🗺 Y Combinator W20 Batch

Overlooked #13

Hi, it’s Alexandre from Idinvest. Overlooked is a weekly newsletter about underrated trends in the tech industry. Today, I’m digging into the last batch of SF-based accelerator Y Combinator.

Hi everyone! 👋

I hope that you and your friends & family are doing well in these strange days!

I don't want to talk about covid in this newsletter because I'm sure that you hear enough things about it during the rest of the week. I know it's important and I'm not overlooking this crisis but I prefer to give you other topics to think about.

Today, I'm sharing with you my learnings of the past YC batch that just ended in March. I'm super excited about some trends and startups discovered in the long list of 190+ companies that went through this batch.

Y-Combinator is a Silicon Valley seed accelerator founded in 2005 which has invested in 2,000+ companies in the past 15 years. Twice a year, the accelerator organizes 3-month batches (from Jan. to Mar. and from Jun. to Aug.).

During these months, founders work incredibly hard on their startup to enhance their product and grow their revenues. They are coached by the Y-Combinator teams, they attend to events and dinners with other startups in the batch and famous entrepreneurs. At the end of the 3 months, a Demoday is held in front of top US investors and most of the time startups manage to raise funding rounds with great investors and financial terms. You also become part of the Y-Combinator family accessing to amazing companies that went through the accelerator. In exchange of $120k tickets and all the previous mentioned services, Y-Combinator takes a 7% stake in the company.

  • Reason #1 - Outstanding companies went through YC in their early days. The below screenshot taken from the YC homepage should be sufficient to convince you. Just to add figures to these logos, YC has 102 companies in its portfolio which have a valuation superior to $150m+ and its top companies have a cumulative valuation of $155bn.

  • Reason #2 - Taking advantage of geographical differences to replicate an already successful business in the US or in Asia. YC allows you to spot opportunities which are starting to work in other geographies and that you can import and adapt to your country. Even within YC, you observe this behavior with numerous startups from emerging and developing countries replicating successful models from developed countries (e.g. in the YC W20 batch, Workpay building the Gusto for Africa, TagMango building a Cameo for India, Bamboo building the Revolut for Nigeria, Newman's building the Hims for Indonesia etc.)

  • Reason #3 - Your existing business can learn things from how companies in similar industries at YC are behaving. Put them in a short list and witness how they evolve in the upcoming months in terms of product positioning, sales and marketing strategy, recruitment. These companies will be implementing best in class techniques that could be useful to grow your own business.

  • Reason #4 - It puts you in the right mindset to be successful and build a truly global company. YC is not about money. It's more about maximizing your exponential learning curve as a founder by taking you to the next level in terms of spirit, best practices and network.

First of all, I want to congratulate the whole YC team for moving the YC Demo Day forward one week and do it online. My guess is that this extra-week must have helped numerous companies to raise their round before investors started to get too worried to send and sign term sheets because of the the covid crisis.

And if we look at startups accelerated during the global financial crisis in 2008-2009, investors had not regretted to invest in YC companies during these though years (Heroku, W08, Stripe S09, Mixpanel S09, Wepay S09, Airbnb W09) - Stripe and Airbnb being the two most valued YC-backed startups.

Second, Y-Combinator batches are always a mix of 1/ crazy projects that you don't understand at the first sight, 2/ projects around growing tech trends (no code, productivity, API-first, remote, influencers etc.) and 3/ existing successful business ideas that are replicated in other geographies.

Third, in the below slide, I have gathered some startups in the categories I'm following closely as an investor to have more insights and learnings on them. For instance, here are my learnings for the "productivity tools" category:

  • Rise of productivity tools verticalized on a certain function (sales, marketing, product etc.) → Laserfocus dedicated to sales people

  • Ongoing unbundling of the Microsoft suite (Teams, Outlook, Calendar, Word, Powerpoint, Excel etc.) → Cron unbundling the Calendar part

  • Impact of Superhuman on product design and go to market strategy → Invite only beta with human onboarding is becoming a standard

  • Rise of tools dedicated to promote certain positive behaviors within companies → Cadence to replace project update meetings and infinite chains of mails

  • New productive tools are no longer punitive but use positive psychological mechanisms to help you getting better day after day → Motion (cf. infra)

If you are building something around one of these categories, we should talk (drop me an email at ade@idinvest.com).

Favorite #1 - Motion - A web browser extension to become more productive

It's a browser extension to help users manage their time on the web more efficiently. Honestly, I have tried numerous extensions and applications in the past few years and Motion is the best product I have seen so far.

It goes beyond setting up a blacklist of websites to let you build something more customized depending on your past browser history. You can set up focus sessions when you have a defined amount of time to tackle a specific task.

Every morning, you have a report with the previous day data divided that you can divide between productive and unproductive time. The tool is not punitive but helps users to get more productive overtime. For instance, when you go on a distracting site, you are not totally blocked but you could set up a 5 minutes break.

I'm still looking for an holistic tool able to track what you do in your browser but also in your desktop and in your phone. In the meantime, I will keep using Motion.

Favorite #2 - Riot - An anti fishing simulation and training tool

At Idinvest, we knew Riot's CEO, Benjamin Netter, before his new venture. He was a cofounder and CPO in one of our portfolio company called October (European crowd-lending platform).

He left at the end of 2019 to work on his new project called Riot Security which an anti-fishing training product for your employees with three main components: 1/ a tool to send fake phishing campaigns to your employees, 2/ a dashboard with the results of the different campaigns, 3/ security trainings for employees behaving badly against fishing.

Numerous companies are susceptible to fishing attacks and it's much more efficient to have a tool like Riot to train your employees than to rely on your IT manager sending you 4-5 real fishing template mails per week telling you in the subject "DON'T OPEN THIS MAIL".

I would love to have Benjamin's long term vision on the product roadmap. Anti-fishing is a good way to enter an IT department but you have to offer much more to become a must have and not simply a nice to have tool. Two promising moves could accelerate the adoption of the product: 1/ be able to expense Riot with in training budgets, 2/ to couple Riot with cyber insurance offerings.

Favorite #3 - Fitness AI - Mobile app to have personalized weight-lifting plans

Let's start by some numbers: 18k paying users, $100k MRR, 4 people in the team., totally bootstrapped from day 1. Insane. I don't even get why they decided to go through YC and enter the VC-game...

Fitness AI is at the crossroad of several interesting trends in consumer mobile. On the one hand, the rise of subscription as a business model for mobile apps replacing advertising and upfront expensive payments. On the other hand, the rise of a 2nd generation of sports mobile apps that are no longer simple tracking tools but apps able to offer a fully customized experience. With Fitness AI, your healthcare data are combined with your past performance and other sportsmen performance to offer you the perfect and custom plan.

I also love the fact that Fitness AI is not an overnight success. The core vertical of the app (i.e. the ability to personalize the experience) depends on the data of a previous app developed by the CEO which was a simple weightlifting tracking tool. With only 40k users, he got 6m workouts logged which was a great base to build the algorithm behind Fitness AI.

To be honest, I don't get weight-lifting as a sport. I'll not be able to give a good user perspective on the mobile app but I love the idea of personalization and helping you to get stronger step by step. The first workout is suited to your actual strengths and is not a super hard workout - punitive and discouraging.