Y Combinator sets its sights on D.C. with Luther Lowe

Today, we’re bringing you a conversation from TechCrunch's StrictlyVC event in DC earlier this month, where TechCrunch Editor in Chief & General Manager Connie Loizos sat down with Luther Lowe, who serves as Y Combinator’s Head of Public Policy. Lowe joined the accelerator last fall from Yelp, where he was SVP of Public Policy. Connie and Luther touched on antitrust efforts to reign in big tech, Y Combinator’s impact, leadership and access to talent, and what competition, policy and regulation look like in the AI era. It’s a super interesting conversation, so press play and listen in! Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Monday, Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:11Speaker 00

  Hello and welcome back to Equity, TechCrunch's flagship podcast about the business of startups. I'm Mary Ann Azevedo and this is our Wednesday episode where we hone in on a trend in the startup world and dive deep. Today, we're bringing you a conversation from TechCrunch's Strictly VC event in DC earlier this month, where our editor in chief and general manager, Connie Loizos, sat down with Luther Lowe, who serves as Y Combinator's Head of Public Policy. Connie and Luther touched on antitrust efforts to rein in big tech, Y Combinator's impact, leadership and access to talent, and what competition policy and regulation look like in the AI era. It's a super interesting conversation, so let's take a listen.

• 0:55Speaker 01

  If you are joining us a little bit late and we're wondering about Humane AI again, I'm sorry, big bummer, they're not coming, but we have an amazing guest in their stead. I'm very excited. Luther Lowe, who joined the world's most powerful accelerator program, Y Combinator, last fall. Before joining YC, Luther was Senior Vice President of Public Policy at Yelp, where over a 15 year career with the company, he became a prominent voice pushing for antitrust action against Google, even launching an email newsletter called This Week in Google Antitrust to track support against the search giant. I'm so happy to be sitting down with you. Thank you so much.

• 1:35Speaker 01

  So I think some people in this room are very familiar with you, others are not. I was reading before I came here, this story that I think I had read last year, but a longtime reporter, Adam Moschinski, had profiled you last year, and I just wanted to share what he wrote, which is that, "It is no understatement to say that Yelp's fingerprints, and therefore Lowe's, have been on every major effort to rein in big tech for more than a decade. In antitrust circles, Lowe has earned a reputation for both marshaling allegations of abuse by the biggest tech players and suggesting remedies to rein them in." This is great. He was instrumental, for example, in lobbying the EU's then antitrust chief, Margaret de Vastaya, I'm not sure I'm mangling her name, to bring charges against Google in 2015, resulting in a

• 2:19Speaker 01

  guilty verdict two years later. "You're on a first-name basis," Adam said, "with members of Congress behind Reform and in Washington, and a persistent thorn in the side of big tech." Accurate?

• 2:29Speaker 02

  Um, yeah, I'm pro little tech. I feel like I'm slightly less caustic and aggro than I was in my, wearing my last hat, but still care a lot about whether or not little tech companies are fairly represented in places like Washington and Brussels.

• 2:47Speaker 01

  Yeah, absolutely. Well, obviously, there are people in this audience who have that same concern. I did want to ask really quickly, the story talks about how American law has long favored improved products over protecting failed competitors, which we saw, you know, Lena talking a little bit about. I mean, they've had to sort of come up with new ways to decide whether or not something's a monopoly. So Google was improving its offerings for a long time and FTC was sort of like, okay, well, they're offering great stuff. So that's that. You started persuading people who matter that the problem is that Google's growing power harms consumers by degrading their competitors' products, which I thought was a pretty smart take. Can you elaborate a little bit?

• 3:22Speaker 02

  Actually, in that case, the study that was done, and I think what's interesting is that you can see all kinds of examples across all the major gatekeepers these days of this, is that when you have dominance, basically you get a monopoly, congratulations, and now you are sort of scanning the landscape and looking for adjacent markets to enter. And how can you sort of unfairly use some kind of edge to snuff out competitors? And so as you and Chair Khan spoke about, the lens, at least for the last 40 years before the Biden administration kind of came in and brought some fresh thinking into it, was very oriented around consumer pricing. It turns out that with these gatekeepers,

• 4:03Speaker 02

  you can actually see very often the gatekeeper is degrading quality. And so that becomes the proxy for a price increase. So even though the product is quote unquote free, if they are degrading the quality, then you can kind of swap that for a consumer price increase in a consumer welfare analysis. And that was the basis of the paper that Tim Wu and Professor Michael Luca did in 2015, that really was kind of the linchpin of a lot of Yelp's arguments. It basically was like, look, ultimately, when they put their thumb on the scale, they're not just hurting competitors. It wasn't competitor degradation. It was actually they were degrading their own product and hurting consumers. So in other words, if you did a search for pediatrician New York City, instead of seeing services like Zocdoc, RateMDs, Healthgrades, services that had hundreds and hundreds of reviews for

• 4:47Speaker 02

  that type of query, you would be getting a handful of reviews from Google. And that kind of self-dealing, again, is just pernicious across all these dominant platforms.

• 4:57Speaker 01

  Are any of those brands still in business?

• 4:59Speaker 02

  Zocdoc, I believe, is. Zocdoc's headquartered in New York. I haven't really kept up with the medical local search base.

• 5:06Speaker 01

  Just names I haven't heard in a long time. Well, I will say, and I hope this doesn't sound offensive, but I am amazed that you stayed so long with Yelp, which is no shrinking violet, but not a power player and has sort of credibility issues of its own. And I'm sure that the big tech companies were trying to pull you in as a lobbyist for them. Why stay so long?

• 5:24Speaker 02

  You know, I'm really proud of what, and my old hat again, just here with my new hat on, but really proud of what Yelp's mission was and what we did there in terms of helping. I think Adam Lashinsky's piece is accurate, that there are inflection points along the way over the last decade plus, looking at the kind of anti-big tech backlash, you know, we were part of it along the way. And I think helping shift the conversation, it made it feel like I'm not just showing up to work to do this, you know, help improve local search results. It's like shifting the conversation about economic justice, concentration in our economy. And so it ended up being much bigger mission and I really relish that. And there were very few things that I would even consider leaving for, which is why I'm like

• 6:07Speaker 02

  so thrilled to have upgraded from a speedboat to an armada.

• 6:11Speaker 01

  Yeah, absolutely. So I was going to ask if you thought you'd find, or you are finding a bigger audience for Y Combinator. I mean, in Silicon Valley, it is the 800-pound gorilla on the startup scene. How is it perceived here? The same way?

• 6:23Speaker 02

  I mean, I was actually going to kind of take a step back and explain that, you know, what Y Combinator is.

• 6:28Speaker 01

  Yeah, go ahead.

• 6:28Speaker 02

  Because a lot of folks in Washington DC, part of my role is about kind of YC 101, because so many folks in DC don't actually know what it is. Essentially, it started in, is the original accelerator. It started back in 2005. Paul Graham, who had successfully sold a company in the 90s and was sort of helping founders by writing essays and, you know, avoiding pitfalls for people who were thinking about doing technology startups, created this program. He had a call for applications. 12 people got in, moved to Cambridge, Mass for the summer of that class. Reddit and Twitch were born and it just kept going and growing. And now, basically, the way it works is if you and I had a cool idea, we could apply. There's about a 1% acceptance. Rate you give up about 10% roughly equity, get a half a million in funding.

• 7:13Speaker 02

  You move to San Francisco now is where it's anchored and for about 12 weeks. Just get intensive mentoring and you're getting that kind of zero to one product market fit. And the most surprising thing with the new role is how many in Washington don't even know it exists. And you think about, we've now seeded 5,000 companies have 11,000 founders in our network. Like that is just an insane impact for the US technology economy. And so trying to educate policymakers about that impact and how we touch virtually every congressional district in the United States. That's been a big part of my kind of early work.

• 7:45Speaker 01

  You could wear like a T-shirt every time you show up with somebody Airbnb Coinbase Dropbox.

• 7:51Speaker 02

  Exactly.

• 7:58Speaker 01

  Well, I was going to ask then what people make of Gary Tan, who is the president. So Gary is a long time, he was partner with Y C, he's been an entrepreneur, he's back at Y C as the president. The most courteous, even killed guy in the world to talk with, but very combative on social media. And so I just was wondering what people think of him because I think people in San Francisco are like, what's, what's going on?

• 8:20Speaker 02

  I mean, Gary, I really love Gary because I met Gary back in 2022. And he was the only venture capitalist at the time that was putting his neck out for this legislation called the American Innovation Choice Online Act. It was introduced by Clovis, Char and Grassley. And basically the bill would have curbed the most egregious forms of self-preferencing by the largest gatekeeping companies. You know, I think there's a lot of reasons the investors, kind of that community will sit on his hands for those questions. Sometimes it's almost like a social capture or sometimes it's like folks are libertarian or, you know, they have different political views about like the role of the government and stuff. But I was really impressed with his leadership on that. We sort of hit it off and stayed in touch.

• 9:02Speaker 02

  And then when he came into the Y C role, got coffee and basically within six months or so, he's invited me to come be part of the team. And so I, I love Gary, you're not going to get me to say anything, you know, but he's a mensch and is. I agree with what you've said. He is interpersonally, he's like so warm and is just, he was out in Washington a few weeks ago. And like off of a red eye was just like going nonstop until about 11pm. Yeah, it sometimes has some spicy tweets.

• 9:33Speaker 01

  Yeah, no, no, I guess I just wondered if it's a strategy. I mean, you know, attention is good and he's been getting a lot of attention. And it seems just, I guess, unlike him historically. So I thought it was sort of an interesting path he's been taking. Anyway, we'll move on.

• 9:48Speaker 01

  So my understanding is that you have a three-pronged approach here to helping startups find more breathing room. And that is access to talent, access to markets and access to AI, which the latter part means you like for AI to be open sourced. So that again, like we've been talking about all night, it's not just the big companies that are controlling and benefiting from this tech. On the talent piece, the FTC just adopted this non-compete rule. For us in California, it has less impact because we've had this sort of regulation in place, but everywhere else it seems like a very big deal. Are you happy with the look of that? It protects everybody except for senior executives in a policy role that make over $150,000, right?

• 10:26Speaker 02

  I think that the non-compete's rule was great. We thought it was a good move by the FTC. Look, we would be happy if Congress did something as well, but I, you know, we'll see. Part of the issue is in Washington, you have such just pernicious influence by the most powerful, largest companies. And really, there's been a vacuum for the voice of these smaller companies and that's really what we're trying to fill. I would love for Congress to tackle non-compete's as a federal legislation, but I just frankly don't see it happening just because of that pernicious influence. Open source AI is so critically important, making sure that people can build on these models without fear that they're going to have to,

• 11:09Speaker 02

  you know, register with some kind of safety commission. Like we are still in very, very nascent stages of these tools. And we want to make sure that ultimately this field is very competitive and we don't want just a handful of companies to control the entire kind of LLM innovations. And so access to markets. Has to do with basically ensuring that we have robust competition in the United States, supporting strong enforcement against companies that are egregiously self-preferencing. Access to talent has everything to do with immigration, making sure that talented people can get into the United States. And, and that's actually an example of how, you know, you asked about like, am I still a thorn in big tech side? I mean, that's a great example of how, you know, we cooperate with the larger tech companies because the entire technology industry is affected.

• 11:53Speaker 02

  So those are kind of the big themes. I've noticed it's, the job is also involved a lot of kind of white glove federal bureaucracy navigation. There's some tax issues like section 174. Basically, we've abruptly sort of pulled the rug on, on founders who are trying to deduct their R and D expenses. They can no longer do that. That has to be amortized over many years. It's somewhat esoteric, but it's really, really important for these tiny companies.

• 12:19Speaker 01

  I was gonna say, I need to learn more about that. So we talked about, you talked fleetingly about immigration. It seems like such an intractable problem because Congress really doesn't want that disentangle high skilled immigration from illegal immigration, meaning, you know, as it relates to the border. And that's obviously a political grenade. Are there other things that could be done other than non-competes in high skilled immigration? You know, another issue that we're seeing all the time in Silicon Valley with regard to access to talent is how much these companies are paying these college graduates and, you know, people working at startups. I mean, it's very hard for a startup to compete if Google says, here's $3 million to start with plus equity. I mean, has anybody ever talked about capping these salary packages? Or is that just completely bananas, would never happen?

• 13:04Speaker 02

  I think you have to look at why this is such an exciting time to build something that people want. The reason that Google or OpenAI or whoever is throwing these seven-figure salaries at these young people is because they know that's the competition, that they can walk and with either by themselves or with a co-founder, go build something that has a strong likelihood of being worth a whole lot more. You know, that's the market. I don't know if like throttling salaries is going to solve it. I think it's ultimately a good signal because it means they are fearful that people are going to go off and build on this new wave of technology.

• 13:41Speaker 01

  Can I ask quickly, what is YC's relationship with OpenAI? Because in some ways, it was kind of partly incubated at YC. The former president, Sam Altman, was at YC when he was transitioning over to OpenAI. He's still running OpenAI. Is it contentious? What's, you know, you are, you have a stake in the company.

• 14:01Speaker 02

  Yeah, I mean, I, I came, I started at YC in, in October, so I don't, I've never met Sam. But like, I, my, my read is that, you know, folks are still friends and whatnot. There's a, you know, he led the organization for, Sam led the organization for, for many years. And it was sort of in some ways sort of spun out of Y Combinator. And Paul Graham has tweeted a decent amount about this to dispel some of the myths. You know, many of our companies are like about half of our, so every year now, we're doing about 250 companies per batch. So every six months, 250 companies, every year 500 companies. And half of those companies are AI. And a lot of those companies are building on OpenAI.

• 14:44Speaker 02

  So I think that's, you know, I think that reflects that there is a strong relationship. There's a lot of former YC folks that are in OpenAI. We, we, you know, every, once every couple of weeks, I'm, you know, exchanging emails with them and, and corresponding with them on an issue. So there, there might be issues where we don't totally see eye to eye, maybe on, when it comes to these open source debates. But frankly, I think all this stuff is so early that it's, it's hard to like diagnose. I think the relationship is, is, is fine.

• 15:14Speaker 01

  Well, I guess, I was just thinking, it makes your position sort of hard to articulate because you do have these companies that are building on OpenAI. OpenAI says, look, we're only keeping it closed because of safety concerns. We just want to make sure we're building this responsibly. And on the other side, you're, you're telling people it's got to be open source or these companies, startups can't thrive. So it's a little bit hard to square.

• 15:36Speaker 02

  I think we just want maximum options for founders. So you don't want a system where, look, if, if OpenAI is providing, you know, I use OpenAI almost on a daily basis. I think that people, founders, if they find that GPT-4 and, and later iterations are the right tool to build on, that's, that's great. We encourage that. We also think that founders need to have the option to be able to build on Mistral, Llama, all the other open source tools, because that perhaps can provide maybe cost savings. It maybe provides some more flexibility in terms of the type of tinkering that they can do. So I think the more competition, the better is ultimately our position. It's not like absolute one or the other.

• 16:15Speaker 01

  Sure. And spread your bets a little bit. It's never great to have, you know, be completely dependent on some other company for your business. Well, you and I were talking about this backstage a little bit. Sometimes I worry that we're late. And I don't know, Helen, I would have loved to talk to you about this as well. But, you know, five years ago, Sam actually came to one of these events. And he was talking and we were all sort of laughing. And he said, I think I'd asked him, are you going to license this technology? How are you going to make money? And he said, someday I'm going to ask this generally intelligent system how we make money for our investors. And everybody in the audience laughed. And he was like, I know it sounds like an episode of Silicon Valley, but I'm not kidding. I really believe that's going to happen. But he was saying back then, like, we have to regulate things. We've got to regulate things. And there was a lot happening, but people outside of the industry didn't have visibility into that.

• 16:58Speaker 01

  Now it feels like the chips have fallen to some extent. How are you thinking about things?

• 17:03Speaker 02

  I mean, the way that I think about AI policy, perhaps unsurprisingly, I see it as something that you really cannot decouple from competition policy, that we really kind of need to get the competition policy sorted out first. So you look at Europe and the Digital Markets Act, not perfect, but at least they're taking a stab at figuring out how do we curb the most egregious forms of self-preferencing by these large firms? And if we don't do that, then it's pretty easy to see how this plays out. I mean, I looked with some concern at the Apple announcements yesterday, and there were a lot of kind of, actually, this was just talked about with Chair Khan, the memes and the tweet threads about, look at all the startups that have been killed by this.

• 17:44Speaker 02

  And there's an alternate universe where we're embracing interoperability, where we're compelling these firms to stop self-preferencing. And it's better for everybody. It restores. So the answer is like, it's not too late. I think if we compel the largest gatekeepers to be more interoperable, to stop self-preferencing, then we can move toward more pluralism, which is what the web used to be. And that, you know, was a pretty cool time, you know, 15 plus years ago, when I originally moved out to San Francisco, it felt like there was promise and potential in lots of little companies. Gary was here a couple of weeks ago in Washington, and he said, I'd much rather see a thousand unicorns than another trillion dollar company.

• 18:24Speaker 02

  And I think that's possible, but we have to do all we can to nurture founders, to compel the largest gatekeepers to interoperate and stop self-preferencing. Once we do that, I think it's really incredible potential for and protect open source AI and the ability for people to tinker and build on open source tools. It's going to unleash a ton of innovation.

• 18:46Speaker 01

  You know, the problem, though, again, not to be too negative, but you are going up against, these companies now are trillion dollar companies. They are spending hundreds of millions of dollars here. And then there's you and some VCs who are coming in slowly. So how do you fight against this? And I guess who is part of this loose coalition that you're hopefully forming to fight back against all of that money?

• 19:08Speaker 02

  You know, there was a great story over the weekend in the Wall Street Journal about Google and this guy named Joshua Wright, who was at George Mason University. And the TLDR of the story is that he was doing kind of Harvey Weinstein-y stuff at the law school at George Mason, which was very disturbing. But all the while, he's just getting, he was before, during, and after he was served as an FTC commissioner, he was being paid to essentially use GMU to launder these ideas from the companies that were defending their abuses of dominance as legit academic things. And it just talked about this pernicious corruption. And ultimately, Amazon, Facebook, Google were paying him millions of dollars a year.

• 19:52Speaker 02

  There are lots of characters, not the Weinstein-y stuff, but there are lots of characters in Washington that this type of corruption is quite pernicious. What I'm excited about, what I think YC brings to the table, is the ability to tell the authentic stories of these founders. And I'm not kidding when I say, 11,000 founders were connected to virtually every congressional district in the United States. If you can tell an authentic story, that means a whole lot more than some astroturf front group that is purporting to represent the interests of small businesses or startups. And there are tons of groups that exist, basically, that are propped up by the large companies to push that. And sometimes, they're pushing things that everybody agrees with, like the immigration thing I was mentioning. But a lot of times, it's sort of the, they're trying to get the chickens to vote for Colonel

• 20:36Speaker 02

  Sanders. And I think that if we can be that authentic voice, you actually don't need to spend a lot of money. The authenticity is just like this incredible coefficient I found in Washington for moving the needle. And we're not not going to spend money. We're going to definitely invest resources here. We're going to be heavily engaged. We don't need to spend the $300 million that Big Tech spent to kill ICOa in the last Congress. I think we can win with a lot less.

• 21:00Speaker 01

  And your network effects are so considerable. Yeah, you'll definitely be hearing much more about Y Combinator soon, if not already. Luther, thank you so much for joining us.

• 21:09Speaker 02

  Thank you.

• 21:09Speaker 01

  You are a rock star for doing this. And thank you all for sitting here and spending your night with us.

• 21:16Speaker 00

  Equity is produced by Teresa Loconsolo with editing by Kel. Bryce Durbin is our illustrator and we'd like to give a big thanks to our audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thanks so much for listening and we'll talk to you next time.