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Will Investors Move Fast & Break Things at Y Combinator Demo Day? 85% of Companies Already Launched

This post is part of our ongoing coverage of Y Combinator Demo Day Summer 2013. If you like what you read here we hope you will consider subscribing to Mattermark Weekly – our weekly newsletter on startups investing.

Twice each year hundreds of investors convene to watch as companies incubated in the prestigious Y Combinator program present two and a half minute pitches, quickly describing their business opportunity, product, team, market, vision, and traction to date. (See the full list in Mattermark Pro)

Among angels and seed stage VCs the event is widely discussed and in the weeks leading up to Demo Day much research and some early conversation between founders and investors does take place. Indeed many investors work very hard to make sure they’ve seen as many YC companies as they can prior to the big event.

Newly minted venture capitalist Hunter Walk wrote a post titled “I Don’t Want to Meet Your Company At Demo Day” where he explains the sentiment this way:

If you see me at a demo day, it’s likely to show support for the incubator itself, not to discover the Next Big Thing. Why? Because if I’m meeting a founding team for the first time on demo day I messed up. Given Homebrew’s commitment to go “all in” for our founders (leading financing rounds, operational guidance) and our fund’s thematic focus (the Bottom Up Economy), if I’m doing my job we’ll have found one another earlier, even if fundraising activity hasn’t begun.

Given that Y Combinator tends to encourage founders not to talk with investors until close to the end of the batch we’d be curious to hear how many of the 41 founding teams Walk, and other investors, managed to meet with prior to today’s presentations.

David King summarized Walk’s post in another way:

What do you think? With the dearth of seed capital flowing into startups (and arguably driving the top of the funnel for the series A crunch) and the creation of fundable early stage companies at historical levels — should seed stage investors expect not to be viewed as commodity? To hear Paul Graham tell it, acting a bit more like a bank might have huge upside for investors.

“One of the biggest things investors do not get about the fund raising process is what an immense cost talking to them imposes on the startups that are raising money, especially when a startup consists just of the founders. Everything completely grinds to a halt during fundraising,” Graham said at the conference.

Graham suggested that as a result, there’s room for an investor to undercut the competition by moving more quickly with early stage investments. If there existed a reputable investor who would invest $100,000 on market terms within 24 hours, they would be able to corner the market on the best startups, he said. That firm would be approached by all the worst startups as well, Graham said, but at least they’d see everything. In contrast, firms which have a reputation for taking a long time to make their investments would be approached last.

Watch the full video interview:

© Mattermark 2024. Sources: Mattermark Research, Crunchbase, AngelList.