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The inside story of the venture capital and startup world by Tomio Geron.
August 29, 2020
Hello and welcome to Pipeline. This week is a little different: I'm going to dig into two different Demo Days I attended this week. Let me know if you enjoy these sorts of dispatches.
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- Here, read my manual. Reid Hoffman sparked a trend this week after he published a manual on how to work with, well, himself. Now others, such as Hunter Walk and Josh Elman, have published their own. My colleague likened it to MBA journaling, but it reminded me of Bloomberg Beta's manual on how to work with the fund, which is published entirely on GitHub.
- "The problem is on the VCs. We cannot deflect blame to anyone else." Bloomberg published a must-read piece on how Black VCs still find it hard to "confront Silicon Valley's quiet racism."
- What's happening in the messy middle? There's a lot of experimentation in early-stage investing right now, and the exit game is on fire thanks to a surge in SPACs and a hot IPO market. But I hear from VCs that there's now a push to sort out what's happening in the middle, with the growth stage series B to series D investments. So far, I'm hearing about investors leaning more into crafting specialized firms and perhaps Iconiq emerging as the new SoftBank, but I'm curious what your theories are, too. Send me a note at email@example.com.
Biz on Biz
8 lessons from 212 startups
When I started writing about Demo Day back in 2015, Y Combinator's class was much smaller than it is now. But in 2020, the overarching idea is still the same: The startups presenting could be the next Airbnb, Dropbox or Instacart. You just have to be able to spot it.
This week, I tuned in to the two days of YC's Demo Day, plus a "Demo Faire" held by alumni of South Park Commons (a kind of "techie collective" that's closer to the idea of a builder community where people can join without a startup in the works). That meant I listened to eight hours of pitches on Zoom, including the 197 Y Combinator startups who each got one minute, and the 16 startups from South Park Commons that were exhibiting for its alumni fair. (Technically, one of the YC companies was also an alum of SPC, so that's how we get to 212 companies total.)
Unfortunately, I can't tell you what the Airbnb of 2020 is. But here are a few of the people, pitch lines, startup themes and competitive deals that I thought were fascinating.
- Shopify is the new "X for Y" game. Calling your startup the "Uber for X" sometimes feels lazy. But I'm a fan of these descriptors when you're listening to hundreds of one-minute pitches, as it's a great way of getting to the point. Shopify was by the far the biggest inspiration for YC startups this week (seven, by Crunchbase's count): Shopify for India, Shopify for fitness instructors, Shopify for online schools and a Shopify for anyone teaching online.
- In fact, Shopify isn't just an inspiration: There were other startups that were building for Shopify, like a price A/B testing tool called Jika. And if you weren't building a Shopify derivative, other inspirations included Plaid for buildings, Superhuman for reading, Pinduoduo for Europe and Lambda School for Latin America and Europe.
- Some startups think they can build a better Zoom, clearly inspired by COVID-19. But if this pandemic has taught us anything, it's that videoconferencing isn't just for work meetings, and several companies were building better ways to host remote events, from weddings and birthdays to corporate conferences. One example: Rume, which presented at both YC and SPC and lets you have multiple conversations at once — a standout demo when doing a video chat inside another video chat.
- B2B startup businesses are still like catnip to investors. The most competitive deal didn't even present at YC's Demo Day: As TechCrunch first reported, A16Z ended up leading a $16 million round for Trove, which makes compensation tools for startups. Other startups I've heard to keep an eye on: Lendtable, Supabase and Clover.
- Collaboration is a new selling point. Thanks to the rise of Figma and the WFH reality of COVID-19, one of the major themes to emerge was how many startups were working on tools to allow people to work together more easily. Take GitDuck, a "Zoom for developers" that makes it easier to share code. On the flip side, automation and removing people from the process continues to be a big trend, too.
- Some familiar faces are building new companies. Spotted touting their new ventures: Flightcar's former CEO and founder Rujul Zaparde, who was a visiting YC partner and is now the CEO of purchase approvals startup Evergreen; HQ Trivia's former head of product James Ruben, who is building an interactive video platform for kids called Hellosaurus; and the founder of Facebook's OpenCellular project Kashif Ali, who has a new cellular network company Ukama.
- Suddenly, people care about profitability. Normally in this level of seed-stage investing, it's more about the founding team and growth. In fact, many companies should be losing money to grow. It might be to do with the economic climate, but in this batch, profitability seemed important, particularly to startups working on marketplaces.
- And overheard: "We even helped a YC partner get pregnant!" There were several companies focused on women's health and fertility this batch, but this was the first startup I've heard of that got a partner pregnant and used it as a selling point in a pitch.
The hard part of listening to all of these pitches in a row is that many start to sound the same, whether it's another API, another B2B marketplace, or the seventh "Shopify for …" (Also, take South Park Commons' lead to build-in guided stretch breaks during hours in front of Zoom.) But if you had to ask me to pick some favorites from the week, the startups I liked included:
- Adyn: A test to help women pick better birth control (YC)
- CharityVest: Donor-advised funds as an employment benefit (YC)
- Arist: Worker training via text messages (YC)
- Artifact: Think "This American Life" but about your own family (YC)
- Braid: An easy way to pool group money together and end the individual Venmo requests (SPC)
- Facet: A superpowered imaging editor (SPC)
Join us on Tuesday
Edge computing is an emerging concept that holds great promise. AI best practices are still evolving in the cloud. Join us on Tuesday at 9 a.m. PT for our virtual event Computing at the Edge. Protocol's Tom Krazit will host a discussion with Edgeworx's Farah Papaioannou, IBM's Rob High, Cox Communications' Nancy Li and Swim.ai's Simon Crosby. This event is presented in partnership with Intel.
- Benchmark's Bill Gurley has been a direct listing superfan, but as SPACs have emerged and become a more competitive market, he believes we'll see more companies choose them as their exit. But don't count the IPO out yet. A16Z's Alex Rampell and Scott Kupor published their own defense of the IPO.
- Placement agents are still rare in venture capital, but emerging fund managers are asking Samir Kaji whether a placement agent could help in VC fund creation.
- Need a book to read? Kevin Gao, already known for his compilations of investor writing, has started creating "bookshelves" to track the books that shaped people like Marc Andreessen or Steve Jurvetson.
- With women like Emily Kramer, Ifeoma Ozoma and Aerica Shimizu Banks coming forward about their treatment at tech companies, tech companies should be taking another look at their hiring and promotion policies. Renegade Partners' Susan Alban says being a fair-pay CEO means reducing manager discretion and solving underleveling challenges.
Need to Know
- Absolute S-1 bonanza. Snowflake, Unity, Asana, JFrog, Sumo Logic and Amwell flipped their S-1s on Monday. And then Palantir made its filing public on Tuesday. The week ended with a profitable GoodRx. The most striking part about the many words in these S-1s to my colleague David Pierce: "That everybody in tech is either competing with the giants, relying on them for some critical part of their business, or both."
- This week in TikTok: I'm first to admit that I think Amazon could be a potential suitor in every acquisition, but Walmart? That never crossed my mind. Now the retail giant is in talks to team up with Microsoft to buy TikTok. It could be a crazy shift in the ecommerce landscape — or end up like when eBay owned Skype.
- The SEC changed who can be an investor, so its accredited investor list now doesn't just include rich people, but also "knowledgeable employees" of a fund.
- Diversity is now an investment clause. Ten firms, including Greycroft and First Round, committed to adding a diversity rider to their term sheets to encourage companies to add underrepresented investors.
- From Protocol: Everybody hates digital calendars, so everybody's trying to build a better one.
- And your weekend reading: Apparently Asana co-founder Dustin Moskovitz only agreed to an interview with Forbes if it was his only interview this year. But that's only one reason to read Forbes' excellent cover story on the Facebook co-founder's second act as he takes Asana public.