A Guide to Micro Seed Funding

 

Advantage: Demo Day

At the conclusion of the program, Y Combinator organizes an event, known as Demo Day, for the companies to showcase their products to a room full of investors.  The companies in the summer YC program take part in two Demo Days: one in Boston and another in Mountain View, CA, while the winter group just presents in Mountain View.  Dozens of the top angels and venture capitalists from around the area take time out of their day to attend this event because they know that Y Combinator produces quality companies.  These startups have been prescreened by YC and are hungry for their next round of investment, so one can understand why investors attend.

Each startup has 10 minutes to pitch their idea, showoff the demo, and impress the crowd.  An intriguing presentation will excite investors and hopefully stimulate competition among them to fund the most promising startups.  Ideally, following demo day, startups will have a series of meetings with a variety of angel and/or venture capitalists.  Those interested in investing will provide the startup with a term sheet, which outlines the structure of the deal.  It is crucial to have a lawyer’s involvement at this point, because once a term sheet is signed by the company, the most important areas for negotiation, such as board composition and liquidation preferences, have been decided.

Demo day is a great benefit to startups funded by YC because they are able take advantage of the network of contacts and brand quality associated with Y Combinator.  This is necessary, because unless a startup is experiencing fast growth and media attention on its own, young entrepreneurs will struggle to obtain face time with the top angels and venture capitalists, and it would be particularly difficult to create competition for the deal without Y Combinator’s help. 


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