Techstars Acquires Nonprofit UP Global, As Startup Industry Matures
Techstars, one of the nation’s foremost startup accelerator programs, has acquired the nonprofit entrepreneurship education outfit UP Global in a bid to cover the full spectrum “from idea to IPO.”
The Seattle-based nonprofit may be best known as the umbrella group overseeing Startup Weekend events, 54-hour sprints held in cities around the world in which people share and vet ideas, form teams, and throw together the outlines of a new business. UP Global also produces online Startup Digest newsletters, Startup Week celebrations, and other education and networking events for aspiring entrepreneurs and the startup-curious.
There’s a lot to recommend the combination of the Seattle-based nonprofit with a for-profit venture. They have complementary goals of facilitating entrepreneurship and building startup companies. They have a common history. UP Global already shares space with Techstars Seattle in Startup Hall. Techstars’ Brad Feld is an UP Global board member.
But the business case is a bit tougher to suss out. Terms of the deal are not being disclosed. “Nobody made any money on this—myself or anybody on the team or board,” said UP Global CEO Marc Nager.
After having a third-party determine UP Global’s valuation—itself a difficult exercise for a nonprofit—the consideration paid by Techstars “will remain in an ongoing nonprofit entity [that] will be able to donate it to causes that are aligned with the mission of supporting entrepreneurship, but strictly to charitable, nonprofit type activities… not to benefit Techstars or anything else,” Nager said.
Techstars will not get any proprietary deal flow into its accelerators. It doesn’t plan to make any major changes to Startup Weekend or other programs organized by UP Global, which will henceforth be known as Techstars Community Programs. It’s actually dropping fees for some programs. UP Global’s employees will join Techstars, but for the most part continue with their work status quo.
Leaders of the two organizations make this sound like a somewhat altruistic move—one that preserves and expands the services UP Global provides to entrepreneurs and innovation communities around the world, for the indirect benefit of Techstars and everyone else engaged in the startup industry. While a buyout deal represents an unusual “exit” for a nonprofit, they said UP Global wasn’t in jeopardy of closing its doors in absence of an acquisition. Still, the organization was facing challenges as the startup industry matured. It laid off about a third of its 60-person staff earlier this year after failing to renew some sponsorships.
“It’s definitely an indication of the larger business-model challenges and conversations we’ve been having,” Nager said. “I can say for myself, doing this for six years, we hit a point where it’s been incredibly frustrating as a nonprofit, where we’re completely reliant on sponsorships.”
Nager and the UP Global team knew they were creating real value in the form of welcoming more people into entrepreneurship, and supporting the creation of new companies—the source of an outsized share of new jobs in the U.S.
“It’s just nonprofit 101: Every nonprofit having a real impact has that same challenge of, ‘Hey, we create value, how do we capture that and use that to invest in furthering our mission?'” he said.
Meanwhile, UP Global, and its sponsors and partners—including Coca-Cola, Chase, Sprint, and Intuit—were looking to move down the startup pipeline. “We’ve had a number of partners over the years say, ‘Hey, the early stage stuff is great. We get a lot of reach and awareness out of it, but now we need to double down and be able to support established teams that are more predictable and can help them accomplish their goals a little bit more tangibly,'” Nager said.
As UP Global sought to expand toward more mature startups, filling out its vision of helping aspiring entrepreneurs through every stage of the company-building journey, Techstars—with its well-established, highly selective accelerators and investment funds—was looking to expand in the opposite direction.
“We’ve always had the same idea, that we want to help entrepreneurs from idea to IPO,” said Techstars co-founder and managing partner David Brown. “The reason that this deal came together was because at a time when UP was trying to figure out how to move down that value chain, we were trying to figure out how do we move up.”
I asked Brown why Techstars, a globally recognized and elite destination for the best startups, would need to worry about the wide-end of the entrepreneurship funnel—the on-ramps to entrepreneurship, to borrow from Techstars Seattle managing director Chris DeVore’s 2012 post “On-Ramps + Rocket Launchers: Why successful startup ecosystems are T-shaped“.
“It’s not that we had trouble attracting great companies to come into the top of the funnel, into the accelerators,” Brown said. “We receive 12,000 to 15,000 applications a year, so finding the companies was not the issue. What we want to do is inspire even more people to become entrepreneurs, or to help people who want to become entrepreneurs get there sooner, or faster, or better.”
He added, “That is good for Techstars, and for the accelerators, and for the venture funds—I don’t want to hide from that. It means that there will be more, smarter, better companies that ultimately come through our accelerators, and will be an opportunity for investment from our venture funds.”
That said, there is no explicit deal-flow from UP Global programs to Techstars baked into the acquisition. “We would be equally happy if they went to a different accelerator after Startup Weekend,” Brown said.
UP Global programs have been a modest contributor of talent to Techstars prior to the acquisition. Nager said he knows of at least 18 teams that have either met a co-founder or formed a company at an UP Global event that later made it to a Techstars accelerator. Brown said UP Global programs could be a good source of new employees for Techstars startups.
Techstars has ushered 536 startups through its programs, which now run in Austin, Boston, Boulder (where the organization is based), Chicago, New York City, Seattle, Berlin, and London, as well as seven others it runs with corporate partners focused on specific industries such as digital health, robotics, and mobility.
Now with the title of chief community officer for Techstars, Nager said UP Global’s constituents should not be concerned about rising fees or other efforts to extract more revenue from its programs as a result of the acquisition by for-profit Techstars. “If you know Techstars, you know us,” he said. “You know that culturally, we’re so aligned. Our values are so aligned.”
The organizations sprung from a common source. Techstars’ first employee, Andrew Hyde, founded Startup Weekend in 2007, and it was Techstars companies that participated.
Brown echoed Nager’s assurances, adding: “Techstars has never been about profiting from entrepreneurs. We’ve never charged to go through an accelerator, and when we started in 2007, that was the model. … We always viewed it as, we’re going to invest in you.”
That’s why Techstars decided to drop fees for UP Global’s Startup Next program, a five-week prep-school for startups preparing for application to an accelerator.
UP Global sponsor Google For Entrepreneurs will continue funding Startup Weekend and Startup Next “and many of our current partners will be making the transition to supporting our programs as part of Techstars,” according to an UP Global post on the deal.
UP Global’s strong international footprint—it plans 1,000 Startup Weekend events in 120 countries this year, including in places like Iran and Syria, which aren’t top of mind for startup formation—will also aid Techstars’ expansion plans, which should accrue to the good of the Pacific Northwest. “Our region will now play a more significant role in Techstars’ global expansion, and also benefit from closer ties to the wider global innovation ecosystem that Techstars has been so instrumental in supporting,” writes DeVore in a post outlining Seattle’s key contributions to the deal.
Nager said the nonprofit model that took UP Global this far was the right one—particularly given the enormous growth the startup industry has undergone—even if it doesn’t serve the organization going forward.
“Seven years ago the world didn’t even really know what startups were,” he said. “The iPhone was just invented. Contextually, ‘startup’ was never spelled as one word. It was always hyphenated. We have a real word now. The private market has been able to also see the value that we’ve been able to create at those early stages. The nonprofit was really a great business model decision for us that allowed us to scale, have a big impact, prove our value, and I think declare a great victory for the entire entrepreneurial industry as it matures.”