Along with a bunch of other TechCrunch folks, I spent this week extremely focused on one event: Y Combinator. The elite accelerator announced a staggering 377 startups as its Summer 2021 cohort. We covered each and every registered startup they featured and selected some of the favorites:
There is something quite serious and magical about spending literally hours listening to founder after founder present their ideas, with a minute, a single slide, and a lot of optimism. That’s why I like to cover demo days – I get tunnel vision on where innovation is headed, which giants are ready for disruption, and what the founders think is a nifty competitive advantage versus a simple baseline. .
With that said, I will share a warning. While YC is an ambitious snapshot, it is not entirely illustrative of the next wave of decision makers and leaders within startups, from a diversity perspective. The accelerator posted small gains on the number of women and LatinX founders in their lot, but the number of black founders who participated decreased. The need for more diverse accelerators has never been more obvious, and as some in the tech community argue, it’s Y Combinator’s biggest blind spot.
This in mind, I want to leave you some conclusions that I had after listening to hundreds of presentations. Here’s what the 377 Y Combinator releases taught me about startups:
- Instacart walked so YC startups could walk. Instacart, last valued at $ 39 billion, is one of the most successful Y Combinator graduates, making it even spicier that various startups within this summer’s batch want to take on the giant. Rather than chasing the obvious, speed, startups are looking to improve the grocery delivery experience through premium produce, local recipes, and even ugly veggies. It suggests that there may be a new chapter in grocery delivery, one in which ease is not the only competitive advantage.
- The pre-seed Crypto world is quieter than fintech. YC feels more like a fintech accelerator than ever, but when it comes to crypto, there weren’t as many moon shots as I expected. We talked about this a bit on the Equity podcast, but if anyone has theories as to why, i’m willing to listen to them.
- Edtech wants to interrupt artistic subjects. It’s common to see edtech founders flock to subjects like science and math when it comes to disruption. Why? Well, from a purely pedagogical perspective, it is easier to scale a service that answers questions that only have one correct answer. While math may fit in a box that works for an AI-powered tutoring bot, the arts, on the other hand, may require a bit more human touch. That’s why I was excited to see a number of educational technology startups, from Spark Studio to Litnerd, focusing on the humanities in their presentations. As shocking as it may sound, rethinking how a book club is read is definitely a refreshing milestone for educational technology.
- Sometimes the best pitch is no pitch. One pitch stood out simply because it was addressing the elephant in the room – we’re all stressed out. Jupe sells glamping-in-a-box and the profitable business likely benefited from COVID-19. I remember it because the founder used a part of his speech to tell investors to breathe, because it has been a long two days. Being human, and most importantly speaking as one, is what it takes to stand out these days.
On that note, breathe out. Let’s move on to the rest of this newsletter, which includes nostalgic nods to Wall Street, public appearances, and my new favorite podcast. As always, you can find and support me on Twitter. @nmasc_ or send me tips at [email protected]
A return to the old school Wall Street
With so many new funds, individual GPs, and alternative sources of capital on the market these days, the founders are confused. Funding may have drifted away from three types on Sand Hill Road, but it has also become more fragmented, meaning entrepreneurs need to get even more sophisticated in the way they fill in their limit tables. This week, I interviewed a recently corporate-backed startup that came up with a solution: a return to the old school of Wall Street.
This is what you need to know: Hum Capital wants to help investors perfectly allocate their resources to ambitious companies. The startup seeks to emulate the world of old school Wall Street, which helped ambitious business owners find the best financing option for their goal, rather than the current dance of startups trying to prove themselves for one type of equity. In my story, I explained more about the business.
In this point, Hum Capital’s product is easy to explain:
It uses artificial intelligence and data to connect companies with the funders available on the platform. The startup connects with a capital-hungry startup, ingests financial data from more than 100 SaaS systems, including QuickBooks, NetSuite, and Google Analytics, and then translates it to some 250 institutional investors on its platform.
From Hum to mmhmm:
IPO Presentations and Other Riots
When the pandemic began to affect startups, Toast topped the list. The restaurant tech startup had a series of deep layoffs as many of its clients in the hospitality industry had to close. Months later, Toast made headlines again with a dramatically different message: It’s going public and here’s all of our financial data.
This is what you need to know: This week, Toast published its S-1, offering a portrait of how the startup was affected by the COVID-19 pandemic and answering questions about why it is going public now. After smashing the Warby Parker S-1, Alex had five takeaways from the Toast S-1. My favorite extract? Toast was smart to branch out beyond its hardware, portable payment processors:
Toast’s two biggest revenue streams, software and fintech revenue, have seen steady quarter-over-quarter growth. Hardware revenues have proven to be slightly less consistent, although they are also moving in a positive direction this year and set what appears to be an all-time record result in the second quarter of 2021.
Toast would have had a much worse second quarter last year if it hadn’t had software revenue. And since then, its growth wouldn’t have been so impressive without the payment revenue (its fintech line, loosely speaking). The broad mix of revenue that Toast generated has been shown to limit downside while leaving plenty of room for growth.
Butter or jam:
Now that that’s out of the way, I want you to listen to Found, TechCrunch’s newest podcast that focuses on talking to early stage founders about building and launching their businesses. Recent episodes include:
Seen on TechCrunch
Seen on Extra Crunch
Speak next week