Uncapped #7 | Garry Tan from Y Combinator

This week I sat down with Garry Tan, President & CEO of Y Combinator. YC has funded 5,000+ startups including Airbnb, Stripe, DoorDash, Rippling, and Reddit, among others that have totaled $600B in combined valuation. Garry is a designer, engineer, and investor in early stage startups. Previously Founder & Managing Partner of Initialized Capital, an early stage venture capital fund that was earliest in Coinbase and Instacart. Before that, Garry was a partner at Y Combinator where he invested in and directly worked with over 700 companies at the earliest stage. He previously co-founded Posterous and helped build it to a world-class website used by millions (acquired by Twitter). Garry is a builder at heart. We covered: Running YC like a founder Advice for founders Picking winners What changes because of AI YC being the “YC of hard tech” Public service --- Timestamps: (0:00) Intro (0:25) Running YC like a founder (6:25) Focusing on growth and prosperity (12:40) Incredible pick rate (14:34) Role of the Group Partner (19:21) Lean vs fat startups (20:53) Archetypes of special founders (25:18) Rule changes because of AI (33:00) YC being the “YC of hard tech” (37:40) Community and political involvement --- Linktree: https://linktr.ee/uncappedpod Twitter: https://x.com/jaltma Email: [email protected]

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  If you can get Keith Raboy to invest in your startup, you should do a fat startup.

• 0:03Jack Altman?

  Yeah, exactly.

• 0:04Speaker 00

  You know, and a few other of our friends, obviously, like if a lot will do it, like if a lot, you know, there we sort of know all the people who can and will do it.

• 0:11Jack Altman?

  Yeah.

• 0:11Speaker 00

  And like if they want you to do a fat startup, you should do a fat startup with them.

• 0:15Jack Altman?

  All right, Gary, thank you so much for doing this. It's great to be here. I appreciate you making time for it.

• 0:19Speaker 00

  Jack, thanks a lot for having me.

• 0:21Jack Altman?

  Yeah, I know you're super busy and I'm really excited to have this conversation. You're now, I think, two years into running YC. Is that, that's about right? And you've really been running it like a founder from my perspective. And I kind of want to start by getting inside your own mentality. And what's the headspace that's lets you do that? Cause you've made a lot of changes that I think have been really good, that have broadly been received as really good, but that were not easy to do. I think you've done a lot of stuff that has required the confidence of a founder and you've acted like that. So can you talk a little bit about what headspace you came into when you started running YC?

• 0:53Speaker 00

  Definitely. I mean, the great thing about YC is that we need to go zero-based accounting. So literally, if we were, you know, starting YC from scratch again, all the things that we would add, you know, we would add in that moment, like we're keeping those things. And that's like a very freeing thing to actually have the people who support you and like are your board. You know, for them to say that is just, you just have, you know, sort of not totally carte blanche, but you have like as close to it as you could while not being like directly the owner of the thing.

• 1:27Jack Altman?

  When you had that conversation and you're thinking zero-based accounting for YC, like what is, what is order of business number one? Like what must be true first order of business for you for YC to thrive and be what you want it to be?

• 1:40Speaker 00

  I mean, I guess from an abstract standpoint, because there are lots of specifics that I want to get into. But from the most abstract standpoint, like I view YC as this like tree of prosperity. And then, you know, like it or not, every organization in the world, no matter how dominant, could use a little bit of pruning, like this is a garden. And in order for, you know, if you have fruit trees in your backyard, you know, that in order to actually have a good bloom, you know, sort of a good crop coming out of your fruit trees, you've got to do all this pruning, you know, months or sometimes, you know, in the years in advance of that.

• 2:20Jack Altman?

  Totally.

• 2:21Speaker 00

  And so, and all of that is basically really, really hard.

• 2:25Jack Altman?

  Yeah.

• 2:25Speaker 00

  It's really hard to say no to things and to people. And You know, I think basically, culture is everything. And you know, when you really get into the weeds on that, it's like, well, who do you fire? And who do you hire? And who do you promote? And these are things that as a young founder, people tell you this. And then, you know, well, you ran, I mean, you created, you know, one of the defining SaaS companies in HR software. So, you know, you probably like totally immersed yourself in that and like spent a lot of time trying to help people figure this out.

• 2:59Jack Altman?

  Totally.

• 2:59Speaker 00

  How do you, what is culture? And how do you actually implement that into strategy? And, you know, how do you walk like sort of without, without a net? You're like, I'm just gonna do this thing. And, you know, it might be a total disaster, or it might be the best thing we did.

• 3:15Jack Altman?

  Yeah, I mean, one of the things as I'm looking back, I guess YC's been around for 20 years. And, you know, when Paul and Jessica and, you know, the early group started, it was this very small, very pure core focus on just funding early-stage startups in this model that we all know as YC. And then looking back through like the 2010s, there was all this like expansionary stuff that happened.

• 3:37Speaker 00

  Totally.

• 3:38Jack Altman?

  And I guess, looking back, a lot of that was a big part of what, you know, has helped YC maybe blossom into what it is. But then, you know, there became this moment then, kind of like you're saying, of re-centering to the core. And it's now much bigger and more impactful than it ever was in the past. As you're thinking about that sort of evolution and that breathing, could you imagine a moment where you go back to some of those expansionary bets over time? You know, and 15 years later, there's another pruning cycle that happens?

• 4:03Speaker 00

  I don't know. That's, that's life, right? Like, you try a bunch of stuff, some things work, sometimes, sometimes things go kind of awry. I will really, you know, it's actually not a surprise to me at all that like subsequent to me coming back and seeing, you know, what Brian told me, which is, you know, zero-based accounting. Like, he came to our board meetings with Founder Mode Energy before we even knew that it was called Founder Mode Energy. Because he had gone through that moment in Airbnb's time where a lot of young founders go through that. I mean, pretty much all of them, actually. You know, if you're so lucky to get. Product market fit, then you surround yourself with some of the smartest people in the investing world and they go on your board.

• 4:46Speaker 00

  And then they say, hey, you need to hire the person who was the expert at this other company to do this. And they come with this rolodex and this way of doing things. And then sooner or later, you know, a few years into it, you look down and you realize like, well, is this my company? Or is it my board's company or is it the shareholders company like, what is it? And, uh, you know, Brian's experience was that, uh, he, you know, not everyone gets that moment. Like COVID was that moment for him to sort of reclaim and sort of reset the culture of Airbnb. And, um, I think we were just sort of coming right off of that. And so he immediately, uh, sort of infused that into me and Y C. So we're deeply thankful for that.

• 5:29Jack Altman?

  Yeah, yeah.

• 5:29Speaker 00

  Yeah, but you know, I mean, never say never. And, um, I guess the weirdest thing that I hope for Y C is that if we do it right,

• 5:40Speaker 00

  we can sort of regrow the, the tree of prosperity in a way that like, it doesn't have to be pruned quite so much.

• 5:46Jack Altman?

  Totally.

• 5:46Speaker 00

  Like, uh, it's much better to prune as you go, to shape it into the tree that you want, instead of let it grow completely wild and then have to cut back. And then it's already, you know, they're, they're like entire branches that are grown in a way that, you know, might not be ideal, might not fruit.

• 6:04Jack Altman?

  Yeah. I mean, one of the other amazing things though, as I'm looking back, it's, you know, the early batches of Y C were eight companies, 12 companies, 15 companies, twice a year. Now you have, what, you know, 150 or so, four times a year. So, you know, the

• 6:19Speaker 00

  Double velocity.

• 6:20Jack Altman?

  And they're still amazing. So, you know, like clearly the whole market has not been captured. So maybe that brings me to another, um, question of mine is as you think about growing Y C, do you think about, um, do you think about capturing more of sort of the market making? Maybe that's the wrong sort of language, but making Y C a product that even more founders want to have. Like, is that one of the drivers as you think about what's next?

• 6:43Speaker 00

  Oh, definitely. I mean, um, I think both, right? Like, there's sort of the zero sum and there's also the abundance mindset, right? And the fun thing about it is like, actually, both are at play, right? There is a zero sum aspect of this and then there are going to be people from central casting who are, you know, super cracked and have the right resume and they were like sort of shot out of a cannon. And, you know, I think that YC actually makes sense for those people. And, you know, we're going to get some of them. And, you know, on that side, we're, you know, competing with some of the top VC names in the world.

• 7:19Jack Altman?

  For sure.

• 7:20Speaker 00

  The top seed investors, like, you know, and that's okay. I don't know. It's not the end of the world. Like, you know, Jack, when you get a great, super cracked founder.

• 7:28Jack Altman?

  I'm just like, you should also do YC. Yeah, exactly.

• 7:30Speaker 00

  Which would be great. Yeah. I mean, so there's that. And then the really fun part, the part that I think is the most generative, sort of the thing that I think if you talk to the YC partners, like, we're very excited about is that, you know, we're going to do that, but also like, you know, we want to create prosperity where, you know, in the past there wasn't. And that's like, sort of classically, that's what PG did. He said, very technical founders, like, this is sort of the mispriced asset. Like, you know, there are lots of things that are mispriced, but highly technical young founders are sort of the most mispriced, right?

• 8:08Jack Altman?

  Yes. But when you think like that, in terms of maybe founder archetypes or parts of the market that you're like, okay, we know YC. YC has always been for this young founder. It's always been for outsider founders breaking in. There've been like, I could name a set of archetypes that it's for. Do you think about any archetype founders that you think YC, you want to grow, you know, your sort of footprint with? Like, do you think in those terms? Or do you just think about better product, growing brands will do better? Or do you think, okay, how do we improve our product for second time founders? You know, like, it was great that Parker at Rippling came through YC again, but how do you think, do you ever think, well, let's make sure we always get that to happen? Or what's inside the mind, did you think about expanding the aperture of who YC appeals to?

• 8:52Speaker 00

  Man, I mean, I think it's a hard question. I mean, the hardest question is like, what do you focus on? And if you focus on all of them, like, are you, you know, really focusing on any of them, actually? I think it's pretty clear that we're really focused on technical founders. But one of the things we need to work a lot harder to dispel is like, there's this concept now that, oh, it's for people who worked at certain companies, or went to Harvard, or Stanford, or MIT. And it's like, some of it is like, yes, it's like for them, but it's also for people who went to Cornell, went to UIUC, went to like, you know, I don't know. The weirdest thing, I mean, in the political landscape today is realizing, and you know, you can open up your X feed and see it every single day. Like,

• 9:35Speaker 00

  there are people who are absolutely brilliant, 150 IQ, great engineers who get rejected from 15 schools straight, right? And, you know, that's not fair.

• 9:45Jack Altman?

  I actually spent time talking to the guy who went viral with that tweet today. And I got to hang out with him last week. And he's just like this brilliant guy, who's like, super hardworking, and it just like tells you that like, they're not hitting all of it. And actually, to my mind, YC actually is really valuable to people who don't already have the brand and the network built in, because you come in, you just like get like, you know, shout out of a rocket into Silicon Valley culture. So it's definitely good for that.

• 10:09Speaker 00

  Yeah. But I think, I mean, universities have this problem, and universities themselves sort of treat it in a similar way. I mean, maybe that's what has been broken, right? Like, historically, like, I got to go to Stanford, and Stanford was an awesome place to go. But, you know, I maybe, you know, child of immigrants, like, not, you know, came from a poor family, like, we didn't necessarily belong. But like, the reason why Stanford was awesome was, you had all the people who were going to be successful in one place. And then, that, you know, by sort of transference, or by me being in that place, like, being a fraternity brother with Joe Lonsdale and Stephen Cohen, like, brought me in touch with Peter Thiel, right? And it's like, okay, there is something to

• 10:53Speaker 00

  be said for having places that have both diversity and merit in one place, right? Like, and that's, you know, we're, society's having the worst debate ever about this right now. Somehow, it's like, pick one or the other.

• 11:10Speaker 00

  I don't know, the ideal is like, you know, you have both in the same place.

• 11:15Jack Altman?

  Yeah.

• 11:15Speaker 00

  And so that's embedded in your question.

• 11:18Jack Altman?

  Yes.

• 11:18Speaker 00

  Where, you know, where should Y C go? It's like, we want to go where really great builders are. And they are like, not a monolith. Like, some of them do go to the top schools. Some of them do study computer science. Some of them don't.

• 11:32Jack Altman?

  Yeah.

• 11:32Speaker 00

  And then if we're that community and we can select well, then we will actually help make a lot more of them successful. And then that will be get, you know, more people of all sorts. Like, I think the key idea that Paul, I don't think this is what he set out to do per se, but like intuitively, this is what he figured out. The world needs shelling points for

• 11:55Jack Altman?

  For just talented.

• 11:57Speaker 00

  Builders, for talented people.

• 11:58Jack Altman?

  Totally.

• 11:58Speaker 00

  And then their capital exists, their customers exist.

• 12:02Jack Altman?

  Yeah.

• 12:02Speaker 00

  Their like, knowledge and support and, you know, the best friends of your life.

• 12:07Jack Altman?

  Yep.

• 12:08Speaker 00

  Can you, can come together.

• 12:09Jack Altman?

  I just had Alad Gill on the podcast the other day, and this is one of the things he was talking about is that early in your career, you will meet, hopefully, you're going to meet a lot of people who, over the next 20 years, will do really impressive things. And finding those cohorts early on is like one of the best things about working at a company. And it's like, you know, for me, a bunch of my founder friends are Y C founders, and it's like not random. That that's kind of how you end up going through it. And so some of it's just bringing those networks together. This may be, I actually want to come back to the politics thing a bit because I'm super interested on that. But one last point here that I wanted to get to was, somebody recently made the point that Y C's correct decision rate is very good.

• 12:51Jack Altman?

  And obviously, there have been companies that have applied, not gotten in, that have gone on to do well. I can't remember the examples. I'm sure there's like a handful and that's great, but compared

• 12:59Speaker 00

  Can't catch them all.

• 13:00Jack Altman?

  Can't catch them all, but compared to a like a regular, compared to even like a, I would guess, compared to even like a Sequoia, or like a really good investor, it seems like a, like a hilariously good pick rate. And I was wondering, do you think that that is something to do with the process you have of selection? Or do you think that's something to do with what YC does to companies after they've gotten in? Like, do you have any explanation in your mind for why the pick rate seems as good as it is?

• 13:29Speaker 00

  I think it's not more complicated than game recognize game, right? I think that if we have partners here who are great builders themselves, you just end up getting way more reps than anyone else, right? Like, think about being, you know, a lot of, we both probably run across a lot of 22-year-olds who are desperate to become associates at VC. And it's like, bro, don't do that, please.

• 13:50Jack Altman?

  Do you think that's a bad idea, generally speaking?

• 13:52Speaker 00

  Just like, go start a company. Like, great founders want to be around other people who have actually been there. It's like that Jay-Z line. Everybody want to tell you how to do it, they never did it. And so, it's just so obvious. Like, don't, you know, rather than seek the trappings of this, or like, play the ego status money game, it's like, go create things of great value. And then, that's really just all what I want YC to be. It's like, someone who has built stuff will sit down with you and you'll have like, personal one-on-one experience with them. And they're not going to say, like, necessarily things that you want. Like, they're not going to validate your bad decisions. They're going to say, like, this is what I think you should do. But it's like a soft advisor thing, right?

• 14:34Jack Altman?

  Yeah. What is the nature of that role? Actually, when you think about the YC partner, YC founder relationship, and I think back on mine, I was very lucky. I had Dalton Caldwell and Aaron Harris, both were great. And I experienced them as like, pretty direct, pretty honest. Like, it wasn't like kid gloves or anything like that, in a positive way. Is that like the, like, when you think about as a partnership, talking about how you're showing up with the founders during the batch, are you like, you know, we're going to be, what are the words you use when you think about, you know, talking to your team about how everyone should show up?

• 15:06Speaker 00

  I mean, we should sort of be like benevolent, like bodhisattvas in a way. It's like, okay, here's, you're on this path. And like, the hard part is like, you know, bodhisattva is probably overstating it, because it's like, we don't know the path. Like, we just know how not to die, actually. That's the part that we can really help with. Whereas- And I think that makes a really big difference, like, you know, losing your co-founder over dumb arguments, you know, picking the wrong investor, like messing things up in terms of your first hires, like having, you know, picking too many different things to focus on and not focusing on any one. Like, there's like a billion ways to die.

• 15:45Jack Altman?

  Yeah.

• 15:46Speaker 00

  And if, you know, as investors, the best thing we can do is say like, oh yeah, we saw like 50 people die that way. In fact, you want to talk to one of them?

• 15:52Jack Altman?

  Yep. That's one of the things I loved is I feel like YC just drilled the fundamentals. It was like, don't get distracted, just build product, just talk to customers, don't die, don't break up with your co-founder, don't run out of money. It was like very simple, but it was constant.

• 16:05Speaker 00

  Yeah. And it's hard to do because, you know, what happens is it's like that meme, you know, no one who's ever tried to do it has, you know, made it, but it might work for us.

• 16:16Jack Altman?

  Yeah.

• 16:17Speaker 00

  It's like that, that whole meme is basically the, the thing that first time founders in particular really get hung up on, right?

• 16:23Jack Altman?

  Well, it's hard because they're, they're, so maybe I'll channel a couple of the schools of thought that maybe are not exactly counter, but are different to YC. And I'd actually love to hear what you think about some of these. But one of them would be, on this point, would be, like, great companies are very unconventional and, you know, they look different. And when special things happen, they start in special ways and you can't follow the rules and blah, blah, blah.

• 16:45Speaker 00

  That's just people who haven't seen their things, probably.

• 16:47Jack Altman?

  Yeah. So you, but you probably have a lot of founders who heard that somewhere.

• 16:50Speaker 00

  Right.

• 16:50Jack Altman?

  And then they come into their partner meeting and they're saying something like that. And so what's the, what is the way that that, you know, common back and forth gets navigated, would you say?

• 16:58Speaker 00

  I mean, some of it is like, it's not our, we're not the boss. And so, you know, there's this famous quote, even from PG, I think he was advising Jason Tan from SIF Science. It's in that book by Randall Strauss about YC as one of the batches I worked. And he said, you know what? You you guys do whatever you want. You're the reason why we fund a hundred companies. Like, if you want to drive off the cliff, go right ahead.

• 17:24Jack Altman?

  Wow.

• 17:25Speaker 00

  Which is like this hilarious quote in that like, they didn't. It's like they ended up making a unicorn company. I don't even remember what the specific thing was, but some of the point was like, we're not the boss. Like, we're here to just tell you what we think and to try to be benevolent and help you. And, you know, that's that's what the soft advisor thing means, I think.

• 17:47Jack Altman?

  Yeah.

• 17:47Speaker 00

  And at least my experience working with a great many companies, like if I come in and just say like, do this, do that. Like, that was the whole reason why I started a company, to not have people come and order me around and tell me, you know, what to do.

• 18:00Jack Altman?

  You too.

• 18:02Speaker 00

  You know, I don't think founders who are truly great even respond to that. So I don't know. I guess that's how I square the circle.

• 18:08Jack Altman?

  Yeah.

• 18:08Speaker 00

  It's like, the people who just come in, I mean, we would see this all the time. Like, I remember even during my YC batch in 2008. We were some of the people who PG would either give you like the best advice in the world, or sometimes like really, really bad advice. And then if you talk to any alum, all you know, all the alums like sort of have some story, usually around naming. Where it's like, oh, we're not going to do that. But like this other advice, absolutely brilliant. What I realized was like, most people in startup land you run across, they will give you like very median advice. Like, it's not going to change your trajectory very much because it's like, you know, I read that on the internet. There are five podcasts that already say that. So, you know, did you need to have the conversation? Like, probably not.

• 18:53Speaker 00

  What's really valuable is to have people around who have seen enough and are intuitive enough about like ideas and technology and teams that they can give you even spiky advice, right? Sometimes like the worst advice. But good founders are like, oh, that's bad advice. I'm just not going to do that.

• 19:09Jack Altman?

  And I actually remember YC, there was also a meta narrative was, don't take anybody's advice like carte blanche, including ours. And I'd rather get that and then a lot of advice that contained extremes rather than just a bunch of nothing.

• 19:20Speaker 00

  Yeah.

• 19:21Jack Altman?

  Another one that I'm curious is the sort of lean startup versus fat startup sort of dichotomy. I don't know if this is exactly a fair characterization, especially as YC has gone into more hard tech companies.

• 19:32Speaker 00

  Totally.

• 19:32Jack Altman?

  But there, there, you know, there, there would, there could be a characterization that there's the lean iterate, sort of like raise as little capital as possible, keep your team as small as possible and like find product market fit through your customers. And roughly speaking, that's YC. And then over on the far end of the spectrum, you have the fat startup where it's like you plan the whole movie, you hire out the whole team and you like, you push something into the world.

• 19:54Speaker 00

  Totally.

• 19:55Jack Altman?

  How do you think about that dichotomy? Is that an accurate representation? Do you disagree? Do you think it is based on some startups should be one, some startups should be other?

• 20:02Speaker 00

  I mean, if you can get Keith Raboy to invest in your startup, you should do a fat startup.

• 20:05Jack Altman?

  Yeah, exactly.

• 20:06Speaker 00

  You know, and a few other of our friends, obviously, like if a lot will do it, like if a lot, you know, there, we, we sort of know all the people who can and will do it.

• 20:14Jack Altman?

  Yeah.

• 20:14Speaker 00

  And like, if they want you to do a fat startup, you should do a fat startup with them. Because they're, you know, I mean, I think that's like network and investor dependent, right? Like if you have access directly to Vennode.

• 20:24Jack Altman?

  Yeah.

• 20:24Speaker 00

  Yeah, you should do a fat startup.

• 20:26Jack Altman?

  Yeah.

• 20:26Speaker 00

  Like if, if he wants you to do one, like you've been blessed, right? And then for the great many, you know, millions or billions of the rest of us on the planet.

• 20:35Jack Altman?

  I love that.

• 20:35Speaker 00

  Not totally clear, like you can believe that you will and maybe you could do it. But how would you even get to the point where you could be a fat startup? Well, you gotta do it lean.

• 20:45Jack Altman?

  Yes, I love that. A couple more, because I've got.

• 20:49Speaker 00

  Oh, please.

• 20:50Jack Altman?

  A couple more on founders and startups.

• 20:51Speaker 00

  These are good questions.

• 20:53Jack Altman?

  Because you probably at the moment, you know, where you, you go in and out, but you, you're right, you know, the last couple of years, you're probably seeing as many companies as possible, you know? And so I want to hear your current view of if you had to name the couple archetypes of a special founder and a couple of things where, you know, you, you have most frequently recently been like, that is, you know, a source of greatness for a founder. What are the things on your mind right now that you think create those archetypes? If you had to boil it down to a couple?

• 21:26Speaker 00

  I mean, the founders that I've been able, I've, I've been lucky to run across, especially the last couple of years, they can just sit down with people who have a particular need. And it's like, they're just like yanking out like the requirements right out of the customers. And then the interesting thing about like, being able to do that in the first few meetings is that after a while, when you're coming back with product and you know, you're in market with them or you're like deployed with their customers, with real customers, like, you know, basically that yanking turns into like, they're pushing.

• 21:58Jack Altman?

  Yes.

• 21:59Speaker 00

  And that's product market fit. So.

• 22:02Jack Altman?

  Yeah, I think of that as like commerciality, like there's some people who just know this is where the problem is and I can just find it somehow.

• 22:08Speaker 00

  So yeah, I mean, it's kind of counterintuitive in that I think a lot of people think of founders as like forceful, but like this is actually a very like sort of opposite of forceful.

• 22:19Jack Altman?

  You know what it's like?

• 22:19Speaker 00

  They're very perceptive.

• 22:20Jack Altman?

  It's like how a great seller is like the best listener of all time. It's like that kind of.

• 22:24Speaker 00

  Yeah, yeah, totally. I think that's exactly how that works. Yeah.

• 22:27Jack Altman?

  Yeah.

• 22:27Speaker 00

  And then, so it's, it's odd because like the cargo cult around great founders is like, oh, let me listen less. And it's like, oh, no, no, no. Actually, you have to listen 10 times more than the other people who don't listen.

• 22:38Jack Altman?

  How do you know that when you see it so early? Cause I think this is one of the things that I think a lot of people struggle with. I certainly struggle with it is it's hard to see it like, cause you're, you know, you're see, you're trying to call that about a founder before you've seen them do it.

• 22:53Speaker 00

  Yeah.

• 22:53Jack Altman?

  So how do you do that?

• 22:54Speaker 00

  I mean, sometimes you just hear their other stories and you know, spiky people are just spiky in all sorts of weird ways. Like Serena Gay from Data Curve is like one of my favorite recent founders from the last year. You know, they dropped out of Waterloo at I think age 19 or 20. And then she had already built like one of the number one rock climbing apps in the app store at like 16 or something. So you're like, oh yeah, these people have very like, they're like, you know, sort of a my, like they're an inch wide and like a mile deep on very specific things.

• 23:30Jack Altman?

  Like unusual people do unusual stuff.

• 23:32Speaker 00

  Oh, yeah.

• 23:32Jack Altman?

  Starting early.

• 23:33Speaker 00

  Yeah, yeah. I like.

• 23:34Jack Altman?

  That's one of the YC app questions. Isn't it like something that you, that's like a core question, I feel like, around this.

• 23:39Speaker 00

  Well, the big one is, you know, what are some human, like some hacks? You know, there's there's sort of this strain of like, are people a little bit naughty?

• 23:48Jack Altman?

  Yeah, yeah.

• 23:49Speaker 00

  Which is interesting.

• 23:50Jack Altman?

  Yes, and it's kind of related, I think, maybe, but a little different. What else? If that's, I agree with that bucket completely, obviously. Is there any other thread that's equivalent to that that you're looking for that you're trying to smell out in somebody?

• 24:02Speaker 00

  I mean, the world is like really, really full of systems. So, you know, it might just be like the same side of like that other coin. Like, basically, if you're very, very much a systems thinker and you think, you know, basically, all the world is like somewhat rational. It is not perfectly rational. But like, when you think about all the people in your life or all the people you'll ever meet, like, there, you know, there's some sort of core thing going on. And then, can you understand it? And I mean, maybe, yeah, that that is actually, you know, I'm cheating by saying the same thing. But like, I feel like that's really, really important. Like, you know, can you sit down with a person from any walk of life and then understand what are their motivations?

• 24:45Speaker 00

  How do they get promoted? Like, you know, what's their ideology?

• 24:49Jack Altman?

  Yeah.

• 24:49Speaker 00

  Like, there's just sort of this.

• 24:50Jack Altman?

  It's a good single answer, because this is also what predicts that they can be able to recruit. Are they going to sell customers? Are they going to fundraise? All these things kind of come from a version of this, which is not quite the ability to sell, even though it looks like it. It's like ability to like, see genuine, like, you know, a genuine interaction that'll be valuable to everybody or something.

• 25:09Speaker 00

  Yeah, I mean, basically, if you're going to program the world, you sort of have to, you know, reverse engineer the world first.

• 25:15Jack Altman?

  Yes, yeah, that's well said. The recent sort of like AI boom has led to, I think, you know, amazing things for our industry, obviously. And most YC companies now, I would say, are using AI to some extent. Can you talk a little bit about what you're seeing for them and their experience? And so like, you know, a couple of things that are coming to mind for me lately are, I'm seeing like buyers in old industries that never would have wanted to even buy, that were like struggling to even adopt cloud, or all of a sudden like, super hungry for AI. Like, you know, you see this in education and healthcare and legal. And so you see like, that's an interesting dynamic. There's more competition than probably ever before. So anytime there's like a good idea, there's like 19 people going after the same good idea.

• 26:01Jack Altman?

  There's new considerations around margin. Like, I think like most of building a startup is probably the same, but like some of the rules have clearly changed. So like as you're navigating this and now as most of your companies are using AI to some extent, like what are the big rule changes that you're experiencing or observing?

• 26:18Speaker 00

  I guess the wild thing is people seem to really need a good claim. There's a great medical billing company. I mean, there are many really great medical billing companies. There's one recently that I met who they now make the claim that if you are running one of these like 10 or 15 person clinics, it might be in, you know, all kinds of places, dermatology or wherever. I mean, it doesn't even have to be human. It could be a veterinary. You just with their their software, you can have one back office person. Like, so you can have mainly clinicians and like one back office person per clinic.

• 26:58Speaker 00

  And so, I mean, the the type of claims that you can make and make good on with large language models today is kind of astonishing.

• 27:06Jack Altman?

  Yeah.

• 27:07Speaker 00

  And that I don't think was true. I mean, I think.

• 27:11Jack Altman?

  And people believe you, which is what's crazy.

• 27:13Speaker 00

  Well, you showed them the demo.

• 27:14Jack Altman?

  Yeah.

• 27:14Speaker 00

  It's like, and then you have five other customers who are already doing it. So I think that we're going to see, you know, 10,000 flowers bloom in vertical AI software.

• 27:26Speaker 00

  And then I guess we'll see like the difficulty will be, you know, will there be roll ups? Like what will happen? Will there be a thousand for the next year or two? And then from a thousand, will it like get whittled down to 100? You know, as the models get smarter and smarter, what's going to happen?

• 27:43Jack Altman?

  Do you think it will change any? Like, you know, historically, it's like a market has like a one, two, three, and the one's a lot bigger than two, who's a lot bigger than three. Do you, is there any reason why you think it might be different in this cycle? Or do you think that's the natural destination here?

• 27:56Speaker 00

  I mean.

• 27:59Speaker 00

  I think short of believing that AGI will happen and or ASI will happen and you know, none, no software will exist again.

• 28:07Jack Altman?

  Yeah.

• 28:09Speaker 00

  I think all the standard rules still apply like, you know, it's same, that's what I would say to a regulator too. It's like, you know what? This is just really, really good software.

• 28:19Jack Altman?

  That's what I think.

• 28:20Speaker 00

  Very, very accessible right now.

• 28:21Jack Altman?

  Yeah.

• 28:22Speaker 00

  And so all the rules that we already came up with to govern day to day life already apply. And so that, you know, and then on the business side, the moats are all the same, right?

• 28:36Jack Altman?

  For sure.

• 28:36Speaker 00

  Like switching cost, data that like, you know, you have access to that nobody else has, brand, network effects. I mean, there's just what like five. There's not that many.

• 28:46Jack Altman?

  So if we're in this moment where like, software just became incredibly sick and these markets are in some ways wide open, flowers are blooming everywhere, does that mean that once you've got like a hook, you should actually go like complete blitz scale mode right now? Like, is that, is that a natural conclusion from the setup?

• 29:04Speaker 00

  I think those are, that basically every founder has to make up their mind for themselves right now. I, we're starting to see some evidence that you don't have to. There's an alternative that's sort of brewing where maybe you can get to 50, 100 million dollars ARR or and sustain it with less than 20 people.

• 29:24Jack Altman?

  Yep. Linear is like a good example of that type of company.

• 29:27Speaker 00

  Totally.

• 29:28Jack Altman?

  Yeah.

• 29:29Speaker 00

  I mean, that, that's brand and I mean, I mean, that, that might be brand actually. I mean, you're like, in theory, there could be network effects. I mean.

• 29:40Jack Altman?

  Yeah, certainly some within a company.

• 29:41Speaker 00

  Right.

• 29:42Jack Altman?

  Yeah. But in general, when I'm thinking about these vertical AI companies and you know, you look at legal or accounting or finance or healthcare, pick your vertical, if there's a really good new idea happening and nine people, you know, got a clutch in the wall at the same time, it might, I guess I wonder, you know, does it lead to, and you're working with a bunch of these, do you then say scramble up the wall as fast as possible?

• 30:05Speaker 00

  Oh yeah, definitely. I mean, to the extent you can. And then the difference now is, do you hire a giant team of people? Or do you just automate internal to yourself? And like increasingly, like, pretty much everyone we're seeing, they're making, they're choosing to automate using their own agents internally.

• 30:23Jack Altman?

  Yeah. Do you think that there's like a, there's definitely a rise in the number of companies, I think, that could choose not to raise? And, you know, you'll see that kind of perspective a lot of times, you know, people saying there's going to be all these companies that don't need cash because AI and blah, blah, blah. And then Parker put out a thoughtful tweet about how actually that is not how it's going to work because competition means that the team that hires two teams, everything's the same, but one team hires a hundred sales reps, who's going to win?

• 30:52Speaker 00

  Yeah. Well, I think it's going to be a race. Basically, like you, the people who are blitzscaling will have the benefit of lots of, you know, some of it is like, at that point, it has to be blitzscaling with, you know, 150 IQ people. And so the question is like, how many Silicon Valley companies really are able to draw that level of talent? Hiring at 50 people, 100 people, 200 people, 500 people, 1,000 people. Parker Conrad is almost certainly with Matt McGinnis and like, he has like the all-star team and he's able to, you know, sort of aqua hire 150 IQP people into him and then integrate it and go from like,

• 31:33Speaker 00

  zero to 10 million ARR for like all these other lines, lines of businesses. It's like, you know, I actually think that the compound startup is possible if you can do that.

• 31:42Jack Altman?

  If you can get that talent.

• 31:43Speaker 00

  But that's an if, and like very few people are really, really capable of doing that.

• 31:47Jack Altman?

  Actually, that's another good, sorry, there's so many things here. The, the compound startup is another one where I'm seeing more frequently, I'm hearing the advice, or even founders just wanting to organically say, software's easier than ever to build. I'm going to compound mega early, which is sort of the opposite of focus and be great and pure at one thing, which was always the advice, you know, I got in 2016.

• 32:09Speaker 00

  I think it's the barrels versus bullets thing.

• 32:11Jack Altman?

  Something like that, yeah.

• 32:12Speaker 00

  So you need barrels.

• 32:13Jack Altman?

  Yeah.

• 32:14Speaker 00

  That person can do it if they can show that they can consistently hire and. Build that. I mean,

• 32:18Jack Altman?

  Yeah.

• 32:19Speaker 00

  You could say that the Ramp guys did it. They did a great job, right?

• 32:22Jack Altman?

  Yeah, it's actually a good reframe of the whole problem, which is of course it's better to be as multi-product as early as possible as you can.

• 32:29Speaker 00

  If you can, right?

• 32:30Jack Altman?

  And it kind of good, it's kind of the same. It's kind of the same ethos as what you said around the fat startup. It's like, yeah, great. If you can raise a hundred and have Keith on your board.

• 32:36Speaker 00

  Do it, man. Do it. Why wouldn't you like?

• 32:38Jack Altman?

  But otherwise, here's a, here's a way to do it the other way.

• 32:40Speaker 00

  Yeah.

• 32:41Jack Altman?

  Yeah.

• 32:42Speaker 00

  So, yeah, I mean, I think basically that rather than have dogma, the better thing for any smart founder who's a systems thinker is, I mean, a systems thinker coming in here is not going to watch you and me on a podcast being like, oh, they said this.

• 32:55Jack Altman?

  Yeah.

• 32:55Speaker 00

  A true systems thinker will actually just make up their own mind.

• 32:58Jack Altman?

  Yeah. Yeah. Um, okay. Outside of voice, outside of AI, there's a lot of interest going into hard tech broadly speaking right now. And I think, which is amazing. Obviously, we've got like SpaceX and Andorol, but like there's also another new crop of companies coming up that are leaving it. And so then you have a lot of the big VC firms putting a lot into it. And I've seen, you know, you've said Y C, you know, people will be like,

• 33:19Speaker 00

  About 10% now.

• 33:20Jack Altman?

  This is the Y C of hard tech. And you're like, we're the Y C of hard tech.

• 33:23Speaker 00

  Yeah.

• 33:23Jack Altman?

  So, yeah, talk to me about like hard tech. And I, I know it's grown for you. I've seen a bunch of really cool companies in recent batches doing it. But like, what's, what's on your mind there?

• 33:31Speaker 00

  Yeah, I, you know, the great thing about Y C is like, I think ultimately, you know, every startup founder should be thinking about how can I build a shelling point? And then having a shelling point is awesome because that's what Y C has. And it's like, if we can get really smart people, you know, whether it's hardware or software to come do this thing, like Demo Day, we have more than a billion dollars. I think it's going on 1.2 billion dollars a year in like, you know, relatively, like it's not totally captive. They don't have like contracts over it, but like, you know, consistently every single year, this number goes up, the amount of money that comes into Y C Demo Days. And so, and I don't know, I want that number to be 2 billion. I want that billion, number to be two and a half billion over the next five, 10 years. Like, we're going to keep growing that.

• 34:16Speaker 00

  And then in particular, hard tech is such an interesting, like sort of purple cow, especially at Demo Day. So, um, you know, the average, or sorry, the median Y C startup will end up raising, you know, a million to a million and a half bucks at Demo Day. But, um, You know, the harder tech companies that can show a lot of real commercial validation or technological breakthrough during those three or four months. I mean, they're raising three, five, 10, like 20, you know, it's like entirely possible to raise the amount of money you need to have a truly successful hard tech company just by coming to do Y C for three months. Because in why it's because we have this captive set of, you know, more than a billion

• 35:00Speaker 00

  dollars a year just focused on Y C companies. And the hard tech stuff is very compelling and, you know, we're seeing real success like SoluGen, Early, Astronis, there, boom, there are so many examples.

• 35:13Jack Altman?

  When you think about the hard tech segment, do you think of it as the same whole process for Y C? You recruit the companies the same way, you interview them the same way, you give them advice that's the same, you fund them the same, and it's just a different type of company? Or is there a bit or two that flips in a different way where you're like, actually, we take a slightly different set of advice or slightly different mindset with, you know, a satellite company versus with a A I for law company?

• 35:39Speaker 00

  Well, the great thing is, you know, every single partner at Y C does do hard tech. And we're starting to do more specialized programming around it. I mean, Andy Lapsa from Stoke Space came back and did a hard tech mini conference for this last batch, and we're going to keep doing that. I mean, the great thing about Y C is like, it's less about, you know, sort of the specific services, it's a lot more about like the mindset and, you know, being alongside a cross section of all the other sort of good, you know, really good builders. And, you know, you're just never alone in that respect. I mean, even look at any investor, it's like, once you make it to G P at a firm or something,

• 36:23Speaker 00

  like you're what, like eight years into your career, like, you know, the last time you wrote real code or like designed a real mechanical thing might be eight years ago. And, you know, what is that partner really going to do? You know, the Y C is not too different in that respect, but what Y C does have is just this, you know, phalanx of incredible hard tech companies who can be basically right there by your side. Like, my favorite thing is, when I did Y C, I

• 36:56Speaker 00

  I so needed help fundraising, like, you know, James Lindenbaum from Heroku came and helped me and like, you know, Serno de Bergerac, our seed round. And then about nine months later, after we raised the seed, he was running, you know, a Ruby on Rails hosting platform. And they were worried about not being able to support like some of the biggest rail sites on the web. And I happen to run one of the biggest rail sites on the web. So he said, Gary, can you give us your source code? I said, for you, yes. That's like the kind of stuff that you would do for a fellow YC batchmate.

• 37:31Jack Altman?

  Yeah, awesome.

• 37:32Speaker 00

  There's just no way you would do it for anyone else.

• 37:34Jack Altman?

  Totally. Yeah, the, the, the trust in there is just so valuable.

• 37:37Speaker 00

  Yeah.

• 37:39Jack Altman?

  There are, maybe in our, in our last little segment, I want to talk about sort of your involvement in politics and local government and the community outside YC. There is like a current, as of right now, there's a bit going about you saving, you know, the city. And there's these Batman calls at your name, which I think is very good. And I've done a couple myself. Hopefully by the time this is posted, it's either died down or it's gone hyperbolic in the other direction. But a lot of that, I think, is a result of you taking on a lot of causes that, you know, it's like, ah, I really want that solved, but I don't have the energy. And like, I'm glad that Gary's doing that. And like, I saw you doing this with, you know, education, you've done it with sort of like, you know,

• 38:21Jack Altman?

  having the city be clean and safe. You've done it with keeping tech companies in San Francisco. I know now you're spending time in DC and you're probably operating on a bunch of stuff at the national level that, you know, can't even talk about yet. But what is driving you to invest your time, which you don't have a lot of, into all this stuff around you outside YC?

• 38:41Speaker 00

  I guess what I realized is like, because of my childhood, which was relatively difficult, I actually am just wired differently. And I need like conflict in my life. I didn't really realize this until I actually need my, my limbic system really needs stimulation.

• 38:58Jack Altman?

  Like you grew up with conflict and so you need it to feel.

• 39:00Speaker 00

  Yeah. Yeah. Yeah. I just need a baseline radiation level of being on edge in order to like feel normal. So I did not realize this, but.

• 39:09Jack Altman?

  That's not the answer I thought you were gonna say.

• 39:10Speaker 00

  Oh, my God. I don't know. I mean, I think I got, I started getting involved in it. Mostly right during COVID and after. Some of it was, actually, there was this famous clubhouse that maybe you were on with Mike Solana. And then we had Chesa Boudin, the sitting DA at the time. And just hearing him lie through his teeth through clubhouse, you know. And maybe it was just like, you know, COVID, like, just isolation. Plus, like, hearing someone who's supposed to be a civil servant, someone who is supposed to be protecting people in our, in our society. Just come out and just lie to people, like, just very brazenly.

• 39:53Speaker 00

  I ended up meeting with Nancy Tang, who was a candidate who lost against him in the prior election. Went for a walk around in Noye Valley. And then, I guess, for me, like, my systems thinking started going and trying to understand, well, you know, why is it like this? How did it get here? What's the story? There's no bench, there's no, you know, there's, you know, Gavin Newsom went off to state. Ed Lee died. And then there was no sort of.

• 40:20Jack Altman?

  There was a vacuum.

• 40:21Speaker 00

  There was a vacuum of really strong leadership that was sort of holding up the city.

• 40:26Jack Altman?

  Yes.

• 40:27Speaker 00

  And so, once I understood that, it's like, you know, well, what do we do? Like, we have tech, we have tech money. Everyone's afraid to say anything. Like, do you remember what they would do to, like, you know, even the local press? Like, literally, the Chronicle would, you know, borderline libel Ron Conway, who's a close friend of ours. And it's like, unbelievable that they would do that. And so, you know, Nancy came to me and said, you know what? Here's, here's how it works. And then after that, you know, she got me involved in some people who were putting together the recall of Chesa Boudin.

• 41:01Jack Altman?

  This, this might be neither here nor there, but did you ever come up with a diagnosis for, like, aside from the vacuum of power? Like, why there was this sort of posturing that was going on where people were sort of seeming so self-righteous? While sort of like, you know, annihilating what, in my opinion, you know, destroying schools in the city and all this stuff? Like, do you ever get to what you thought was like, the root of what was there that needed to sort of be gutted?

• 41:27Speaker 00

  I mean, I hate to say it, but like the media angle was a big part of it. And we still have that problem there. You know, there is a little bit of a lack of truly independent and, you know, honest media in local San Francisco and in the Bay Area. You know, Voice of San Francisco with Susan Reynolds is like, you know, one of the few people who they're like really willing to say something about, you know, actually do the real investigative journalism about really, what is a moderate view, right? Like, there was no voice. And when it became unsafe to say even moderate reasonable things, like, I want to be able to walk down the street and not be worried about being assaulted.

• 42:10Jack Altman?

  Yeah.

• 42:10Speaker 00

  And it's like, you would be called a racist.

• 42:12Jack Altman?

  Yeah.

• 42:12Speaker 00

  And, uh,

• 42:13Jack Altman?

  Or like you want your kids to like learn regular stuff at school.

• 42:16Speaker 00

  I want them to learn algebra in middle school. And I don't have, I want to have to, you know, send them to a private school for them to get a good education. Like, these are like very, anywhere in the country, you could say that. And it's, you know what, like,

• 42:30Jack Altman?

  We just got upside down for a while.

• 42:31Speaker 00

  It's very upside down.

• 42:32Jack Altman?

  Do you feel like we're now through that? Do you think there's still, is there still a lot more work to do at the San Francisco level on this sentiment? Or do you think we're through what we needed there and now we can rebuild?

• 42:42Speaker 00

  I mean, my hope is that San Francisco, you know, I think, I feel really good about Leary, I feel really good about the current Board of Supervisors. And the interesting thing is even the unions, the, you know, public sector unions that supported this sort of, what they enforced was like perfect uniformity of ideology as a purity test, because then they knew, then they felt safe. They knew that, like, if someone said these things that were really out of whack with the public, they knew that they would not be defunded. For instance, their interests would not be, it all comes back to money and power.

• 43:17Jack Altman?

  Yeah.

• 43:18Speaker 00

  That's, that's sort of the classic system.

• 43:20Jack Altman?

  Yeah.

• 43:20Speaker 00

  And so I think it's changing. Even the unions themselves are sort of realizing like, oh yeah, we're not going to push watering down the curriculums in schools quite as hard in SFUSD anymore. And I think all, you know, nature's healing a bit. I mean, my hope is that San Francisco in the next 10 years, you know, the coolest thing would be if someone says, San Francisco Democrat. And like, people don't think like,

• 43:47Jack Altman?

  Right.

• 43:47Speaker 00

  You know, sort of downtown is for drug users and we don't want to teach kids math. They think, oh, like, that's, you know, a very reasonable thing to, you know, want. You know, San Francisco's beautiful town.

• 44:00Jack Altman?

  It could be like a model for the Democrats, like reclaiming like a good, moderate left position.

• 44:05Speaker 00

  Yeah. And it seems like sometimes intractable, especially at this moment. But on the other hand, like, like in startups and in politics, we way overestimate what we can do in one year. And we way underestimate what we can do in 10. So I, I'm fairly certain this is going to come together. It'll come together in San Francisco. It's going to come together in California. And if we can fix both our city and our state, then we got the country man.

• 44:30Jack Altman?

  Yep. So I guess, are there any other fights right now that are, you know, you talked about your Olympic system, like what, what are the fights you care about the most right now? Like, when you think about this at the local, state, national level, like what's, what do you have your eyes on right now is like the thing that you'd really hope to see get improved over the next year, three, five, whatever?

• 44:48Speaker 00

  Oh, well, I mean, locally, I think everything's going really well. I think at the state level, I'm just like learning a lot more about it now. There's a guy named David Crane, governed for California, who I'm learning a lot about Sacramento from him. And I think that we could potentially turn California. Like, I think that there's a big opportunity for someone at the governor level and at the AG level in the next, you know, five to 10 years.

• 45:16Jack Altman?

  Turn it the way San Francisco's going.

• 45:17Speaker 00

  Yeah, I think we can have, we can demand.

• 45:19Jack Altman?

  Cause there's stuff in LA and there's like a lot of other stuff.

• 45:21Speaker 00

  Yeah, totally. I mean, I think Rick Caruso coming out of LA could be a really, really great leader, either for LA or, you know, in Sacramento.

• 45:30Speaker 00

  I think, you know, Matt Mahan out of San Jose, incredible. Our own, very own Brooke Jenkins is a district attorney now. And I think that she would make incredible strides in Sacramento. And, you know, if you look at the past 20 years, you know, as California goes, like, those people end up becoming the leaders at a national level. But I can tell you, like, if Brooke Jenkins or Matt Mahan or Tin Ho, the DA out in Sacramento, or Rick Caruso, or any of these people make it all the way up there. I think that we're looking at a resurgence and abundance in the Democratic Party. And so it is possible.

• 46:08Jack Altman?

  Yeah. And then I guess last is national, but I guess that's probably is a big fish.

• 46:11Speaker 00

  That's the final boss.

• 46:12Jack Altman?

  Yeah, that's the final boss.

• 46:13Speaker 00

  Yeah.

• 46:14Jack Altman?

  Maybe that comes over time.

• 46:14Speaker 00

  Ask me in 20, 30 years.

• 46:15Jack Altman?

  Yes, that's awesome. Well, Kerry, thanks a ton for doing this. This was really fun. I enjoyed this as always. So appreciate me getting time.

• 46:21Speaker 00

  We'll do it again.

• 46:22Jack Altman?

  Great.

• 46:22Speaker 00

  Thanks, man.