It’s a reversal of roles in Silicon Valley’s startup scene: Investors are clamoring for face time with entrepreneurs.
Hundreds of tech’s most prominent backers packed into an auditorium at the Computer History Museum in Mountain View, California, today to hear two-minute pitches from the latest batch of young startups to emerge from business incubator Y Combinator.
More than 400 investors, ranging from big-name venture capitalists such as Battery Ventures and Matrix Partners to smaller angel investors including Ron Conway and Max Levchin, outnumbered the 66 companies giving presentations.
That meant one thing: competition for deals.
With so many investors seeing the same pitches for the first time, the most impressive entrepreneurs get inundated with offers and often get an upper hand in negotiating deals.
“The people who are the most aggressive just chase the entrepreneur and say, ‘Hey, I’ll invest right now, any terms,’” said Jeff Clavier, founder and managing partner at SoftTech VC in Palo Alto, which typically invests about $400,000 in early-stage startups and asks for at least 5 percent equity. He hoped to book meetings for tomorrow with seven Y Combinator startups and invest in one or two of them.
But with the big pool of competing investors, he admits some of the best companies could be fully-funded before he can get out the checkbook.
“There’s always a few deals that are going to fly away on us,” Clavier said.
Some startups were lavished with more investor love than others. Pair, an application aimed at helping couples communicate over mobile phones, signed on three new investors by midday and got about two-thirds of the way through raising a $1.5 million round of funding. The presentation for iCracked, a company that fixes cracked smartphone screens, was interrupted by one eager investor shouting out, “I love you already! You’re awesome!”
Y Combinator used to break up its startup presentations over several days, but they’re now grouped into one daylong marathon.
“This is a very different feel from years past,” said Dana Stalder, general partner at Matrix Partners, who has attended Y Combinator demo days since the program began in Boston seven years ago. Though the field of startups is bigger, the quality of the pitches has never been higher, he said.
“It’s become a platform that now attracts very high quality entrepreneurs,” he said. “You’re getting entrepreneurs who have a little more experience, entrepreneurs from all over the United States.”
That has translated into a lot of investor interest. For Stalder, that meant having to take a seat on the floor.