August 11, 2023 • 42 mins
Y Combinator is a famous Silicon Valley startup accelerator where Airbnb, Coinbase and Reddit all got their start. This startup school has backed companies now valued at $600 billion. Emily Chang met with Y Combinator CEO and President Garry Tan to discuss his roots as a founder who went through Y Combinator himself, to his return as the accelerator's current CEO. They discuss what it takes to be a great founder, the Silicon Valley Bank crisis, how Mr. Beast schooled Tan on his content creating, and the fate of San Francisco.
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Speaker 1 (00:04):
Hi, hard to see you, get to see you.
Speaker 2 (00:12):
I hear this as a special coffee shop.
Speaker 3 (00:14):
Yeah, this is just where so much stuff happened, especially
for YC, over really ten years.
Speaker 1 (00:21):
I'm Emily Chang, and this is the circuit. Gary Tan
is head of one of Silicon Valley's most influential startup accelerators.
It's called Why Combinator, and it's kind of like mecca
for aspiring entrepreneurs. Tan first got accepted to YC as
a founder himself in two thousand and eight when he
founded Postuous, a blogging platform that was later acquired by Twitter.
(00:43):
He went on to become a partner at YC, start
his own venture capital firm, Initialized, and even has a
popular YouTube channel where he shares his insights on dos
and don'ts for startups. When it comes to all of
the videos you've made, what have you found really resonate?
Speaker 2 (00:58):
It's like what.
Speaker 4 (00:58):
Takes off umber?
Speaker 3 (01:00):
One thing for me is just actually talking about the
things I messed up.
Speaker 1 (01:05):
Fifteen years after joining y C is a founder, he's
now back steering the ship. But first coffee. Here's my
conversation with Why Combinator president and CEO Gary Tan.
Speaker 2 (01:17):
I have ever done a deal here or anything like that.
Speaker 3 (01:19):
Ah, you know, like YC is interesting because the deal
is pretty straightforward. We just meet them for ten minutes
and then decide yes or no.
Speaker 4 (01:28):
Yeah that's right. So that's ten minutes and then yes
or no, Yeah that's right.
Speaker 1 (01:32):
Wow, how do you know in ten minutes?
Speaker 3 (01:35):
Well, I think you can look at you know, what
the founders are capable of their skills. I think we're
up to forty thousand applications ever every year.
Speaker 2 (01:45):
Every year.
Speaker 1 (01:46):
Yeah, and you pick like a few hundred.
Speaker 4 (01:48):
That's right.
Speaker 3 (01:49):
It's a very it's the lowest acceptance rate, you know,
more more selective than you know, pretty much any selective
school in the world. I feel like a lot of
this stuff all started here, you know, back in really
two thousand and five, this idea that you could give
very small amounts of money to just a few teams
and have those teams go on to become sort of
(02:09):
the the Reddit and the Airbnbs of the world.
Speaker 2 (02:12):
All right, thank you got to try, and oh.
Speaker 4 (02:15):
Thank you very much.
Speaker 2 (02:17):
Warm let's go.
Speaker 3 (02:20):
This is where people meet their first investors. This is
where they meet their co founder for the first time.
Sometimes this is a really important part.
Speaker 1 (02:29):
Of Silicon Valley and you actually were in YC yourself.
Speaker 3 (02:33):
Oh yeah, I lived five blocks down that way and
YC is about five blocks down this way.
Speaker 1 (02:38):
And when were you accepted to YC two thousand and eight,
two thousand and eight, So just at the start of
financial crisis.
Speaker 4 (02:44):
Yeah, for sure.
Speaker 3 (02:46):
We raised our angel around for posterous the day Lehman
died and nobody else in our batch managed to raise
any money.
Speaker 2 (02:51):
And you're a barrier guy, that's right. You were born
and raised here.
Speaker 3 (02:54):
Yeah. I grew up right here in Fremont, right across
the bay, and Tech gave me everything I have honestly,
you know, child of Chinese immigrants. You know, we were
sometimes food and secure, but I just remember tech was here,
and we grew up in the shadow of all this greatness,
all this technology being built from nothing. I knew that
I wanted to learn to code, and you know, I
(03:16):
cold called the Internet section until I got a job.
And we were living in one or two bedroom apartments,
right and for my parents to you know, sometimes struggle
with English, the cultural barrier.
Speaker 4 (03:27):
You know.
Speaker 3 (03:27):
My dad was forming at a machine shop, my mom
was a nurse assistant at a convalescent home for dinner.
We would sort of have the expired bread that someone
would drop off to sort of help out my mom,
who was, you know, working sometimes two shifts just to
keep the family going. And so I think that's one
of the really important things to me that I realized, like,
(03:48):
tech is this thing that can bring people out of
whatever situation they're in and often into prosperity.
Speaker 4 (03:54):
And that's what I want for everyone.
Speaker 1 (03:56):
You were sort of like an engineered designer by background.
How does that inform you perspective?
Speaker 3 (04:01):
This is why YC really attracted me in two thousand
and eight was that here was the one place that
wasn't about the flash.
Speaker 4 (04:10):
It wasn't about you.
Speaker 3 (04:11):
Know, whether you had an MBA or you know, you
went to some school or whatever. It was just purely, hey,
can you build something great?
Speaker 1 (04:19):
You have this picture, it's two thousand and eight. I
believe you're sitting on the ground and you can see
Paul Graham in the background and Mark Zuckerberg. What's going
on in that moment?
Speaker 3 (04:29):
At that point I knew I wanted to start a company,
and Y see through this event that was a free
event called Startup School, and it was all sort of
like the luminaries.
Speaker 4 (04:38):
You know, I believe that year.
Speaker 3 (04:40):
Jeff Bezos came and he actually launched AWS at that
startup school in two thousand and eight at the auditorium
at Stanford.
Speaker 4 (04:49):
I was sitting on the ground.
Speaker 3 (04:51):
Photography was one of my loves, and I was actually
thinking about, you know, either starting a company or becoming
a hip hop editorial photographer.
Speaker 2 (04:59):
Very different opposition.
Speaker 1 (05:00):
Yeah, you went on to become a partner at YC yourself.
How did you make the transition from entrepreneur to investor?
Speaker 3 (05:06):
You know, we were doing dead simple blogs by email
posters and then didn't you sell that to Twitter much later? Actually,
I mean Instagram came out and that flatlined our growth.
And this is one of the interesting things about being
an investor. You know, I think we were very much
in the running to be sort of one of the
major social networks, but that was because there were no
(05:26):
really great iPhone apps yet for uploading photos until Instagram.
And now I realize it's actually the role of the investor.
We need to be helping them understand the historical context,
like you know, what is actually happening in the market,
and what are the brass rings that are going to
be enduring, meaningful businesses that could be worth billions adults.
Speaker 1 (05:47):
So obviously you worked at YC for but you went
on to start your own fund.
Speaker 2 (05:50):
Initialized.
Speaker 1 (05:51):
Absolutely you made some pretty smart bets early on. You
invested in coinbase, for example. What did you learn from
that experience that gave you sort of the bona fides
to an investor?
Speaker 3 (06:01):
This is actually a business that requires you to see enough.
And YC was just such a concentrated form of all
of tech happening, and it remains that that. I think
you just end up learning way more about what's doable,
what's possible.
Speaker 1 (06:16):
So coming back to YC as CEO, is that like
a dream job?
Speaker 3 (06:21):
Yeah, the ability to help people basically achieve their dreams.
Speaker 4 (06:27):
That's what YC did for me. I'm a steward here.
Speaker 3 (06:30):
I'm trying to figure out what can we do to
help more innovation happen in the world.
Speaker 2 (06:35):
So YC is how far away?
Speaker 4 (06:37):
About five blocks down the street?
Speaker 2 (06:39):
I want to see it.
Speaker 4 (06:40):
Yeah, let's go check it out.
Speaker 1 (06:44):
Airbnb, Stripe, drop Box, Instacart, Twitch, Coinbase.
Speaker 2 (06:50):
Am I forgetting anyone?
Speaker 4 (06:51):
I mean so many?
Speaker 3 (06:52):
The thing is there are ninety companies worth a billion
dollars or more.
Speaker 1 (06:56):
So many companies have come through these doors.
Speaker 2 (06:58):
Talk to me a little bit about to process.
Speaker 1 (07:00):
For those who don't understand what exactly does a startup accelerator.
Speaker 3 (07:04):
Do well, HYC works kind of as a ten to
twelve week program. Anyone can apply online. All they have
to do is ideally have an idea and have a demo.
Sometimes we get about eighteen thousand such applications every six months,
and what we do is we try to figure out
(07:24):
who are the smartest, best people, who are capable, and
what are the things that they're trying to do and
are those things viable? And then we actually try to
interview about a thousand of them every six months and
we whittle it down to about two hundred and fifty
to give half a million dollars to which is great
because when I first started, I think YC only gave
(07:47):
me twelve thousand dollars. I think that's gone up a bit.
It's gone up a bit. You know, times are different.
But I think the most important reason why it's more
money is because we want anyone who is really talented
and skilled, regardless of whether or not they have your
credit card debt. The way I did when I started
my company, or you might have pretty big savings. You know,
(08:07):
that's privilege. I think that regardless of any of that,
people who have skills should be able to start great businesses.
And YC is the place to give you not just money,
but also know how and a community.
Speaker 1 (08:20):
You mentioned y see, it's like a community like no other.
I mean, you know, the people who get in here
are getting a ticket to a massive network. I mean,
if you talk about all the companies we just mentioned,
right absolutely, you know, if I come into YC, can
I just call Brian Chesky or call Gary Tan and
get your advice?
Speaker 3 (08:38):
Yeah, I mean that's sort of what it's meant to be, right.
I Mean one of the things that is always important
to me is that YC be the most inclusive place
for the people who are the best, simply because if
you go to you know, a tech conference or you know,
you try to network your way into startups, it's actually
really impossible for the people on the other end to
(08:58):
even figure out, oh, is as someone who's good who
I could spend time with. And when you look at
the failure rate of startups period, more often than not,
when you approach someone in one of those other contexts.
The answer is no, I can't spend time here because
I can't vet you. I can't figure out if this
is someone who know something good will happen with that.
(09:19):
I think is some of the reason why y SEE
exists is that no, no, this is actually a community
of really great people.
Speaker 1 (09:26):
What does the newest class of founders look like? What
problems are they trying to solve?
Speaker 3 (09:31):
Yeah, I think that one of the biggest things is
always what are the new capabilities and what we're seeing
with whether it's open AI or anthropic or you know,
any number of large language models. There's this sort of
moment where computers can think like they can actually look
at blocks of text and give you something that a
(09:51):
human being normally would be necessary to sort of give you.
That's a really exciting time for just software period. You know,
before you had to have long training processes for very
specialized tasks, and now we're seeing it sort of approach
all of knowledge work and we're just scratching the surface
on what that could be. And then a good deal
(10:12):
of them are focused on AI bringing in large language models.
Speaker 1 (10:16):
Demo day is sort of like a write a passage. Oh,
definitely right, what happens on demo day?
Speaker 3 (10:21):
Obviously, these companies come in, they have half a million dollars.
They don't necessarily have to raise because if you're an engineer, designer,
product person, you can just do it yourself. And then
it's a thousand investors, vcs, angel investors, people who have
been there, and they often raise millions of dollars. And
so that's a really powerful moment because when that's a
(10:43):
moment of euphoria and then hey guys, it's back to work,
what do.
Speaker 1 (10:47):
You say to the folks who are out there thinking
how do I get in?
Speaker 3 (10:50):
The big thing is I think we really like people
who are earnest, Like you don't have to pretend to
be something other than you're not. What we really care
about is are you solving a real problem? Can you
show us the quality of your work? Is there a
feed of strength in terms of like technically or design wise,
or even go to market, like can you access a
(11:11):
market that nobody else can actually access? Like? Those are
sort of the sum total things that end up mattering
for a startup. You know, the startups that make it
all have sort of a bunch of these things figured
out in a row and you don't have to have
all of those things, but just show your work, show
us what you can do and why you're actually working
(11:31):
on that problem. The great thing about YC is that
you don't have to know anyone. You just have to
have a web browser and you go to y combinator,
dot com, slash apply and you answer about you know,
a dozen questions or so record a thirty second video.
Speaker 4 (11:46):
But in those questions, we care.
Speaker 3 (11:47):
About, you know, what can you do, what have you
done in the past, show us the demo, tell us
about the market. You know, are you solving a problem
that people really want? And those are really the questions
that we care about.
Speaker 1 (12:00):
Picking just a few hundred people out of thousands, forty thousand,
forty it has to be more than that, like how
do I make my application stand out?
Speaker 3 (12:09):
One of the most common questions we ask around at
YC is what's the most interesting thing about X? And
it might be or what is the most surprising thing?
So I remember reading Brian Armstrong's application when the coinbase
and so he had read the Satoshi Nakamoto white paper
and he painted in us meeting him this idea that well,
(12:32):
bitcoin is this fringe thing, but what if it wasn't.
And that's sort of the core of early stage investing
periods that you know, if you can suspend disbelief and
listen to someone truly and listen to what they're seeing
in the market and understand, hey, what if they're right?
There are a billion reasons why this might not work.
(12:54):
But if it does happen, why and could we believe
that that could happen?
Speaker 4 (12:58):
And is this the person to do it?
Speaker 1 (13:00):
And what is the actual process like, like how do
you decide?
Speaker 3 (13:05):
Well, you know, honestly, the craziest thing is we'll actually
meet people for ten minutes, and in those ten minutes.
Speaker 4 (13:12):
We will try to figure out do we believe.
Speaker 3 (13:15):
In this market, this person and what they've built and
what they can build.
Speaker 1 (13:20):
So in ten minutes you decide whether to give someone
a golden ticket.
Speaker 4 (13:24):
That's right?
Speaker 2 (13:25):
I mean, is that even possible?
Speaker 1 (13:28):
Well, you know, are you making all the right decisions?
Speaker 4 (13:31):
Well, we hope so.
Speaker 3 (13:32):
And the thing is the numbers sort of speak for themselves.
That's why Demo Day exists. You know, those thousand investors
come back year after year after year because you could
go to three hundred rooms, fly all around the world
and not be in that room where you'll never find
a congregation of hundreds of startups in which you know
(13:55):
a dozen of them will probably go on to be
worth a billion dollars more. And so that's why when
you go up and down sand Hill Road or in
the portfolios of investors anywhere in the world, often you
will find a fund returner in a YC company.
Speaker 1 (14:09):
So what do you say to the folks who want
you know, how do I stand out in ten minutes?
Speaker 2 (14:14):
What's the secret?
Speaker 3 (14:15):
I mean, the hard part is it's not really about
what happens in that ten minutes. It's about the ten
thousand hours that goes in beforehand, right, Like can people
become the best at their field? In software engineering or management,
or design or product or sales. The best CEOs in
the world are sort of jack of all trades, but
(14:36):
master of one or two. And that isn't something that
is in that ten minutes or in those twelve questions.
That's something in someone's life, like how.
Speaker 4 (14:44):
Do they live their life?
Speaker 3 (14:46):
How do they prioritize One of the coolest stories is
actually from one of our group partners at YC. Her
name's Sir b Sarna, and she actually had a pain
in her side. It turned out she had a women's
health iss you, and when she was sixteen or seventeen,
she decided, I'm going to orient my life around solving
(15:06):
a problem in that space. And that's really what we want.
I mean, I think that that large is happening, will
continue to happen, and that's sort of the big blessing
of that we get to work in tech, that we
get to teach people, Hey, you.
Speaker 4 (15:22):
Weren't meant to have a boss.
Speaker 3 (15:24):
If you're a practitioner, if you're an engineer, if you're
a designer, if you're technical and you're able to understand
the world at that level, you know you don't have
to know about business, will teach you business.
Speaker 4 (15:36):
The community will teach you that.
Speaker 3 (15:38):
Just build the thing that nobody else has that everyone
wants and come do YC and this will be the
community for you, for us to help you.
Speaker 1 (15:48):
Well continue this conversation after this quick break. The vast
majority of companies in the BASH are still from the
Bay Area, right.
Speaker 3 (15:58):
So eighty six percent of people have moved moved to
San Francisco, but they honestly sort of come from all
around the country and all around the world.
Speaker 2 (16:06):
So that's my next question.
Speaker 1 (16:08):
You know, are you really looking for people from around
the world or do people who are here have an advantage?
Speaker 3 (16:13):
Well, San Francisco is interesting because it turns out that
a lot of people have already moved here, already work
in tech or already work you.
Speaker 4 (16:23):
Know, in the Bay Area.
Speaker 3 (16:24):
But that being said, you know, there's as much interesting
stuff happening on YouTube, you know, in all of the
other major centers. And so that's why YC is sort
of this very concentrated form of Silicon Valley. Lots of
people come here just for the batch, they raise money,
they build their community, and then they go back and
become the best company in Mumbai, the best company in London,
(16:50):
the best company in Eastern Europe, you know, sort of
all around the world.
Speaker 4 (16:53):
There are just so.
Speaker 3 (16:54):
Many examples of that culture sort of bringing together. So,
you know, I think that this is a story that
is San Francisco Bay Area based, but also one that
radiates out into the entire world.
Speaker 1 (17:06):
We don't have enough women. We haven't had enough women
for a couple of decades. Now when you look at
the numbers, what are you seeing in the numbers now?
Because it's hard to see it's hard to know what
the data actually is, but when you look at the
founders who present on double day's still pretty dismal in
terms of the representation of women and people of color.
Speaker 3 (17:25):
Absolutely, I mean, and I think representation matters a lot.
At the end of the day, the types of problems
that people solve kind of come out of their own stories.
Speaker 4 (17:34):
It is important to us. It's important to me.
Speaker 3 (17:37):
You know, at YC we have more than eight hundred
and fifty women founders who have gone through the program,
and you're right, that's not enough, and we're always looking
for ways to do more.
Speaker 2 (17:45):
So what more can you do?
Speaker 1 (17:46):
And I know you've thought about this a lot at
INITIALIZED What have you learned?
Speaker 2 (17:50):
What are you doing to make to change the ratio?
Speaker 4 (17:54):
Right?
Speaker 1 (17:54):
Because I think a lot of people look at YC
and see all of these, you know, iconic founders.
Speaker 2 (18:00):
Who are all men and think they can't do that.
Speaker 4 (18:02):
Yeah.
Speaker 2 (18:03):
Right.
Speaker 3 (18:04):
We want the process to be something that is as
open and inclusive as possible, and less and less about
what neighborhood did you grow in, grow up in, what
school you went to. I think it's incredibly important, you know,
what is the quality of your work and what is
the quality of the thinking, And that's very important. You know,
I think that going to half a million dollars per
(18:24):
company opens it up financially to so many more people
from all kinds of backgrounds, and so you know, there's
a lot to be done, and you know we're not done.
Speaker 1 (18:34):
Do you think why, I see it all helped perpetuate
the you know, sort of white bail nerd stereotype of
what a founder or an engineer is supposed to look like.
Speaker 3 (18:42):
Gosh, I hope not. I certainly don't look like that.
But I think that we're seeing so much more happening
at the earlier, earlier and earlier stages. That's why we
spend so much time, for instance, on YouTube, because you know,
I want that message to be out there, like you
don't have to be a particular place, you don't have
to look a certain way. You know, this should be
(19:04):
something that is open and available for everyone.
Speaker 1 (19:08):
Everyone gets half a million dollars now, it's part of
the standard deal. I know when you came out with that,
there was some sort of some reaction some folks HYC
is taking too much? Why do you think that's a
fair deal for founders?
Speaker 3 (19:21):
Why C is always going to be really focused on
people who are doing it for the first time. And
you know, speaking as a former venture capitalist, I know
there is so much money out there for people who
have been there, done that, have the right resume, went
to work at you know, went to the right schools.
Speaker 4 (19:39):
Et cetera.
Speaker 3 (19:39):
Right, Like, that's a whole way to do it. But
why see, there's only one HYC. There are many vcs,
but there's only one HYC that has this approach that
is ultimately about can you go and make something people want?
And can we make the whole process as much about
that as possible?
Speaker 1 (19:58):
Why C branched out into a lot of things, like
a lot of funds did to be honest, over the
course of the last ten years, you're now ending the
later stage investing. Does that make it harder for a
lot of the YC companies to then do follow on rounds?
Does that sort of clip their wings before they can
even fly?
Speaker 4 (20:16):
Well?
Speaker 3 (20:17):
I don't think so, just because you know, even looking
at demo day, you know we have a thousand people
showing up there all the time, simply because this is
the most the most concentrated form of highly talented people
in one room. Possible, and I think that that's true,
you know, at the A, at the B, at the C,
and then ultimately it comes back to are the founders,
(20:40):
you know, creating something people want or not? And so
I think that focusing on the early means that we
can also focus on the people who are most underappreciated,
under addressed, and that's the first timers, the outsiders, the
people who just don't have a giant community of VC
(21:00):
out there, you know. And I think that that's going
to continue to be true.
Speaker 2 (21:05):
So talk to me about that strategy shift.
Speaker 1 (21:07):
And I don't know if this was like one of
the first big decisions you had to make a CEO
to go back to your roots and focus on early
stage rather than the late stage.
Speaker 2 (21:16):
How did you make that decision?
Speaker 3 (21:19):
Well, the late stage team did incredible work for us.
They have incredible, substantial contributions. At the same time, you know,
when we're trying to work on our own business, the
best thing we can do is take our own advice.
And especially in times of sort of recentering, you a
reset in what's happening out there in VC, it's quite
(21:40):
natural for us to try to take our own advice
around what are the things that make you truly unique
and really focus on those things. So you know, that
was a painful decision to make, but it was ultimately
the right one for y See.
Speaker 1 (21:53):
Tech is going through a tumultuous time right now. We're
seeing tens of thousands of people getting laid off from
tech companies.
Speaker 2 (22:00):
How does this play out?
Speaker 3 (22:01):
Well, my hope is that a lot of them realize
that they have a role to play in creating technology
that probably couldn't have been created where they were. I
think a lot of large companies started treating their employee
base almost as a place to park resources and almost
as a competitive moat versus the other giants. When I
(22:24):
think about the amount of talent that was sort of
locked up in cushy jobs that could have been actually
out there in the market making new technology, pushing things forward.
I'm hoping a lot of them actually come over to
startups and they realize, Oh, this is what it's like
to run fast again, and this is how having a
lot more agency and what the product is and you're
(22:47):
talking to customers very directly. That's fun, that's interesting, and
not only that, you can create a business that really matters,
that stands the test of time.
Speaker 1 (22:55):
What's your advice for these workers who are getting light off.
It does sound a little trite to say it's time
to build.
Speaker 4 (23:01):
Right, sure it does.
Speaker 3 (23:03):
I mean I think some of it is like it
takes stock right, Like, you know, a lot of people
have families.
Speaker 4 (23:07):
I feel for that.
Speaker 3 (23:09):
But take a moment and realize, hey, you know, there
was a reason why they worked at those incredible places,
just as y see as this place that people aspire to,
you know, working for a Google or a Meta, those
things were really big honors. And they're sort of sitting
alongside some of the smartest people in the world, and
(23:30):
how cool would that be to band together with some
of them and then remember, oh, this is what it's
like to talk to a customer, and you know, let's
make the simplest possible thing that might solve that person's
need and then rinse and repeat. Like, getting much more
connected to the problems out there, I think will lead
to just a lot more direct access to I mean,
(23:52):
building equity, building businesses that really matter.
Speaker 1 (23:55):
Well, speaking of equity, for years, tech workers have been
paid in stock and that was sort of you know,
the ticket you're taking a risk on this company. It
could be worth zero or it could you know, be
worth millions. Right, we're seeing kind of the dark side
of RSUs are.
Speaker 2 (24:10):
Getting paid in stock.
Speaker 1 (24:11):
Now do you think that's still the way it should
work in Silicon Valley?
Speaker 3 (24:17):
I do think that giving a lot of equity, whether
it's stock options or common stock to employees is great.
I mean that's some of the magic of startups. And
so to me, some of the beauty of a startup
is that if you start as a founder, you own
you know, one hundred percent of it on day one
before you even sell a single share of stock to anyone.
Speaker 4 (24:41):
And that's really powerful.
Speaker 3 (24:42):
Like that's really what spoke to me back in the
day that hey, when I work really, really hard and
I create a product or a service of value, you know,
it's the equity holders that get to share in that.
I think this is about labor being able to act
access actual capital, and this is like one of the
(25:03):
most direct and most awesome versions of it.
Speaker 1 (25:06):
So there's a dark side here, right, I mean, especially
a lot of these employers are getting paid and restricted
stock options that they have to actually pay a lot
of money to access. And now that a lot of
workers are getting laid off a lot of those options
are worth nothing absolutely, So what do you think is
wrong with that part or that piece of the puzzle.
Speaker 3 (25:24):
Well, some of the trickiest parts is that being able
to value these companies is really, really hard. And some
of the bad behavior we saw from startup founders was
trying to reach for that billion dollar valuation because they
wanted the headline out there saying that they're a unicorn now.
But that comes at a cost, right, And that's something
(25:45):
that I think all investors across the board need to
share responsibility for where we need to really help people
understand the focus on valuation and getting that next notch
of valuation above all else that comes at both a
great personal to the founders themselves but also to the employees.
Speaker 2 (26:04):
So what do you think needs to change?
Speaker 3 (26:06):
I think some of it is already happening, right, you know,
the revaluation of startups right now is starting and it
will continue. And then I think this time around, people
are going to be a lot more mindful about do
I really need to do that fifty to two hundred
million dollar raise or can I get there with less?
And you know, can I take care of myself and
(26:27):
my shareholders in a better way than stretching to sort
of get the next blockbuster round round after round.
Speaker 1 (26:34):
So for those who are already out there building and
have been building through this time when valuations have gone wild,
what happens to them? Where do all the private unicorns go?
Speaker 4 (26:44):
Yeah?
Speaker 3 (26:45):
Well, it really comes back to the idea that startups
equal growth. So a lot of these companies actually have
something like forty eight or sixty months or even more runway,
and so even though they might have gotten money for
very cheap, if they're continuing to grow, they can actually
still grow into those valuations. Not everyone's going to do it,
(27:06):
but a great many will. And you know, that's the
beauty of our business that you could even have a
business that is growing at the rate of two x
or three x or four x on its way to
an IPO.
Speaker 1 (27:18):
So you're a few months into this job as CEO
of y Combinator and Silicon Valley bank collapses. What is
your level of panic in that moment?
Speaker 3 (27:28):
Well, I remember, you know, I'm dropping my seven year
old off Friday morning at nine am, and then immediately
I start getting texts and phone calls from founders saying
that was my only bank account.
Speaker 4 (27:40):
What do I do.
Speaker 3 (27:42):
And so the second I get back to my desk,
I realized, oh, there's actually a story that needs to
be told right now, because it wasn't clear to me
that people were going to give a bank called Silicon
Valley Bank the benefit of any doubt at all, simply
because of its name. You know, when you think Silicon Valley,
the number one thing that I realize is people sort
(28:03):
of think of the big tech companies, and aren't these
big tech companies having increasingly a negative impact on my life?
I realized that I'm viewing it from a very different place.
But we have something like nine thousand founders in our community,
and I had dozens of texts from them saying, hey,
(28:24):
this is a real problem. And what I realized is
this is not big tech in an hour of need.
This is a moment of little tech. Literally, you know,
one to twenty person companies that, done right in another
ten or twenty years could become the next Instacart or
the next Airbnb.
Speaker 2 (28:46):
Little tech.
Speaker 1 (28:46):
Little tech, little tech might need to be a thing
that anyone is going to change how the world sees
Silicon Valley.
Speaker 4 (28:52):
Yeah, and I knew that immediately at that moment.
Speaker 3 (28:56):
That was a story that needed to be told because
it's too easy to just read the headline and say, oh,
Silicon Valley, big tech, don't care about that, They'll be fine.
And we actually figured out from our community that about
a third of the people who were using SVB were
not going to be able to make payroll. So we
were able to sort of put two and two together
(29:17):
and realize that this actually adds up to hundreds of
thousands of jobs. So that suddenly made it much more
real for policy makers in DC. And we're really thankful
to them because there was a narrative going against and
they responded as the stories came up. And to me,
I think that the resolute action of the FED, the FDIC,
(29:40):
Congress people, the White House all in concert, it really
averted something that could have been a lot worse.
Speaker 1 (29:46):
You were out there very loudly saying this could be
a mass extinction event for startups. Were you having conversations
with anyone in Washington or any regulators or people who
were in the room deciding we're going to throw this
bank a lifeline or not.
Speaker 3 (29:59):
What I can say is that the YC network is
really really strong, and it does extend into every field
out there. I think that once people heard the number
of jobs that were at stake and the number of
types of startups. This is biotech, this is pharma, this
is chip design, this is climate tech. If you randomly
(30:20):
chose to delete a third of startups, period, you would
hit American innovation in a very fundamental way. I think
once the numbers and really the stories from the founders
themselves were told to the people in the halls of power,
I was very impressed by the reaction that they suddenly realized, Oh,
(30:42):
this isn't a small regional concern in a part of
the country that is politically unpopular. This is something that
could really hurt the United States. And that's what I
care about deeply, right. I feel that we need to
make sure that we take care of the fact because
you know, especially little tech, they're the ones who ultimately
(31:05):
take the risk and then ultimately bring these technologies to
bear that touch all of society.
Speaker 2 (31:12):
This whole SVB thing is made clear.
Speaker 1 (31:14):
A lot of people look at Silicon Valley and see elites.
Speaker 2 (31:17):
Are they wrong?
Speaker 4 (31:18):
You know?
Speaker 3 (31:19):
I think that there's different types, and the tricky thing
is we have to acknowledge that technology has had an
impact on society and.
Speaker 2 (31:28):
Will continue and good for good and bad.
Speaker 3 (31:32):
And anytime you have power that is accumulated in the
hands of the few, that's something we should be worried about.
But I will say that in this dichotomy of big
tech versus little tech, we want to really help little tech.
Little tech is competition, and competition is the way that
we have actually vibrant markets that give consumers new choice,
(31:54):
and that is actually a very important thing to protect.
Speaker 1 (31:59):
Venture capital is blamed for a lot of things and
has been blamed for the SBV collapse, you know, Is
VC to blame?
Speaker 4 (32:07):
You know?
Speaker 3 (32:07):
I think that was a tricky moment for everyone because
I think if you're actually trying to give good advice
to founders, you try to tell them what might actually
happen and let them make the right choice for themselves.
Speaker 4 (32:21):
And so that's the tricky thing.
Speaker 3 (32:23):
I think that people want to say that vcs caused
a bank run. At the same time, I think that
there were lapses in communication on the part of SVB,
on the part of the outgoing CEO, and so the
truth sort of lies someplace in there, you know. I
think founders do want investors to sort of tell them
(32:43):
what was right and what was actually going to happen,
because I think in that moment it might be worse.
You know if you were affected, Like how would you feel? So?
And that's I think the difficult line that good investors
have to walk. It's like, don't change your advice based
on your own interest when your interest might diverge. Just
(33:04):
call it out and just you know, say It's almost
like a golden rule for startups, like what is the
thing that would help the founder regardless of anything else.
Speaker 1 (33:13):
How long do you think the downturn lasts?
Speaker 2 (33:16):
How hard does this get?
Speaker 3 (33:19):
I guess it's so hard to tell. And you know,
I'm not a macroeconomist. You know, some people like to
play that on Twitter, though, so I think that, at
least speaking for myself, I underestimated to what degree interest
rates rule everything around us if people have to play macroeconomist,
and I think a lot more of us have to
(33:39):
now because it just affects all of us. You know,
it affects valuations. It affected the SVV crisis. You know,
if you work in crypto, you better pay attention. I mean,
all of these things matter because the price of money
is sort of shifting radically, so I don't have a
crystal ball, at least in the short term. It seems
like the FED slowing down on its interest rate moves
(34:01):
may well be a good positive sign for valuations. And
I'm always rooting for the founder, so that's a good thing.
On the other hand, you know, inflation, it's anyone's guess
if that's actually beaten or not. And so I think,
you know, you sort of have you know, unstoppable force
out there versus immovable object, and I sort of can't
tell which which side is going to win.
Speaker 1 (34:23):
Yeah, the circuit continues after this quick break. Paul Graham
famously said that a startup is either default dead or alive.
How many starships are out there that are default dead
and don't even know it yet.
Speaker 3 (34:37):
Well, the tricky thing is pretty much every startup when
it's born is default dead. And it is actually the
role of the founder to create something people want and
then figure out a way to get in front of people.
Only then does something go from default dead to default alive.
So I think, you know, it's quite normal for it
to be default dead. That is just one thing that
(34:59):
will go away from startups. When we talk about risk
in startups. If every single one succeeded, it would mean
that people are not taking enough risk.
Speaker 1 (35:08):
Do you think it's to be harder for startups to
raise money for the next ten years? Right, like it's
been a fruitful time.
Speaker 2 (35:15):
Is this just the new normal?
Speaker 4 (35:17):
Well?
Speaker 3 (35:17):
I think, you know, monetary policy is just one piece
of it. The part that is also very hard to tell,
but I'm very optimistic on, is that technology has always
built on itself. So cloud computing allowed Airbnb, but also
is built on social and then suddenly you had mobile
And today we're in the midst of this large language
(35:41):
model explosion, and I think that that might be the
next platform, and those platforms will actually give rise to
new platforms that we don't even know about yet. So
you know, if you ask on a ten year timeframe,
will there be more technology or less?
Speaker 4 (35:57):
I think there's going to be more.
Speaker 3 (35:58):
And you know, if it's a one or two year timeframe,
like you know, we got to ask Uncle Jerome, when
you look.
Speaker 1 (36:04):
At venture capital culture in the way it operates, do
you see things that are broken?
Speaker 3 (36:08):
I think the hardest part is often there's not alignment, right,
you know, people view VC as a career. You know,
if you're a junior VC, you're coming in, you might
only be able to do one or two deals, three
or four deals period. And in those three or four deals,
one better be a unicorn. And we see people bend
over backwards sort of put their own interests ahead of
that of the founder, and sometimes that's systemic. But you know,
(36:31):
I think that YC is actually about giving founders a community,
giving founders a voice, and giving a way to sort
of speak that type of truth to power and you know,
sort of change the way it works. And that was
true when I did YC, and that's what we believe
will continue to happen into the future.
Speaker 1 (36:50):
Do you think ve your capital needs a reset?
Speaker 3 (36:53):
Well, I think we are still in this moment where
VC is still growing and tech is still growing, and
I think there will be reform. You know, there will
be new and better ways to do it, and we're
always on the lookout for how do we amplify that
and help the people who are helping the founders.
Speaker 1 (37:11):
There are now a lot of startup accelerators out there,
Andreesan Horowitz Sequoya, they've got early stage programs.
Speaker 2 (37:17):
There are startup accelerators around the world.
Speaker 3 (37:20):
Why choose y see, well, I think that we are
the one place that is extremely aligned with the founder.
And so you know, when you look at how people
pay attention to founders, and you know, what is it
that makes them great? Like I think for us, we're
always going to put the founder like right front and center,
you know. And the thing is people say founder friendly.
(37:43):
I don't think it's really even about that. It's like
if your friend was addicted to a horrible drug and
you allow them to do it, is that being a friend?
Speaker 4 (37:52):
It's not so.
Speaker 3 (37:53):
I think we want to be founder truthful. We want
to take care of people, We want the best for them,
and we want the best for society as a whole.
Speaker 1 (38:00):
Do you see that happening out there where firms are
being founder unfriendly or founder untruthful.
Speaker 4 (38:05):
I think it's tricky, right.
Speaker 3 (38:07):
It's at the micro level of like what are the
incentives for you know, individual operators working within sort of
principal agent problem, Like if you look at it that level,
that might explain why people are encouraged to go and
do like the mega rounds back to back. Right, that's
not great, right, and I think that that will change.
Speaker 2 (38:25):
AI is the new hot ticket. How bullish? Are you
on AI?
Speaker 3 (38:30):
I think the wild thing is I think we're just
scratching the surface, right, the idea that you can give
twenty thousand words to a computer program and get back
a summary, and you can even interrogate it for opinions
like what would so and so say, what would this
other stakeholder say? I think we're just getting our heads
around what that means, right, It's pretty astonishing. I did
(38:53):
not have on my Bingo card that for twenty twenty
three that you'd be able to speak to a computer
in the way that you can now.
Speaker 1 (39:01):
I know obviously some of these companies came out of YC,
but in many ways, people look at self driving cars
and crypto the metaverse as kind of.
Speaker 2 (39:09):
The last three hype cycles.
Speaker 1 (39:10):
That's right, and they haven't delivered on the promise. Could
AI be just the next bubble?
Speaker 3 (39:16):
It's entirely possible. It always happens that way. There are
always hype cycles. But then there's sort of that moment
where a founder sits down and creates it and shows
it to people and it's right. And I want this
place to be where that happens. And I'm long term bullish.
Speaker 1 (39:33):
Sam Altman obviously long time YC friend was a YC founder,
ran YC for a while, had your job. He's now
the founder of open Ai. Microsoft a huge backer of
open Ai. Between Microsoft and open Ai and Google and
Facebook and Apple and Amazon, is there enough room for
startups to run when it comes to AI? Do they
(39:54):
have room to really compete?
Speaker 4 (39:56):
I think so.
Speaker 3 (39:57):
And some of it is like, we actually don't even
know the physical of this market yet. You know, it
took many years of the search engine world and the
search engine war before we figured out that Google and
AdWords were going to be the winner. I think we're
right there right again. But the outcome of it will
be move in you know, worldwide GDP.
Speaker 4 (40:17):
On that order.
Speaker 1 (40:18):
So are you seeing new AI startups that can compete
in the shadow of giants?
Speaker 4 (40:23):
Absolutely?
Speaker 3 (40:23):
You know, I would never count out, you know, the
little startup, little tech founder, the brilliant engineer who figures
out a way to fight against unbelievable amounts of capital
or unbelievable amounts of market power. And I think that
that's needed in society, like we need to give consumers
as much choice as possible. And that's how good things
(40:45):
actually happened through tech like, that's how we combat this
idea that big tech is too powerful. Like, guess who's
going to fight against them?
Speaker 4 (40:53):
Its startups.
Speaker 1 (40:54):
What's going to define the Gary Tan era of YC?
Speaker 3 (40:58):
Well, what I hope is that a thousand flowers bloom
at the end of the day. For what YC has
done for me in my life, I am deeply grateful,
And you know I'm not just the CEO. I'm also
a client. You know, I also experienced this crazy place
that gave me prosperity, and ultimately, all I care about
(41:18):
is that that story continues, that we have so much
more prosperity in the world, and that people who are
great designers and builders and product people and engineers they
get the chance to not just be like oft in
a cage someplace working for someone else, but to experience
what it's like to be a founder, to be able
(41:38):
to make those decisions, and then ultimately share in the
bounties of it.
Speaker 1 (41:42):
Thanks so much for listening to this episode of The Circuit.
I'm Emily Chang. You can follow me on Twitter and
Instagram at Emily Chang TV. You can watch new episodes
of the Circuit on Bloomberg Television or on demand by
downloading the Bloomberg app to your smart TV and check
out our other Bloomberg podcasts on Apple Podcasts, the iHeartMedia app,
or wherever you listen to shows and let us know
(42:04):
what you think by leaving us a review. I'm your
host and executive producer. Our senior producer is Lauren Ellis.
Our associate producer is Lizzie Phillip. Our editor is Sebastian Escobar.
Thanks so much for listening
Hi, hard to see you, get to see you.
Speaker 2 (00:12):
I hear this as a special coffee shop.
Speaker 3 (00:14):
Yeah, this is just where so much stuff happened, especially
for YC, over really ten years.
Speaker 1 (00:21):
I'm Emily Chang, and this is the circuit. Gary Tan
is head of one of Silicon Valley's most influential startup accelerators.
It's called Why Combinator, and it's kind of like mecca
for aspiring entrepreneurs. Tan first got accepted to YC as
a founder himself in two thousand and eight when he
founded Postuous, a blogging platform that was later acquired by Twitter.
(00:43):
He went on to become a partner at YC, start
his own venture capital firm, Initialized, and even has a
popular YouTube channel where he shares his insights on dos
and don'ts for startups. When it comes to all of
the videos you've made, what have you found really resonate?
Speaker 2 (00:58):
It's like what.
Speaker 4 (00:58):
Takes off umber?
Speaker 3 (01:00):
One thing for me is just actually talking about the
things I messed up.
Speaker 1 (01:05):
Fifteen years after joining y C is a founder, he's
now back steering the ship. But first coffee. Here's my
conversation with Why Combinator president and CEO Gary Tan.
Speaker 2 (01:17):
I have ever done a deal here or anything like that.
Speaker 3 (01:19):
Ah, you know, like YC is interesting because the deal
is pretty straightforward. We just meet them for ten minutes
and then decide yes or no.
Speaker 4 (01:28):
Yeah that's right. So that's ten minutes and then yes
or no, Yeah that's right.
Speaker 1 (01:32):
Wow, how do you know in ten minutes?
Speaker 3 (01:35):
Well, I think you can look at you know, what
the founders are capable of their skills. I think we're
up to forty thousand applications ever every year.
Speaker 2 (01:45):
Every year.
Speaker 1 (01:46):
Yeah, and you pick like a few hundred.
Speaker 4 (01:48):
That's right.
Speaker 3 (01:49):
It's a very it's the lowest acceptance rate, you know,
more more selective than you know, pretty much any selective
school in the world. I feel like a lot of
this stuff all started here, you know, back in really
two thousand and five, this idea that you could give
very small amounts of money to just a few teams
and have those teams go on to become sort of
(02:09):
the the Reddit and the Airbnbs of the world.
Speaker 2 (02:12):
All right, thank you got to try, and oh.
Speaker 4 (02:15):
Thank you very much.
Speaker 2 (02:17):
Warm let's go.
Speaker 3 (02:20):
This is where people meet their first investors. This is
where they meet their co founder for the first time.
Sometimes this is a really important part.
Speaker 1 (02:29):
Of Silicon Valley and you actually were in YC yourself.
Speaker 3 (02:33):
Oh yeah, I lived five blocks down that way and
YC is about five blocks down this way.
Speaker 1 (02:38):
And when were you accepted to YC two thousand and eight,
two thousand and eight, So just at the start of
financial crisis.
Speaker 4 (02:44):
Yeah, for sure.
Speaker 3 (02:46):
We raised our angel around for posterous the day Lehman
died and nobody else in our batch managed to raise
any money.
Speaker 2 (02:51):
And you're a barrier guy, that's right. You were born
and raised here.
Speaker 3 (02:54):
Yeah. I grew up right here in Fremont, right across
the bay, and Tech gave me everything I have honestly,
you know, child of Chinese immigrants. You know, we were
sometimes food and secure, but I just remember tech was here,
and we grew up in the shadow of all this greatness,
all this technology being built from nothing. I knew that
I wanted to learn to code, and you know, I
(03:16):
cold called the Internet section until I got a job.
And we were living in one or two bedroom apartments,
right and for my parents to you know, sometimes struggle
with English, the cultural barrier.
Speaker 4 (03:27):
You know.
Speaker 3 (03:27):
My dad was forming at a machine shop, my mom
was a nurse assistant at a convalescent home for dinner.
We would sort of have the expired bread that someone
would drop off to sort of help out my mom,
who was, you know, working sometimes two shifts just to
keep the family going. And so I think that's one
of the really important things to me that I realized, like,
(03:48):
tech is this thing that can bring people out of
whatever situation they're in and often into prosperity.
Speaker 4 (03:54):
And that's what I want for everyone.
Speaker 1 (03:56):
You were sort of like an engineered designer by background.
How does that inform you perspective?
Speaker 3 (04:01):
This is why YC really attracted me in two thousand
and eight was that here was the one place that
wasn't about the flash.
Speaker 4 (04:10):
It wasn't about you.
Speaker 3 (04:11):
Know, whether you had an MBA or you know, you
went to some school or whatever. It was just purely, hey,
can you build something great?
Speaker 1 (04:19):
You have this picture, it's two thousand and eight. I
believe you're sitting on the ground and you can see
Paul Graham in the background and Mark Zuckerberg. What's going
on in that moment?
Speaker 3 (04:29):
At that point I knew I wanted to start a company,
and Y see through this event that was a free
event called Startup School, and it was all sort of
like the luminaries.
Speaker 4 (04:38):
You know, I believe that year.
Speaker 3 (04:40):
Jeff Bezos came and he actually launched AWS at that
startup school in two thousand and eight at the auditorium
at Stanford.
Speaker 4 (04:49):
I was sitting on the ground.
Speaker 3 (04:51):
Photography was one of my loves, and I was actually
thinking about, you know, either starting a company or becoming
a hip hop editorial photographer.
Speaker 2 (04:59):
Very different opposition.
Speaker 1 (05:00):
Yeah, you went on to become a partner at YC yourself.
How did you make the transition from entrepreneur to investor?
Speaker 3 (05:06):
You know, we were doing dead simple blogs by email
posters and then didn't you sell that to Twitter much later? Actually,
I mean Instagram came out and that flatlined our growth.
And this is one of the interesting things about being
an investor. You know, I think we were very much
in the running to be sort of one of the
major social networks, but that was because there were no
(05:26):
really great iPhone apps yet for uploading photos until Instagram.
And now I realize it's actually the role of the investor.
We need to be helping them understand the historical context,
like you know, what is actually happening in the market,
and what are the brass rings that are going to
be enduring, meaningful businesses that could be worth billions adults.
Speaker 1 (05:47):
So obviously you worked at YC for but you went
on to start your own fund.
Speaker 2 (05:50):
Initialized.
Speaker 1 (05:51):
Absolutely you made some pretty smart bets early on. You
invested in coinbase, for example. What did you learn from
that experience that gave you sort of the bona fides
to an investor?
Speaker 3 (06:01):
This is actually a business that requires you to see enough.
And YC was just such a concentrated form of all
of tech happening, and it remains that that. I think
you just end up learning way more about what's doable,
what's possible.
Speaker 1 (06:16):
So coming back to YC as CEO, is that like
a dream job?
Speaker 3 (06:21):
Yeah, the ability to help people basically achieve their dreams.
Speaker 4 (06:27):
That's what YC did for me. I'm a steward here.
Speaker 3 (06:30):
I'm trying to figure out what can we do to
help more innovation happen in the world.
Speaker 2 (06:35):
So YC is how far away?
Speaker 4 (06:37):
About five blocks down the street?
Speaker 2 (06:39):
I want to see it.
Speaker 4 (06:40):
Yeah, let's go check it out.
Speaker 1 (06:44):
Airbnb, Stripe, drop Box, Instacart, Twitch, Coinbase.
Speaker 2 (06:50):
Am I forgetting anyone?
Speaker 4 (06:51):
I mean so many?
Speaker 3 (06:52):
The thing is there are ninety companies worth a billion
dollars or more.
Speaker 1 (06:56):
So many companies have come through these doors.
Speaker 2 (06:58):
Talk to me a little bit about to process.
Speaker 1 (07:00):
For those who don't understand what exactly does a startup accelerator.
Speaker 3 (07:04):
Do well, HYC works kind of as a ten to
twelve week program. Anyone can apply online. All they have
to do is ideally have an idea and have a demo.
Sometimes we get about eighteen thousand such applications every six months,
and what we do is we try to figure out
(07:24):
who are the smartest, best people, who are capable, and
what are the things that they're trying to do and
are those things viable? And then we actually try to
interview about a thousand of them every six months and
we whittle it down to about two hundred and fifty
to give half a million dollars to which is great
because when I first started, I think YC only gave
(07:47):
me twelve thousand dollars. I think that's gone up a bit.
It's gone up a bit. You know, times are different.
But I think the most important reason why it's more
money is because we want anyone who is really talented
and skilled, regardless of whether or not they have your
credit card debt. The way I did when I started
my company, or you might have pretty big savings. You know,
(08:07):
that's privilege. I think that regardless of any of that,
people who have skills should be able to start great businesses.
And YC is the place to give you not just money,
but also know how and a community.
Speaker 1 (08:20):
You mentioned y see, it's like a community like no other.
I mean, you know, the people who get in here
are getting a ticket to a massive network. I mean,
if you talk about all the companies we just mentioned,
right absolutely, you know, if I come into YC, can
I just call Brian Chesky or call Gary Tan and
get your advice?
Speaker 3 (08:38):
Yeah, I mean that's sort of what it's meant to be, right.
I Mean one of the things that is always important
to me is that YC be the most inclusive place
for the people who are the best, simply because if
you go to you know, a tech conference or you know,
you try to network your way into startups, it's actually
really impossible for the people on the other end to
(08:58):
even figure out, oh, is as someone who's good who
I could spend time with. And when you look at
the failure rate of startups period, more often than not,
when you approach someone in one of those other contexts.
The answer is no, I can't spend time here because
I can't vet you. I can't figure out if this
is someone who know something good will happen with that.
(09:19):
I think is some of the reason why y SEE
exists is that no, no, this is actually a community
of really great people.
Speaker 1 (09:26):
What does the newest class of founders look like? What
problems are they trying to solve?
Speaker 3 (09:31):
Yeah, I think that one of the biggest things is
always what are the new capabilities and what we're seeing
with whether it's open AI or anthropic or you know,
any number of large language models. There's this sort of
moment where computers can think like they can actually look
at blocks of text and give you something that a
(09:51):
human being normally would be necessary to sort of give you.
That's a really exciting time for just software period. You know,
before you had to have long training processes for very
specialized tasks, and now we're seeing it sort of approach
all of knowledge work and we're just scratching the surface
on what that could be. And then a good deal
(10:12):
of them are focused on AI bringing in large language models.
Speaker 1 (10:16):
Demo day is sort of like a write a passage. Oh,
definitely right, what happens on demo day?
Speaker 3 (10:21):
Obviously, these companies come in, they have half a million dollars.
They don't necessarily have to raise because if you're an engineer, designer,
product person, you can just do it yourself. And then
it's a thousand investors, vcs, angel investors, people who have
been there, and they often raise millions of dollars. And
so that's a really powerful moment because when that's a
(10:43):
moment of euphoria and then hey guys, it's back to work,
what do.
Speaker 1 (10:47):
You say to the folks who are out there thinking
how do I get in?
Speaker 3 (10:50):
The big thing is I think we really like people
who are earnest, Like you don't have to pretend to
be something other than you're not. What we really care
about is are you solving a real problem? Can you
show us the quality of your work? Is there a
feed of strength in terms of like technically or design wise,
or even go to market, like can you access a
(11:11):
market that nobody else can actually access? Like? Those are
sort of the sum total things that end up mattering
for a startup. You know, the startups that make it
all have sort of a bunch of these things figured
out in a row and you don't have to have
all of those things, but just show your work, show
us what you can do and why you're actually working
(11:31):
on that problem. The great thing about YC is that
you don't have to know anyone. You just have to
have a web browser and you go to y combinator,
dot com, slash apply and you answer about you know,
a dozen questions or so record a thirty second video.
Speaker 4 (11:46):
But in those questions, we care.
Speaker 3 (11:47):
About, you know, what can you do, what have you
done in the past, show us the demo, tell us
about the market. You know, are you solving a problem
that people really want? And those are really the questions
that we care about.
Speaker 1 (12:00):
Picking just a few hundred people out of thousands, forty thousand,
forty it has to be more than that, like how
do I make my application stand out?
Speaker 3 (12:09):
One of the most common questions we ask around at
YC is what's the most interesting thing about X? And
it might be or what is the most surprising thing?
So I remember reading Brian Armstrong's application when the coinbase
and so he had read the Satoshi Nakamoto white paper
and he painted in us meeting him this idea that well,
(12:32):
bitcoin is this fringe thing, but what if it wasn't.
And that's sort of the core of early stage investing
periods that you know, if you can suspend disbelief and
listen to someone truly and listen to what they're seeing
in the market and understand, hey, what if they're right?
There are a billion reasons why this might not work.
(12:54):
But if it does happen, why and could we believe
that that could happen?
Speaker 4 (12:58):
And is this the person to do it?
Speaker 1 (13:00):
And what is the actual process like, like how do
you decide?
Speaker 3 (13:05):
Well, you know, honestly, the craziest thing is we'll actually
meet people for ten minutes, and in those ten minutes.
Speaker 4 (13:12):
We will try to figure out do we believe.
Speaker 3 (13:15):
In this market, this person and what they've built and
what they can build.
Speaker 1 (13:20):
So in ten minutes you decide whether to give someone
a golden ticket.
Speaker 4 (13:24):
That's right?
Speaker 2 (13:25):
I mean, is that even possible?
Speaker 1 (13:28):
Well, you know, are you making all the right decisions?
Speaker 4 (13:31):
Well, we hope so.
Speaker 3 (13:32):
And the thing is the numbers sort of speak for themselves.
That's why Demo Day exists. You know, those thousand investors
come back year after year after year because you could
go to three hundred rooms, fly all around the world
and not be in that room where you'll never find
a congregation of hundreds of startups in which you know
(13:55):
a dozen of them will probably go on to be
worth a billion dollars more. And so that's why when
you go up and down sand Hill Road or in
the portfolios of investors anywhere in the world, often you
will find a fund returner in a YC company.
Speaker 1 (14:09):
So what do you say to the folks who want
you know, how do I stand out in ten minutes?
Speaker 2 (14:14):
What's the secret?
Speaker 3 (14:15):
I mean, the hard part is it's not really about
what happens in that ten minutes. It's about the ten
thousand hours that goes in beforehand, right, Like can people
become the best at their field? In software engineering or management,
or design or product or sales. The best CEOs in
the world are sort of jack of all trades, but
(14:36):
master of one or two. And that isn't something that
is in that ten minutes or in those twelve questions.
That's something in someone's life, like how.
Speaker 4 (14:44):
Do they live their life?
Speaker 3 (14:46):
How do they prioritize One of the coolest stories is
actually from one of our group partners at YC. Her
name's Sir b Sarna, and she actually had a pain
in her side. It turned out she had a women's
health iss you, and when she was sixteen or seventeen,
she decided, I'm going to orient my life around solving
(15:06):
a problem in that space. And that's really what we want.
I mean, I think that that large is happening, will
continue to happen, and that's sort of the big blessing
of that we get to work in tech, that we
get to teach people, Hey, you.
Speaker 4 (15:22):
Weren't meant to have a boss.
Speaker 3 (15:24):
If you're a practitioner, if you're an engineer, if you're
a designer, if you're technical and you're able to understand
the world at that level, you know you don't have
to know about business, will teach you business.
Speaker 4 (15:36):
The community will teach you that.
Speaker 3 (15:38):
Just build the thing that nobody else has that everyone
wants and come do YC and this will be the
community for you, for us to help you.
Speaker 1 (15:48):
Well continue this conversation after this quick break. The vast
majority of companies in the BASH are still from the
Bay Area, right.
Speaker 3 (15:58):
So eighty six percent of people have moved moved to
San Francisco, but they honestly sort of come from all
around the country and all around the world.
Speaker 2 (16:06):
So that's my next question.
Speaker 1 (16:08):
You know, are you really looking for people from around
the world or do people who are here have an advantage?
Speaker 3 (16:13):
Well, San Francisco is interesting because it turns out that
a lot of people have already moved here, already work
in tech or already work you.
Speaker 4 (16:23):
Know, in the Bay Area.
Speaker 3 (16:24):
But that being said, you know, there's as much interesting
stuff happening on YouTube, you know, in all of the
other major centers. And so that's why YC is sort
of this very concentrated form of Silicon Valley. Lots of
people come here just for the batch, they raise money,
they build their community, and then they go back and
become the best company in Mumbai, the best company in London,
(16:50):
the best company in Eastern Europe, you know, sort of
all around the world.
Speaker 4 (16:53):
There are just so.
Speaker 3 (16:54):
Many examples of that culture sort of bringing together. So,
you know, I think that this is a story that
is San Francisco Bay Area based, but also one that
radiates out into the entire world.
Speaker 1 (17:06):
We don't have enough women. We haven't had enough women
for a couple of decades. Now when you look at
the numbers, what are you seeing in the numbers now?
Because it's hard to see it's hard to know what
the data actually is, but when you look at the
founders who present on double day's still pretty dismal in
terms of the representation of women and people of color.
Speaker 3 (17:25):
Absolutely, I mean, and I think representation matters a lot.
At the end of the day, the types of problems
that people solve kind of come out of their own stories.
Speaker 4 (17:34):
It is important to us. It's important to me.
Speaker 3 (17:37):
You know, at YC we have more than eight hundred
and fifty women founders who have gone through the program,
and you're right, that's not enough, and we're always looking
for ways to do more.
Speaker 2 (17:45):
So what more can you do?
Speaker 1 (17:46):
And I know you've thought about this a lot at
INITIALIZED What have you learned?
Speaker 2 (17:50):
What are you doing to make to change the ratio?
Speaker 4 (17:54):
Right?
Speaker 1 (17:54):
Because I think a lot of people look at YC
and see all of these, you know, iconic founders.
Speaker 2 (18:00):
Who are all men and think they can't do that.
Speaker 4 (18:02):
Yeah.
Speaker 2 (18:03):
Right.
Speaker 3 (18:04):
We want the process to be something that is as
open and inclusive as possible, and less and less about
what neighborhood did you grow in, grow up in, what
school you went to. I think it's incredibly important, you know,
what is the quality of your work and what is
the quality of the thinking, And that's very important. You know,
I think that going to half a million dollars per
(18:24):
company opens it up financially to so many more people
from all kinds of backgrounds, and so you know, there's
a lot to be done, and you know we're not done.
Speaker 1 (18:34):
Do you think why, I see it all helped perpetuate
the you know, sort of white bail nerd stereotype of
what a founder or an engineer is supposed to look like.
Speaker 3 (18:42):
Gosh, I hope not. I certainly don't look like that.
But I think that we're seeing so much more happening
at the earlier, earlier and earlier stages. That's why we
spend so much time, for instance, on YouTube, because you know,
I want that message to be out there, like you
don't have to be a particular place, you don't have
to look a certain way. You know, this should be
(19:04):
something that is open and available for everyone.
Speaker 1 (19:08):
Everyone gets half a million dollars now, it's part of
the standard deal. I know when you came out with that,
there was some sort of some reaction some folks HYC
is taking too much? Why do you think that's a
fair deal for founders?
Speaker 3 (19:21):
Why C is always going to be really focused on
people who are doing it for the first time. And
you know, speaking as a former venture capitalist, I know
there is so much money out there for people who
have been there, done that, have the right resume, went
to work at you know, went to the right schools.
Speaker 4 (19:39):
Et cetera.
Speaker 3 (19:39):
Right, Like, that's a whole way to do it. But
why see, there's only one HYC. There are many vcs,
but there's only one HYC that has this approach that
is ultimately about can you go and make something people want?
And can we make the whole process as much about
that as possible?
Speaker 1 (19:58):
Why C branched out into a lot of things, like
a lot of funds did to be honest, over the
course of the last ten years, you're now ending the
later stage investing. Does that make it harder for a
lot of the YC companies to then do follow on rounds?
Does that sort of clip their wings before they can
even fly?
Speaker 4 (20:16):
Well?
Speaker 3 (20:17):
I don't think so, just because you know, even looking
at demo day, you know we have a thousand people
showing up there all the time, simply because this is
the most the most concentrated form of highly talented people
in one room. Possible, and I think that that's true,
you know, at the A, at the B, at the C,
and then ultimately it comes back to are the founders,
(20:40):
you know, creating something people want or not? And so
I think that focusing on the early means that we
can also focus on the people who are most underappreciated,
under addressed, and that's the first timers, the outsiders, the
people who just don't have a giant community of VC
(21:00):
out there, you know. And I think that that's going
to continue to be true.
Speaker 2 (21:05):
So talk to me about that strategy shift.
Speaker 1 (21:07):
And I don't know if this was like one of
the first big decisions you had to make a CEO
to go back to your roots and focus on early
stage rather than the late stage.
Speaker 2 (21:16):
How did you make that decision?
Speaker 3 (21:19):
Well, the late stage team did incredible work for us.
They have incredible, substantial contributions. At the same time, you know,
when we're trying to work on our own business, the
best thing we can do is take our own advice.
And especially in times of sort of recentering, you a
reset in what's happening out there in VC, it's quite
(21:40):
natural for us to try to take our own advice
around what are the things that make you truly unique
and really focus on those things. So you know, that
was a painful decision to make, but it was ultimately
the right one for y See.
Speaker 1 (21:53):
Tech is going through a tumultuous time right now. We're
seeing tens of thousands of people getting laid off from
tech companies.
Speaker 2 (22:00):
How does this play out?
Speaker 3 (22:01):
Well, my hope is that a lot of them realize
that they have a role to play in creating technology
that probably couldn't have been created where they were. I
think a lot of large companies started treating their employee
base almost as a place to park resources and almost
as a competitive moat versus the other giants. When I
(22:24):
think about the amount of talent that was sort of
locked up in cushy jobs that could have been actually
out there in the market making new technology, pushing things forward.
I'm hoping a lot of them actually come over to
startups and they realize, Oh, this is what it's like
to run fast again, and this is how having a
lot more agency and what the product is and you're
(22:47):
talking to customers very directly. That's fun, that's interesting, and
not only that, you can create a business that really matters,
that stands the test of time.
Speaker 1 (22:55):
What's your advice for these workers who are getting light off.
It does sound a little trite to say it's time
to build.
Speaker 4 (23:01):
Right, sure it does.
Speaker 3 (23:03):
I mean I think some of it is like it
takes stock right, Like, you know, a lot of people
have families.
Speaker 4 (23:07):
I feel for that.
Speaker 3 (23:09):
But take a moment and realize, hey, you know, there
was a reason why they worked at those incredible places,
just as y see as this place that people aspire to,
you know, working for a Google or a Meta, those
things were really big honors. And they're sort of sitting
alongside some of the smartest people in the world, and
(23:30):
how cool would that be to band together with some
of them and then remember, oh, this is what it's
like to talk to a customer, and you know, let's
make the simplest possible thing that might solve that person's
need and then rinse and repeat. Like, getting much more
connected to the problems out there, I think will lead
to just a lot more direct access to I mean,
(23:52):
building equity, building businesses that really matter.
Speaker 1 (23:55):
Well, speaking of equity, for years, tech workers have been
paid in stock and that was sort of you know,
the ticket you're taking a risk on this company. It
could be worth zero or it could you know, be
worth millions. Right, we're seeing kind of the dark side
of RSUs are.
Speaker 2 (24:10):
Getting paid in stock.
Speaker 1 (24:11):
Now do you think that's still the way it should
work in Silicon Valley?
Speaker 3 (24:17):
I do think that giving a lot of equity, whether
it's stock options or common stock to employees is great.
I mean that's some of the magic of startups. And
so to me, some of the beauty of a startup
is that if you start as a founder, you own
you know, one hundred percent of it on day one
before you even sell a single share of stock to anyone.
Speaker 4 (24:41):
And that's really powerful.
Speaker 3 (24:42):
Like that's really what spoke to me back in the
day that hey, when I work really, really hard and
I create a product or a service of value, you know,
it's the equity holders that get to share in that.
I think this is about labor being able to act
access actual capital, and this is like one of the
(25:03):
most direct and most awesome versions of it.
Speaker 1 (25:06):
So there's a dark side here, right, I mean, especially
a lot of these employers are getting paid and restricted
stock options that they have to actually pay a lot
of money to access. And now that a lot of
workers are getting laid off a lot of those options
are worth nothing absolutely, So what do you think is
wrong with that part or that piece of the puzzle.
Speaker 3 (25:24):
Well, some of the trickiest parts is that being able
to value these companies is really, really hard. And some
of the bad behavior we saw from startup founders was
trying to reach for that billion dollar valuation because they
wanted the headline out there saying that they're a unicorn now.
But that comes at a cost, right, And that's something
(25:45):
that I think all investors across the board need to
share responsibility for where we need to really help people
understand the focus on valuation and getting that next notch
of valuation above all else that comes at both a
great personal to the founders themselves but also to the employees.
Speaker 2 (26:04):
So what do you think needs to change?
Speaker 3 (26:06):
I think some of it is already happening, right, you know,
the revaluation of startups right now is starting and it
will continue. And then I think this time around, people
are going to be a lot more mindful about do
I really need to do that fifty to two hundred
million dollar raise or can I get there with less?
And you know, can I take care of myself and
(26:27):
my shareholders in a better way than stretching to sort
of get the next blockbuster round round after round.
Speaker 1 (26:34):
So for those who are already out there building and
have been building through this time when valuations have gone wild,
what happens to them? Where do all the private unicorns go?
Speaker 4 (26:44):
Yeah?
Speaker 3 (26:45):
Well, it really comes back to the idea that startups
equal growth. So a lot of these companies actually have
something like forty eight or sixty months or even more runway,
and so even though they might have gotten money for
very cheap, if they're continuing to grow, they can actually
still grow into those valuations. Not everyone's going to do it,
(27:06):
but a great many will. And you know, that's the
beauty of our business that you could even have a
business that is growing at the rate of two x
or three x or four x on its way to
an IPO.
Speaker 1 (27:18):
So you're a few months into this job as CEO
of y Combinator and Silicon Valley bank collapses. What is
your level of panic in that moment?
Speaker 3 (27:28):
Well, I remember, you know, I'm dropping my seven year
old off Friday morning at nine am, and then immediately
I start getting texts and phone calls from founders saying
that was my only bank account.
Speaker 4 (27:40):
What do I do.
Speaker 3 (27:42):
And so the second I get back to my desk,
I realized, oh, there's actually a story that needs to
be told right now, because it wasn't clear to me
that people were going to give a bank called Silicon
Valley Bank the benefit of any doubt at all, simply
because of its name. You know, when you think Silicon Valley,
the number one thing that I realize is people sort
(28:03):
of think of the big tech companies, and aren't these
big tech companies having increasingly a negative impact on my life?
I realized that I'm viewing it from a very different place.
But we have something like nine thousand founders in our community,
and I had dozens of texts from them saying, hey,
(28:24):
this is a real problem. And what I realized is
this is not big tech in an hour of need.
This is a moment of little tech. Literally, you know,
one to twenty person companies that, done right in another
ten or twenty years could become the next Instacart or
the next Airbnb.
Speaker 2 (28:46):
Little tech.
Speaker 1 (28:46):
Little tech, little tech might need to be a thing
that anyone is going to change how the world sees
Silicon Valley.
Speaker 4 (28:52):
Yeah, and I knew that immediately at that moment.
Speaker 3 (28:56):
That was a story that needed to be told because
it's too easy to just read the headline and say, oh,
Silicon Valley, big tech, don't care about that, They'll be fine.
And we actually figured out from our community that about
a third of the people who were using SVB were
not going to be able to make payroll. So we
were able to sort of put two and two together
(29:17):
and realize that this actually adds up to hundreds of
thousands of jobs. So that suddenly made it much more
real for policy makers in DC. And we're really thankful
to them because there was a narrative going against and
they responded as the stories came up. And to me,
I think that the resolute action of the FED, the FDIC,
(29:40):
Congress people, the White House all in concert, it really
averted something that could have been a lot worse.
Speaker 1 (29:46):
You were out there very loudly saying this could be
a mass extinction event for startups. Were you having conversations
with anyone in Washington or any regulators or people who
were in the room deciding we're going to throw this
bank a lifeline or not.
Speaker 3 (29:59):
What I can say is that the YC network is
really really strong, and it does extend into every field
out there. I think that once people heard the number
of jobs that were at stake and the number of
types of startups. This is biotech, this is pharma, this
is chip design, this is climate tech. If you randomly
(30:20):
chose to delete a third of startups, period, you would
hit American innovation in a very fundamental way. I think
once the numbers and really the stories from the founders
themselves were told to the people in the halls of power,
I was very impressed by the reaction that they suddenly realized, Oh,
(30:42):
this isn't a small regional concern in a part of
the country that is politically unpopular. This is something that
could really hurt the United States. And that's what I
care about deeply, right. I feel that we need to
make sure that we take care of the fact because
you know, especially little tech, they're the ones who ultimately
(31:05):
take the risk and then ultimately bring these technologies to
bear that touch all of society.
Speaker 2 (31:12):
This whole SVB thing is made clear.
Speaker 1 (31:14):
A lot of people look at Silicon Valley and see elites.
Speaker 2 (31:17):
Are they wrong?
Speaker 4 (31:18):
You know?
Speaker 3 (31:19):
I think that there's different types, and the tricky thing
is we have to acknowledge that technology has had an
impact on society and.
Speaker 2 (31:28):
Will continue and good for good and bad.
Speaker 3 (31:32):
And anytime you have power that is accumulated in the
hands of the few, that's something we should be worried about.
But I will say that in this dichotomy of big
tech versus little tech, we want to really help little tech.
Little tech is competition, and competition is the way that
we have actually vibrant markets that give consumers new choice,
(31:54):
and that is actually a very important thing to protect.
Speaker 1 (31:59):
Venture capital is blamed for a lot of things and
has been blamed for the SBV collapse, you know, Is
VC to blame?
Speaker 4 (32:07):
You know?
Speaker 3 (32:07):
I think that was a tricky moment for everyone because
I think if you're actually trying to give good advice
to founders, you try to tell them what might actually
happen and let them make the right choice for themselves.
Speaker 4 (32:21):
And so that's the tricky thing.
Speaker 3 (32:23):
I think that people want to say that vcs caused
a bank run. At the same time, I think that
there were lapses in communication on the part of SVB,
on the part of the outgoing CEO, and so the
truth sort of lies someplace in there, you know. I
think founders do want investors to sort of tell them
(32:43):
what was right and what was actually going to happen,
because I think in that moment it might be worse.
You know if you were affected, Like how would you feel? So?
And that's I think the difficult line that good investors
have to walk. It's like, don't change your advice based
on your own interest when your interest might diverge. Just
(33:04):
call it out and just you know, say It's almost
like a golden rule for startups, like what is the
thing that would help the founder regardless of anything else.
Speaker 1 (33:13):
How long do you think the downturn lasts?
Speaker 2 (33:16):
How hard does this get?
Speaker 3 (33:19):
I guess it's so hard to tell. And you know,
I'm not a macroeconomist. You know, some people like to
play that on Twitter, though, so I think that, at
least speaking for myself, I underestimated to what degree interest
rates rule everything around us if people have to play macroeconomist,
and I think a lot more of us have to
(33:39):
now because it just affects all of us. You know,
it affects valuations. It affected the SVV crisis. You know,
if you work in crypto, you better pay attention. I mean,
all of these things matter because the price of money
is sort of shifting radically, so I don't have a
crystal ball, at least in the short term. It seems
like the FED slowing down on its interest rate moves
(34:01):
may well be a good positive sign for valuations. And
I'm always rooting for the founder, so that's a good thing.
On the other hand, you know, inflation, it's anyone's guess
if that's actually beaten or not. And so I think,
you know, you sort of have you know, unstoppable force
out there versus immovable object, and I sort of can't
tell which which side is going to win.
Speaker 1 (34:23):
Yeah, the circuit continues after this quick break. Paul Graham
famously said that a startup is either default dead or alive.
How many starships are out there that are default dead
and don't even know it yet.
Speaker 3 (34:37):
Well, the tricky thing is pretty much every startup when
it's born is default dead. And it is actually the
role of the founder to create something people want and
then figure out a way to get in front of people.
Only then does something go from default dead to default alive.
So I think, you know, it's quite normal for it
to be default dead. That is just one thing that
(34:59):
will go away from startups. When we talk about risk
in startups. If every single one succeeded, it would mean
that people are not taking enough risk.
Speaker 1 (35:08):
Do you think it's to be harder for startups to
raise money for the next ten years? Right, like it's
been a fruitful time.
Speaker 2 (35:15):
Is this just the new normal?
Speaker 4 (35:17):
Well?
Speaker 3 (35:17):
I think, you know, monetary policy is just one piece
of it. The part that is also very hard to tell,
but I'm very optimistic on, is that technology has always
built on itself. So cloud computing allowed Airbnb, but also
is built on social and then suddenly you had mobile
And today we're in the midst of this large language
(35:41):
model explosion, and I think that that might be the
next platform, and those platforms will actually give rise to
new platforms that we don't even know about yet. So
you know, if you ask on a ten year timeframe,
will there be more technology or less?
Speaker 4 (35:57):
I think there's going to be more.
Speaker 3 (35:58):
And you know, if it's a one or two year timeframe,
like you know, we got to ask Uncle Jerome, when
you look.
Speaker 1 (36:04):
At venture capital culture in the way it operates, do
you see things that are broken?
Speaker 3 (36:08):
I think the hardest part is often there's not alignment, right,
you know, people view VC as a career. You know,
if you're a junior VC, you're coming in, you might
only be able to do one or two deals, three
or four deals period. And in those three or four deals,
one better be a unicorn. And we see people bend
over backwards sort of put their own interests ahead of
that of the founder, and sometimes that's systemic. But you know,
(36:31):
I think that YC is actually about giving founders a community,
giving founders a voice, and giving a way to sort
of speak that type of truth to power and you know,
sort of change the way it works. And that was
true when I did YC, and that's what we believe
will continue to happen into the future.
Speaker 1 (36:50):
Do you think ve your capital needs a reset?
Speaker 3 (36:53):
Well, I think we are still in this moment where
VC is still growing and tech is still growing, and
I think there will be reform. You know, there will
be new and better ways to do it, and we're
always on the lookout for how do we amplify that
and help the people who are helping the founders.
Speaker 1 (37:11):
There are now a lot of startup accelerators out there,
Andreesan Horowitz Sequoya, they've got early stage programs.
Speaker 2 (37:17):
There are startup accelerators around the world.
Speaker 3 (37:20):
Why choose y see, well, I think that we are
the one place that is extremely aligned with the founder.
And so you know, when you look at how people
pay attention to founders, and you know, what is it
that makes them great? Like I think for us, we're
always going to put the founder like right front and center,
you know. And the thing is people say founder friendly.
(37:43):
I don't think it's really even about that. It's like
if your friend was addicted to a horrible drug and
you allow them to do it, is that being a friend?
Speaker 4 (37:52):
It's not so.
Speaker 3 (37:53):
I think we want to be founder truthful. We want
to take care of people, We want the best for them,
and we want the best for society as a whole.
Speaker 1 (38:00):
Do you see that happening out there where firms are
being founder unfriendly or founder untruthful.
Speaker 4 (38:05):
I think it's tricky, right.
Speaker 3 (38:07):
It's at the micro level of like what are the
incentives for you know, individual operators working within sort of
principal agent problem, Like if you look at it that level,
that might explain why people are encouraged to go and
do like the mega rounds back to back. Right, that's
not great, right, and I think that that will change.
Speaker 2 (38:25):
AI is the new hot ticket. How bullish? Are you
on AI?
Speaker 3 (38:30):
I think the wild thing is I think we're just
scratching the surface, right, the idea that you can give
twenty thousand words to a computer program and get back
a summary, and you can even interrogate it for opinions
like what would so and so say, what would this
other stakeholder say? I think we're just getting our heads
around what that means, right, It's pretty astonishing. I did
(38:53):
not have on my Bingo card that for twenty twenty
three that you'd be able to speak to a computer
in the way that you can now.
Speaker 1 (39:01):
I know obviously some of these companies came out of YC,
but in many ways, people look at self driving cars
and crypto the metaverse as kind of.
Speaker 2 (39:09):
The last three hype cycles.
Speaker 1 (39:10):
That's right, and they haven't delivered on the promise. Could
AI be just the next bubble?
Speaker 3 (39:16):
It's entirely possible. It always happens that way. There are
always hype cycles. But then there's sort of that moment
where a founder sits down and creates it and shows
it to people and it's right. And I want this
place to be where that happens. And I'm long term bullish.
Speaker 1 (39:33):
Sam Altman obviously long time YC friend was a YC founder,
ran YC for a while, had your job. He's now
the founder of open Ai. Microsoft a huge backer of
open Ai. Between Microsoft and open Ai and Google and
Facebook and Apple and Amazon, is there enough room for
startups to run when it comes to AI? Do they
(39:54):
have room to really compete?
Speaker 4 (39:56):
I think so.
Speaker 3 (39:57):
And some of it is like, we actually don't even
know the physical of this market yet. You know, it
took many years of the search engine world and the
search engine war before we figured out that Google and
AdWords were going to be the winner. I think we're
right there right again. But the outcome of it will
be move in you know, worldwide GDP.
Speaker 4 (40:17):
On that order.
Speaker 1 (40:18):
So are you seeing new AI startups that can compete
in the shadow of giants?
Speaker 4 (40:23):
Absolutely?
Speaker 3 (40:23):
You know, I would never count out, you know, the
little startup, little tech founder, the brilliant engineer who figures
out a way to fight against unbelievable amounts of capital
or unbelievable amounts of market power. And I think that
that's needed in society, like we need to give consumers
as much choice as possible. And that's how good things
(40:45):
actually happened through tech like, that's how we combat this
idea that big tech is too powerful. Like, guess who's
going to fight against them?
Speaker 4 (40:53):
Its startups.
Speaker 1 (40:54):
What's going to define the Gary Tan era of YC?
Speaker 3 (40:58):
Well, what I hope is that a thousand flowers bloom
at the end of the day. For what YC has
done for me in my life, I am deeply grateful,
And you know I'm not just the CEO. I'm also
a client. You know, I also experienced this crazy place
that gave me prosperity, and ultimately, all I care about
(41:18):
is that that story continues, that we have so much
more prosperity in the world, and that people who are
great designers and builders and product people and engineers they
get the chance to not just be like oft in
a cage someplace working for someone else, but to experience
what it's like to be a founder, to be able
(41:38):
to make those decisions, and then ultimately share in the
bounties of it.
Speaker 1 (41:42):
Thanks so much for listening to this episode of The Circuit.
I'm Emily Chang. You can follow me on Twitter and
Instagram at Emily Chang TV. You can watch new episodes
of the Circuit on Bloomberg Television or on demand by
downloading the Bloomberg app to your smart TV and check
out our other Bloomberg podcasts on Apple Podcasts, the iHeartMedia app,
or wherever you listen to shows and let us know
(42:04):
what you think by leaving us a review. I'm your
host and executive producer. Our senior producer is Lauren Ellis.
Our associate producer is Lizzie Phillip. Our editor is Sebastian Escobar.
Thanks so much for listening
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