December 4th, 2020
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.
We purchase the right to 6% of the company’s Fully Diluted Capital Stock at the Qualified Financing (as defined below) for $20,000 USD. We will be issued our 6% common shares immediately before the Company’s next equity financing of $250,000 USD or more (a “Qualified Financing”). Our 6% equity investment is subject to our Equity Back Guarantee. Here is a helpful post by David Cohen explaining our intent for the Equity Back Guarantee.
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.
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.
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.
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.
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.
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.
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.
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.