Earlier this week, accelerator group Techstars announced changes to its operations. But what was planned internally to be an exciting new chapter for the organization ended up being somewhat of a PR nightmare. 

Techstars found itself facing criticism for some of its decisions and execution after announcing it would shut down its Boulder and Seattle accelerators after recently shuttering its Austin-based program, which TechCrunch was first to report in December.

For example, Zillow co-founder Spencer Rascoff said on X that the Techstars memo about closing  its Seattle program was a “brutal takedown” of that city’s startup scene. Techstars Boulder alumni Liz Giorgi also vented on X about how “surprised by how poorly this was handled.”

TechCrunch sat down with Techstars CEO Maëlle Gavet and asked her about goings-on within her organization, and the critics’ opinions. This interview has been edited for brevity and clarity.

TechCrunch: Some say moving from local fundraising to more centralized models has not been in the best interest of founders. What do you say to such criticisms? 

Maëlle Gavet: When Techstars was born 17 years ago, it started almost as a franchise — where we would go into a city and there’d be a managing director raising a fund under the TS brand. But it would be a fairly isolated bubble that would exist.

This helped the company to grow at the very beginning. At the time funds were mostly raised from local investors it was a very novel model, one that worked extremely well at the time.

The franchise model has its limits from a return perspective. It’s very volatile because it’s very narrow. And, institutions are usually not interested. Because of that, basically it’s not the model that works anymore … we’ve seen that over and over again. Especially in the United States — all the big cities now have an ecosystem. We realized that over time our power was in terms of the infrastructure that we can provide to founders, and not just during the program, but after — because of our scale. 

Over the past six months, we tried again in three markets to have local fundraising to see if it was going to take off again. But it confirmed that it’s not working as well as it used to, so we stopped doing that test.

So then, where does TS stand in terms of raising new funds?

I can’t comment about fundraising. Trust me, I wish I could. I would love to set the record really straight.

I can share that at a high level, we have two types of funds. All of them are pre-seed. TSA 2021 is our macro or institutional fund, and it is our flagship and biggest fund that is backed by institutional investment funds, endowments and multiple LPs that we’re finishing deploying this year. It’s a $150 million fund that is also universal, with no focus in terms of industry. If anything, we’re trying to have a very balanced, hyper diversified portfolio in terms of industry. That’s how we predict very predictable returns and low volatility. On a given fund you get 800-900 positions in the fund across the board.

Then we have a solo LP fund. Advancing Cities Fund is a little over $80 million. These are the corporate partner funds that focus on a specific ecosystem that they’re in. They have a pretty narrow investment strategy in terms of industry. The corporations want specific relationships with the startups to be able to have access to innovation for potential M&A or commercial partnerships in the future. It’s a different risk profile.

Last year, we did about 700 pre-seed investments. This year, we should be making about 800 investments — growing both inside and outside of the U.S. The pipeline looks strong.

Some say the lack of local fundraising created lower pay and more work for the local MDs. What would you say to that?

We don’t talk about compensation, but finding MDs has never been really complicated given the comp package. We can’t comment about how former employees or MDs feel about the new compensation but it seems to be very attractive to a whole new generation of MDs.

Some argue that having corporate partners makes the corporations the customer, and not the founder. What do you say to that?

That doesn’t match the data we have. I’m a little puzzled. While it may be an easy narrative to have, when you look at the applications and acceptance rates into the corporate program, they are also high-performing. And extremely sought-after with partners such as NASA, eBay and Ecolab that entrepreneurs really want to be a part of. Myself as a former entrepreneur — when I was working on e-commerce stuff, I would have loved to have access to eBay. 

Plus, we are quite selective in who we work with. I think there is sometimes this idea that we’re going to accept anyone.

First and foremost, we are a pre-seed investor, the most active one in the world. We live and die by the returns we provide to our LPs. There is zero incentive to decrease return for a few quick bucks with partners. Plus, frankly, there is a reputational risk. 

What is the status of the DEI-focused Advancing Cities Fund?  

To be clear, we raised that from a lot of high net worth individuals and it happened to be on the JPMorgan wealth platform. It’s not JPMorgan money, not a JPMorgan fund. We spent a lot of time fundraising for that money. They served as a placement agent for the fund. There seems to be some confusion there.

We are two-thirds deployed out of that $80 million fund (which launched in May of 2022) and it’s going well.

What do you say to accusations that you have had a lack of focus as an organization?

I haven’t heard that. From the outside, we’re such a nontraditional investment firm it’s probably very disconcerting for a lot of people. I guess a lot of people who put us in the VC box look at us and say, wait, so you have programs in how many cities again? To be clear, we’re going to make more investments this year than ever before. So 2024 and we’re going to run 50 accelerator programs in more than 30 locations around the world. 

Unfortunately, I can’t show you financials but we have more partners and mentors than we’ve ever had.

How many central staff are there still at the company? Have you had layoffs and what happens to staff in cities that you are no longer operating programs?

We have a little over 300 employees. Employees are either running accelerator programs or working in ecosystem development programming, which builds deal flow for accelerators.

We did have a reorganization recently where a few people were exited. In markets where we stop running accelerator programs, we tried to reallocate people to other functions and other jobs in other markets.

Some of the reaction happening this week seems to be coming from people not understanding or reacting by saying, “If you’re not in a city anymore, that means you don’t care.” The idea that Techstars needs to be physically present to be involved in an ecosystem is strange. No one is asking that from other investors. We’re seemingly the only firm held to that standard where we have to have physically a team and accelerator in a city. For example, we invest extremely heavily in the United States across the board. We’re very active in the Midwest. But we don’t necessarily need to have a physical team absolutely everywhere.

We also have infrastructure staff who do fundraising, do marketing at scale, because we’re very active on social media. We’re very active in a bunch of summits and events all around the world. These are the people who build the tech infrastructure.

The one thing that is very underestimated about Techstars is the fact that to manage a portfolio of well over 4,000 companies and manage all the alumni, mentors, shareholders, investors, you have to build a pretty substantial tech stack to support all of that. We have a hybrid model that is very unique to Techstars. We want founders to have that in-person experience that’s very hands-on and intimate but also to benefit from the global infrastructure and everything that we’re doing. We’re trying to constantly find the balance between hyperlocal and global.

Some say that you’re focusing on markets where you’re needed the least.

We are an investor, and we often end up with six to 10% ownership in companies. Our job is to find great unstoppable founders and help them to be more successful. When they’re successful, we’re successful and our LPs are successful. There’s a very strong association in some people’s minds that the only way to develop an ecosystem is to be physically in the market with an accelerator. What we’re saying is that we’re relentless in finding founders everywhere and backing more underrepresented founders than anyone else — female, people of color, over 50, from the Midwest.

We have 4,500 mentors around the world that are actively involved. 

And whether we like it or not, there are ecosystems where it is actually easier for founders to be successful. They can always come back to whatever ecosystem they’re from and we encourage them to do that. But we want them to have connections to Silicon Valley to Los Angeles to New York to London. 

Also, just because we’re not running an accelerator class in a market doesn’t mean that we’re not continuing to invest in companies in that ecosystem or in local events. They are not market exits. I would bet that we’re going to be backing a really large number of founders from Texas and Washington state in 2024. 

How did the decisions of LPs such as Foundry Group and Silicon Valley Bank affect your operations/decisions at all?

They were more than LPs. They are also shareholders. And that piece is more important than the LP piece by a long way as they were pretty small LPs in our funds in general. Foundry has a rep on the board — Brad Feld — and I got an email from him about an hour ago. Nothing has changed from that perspective.

SVB is in more of a transition phase as they’re still trying to figure out what to do with the business… We still have a rep on the board.

What are you most excited about when it comes to Techstars 2.0?

I’m super excited about creating a new curriculum to be more effective. There’s a bunch of stuff that we’re working on. But I’m most excited about creating like this “masterclass for entrepreneurs.” We’ve basically accumulated so much knowledge over the last 17 years and when I look at our roster of mentors, it’s unbelievable. Historically, unfortunately, a lot of that was siloed…We finally figured out a way that if you are an entrepreneur, you can have access to our entire knowledge and our entire roster of mentors.

Earlier this week, accelerator group Techstars announced changes to its operations. But what was planned internally to be an exciting new chapter for the organization ended up being somewhat of a PR nightmare. 

Techstars found itself facing criticism for some of its decisions and execution after announcing it would shut down its Boulder and Seattle accelerators after recently shuttering its Austin-based program, which TechCrunch was first to report in December.

For example, Zillow co-founder Spencer Rascoff said on X that the Techstars memo about closing  its Seattle program was a “brutal takedown” of that city’s startup scene. Techstars Boulder alumni Liz Giorgi also vented on X about how “surprised by how poorly this was handled.”

TechCrunch sat down with Techstars CEO Maëlle Gavet and asked her about goings-on within her organization, and the critics’ opinions. This interview has been edited for brevity and clarity.

TechCrunch: Some say moving from local fundraising to more centralized models has not been in the best interest of founders. What do you say to such criticisms? 

Maëlle Gavet: When Techstars was born 17 years ago, it started almost as a franchise — where we would go into a city and there’d be a managing director raising a fund under the TS brand. But it would be a fairly isolated bubble that would exist.

This helped the company to grow at the very beginning. At the time funds were mostly raised from local investors it was a very novel model, one that worked extremely well at the time.

The franchise model has its limits from a return perspective. It’s very volatile because it’s very narrow. And, institutions are usually not interested. Because of that, basically it’s not the model that works anymore … we’ve seen that over and over again. Especially in the United States — all the big cities now have an ecosystem. We realized that over time our power was in terms of the infrastructure that we can provide to founders, and not just during the program, but after — because of our scale. 

Over the past six months, we tried again in three markets to have local fundraising to see if it was going to take off again. But it confirmed that it’s not working as well as it used to, so we stopped doing that test.

So then, where does TS stand in terms of raising new funds?

I can’t comment about fundraising. Trust me, I wish I could. I would love to set the record really straight.

I can share that at a high level, we have two types of funds. All of them are pre-seed. TSA 2021 is our macro or institutional fund, and it is our flagship and biggest fund that is backed by institutional investment funds, endowments and multiple LPs that we’re finishing deploying this year. It’s a $150 million fund that is also universal, with no focus in terms of industry. If anything, we’re trying to have a very balanced, hyper diversified portfolio in terms of industry. That’s how we predict very predictable returns and low volatility. On a given fund you get 800-900 positions in the fund across the board.

Then we have a solo LP fund. Advancing Cities Fund is a little over $80 million. These are the corporate partner funds that focus on a specific ecosystem that they’re in. They have a pretty narrow investment strategy in terms of industry. The corporations want specific relationships with the startups to be able to have access to innovation for potential M&A or commercial partnerships in the future. It’s a different risk profile.

Last year, we did about 700 pre-seed investments. This year, we should be making about 800 investments — growing both inside and outside of the U.S. The pipeline looks strong.

Some say the lack of local fundraising created lower pay and more work for the local MDs. What would you say to that?

We don’t talk about compensation, but finding MDs has never been really complicated given the comp package. We can’t comment about how former employees or MDs feel about the new compensation but it seems to be very attractive to a whole new generation of MDs.

Some argue that having corporate partners makes the corporations the customer, and not the founder. What do you say to that?

That doesn’t match the data we have. I’m a little puzzled. While it may be an easy narrative to have, when you look at the applications and acceptance rates into the corporate program, they are also high-performing. And extremely sought-after with partners such as NASA, eBay and Ecolab that entrepreneurs really want to be a part of. Myself as a former entrepreneur — when I was working on e-commerce stuff, I would have loved to have access to eBay. 

Plus, we are quite selective in who we work with. I think there is sometimes this idea that we’re going to accept anyone.

First and foremost, we are a pre-seed investor, the most active one in the world. We live and die by the returns we provide to our LPs. There is zero incentive to decrease return for a few quick bucks with partners. Plus, frankly, there is a reputational risk. 

What is the status of the DEI-focused Advancing Cities Fund?  

To be clear, we raised that from a lot of high net worth individuals and it happened to be on the JPMorgan wealth platform. It’s not JPMorgan money, not a JPMorgan fund. We spent a lot of time fundraising for that money. They served as a placement agent for the fund. There seems to be some confusion there.

We are two-thirds deployed out of that $80 million fund (which launched in May of 2022) and it’s going well.

What do you say to accusations that you have had a lack of focus as an organization?

I haven’t heard that. From the outside, we’re such a nontraditional investment firm it’s probably very disconcerting for a lot of people. I guess a lot of people who put us in the VC box look at us and say, wait, so you have programs in how many cities again? To be clear, we’re going to make more investments this year than ever before. So 2024 and we’re going to run 50 accelerator programs in more than 30 locations around the world. 

Unfortunately, I can’t show you financials but we have more partners and mentors than we’ve ever had.

How many central staff are there still at the company? Have you had layoffs and what happens to staff in cities that you are no longer operating programs?

We have a little over 300 employees. Employees are either running accelerator programs or working in ecosystem development programming, which builds deal flow for accelerators.

We did have a reorganization recently where a few people were exited. In markets where we stop running accelerator programs, we tried to reallocate people to other functions and other jobs in other markets.

Some of the reaction happening this week seems to be coming from people not understanding or reacting by saying, “If you’re not in a city anymore, that means you don’t care.” The idea that Techstars needs to be physically present to be involved in an ecosystem is strange. No one is asking that from other investors. We’re seemingly the only firm held to that standard where we have to have physically a team and accelerator in a city. For example, we invest extremely heavily in the United States across the board. We’re very active in the Midwest. But we don’t necessarily need to have a physical team absolutely everywhere.

We also have infrastructure staff who do fundraising, do marketing at scale, because we’re very active on social media. We’re very active in a bunch of summits and events all around the world. These are the people who build the tech infrastructure.

The one thing that is very underestimated about Techstars is the fact that to manage a portfolio of well over 4,000 companies and manage all the alumni, mentors, shareholders, investors, you have to build a pretty substantial tech stack to support all of that. We have a hybrid model that is very unique to Techstars. We want founders to have that in-person experience that’s very hands-on and intimate but also to benefit from the global infrastructure and everything that we’re doing. We’re trying to constantly find the balance between hyperlocal and global.

Some say that you’re focusing on markets where you’re needed the least.

We are an investor, and we often end up with six to 10% ownership in companies. Our job is to find great unstoppable founders and help them to be more successful. When they’re successful, we’re successful and our LPs are successful. There’s a very strong association in some people’s minds that the only way to develop an ecosystem is to be physically in the market with an accelerator. What we’re saying is that we’re relentless in finding founders everywhere and backing more underrepresented founders than anyone else — female, people of color, over 50, from the Midwest.

We have 4,500 mentors around the world that are actively involved. 

And whether we like it or not, there are ecosystems where it is actually easier for founders to be successful. They can always come back to whatever ecosystem they’re from and we encourage them to do that. But we want them to have connections to Silicon Valley to Los Angeles to New York to London. 

Also, just because we’re not running an accelerator class in a market doesn’t mean that we’re not continuing to invest in companies in that ecosystem or in local events. They are not market exits. I would bet that we’re going to be backing a really large number of founders from Texas and Washington state in 2024. 

How did the decisions of LPs such as Foundry Group and Silicon Valley Bank affect your operations/decisions at all?

They were more than LPs. They are also shareholders. And that piece is more important than the LP piece by a long way as they were pretty small LPs in our funds in general. Foundry has a rep on the board — Brad Feld — and I got an email from him about an hour ago. Nothing has changed from that perspective.

SVB is in more of a transition phase as they’re still trying to figure out what to do with the business… We still have a rep on the board.

What are you most excited about when it comes to Techstars 2.0?

I’m super excited about creating a new curriculum to be more effective. There’s a bunch of stuff that we’re working on. But I’m most excited about creating like this “masterclass for entrepreneurs.” We’ve basically accumulated so much knowledge over the last 17 years and when I look at our roster of mentors, it’s unbelievable. Historically, unfortunately, a lot of that was siloed…We finally figured out a way that if you are an entrepreneur, you can have access to our entire knowledge and our entire roster of mentors.