Cuts to Techstars’ staff and its decision to shutter certain accelerators came after it missed its 2023 revenue goals, according to documents outlining its preliminary 2023 results viewed by TechCrunch.

Techstars also lost millions of dollars more by year’s end (in adjusted EBITA) than it had anticipated it would, additional documents that discussed mid-year performance outlined. And the company’s costs were too high compared to its revenues, the documents indicated.

Techstars recently shut its Boulder and Seattle accelerators after pausing its Austin-based program. It laid off around 7% of staff and, last week, announced such a major overhaul to its operations that it dubbed the changes “Techstars 2.0.” Although the documents detailed several aspects of Techstars’ 2023 financial performance, they were based on preliminary data as of January and its final year-end numbers may differ. Techstars declined to comment.

The financial headwinds Techstars experienced in 2023 aren’t unique. Many members of the startup-venture landscape, including Techstars’ competitors, have been forced to adapt to top-line results that failed to live up to internal expectations after rising interest rates upended the economic landscape.

Some funds are making more drastic choices like shuttering due to internal issues; others are closing on a more planned timeline. Even Y Combinator has returned somewhat to its roots as an early-stage investor, pulling back from later-stage dealmaking.

So Techstars’ retooling in that context is not surprising. But the numbers give us rare insight into the economics of running an accelerator group of Techstars’ size.

The financial realities of running a massive accelerator

This internal data also makes it clear that Techstars’ expenses ran ahead of its ability to generate revenue in 2023, helping to explain why the company has worked to reduce its geographic footprint and reduce its total staffing.

It had 54 active accelerator programs on average during the year, leading to 682 graduated portfolio companies and total revenue for 2023 came to $73.1 million, according to the documents.

Even so, a separate document detailing the company’s full-year budget, and a mid-year forecast against those goals, indicates that the company’s 2023 revenue came in sharply under expectations. The firm initially budgeted for $94.8 million in revenues. In June of 2023 Techstars lowered its forecast for the year to $88.2 million; its end-of-year number — a $15 million shortfall from its already reduced expectations — helps explain why the company is reducing costs.

In terms of expenses, Techstars finished the year with smaller costs than it anticipated at the beginning of 2023, or that it forecasted at the mid-year mark. It initially budgeted program expenses at $39.9 million and operating expenses at $63.8 million. In June Techstars thought that it would close the year spending $38.1 million and $60.5 million, respectively. However, end-of-year data put program spend at just $34.3 million, and operating expenses at $53.5 million.

The cost underruns may be due to fewer accelerators operating than anticipated. Techstars’ 2023 budget targeted an average of 68 “active accelerator programs,” but was reduced to 61 in its mid-year forecast. The final figure came in four under its revised estimate.

With lower than expected revenues in 2023, but also more modest costs, how profitable was Techstars last year? The firm had already been anticipating ending the year with a loss, but the year finished far deeper in the red than it had estimated. It had budgeted an adjusted EBITDA loss of $600,000 at the start of 2023, at the mid-year point the company expected its adjusted profit to close the year at negative $1.9 million. The final number was negative $7.2 million.

The good news was that Techstars had plenty of cash in 2023 to handle these troubles and its closing cash balance in 2023 was actually much better than originally anticipated. It had budgeted an end-of-year cash balance of $43.5 million and by mid-year had forecasted $50.7 million. Its actual result, a year-end balance of $48.7 million, means that the company started the year with more cash than had it originally planned, even if the final figure was under its mid-year expectations.

Is that a lot of cash?

For Techstars, that’s a lot of cash. Several sources who spoke with TechCrunch indicated some concern that Techstars was running short of cash, saying that it could run short of funds by the end of 2024. But these documents reveal that the company closed last year with around $50 million in cash for its operational budget. The capital it uses to invest in startups and its investment vehicles’ raised capital is not counted in its own operational cash balances.

However, our sources have also suggested that the funds Techstars used to back its 2024-era accelerator programs — its Techstars 1.0, if you will — will complete the investing cycle this year. This isn’t alarming. Investment funds are supposed to be used to invest in startups.  And its parent company is well-capitalized, based on our analysis of these documents.

TechCrunch has not yet confirmed if 2023’s cuts to staff and programs will be enough, or if more city accelerators or other programs will be shut down. It recently laid off around 20 people, or 7%, sources confirmed to TechCrunch.

“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,” Techstars CEO Maëlle Gavet told TechCrunch last week. The company currently has a little over 300 employees, she explained, divided into two camps: those working on accelerator/ecosystem programs, and those working on infrastructure programs.

However, a recent all-hands meeting seen by TechCrunch revealed that managing directors were still trying to reduce operating expenses. Alongside the 7% staff reduction, those reductions will help the company save more than $8 million this year, sources tell TechCrunch. If the company cuts even more programs, the company’s cash burn could become modest even with no revenue growth.

Techstars is retrenching and rebuilding itself, but its end of year data doesn’t paint the picture of a company in dire straits; instead, it appears that Techstars grew too big for its revenue base in the post-zero-interest-rate-policy world and cost cuts were a logical step to take. Whether Techstars is making the right strategic choices in what it is nixing — as some critics and former employees have questioned — remains to be seen. But in purely fiscal terms, the choices are easy to grok.

Current and former Techstar employees can contact Dominic-Madori Davis by email at dominic.davis@techcrunch.com or on Signal, a secure encrypted messaging app, at +1 646.831.7565; or contact Mary Ann Azevedo by email at maryann@techcrunch.com or by Signal at +1 408.204.3036.