Takeaways from Y Combinator’s Summer 2021 Demo Day
By Ryan Mendoza, Partner
YC’s recent S21 Demo Day event kept us even busier than usual, this time showcasing its largest-ever collection of early-stage startups — a batch of 377 companies, up from 320 last time.
While pitch presentations remained fully remote and we saw mostly similar valuations to previous rounds (with pre-launch, pre-revenue companies commanding $12–15M depending on market and team), there were some exciting new developments and improvements for us to explore.
Startups with more complex technologies in hot markets — space tech and electric vertical take-off and landing (eVTOL) aircraft — commanded valuations of $50M or higher.
In terms of demographic diversity, YC noted that 37% of this cohort’s founders identified as a member of an “underrepresented group.”
12% of them were female founders, compared to 10% last time and LatinX founders saw a slight uptick to 15%, from 14% last time.
FemTech
Women-led startups focused on women and womxn have gained more traction, not only in e-commerce and health tech but increasingly in fintech arenas to address issues such as financial and consumer education. Are men, as TechCrunch recently suggested, now a “niche demographic?”
YC 2021 Demo Day Startups By Sector, March vs. August
In every YC batch we spot several trends and a handful of companies operating in each. Here’s what we identified from this Summer (S21) batch:
Notable Categories
Sustainability
There has been great growth in the sustainability sector, driven by government incentives, consumer awareness, improvements in tech and, of course, investor interest.
- Phykos
- Carbonfact
- Greenwork
- Heimdal
- HeyCharge
- Bluumbio
- Abatable
- Ferveret
- SolarMente
- Waterplan
- Buoyant Aero
- Coulomb AI
Dental Tech
This is an interesting category defined by old technologies and processes where we are starting to see innovation. The dentistry industry has traditionally been slow to adopt new tech, but has begun seeing an increase in products that improve workflows and changing care models.
Research
Research work typically involves workflows and processes not directly related to the primary work of answering a question or testing a hypothesis. This has driven an increase in tools that automate or reduce the amount of time spent on these usually manual tasks, making researchers more productive. We’re also finding an increase in tools to democratize access to new research findings.
Investing
A surge in trading among Gen Zers and millennials on Robinhood and other investing platforms was a key theme in 2020. This naturally spawned a rush of new competing, socially driven, online trading platforms. This YC cohort demonstrated a new era of startups with investing tools and data insights to drive better investing decisions that can be used with existing platforms.
Construction
The construction industry saw a surge in tech adoption starting in 2020, and the pandemic fueled this adoption, creating a need for more virtual, off-site solutions for inspection and project management. We’ve also seen a consolidation of products as construction companies prefer platforms and grouping of offerings. The growth in Procore and their product offerings is an example of this.
No Code/Low code
The ramp up in the development of new no-code/ low-code tools has been ongoing for some time now. The drivers of growth in this space have been a shortage in talent of software developers and data sciences as well as digital transformation. These tools allow for agile process improvement. This latest YC batch saw a large cohort of no-code/ low-code tools.
Notable Startups
Ruth is a standout among the women-led startups, with traction in the digital health space. Many newcomers are focused on consolidating a broad array of services and many target maternal care. The specific post-partum sector is largely untapped within telehealth services and Ruth tackles issues and services such as pelvic floor training, lactation consulting, and post C-Section recovery.
The use of health and wellness coaches has been steadily rising in numerous digital health and health care services such as Noom, Calm and Livongo, to name just a few. Health coaching is a $7B market with a CAGR of 5.4%. These companies hire, train and manage health coaches as their own employees. Pillar health is a unique model that provides health care coaches as a service for these companies. They maintain a large network of certified health coaches, and provide the backend system and data management to provide a quality health coaching service. The firms then use this network to improve their services for customers, in turn increasing personalization and engagement.
There are several eVTOL vehicles on the market these days — Joby Aviation, Archer Aviation, Volocopter and Lilium to name a few. Most of these companies target the commuter distance and with just a few passengers (think San Jose to San Francisco). Craft, founded by electric propulsion and automotive manufacturing experts, is incorporating various innovations into their vehicle to allow for flights of up to 1,000 miles, using a slipstream wing design capable of vertical takeoff and high-speed cruising, with a hybrid electric engine. Craft is targeting small airlines, and their range allows them to cover 65% of domestic routes.
Food delivery has been one of the fastest-growing markets since pandemic lockdowns began. DoorDash, Uber Eats and GrubHub were thrust into the limelight as the stars of the show. As happens in every industry, as we get used to the service or convenience it brings, we start to find the holes and ways it can be improved. Caches are small autonomous “dark stores” that hold packaged food items and are available on all delivery platforms. They show up on your favorite delivery platform, same as any restaurant, and an order is placed as normal. The delivery driver will go to the small store, identify himself as the delivery person for that order and receive the goods and proceed to the consumer. The system leverages purchase history in their locations to stay stocked with relevant and in-demand items. The store can only be accessed when the consumer is within a certain radius, thus improving unit economics. The model provides access to packaged goods either typically not available for delivery or not sustainable from an economic standpoint for deliveries.
Enterprise AI tools are starting to proliferate as the technology improves and tools for maintenance and monitoring are becoming both more widely available and more specialized. The Beauty and Personal Care market is an enormous and fast-growing space. With a CAGR of 4.82%, it is expected to grow to $558B by 2026. New types of customers are beginning to demand products. There are new and growing middle class consumers, and growing senior market segments. With these, there’s a push toward personalization and specialized products. Potion is building a unique AI-powered formulation tool to enable R&D teams to build products faster. Using the tool, researchers can streamline development processes by simulating and predicting product outcomes, and leveraging AI-based insights to quickly produce formulations.
Non-fungible tokens or NFTs have been shifting from a niche trend to more widespread adoption and starting to look like a mainstream technology. Transaction volumes on marketplaces are reaching all-time highs, with new marketplaces popping up, and celebrities increasingly marketing their own NFTs. It’s no surprise then to discover some NFT startups in the latest YC batch. Dime stood out to me as an artist marketplace, democratizing access to NFTs, by putting them in the background and not focusing on the NFT or their technology requirements for. Artists and creators don’t need to worry about how to create NFTs or use wallets, this is all handled on the backend, and opaque to the user. Dime lets creators turn their content into unique digital collectibles. Fans can buy items from their favorite artists, trade them on their marketplace, and display their collections on the site. Tools like those that Dime offer will be important for further commercializing the NFT space, and moving the transfer of ownership digital.
The specialized healthcare clinic model is on the rise. We’ve seen the “new One Medical for X or Y” quite frequently these days. Outsourcing a specific type of care allows for better quality, preventative care, more transparent pricing, and easier scheduling and continuum of care. The translation of this into the dental space is an obvious one. With easier scheduling, transparent pricing, same-day appointments, telehealth services, and a focus on preventative care, Rinse is looking to change the patient experience around the dental industry. With a first location launching soon in San Francisco, the firm has the potential to disrupt an old industry with a commonly unhappy customer base.
Cabal is a software tool for startups to better engage and utilize their investors and advisors. A startup’s investor base and advisors can be a very valuable asset. Organizing communications with them, however, and getting timely feedback is not always easy. Slack doesn’t always cut it. Cabal has a range of features allowing for document management with investors, templates for updates, and tools for requesting intros and referrals, to name a few. There is a value proposition for stakeholders, founders and investors, which should help drive acquisition. Investors need to stand out in a competitive environment, and tools like Cabal can help uncover the areas they can support.
It was an exciting and dynamic demo day, and we have become accustomed to the virtual format. However, I do look forward to the time when we can meet founders again in person following their pitches. Those few moments can mean a lot for the founder/ investor relationship.
There have also been the running questions: Will these batch sizes continue to increase? And if so, could they reach a point of diminishing returns. From our perspective, it is difficult to manage such a vast pipeline, but it also forces both focus and conviction, which ultimately benefit both sides.
