Techstars Investment Terms
A note from Techstars Founder and CEO David Cohen.
A $220,000 day-one investment
Techstars is introducing an improved accelerator investment offer for companies accepted into our future programs — $220K at acceptance, plus all the benefits of our 3-month mentorship-driven accelerator, perks, and global network.
Day-one capital
MFN Safe
CEA for 5% common
Min priced-round trigger
How the $220K breaks down
$200,000 through an uncapped MFN Safe + $20,000 through a Post-Money Convertible Equity Agreement (CEA). Total equity Techstars receives is 5% common plus the future value of the $200K MFN Safe.
David Cohen & Andrew Cleland explain the new offer
Techstars Chief Investment Officer Andrew Cleland and Founder and CEO David Cohen walk through the key details of the new offer and what it means for founders.
The Investment Structure
Techstars' total investment of $220,000 is made up of two convertible investment agreements and a side letter. The side letter sets out certain rights Techstars needs going forward.
- $20,000 fixed-percentage CEA for 5% common stock
- When the company does a priced round of at least $1M, the CEA converts into common stock equal to 5% of the company's equity (including the existing option pool), after all Safes and other convertibles have converted alongside the round. The CEA and Safe are diluted by any new money in the priced round and any option-pool increases.
- $200,000 uncapped MFN Safe
- Converts when the company does a priced round of at least $1M. Uncapped — no pre-determined valuation cap or limit on the conversion valuation. The Safe automatically adopts the terms of the lowest-cap Safe (or other most favorable terms, e.g. a discount) issued between the MFN start date and the priced round. If you issue a subsequent Safe with a 20% discount or an $8M cap, Techstars gets that benefit.
- Side letter
- Establishes pro rata, digital-assets, and drag-along rights, plus regulatory and tax matters. Techstars and your company have an ongoing shareholder relationship: (i) Techstars can invest in new financings like a seed round, (ii) the company sends Techstars information on key operating metrics and burn, and (iii) the company fulfills specific obligations at events like a priced round or exit.
Why these terms?
The CEA in common equity puts Techstars on the same side of the table as founders — our return happens when your company succeeds, not ahead of founders and their employees. The uncapped MFN Safe is founder-friendly and pre-establishes no valuation limit.
Incorporating
Techstars invests in US corporations or foreign equivalents. If a company is incorporated in a non-approved country (e.g. India), it needs to complete a reorganization — sometimes called a flip — before Techstars can invest. We have the network to help.