At Y Combinator Demo Day, many echoes of Kickstarter

Startups hoping to leverage Kickstarter's success were everywhere during the semi-annual graduation showcase, looking to get in on the crowdfunding action.

MOUNTAIN VIEW, Calif.--If you cringe when you hear a company described as "Kickstarter for" this industry or that genre, yesterday's Y Combinator Demo Day was probably not for you.

As happens twice a year, a Who's Who of A-list (and B- and C-list) venture capitalists and angel investors descended on the Computer History Museum here for the semi-annual Demo Day. There, the newest graduating alumni of the world's leading tech incubator had the chance to show off their talents -- and wares and/or services -- to the money men and women and reporters who might help to further their ambitions and fill their coffers.

And throughout the day, Kickstarter was very much on people's minds.

A couple of years ago, few had heard of the Brooklyn-based startup that was aiming to democratize the way project creators raise money. But now, with a nearly endless collection of success stories under its belt, Kickstarter has become the beast of the crowdfunding world. And everyone wants to break off a piece of that success.

Over the course of the day, 47 startups took the stage for the three minutes under the spotlights. And no less than five of them were either described as "Kickstarter for" something, or were based on the now-well-understood crowdfunding model -- or trying to profit from that model's general disorganization.

There was Microryza -- "Kickstarter for science;" Teespring -- "Kickstarter for T-shirts;" Watsi -- a non-profit aiming to leverage the crowd to finance individuals' medical care; Wefunder -- which wants to fund startups using the Kickstarter model; and Backerkit, which has built a CRM system for Kickstarter project creators.

Plus, there was one company hoping to leverage crowdsourcing to solve difficult to diagnose medical conditions.

All in all, this felt like a reunion party for the word "crowd." And we have the JOBS Act to thank for that. That legislation, which was designed to let small investors get in on the fun (and risk, obviously) of funding privately-held startups or projects, was passed by Congress passed and signed by President Obama, but has yet to be implemented. Nonetheless, it has inspired the growth of crowdfunding, with Kickstarter and competitors like Indiegogo leading the charge.

And clearly it has inspired the creation of a number of new startups who, incidentally, are looking for help from the Silicon Valley VC community. Not to worry, though: That community seems eager to offer assistance.

"I think that's a really interesting technology," said Tim Draper, a principal at the blue-chip VC firm Draper Fisher Jurvetson. "I compare it to social media (like Facebook and Twitter) and I compare it to peer-to-peer file sharing."

Draper said his firm has already invested in a couple companies trying to leverage the crowd, and noted that he's fully behind Wefunder's concept of trying to crowdsource the funding of startups because of the difficulty these days in raising liquidity through the public markets. "I'm encouraging this kind of thing," Draper added.

To hear some at Demo Day tell it, crowdfunding is just getting started. Although thousands of projects have raised money using one of the services in the field, there's a limitless number of others who may see the success of some of these efforts and realize that they, too, can turn for help to the public at large for building their house-sized piano, circumnavigating the globe by ultralight, producing a documentary on sloths, or anything else that floats their boat.

And while many more people find their projects unfunded in the end due to lackluster interest, crowdfunding's success in general doesn't surprise some in the VC community. "I think it's a very interesting area," said Avalon Partners founding partner Kevin Kinsella, "whose boundaries have not been fully explored."

Given that so many of the companies presenting during Demo Day were focused on crowdfunding, one might conclude that Y Combinator set out to showcase a theme. But that's not at all the case, said Sam Altman, a partner at the incubator. "Sometimes people think Y Combinator has big ideas" about themes," said Altman, himself an alum, and the founder of Loopt. "But really, we just fund the best startups."

Altman said that one element behind crowdfunding's rapid growth is that there's "finally critical mass" around the concept of the crowd. As proof, he pointed to Reddit, which he termed "the original Y Combinator success." "The crowd's a really powerful force on the Internet," Altman said, "and people finally understand how to harness that."

 

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