Thoughts After Y Combinator Demo Day
There's lots of motion in the ocean in the early stage investing world. TechCrunch has a write-up on the companies that presented at Y Combinator's demo day yesterday. I had several of my own thoughts. — Quality — The average company quality is up.
Context & Ripple Effects
A year after PE Hub's mixed review of Y Combinator's Demo Day — cool companies alongside some hot air — Adam Smith reads the Summer 2010 batch differently: average company quality is up. TechCrunch's write-up frames the same event as Y Combinator's biggest Demo Day yet, drawing a throng of investors to see the presenting companies.
The two data points sit inside a broader surge Smith flags directly: lots of motion in the early-stage investing world. A Demo Day that was once a niche gathering is becoming a crowded investor event precisely as seed activity picks back up.
First-order effects
- Investors at the 2010 Demo Day face more competition per deal — a bigger crowd bidding over a batch whose average quality Smith judges higher than last year's.
Second-order effects
- Y Combinator's leverage over terms rises when demand outstrips batch supply, while angels and seed funds outside the room must either attend earlier batches or pay up later.
Third-order effects
- If batch size and investor turnout keep climbing together, the Demo Day hardens into the standard marketplace where early-stage deal flow is priced, displacing ad-hoc angel introductions.
The trend: Early-stage investing is consolidating around accelerator Demo Days as the primary venue for discovering and pricing seed deals.