The Rise and Fall of Newchip Accelerator

One of the biggest startup accelerators is being liquidated. Was it a scam or just another failed startup?

DC Palter
Entrepreneurship Handbook
13 min readMay 13, 2023

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Photo by Melinda Gimpel on Unsplash

Y-Combinator is without a doubt the best known startup accelerator. Newchip, based in Austin TX, rivaled it as one of the largest, with a radically different business model.

On March 17, Newchip (under its corporate name of Astralabs) filed for Chapter 11 bankruptcy protection from creditors. This would allow the company to restructure and continue operating.

However, on May 11, in a shocking development, the bankruptcy court ordered Newchip shut down and liquidated, leaving thousands of startups that had paid to join the accelerator out in the cold.

Newchip claims to have helped 5000 pre-seed through Series A startups that graduated their program, with 1200 more in their current cohorts. Each startup paid $8K to $20K to join after being promised guidance, mentorship, and introductions to investors, promises that were largely unfulfilled.

Was Newchip a legitimate accelerator providing valuable services to young startups destroyed in an attempted coup by vengeful former employees? Or was Newchip the venture world’s version of Trump University, providing nothing but a generic canned curriculum while charging naïve founders a huge sum so the founder could live a lavish lifestyle? It depends on who you believe.

Newchip Business Model

There’s no reason an accelerator needs to follow the Y-Combinator model of offering cash to startups in return for a big slug of equity on which they’d make a huge return if and when the company exits. Or the university model of no cost, no equity, non-profit, bug alumni and donors every year to sponsor.

Newchip’s model was simple — charge tuition, run the program online, sign up hundreds of startups at a time, and make money. Which would be okay if they were upfront about it.

But nowhere on their website do they mention anything about fees. Instead they made the program sound exclusive, with an application process like other accelerators. Ryan told me that over 65% of companies they targeted failed to meet the minimum required funding or…

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Entrepreneur, angel investor, startup mentor, sake snob. Author of the Silicon Valley mystery To Kill a Unicorn: https://amzn.to/3sD2SGH