Deal-Flow Newsletters Surface Gold Nuggets for Investors

Deal-Flow Newsletters Surface Gold Nuggets for Investors

Will Y Combinator ever fund 1,000 startups in a single batch? Geoff Ralston, the company’s president, does not believe it is impossible. The prospect, though, poses a problem for the tech press: we can do our best to choose favorites, but we can’t cover every single intriguing business in its early stages. This condition, it turns out, presents an opportunity for deal-flow newsletters, a new form of startup curation. “The early-stage aspect of the tech business deserves to be recorded since it’s where every startup’s journey begins, and there are so many intriguing concepts being attempted,” said Martin Bryant, who founded the PreSeed Now newsletter today. 

“The ideal spot for this newsletter is firms who have progressed beyond a napkin idea but have yet to seek external equity investment.” The intended audience for PreSeed Now and its competitors, such as Spain’s Verm, is investors. Although the new U.K. newsletter does not yet have data to disclose, Verm does, and they demonstrate demand: In just a few months, it had 4,500 subscribers. Do investors care about the information provided by deal-flow newsletters? What’s in it for newsletter publishers and the businesses they cover? Let’s get started.

The Choice Paradox, According to Bryant and Verm co-creator Aitor Rodrguez, there are various reasons why investors join up for a deal-flow newsletter. Business angels, as well as early-stage venture capitalists, make up a sizable portion of the audience; both types of investors are always on the lookout for great firms to add to their portfolios. Later-stage funders like firms to be on their radar well ahead of time so they can anticipate what’s coming.

I assumed it was a breezy passing idea when Y Combinator President Geoff Ralston mentioned the possibility of YC enrolling 1,000 businesses in a single batch for the first time. “Could we fund 1,000 startups in a single batch?” Ralston pondered aloud the other day in a Zoom session with me. “I mean, absolutely.” If we can employ another ten or more people who share our love for startups and are willing to spend a significant amount of time reading applications, working with businesses, and producing those transforming experiences.”

For almost its entire history, YC has struggled to determine how much it might extend its twice-yearly batches without compromising the quality of its network. When I initially arrived in Silicon Valley, YC co-founder Paul Graham walked me through the tradeoffs. Wouldn’t that diminish Y Combinator’s reputation, I wondered on Ralston’s behalf? Isn’t that going to diminish YC’s signaling power? “It’s only true if we support a lower-quality entrepreneur and firm as a result,” Ralston explained. “Look, the truth is that we still only support a small proportion of all businesses each year.”

Y Combinator announced its first 11-company batch1 in June 2005, which includes Reddit. This year’s summer batch includes almost 400 businesses. Last year, more than 10,000 firms in the United States received venture capital investment. YC, on the other hand, is thinking worldwide. “So I think that when YC does have a batch of 1,000 firms, we’ll discover the same percentages of success,” Ralston said again, this time with greater certainty: “So I think that when YC does have a batch of 1,000 companies, we’ll find the same percentages of success.”