For the past two days, I’ve been watching over 200 founders pitch their young startups at Y Combinator’s virtual Demo Day. Of course, as I even joked on Twitter (or, I suppose, X), artificial intelligence was undoubtedly the biggest theme of this summer’s batch. But after reflecting on my notes and chatting with a couple venture investors, I rounded up a few takeaways.
San Francisco is back
San Francisco was predictably a big theme this year, as Jessica teased in yesterday’s newsletter. Y Combinator was fully back in person this summer, and CEO and president Garry Tan didn’t hold back on singing the tech hub’s praises in his opening remarks: He compared YC in San Francisco to “Rome or Athens in antiquity.” But Tan’s enthusiasm for the city wasn’t just words: Scrolling through the list of companies, a lot of those selected for this batch are based out of SF.
That’s attractive to investors like Niko Bonatsos, a managing director at General Catalyst, which he says invests in pretty much every YC batch. “We do love that a ton more of the companies are focused on the U.S., and the majority of them are in California working out of San Francisco,” Bonatsos, who splits his time between SF and New York, told me. “This is what made YC great before,” he argued, adding that he feels like it’s “back to the roots.”
A.I. + law
As I and others have pointed out, this summer batch was all about A.I.—with A.I. startups making up a huge portion of those pitching investors this week. But within that broad category, I noticed several companies that are applying A.I. in some way, shape, or form to the legal field: atla is building A.I. assistants to help in-house lawyers answer legal questions; Hidden Hand is working on being an A.I. paralegal for contingency law; and Pincites is applying A.I. to help companies save time on contract negotiation.
These fledgling startups are tapping into a bigger theme: A.I.-for-law companies have become popular with investors recently. Take EvenUp, which is focusing on A.I. for personal injury law, and raised a round led by Bessemer Venture Partners earlier this year at a $350 million valuation (reportedly raising even more this summer); and Sequoia Capital-backed Harvey, more broadly working on providing elite law firms with a generative A.I. copilot to assist them, which also raised funding earlier this year.
I do wonder if some of these companies are focusing on markets that are too niche to get enough revenue to turn into big unicorns. But some VCs clearly believe that even though startups like EvenUp are focusing on a pretty specific market (personal injury law), there’s enough opportunity to return their investments. It’ll be interesting to see if these YC companies are able to ride that broader A.I.-for-legal trend and win checks.
Stripe, Rippling, Datadog were popular cameos for pitches
Plenty of startups like to compare themselves to successful companies, even if they’re competitors. For example, Stripe, the $50 billion startup that also went through YC many years back, has long attracted comparisons, as I wrote about a while back. And a couple startups in this week’s YC batch were eager to invoke Stripe’s name, with “Stripe for” taglines on their pitch decks, à la YC startup Flex’s “Stripe for accepting HSA/FSA payments.”
Other companies inserted as the “fill-in-the-blank for” that I noticed include Rippling, Plaid, Datadog, Mint, Shopify, and Snowflake. This clearly isn’t a new trend, but it’s always interesting to see which companies have reached that level of fame or respect among VCs that founders aspire to be the next them or the them for something.
Flexport’s C-suite shakeup: The supply chain management company had some big C-suite changes this week. On Wednesday, Dave Clark said he was resigning as CEO of Flexport—about a year after he joined the company from Amazon. In a swift reversal, Ryan Petersen, Flexport’s founder, declared he was returning to lead the company after stepping down from the CEO role in March, and after joining famed VC firm Founders Fund just two months ago. And per reports, there's been some drama behind the scenes.
Have a great weekend,
Anne Sraders
Twitter: @AnneSraders
Email: anne.sraders@fortune.com
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