The sound of crickets: VC offices on Y Combinator Demo Day

Over the years, Paul Graham and his partners have graduated 384 companies from their influential incubator. Today, 65 new startups went on stage to vie for investors' attention and dollars.

Daniel Terdiman Former Senior Writer / News
Daniel Terdiman is a senior writer at CNET News covering Twitter, Net culture, and everything in between.
Daniel Terdiman
5 min read
Many of the Y Combinator-graduating companies presenting during Demo Day had no problem saying why they were the best in their field. Daniel Terdiman/CNET

MOUNTAIN VIEW, Calif.--If you 're an entrepreneur looking for money today on the famous Silicon Valley venture capital row known as Sand Hill Road, yes, that is the sound of crickets you hear.

That's because today is Y Combinator Demo Day, and the lion's share of the biggest tech-oriented VCs in the Valley are packed into one auditorium here, listening to 65 early-stage companies pitch their wares.

The list is a veritable who's who of investors: Ron Conway, Tim Draper, Jeff Clavier, Mike Arrington, Stewart Alsop, and many, many others. And they've got their checkbooks with them.

That's good, because if there's one thing that each of the 65 companies presenting here today is after, it's funding. Press is always good, of course, but the real brass ring here is the promise of the cash that will help these companies move quickly from Y Combinator graduate to functional business.

How else to explain the presentations here by farm management software developer FarmLogs, which will never catch fire with the digerati? FarmLogs had one key figure in its presentation: the million-plus American farms that "need this solution [represents a $1.4 billion opportunity in software alone]."

That's a lot of potential revenue, and it's exactly what the VCs have flocked here to look for--startups that have developed real businesses, never mind if there's an iPhone app.

"We really like the concept of building businesses," said Clavier, the managing partner of SoftTech VC, "and we're less interested in momentum plays."

Clavier said that after each Y Combinator Demo Day, he and his two partners invite between six and seven of the incubator's graduating companies to come and make presentations. And possibly pick up a check.

Of course, as Y Combinator partner Jessica Livingston put it, the companies that are making their cases during Demo Day aren't necessarily making their way on stage hoping to leave at the end of the event with a check in hand. "We tell them the goal isn't to get a VC to invest in them (today)," Livingston said, "but [rather to get a VC to] want to meet with you later."

Teslas and Fiskers and Priuses, oh my
How do you know there are a bunch of VCs in a room? Check the parking lot outside for a plethora of energy-efficient cars. It came as no surprise that when I got to the Computer History Museum here, where Demo Day is taking place, the first car I saw was a $100,000 Fisker Karma. And then a sea of Priuses, and of course a Tesla or two.

This Fisker Karma was just one in a sea of energy-efficient cars parked in a lot outside Y Combinator Demo Day, a sure sign of the presence of venture capitalists. Daniel Terdiman/CNET

But electric and hybrid cars aside, after watching a few of the presentations, some patterns fell into place. First, almost every team (comprising between one and four members) went up on stage wearing branded T-shirts and, often, hoodies. That's how you could tell them apart in the crowds later.

But their presentations all had a similar pace. They'd introduce themselves and their service, and then almost immediately follow up with a graph demonstrating their explosive "week over week" growth. This almost seemed like a requirement.

To Michael Arrington, the founder of TechCrunch and now a founder of the VC firm CrunchFund, the similarities between presentations are likely a reflection of Graham and his team "getting it down to a science" and helping those startups do the most they can on stage to get press attention and investment money.

During a break, I asked Jan Senderek, a member of presenting company Popset, which is building a business around photo albums for groups, about the similarities in the style of the presentations.

Senderek said that while the Y Combinator teams aren't given specific guidelines for how to present on stage, they do spend a couple days going through their slides with the incubator's organizers. And when I asked about the almost religious reliance on a graph showing week-over-week growth, he explained that it's a metric Y Combinator companies get drilled into them during their three months in the program.

Most of the startups presenting during Demo Day included a graph showing their impressive week-over-week growth. Daniel Terdiman/CNET

While some of the teams that are part of Y Combinator include tech industry veterans, many are made up of first-time entrepreneurs, and that's something Arrington finds refreshing.

Arrington said he appreciates that the teams coming out of Y Combinator tend not to be jaded and are mainly made up of "young guys that have never been screwed over" by standard Silicon Valley politics. And these teams are "re-energizing Silicon Valley with the fresh blood of innocents," he said.

Of course, Arrington has a vested interest in the success of many of the companies presenting here. He said CrunchFund will likely invest in about 15 of the startups in the current Y Combinator program.

That number is impressive, if you think about the fact that when Y Combinator had its first Demo Day in 2005, only 15 companies in total participated. Now, with 65 companies taking their turns on stage, each of which get $20,000 for being in the program, plus an additional $150,000 in automatic funding from Conway's SV Angel and investor Yuri Milner, there's some serious talent on display.

"The scale of Y Combinator is ginormous" today, Clavier said. "This is by far the biggest I've ever seen, and it's impressive. They do a great job of getting investors to come and spend a day with them."

Added Clavier, each new Y Combinator class seems to feature "10, 20, or even 30 completely legit companies, and you decide which ones you're interested in" funding.

Y Combinator founder Paul Graham Daniel Terdiman/CNET

Speaking with Y Combinator founder Paul Graham, he showed obvious pride in claiming the top spot in an ever-growing number of incubators in Silicon Valley and around the country. Graham said the benefit of being the top dog is that he and his partners get the "first pick" of the hundreds of startups applying to be part of incubator programs.

And how does Y Combinator maintain its ability to keep on getting those first picks?

"By not screwing up," Graham said. "Because if you're first, and you don't f--k up, you stay first."

For Y Combinator, that means doing three things right: picking the best companies; helping them mature; and introducing them to the right people.

Does it work? It sure seems to. Of the 384 companies that have been through Y Combinator since 2005, Graham estimated that 250 of them are still in business. And being a graduate brings some serious cred.

I asked Alex Ohanian, the founder of Reddit and a member of the inaugural Y Combinator class, what it means.

"Back in '05, I had to keep explaining [what Y Combinator was]," Ohanian said. "Today, I can't get seated at restaurants [as an alum], but, maybe [I can] in Palo Alto."