With the identical application, it doesn't hurt to hedge your bets and apply to them as well as Y Combinator. They've got nothing over YC but it's certainly a viable alternative.
Can you clarify the line about inside info and how the Tech Stars program could be bad for a company's future VC funding?
If a seed firm has an official relationship with a VC, that VC will know which of their startups are best. They can't invest in all of them, since the number of startups is so much larger at the seed phase. Any they don't invest in, other VCs will know are rejects. And this is the kiss of death, because the most important thing to most VCs is other VCs' opinion.
Both Techstars and the new Lightspeed thing have this problem. At Techstars one of the founders is a VC, and Lightspeed is itself a VC firm.
It's bad if you come out of the Techstars program without any funding and a non-sustainable company, but then you're probably screwed anyways. VCs are infamously inscrutable; we hear that they are always out to take advantage of naive or underfunded companies.
If you're good enough to get further investment after Techstars, you get it from a VC that you already know instead of having to deal with the typical painful negotiations. And if Brad Feld's Foundry Group will give you money, maybe you could get Bay Area VC money. Even better, the best companies will get to reinvest their own profits.
With their hard ties to VCs, if TechStars do not continue with you in their next round, you are auto-stigmatized. TechStars has then effectively marked you as undesirable in a sense and others might not give you a fair look.
Can you clarify the line about inside info and how the Tech Stars program could be bad for a company's future VC funding?