Y Combinator v.s. Techstars: Accelerator comparison by a three-time alum
This post is written by Weiting Liu, Founder & CEO of Codementor, a live help marketplace for developers. Weiting is a serial entrepreneur and an alumnus of both Y Combinator (YC ’07 SocialPicks, ’12) and Techstars (Seattle ’13 Codementor).
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Being one of the rare founders to be both a Y Combinator and Techstars alum, I’ve had the privilege of going through two of the top accelerators in the world. Unlike YC and 500 Startups which seem to have more common overlaps, there have been very few founders who’ve gone through both YC and Techstars programs.
Over the years I’ve been asked countless times about what my experiences were like going through the programs, how helpful the networks were to my startups, and how I’d recommend fellow founders to choose which one to join.
I have the utmost respect for Paul Graham, Sam Altman, David Cohen, Brad Feld, all YC partners and Techstars directors. YC and Techstars are the two earliest accelerators ever created, yet they are now being run with very different visions and philosophies. Depending on what your goals are, you might find one of them to be a better fit for you and your startup.
When PG and the original founders of YC created the genre 10 years ago, the deal was $11,000 + $3000*n for 2%-10%. A few iterations later (including the $150K Start Fund and $80K YCVC), YC’s terms are now $120k for 7%. Techstars terms are now $118,000 for 7-10% equity.
All of the terms are comparable – the implied valuations would fall between $1.2M – $1.7M, which is definitely on the low end of the spectrum in this day and age if you see this in pure monetary value. However, the valuation is somewhat arbitrary, and depending on your background, the valuation you’d receive in your next funding round as part of the accelerator group will usually be higher than what you’d receive had you raised by yourself.
I’ve been asked many times by experienced founders or startups with traction questioning the merit of giving away 7% to an accelerator like YC or Techstars. My answer has always been – it’s 100% worth it, and if you get in, unless you already have a Series A term sheet from a top VC in your hands, you’d need to be either stupid or part of the PayPal Mafia to not take it. In most cases the price would pay for itself with the higher valuation you’d get via the help of the network (PG (in)famously called it an IQ test) . Most importantly, the value of being in the alumni network transcends beyond your current startup and stays with you forever in your entrepreneurial journey.
During the Program
YC is very freeform. There’s no office (and there’s probably no easy way to fit in 85 teams under one roof now). There’s a weekly dinner, where we’d get to meet with super baller people like Mark Zuckerberg and Peter Thiel over chili rice once a week. There are also office hours with YC partners and group office hours with batch mates that we can book as often or as little as we’d like.
The weekly dinner and office hours act as great checkpoints for self-imposed weekly milestones. As you see other great batch mates making progress, this creates an environment for extremely healthy competition that drives you to push harder.
Going through an accelerator is all about getting a lot of things done in a short period of time. In its own words, YC’s goal is “to create an environment where you can focus exclusively on getting an initial version built.” They weren’t kidding when they said that. Growth is everything for a startup, and PG famously asked startups to focus on 1 single metric and do whatever it takes to make it move up and to the right. To drive this point home, at our first weekly Tuesday dinner, PG told us to do only 3 things during YC:
- Write code
- Talk to users
During YC if you’re considering about doing anything during the 3 months – ask yourself: “is this writing code? Is this talking to users? Is this exercise?” if it’s none of the above, you probably shouldn’t be doing it.
Techstars, on the other hand, is very structured. There are usually around 10 teams for each batch, and there’s a co-working space where we are expected to come and work and hang out with all other teams in our batch on a daily basis. There are also classes, seminars and workshops covering various topics almost on a daily basis: customer development, marketing, PR, and more.
There’s a strong focus on Steve Blank’s preachings and Eric Ries’s Lean Startup methodology, and we’d use the Business Model Canvas quite frequently. During the first month, we were pushed to understand our customers deeply. We were asked to stop writing code and “get out of the building” to talk to people to make sure we’re indeed building something people want. We were also taught valuable hands-on techniques of doing customer development, user surveys and more. For introvert founders like myself, all we ever wanted to do was to stay heads down and write code. Writing code is easy; talking to people is hard. However, I can say that by pushing ourselves to spend time doing customer development it has built a strong foundation for our startup, as we’re now armed with deep understanding of our startup’s target audience.
Techstars’ program structure is as follows:
- Month 1 – customer development
- Month 2 – product development and gaining traction
- Month 3 – honing your pitch to investors & practicing for Demo Day
Techstars’ regional ecosystem focus also enables us to work with a lot of great local mentors. It’d be up to you to manage your relationship with these mentors and make the most out of the relationships.
Interactions with Batchmates & Alumni
It’s widely known that one of the most valuable drivers of joining an accelerator would be the access to the alumni network, and I feel very privileged to be on both of the ycfounders and founders@techstars lists. Both YC and Techstars now have roughly over 1600 alumni. There’s a strong feeling of mutual respect among all alumni as well as the pride to be part of an exclusive network for life. Founders indeed help each others out, and with the growing number of alumni, you’re probably 1-2 degrees away from anyone in the entire tech community.
Techstars is distributed across 9+ cities worldwide. Techstars companies work in the same co-working space during the program, and with its much smaller batch size (10 v.s. YC’s 85), you’d definitely have the chance to interact a lot more frequently with your batch mates.
Techstars has presence in major tech cities such as Austin, Berlin, Boston, Boulder, Chicago, San Antonio, London, New York, and Seattle. What’s awesome about this is there’s almost always a Techstars program in a major tech city, and if you ever need region-specific support, the alumni network will be extremely helpful. For example, I traveled to Europe to meet with users and explore market opportunities for Codementor late last year. I was immediately introduced to the fine folks at Techstars London and Berlin, camped out of London’s Warner Yard and got great introductions to the European startup communities.
The slight downside is that even though we are all part of the Techstars family, being miles apart in different cities and not having the chance to meet in person frequently makes it harder to develop closer relationships across different Techstars programs. Recognizing this, Techstars has an annual founders-only FounderCon conference that’s a great opportunity for everyone in the family to gather up and build relationships.
On the other hand, YC is deeply focused in the Silicon Valley and most of the alumni are also based here. During YC, you’ll get the chance to interact with YC alumni right from the very beginning – as early as your YC interview day. Also, since many YC companies have become widely successful, we’d have the honour of having successful YC founders joining us at weekly Tuesday dinners as peers. I remembered how pumped I was when the Airbnb founders told us “the only difference between you and us, is 4 years.” Talk about great motivational speeches! Meeting them on a regular basis not only enabled us to learn great things from them, but what was more important was it made us believe we were in the same league as these great founders and greatness was within realistic reach.
The downside of having a big batch for YC is that you don’t get to know your batch mates that well. I remembered the last time I went through YC, I was still saying hellos to my batch mates for the first time on Demo Day!
YC, Techstars and 500 Startups also approach Demo Day quite differently. Contrary to popular beliefs, YC actually doesn’t put too much emphasis on practicing for Demo Day. In fact, we stayed laser-focused on our product until almost the very end of the accelerator program and started practicing for pitches less than one week before Demo Day. Techstars, on the other hand, spends the last month of the program practicing and refining pitches. Part of the reason may be the length of a typical YC Demo Day pitch being ~2min, while our Techstars demo day pitch was three times as long with 6 full minutes.
YC’s Demo Day is definitely an event by itself. We’d be walking by the who’s who of the startup scene. 100% of the attendees are either YC founders, invited investors, or members of the media. It’s an exclusive event with no outsiders allowed, and everyone’s there hustling and doing real businesses. It is really a coming-out party and start of fundraising for many of the YC startups.
For Techstars, Demo Day plays a less direct role in terms of fundraising. Startups were encouraged to pitch to investors throughout the program, so for many investors they’d not be seeing the startups for the first time on Demo Day. Techstars Demo Day is also a celebration of the local tech scene. It is an inclusive event by design, and there’s a strong vibe of local entrepreneurial community rooting for each other.
Over the years YC has grown from a summer program designed for college students to a transformative global powerhouse with a wide range of entrepreneurial experiences. In addition to the traditional young smart hackers, we’re now seeing successful repeat entrepreneurs and mature companies with real, substantial revenues applying to the program. YC’s brand and program structure make it an attractive fundraising platform even for the experienced entrepreneurs. With YC companies now consistently raising at valuations north of $10M post demo day, the equity you’d give to YC would almost pay for itself with the premium on the valuation that you’d get as a YC company.
Techstars isn’t too shabby when it comes to fundraising either. After all, over the years quite a few companies have emerged as great hits in the Techstars network: SendGrid, Digital Ocean, and GrabCAD to name a few. For Techstars, the going rate for post-demo day valuations usually starts from $3M, and can be ~$6M+ for the top companies within each batch. For many local investors, these valuations seem less bubbly and a lot more digestible than YC companies. Techstars now also has its own $150M fund dedicated to funding companies in the Techstars ecosystem.
After the Program
What happens after the program ends?
If you’re moving to a new city to join a Techstars program, I’d strongly recommend you to consider not leaving and to continue building your startup there. For us at Codementor, we joined Techstars Seattle mainly because of managing director Andy Sack’s own personal experience in our space. During our three-month stay there we’ve met many great mentors and awesome folks in the city. However, we moved out of Seattle a week after Demo Day, and gradually found ourselves interacting with the community a lot less frequently. As there was no continuity, sadly we became quite detached from the Seattle local community. Since Techstars puts so much focus on building local ecosystems, this probably shouldn’t come as a surprise.
For YC – you’re still welcome to sign up for office hours with partners after the program. In fact, you can generally still sign up for office hours even if you’re no longer involved with a YC startup. I’m years away from my last YC company, yet I’m still a YC alum for life, and YC partners remain as helpful as ever.
The fundamental philosophy, in my opinion, is the biggest difference between Techstars and YC.
YC’s core belief is that Silicon Valley is the center of the gravitational pull in the startup universe. You should either strongly consider building your startup here, or at the very least spend 3 months here.
To understand Techstars’ vision and belief, all you have to do is to look at Brad Feld’s “Boulder Thesis” and his book “Startup Communities: Building an Entrepreneurial Ecosystem in Your City”. Techstars’ thesis is all about fostering ecosystems within different cities. In essence, Techstars believes you shouldn’t have to go to the Silicon Valley to build a company. Over the years Techstars has been helping local entrepreneurial ecosystems around the world thrive with its network and resources.
Which One Should You Choose?
If you are in a unique position where you’re accepted into both programs – congratulations! Either way you won’t be making a bad choice here.
If your startup is at a stage where you need to figure a lot of things out, Techstars’ structure and mentorship would be more valuable to you. If you’ve achieved great product-market fit and your next milestone is all about fundraising, YC’s brand name will be able to help you raise at a top valuation.
If your goal is to join the Silicon Valley tech community as an insider and raise money from Silicon Valley investors at the highest valuation possible, then YC would be the undeniable choice. If you’re an international founder hoping to break into the Silicon Valley scene, YC would also be a great option for you.
If you’re based in one of the Techstars cities (say in Boulder, Seattle, NYC, or London), and you plan to grow your company there, choose Techstars. Techstars has a much stronger network in tech cities other than SF Bay Area, and you’ll be working with mentors and investors in those cities who’d be rooting for you. If you share the long-term vision of building a sustainable company in a local community and making a long-lasting impact there, then Techstars may be a better option for you.
Choosing a startup accelerator is analogous to choosing a university or an MBA program to attend. You certainly do not have to be a Stanford alum to have a successful career, and going through Y Combinator or Techstars does not guarantee any kind of startup success either.
p.s. Techstars founder David Cohen is hosting an office hours on Codementor to answer your questions about Techstars and more. RSVP here.
p.p.s. The application deadlines for Techstars’ Seattle, Chicago, and London programs are coming soon … please do apply!
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