unpaid principal and accrued interest, or (ii) the amount the Holder would have been entitled to receive in connection with the sale if the unpaid principal and accrued interest on the Note had been converted into shares of the Company’s common stock at a conversion price equal to the valuation cap of $3,000,000 USD divided by the outstanding shares of the Company as of immediately prior to closing the sale calculated on a Fully Diluted basis.
Same as above.