I was initially put off by the "Well, in 8 years, why haven't they had a big (>100M) exit?" in the beginning; I figured it was more of the kind of silly entitled bubble talk I've been seeing elsewhere.
The equity analysis you pointed out as well as the description of the LoI stuff made me reconsider that position, and by the end of the article I was glad I read it. It wasn't quite the muckraking I was expecting, and instead was a decent exploration of when a fit with an accelerator just didn't exit.
Matasano never did the incubator/accelerator thing, right?
As for the 8 years and no exits, it should be noted that the average time to a successful acquisition is 7 years, 8.25 for IPO. Reference: http://techcrunch.com/2013/12/14/crunchbase-reveals-the-aver.... There are a few TechStars companies that are doing really well and should exit for >100M. SendGrid comes to mind.
Also, I think the section regarding TechStars success makes an assumption mistake:
"The national rate of failure for startups is 75-90%. So lets say it was a good year and Techstars Chicago received a 1000 applicants/startups to choose from. You know based on national averages that 750-900 of these companies will fail. That leaves 100-250 that will succeed. Techstars is only taking 1% of applicants, which is 10 startups. Unless Techstars is picking poorly, they are selecting companies that are positioned for success from day one. These startups would most likely succeed with or without Techstars."
The common assumption that 75%-90% of startups fail is usually regarding venture backed startups, not people who fill out the TechStars applications. I would wager that the if you looked at the failure rate of anyone who had an idea they wanted run through an accelerator, the failure rate would be much, much higher. What you should benchmark TechStars against VC performance.
Techstars in Chicago is actually less than 2 years old. Excelerate labs was 2 years old at the time it joined Techstars, so the oldest company connected to that city is less than 4.
Also important to control for cohort size. These are 10 company classes. A 100 million+ breakout seems to be somewhere between a 1 in 100 and a 1 in 50 occurrence.
Given that I work with our cloud program and in Austin I'm not as intimate with the alumni from Chicago, but one that I am personally fond of is http://www.giveforward.com/
They've crowd-funded over 125 million dollars toward medical expenses for people in need.
I'm a Chicagoan and and as jaredmck mentioned, there aren't any breakout successes. However, there are a number of companies are gaining steam like FoodGenius, Simple Relevance, and TempoIQ. Here's a link to the legacy Excellerate Portfolio: http://exceleratelabs.com/portfolio/
I think it's safe to say that's the answer - SpotHero is doing quite well and just raised a $4.5M series A, GiveForward as mentioned has crowdfunded a good amount of money for people's medical bills, and FeeFighters sold to groupon relatively early on. None of these are "breakout successes" to the tune of a 100M valuation, however.
Chicago startup scene has not generated a ton of hits, but there have been a few notable successes. But there are also a lot of solid companies that will probably make money for investors. You have to realize that there are very few Facebooks, AirBnBs and Ubers in total and most of them are by definition in SV. So you would expect relatively few out of Chicago at this point
And the real answer to this is that getting large exits takes a long time. Unless I'm mistaken YC, which is older than Techstars and has 50% more portfolio companies, has 3 exits over 100 million, OMGPOP, Heroku and Twitch. Granted the last one was a big one.
Techstars should see some other big exits over time with SendGrid (couldn't find actual current valuation) and DigitalOcean ($153M Valuation in 3 years) to name a few
Nope, we didn't take a dime of funding (but our business isn't compatible with funding).
The exit analysis is the first thing I think of when I think of Techstars, too. Ostensibly, the reason to sign on with an "incubator" is that the connection you get would enable you to obtain rapid growth. But I can't think of good examples of companies where that's happened.
The equity analysis you pointed out as well as the description of the LoI stuff made me reconsider that position, and by the end of the article I was glad I read it. It wasn't quite the muckraking I was expecting, and instead was a decent exploration of when a fit with an accelerator just didn't exit.
Matasano never did the incubator/accelerator thing, right?