Twice a year, dozens of Silicon Valley’s most promising entrepreneurs take the stage and, one by one, pitch their startups to a room packed with venture capitalists and celebrity investors. In years past, they included Ashton Kutcher, Joe Montana and MC Hammer. There was none of that on Monday, though—only a sparse website and a lot of video conference calls.
Demo Day at Y Combinator is a sacred Valley ritual that’s struggling to find its place in a world reshaped by the coronavirus pandemic. The event had previously been scheduled to take place at San Francisco’s Pier 48, an expansive event space in the shadow of Oracle Park, where the Giants normally play, though not for at least a few weeks. Major League Baseball, like just about everything else, is on hold.
Jake Mor had been making preparations for his Demo Day presentation when he learned barely a week ago that the event was canceled and that his class would be the first to go online-only. “It sucks,” said Mor, who’s building an app called FitnessAI that offers personalized weight-lifting regimens. “But if they didn’t cancel it, I’d feel more uncomfortable presenting onstage and contributing to the spread.”
In its place, Y Combinator posted an invite-only website on Monday listing nearly 200 startups in the current class. VCs can click on the name of a company to see a brief description, a couple key metrics about the business and contact information for the founders. Contrary to the initial plan, there are no pitch videos.
Mor quickly overcame his disappointment and in true entrepreneurial spirit, offered an optimistic take. The new format would favor functioning businesses like his, he said, and weed out the charlatans. “The first thing they see is the metrics, not the charisma,” Mor said.
Through its business incubator, Y Combinator offers coaching, connections and $150,000 in exchange for 7% of equity in each startup. Y Combinator helped launch Airbnb and Dropbox, and members often like to brag that getting in is tougher than Harvard. It is, however, less diverse.
Among founders in the current class, 11% are women, 9% are black, and 8% are Latino—a series of stats that passes for diversity only in Silicon Valley. (Willett Advisors, the investment arm for the personal and philanthropic assets of Michael Bloomberg, the founder and majority owner of Bloomberg LP, is an investor in Y Combinator startups.)
For years, Demo Day has hardly been a true unveiling. The top seed investors work to get early looks at the standout Y Combinator companies, and by the time Demo Day rolls around, they already know which ones they’d like to fund. This group is no different. Niko Bonatsos, a partner at General Catalyst, said his firm met virtually with some of the entrepreneurs last week and established “handshake” deals with two of them. (No actual handshakes were exchanged.)
Y Combinator said the program for the next class of startups, which begins in the summer, could take place partly or entirely through online video. “Covid-19 will have an impact on every part of the global economy over the upcoming months,” Y Combinator said last week. “This is a unique worldwide crisis, but it will not lessen the extraordinary opportunities for terrific founders to start and build epic companies.”
VCs are still reckoning with the implications of a virtual Demo Day. Putting aside macroeconomic effects, valuations could come down when there’s not a bunch of checkbooks competing for the same group of companies in one room, Bonatsos said: “Less FOMO among investors.”
Demo Day is most effective as a deadline for founders to finalize business plans and take on outside investment, said John Lilly, a venture partner at Greylock Partners who led the firm’s funding round for Dropbox. That will continue regardless of whether it takes place onstage or online. “Without Demo Day, you get a rolling timeline that isn’t as useful,” he said.
Several entrepreneurs exhibiting in Monday’s online Demo Day saw unique advantages in the new setup. Captivity: “All the investors are at home. They’re not distracted,” said Diego Fischer, founder of Carupi, a car-selling service. Bragging rights: “This Demo Day is the one where the batch can say they raised during a pandemic,” said Yin Wu, founder of Pulley.com, which helps startups track their stock ownership. And equality: Wu is eight months pregnant and took all her meetings over Zoom video calls, she said: “A lot easier.”