In January 2011, Yuri Milner shocked the VC world by teaming up with angel investor Ron Conway. Together the team created Start Fund and committed to offer every Y Combinator startup going at the time, $150,000 in convertible debt. Short of a gift, this type of investment is the most entrepreneur friendly out there.
Although it has been a long time coming, TechStars is responding to this competition with their own offer of convertible debt for the companies under its wing. The Boulder, Colorado company funds about 60 startups a year. The additional funding will begin with their 2012 programs including those in Boston, Boulder, New York, Seattle and TechStars Cloud.
Another shake up in the investment community that prompted TechStarts to start raising more funds was the announcement of a $180 million fund for Innovation Works by Kai-Fu Lee, the former head of Google china. There is a need for TechStars to stay competitive.
TechStars traditionally offers it’s companies $18,000 for 6% equity. The companies then participate in a three month startup boot camp. David Cohen, CEO, says this additional funding will make TechStars more attractive to people who have families, full time jobs or higher living expenses then single founders.
According to Businessweek, the investors putting up the funding include Foundry Group, IA Ventures, Avalon Ventures, DFJ Mercury, SoftBank Capital, SVB Financial Group, RRE Venture, Right Side Capital Management, as well as TechStars alums and other angels.
