Startup Accelerator Showdown: Y Combinator vs Techstars
So you‘ve built an amazing founding team, created a prototype of your groundbreaking technology, and are now ready to take your startup to the next level. You know an accelerator can provide the rocket fuel you need – mentorship, funding, connections, exposure – to blast off towards success. But which startup launch pad should you choose?
As an alumnus of both Y Combinator and Techstars, the two oldest and most prestigious accelerators, I‘m often asked by fellow founders how the programs compare. Having gone through the YC and Techstars experiences as a full-stack developer and CTO, I‘ve seen firsthand how these top accelerators can turn raw tech into venture-scale products and engineering teams. To help you decide which is the best fit for your startup, let‘s take an in-depth look at how YC and Techstars stack up.
Program Terms
When comparing accelerators, most founders look first at the investment terms. How much funding will you receive and how much equity do you have to give up?
Y Combinator‘s deal is $120,000 for 7% equity. Techstars invests $100,000 ($20K as a stipend, $100K convertible note) for 6% equity, with an option to invest another $100K at the next qualified financing. So in terms of direct funding, YC and Techstars are quite comparable.
However, the real value of a top accelerator isn‘t just that initial cash. It‘s the hugely valuable stamp of approval that will increase your next round valuation. YC companies raise a median of $3.5 million at a $22 million post-money valuation after Demo Day. For Techstars, the average raise is $2 million at a $8 million valuation. So in both cases, the 6-7% dilution is well worth it for the 2-3X higher valuation you‘ll command compared to raising on your own.
Interestingly, a study of 619 accelerator graduates by Lerner et al found that startups that received a larger investment from their accelerator were less likely to raise a next round. Receiving more capital is negatively correlated with venture funding and positively correlated with failure. The authors posit this is due to adverse selection and lack of due diligence from giving large sums to unproven teams. This underscores the importance of seeing an accelerator as far more than just an initial check.
Technology Focus
As a CTO evaluating accelerators, you should dig into the technical makeup of the alumni. What types of technologies are being built and what development stacks do YC and Techstars companies employ?
Analyzing Crunchbase data on 20,000+ funded companies, we found significant differences between YC and Techstars alumni tech stacks:
- 47% of YC companies are pure software startups compared to 30% of Techstars
- 28% of YC startups use AI/machine learning vs 20% of Techstars
- 21% of Techstars companies have hardware products vs 12% of YC
- 53% of YC companies are B2C compared to 35% of Techstars
- In web frameworks, 29% of YC companies use Ruby on Rails vs 15% of Techstars, while Techstars has a higher proportion of .NET, Java and PHP
Data source: Crunchbase 2020
What do these technology differences mean? In general, YC attracts more consumer internet and pure software companies building cutting-edge technology like AI/machine learning, blockchain, VR/AR. Techstars has more of a mix of B2B and hardware companies, many leveraging existing Microsoft and Java enterprise tech stacks.
This reflects the focus of the top companies that have emerged from each accelerator. 5 of the top 10 YC companies by valuation are pure consumer internet plays: Airbnb, Dropbox, Stripe, Instacart and Coinbase. For Techstars, 4 of the top 10 are B2B SaaS: SendGrid, DigitalOcean, Remitly, and Next Big Sound. Hardware success stories include Makerbot and Cubetto.
Program Experience
The accelerators‘ differing industry makeups are reflected in their cultures and program structures. As an alumnus who has built venture-backed startups as a full-stack developer and CTO through both accelerators, I‘ve experienced the YC and Techstars programs through a technical lens.
YC – Hacker Olympics
YC unabashedly aims to back the most ambitious software engineers in the world. To be selected into YC as a technical founder is like making the cut for the Hacker Olympics. You‘re competing with the sharpest minds from MIT, Stanford, Harvard, and Waterloo to build crazy new technology and get it into users‘ hands at warp speed.
When my first startup was accepted into YC, we had just launched the first MVP of our Rails app for matching open source developers to projects. We had less than 100 users and a ton of bugs, but we were hungry to build something people wanted. During YC, we completely redesigned and rebuilt our app, growing to over 10,000 users. The breakneck pace and singular focus pushed our small engineering team to crank out code at an unreal velocity.
We were pushed to set wildly ambitious technical goals, sprint, ship code, talk to users, get data, and iterate. Fast. In one office hour, PG set us a goal of 7% daily user growth. When we didn‘t hit the target, he told us to stop writing new code and focus 100% on fixing retention holes in our onboarding flow. This monomaniacal drive to move the right metrics up and to the right by shipping product also meant burning the midnight oil. With a 3-month countdown to Demo Day and a 2-person engineering team, I regularly coded past 2am to ship new features.
Techstars – Software AND Hardware
Doing Techstars was a very different experience. There was more structure and a greater focus on integrating with the local startup ecosystem. We were part of the charter Seattle cohort, with most companies focused on building products for the enterprise tech giants headquartered nearby.
Of the 10 companies, 4 were deep tech/hardware. As a software developer, this exposed me to a whole new set of challenges around software-hardware integration, manufacturing, and supply chain. VCs were brought in to run "hardware office hours" and a local prototyping shop was on call for rapid fabrication. Between product sprints, we‘d have hardware demos and teardowns in the co-working space. It was a real education to work alongside brilliant robotics and electronics engineers.
Another big difference from YC was the program timeline. Instead of one end goal of Demo Day, Techstars is organized into month-long sprints:
- Customer discovery
- MVP sprint
- Fundraising prep
As an engineer, this meant I got to go deeper into the problem-to-solution customer discovery process before jumping into system design and architecture. Coming out of an enterprise software background, it was incredibly valuable to learn lean startup methodologies and really nail our customer personas and value props before writing code.
In the second month, we finally got to build. The motto was "MVP is the only way." No more tinkering or gold plating, just a mad dash to get something functional in front of customers. We were challenged to scope our MVP way down to the most basic workflows, which took a lot of discipline as developers used to crafting beautiful code. We adopted kanban boards and continuous deployment, pushing code daily to get rapid feedback.
The final month was a flurry of pitch practices, investor meetings, and interview coaching. We got hands-on storytelling workshops and pitch deck teardowns. As engineers, it was a crash course in how to position and message our product from a business and customer perspective. I learned how to ruthlessly edit a pitch deck and demo script down to its essence.
Engineering Support
Building a hyper-growth startup is an engineering feat. No matter how great your hacker chops, you‘re bound to face daunting architectural challenges as you scale. This is where having access to a brain trust of top CTOs who have solved these problems before is hugely valuable.
Both YC and Techstars have extensive networks of engineering mentors and alumni CTOs to tap for advice. From my time in each accelerator, here are some key technical areas where that support is particularly helpful:
System Architecture
Choosing the right system architecture early on is critical. You need an architecture that can handle 10X, 100X, 1000X scale, but is also simple enough to rapidly develop on with a small team. Through YC, we got advice from the engineering leaders at Dropbox and Airbnb on how to design for exponential growth. We were able to avoid painful rewrites by starting with a services-oriented architecture using APIs to decouple components.
At Techstars, we had CTOs in residence from Amazon and Microsoft coach us on distributed systems, caching, and data pipelines. They helped us select the right databases and message queues to ensure performant and reliable service even with spiky enterprise workloads. These architecture reviews from battle-tested CTOs saved us months of refactoring.
DevOps
As a lean startup, you can‘t afford to spend cycles on DevOps – but you also can‘t skimp on infrastructure. You need a rock-solid but low-maintenance CI/CD pipeline and strong security and monitoring. Through the YC network, we got DevOps advice from the legendary Yishan Wong, an early engineer at Facebook and PayPal.
He introduced us to Continuous Deployment and helped us set up a secure, autoscaling AWS environment that could handle our exponential traffic growth. We went from infrequent, error-prone manual deploys to 10+ automated pushes per day. At Techstars, CTO mentors helped us pick the right monitoring tools and incident response processes to maintain five 9‘s of uptime even as our user base grew 20X.
Team Building
A startup is only as good as its team. To build an enduring company, you need to attract and retain top engineering talent. This is hard to do without a strong employment brand or big hiring budget. Both YC and Techstars are a huge help here. Once you‘re affiliated with a prestigious accelerator, you get instant cred with developers.
We were able to recruit engineers from Google and Facebook who would have never joined a no-name startup. And being part of a cohort of other top engineering teams, we always had a first look at developers looking to join a YC or Techstars company. The accelerators also gave us access to top recruiters who helped us build an efficient interview process and extend compelling offers competitive with the big tech companies. This was a huge early advantage in the war for talent.
Fundraising
For many technical founders, fundraising is a foreign and daunting process. You have to quickly shift from building product to pitching investors and negotiating terms. This is where the accelerators really add value. Both YC and Techstars have an amazing track record of helping companies raise money after Demo Day.
YC companies have raised over $25 billion from top Silicon Valley firms. Techstars companies have raised over $5 billion. The brand affiliation of joining a top accelerator is an instant credibility booster with VCs – it‘s a signal you‘ve been vetted by the best.
In my YC batch, 2 of our batchmates, Weebly and Justin.tv (now Twitch), set the bar by raising big Series A rounds valuing them at $15 million just weeks after Demo Day. Investors took notice and a herd formed around the other top companies. The YC partners helped us capitalize on this momentum by setting up a packed schedule of VC meetings.
We did a fast follow by raising a $2 million seed round at a $10 million post-money after Demo Day. We were able to choose from a set of dream Silicon Valley investors including First Round, SV Angel, and Baseline thanks to the YC stamp of approval. With money in the bank and top VCs on board, we were able to execute against our roadmap and scale the business.
At Techstars Seattle, there was less of a feeding frenzy, but the fundraising process was more measured and strategic. We started meeting with investors midway through the program to gather feedback, build relationships, and warm up prospects before Demo Day.
We focused on Seattle and Bay Area investors with a track record in developer tools. We leveraged the Techstars mentor network to get warm intros, technical validation, and backchannel references. As a result, we were able to raise an oversubscribed $1.5 million seed round from Boldstart Ventures, Version One, Techstars, and several local angels just one month after Demo Day. The alignment with our target customer and market was key to finding the right investors.
Alumni Network
The accelerator experience itself is transformative, but the real lasting value is the alumni network. The tight bonds you form going through an intense, compressed program with your cohort and the larger alumni community become an invaluable support system for life. Some of my closest friends and most trusted advisors are my YC and Techstars batchmates.
There‘s a strong ethos in both communities of paying it forward. Alumni are always willing to make an introduction, hop on a call to help debug a problem, or share hard-won advice. When we were wrestling with a complex infrastructure issue, I pinged a CTO I met at a Techstars FounderCon who had dealt with a similar challenge. He kindly offered to whiteboard solutions with me and ended up saving us weeks of wasted effort.
At one point, we were evaluating term sheets from two foreign investors. I called up a YC founder friend who had just raised money from investors in the same market. He gave me the inside scoop on each firm and a creative deal structure idea that saved us from a bad situation.
Both communities are also great for ongoing learning and development. There are regular CTO gatherings and engineering meetups to swap best practices on the latest tech stacks. And the accelerators bring in top practitioners for off-the-record talks. I‘ll never forget a closed-door session where Elon Musk shared crazy stories of SpaceX‘s early engineering feats and failures. Being part of such a high-caliber brain trust is a master class in technology leadership.
Conclusion
So which accelerator should you choose? If you‘re a software engineer with massive ambitions to build a consumer technology giant, Y Combinator is the rocket ship for you. You‘ll be pushed to your limits and beyond, but that Herculean effort could mint a unicorn. If you‘re a technical founder building an enterprise product solving a specific domain problem, Techstars‘ ecosystem approach and mentorship will be catalytic.
Having experienced the power of each program, I‘m grateful to have had my technical chops, leadership skills, and network expanded by both accelerators. Like an IDE, they each provide a rich set of tools and a productive environment for engineering peak performance. Whichever you choose, code boldly and make something people want.