Our 9 favorite startups from Y Combinator W19 Demo Day 2

Every startup is a bank — or wants to be

The following from C. S. Lewis. was on my fraternity email list this morning. It was written in 1948 after the dawn of the atomic age.

In one way we think a great deal too much of the atomic bomb. “How are we to live in an atomic age?” I am tempted to reply: “Why, as you would have lived in the sixteenth century when the plague visited London almost every year, or as you would have lived in a Viking age when raiders from Scandinavia might land and cut your throat any night; or indeed, as you are already living in an age of cancer, an age of syphilis, an age of paralysis, an age of air raids, an age of railway accidents, an age of motor accidents.”

In other words, do not let us begin by exaggerating the novelty of our situation. Believe me, dear sir or madam, you and all whom you love were already sentenced to death before the atomic bomb was invented: and quite a high percentage of us were going to die in unpleasant ways. We had, indeed, one very great advantage over our ancestors—anesthetics; but we have that still. It is perfectly ridiculous to go about whimpering and drawing long faces because the scientists have added one more chance of painful and premature death to a world which already bristled with such chances and in which death itself was not a chance at all, but a certainty.

This is the first point to be made: and the first action to be taken is to pull ourselves together. If we are all going to be destroyed by an atomic bomb, let that bomb when it comes find us doing sensible and human things—praying, working, teaching, reading, listening to music, bathing the children, playing tennis, chatting to our friends over a pint and a game of darts—not huddled together like frightened sheep and thinking about bombs. They may break our bodies (a microbe can do that) but they need not dominate our minds.

— “On Living in an Atomic Age” (1948) in Present Concerns: Journalistic Essays

Of course, since it was a fraternity email list, it included:

and

Regardless, it’s important to remember the iconic Battlestar Galactica message. “All of this has happened before. All of this will happen again.”

I’ll end with something to ponder for the weekend, which is C.S. Lewis’s punchline recast for Covid-19.

This is the first point to be made: and the first action to be taken is to pull ourselves together. If we are all going to be destroyed by a virus, let that virus when it comes find us doing sensible and human things, but with social distancing in the near term to slow it down—WFH, teaching remotely, reading, listening to music on our stereos, bathing the children, exercising at home, chatting to our friends over a video conference—not huddled together like frightened sheep and thinking about viruses. They may break our bodies (a microbe can do that) but they need not dominate our minds.

Lisa Enckell is a partner at Antler, an early-stage venture capital firm and startup generator.

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Microsoft is canceling its Build developer conference – one of its largest events of the year – and moving it online, citing health concerns amid the spread of coronavirus.

The event was slated to be held on May 19 to 21 in Seattle, and had around 6,000 attendees in 2019.

"The safety of our community is a top priority," Microsoft said in a statement to Business Insider. In light of the health safety recommendations for Washington State, we will deliver our annual Microsoft Build event for developers as a digital event, in lieu of an in-person event. We look forward to bringing together our community of developers in this new virtual format to learn, connect and code together. Stay tuned for more details to come."

King County, where Microsoft is headquartered and where Build was scheduled to be held, is an epicenter of the coronavirus outbreak in the US.

Microsoft's peers, including Facebook, Google, and Amazon, have similarly canceled many of their massive developer events and moved them online, in a bid to stem the spread of the virus.

Microsoft has had at least two COVID-19 cases among employees. The company has advised most employees to work from home, but is asking some sales people to continue working.

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An employee in Google's office in Bangalore, India, has tested positive for the coronavirus disease, COVID-19, and has been placed in quarantine, CNBC reported on Thursday.

Google, as well as the property managers of other buildings in the surrounding office park, instructed employees there to go home immediately and continue working remotely, according to CNBC.

In an email to employees, Google said the individual had contracted the disease while traveling overseas and had been in the office Monday, but was initially asymptomatic and had passed temperature screenings, CNBC reported.

The earliest known case of a Googler testing positive for COVID-19 was first reported at the end of February by Business Insider. Shortly after, the company restricted all international employee travel in an effort to slow the spread of the virus, also first reported by Business Insider.

Earlier this week, Google advised all employees based in North America that they should work from home if possible, joining other companies in taking more aggressive measures to protect employees and communities as the outbreak worsens.

Google did not immediately return a request for comment.

The Department of Defense on Thursday in a court filing said it "wishes to reconsider" its decision to award the $10 billion JEDI cloud computing contract to Microsoft, citing very specific challenges from Amazon on technical aspects of the Microsoft Azure cloud.

Amazon Web Services, the other frontrunner for the contract, has alleged in a lawsuit that the JEDI award process was unfairly biased amid President Donald Trump's frequent criticism of Amazon, and that Microsoft's Azure cloud didn't meet the technical requirements set forth by the Pentagon.

"We believe the Department of Defense made the correct decision when they awarded the contract," Microsoft spokesman Frank Shaw said. "However, we support their decision to reconsider a small number of factors as it is likely the fastest way to resolve all issues and quickly provide the needed modern technology to people across our armed forces."

"We are pleased that the DoD has acknowledged 'substantial and legitimate' issues that affected the JEDI award decision, and that corrective action is necessary," an AWS spokesperson said in a statement. "We look forward to complete, fair, and effective corrective action that fully insulates the re-evaluation from political influence and corrects the many issues affecting the initial flawed award."

In the filing, the Department of Defense says that its decision to seek a reconsideration of the deal comes "in response to the other technical challenges presented by AWS."

Specifically, the Pentagon is requesting the court remand the case to the Department of Defense for 120 days to "reconsider certain aspects of the challenged agency decision." The filing also indicates that the Department of Defense won't seek additional bids from any other companies, but that it will rather reassess Microsoft Azure versus Amazon Web Services in light of the specific technical points raised by Amazon. 

In what appears to be a tacit admission that Amazon has a legal case, the Pentagon also said its motion is "in the interests of justice it will provide the agency with an opportunity to reconsider the award decision at issue in light of AWS's allegations."

The Pentagon also said it will propose that Microsoft and Amazon "file a joint status report" on whether the legal case should proceed.

The Pentagon awarded the $10 billion JEDI contract to Microsoft, in a stunning defeat for Amazon, whose Amazon Web Services — the dominant player in the cloud — was widely expected to win the project for building a massive platform that would store sensitive military and defense data. Amazon Web Services and Microsoft were selected as the two finalists in a contentious bidding process that initially included Oracle, IBM, and Google.

Amazon has challenged the decision in court. In a newly unsealed filing, Amazon claimed the bidding process was "incurably tainted" by political interference by President Donald Trump — evidenced, it says, by the Defense Department allegedly refusing to answer its questions.

Trump is a frequent critic of Amazon CEO Jeff Bezos and the Washington Post, which Bezos also owns. 

A federal claims judge ordered work on the contract to stop while the case plays out. The judge also recently gave an indication that Amazon's challenge could be successful, writing in a that AWS can likely prove the Pentagon made an error in the evaluation process and that the error affected the outcome. Microsoft disagrees.

When the Department of Defense solicited bidders for JEDI, a requirement for one aspect of the proposal called "Price Scenario 6" was for online storage to be "highly accessible." Amazon alleges Microsoft's proposal did not meet that requirement.

Amazon alleges it should have been enough to eliminate Microsoft from the competition. The judge said Amazon is likely to be able to prove the DoD improperly evaluated Microsoft's proposal, and that Amazon's "chance of securing the award was not insubstantial absent the error."

"DoD does not intend to conduct discussions with offerors or to accept proposal revisions with respect to any aspect of the solicitation other than Price Scenario 6," the DoD said in the filing. "At this time, DoD does not anticipate clarifications being necessary on issues other than the offerors' online marketplace offerings."

Microsoft earlier this week told Business Insider its proposal does meet the requirement, and the DOD argues Amazon "seeks to elevate superficial labels over technical performance," and that if Microsoft's proposal didn't meet the requirement, neither did Amazon's.

Here's Microsoft's full statement from spokesperson Frank Shaw:

"We believe the Department of Defense made the correct decision when they awarded the contract. However, we support their decision to reconsider a small number of factors as it is likely the fastest way to resolve all issues and quickly provide the needed modern technology to people across our armed forces. Throughout this process, we've focused on listening to the needs of the DoD, delivering the best product, and making sure nothing we did delayed the procurement process. We are not going to change this approach now.

Over two years the DoD reviewed dozens of factors and sub factors and found Microsoft equal or superior to AWS on every factor. We remain confident that Microsoft's proposal was technologically superior, continues to offer the best value, and is the right choice for the DoD."

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Amazon Web Services has been focused on signing up more large business customers in recent years, as it continues to expand beyond the tech startup community that first adopted its cloud technology.

That shift is important because large businesses typically sign longer-term contracts — unlike smaller companies that prefer the pay-as-you-go model — making them a bigger and more predictable source of revenue.

One figure from Amazon's annual filing reflects that transition: performance obligations. 

Performance obligations, which Amazon says is "primarily related to AWS," represent the total value of signed contracts that haven't been recorded as revenue because the service hasn't been delivered yet. For example, if a company signs a three-year deal, only the first 12 months worth of contracts are recorded as revenue over the course of the first year, while the rest of the contract goes to performance obligations.

Amazon's performance obligations, or backlog revenue, jumped 54% to a record $29.8 billion in its most recent quarter, according to company filings. That's almost a 2.5-times growth since the first quarter of 2018, when Amazon first started disclosing the figure. The remaining life on those contracts is on average 3.3 years, meaning Amazon expects to convert most of its performance obligations to revenue over that stretch.

Lee Horwitz, an analyst at Evercore Partners, told Business Insider that most of Amazon's performance obligations likely come from contracts signed by larger enterprises who are making longer commitments to AWS. The 54% growth in backlog revenue last quarter is bigger than AWS's overall revenue growth of 34%, signaling faster adoption among large businesses than small companies, he said.

"It's a good leading indicator of overall enterprise demand," Horwitz said. "We see AWS's enterprise growth outpacing small and medium size business growth at this point."

AWS is no stranger to serving large businesses. It's been the cloud provider for Netflix and Airbnb for a long time, and has a giant contract with the CIA as well. But as more companies move their entire computing needs to the public cloud, AWS is seeing a more diverse group of enterprise customers in different verticals, including healthcare, finance, and energy.

At last month's Goldman Sachs Technology and Internet Conference, AWS CEO Andy Jassy highlighted this shift, saying it's one of the biggest changes he's seen in its business over the past six years. While companies like Slack and Pinterest started using AWS since they were small startups, he said a growing number of big companies like Goldman Sachs and GE are now using it as well.

"In the early days of AWS, it was mostly startups building their businesses from scratch on top of AWS," Jassy said. "What's happened over the last six years is that the enterprise and public sector have very rapidly adopted AWS in the cloud."

Even compared to some of its peers, Amazon's performance in obligations growth is noticeable. Microsoft's number grew 29% in its most recent quarter, while Salesforce's saw 20% growth from the year-ago period. Google disclosed $11.4 billion in performance obligations for the first time last quarter. While it's difficult to do an apples-to-apples comparison with these figures, given each company includes different cloud services in its calculation, it still gives good context in how fast Amazon's enterprise portion is growing.

"It's an eye-popping number that speaks to the underlying demand Amazon is seeing from AWS build-outs over the coming year," said Dan Ives, an analyst at Wedbush Securities.

AWS reported $35 billion in sales last year, a 37% increase from the previous year. So far this year, AWS announced Carrier, 3M, and the German soccer league Bundesliga as new business customers.

But the pace of AWS's enterprise growth could be affected by the coronavirus, according to D.A. Davidson's analyst Tom Forte. As more companies put in travel bans in place and cancel customer conferences, every software company, including AWS, could find it more difficult to close deals, he said. Amazon, for example, has been significantly expanding its enterprise salesforce in recent years, as most enterprise customers prefer doing business in-person.

In fact, Salesforce disclosed in its annual filing that the coronavirus is now a risk factor as the company cut back on customer events and faces a slower spending environment. 

"These conditions can affect the rate of IT spending and could adversely affect our customers' ability or willingness to attend our events or to purchase our enterprise cloud computing services, delay prospective customers' purchasing decisions, reduce the value or duration of their subscription contracts, or affect attrition rates, all of which could adversely affect our future sales and operating results," Salesforce wrote in its filing.

In a note published this week, D.A. Davidson also said software companies that rely on traveling sales reps and user conferences to sell to large enterprises are most impacted by the coronavirus. While it didn't mention AWS, the note said companies like Salesforce and Workday could see increased risk in the current environment "given the travel bans and conference cancellations (along with the accompanying lower business confidence)." Forte said the impact will likely start to show up in future quarters as the coronavirus only started to affect US companies in recent weeks. 

"There is a risk — but it looks like there is a greater risk to the June quarter than to the March quarter," Forte said.

As a workplace communication app, Slack is an ideal tool to help a new wave of remote workers do their jobs amid the spread of coronavirus.

And on Thursday Slack confirmed that it has seen an uptick in new users — but said it's too early to tell if those users will become paying customers and boost its business.

Since Slack has a freemium model where users can get a streamlined version of the product for free before paying for more features, most new users are using Slack's free product. CFO Allen Shim said on a call with analysts after Slack reported earnings that the company is seeing a "significant spike in created teams which typically start out as free."

Shim and CEO Stewart Butterfield added that it is too soon to tell if any of that new usage will translate to paying customers and increased revenue for the company, and that it's difficult to predict what might happen given how uncertain the business environment is at the moment.

"At this time we don't have a clear idea of the net impact of the macro environment on our business, which is another way of saying that there is more uncertainty than normal in our forecasting. You'll see this reflected in our guidance," Butterfield said on the call with analysts.

Butterfield said the company is seeing much of that new usage in countries most affected by the coronavirus: like Italy, South Korea and Japan. They've also had existing customers reach out to the company about increasing their usage faster than originally planned. 

"There is just a massive outpouring of interest on the customer side, and it's really all over the place ... So a lot of this is unfolding in real time," he added.

Slack's true growth comes from signing on large companies, like IBM and Uber as Business Insider previously reported, as customers. The company says it now has 70 paid customers who pay more than $1 million annually, and 839 paid customers paying over $100,00 annually. 

Those deals take time to cultivate and close, so the company is anticipating that might be impacted by the coronavirus, reflected in the lower than expected guidance Slack gave for the next quarter. 

Slack has asked all employees to work from home and cancel all non-essential work travel.

"While the pipeline currently remains healthy, we see risk due to increased customer uncertainty and travel disruption, particularly in the enterprise segment," Shim said. 

The uncertainty caused by coronavirus also means that companies might be more conservative about what they're spending money on. Butterfield said that new customers have told him that signing a deal with Slack might be the last deal they sign for a while.

"Last week, so not in Q4, but we closed a deal with one of the world's biggest asset managers. I got an email from the CTO the day he signed saying, 'Hey, look I signed, just FYI, this was the last deal I'm signing before the doors close," he said.

Ultimately Butterfield thinks that even if it's hard to predict the impact on business from coronavirus, the huge spike in remote work will have some lingering effects on behavior and companies will have to change.

"Those really radical shifts in behavior that happen over a short period of time, we're going to have some lingering effects that I think organizations who previously had been really resistant to distributed workforces are probably going to open up a little bit," Butterfield said. 

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Y Combinator's rite of passage, the famous 2-minute pitch to a room packed with potential investors, is the latest victim of the coronavirus pandemic. 

Startups that are part of Y Combinator's "accelerator" program, which includes coaching and seed stage funding, learned last week that this year's Demo Day was going virtual. Instead of presenting their fledgling business ideas in front of a crowd, the startups would submit video recordings of their pitches for investors to watch. 

Now, Y Combinator has decided that it will do away entirely with the custom of founders talking up their business at this year's Demo Day and that startups in the program will not even make pre-recorded video pitches. Y Combinator will instead feature individual slides about each startup for investors to peruse on a special Demo Day portal.

"Through the website, investors will have access to a single-slide summary, a short description of the company, and a team bio. They can sort companies by industry and geography, and will be able to export the list of companies to a spreadsheet," Y Combinator President Michael Seibel wrote in a blog post announcing the changes Tuesday.

Y Combinator justified the change as part of an effort to speed up the pitch process because investors are moving fast to make investment decisions.

"As we shared on Friday, we know startup investors will continue to support our newest batch — just as they have for the last 15 years. The activity over the last week has shown us that the community surrounding YC is as strong as ever," Y Combinator President Michael Seibel wrote in a blog post announcing the changes Tuesday.

Since it began 15 years ago, Y Combinator's startup program has seen some of Silicon Valley's most famous names pass through it, including Airbnb, DoorDash and Stripe. The new format of the Demo Day ritual this year will represent a big break from tradition and a curveball for startups looking to attract the backing of powerful VC firms.

Without prerecorded pitches, many founders have turned the focus back onto their companies instead of working out the perfect pitch. It has also changed Y Combinator's timeline — the accelerator announced that the slides would be available to investors starting March 16, a full week before the originally planned Demo Day and its virtual replacement.

"Demo Day moving online, I really see that as a positive for us," Motion cofounder and CEO Harry Qi told Business Insider. Motion is among the accelerator's current batch and was originally planning to present in front of thousands of investors on Demo Day in San Francisco.

"We have more time to work on the startup instead of having to fine-tune the presentation. I probably would have to spend five hours to make it perfect, but now I can just build and code more."

But both investors and founders have started to question the logistics and value of Demo Day, which had to cover two full days of pitches in September to accommodate the growing batches of startups that made it through the program. In its earliest days, founders would pitch cofounder Paul Graham and a handful of outside investors in small rooms in Boston and Mountain View. As the accelerator's acclaim has grown, so too has its batches of startups. To stand out against the noise, many founders have started pitching investors before Demo Day even begins, and some have signed deals before stepping out onto the stage. 

Although Y Combinator has said investor interest remains on par for previous Demo Days, there is a not-insignificant chance that many startups graduating from its most recent program may not see their funding targets either because they were lost in a 250-slide deck or because they did not meet investors before San Francisco became a coronavirus hotbed. 

Either way, the fate of Y Combinator's 2-minute pitch format, the likes of which have minted breakout hits like Airbnb, Stripe, and Coinbase, is now up for debate. It will be up to this batch, Y Combinator's biggest ever, to seal the deal.

As thousands adjust to life in quarantine, a plethora of coronavirus outbreak-inspired playlists are popping up on Spotify. With names like "melodic future bass songs that make me forget about coronavirus," these playlists provide a surprisingly intimate look at how people across the globe are feeling about and coping with the ongoing crisis. 

 

Carlotta Freni — who works in the music industry and has lived in Milan, Italy for 13 years — created her quarantine playlist "Songs for Pandemics" after the Lombardy region's lockdown began on February 23. That lockdown now includes the entire country, as the number of infections and deaths continues to climb.

"To me, music is the primary way to communicate feelings and to seal a particular moment or history inside our memories," Freni wrote in an email interview. 

Dubbing the 23rd "the day of the Italian rage at the supermarkets," Freni recalls going to the nearest supermarket to photograph the empty shelves and experiencing for the first time "the fear and the disorder of a scared crowd." The following day, she created the playlist and used one of the ghostly supermarket photos as a cover image. 

"I was conscious that we had to stay at home in order to prevent a sanitary disaster," Freni wrote in an email interview. "So I decided to create a playlist for my friends, in order to share with them some good sounds and vibes, and let the day flow."

To be faithful to this "unique period in our recent history," Freni decided to include an eclectic mix of new releases from the past few weeks, songs by artists who canceled gigs in Milan to prevent contagion, songs about crisis, and "songs from the past" that "let the listeners both dance and meditate." Lastly, Freni added, she tried to put listeners in a good mood with a playlist that is equally joyful and melancholic. Her friends loved it. 

"I'm happy to have contributed to their wellness in a very simple way," Freni wrote. 

The most popular playlist to emerge from the outbreak, however, was "COVID-19 Quarantine Party," which boasted more than 35,000 followers before its name was deleted after Insider contacted the creator for comment. The tracklist conveys a sense of resigned acceptance with titles like "The Kids Don't Stand a Chance" by Vampire Weekend, "You Sound Like You're Sick" by The Ramones, and "Time Is Running Out" by Muse. 

This "Coronavorus Hand Washing Playlist" created by user jenntrev, on the other hand, serves a functional purpose. All 51 songs on the playlist have "a chorus/pre-chorus of at least 20 seconds for you to sing or hum (either aloud or in your head) while washing your hands to ensure you meet the handwashing guidelines set forth by the CDC." 

But the prevailing attitude expressed through these playlists is one of growing civil unrest co-mingled with a need for distraction and escapism. Take, for example, this "*corona virus intensifies*" playlist put together by user chrislax123, which bounces from optimistic tracks like Taylor Swift's "Shake It Off" and Ed Sheeran's "I Don't Care" to songs that hint at darker and more conflicted emotions, like "Stressed Out" by Twenty One Pilots and "The Age of Worry" by John Mayer. 

That said, if you're too anxious for Top 40 hits, user Listen2Listed has you covered with "Coronavirus beats to chill/hide in my room to," a playlist dedicated to soothing, lo-fi hip hop. 

Spotify did not immediately respond for comment. 

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