Running Y Combinator Like a Founder | Garry Tan | Ep. 7

1. 0:00 – 0:25

   Intro

   1. GTGarry Tan0:00

      and if you can get Keith Rabois to invest in your startup, you should do a fat startup.

   2. JAJack Altman0:03

      Yeah, exactly.

   3. GTGarry Tan0:04

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

   4. JAJack Altman0:11

      Yeah.

   5. GTGarry Tan0:11

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

   6. JAJack Altman0:14

      [upbeat music] All right, Garry, thank you so much for doing this. It's great to be here. I appreciate you making time for it.

   7. GTGarry Tan0:19

      Jack, thanks a lot for having me.

   8. JAJack Altman0:21

      Yeah, I know you're super busy, and, um, I'm really excited to have this conversation. Um,

2. 0:25 – 6:25

   Running YC like a founder

   1. JAJack Altman0:25

      you're now, I think, two years into running YC. Is that, that, that's about right? And you've really been running it like a founder, uh, from my perspective, and I kinda wanna start by getting inside your own mentality, and what's the headspace that's let 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, um, 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?

   2. GTGarry Tan0:53

      Definitely. I mean, the great thing about YC is that, um, we're, we, we need to go zero-based accounting. So literally, uh, 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. Um, 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.

   3. JAJack Altman1:27

      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?

   4. GTGarry Tan1:41

      I mean, I guess from an abstract standpoint, um, 'cause there are lots of specifics that I don't want to get into [chuckles] but, um, from the most abstract standpoint, like, I view YC as this, like, tree of prosperity. And then, um, you know, like it or not, every organization in the world, uh, no matter how dominant, could use, uh, a little bit of pruning. Like, this is a garden, and, uh, in order for... You know, if you have fruit trees in your backyard-

   5. JAJack Altman2:08

      Right

   6. GTGarry Tan2:08

      ... you know that, uh, 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.

   7. JAJack Altman2:20

      Totally.

   8. GTGarry Tan2:21

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

   9. JAJack Altman2:25

      Yeah.

   10. GTGarry Tan2:25

       It's really hard to say no to things and to people. And, um, I, you know, I think basically, culture is everything.

   11. JAJack Altman2:33

       Yeah.

   12. GTGarry Tan2:33

       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-

   13. JAJack Altman2:41

       Yeah

   14. GTGarry Tan2:41

       ... these are things that, as a young founder, people tell you this. And then, you know, well, you, you ran [chuckles] ... I mean, you created a high, uh, you know, one of the defining SaaS companies in, uh, HR software. So, you know, you, you probably, like, totally immersed yourself in that and, like, spent a lot of time trying to help people figure this out.

   15. JAJack Altman2:59

       Totally.

   16. GTGarry Tan3:00

       How do you at-- 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, 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.

   17. JAJack Altman3:16

       Yeah. I mean, one of the things, as I'm looking back, I guess YC's been around for twenty years, and, you know, when Paul and Jessica and, you know, the, 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 twenty tens, there was all this, uh, like, expansionary stuff that happened.

   18. GTGarry Tan3:37

       Totally.

   19. JAJack Altman3:38

       And I guess looking back, a lot of that was a big part of what, you know, has p- helped YC maybe blossom into what it is. But then, you know, there be, there became this moment, then, kinda like you're saying, of recentering 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-

   20. GTGarry Tan4:01

       Yeah, why not?

   21. JAJack Altman4:01

       ... fifteen years later, there's another pruning cycle-

   22. GTGarry Tan4:02

       Totally

   23. JAJack Altman4:03

       ... that happens?

   24. GTGarry Tan4:03

       I don't know. That's, uh, that's life, right? Like, you try a bunch of stuff, some things work, sometimes, sometimes things go kind of awry. Um, I will really, like... You know, it's actually not a surprise to me at all that, like, subsequent to, uh, 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, uh, founder mode energy before we even knew that it was called founder mode energy [chuckles] 'cause 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, uh, in the investing world, and they go on your board. 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 YC, so we're deeply thankful for that.

   25. JAJack Altman5:29

       Yeah. Yeah.

   26. GTGarry Tan5:29

       Yeah. But, you know, I mean, never say never, and, um, I guess the weirdest thing that I hope for YC is that if we do it right, um, 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.

   27. JAJack Altman5:46

       Totally.

   28. GTGarry Tan5:46

       Right? Like, you know, 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.

   29. JAJack Altman5:57

       Yeah.

   30. GTGarry Tan5:57

       And then it's already... You know, there, there are, like, entire branches that are grown in a, a way that, you know, might not be ideal, might not fruit, right?
3. 6:25 – 12:40

   Focusing on growth and prosperity

   1. JAJack Altman6:26

      um, question of mine is as you think about growing YC, do you think about, um, do you think about capturing more of sort of the market making? Or maybe that's the wrong sort of language, but making YC a product that even more founders want to have? Like, is that one of the drivers as you think about what's next?

   2. GTGarry Tan6:43

      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, uh, the funny thing about it is, like, actually both are at play, right? There is a zero-sum aspect of this, and that, um, 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. Um, and, you know, I think that YC actually makes sense for those people, and, you know, we're gonna get some of them.

   3. JAJack Altman7:14

      Mm-hmm.

   4. GTGarry Tan7:14

      And, you know, on that side, we're, you know, competing with some of the top VC names in the world-

   5. JAJack Altman7:19

      For sure

   6. GTGarry Tan7:20

      ... and the top seed investors like, you know, and that's okay. I don't know. It's not the end of the world.

   7. JAJack Altman7:24

      Yep.

   8. GTGarry Tan7:24

      Like, you know, Jack, when you get a great, super cracked founder-

   9. JAJack Altman7:28

      I'm just like, you should also do YC

   10. GTGarry Tan7:30

       ... it's gonna be great.

   11. JAJack Altman7:30

       Yeah, exactly.

   12. GTGarry Tan7:30

       Yeah, which would be great.

   13. JAJack Altman7:31

       Yeah.

   14. GTGarry Tan7:31

       Yeah, I mean, um, so there's that, and then the really fun part, the part that I think is the most generative, sort of the, the thing that I think if you talk to the YC partners, like, we're very excited about is that, uh, you know, we're gonna do that. But also like, you know, we want to create, uh, 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, um, mispriced asset. Like, you know, lot-- there are lots of things that are mispriced, but, uh, highly technical young founders are sort of the most mispriced-

   15. JAJack Altman8:08

       Yes

   16. GTGarry Tan8:08

       ... right? Um-

   17. JAJack Altman8:09

       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's been like a, 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, what's inside the mind as you think about expanding the aperture of who YC appeals to?

   18. GTGarry Tan8:52

       Man, I mean, I, I think it's a hard question. I mean, the, the hardest question is like, what do you focus on? And if you focus on all of them, like, are you, you know, really, uh, focusing on any of them, actually? Um, I think it's pretty clear that we're really focused on technical founders, but, um, one of the things we, uh, 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.

   19. JAJack Altman9:26

       Yeah.

   20. GTGarry Tan9:26

       Uh, uh, you-- the weirdest thing, I mean, in the political landscape today, is realizing, and, you know, y- you can open up your X feed and see it every single day, like, there are people who are absolutely brilliant, hundred fifty IQ-

   21. JAJack Altman9:39

       Yeah

   22. GTGarry Tan9:39

       ... great engineers who get rejected from-

   23. JAJack Altman9:41

       Totally

   24. GTGarry Tan9:41

       ... fifteen schools straight, right?

   25. JAJack Altman9:43

       Yeah.

   26. GTGarry Tan9:43

       And, uh-

   27. JAJack Altman9:43

       Yeah

   28. GTGarry Tan9:44

       ... you know, that's not fair.

   29. JAJack Altman9:45

       I actually spent time talking to the guy who went, uh, viral with that tweet-

   30. GTGarry Tan9:48

       Oh, yeah
4. 12:40 – 14:34

   Incredible pick rate

   1. JAJack Altman12:40

      but the one last point here that I wanted to get to was, um, somebody recently made the point that, um, YC's, um, correct decision rate is very good, 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 to-

   2. GTGarry Tan12:59

      Can't catch 'em all. [chuckles]

   3. JAJack Altman13:00

      Can't catch 'em 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, um, do you think that that is something to do with, um, 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?

   4. GTGarry Tan13:29

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

   5. JAJack Altman13:51

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

   6. GTGarry Tan13:52

      Just, like, go start a company. Like, great founders wanna be around other people who have actually been there. It's like that Jay-Z line, "Everybody wanna 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, you know, ego, status, money game, it's like, go create things of great value, and then that, that's really just all what I want YC to be. It's like someone's gonna-- 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 gonna say, like, necessarily things that you want. Like, they're not gonna, like, validate your bad decisions. They're gonna say, like, "This is what I think you should do," but it's like a soft advisor thing, right?

5. 14:34 – 19:21

   Role of the Group Partner

   1. JAJack Altman14:34

      Yeah.

   2. GTGarry Tan14:34

      Well, uh-

   3. JAJack Altman14:34

      What is the nature of that role, actually? And that, to me, wh- when you think about the YC partner, YC founder relationship, um, and I think back on mine, I was very lucky. I had Dalton Caldwell and Aaron Harris. Both were great. And, um, I experienced them as, like, pretty direct, pretty honest. Like, it wasn't like kid gloves or anything like that-

   4. GTGarry Tan14:53

      Totally

   5. JAJack Altman14:53

      ... in a positive way. Is that like the e- 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 gonna be..." Uh, w- what, what are the words you use when you think about, you know, talking to your team about how everyone should show up?

   6. GTGarry Tan15:06

      I mean, we should sort of be, like, benevolent, like bodhisattvas, in a way.

   7. JAJack Altman15:11

      Sure.

   8. GTGarry Tan15:11

      It's like, okay, here's- you're on this path, and like, the hard part is, like, you know, bodhisattva's probably overstating it 'cause it's like we don't know the path. Like, we just know how not to die, [chuckles] actually. That's the part that we can really help with. Um, whereas, you know... And I think that makes a really big difference, like, you know, uh, losing your co-founder over dumb arguments, uh, you know, picking the wrong investor, like, messing things up in terms of your first hires, like, uh, 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.

   9. JAJack Altman15:45

      Yeah.

   10. GTGarry Tan15:46

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

   11. JAJack Altman15:52

       Yep.

   12. GTGarry Tan15:53

       Um, but-

   13. JAJack Altman15:53

       That's one of the things I loved is w- 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, run out of money." It was, like, very simple, but it was constant.

   14. GTGarry Tan16:05

       Yeah.

   15. JAJack Altman16:06

       And-

   16. GTGarry Tan16:06

       And it's hard to do because, uh, you know, what, what happens is, um, 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." [chuckles]

   17. JAJack Altman16:16

       Yeah, totally.

   18. GTGarry Tan16:17

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

   19. JAJack Altman16:23

       Well, it's hard 'cause there, there-- 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, um, 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.

   20. GTGarry Tan16:45

       That's just people who haven't seen enough things-

   21. JAJack Altman16:46

       So-

   22. GTGarry Tan16:46

       ... probably. [chuckles]

   23. JAJack Altman16:47

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

   24. GTGarry Tan16:50

       Right.

   25. JAJack Altman16:50

       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?

   26. GTGarry Tan16:58

       I mean, some of it is like, it's not our-- we're not the boss, and so, uh, you know, there's this famous quote e- even from PG, uh, I think he was, uh, advising s- uh, Jason Tan from Civics Science. Um, it's in that book by Randall Stross-

   27. JAJack Altman17:13

       Mm

   28. GTGarry Tan17:13

       ... about YC, uh, 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. [chuckles] Like, if you want to drive off the cliff, go right ahead."

   29. JAJack Altman17:24

       Wow.

   30. GTGarry Tan17:25

       Uh, which is like-
6. 19:21 – 20:53

   Lean vs fat startups

   1. GTGarry Tan19:21

      Yeah.

   2. JAJack Altman19:21

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

   3. GTGarry Tan19:32

      Totally

   4. JAJack Altman19:32

      ... but they're, they're, 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, comp- you, you push something into the world.

   5. GTGarry Tan19:54

      Totally.

   6. JAJack Altman19:55

      Um, 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 another?

   7. GTGarry Tan20:02

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

   8. JAJack Altman20:05

      Yeah, exactly.

   9. GTGarry Tan20:06

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

   10. JAJack Altman20:14

       Yeah.

   11. GTGarry Tan20:14

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

   12. JAJack Altman20:17

       Yeah

   13. GTGarry Tan20:17

       ... um, because they're, you know... I mean, I think that's like network and investor dependent, right?

   14. JAJack Altman20:22

       Yeah.

   15. GTGarry Tan20:22

       Like, if you have access directly to Vinod-

   16. JAJack Altman20:24

       Yeah

   17. GTGarry Tan20:25

       ... yeah, you should do a fat startup.

   18. JAJack Altman20:26

       Yeah.

   19. GTGarry Tan20:26

       Like, if, if he wants you to do one, like, you've been blessed, right?

   20. JAJack Altman20:30

       Yeah.

   21. GTGarry Tan20:30

       And then for the great many, you know, millions or billions of the rest of us on the planet, like-

   22. JAJack Altman20:35

       All of that

   23. GTGarry Tan20:36

       ... 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've got to do it lean.

   24. JAJack Altman20:45

       Yes. I love that. Um, a couple more, 'cause, um, I've got-

   25. GTGarry Tan20:49

       Oh, please

   26. JAJack Altman20:50

       ... a couple more on founders and startups.

   27. GTGarry Tan20:51

       These are good questions.

   28. JAJack Altman20:52

       Um,

7. 20:53 – 25:18

   Archetypes of special founders

   1. JAJack Altman20:53

      'cause you probably, at the moment, you know, we're- if you, you go in and out, but you've, you're right, you know, in 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 the couple 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.

   2. GTGarry Tan21:26

      I mean, the founders that I've been able... I've, I've been lucky to run across, especially the last couple of years, um, 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, uh, 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 cust- uh, with real customers, like, you know, basically, that yanking turns into, like, they're pushing [chuckles] like-

   3. JAJack Altman21:59

      Yes

   4. GTGarry Tan21:59

      ... they're, and that's product-market fit.

   5. JAJack Altman22:01

      Mm-hmm.

   6. GTGarry Tan22:01

      So, uh-

   7. JAJack Altman22:02

      Yeah, I think of that-

   8. GTGarry Tan22:03

      So hard

   9. JAJack Altman22:03

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

   10. GTGarry Tan22:08

       Right. 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.

   11. JAJack Altman22:19

       You know what it's like?

   12. GTGarry Tan22:19

       It's like they're very perceptive.

   13. JAJack Altman22:20

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

   14. GTGarry Tan22:23

       Yeah.

   15. JAJack Altman22:23

       It's like that, kind of.

   16. GTGarry Tan22:24

       Yeah, yeah, yeah. Totally.

   17. JAJack Altman22:25

       Okay.

   18. GTGarry Tan22:25

       I think that's exactly how that works.

   19. JAJack Altman22:26

       Yeah.

   20. GTGarry Tan22:27

       Yeah.

   21. JAJack Altman22:27

       Yeah.

   22. GTGarry Tan22:27

       And then, so it's, it's odd because, like, the, the cargo cult around great founders is like: Oh, let me listen less.

   23. JAJack Altman22:33

       Yeah.

   24. GTGarry Tan22:33

       And it's like: Oh, no, no, no, actually, you have to listen ten times more than the other people who don't listen.

   25. JAJack Altman22:38

       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.

   26. GTGarry Tan22:53

       Yeah.

   27. JAJack Altman22:53

       So how do you do that?

   28. GTGarry Tan22:54

       I mean, sometimes you just hear their other stories, and, you know, spiky people are just spiky in all sorts of weird ways. Um, like Serena, uh, Gay from, um, DataCurve is, like, one of my favorite recent founders from the last year. Uh, you know, they dropped out of Waterloo at, I think, age nineteen or twenty, and then she had already built, like, one of the number one, uh, rock climbing apps in the App Store [chuckles] -

   29. JAJack Altman23:19

       Wow

   30. GTGarry Tan23:19

       ... at, like, sixteen or something. [chuckles] So you're like: Oh, yeah, these people have very, like, they're like an, you know, sort of a mi- like, they're an inch wide and, like, a mile deep on very specific things.
8. 25:18 – 33:00

   Rule changes because of AI

   1. JAJack Altman25:18

      the recent sort of, like, AI boom has led to, I think, you know, amazing things for our industry, obviously, and, uh, most YC companies now, I would say, are using AI to some extent. Can you talk a little bit about what you're seeing, um, for them and their experience? And so like, you know, a couple 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, are 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 nineteen people going after the same good idea. 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?

   2. GTGarry Tan26:18

      I guess the wild thing is, um, people seem to really need a good claim. Like, there's a, a great, uh, medical billing company. Uh, I mean, there are many, uh, really great medical billing companies. There, there's one recently that I met who they now make the claim that, um, if you are running one of these, like, ten or fifteen-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.

   3. JAJack Altman26:45

      Mm-hmm.

   4. GTGarry Tan26:45

      Um, you just, with their, their software, you can, uh, have one back office person. [chuckles]

   5. JAJack Altman26:53

      Mm-hmm.

   6. GTGarry Tan26:53

      Like, so you can have mainly clinicians and, like, one back office person per clinic. [chuckles] 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.

   7. JAJack Altman27:06

      Yeah.

   8. GTGarry Tan27:07

      And, uh, so that, that I don't think was true. I mean, I think, um-

   9. JAJack Altman27:11

      And people believe you-

   10. GTGarry Tan27:12

       Yeah

   11. JAJack Altman27:12

       ... which is what's crazy. Well, it's true.

   12. GTGarry Tan27:13

       You show them a demo.

   13. JAJack Altman27:14

       Yeah.

   14. GTGarry Tan27:14

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

   15. JAJack Altman27:25

       Mm-hmm.

   16. GTGarry Tan27:25

       Um, and then I guess we'll see. Like, uh, 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 a hundred? You know, as the models get smarter and smarter, what's going to happen?

   17. JAJack Altman27:43

       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?

   18. GTGarry Tan27:56

       I mean, I think short of believing that AGI will happen and, uh, or ASI will happen, and, you know, none-

   19. JAJack Altman28:06

       And no rules matter

   20. GTGarry Tan28:06

       ... no software will exist again-

   21. JAJack Altman28:08

       Yeah

   22. GTGarry Tan28:08

       ... um, I think all the standard rules still apply. Like, you know, i- it's the same. Uh, that's what I would say to a regulator, too.

   23. JAJack Altman28:15

       Mm-hmm.

   24. GTGarry Tan28:15

       It's like: You know what? This is just really, really good software-

   25. JAJack Altman28:18

       That's what I think. Just sick software

   26. GTGarry Tan28:20

       ... that's very, very accessible right now.

   27. JAJack Altman28:21

       Yeah. Yeah.

   28. GTGarry Tan28:22

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

   29. JAJack Altman28:36

       For sure.

   30. GTGarry Tan28:36

       Switching cost, data that, like, you know, you have access to that nobody else has, uh, brand, network effects. I mean, there's just, what? Like, five.
9. 33:00 – 37:40

   YC being the “YC of hard tech”

   1. JAJack Altman33:00

      outside of YC- outside of AI, um, there's a lot of interest going into hard tech, broadly speaking-

   2. GTGarry Tan33:05

      Oh, yeah

   3. JAJack Altman33:05

      ... right now, and I think, which is amazing. Obviously, we've got, like, SpaceX and Anduril, but, like, there's also another new crop of companies coming up that are leading 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 YC-- you know, people have been like, oh-

   4. GTGarry Tan33:19

      About ten percent now

   5. JAJack Altman33:20

      ... this is the YC of hard tech, and you're like: "We're the YC of hard tech."

   6. GTGarry Tan33:23

      Yeah, totally.

   7. JAJack Altman33:23

      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?

   8. GTGarry Tan33:31

      Yeah, I... You know, the great thing about YC is, like, I think ultimately, uh, you know, every startup founder should be thinking about: "How can I build a Schelling point?" And then having a Schelling point is awesome because that's what YC has. [chuckles] And so, like, if we can get really smart people, no, you know, whether it's hardware or software, to come do this thing, like, uh, Demo Day, we have more than a billion dollars. I think it's going on one point two billion dollars a year, and like, cap- you know, relatively, like, it's not totally captive. They don't have, like, contracts over it but, like, you know-

   9. JAJack Altman34:00

      Yeah

   10. GTGarry Tan34:00

       ... consistently, every single year, this number goes up, the amount of money that comes into YC Demo Days.

   11. JAJack Altman34:06

       Mm.

   12. GTGarry Tan34:07

       And so, and I don't know, I want that number to be two billion. I want that billion n-number to be two and a half billion, uh, over the next five, ten years. Like, we're gonna keep growing that. 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 YC startup will end up raising, you know, a million to a million and a half bucks-

   13. JAJack Altman34:29

       Mm-hmm

   14. GTGarry Tan34:29

       ... at Demo Day. But, um, you know, har- 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, ten-

   15. JAJack Altman34:44

       Yeah

   16. GTGarry Tan34:44

       ... like, twenty. You know, I, it's, like, entirely possible to raise the amount of money you need to have a truly successful hard tech company, uh, just by coming to do YC for three months. 'Cause, becau- and why? It's because we have this captive set of, you know, more than a billion dollars a year just focused on YC companies, and the hard tech stuff is very compelling, and we're s- you know, we're seeing real success. Like Solugen early, uh, Astranis, they're-

   17. JAJack Altman35:10

       Yeah

   18. GTGarry Tan35:11

       ... boom, there are so many examples.

   19. JAJack Altman35:13

       When you think about the hard tech segment, do you think of it as the same whole process for YC? 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 com- a slightly different set of advice or a slightly different mindset with, you know, a satellite company versus-

   20. GTGarry Tan35:37

       Yeah

   21. JAJack Altman35:37

       ... with a AI for law company?"

   22. GTGarry Tan35:40

       Well, the great thing is, uh, all, you know, every single partner at YC, uh, does do hard tech, and, um, you, we're starting to do more specialized programming around it. I mean, um, Andy Lapsa from Stoke Space came back and did a hard tech, uh, mini conference for this last batch, and we're gonna keep doing that. I mean, the great thing about YC is, like, it's less about, um, 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, um, 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 GP at a firm or something, like, you're, what, like, uh, 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, the YC is not too different in that respect, but what YC does have is-... just this, you know, phalanx [chuckles] of incredible hard tech companies who can be basically right there by your side. Like, um, my favorite thing is when I did YC, I, um, I so needed help fundraising, like, you know, James Lindenbaum from Heroku came and helped me, and like, you know, Cyrano de Bergerac, our seed round.

   23. JAJack Altman37:04

       Mm.

   24. GTGarry Tan37:04

       And then about nine months later, after we raised the seed, uh, he was running, uh, a, you know, a Ruby on Rails hosting platform, and, uh, they were worried about not being able to support like some of the biggest Rail sites on the web.

   25. JAJack Altman37:18

       Mm.

   26. GTGarry Tan37:18

       And I happened to run one of the biggest Rail sites on the web. So he said, "Garry, can you give us your source code?" And I said, "For you, yes." [chuckles] Like, that's like the kind of stuff that you would do for a fellow YC batchmate-

   27. JAJack Altman37:31

       Yeah, that's awesome.

   28. GTGarry Tan37:31

       -but like, there's just no way you would do it for anyone else.

   29. JAJack Altman37:34

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

   30. GTGarry Tan37:37

       Yeah.
10. 37:40 – 46:26

    Community and political involvement

    1. JAJack Altman37:40

       maybe in our, in our last little segment, I wanna talk about sort of your involvement in, um, politics and local government and the community outside YC. There's 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.

    2. GTGarry Tan37:57

       [laughs]

    3. JAJack Altman37:58

       Um, hopefully by the time this is posted, it's either died down or it's gone hyperbolic in the other direction.

    4. GTGarry Tan38:03

       [laughs]

    5. JAJack Altman38:03

       But, um, a lot of that, I think, is a result of you taking on a lot of causes, um, 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 Garry's doing that." And like, I saw you doing this with, you know, education. You've done it with sort of like, you know, m- 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?

    6. GTGarry Tan38:40

       Um, I guess what I realized is like, uh, because of my childhood, which was relatively difficult, I actually am just wired differently, and, uh, I need, like, conflict in my life. [chuckles] I didn't really realize this-

    7. JAJack Altman38:53

       Oh, wow!

    8. GTGarry Tan38:53

       -until-

    9. JAJack Altman38:54

       Yeah.

    10. GTGarry Tan38:54

        I actually need... My, my limbic system really needs stimulation.

    11. JAJack Altman38:58

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

    12. GTGarry Tan39:00

        Yeah.

    13. JAJack Altman39:01

        ... amazing.

    14. GTGarry Tan39:01

        Yeah, yeah. I just need a baseline radiation level-

    15. JAJack Altman39:03

        Yeah

    16. GTGarry Tan39:03

        -of, uh, being on edge in order to, like, feel normal.

    17. JAJack Altman39:07

        That's right. [chuckles]

    18. GTGarry Tan39:07

        [chuckles] So-

    19. JAJack Altman39:08

        Yeah

    20. GTGarry Tan39:08

        ... I d- I did not realize this, but-

    21. JAJack Altman39:09

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

    22. GTGarry Tan39:10

        Oh, my God.

    23. JAJack Altman39:11

        Yeah.

    24. GTGarry Tan39:11

        I don't know. I mean, I think, uh, I got- I started getting involved in it, um, mostly right aft- right during COVID and after. Um, eh, some of it was actually, there was this famous clubhouse that maybe you were on-

    25. JAJack Altman39:23

        Mm

    26. GTGarry Tan39:23

        ... with, uh, Mike Solana.

    27. JAJack Altman39:25

        Oh.

    28. GTGarry Tan39:25

        And then we had Chesa Boudin-

    29. JAJack Altman39:26

        Yes

    30. GTGarry Tan39:27

        ... the sitting DA at the time.

Episode duration: 46:26