Hundreds gathered this week at Pier 48 in San Francisco to watch the more than 200 companies from the 2019 Winter Cohort of Y Combinator present their two-minute releases. The audience of venture capitalists, who collectively manage hundreds of billions of dollars, pointed to their favorites. The best investors, however, had already chosen garbage.
What many do not realize the tradition of Demonstration Day is that the launch is not a requirement; in fact, some YC graduates skip the stage opportunity altogether. Why? Because they have already raised capital or are in the final stages of closing a deal.
About the new companies
ZeroDown, Overview.AI and Catch are among the new companies in the YC lot W19 that was held on this week’s Demo Day, as they have already pocketed venture capital. ZeroDown, a financing solution for real estate purchases in the Bay Area, raised a round of more than $ 10 million with a valuation of $ 75 million, sources told TechCrunch. ZeroDown has not responded to requests for comment, nor has the rumored principal investor: Goodwater Capital.
Without requiring a down payment, ZeroDown buys houses directly for clients and helps them to work to own land with monthly payments determined by their income. The business was founded by Zenefits. co-founder and former technology director Laks Srini, former head of operations for Zenefits, Abhijeet Dwivedi, and Hari Viswanathan, former Zenefits personnel engineer.
The founders’ experience in building Zenefits, despite its shortcomings, helped ZeroDown generate great enthusiasm before Demo Day. The sources tell TechCrunch that the startup had actually raised a small round of seeds ahead of YC from former YC president Sam Altman, who recently stepped down to focus on OpenAI, an AI research organization. It is said that Altman encouraged ZeroDown to complete the respected Silicon Valley accelerator program, which, in any case, gives its companies an invaluable network that no other incubator or accelerator can compete with.
Tesla is here too
Russell Nibbelink and Christopher Van Dyke were engineers from Salesforce and Tesla, respectively. In a beginning of industrial automation, Overview is developing an intelligent camera capable of learning the routine of a machine to detect deviations, failures or anomalies. TechCrunch has not been able to contact the Overview team or determine the size of its initial round, although sources confirm that it skipped the Demonstration Day due to an agreement.
Catch, for its part, closed a round of $ 5.1 million seeds co-directed by Khosla Ventures, NYCA Partners and Steve Jang before the Demonstration Day. Instead of presenting its health insurance platform at the big event, Catch published a blog post announcing its first feature, The Catch Health Explorer.
“This is just the first glimpse of what we are building this year,” Catch wrote in the blog post. “In a few months, we will bring the end-to-end health insurance enrollment for individual plans at Catch to provide the best health insurance enrollment experience in the country.”
TechCrunch has more details on financing the startup healthtech, which included the participation of Kleiner Perkins, Urban Innovation Fund and Graduate Fund.
4 new companies already got their deals
Four new companies, Truora, Middesk, Glide and FlockJay had deals in the final stages when they entered the Demo Day stage, deciding to make their pitches instead of skipping the grand final. The sources inform TechCrunch that the renowned venture capital firm Accel invested in both Truora and Middesk, among other graduates of YC W19. Truora offers fast, reliable and affordable background checks for the Latin American market, while Middesk performs due diligence for companies to help them conduct risk assessments and customer compliance.
Finally, Glide, which allows users to quickly and easily create well-designed mobile applications from Google The pages of sheets, the support of First Round Capital and FlockJay, the operator of an online sales academy that teaches job seekers with Underrepresented backgrounds the skills and training they need to pursue a career in technology sales, a safe investment from Lightspeed Venture Partners, according to sources familiar with the deal.
Pre-Demo Day M & A
Getting up before Demo Day is not a new phenomenon. The companies, thanks to the invaluable YC network, increase their chances of increasing, as well as their valuation, at the moment they register in the accelerator. They can start chatting with VCs when they see fit, and they are encouraged to mingle with YC alumni, a process that can result in acquisitions prior to Demo Day.
This year, Elph, a blockchain infrastructure startup, was purchased by Brex, a cutting-edge unicorn who graduated from YC just two years ago. The agreement closed only one week before the Demo Day. De Brex The chief engineer, Cosmin Nicolaescu, told TechCrunch that Elph’s five-person team, including co-founders Ritik Malhotra and Tanooj Luthra, who previously founded the company Steem acquired by Box, were being watched by several larger companies while Brex negotiated the agreement.
Be entrepreneurial, show your potencial
“For me, it was important to get them before the day of the shoot because that opens the floodgates,” Nicolaescu told TechCrunch. “The reason I really liked them is that they are very entrepreneurial, which is in line with what we want to do. Each of our products is really like your own business”.
Of course, Brex offers a credit card for new companies and has no plans to venture into blockchain or cryptocurrency. The Elph team, rather, will take its infrastructure security expertise to Brex, helping the $ 1.1 billion company build its next product, a credit card for large companies. Brex declined to disclose the terms of his acquisition.
Looking for the best deals
Ultimately, it is up to the new companies to determine the cost to which they will renounce equity. YC companies raise capital under the SAFE model, or a simple agreement for future actions, a form of fundraising invented by YC. Basically, an investor makes an investment in cash at the beginning of YC, then receives shares of the company at a later date, usually in a Series A or a subsequent agreement to the seed. YC made the switch from investing in new companies on a secure basis before money to a safe after money in 2018 to make the founders easier for the founders.
Michael Seibel, YC’s executive director, says the accelerator works with each new company to develop a personalized fundraising plan. Companies that rise in appraisals north of $ 10 million, he explained, do so because of the high demand.
“Each company decides on the amount of money it wants to raise”
“Each company decides on the amount of money it wants to raise, the valuation it wants to raise and when it wants to start raising funds,” Seibel told TechCrunch by email. “YC is only an advisor and does not determine how our companies operate. The vast majority of companies complete the fundraiser in 1 to 2 months after the Demonstration Day. According to our data, there is little correlation between the companies that have more demand on the Day of the Demo and those that become extremely successful. Our advice to the founders is not to over-optimize the fundraising process. ”
Although Seibel says that most of the increases in the months after the Demonstration Day, it seems that the best investors know how to be proactive about the review and investment in the lot before the big event.
Everything goes fast at YC
Khosla Ventures, like other major VC firms, meets with YC companies as soon as possible, partner Kristina Simmons tells TechCrunch, even scheduling interviews with companies in the period between the time a startup is accepted to YC before the program really starts. Another Khosla partner, Evan Moore, echoed Seibel’s statement, stating that there is no correlation between future unicorns and those who raise capital before Demo Day. Moore is a cofounder of DoorDash, a YC graduate is now worth $ 7.1 billion. DoorDash closed its first round of capital in the weeks after Demonstration Day.
Thoughts on the day of the demonstration
“I think a lot of the activity before the day of the demonstration is led by the FOMO investor,” Moore wrote in an email to TechCrunch. “I’ve had investors ask me how to enter a company without even knowing what the company does! I mainly see this as a side effect of something good: YC has helped tilt the scale towards the founders by creating an environment where investors These dynamics are not what many investors are accustomed to, so each group complains about the valuations and how easy the founders have it, but facilitating ambitious entrepreneurs to obtain funds and pursue their vision is a good thing for the company. economy “.
This year, given the number of recent changes in YC, that is, the size of his last batch, there was additional pressure on the accelerator to show his best group so far. And while some told TechCrunch that they were particularly impressed with the lineup, others expressed their frustration with the ratings.
Many new YC companies are raising funds
Many new YC companies are raising funds in valuations of or more than $ 10 million. In this context, this is perfectly in line with the assessment of the initial stage of the seed in 2018. According to the PitchBook, the emerging companies of the USA. UU Seed rounds increased to a median after the $ 10 million valuation last year; So far this year, companies are increasing seed rounds to a slightly higher post-valuation of $ 11 million. That said, many of the new companies in the YC cohorts are not as mature as the average company in the planting stage. According to the PitchBook, a company can be several years old before securing its seed round.
However, expensive deals can be a disappointment for investors who are in YC every year, but because their reputation is not as high as that of Accel, it is not possible to book meetings before the Demo Day with the best of YC .
The question is who is Y Combinator
And the answer is founders, not investors. YC has no obligation to offer agreements of a certain valuation nor is it responsible for which investors get access to their best companies at what time. After all, startups are accumulating ever larger rounds, earlier in their lives; Should not YC, a microcosm for the startup ecosystem of Silicon Valley, recommend to its startups to charge the best investors the current rate?