Trendspotting at Y Combinator Demo Day
Back in the day, I used to trek to Las Vegas every January, along with 150,000 or so of my closest friends, to attend the annual Consumer Electronics Show.
I went to CES to have meetings. It was, and remains, an important opportunity to get together with vendors, customers, and partners. But I also went because CES what the best place to gauge what was happening across the technology industry. Almost every company you can think of (and a few thousand you’ve certainly never heard of) went all out for CES every year. The show was the place where you saw new trends cross over into the mainstream.
These days, though, technology is not really its own industry any more. Instead, tech is part of every industry, and is transforming every industry. The CES show floor isn’t the same trend aggregator that it once was, because tech has turned inside out. The most interesting things often aren’t new products, but new ways of applying technology to solve hard problems.
So, Y Combinator demo day is where I go now to think about what’s happening — and what will be happening soon — in tech.
Y Combinator’s twice-yearly accelerator classes are big (141 presented at demo day this week), extremely well curated, and always ahead of the curve in various interesting ways.
YC hosts a demo day preview — sort of a dress rehearsal — that many YC alumni attend. Alumni demo day is a combination reunion, show of support, and networking event packed into a single 10-hour day!
Here are some of the things that I thought were particularly interesting, at a macro level, from this week’s “Winter 2018” YC alumni demo day.
There has never been a lot of biotech in Silicon Valley. But that’s changing fast. More than 20 of the companies in this Y Combinator batch are hard-core biotech or healthcare, working on problems like new approaches to curing cancer and computational drug discovery. I talked to several of the biotech founders, and it’s going to be really interesting to watch their companies evolve over the next year.
Very few traditional tech venture investors have done much health care investing. And traditional biotech investors in San Diego and Boston don’t cross over into broader tech very well. YC is bridging that gap and doing a bunch of interesting new things to support biotech and healthcare startups.
New materials and new fabrication techniques
A number of the companies in this YC batch are either developing new materials and fabrication tech, or doing things that are made possible by new kinds of materials and fabrication: shape-adaptive materials, 3d-printed orthodontics, custom furniture. As you might expect, there’s a lot of cross-over between this category and biotech.
For a while, it felt like the “silicon” in Silicon Valley was an anachronism. Everything was software and only software! But hardware investing has made a comeback over the last few years, and it’s great to see all the amazing things the chemical and mechanical engineers are cooking up.
Food, broadly defined
Speaking of cooking, agriculture- and food-related industry makes up something like 20% of the global economy. A number of food-related companies presented on demo day, with products ranging from a really cool social food ordering app to autonomous tractors.
There’s definitely been a lot of investment in consumer-facing food companies, over the past few years. But it still feels like we’re in the early days of internet and mobile tech reshaping how and what we eat. And that’s even more true on the production side — agriculture is changing as fast as it ever has, both in the US and globally.
Machine learning doesn’t feel new any more
A lot of companies in this YC batch have a machine learning component to what they are doing, but none described themselves as “machine learning companies.” Instead, they are companies that are tackling specific challenges using techniques that include machine learning. That’s an interesting transition from a year or two ago, when a lot of startup pitches focused more on their machine learning angle than on the market opportunity they were aimed at.
I was particularly intrigued by a team building a pharma company from scratch and an app that uses AI to organize your baby pictures.
There was less blockchain than I expected
Roughly half a dozen companies in this YC batch had a blockchain or cryptocurrency component to their pitches. All of those are doing interesting things, and clearly blockchain tech is here to stay in the startup and fintech ecosystems. But because I read a lot of VC Twitter, I assumed that there’d be three or four times as many “crypto” companies in this YC batch. :-)
YC is highly selective, and that’s especially true with regards to pre-revenue companies. I think the relatively small number of blockchain/cryptocurrency companies in the batch is actually a good sign for the sector. If venture investor conventional wisdom follows along behind Y Combinator trends, as is often the case, there will be some breathing room now for blockchain reality to catch up with the hype.
Diversity of founder backgrounds
The YC demo day lineup continues to look a little more like the rest of the country, and the rest of the world, every year. This time around, 16% of company founders are women, and 13% are Black or Latinx.
Those numbers aren’t where they should be, yet, but YC deserves a lot of credit for actively recruiting a broader group of founders, and for (I assume this is the case — I have no inside knowledge about this) working to correct for the pattern matching biases that are an endemic part of Silicon Valley professional life.
YC has also become an international program. A third of the companies in this batch are from outside the United States. And I’d guess that half the companies would fit a broader definition of “international” — companies that were founded outside the US or have at least one founder who is an immigrant to the US.
Immigrants founding companies in Silicon Valley is not new (Apple, Google, Amazon, Facebook, Intel, Oracle, and Tesla were all founded by first or second-generation immigrants). So this is not a trend. But in the current political environment, let’s just say it qualifies as counter-cyclical.
The Internet has been global for a long time, of course. The startup ecosystem is massively global now, too. YC is part of what made that happen, and continues to play a leading role.
I’m a co-founder of Daily.co. We make super-easy, super-capable video calling software and hardware, and were part of the Y Combinator Winter 2016 batch. I’m always interested in hearing from startup founders, and always happy to be helpful in any way I can. Feel free to schedule a video call with me.