How Internships Seed Most of YC's Billion-Dollar Startups

1. 0:00 – 3:20

   Intro

   1. GTGarry Tan0:00

      I have news for you guys. YC is throwing our first ever AI startup school in San Francisco on June 16th and 17th. Elon Musk, Satya Nadella, Sam Altman, Andrej Karpathy, Andrew Ng, and Fei-Fei Li are just a few of those confirmed. The world's top AI experts and founders who will teach you how to build the future. It's a free conference just for computer science grad students, undergrads, and new grads in AI and AI research. And we'll even cover your travel to SF. But you have to apply and space is limited. Link in the description to apply for a spot. Now, onto the video.

   2. HTHarj Taggar0:40

      Right now, if you're building a startup working on, like, cutting edge AI, even if you haven't found the right idea yet, why give up and go back to Google or college or something?

   3. JFJared Friedman0:50

      There's a high probability that your lucky break is just around the corner.

   4. HTHarj Taggar0:52

      Yeah.

   5. JFJared Friedman0:53

      Yeah.

   6. HTHarj Taggar0:53

      And this is kind of the most exciting thing you could be doing with your time.

   7. GTGarry Tan0:56

      Something's happening. I'm not happy with that. Let me go all the way to the edge, let me go into, you know, this outside world. And, uh, from first principles, understand the root cause of this and then, uh, you're going to discover all kinds of things that software and especially AI, the current form of AI, can actually solve. There is, um, a very important question that all founders have to ask when they commit to an idea and that is, "Uh, if not us, then who?" Welcome back to another episode of The Light Cone. I'm Gary. This is Jared, Diana, and Harj. And collectively, we have funded companies worth hundreds of billions of dollars often with just an idea, and that's what we're going to talk about today.

   8. JFJared Friedman1:45

      There are a lot of smart, technical people out there right now who are following along with, uh, this AI stuff. They see incredible potential in the technology. They totally buy that this is a special time to start a company. And the thing that is holding them back from doing so is they just don't have an idea that they're really excited to go and work on. I think we should just basically open source all the tricks that we've learned-

   9. GTGarry Tan2:08

      Yeah.

   10. JFJared Friedman2:08

       ... that we've so far only discussed in office hours but we should just, like, tell everyone. And hopefully this actually helps some people come up with great startup ideas.

   11. GTGarry Tan2:17

       Well, one of the blueprints that seems to be emerging is that you can't just stay too close to where you're at. Like, basically the default, uh, bad startup idea is lazy in that it's almost like a hackathon idea. Like, I read about it on X and, you know, a bunch of people are doing it and, you know, why don't I do that? Um, another version of it is just figuring out what is hot out there and jumping on a bandwagon. Jared, you know, one of the things you caution founders against is actually just maybe running with their hackathon idea.

   12. JFJared Friedman2:51

       Yeah. Often when people are thinking about startup ideas, they tend to gravitate towards things that seem very easy to build a first version of. Um, but most of the best startup ideas are actually, like, s- at- at least somewhat hard to actually ship the first version of. And so that would sort of be my meta lesson from d- d- doing this individually with founders is I'm always trying to push them in the direction of, like, harder, more ambitious ideas and

2. 3:20 – 4:38

   First version

   1. JFJared Friedman3:20

      their subconscious is trying to push them back in the direction of things that they can build in, like, a weekend.

   2. GTGarry Tan3:24

      I guess the interesting thing about it is, uh, you need to get out of the house. So rather than just do what is right in front of you, uh, you have to either aggressively introspect and look within into your history and what you are uniquely great at or you need to aggressively get out of the house into other places, uh, on the outside, being industry, being, uh, government, being other places that serve humanity in some way that... And that's not in your house either actually. So aggressively, you know, internal or aggressively outside. Um, so why don't we make that real by diving as deeply as we can into some specific examples what is within us already? There are lots of examples of people who already spent years and years to get all the way to the edge of understanding whether it's AI or some other field, uh, in the world, you know, and they did it either in their studies, in their research, or where they worked. Diana, I feel like you have a few really good examples.

   3. DHDiana Hu4:30

      Yeah. So basically the ex- examples here are of founders who had this very unique experience in

3. 4:38 – 10:55

   Examples

   1. DHDiana Hu4:38

      prior jobs they were working at and one of them is this company that I mentioned before called Salient. They're basically building a AI voice agent that does, uh, loan processing for auto debt collection. That is a bit of a esoteric idea and when I was working with the founders it took a bit of time to land on a good one. And this turned out to be a good one when I heard that Ari, the founder, learned about it because he used to work at Tesla and as part of being in the Tesla finance ops team, part of the problem with leasing Teslas was this whole process of getting all the payments back and it was all done very manually with all these business operation units that were outsourced. And he thought, "Oh, why not build a AI agent for that?" So that was really good and that ended up working really well and now they're servicing a bunch of large banks. That's a good one. Another one is, uh, which I also mentioned previously in another episode is the founders of Diode Computer. They're basically building the AI circuit board Copilot and their insight is that both of the founders were electrical engineers but also software engineers so that turned out to be a very unique gap.... intersection of skills that has, has not been, is not, that the world of software and hardware don't tend to talk to each other. So they had built circuits at Apple, at startups, and even custom processors. So they had a lot of experience, experience building very high-end electronics and they saw the gap and frustration of working with hardware engineers, that why didn't they do things like software? Why didn't the world get access? Why in the world of, uh, I have to parse through all these data sheets to verify all the components manually, that's the electrical engineer job. Why do I have to do that manually? Why, why not just get a LLM to parse and do all that verification, like in code with like QAing, right? So that was an insight and that was so unique to them because they were the only ones that had the unique experience of one of them being a super strong software engineer and the other one being super strong in hardware.

   2. GTGarry Tan6:53

      I think this is one of those cases where, um, starting a startup that actually turns out to be successful requires you to, uh, be similar to a, uh, PhD or post-doc researcher in some sense, where you have to go all the way to the edge of what human beings know and understand. And then instead of like, you know, publishing research that-

   3. JFJared Friedman7:14

      (laughs)

   4. GTGarry Tan7:14

      ... you know, sort of pokes that edge-

   5. DHDiana Hu7:15

      Hmm.

   6. GTGarry Tan7:15

      ... out a little bit, instead it's like you're creating a product or service that people really want. (laughs)

   7. DHDiana Hu7:21

      To that point of being the PhD level of expert in that world, when founders get into this, they have such a unique fit with founder market fit. They're the best in the world, literally there's no one like, uh, like them that had that work experience and that happened to want to do a startup, that happened to now be really interested in AI, and there's this moment in time that is only N=1, that's only them that can do it, which is cool.

   8. GTGarry Tan7:46

      Yeah. ARI being in a place like Tesla is always very interesting to think about because, you know, there is, um, a very important question that all founders have to ask, uh, when they commit to an idea, and that is, uh, if not us, then who? (laughs)

   9. DHDiana Hu8:00

      Do you wanna, do you wanna talk about Spur, Jared?

   10. JFJared Friedman8:03

       Sure. So Spur is building an AI QA agent. So the way testing works now is if you have a large company, you probably have QA engineers who like write tests to test your software and they're just building an AI agent that writes the tests for you. And the way they came up with the idea is one of the founders worked at Figma, which has like a notoriously complex front end that's very hard to test, and she realized that the engineers were spending a ton of time testing the front end and writing and maintaining tests for it, and that AI just like obviously would enable you to automate a l-... How did that work?

   11. GTGarry Tan8:34

       I guess Figma is a really good place to sort of come out of in that, you know, if you're already at the edge of design and collaboration, you know, plus this AI thing sort of happens, you already have exposure to the right customers and know what the people at the edge are doing because-

   12. JFJared Friedman8:50

       Totally.

   13. GTGarry Tan8:50

       ... you're at the edge. I have a kind of crazier one, which, um, might be heartening to some of the people in the audience in that this is probably my youngest team I've ever funded.

   14. JFJared Friedman8:58

       Oh, how old were they?

   15. GTGarry Tan8:59

       They were 19. They dropped out of freshman year at University of Waterloo, uh, this company called Data Curve. And actually, uh, one of a few pivots, they actually came in as a company called Uncle GPT, and it was sort of this, uh, toy hackathon idea really, like I think they literally won a hackathon with the idea. Your sort of standard ChatGPT wrapper, back when wrapper was the pejorative that everyone was saying. Um, but, you know, the deeper problem was people didn't really want it. It was a really cool demo but there weren't customers that were willing to pay for it and use it all the time. Um, and then during the batch they actually became, um, AI for product managers. To go back to what we were saying earlier, it's sort of, that again is a not leaving the house enough sort of idea for them because, uh, neither of them as 19 year olds had been product managers. So it's actually very, very hard to make software or products for pe- you know, people and, uh, teams where you actually don't have direct experience or knowledge of, uh, of it. And so luckily, you know, and this is maybe a really good example of looking back within, uh, the founder actually, you know, she actually was an intern for Cohere which was all the way out on the edge in terms of LLMs and cogen. And so she had already been working on, uh, data tools and, you know, producing synthetic and real data for, uh, large language models for Cohere and she went back to her old boss and, uh, they said, "Hey, this is what we need." And she said, "Oh, well, I could build that." And so now she's basically off, off and running. I mean, she had a great demo day and then she's making mid to high seven figures, uh, for a company that just started, uh, June of last year.

   16. JFJared Friedman10:45

       I have noticed this pattern with a lot of startup founders. Whenever I have a team in the batch that's pivoting and they do the office hours where they're like, you know, "Lost confidence

4. 10:55 – 12:35

   Pivoting

   1. JFJared Friedman10:55

      in my old idea. What should I go work on now?" Like the first note in my decision tree when I'm trying to like help them find a new idea is like are the founders experts in anything? Because if the founders are experts in anything then like often that's the place to look for, for ideas first. And the thing that I've noticed is that it's often surprisingly hard for the founders to actually know what they themselves are experts in and sometimes you kind of have to pull out of them the, their, their actual areas of expertise.

   2. GTGarry Tan11:23

      This is why it's extra hard for, uh, 19 year olds.

   3. JFJared Friedman11:27

      Yeah.

   4. GTGarry Tan11:27

      But at the same time that's part of the reason why I really love this example, it's, you know, that founder, uh, just had to reach back into her internship from the prior summer (laughs) and there was something lying in plain sight there.

   5. DHDiana Hu11:39

      I think, uh, what you're saying about that I, I seen it a lot. I think a lot of times when founders come in into these office hours with us, it's almost a bit of a allergic reaction to what they were doing by definitions because they were experts on work and grinded out years and years. They're like, "Oh, I don't want to do another-"

   6. JFJared Friedman11:55

      Another, yes.

   7. DHDiana Hu11:56

      "... decade on this thing that I put all this time."

   8. JFJared Friedman11:58

      It's exactly that. Yeah.

   9. DHDiana Hu11:58

      It's like, "This is so boring."

   10. JFJared Friedman11:59

       Boring and they want to chase some shiny object-

   11. DHDiana Hu12:01

       Yeah.

   12. JFJared Friedman12:01

       ... that they don't know anything about.

   13. DHDiana Hu12:03

       ... sort of this, uh-

   14. JFJared Friedman12:04

       (laughs)

   15. DHDiana Hu12:04

       ... the grass is greener. But then they sound so much smarter when they talk about that particular domain. And then when you kind of reflect it back to them, and they're like, "Oh, yeah, you're right." It's like, I'd never heard anyone go so deep into this as what you eloquently have said, versus going over the shiny idea, which is very surface level of insight.

   16. JFJared Friedman12:23

       And internships is another interesting meta point here. I mean, some huge percentage of YC's billion-dollar companies can be traced directly back to, not just a job, but specifically an internship that one of the founders

5. 12:35 – 22:20

   Internships

   1. JFJared Friedman12:35

      had. And so maybe, like, a meta point is, like, if you're, like, in college (laughs) -

   2. DHDiana Hu12:40

      (laughs)

   3. JFJared Friedman12:40

      ... and you want to be in a place to have good startup ideas, like, do internships at, like, really cool companies that are on the bleeding edge of something, 'cause that's, like, a really, like, tried and true path to get you a, a great startup idea.

   4. DHDiana Hu12:51

      I think the other meta point is also being picky at where you end up working. I mean, the example with, uh, the founder of DataCurve working at Cohere. Cohere is at the bleeding edge. The founder of Cohere was one of the authors of the All Attention You Could Need paper, which is the seminal paper that pretty much created this whole AI boom now. She was working there. Another good example I have is this other company called David.AI. The founders were working at Scale, and Scale is at the bl- bleeding edge, or providing all datasets for, right now, the AI boom as well. And David.AI found this niche where Scale wasn't going into, which is wha- the scarcity with datasets around multimodal data, with speaker-separated audio, and going deeper into that, because Scale got very deep into more of the LLM world. So, that turned out to be good. So, kind of to your same point, kind of Cohere and here in this case with having worked at Cohere/now Scale, working on the bleeding edge. You get to find high quality problems that are going to be the future.

   5. GTGarry Tan14:00

      So, that's not the only way to look within. Uh, maybe the one that people really look to and is a little bit more obvious is, what are things that you want to see in the world that you could see yourself just working on for the rest of your life? You know, there'll be dragons for this. But on the other hand, we have some really noteworthy examples of companies that, uh, have really found something, have made something people want.

   6. JFJared Friedman14:25

      I have, um, one story in particular that I share. This story really, like, stuck with me. It's about a company called Can of Soup. We funded Can of Soup, and the founder, Gabriel, had been an early engineer at Substack, which is a company we founded y- ye- years earlier. And very early on, he, like, lost confidence in the idea that we had funded him for. And then he kind of wandered in the wilderness in sort of a pivot hell period, where he was, like, trying to come up with a new idea in sort of, sort of an artificial way, as often happens when founders are pivoting. And he was looking at these various, like, B2B SaaS ideas that were all totally plausible, but he just wasn't really excited about any of them. And he went on a walk with his old boss, uh, Chris, the, the CEO of Substack, and s- um, Chris gave him a piece of advice that's really stuck with me. Gabriel pitched him one of these B2B SaaS ideas, and Chris was like, "Who cares? Work on something that captures the human imagination." Um, and that was the prompt that got Gabriel to just start thinking about, like, a much bigger idea that he would actually be excited to work on for, for, like, a really long time. And that's what sort of led him down the path of coming up with Can of Soup, which is this, like, AI Instagram-like thing that's, like, a totally new kind of social network, and it's a really big, crazy ambitious idea. We don't know if it's gonna work yet, but it's, like, super interesting and, like, so much cooler than the sort of, like, manufactured B2B SaaS ideas.

   7. GTGarry Tan15:57

      I mean, social networks seem like it's, uh, pretty ripe for things that people really want to work on. Um, you know, one of my favorite AI companies right now is called Happenstance. The founder was a Apple AI researcher, sold his last startup, and then he started realizing, especially once, like, word2vec and vector databases started coming out that, you know, when you use things like LinkedIn, how often is it that you're, like, typing something that you're looking for, and it just, you know... I think it's just still using plain old plaintext search. Like, I think it's just using indices from MySQL for all we know. It's literally not smart. And, um, the thing about LLMs and especially... You know, LLMs plus vector search now mean that the, the search engine itself can be so much more intelligent. And so, you know, I, I'm always trying to connect people in the batch to people who could buy their thing or who could help them with access or all of that. And then Happenstance now is just this wild thing where I can type almost anything, more or less in a fuzzy way. I can even describe the people I'm trying to help. I can even describe sort of the, the level or area inside the company I think I want to connect this founder to, and it'll just figure all of that stuff out. It'll write the SQL queries and then, uh, you know, use its own, you know, a mix of, uh, vector search, LLMs, and SQL to find those people in a way that, like, LinkedIn search just fails 10 times out of 10 for some of these really complex queries.

   8. DHDiana Hu17:27

      Part of our job is kind of helping founders to think bigger, because the whole process of starting a startup's already scary. And sometimes founders start with, like, a very small idea that could be inconsequential, but if you 10x it, then how could the world change? And I think, Jared, you had some really good...

   9. GTGarry Tan17:46

      ... example for this one?

   10. JFJared Friedman17:48

       I do. And incidentally, if you're looking for a startup idea, what, one thing you should definitely do is you should go and read or reread Paul Graham's essay called How to Get Startup Ideas, which is really kind of a definitive work on the, on the topic. And he talks about this concept called blinders, where y- if you're looking for a startup idea, you tend to have blinders on where your subconscious doesn't even allow you to see certain ideas because they seem too ambitious and too scary. And so you don't even, they don't even consciously bubble to the surface for you to be able to, like, decide if you want to work on them or not. And a, a great example I have of this, a company called EasyDubs. EasyDubs is building the universal translator, like from Star Trek. So imagine, um, you go to Japan but you don't speak Japanese and you want to have a conversation with someone who only speaks Japanese. You can use EasyDubs and it'll translate, like, simultaneously and in real time, so you can have a real-time conversation with somebody who speaks a different language.

   11. HTHarj Taggar18:43

       So one of the, um, common things people run into when they go through this path of idea is just what we said before. Like, "I, I really don't have any expertise. I've mined everything I can. I've mined all my experiences and I can't generate a good startup idea that way." And, um, that then takes you to, like, Gary's point around, like, you have to get outside of the house and you have to start putting in the work to, like, build the expertise. And so g- I feel like actually our advice to startups who are in the batch when they're going through this path will often change. It's, like, stop thinking about kind of what your, like-

   12. GTGarry Tan19:14

       Yes.

   13. HTHarj Taggar19:14

       ... two-week revenue goals are and start treating yourself as researchers and just try and, like, build expertise in, um, in something in the hope that you find startup ideas. I he- I have a story on, on that type of way of generating an idea. It's, um, a company called Egress Health and they spent a while pivoting and trying to find an idea, weren't kind of landing on anything-

   14. JFJared Friedman19:36

       Mm-hmm.

   15. HTHarj Taggar19:36

       ... that worked really well. And so I think one of their parents, I think it was, um, one of the founders' mothers, like, is a dentist who ran her own sort of small dentist office, uh, and he just went to work with her for a day just to kind of see, like, how does a dentist office work and, like, i- is there anything that software could do better? And he realized a lot of the admin work involved in sort of, um, insurance, um, processing someone's insurance and pre-authorizing them and all of this work was just, like, routine that could really be, um, processed away by an LLM. And so they started working on that, they started building an LLM-powered back office for dentists, uh, and it's working, like, really, really well. (laughs) Like-

   16. JFJared Friedman20:15

       That's so cool.

   17. HTHarj Taggar20:16

       ... yeah.

   18. JFJared Friedman20:18

       I, I, I love it when founders end up in this branch of the decision tree to find a startup idea because through them, I get to learn about all these corners-

   19. HTHarj Taggar20:27

       (laughs)

   20. JFJared Friedman20:27

       ... of the world-

   21. HTHarj Taggar20:28

       Yeah.

   22. JFJared Friedman20:28

       ... and, like, think about where there might be interesting problems. I, there, there's a couple parts about that story that I want to kind of pull out, Harj. One is, um, like, using family connections. Like, a lot of our best startup ideas, like, a, a, a lot of YC's, like, billion dollar startups, literally it was, like, the founder's parent or uncle or cousin or brother or son or, like, old college roommate or just some, like, random connection that was, like, just enough of an opening-

   23. HTHarj Taggar20:54

       Yeah.

   24. JFJared Friedman20:54

       ... to, like, lead them to an interesting place.

   25. GTGarry Tan20:57

       It's surprising how important that is. You know, basically you could cold email a thousand people-

   26. JFJared Friedman21:03

       Yeah.

   27. GTGarry Tan21:03

       ... sometimes and get literally zero responses, but if you have someone who you're going to see every Thanksgiving-

   28. JFJared Friedman21:09

       (laughs)

   29. GTGarry Tan21:09

       ... uh- ... I think they're going to give you some access.

   30. JFJared Friedman21:11

       (laughs)
6. 22:20 – 37:35

   Going undercover

   1. JFJared Friedman22:20

      fricking gold.

   2. HTHarj Taggar22:20

      Yeah.

   3. JFJared Friedman22:21

      Like, you're, you're going to discover something cool.

   4. GTGarry Tan22:24

      I think it's this concept of, uh, going undercover as a undercover secret agent to learn all the deep secrets about a industry which is all kept kind of befo- behind closed doors for good reasons outside of the outsiders. But because you have this special connection with a family member or someone like that or, or sometimes founders are very charming and they get in through that as well. I've had one example like that. And you, you can kind of learn a lot about these esoteric industries. One example is this company called Happy Robot. They're basically building AI agents for, uh, coordinating logistic for truckers. They don't come from trucking, such a esoteric world from them. It, the founders are Spanish which is, like, very far removed from this and PhD students and the way they landed onto that is just the founders are very personable. They, they're very friendly and when you talk to them, you want to be friends with them. Well, the good news is, uh, even if you aren't connected by family or friends-

   5. HTHarj Taggar23:24

      (laughs)

   6. JFJared Friedman23:25

      (laughs)

   7. GTGarry Tan23:25

      ... you, you might also not be friendly-

   8. JFJared Friedman23:27

      Not be an extrovert.

   9. GTGarry Tan23:28

      ... and extroverted enough to make it work the way Happy Robot did. Uh, there is still another way and I'm going to, uh, not put this company on blast because they are an AI billing company that is doing well. Um, but the way they came to the idea was not through connections per se. One of the co-founders actually got a job doing medical billing as a biller, as a remote person for a New York-based, uh, optometrist office and he did not actually disclose that he was using software or building software, but that's what he did. He got a job, uh, came-

   10. JFJared Friedman24:03

       It was like an undercover job. Like, it wasn't like he happened to be working as medical biller.

   11. GTGarry Tan24:06

       (laughs)

   12. JFJared Friedman24:06

       He's like, "I want to automate-"... medical billing. But in order to do that, I need to understand how it works. So I'm going to get a job as a medical biller in order to understand how it works from the inside. Am I understanding you right?

   13. GTGarry Tan24:15

       Exactly.

   14. JFJared Friedman24:16

       Okay.

   15. GTGarry Tan24:16

       He actually got a real job and was paid as a medical biller.

   16. JFJared Friedman24:19

       Okay. I have a founder who did the same thing in a different industry.

   17. GTGarry Tan24:22

       It's wild, right?

   18. JFJared Friedman24:22

       It's totally wild.

   19. GTGarry Tan24:23

       Uh, but it works if you ha- if you don't have connections and you can't, you know-

   20. JFJared Friedman24:28

       Yeah.

   21. GTGarry Tan24:28

       ... walk in and sweet talk people to get access. You know, there are just jobs that are knowledge work jobs that you can do, and then this is actually, uh, my pitch to, you know, sometimes to regulators, that open source is actually a very important piece of this. Because the reason why this person was able to do it legally was he was building his own software to automate the work, all locally on his own computer. So, you know, he was, like, building his own AI agent robot-

   22. DHDiana Hu24:56

       To replace himself.

   23. GTGarry Tan24:56

       ... using Llama 3 to replace himself on two MacBook Pros at the time.

   24. DHDiana Hu25:01

       That's cool.

   25. GTGarry Tan25:01

       And, you know, there was no violation. The, you know, no laws were broken. It's, you know, it's legal to use your own computer and use Zoom and use those things to actually go and work with an external party's thing, because, you know, it's, it was a remote laptop job, and you could do that really easily with it. So, I think that was one of the crazier examples, and it sounds like that's something that, you know-

   26. JFJared Friedman25:24

       More founders should totally do this. They should totally just go get random jobs, like, working in random industries and learn about them from the inside. It doesn't take that long. It's not like you have to, you know, get like an MD or something in order to, to, to become a medical biller. I think it's like a, it's like a, like a two to four-

   27. GTGarry Tan25:40

       Yeah, there's nothing-

   28. JFJared Friedman25:40

       ... four-week training program or something.

   29. GTGarry Tan25:41

       Yeah, exactly.

   30. JFJared Friedman25:42

       Yeah.
7. 37:35 – 41:45

   Fundraising

   1. GTGarry Tan37:35

      users turn around and give them their credit card number or, you know, sign on the dotted line, like big enterprise contracts for $10 or $100,000 a year. And then fundraising rolls around, they start getting the first nos, and then they get... it's like just getting gut punched by, you know, gut punches after gut punches. And they come back in office hours and they're like, "Investors don't get it." And, uh, the thing that I find myself saying over and over again is like, "Yeah. Investors don't get it because they're trying to do it the way like a founder would, trying to be an X influencer, trying to understand (laughs) just reading feeds from like literally their toilet, like and shitposting," right? Like literally that's not how you figure out what's going on. Why would you, the person who's outside of the house, not on the toilet-

   2. HTHarj Taggar38:22

      (laughs)

   3. GTGarry Tan38:22

      ... outside of the house, out there talking to people, shipping software and doing things, like why would you be taking any cues at all from the person who's still sitting on the toilet, like scrolling an X feed? Like it doesn't make any sense, right? You have direct knowledge of the world out there, and you're coming back into Plato's cave, and this person is like saying, "Well, I don't see the shadows yet on the back wall."

   4. HTHarj Taggar38:45

      (laughs)

   5. GTGarry Tan38:45

      And it's like, let me tell you, it's out there, right? Like, you literally have seen it with your own eyes.

   6. JFJared Friedman38:50

      Here's another instance that I've seen where founders like psych themselves out, Garry, that's related to that, which is founders who psych themselves out because spaces seem too competitive, and they end up like shying away from going after ideas that are actually really good because like two competitors launched on TechCrunch and like raised seed funding or something like that. Harj, you- you- you have a good example of a, of a company.

   7. HTHarj Taggar39:15

      Yeah. It's a company both Garry and I worked with actually-

   8. JFJared Friedman39:17

      Okay.

   9. HTHarj Taggar39:17

      ... we mentioned before, like GigaML. They originally applied with a edtech idea. It was an idea to help Indian college students apply to US colleges, uh, Indian high school students apply to US colleges. Then they pivoted into, uh, fine-tuning as a service or around the time where that was just like the open source models had just been released. Uh, they couldn't build a sustainable business so they didn't quite crack that nut, and they were looking for applications of the fact they had become experts in fine-tuning like-

   10. JFJared Friedman39:43

       Mm-hmm.

   11. HTHarj Taggar39:43

       ... models for specific purposes, and they were trying to find a vertical application. And the one that they were most excited about was customer support. Um, but they felt that it was very crowded, like there were lots of people doing customer support, but they went for it anyway. And specifically, they really focused on one company, uh, Zepto, which has really been willing to be like a real early cutting-edge adopter. I mean, a- another meta point here is like Zepto themselves really want to be like the most, a- like operationally efficient delivery company in the world. So, they were looking for these really like high-quality pieces of tech.

   12. GTGarry Tan40:16

       Rumors of IPOing later this year. (laughs)

   13. JFJared Friedman40:19

       (laughs)

   14. HTHarj Taggar40:19

       (laughs) Rumors, who knows? Um-

   15. GTGarry Tan40:20

       Who knows? We don't- we don't know.

   16. HTHarj Taggar40:21

       What I will say about the GigaML founders is they are incredibly smart engineers and not natural salespeople at all. And just one thing I'm used to pre-AI, I'm curious of your opinions on this, is it often feels, especially with B2B SaaS things, like if you're e- entering a crowded space, it's- it's often as much about how can you differentiate on just sales versus like necessarily like your first product. And so you gravitate towards that. Like, I need to feel that this team can really like sell in order to get anywhere if they're gonna launch, you know, a- a new payroll product, for example. Um, but with GigaML, what I'd noticed is that so many of the things just actually don't work very well. Doing like AI that can really replace your customer support team of humans is a hard technical problem. And so although lots of people are pitching that they have it, very, very few people can actually deliver to the level that customers want. And it just turned out that GigaML were like, their- their technical strength meant that they could actually deliver what no one else could, and that got them this deal, and now it's sort of snowballing from there.

   17. JFJared Friedman41:23

       That's like a huge enterprise deal. Did they close Zepto during The Batch or shortly afterward?

   18. HTHarj Taggar41:26

       No, this... I mean, they- they were pivoting for quite a while actually.

   19. JFJared Friedman41:28

       Oh, okay.

   20. HTHarj Taggar41:29

       This- this is one of those stories of where, um, I think it took them about a year, if I don't recall, to find the right idea.

   21. GTGarry Tan41:35

       And that's quite normal, actually.

   22. JFJared Friedman41:37

       It's quite normal, actually. Yeah. A lot of our best companies in recent years have been that, yeah.

   23. GTGarry Tan41:42

       Yeah, which is... flies in the face of I think what everyone believed,

8. 41:45 – 43:48

   Product Market Fit

   1. GTGarry Tan41:45

      you know, ancient history five to 10 years ago. (laughs) Like-

   2. JFJared Friedman41:49

      (laughs)

   3. GTGarry Tan41:49

      ... you know, there were, uh, you know, it's hard to believe but, you know, 10 years ago there were entire seed funds that would say like, "We never do seed extensions." Either you're going to be great-

   4. HTHarj Taggar41:58

      (laughs)

   5. GTGarry Tan41:58

      ... and you're great immediately or, you know, seed extensions are a sucker bet. And, uh, these days I'm pretty glad that we're in the days where that's just not true anymore. Like, you can see that people are getting product-market fit.

   6. HTHarj Taggar42:10

      My speculation on it is AI moves so quickly that every few months there's just a new set of possible ideas that are generated. I also... This is like a more anecdotal thing. I also feel just like because it's so exciting to work on a startup and work on AI right now that the teams just have, um, morale reserves for longer.

   7. JFJared Friedman42:27

      Mm-hmm.

   8. HTHarj Taggar42:28

      Like, it's like why, like if you're building... if you're... right now, if you're building a startup working on like cutting edge AI, even if you haven't found the right idea yet, like why give up and go back to Google or college or something?

   9. JFJared Friedman42:41

      Yeah.

   10. HTHarj Taggar42:41

       Like this is-

   11. JFJared Friedman42:42

       There's a high probability that your lucky break is just around the corner.

   12. HTHarj Taggar42:45

       Yeah.

   13. JFJared Friedman42:45

       Yeah.

   14. HTHarj Taggar42:45

       And this is kind of the most exciting thing you could be doing with your time. Like, and just-

   15. DHDiana Hu42:48

       All these product releases that keep changing the- the whole space the whole time.

   16. HTHarj Taggar42:54

       Yeah.

   17. DHDiana Hu42:54

       Which is crazy.

   18. GTGarry Tan42:55

       Well, that's all the time we have for now. (instrumental music) But I think that that's a pretty great thing for everyone out there to keep in their mind. You know, you can't stay in your house or sit on your toilet, scroll-

   19. HTHarj Taggar43:08

       (laughs)

   20. GTGarry Tan43:08

       ... you know, doom-scrolling X. You have to either look very deeply within you to find that you're already on the edge because of something you've done, or you need to radically get out of the house (laughs) go into, uh, you know, other people's real businesses and the real problems that humanity faces, and then get first principles understanding of what's going on out there. And then, you can build a billion-dollar business using AI. We'll see you guys next time.

Episode duration: 43:48