YC 377 Pitches: Startup Lessons from Y Combinator

Y Combinator’s Summer 2021 Cohort: Key Observations

This week saw considerable attention directed toward a single event, namely Y Combinator, alongside numerous colleagues at TechCrunch. The highly regarded accelerator revealed its Summer 2021 cohort, comprising a substantial 377 startups. Every startup that presented publicly was covered by our team, and a selection of promising ventures were highlighted:

• A comprehensive list of companies participating in Y Combinator’s Summer 2021 Demo Day, Part 1 is available here.
• Details regarding the companies featured on Day 2 of Y Combinator’s Summer 2021 Demo Day can be found here.
• Our preferred startups from YC’s Summer 21 Demo Day, Part 1 were identified in this article.
• A further selection of our favorite startups from YC’s Summer 21 Demo Day, Part 2 is presented here.

There's a genuine and captivating quality to dedicating significant time to listening to founder after founder articulate their concepts, each with a one-minute presentation, a single visual aid, and considerable optimism. This is a primary reason why covering demo days is appealing; it provides focused insight into the direction of future innovation, potential disruptions to established companies, and founders’ perceptions of competitive advantages.

A Note on Diversity

However, it’s important to acknowledge a caveat. While YC provides a valuable overview, it doesn’t fully represent the emerging generation of leaders and decision-makers within the startup ecosystem, particularly concerning diversity. The accelerator demonstrated modest improvements in the representation of women and LatinX founders within its cohort, but experienced a decline in the participation of Black founders. The necessity for more inclusive accelerators is increasingly apparent, and some within the tech industry consider this a significant oversight for Y Combinator.

Bearing this in mind, I’d like to share several key insights gained from listening to hundreds of pitches. Here’s what observing 377 Y Combinator presentations revealed about the startup landscape:

1. The Influence of Instacart. Instacart, currently valued at $39 billion, stands as one of Y Combinator’s most successful alumni – making the emergence of several startups within this summer’s cohort aiming to challenge its dominance particularly noteworthy. Rather than focusing on speed, these startups are seeking to improve the grocery delivery experience through offerings like high-quality produce, regionally-sourced recipes, and even imperfect vegetables. This suggests a potential evolution in grocery delivery, where convenience is no longer the sole determining factor.
2. A Subdued Crypto Presence. YC currently resembles a fintech accelerator more than ever, yet the number of ambitious crypto ventures was lower than anticipated. This point was briefly addressed on the Equity podcast, and I welcome any theories regarding the reasons behind this trend.
3. Edtech’s Expansion into the Humanities. It’s typical to see edtech founders concentrate on subjects like science and mathematics when pursuing innovation. This is largely because, from a pedagogical standpoint, it’s simpler to scale a service that provides answers to questions with definitive solutions. While mathematics lends itself well to AI-powered tutoring systems, the arts often require a more personalized approach. Therefore, I was encouraged to see several edtech startups, including Spark Studio and Litnerd, prioritizing humanities in their presentations. Surprisingly, reimagining the book club experience represents a significant advancement for edtech.
4. The Power of Authenticity. One presentation was particularly memorable because it directly addressed a common concern: widespread stress. Jupe, which offers glamping kits, has proven to be a profitable venture, likely boosted by the COVID-19 pandemic. The founder’s inclusion of a moment for investors to simply breathe, acknowledging the intensity of the past two days, resonated deeply. Demonstrating humanity, and communicating in a genuine manner, is increasingly crucial for making a lasting impression.

With that in mind, take a moment to exhale. Let’s proceed with the remainder of this newsletter, which includes reflections on Wall Street, public filings, and a new podcast I’ve been enjoying. As always, you can connect with and support me on Twitter @nmasc_ or reach out with tips at natasha.m@techcrunch.com.

A Shift Back to Traditional Wall Street Practices

Founders currently face a complex funding landscape, with a proliferation of new funds, solo general partners (GPs), and diverse capital sources. This increased fragmentation can be confusing for entrepreneurs. Navigating this environment requires a more refined approach to managing their capitalization tables.

Recently, a venture-backed startup presented a potential solution: a revitalization of traditional Wall Street methods. The current funding ecosystem has evolved beyond the concentration of power on Sand Hill Road, yet it presents new challenges.

Key Takeaway: Hum Capital aims to optimize resource allocation for investors, connecting them with promising ventures. The company intends to replicate the model of classic Wall Street, where business owners received guidance in securing the most suitable financing for their objectives. This contrasts with the present scenario where startups often focus on demonstrating their suitability for a specific type of capital. Further details about the company’s operations are available in a recent report.

The core offering of Hum Capital is straightforward at this juncture:

From Hum to mmhmm:

• LoftyInc Capital announces the launch of its third fund, totaling $10 million, with a focus on a more inclusive portfolio of African startups.
• Coral Capital successfully closes its third fund, securing $128 million for investment in Japanese startups.
• An exploration of “capital as a service” and its potential to facilitate initial funding rounds in 2021.
• Industry experts discuss alternative financing options and the continuing relevance of venture capital.
• Comprehensive fundraising resources for startups are available at TechCrunch Disrupt 2021.
• An analysis of venture capital firms and their vulnerability during economic downturns.

The company seeks to provide a more curated and effective funding process. This approach emphasizes matching investors with businesses that align with their investment strategies.

Ultimately, Hum Capital’s goal is to streamline the capital allocation process. They aim to restore a level of personalized service reminiscent of the earlier days of Wall Street.

Initial Public Offerings and Related Developments

As the COVID-19 pandemic began to affect startup companies, Toast was prominently mentioned. The technology company serving the restaurant industry implemented significant workforce reductions due to widespread closures within the hospitality sector.

Subsequently, Toast reappeared in the news with a contrasting announcement: its intention to become a publicly traded company, accompanied by a comprehensive disclosure of its financial information.

Key Information: This week saw the release of Toast’s S-1 filing, providing insights into the startup’s experience during the COVID-19 pandemic. It also addresses the rationale behind its current decision to pursue an initial public offering (IPO).

Following a detailed analysis of the Warby Parker S-1 filing, Alex identified five key observations from Toast’s S-1 document.

A particularly noteworthy point is Toast’s strategic decision to expand beyond its initial focus on hardware, specifically its portable payment devices.

Further Reading:

• An examination of Freshworks’ IPO filing.
• Insights into what Amplitude’s direct listing strategy reveals about its offerings, expansion, and overall worth.
• Forbes’ participation in the current trend of media companies going public through special purpose acquisition companies (SPACs).

TechCrunch Events and the Found Podcast

Have you secured your attendance for Disrupt yet? If not, you can find a link to purchase tickets, along with a special discount, here.

With that addressed, I’d like to bring your attention to Found, TechCrunch’s latest podcast series. It’s dedicated to conversations with founders in the initial phases of company development, exploring their journeys in building and launching ventures.

Recent Podcast Highlights

The podcast has recently featured compelling discussions with entrepreneurs tackling diverse challenges. These episodes offer valuable insights into the startup process.

• One founder transformed a difficult personal situation into an innovative solution addressing a significant need within the healthcare sector.
• Another founder is working to establish collaboration between researchers and producers in the emerging field of cultured meat.
• A third founder leveraged their experience as an educator to pinpoint a deficiency in the education system and subsequently created a startup to rectify it.
• Finally, one entrepreneur utilized her deep understanding of retail to pioneer a completely novel shopping experience.

Found provides a unique perspective on the realities of early-stage entrepreneurship, offering listeners a glimpse into the minds of those actively shaping the future.

Weekly Roundup

Highlights from TechCrunch

• The advent of air conditioning, while a significant achievement of the 20th century, is presenting challenges in the 21st.
• Apollo has finalized the $5 billion acquisition of Verizon Media, which will now operate under the Yahoo name.
• Vista Equity Partners is set to become the majority stakeholder in the SaaS company Drift, elevating its valuation to over $1 billion.
• Zoom has revealed the initial group of startups that will benefit from its $100 million investment initiative.
• Bill Gates emphasizes providing guidance rather than definitive answers.

Insights from Extra Crunch

• Startups focused on virtual events are optimistic about continued success following the pandemic.
• Employing cohort analysis can significantly enhance strategic growth for startups.
• Establishing connections with venture capitalists is crucial, and this can be achieved through seven key strategies before formally pitching.
• Launching a credit or debit card presents numerous advantages for businesses.
• Artificial intelligence is being leveraged to revitalize interactions between brands and their clients.

Further discussion will be continued next week.

Sincerely,

N