Blog Post

YC on its ultra-private Alumni Demo Night: “Don’t even think about asking to come”

Like clockwork twice a year, hundreds of former Y Combinator founders from companies like Stripe, Dropbox, and ZenPayroll flock back to the mothership, flying across the country (and sometimes from around the world) before the famed accelerator’s biannual Demo Day.

They’re not actually there for Demo Day — the glitzy, press-oriented and VC-filled circus that the rest of the tech world knows about, where YC’s latest batch pitches their startups. They come for something entirely different: Alumni Demo Night. It happens the evening before the official demo day, in the same venue where Demo Day itself is held.

Alumni Demo Night is a private ritual, with no press or professional investors allowed. It’s a time for YC grads young and old to reconnect with their fellow grads and help the current batch of founders prepare to present. The graduating class runs through all their presentations before a friendly audience of former founders.

As YC has grown up, so has Alumni Night. What started out as an event geared around casual bonding has become something more elaborate, complete with angel investments, business partnerships, and networking among the YC community.

Of course, such networking is only for the elite YC few. The rest of the world isn’t invited, and YC turned down my request to attend Monday evening. “No outsiders come to this thing because it ruins the vibe, so don’t even think about asking to come,” YC co-founder and partner Jessica Livingston warned.

If this smacks of the exclusivity of an Ivy League college reunion — a comparison YC founders hate — that’s because it is. The process for getting into YC may be meritocratic, but once you’re accepted, you’re a member for life. And that membership affords its attendees special privileges the rest of the startup community can’t tap: a twice yearly chance to hobnob with other former founders, develop relationships, and angel invest in the newbies is just one of the perks of being part of “the family.”

A cross-pollination of the YC community

Livingston started Alumni Demo Night in 2010. Back then, Y Combinator was trying to figure out a way for founders to experience Demo Day before the actual event, where they’d be face-to-face with the likes of Marc Andreessen, Ron Conway and other hotshot investors. A trial run before a sea of strangers could help founders iron out all their presentation kinks, and YC grads were a perfect fit for the job — having been through it before, they would be a sympathetic audience.

“Going up to present at Demo Day is this moment emblazoned in founders’ minds. Literally, people will get the shudders coming in, going ‘I haven’t been back there since I was up on stage,’” Livingston told me.

[pullquote person=”Jessica Livingston” attribution=”Jessica Livingson, Y Combinator co-founder”]“When you get that first yes from someone, that changes your entire mentality in fundraising.”[/pullquote]

In the beginning, the event was casual and informal: Pizza, beer and a small collection of graduates on white folding chairs in the audience. But as YC itself matured — it was founded in 2005 and has graduated more than 700 startups, the likes of Heroku, Dropbox, and Airbnb among them — Alumni Demo Night developed as well. Upscale catering replaced the pizza and the event was moved to the Computer History Museum, the same place the actual Demo Day is held.

These days, Alumni Demo Night is far more than just a rehearsal. “Enough of the alums are angel investors themselves that it’s almost like a pre-demo day,” Lee Lin, founder of YC company RentHop, told me.

Although the angel investments made at Alumni Night are small, they can have a big impact on the founders’ frame of mind when they head into actual Demo Day. “When you get that first yes from someone, that changes your entire mentality in fundraising,” Livingston said. “You become confident, you suddenly have a deal going on. Even if it’s like $20,000, you’ve established a valuation.”

Joshua Reeves, founder of YC company ZenPayroll, fondly recalled receiving seed investment offers during his Alumni Demo Night — from Dan Veltri of Weebly and Jude Gomila of Heyzap. After graduating in the winter of 2012, Reeves started angel-investing in YC companies himself. During Alumni Nights, he typically offers funding to a couple of companies in each batch.

In addition to the angel investing, former founders network among themselves before the presentations, leading to eventual business deals and partnerships. “No one is there to sell,” Reeves said. “It’s like a college reunion where you say, ‘Let’s exchange details and make sure to connect and grab coffee and see if we can work together.'”

Should investors be concerned about Alumni Demo Night?

The Silicon Valley talent pool is stiff, and VCs already face plenty of opposition for the hot deals. The idea of a pre demo day occurring, sans the professional investors, might inspire some concern.

Both Reeves and Livingston were quick to say Alumni Night is by no means a replacement for professional Demo Day. “Alumni putting in $20K or $10K — that’s not going to lock up the deal. They usually don’t write the check that night,” Livingston said.

Of course, down the line it’s possible that some former YC founders will become professional investors representing a firm full-time. As for that sticky situation, Livinston said, “We’ll cross that bridge when we come to it.”

In essence, Alumni Demo Night is one of those moments where the lucky — and talented — just get luckier. The built-in family provides a pool of resources for the up-and-coming: Mentorship, angel investment, partnerships, new customers. It’s all part of the YC cache, and it’s a closed door community.

You’re either in — with access to internal YC Wikis, email listservs, and Alumni Demo Night — or you’re not.