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I sat down with Maëlle Gavet, CEO of Techstars, a premier global accelerator and one of the world's most active pre-seed investors. Techstars was founded in 2006 and has backed almost 4000 companies with a combined portfolio market cap of $105B. Some of their invested companies include Remitly, Chainalysis, DataRobot, and Alloy.
In this episode, we discuss:
Trends and lessons learned at Techstars after 16 years, countless programs, and backing 9000 founders
“Being good enough is not good enough. If you have a good enough company, it's going to be extremely difficult to raise. And so now it becomes a question of how do you become great.”
Techstars is not a traditional venture firm; instead, according to Maelle, Techstars acts as a significant source of deal flow to venture capital. Their model is akin to an actively managed index of early-stage innovation, investing in a large number of companies on standard terms, focusing on pre-seed investments around the world. Techstars aims to provide global agility for Limited Partners (LPs) through hyper-diversification and supports entrepreneurs by giving them an advantage in their daily challenges.
Additionally, Techstars is highly data-driven, tracking everything from sourcing to post-program activities, making it one of the few truly data-driven investors. Most recently, they've observed a new wave of entrepreneurship, partly driven by post-COVID layoffs and advancements in technology like AI, Blockchain, and nanotechnology. This has led to a significant increase in applications to Techstars.
Maelle’s criticism of the venture industry and how it could improve to better serve founders
“I think the venture world is in dire need of reinvention.”
Maelle Gavet emphasizes the urgent need for reinvention in the venture capital industry. She points out that the abundance of cheap money led to the emergence of numerous venture firms with weak investment theses, limited experience, and inadequate support for portfolio companies. This situation has resulted in inflated valuations and a disconnect from the financial realities of businesses. She highlights the negative consequences for founders, who are now facing difficulties due to previously inflated valuations and a culture of frequent fundraising disconnected from their companies' actual financial health. This trend has led to an unhealthy environment for startups, where financial realities are catching up with them. She calls for greater accountability in venture firms regarding their investment decisions and due diligence processes, and also notes the highly fragmented nature of the venture capital industry, lacking concentration among top firms, unlike other asset classes. This fragmentation presents a significant opportunity for disruption and change in how venture capital operates.
How Techstars has been able to scale internationally and across programs with a partially decentralized approach
“There's a lot of amazing entrepreneurs around the world that that don't even know that entrepreneurship would really be an opportunity for them that don't really know how to access capital, that don't really have the network that they need to be really successful. Because no one succeeds alone.”
Techstars believes talent and great ideas are globally distributed, but opportunities are not. They focus on identifying and supporting entrepreneurs who lack access to capital, networks, and necessary tools for success. Their investment thesis is centered on helping these entrepreneurs succeed, which in turn generates returns for both the entrepreneurs and Techstars as investors.
The process of sourcing and selecting founders is robust and thorough, involving multiple interactions before making a final decision. The current market dynamics and higher standards for fundraising have made it more challenging for entrepreneurs, making Techstars an even more attractive option for those seeking to enhance their chances of success.
Techstars employs a hybrid model, balancing centralized and decentralized approaches, which evolves based on business needs, customer requirements, and the macro environment. Certain functions, like global sourcing campaigns and legal checks, benefit from centralization for efficiency and consistency. In contrast, other aspects, like program customization, are decentralized to cater to the unique needs of each entrepreneur.
A deep dive into Maelle’s impressive background as a former founder and operator… and a lot more!
“Nothing worth doing is ever easy. And I think I learned at a very young age that you had to work hard to make things happen.”
Gavet describes herself as an entrepreneur at heart, starting her first business at the age of 16 in France. At that time, entrepreneurship was not highly regarded in France, unlike government roles. This perspective led her to seek opportunities outside of France, sparking her interest in exploring different cultures and environments. She views moving to different environments as a powerful mechanism for learning and adaptation. Her enjoyment of this learning process continues even after eight years in the U.S. Having moved around the world a lot, she’s learned that the key is to always try to support and integrate into the local communities of the countries you move to. This approach aligns with Techstars' philosophy, a company she admires for its community-driven approach and its efforts to contribute meaningfully to different regions and cultures.
Episode Summary
00:00 Introduction and Background
02:51 Leaving France and Living in Different Countries
05:04 Adapting to Different Cultures
08:00 The Importance of Reading
10:48 Transition from Operating Roles to Leading an Investing Organization
13:43 Challenges in the Venture Capital Industry
17:02 Using Data to Drive Investment Decisions
20:53 Lessons Learned from 16 Years of Techstars
25:54 The Rise of AI in Early-Stage Businesses
29:50 Attracting Founders to Techstars
31:19 Types of Founders that SHOULD NOT Apply to Techstars
34:33 Balancing Centralization and Decentralization in Techstars
40:31 Challenges of the Job
43:20 Integration of AI Tools at Techstars
46:39 Favorite Aspects of New York City
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Miguel Armaza is Co-Founder & Managing General Partner of Gilgamesh Ventures, a seed-stage investment fund focused on fintech in the Americas. He also hosts and writes the Fintech Leaders podcast and newsletter.
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