In a significant move, Techstars has announced that it will be laying off 17% of its workforce as part of a broader restructuring effort. The company has also decided to end its $80 million J.P. Morgan-backed AdvancingCities program once the fund is completely deployed at the end of this year.
Background on AdvancingCities
The AdvancingCities program was launched in 2022 with the goal of backing more diverse founders through accelerator programs across various cities, including Oakland, New York, Miami, and Washington, D.C. The program was sponsored by J.P. Morgan with a commitment that was supposed to last until December.
However, as previously reported by TechCrunch, the relationship between Techstars and J.P. Morgan had soured almost immediately after the launch of the program. Despite the initial commitment, the bank did not commit to continuing the program by the earlier deadline, leaving the fate of around 20 Techstars employees who worked on the program uncertain.
Layoffs at Techstars
In an email sent to staff, Techstars co-founder and CEO David Cohen explained that the startup accelerator had "overbuilt and overhired" in certain areas. He stated that most of the layoffs would come from engineering, support services, and those working on sales and partnerships. However, Cohen assured that those running most accelerator programs would not be impacted, with the exception of the J.P. Morgan programs, specifically the AdvancingCities program.
Restructuring at Techstars
The news comes during a transformative year for Techstars. The company’s now-former CEO Maëlle Gavet stepped down in May, and Cohen took over as CEO upon her departure. This is not the first time Techstars has undergone layoffs; the company reduced its headcount by 7% in January.
Under Gavet’s leadership, Techstars had a strategy to scale into more programs and back more startups. However, this approach was met with criticism from the investment community as the organization began restructuring itself earlier this year. Cohen addressed these criticisms in his email to staff, stating that the company would now focus on being "better for founders each and every day" by shifting its focus away from scaling.
End of AdvancingCities Program
The end of the AdvancingCities program marks a significant development in the Techstars-J.P. Morgan relationship. While J.P. Morgan has announced plans to fully deploy the $80 million fund, it seems that the partnership will not continue beyond this year.
A spokesperson for J.P. Morgan stated: "In 2022, J.P. Morgan announced the $80MM Advancing Cities Fund, raised as a private placement to invest in a Techstars accelerator program focused on advancing equitable access to funding among diverse founders across the U.S. The fund is expected to be fully deployed by the end of this year, as planned."
However, it appears that J.P. Morgan’s commitment to supporting diverse founders will continue through other initiatives, including the expansion of its diverse manager network and private investments platform.
Impact on Techstars’ Employees
The layoffs at Techstars will undoubtedly have a significant impact on the employees affected by them. The company has promised to support those who are leaving and provide resources for their transition.
As Techstars navigates this period of restructuring, it remains to be seen how the company will adapt to its new strategy and what implications this will have for its future growth and development.
A Look at Techstars’ Recent Developments
Techstars has been undergoing significant changes in recent months. In May, Maëlle Gavet stepped down as CEO, and David Cohen took over. This change in leadership marks a shift towards a more founder-centric approach for the company.
In January, Techstars underwent a 7% headcount reduction, which was seen as a precursor to further restructuring efforts. The latest layoffs bring the total number of employees impacted by these changes to around 20%.
As Techstars navigates this period of transformation, it will be interesting to see how the company adapts and evolves in response to changing market conditions.
Conclusion
The decision by Techstars to lay off 17% of its workforce and end its AdvancingCities program marks a significant development for the company. As Techstars continues to navigate this period of restructuring, it remains to be seen what implications this will have for its future growth and development.
