New Chip
They thought they were joining an accelerator, but instead, they lost their startups
Lacey Hunter thought she was fine throughout the three-month New chip accelerator process. In May 2023, the organization declared bankruptcy. That year, her company faced difficulties after learning that the warrants to purchase an ownership stake had merged with the proceedings.
In 2022, the year her company launched TechAid as an AI tool for humanitarian aid, New chip filed for bankruptcy after just a few sessions into the accelerator program.
While he built a network of friends at Newchip Hunter, he claimed he experienced no tangible benefits. I aspired to deliver the curriculum by August, but in May, it became inaccessible.
The Austin accelerator shut down after submitting a bankruptcy petition caused by employee anger and customer discontent. The court has directed the company to auction off the warrants it possessed from over 1.000 startups who completed the accelerator program.
Generally, startups manage the selection of investors and the associated compensation. Focused on restoring creditors rather than equity interests, the bankruptcy court restricts New chip’s startups’ influence over these matters. The auctions remain active, with the initial tranche completely sold and additional tranches due this spring and summer.
Founders are furious — some individuals, such as Hunter, are losing their businesses.
Newchip’s Fall From Accelerator Grace
Initially functioning as a provider of high-value investments sourced from diverse crowdfunding platforms for equity backing, Newchip later morphed into an accelerator that vowed to support startups in expanding their ventures and accessing investors at an expensive rate.
Founders stated that the startup required founders to spend from a lower end of several thousand to over $18 thousand for its programming. The company offered Newchip the opportunity to gain $250000 shares later at its existing valuation.
Hearing intense backlash about his management approach led eight former employees to leave Newchip as CEO Andrew Ryan. According to TechCrunch last year’s report, Ryan’s management style drew from a military-focused mindset. An illustration arose in a session with around 15 employees in operations and sales roles. According to one attendee, Ryan instructed leaders in each department to study a book about inspiring college volunteers to be more enthusiastic about volunteering. Ryan requested that two senior leaders guide the team through a book discussion. Many became puzzled by it and failed to recognize its relevance to Newchip’s business.
They encountered difficulties with it. Andrew frequently cut off the conversation during the meeting and challenged the group. Ryan noted that this event was a trial for the individuals I’ve called on for today’s effort. I intended to release one of you because of the individual with the lowest performance.
Founders Fight for Their Companies
A founder chose to keep their identity secret and shared with TechCrunch that Newchip reached out to them on LinkedIn and assured them that gaining approval would lead to investor connections. Guided by a friend’s advice, she forwent the $7.500 fee for Newchip and was about to join before it was brought to her attention to avoid paying for networking.
She decided to hear out Ryan. Ryan’s absence from our meeting made her want to regain her payment after she submitted an email to Newchip for a refund of her deposit stating her delayed start date. He reached out to her.
Though the founder reclaimed her funds from Newchip, the company still stood by her contract, leaving her caught in a bankruptcy suit. At this point, she discovered that investors might acquire her company’s warrants at barely any cost and that this could adversely affect future valuations.
I tell TechCrunch how stressed and ashamed I feel. Being a new founder in financial distress means I can’t afford to pay for legal representation. This accelerator should aid founders but is now putting pressure on new founders.
At a certain time, founders could voice their objections to selling their warrants about the court-assigned company Peak Technology Partners.
The last date for those in the first tranche to object to these sales was January 15. According to court reports, founders worldwide, including Australia and Finland, have raised objections.
When Dreams Become Nightmares
In the same way Hunter from TechAid holds the company accountable for Newchip’s shutdown, Garrett Temple does the same. Like Hunter, he engaged with Newchip’s accelerator program from January through May 2023. The company Novogiene specializes in medical technology to prevent outbreaks.
Temple used his credit cards to cover around $7.5К to participate in the program and reported that he did not talk to investors. He joined Newchip to secure investors for his $500 thousand venture round to finance a limited manufacturing run and deliver his product to schools and medical institutions for testing.
After the summer’s demo day, investor meetings were expected to occur. New chip closed in May, and the connections did not appear on that demo day. Unable to continue further, Temple closed his firm in the summer of 2023. Since warrants couldn’t be offered to possible investors, his company ceased to be.
Temple asked his bank for reimbursement from the program when he used credit cards. The bank recovered $5.000 in the beginning. Temple discovered the money was gone from his account a month later and thought New chip resisted accepting the funds.
Though Temple has found new opportunities, he still possesses intellectual property linked to Novogiene. He looks forward to licensing the technology to someone else or re-opening his business.