“Talent is everywhere”: Accelerator Techstars returns with a focus on equity
When the first iteration of Techstars Detroit launched in 2014, Detroit — and its startup community — looked very different.
In early 2020, just before the COVID-19 pandemic took hold, the auto-backed tech accelerator that was funding more than 50 mobility-focused startups shut down as auto companies reprioritized .
Just over two years later, as Metro Detroit’s startup and investor community has matured and largely sustained itself during the pandemic, Boulder, Colorado-based accelerator Techstars will again plant a flag in Detroitthis time with $80 million raised by financial services giant JP Morgan.
Techstars and JP Morgan will also launch similar programs in Atlanta, Chicago, Miami and Washington, DC, with cohorts launching next year in Los Angeles, New Orleans and Oakland. The programs are open to all startup founders but have “been designed to provide equitable access to funding and support for Black, Hispanic and Latino, Native American, and Pacific Islander entrepreneurs,” according to a press release.
Leading Detroit’s new effort is Monica Wheat, a longtime venture capitalist in the region who most recently ran the Techstars Equitech program in Baltimore.
The expansion of the Techstars brand into Detroit and other cities represents a “game changer”, according to Wheat.
“We’re (figuring out) how to increase access and opportunity to all the ideas out there,” Wheat told Crain’s in an interview last week, fresh from a tech conference in Saudi Arabia.
“During the pandemic, a lot of things have changed,” she added. “But I think one of the biggest things that became very obvious (was) that good ideas can come from anywhere and talent is everywhere.”
Techstars announced its initial launch in Detroit on Dec. 10, 2014. Ironically, that’s the same day Michigan’s largest city emerged from the largest municipal bankruptcy in US history, Ted Serbinski pointed out, a veteran Detroit-area venture capitalist who served as the managing director of Techstars’ previous go-around in the Motor City, investing in mobility-focused early-stage companies.
This concept was virtually unheard of at the time and was largely an “experiment,” Serbinski told Crain’s last week.
In 2014, there were questions like, “Can you create a startup community in and around Detroit?” and “Can you invest in startups in this hyper-competitive automotive world?” said Serbinsky.
“And eight years ago it wasn’t really clear if that was even achievable,” he said. “And so the first-generation Techstars Detroit program was experimental, very entrepreneurial.”
Now it’s a very different story.
In 2014, there were 24 business-backed startups in Wayne County, according to the findings of a report last year by EntryPoint, an Ann Arbor-based nonprofit that tracks startup economies in the Midwest.
By 2020, that number had risen to 38, according to the same report, and venture capital funding increased by 333%. According to the EntryPoint report, nearly a quarter of all venture capital-backed companies in Michigan are located in the city of Detroit.
“I think the first iteration of Techstars that started in Detroit about seven years ago came at the perfect time when there was a lot of growth in the tech community,” said Emily Heintz, founder and CEO of Techstars. ‘EntryPoint. “A lot of new people are coming back to town and a lot of people have decided to start tech businesses locally. And so it’s created a really nice atmosphere for networking and resources.”
The return of the Techstars brand to Detroit, with a focus on investing in various founders, is “really exciting,” Heintz added. With Wheat running the program, “there’s hardly a better person to run a program like this.”
While the previous iteration of Techstars in Detroit focused on mobility and the automotive sector, Wheat said the new program will be more independent of the industry.
Additionally, Wheat pointed out that the $80 million JP Morgan has deployed in cities is real investment capital the bank has raised from limited partners who will be looking for a return.
The New York-based financial firm, Wheat said, “is really focused on where it thinks it can get the most bang for its clients’ money, and it thinks Detroit is one of those places.”
Typically, 10 to 12 companies are accepted into each Techstars class, and the Detroit cohort will have two classes per year for three years, for about 72 companies, according to a JP Morgan spokesperson. Companies can receive up to $120,000 in investment.
“With Techstars, our goal is to improve access to capital and other resources that underrepresented entrepreneurs need to start, fund and then scale their businesses,” said Kristin Kallergis Rowland, global head of alternative investments at JP Morgan Private Bank.
Wheat acknowledged that the amount of investment per company is quite minimal, but stressed that the dollars can be “significant” for companies in the pre-seed and seed stage.
“It’s a starting point, (and) some companies will come after having already raised funds, others will have raised no funds at all,” she said. “But…it’s not just the funding. The value for most founders who come into the program is really being part of the Techstars network. And then it’s really having the chance to be exposed to dozens of mentors.”