The weirdness of Silicon Valley manifests itself in a lot of different ways. But watching startup founders push their iPads at Ashton Kutcher today for startup advice and app critiques, rather than photos or autographs, was one of the odder things I’ve seen recently.
As with much of startup culture, there’s a method to the madness. Kutcher and others held the fate of young startups in their hands today at the Y Combinator Demo Day, where 80+ companies get on stage to pitch to investors and the media after months of preparation. The companies are making their debut before the people who will decide whether they will be the next Dropbox, or the next, what-was-that-called-again?
The entire process is something of a cross between a debutante ball and speed-dating, with the investors and founders both trying to gauge interest on the other end. The pitches might seem like the structured part, and the post-event networking just a time for people to hang out with beers. But watching founders negotiate and angle their way toward investors between sessions, (“You go that way, I’ll go this way,” one founder said), you realize just how high the stakes are for these people. Organizers have to rally people back from breaks using a bullhorn. This is not networking for the weak of heart.
And networking success is what Y Combinator does well. In July, co-founder Paul Graham tweeted that excluding the current class, YC companies have raised $1,048,274,000 dollars so far:
The total amount of funding raised by the 380 companies prior to the current YC batch is $1,048,274,000.—
Paul Graham (@paulg) July 25, 2012
It’s an impressive figure, and you get the sense that a good deal of those relationships with investors begins at Demo Day. Investors want to fund YC companies, and everyone knows it:
I need a VC to just stand up at YC Demo Day & shout "I'll fund you all." Then everyone can go out for beers.—
Hunter Walk (@hunterwalk) August 21, 2012
Some have argued that the Y Combinator effect has overvalued all startups, raising the bar so high for early-stage funding that others can’t compete. Others have said that the high seed rounds that YC companies typically raise makes it harder for them to make the jump to Stage A funds down the line, at a time when Facebook’s IPO flop has made it increasingly harder to exit successfully.
But as Kutcher told us, he discovers only about half the companies he invests in at YC demo day-esque events, and the other half outside the Valley. So how critical is your debut on the startup social scene? Like any good debutante, you can probably succeed without it. But a graceful, well-connected splash can’t hurt.