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AcceleratorsStartupsVC

Newchip’s Fall from Grace Leaves Startups Reeling

Nicole Kristine Jovero
Last updated: May 8, 2024 12:12 am
Nicole Kristine Jovero
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2 Min Read
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  • Startup accelerator Newchip’s bankruptcy left over 1,000 startups reeling.
  • Court-auctioned warrants disrupted founders’ cap tables, derailing some companies.
  • The saga tarnished Austin’s startup scene, highlighting accelerator risks.

Contents
Warrants auction turned cap tables into crisis zonesA sour note in Austin’s entrepreneurial symphony

For founders like Acey Hunter and Garrett Temple, the implosion of Austin-based startup accelerator Newchip has been a devastating blow.

Its bankruptcy filing in May 2023 set off a chain reaction that threatened to disrupt the carefully curated cap tables of over 1,000 startups it had worked with.

Warrants auction turned cap tables into crisis zones

Normally, private startups maintain full control over their cap tables, deciding which investors can buy shares and at what prices.

However, the bankruptcy court prioritized repaying creditors over protecting equity holders’ interests.

This led to a court-mandated auction of the warrants – rights to purchase ownership stakes – that Newchip held in its portfolio companies.

A sour note in Austin’s entrepreneurial symphony

The events left founders outraged and, in some cases, forced to shutter their companies entirely. Hunter’s TechAid and Temple’s Novogiene fell victim, with their founders lamenting the loss of potential investor connections and growth opportunities once promised by the accelerator program.

As the fallout continues to reverberate, Austin’s renowned startup ecosystem is grappling with the tarnished legacy of an accelerator meant to nurture fledgling companies.

The Newchip saga now serves as a cautionary tale for founders seeking third-party support, underlining the fragility of the startup journey.

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