October 1, 2014

Tech Startup Market Hot Again?

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We’ve gotten used to hearing bad economic news, to the point that most of us just tune it out now. After all, you can only take so much bad news without it wearing you down.

But could the good times be back again? Judging from reports about Y Combinator’s recent Demo Day, it may be boom times again for Web and mobile tech startups.

Jason Freedman, co-founder of 42 Floors wrote a piece enticingly titled, “Did everybody see what just happened? The pendulum has swung.” In it he outlines that investors are hungry to invest in tech startups, even without business plans — and very different from his experience in 2009. He writes:

“The feeling was palpable. Y Combinator had sixty-five companies present (42Floors was one of them). And we saw 500 eager investors, frenzied almost, excited to invest in entrepreneurs. One investor emailed me four times, texted me three times, called me and sent me a message on LinkedIn — desperate to get a check in before the round closes.

No business plans, not even pitch decks this time. One 2-1/2 minute pitch and a quick follow up meeting. Seven figure seed rounds that can be closed within days and oversubscribed 2x to 3x. Founders with no experience fundraising and no pre-existing networks, making connections with top tier guys. It was really a sight to see.”

He goes on to offer advice to startup entrepreneurs who get seed round funding: “Shut up and get back to work.”  You’ll quickly run through your money, and all the hype won’t matter if you’re not satisfying users and customers.

Y Combinator has been described as an incubator.  On its website it says it provides seed funding to startups, and works with founders to develop their ideas and help them deal with investors.  It holds an annual Demo Day where startup founders present their ideas.

So what types of businesses were hot at Y Combinator’s Demo Day in 2012? According to Eric Eldon writing in Techcrunch: mobile.

“But the thing that is sticking out the most is the nature of the products being launched. Out of the 39 companies presenting on the record today, 15 are mobile-first by my count. * * * The companies today are also noticeably practical — these are not just games and simple utilities.”

More coverage of Y Combinator’s Demo Day is at GigaOm: 10 Startups to Watch.  And at the New York Post:  Tech Incubator Heating Up Investors.

Be careful not to draw too strong a conclusion from just one event.  But it is a sign of a promising trend.

6 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

6 Reactions

  1. I agree that there’s been a rise in action around start-up ventures.

    What’s interesting about today’s environment is a larger percent of the startups are bootstrapped.

    With cloud computing eliminating capital equipment costs and so much opportunity around mobile apps, the economic barriers to entry have never been lower.

    Actually wrote a post last week on the benefits of working with startups at http://www.ishmaelscorner.com.

    Top Five Reasons To Work With Startups On The PR Front

  2. Great to see these new companies getting funding, but it seems like the investors put a lot of faith in the Y Combinator stamp of approval. Hopefully people did their due diligence and we don’t see a revival of the “Company that got millions of dollars with no business plan goes bankrupt” stories.

  3. The market is still alive and grows continuously. We have a lot of hot tech startups from all over the world! People are hungry today to find game changing new solutions for already solved problems, that’s why it won’t ever slow down.

  4. The mobile touch screen is a natural development from the TV tube and computer monitor. Our worklife is on the go, always at hand. It is easy to update, share and get in touch with your friends, co-workers and customers. The challenge is to find all the great content on the app market and to get into the habit to use new applications in your daily workflow. The best thing with the mobile device is the on/off button! ;)

  5. I think the key word in all of this was “practical”. If more start-ups are going to shift to more “practical” products that really create solutions, vs. social, gaming, etc. I think we will continue to send this trend. Exciting stuff!

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