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YC’s W25 batch had demo day last week and I was in SF for the festivities. It also happened to be their 20th anniversary. This is my 7th batch of investing and I like to think I’ve gotten a decent feel for it. YC is mostly great, but one of the not so good feelings you can get is being herded like sheep set to be fleeced. Some thoughts on how to avoid that and what we did this batch.
YC IRL Demo Days are very back
As a YC investor it’s important to understand that you’re being “herded” by the best in the business.
Here’s what I mean:
In the transition from 2 batches a year to 4 the “we’re heads down right now, but would love to jump on a call [insert date closer to demo day]” email that founders are coached to send eager investors throughout the batch has squeezed the call-diligence period from ~4 weeks to ~2 weeks.
This is the time period during which you can get on calls with founders. Yes, to keep founders focused. But also, to increase the momentum of the fundraising process through concentrated demand.
For a non-YC founder this would just be called “running a tight process” and at YC they create that environment for 160 startups all at once. Demo Day brings this same dynamic into a physical space and the energy is palpable. Not always in a good way.
The W25 Demo Day was held at the Palace of Fine Arts in SF and it had three core areas:
The auditorium - for the actual demos
A smaller area right outside the auditorium - for coffee/snacks/mingling during breaks (pictured above)
A larger warehouse type area - for lunch and post-demo-day happy hour
To get from the auditorium/mingling area to the lunch/happy hour area you had to walk ~30 yards through a kind of dark hallway.
As I walked shoulder-to-shoulder in an amorphous blob of AUM from one area to the next I had a distinct feeling of being herded followed shortly by the thought that YC is very good at this.
Herding VCs.
Or “concentrating demand” to put it more politely.
Nothing about that feels like the right place for thoughtful diligence and all tilts the power dynamic towards founders. This causes some investors to literally chase deals around. There are investors that simply don’t participate for this reason. I don’t think that’s the right answer given the number of unicorns YC produces every batch, but I do think it’s something to actively manage.
The ironic part of all this is that the solution is to just listen to the advice Garry gives at demo day every year (approximately): “Move quickly. Have conviction. Don’t ask who else is investing.”
So that’s what we do. Ironically again, that turns into us writing ~90% of our checks before demo day. For W25 we wrote 7 checks in total. 6 before demo day and 1 the day after. Here’s where we landed:
I couldn’t be more excited about this group of founders and it was a really great batch.
Planning to do a more complete live rundown for LPs. If you’re interested, apply here.
Talk soon,
Adam