Lightcone: Consumer is back, What’s getting funded now, The vibes immaculate

1. 0:00 – 1:51

   Coming Up

   1. HTHarj Taggar0:00

      It feels like there's more energy around this batch than there has been for- for as long as I can remember for any YC batch. Like, w- what do you think is happening?

   2. GTGarry Tan0:07

      There's a platform shift, and this is the moment where every single SaaS dollar in the world, uh, it's up for grabs again.

   3. JFJared Friedman0:15

      The batch 3X'd ARR in three months, which is pretty cool.

   4. GTGarry Tan0:19

      That's a great growth rate.

   5. JFJared Friedman0:20

      (laughs)

   6. HTHarj Taggar0:21

      Yeah.

   7. DHDiana Hu0:21

      It's a fun time to build. It's the best time ever. Even as a, as a builder. Because, like, the technology just does such a different thing than what you expected before it.

   8. GTGarry Tan0:37

      Welcome back to another episode of The Light Cone. We're four group partners at Y Combinator, and we funded hundreds of companies, many dozens of which have gone on to become unicorns. This is Jared, I'm Garry, this is Harj, and this is Diana. We just finished the Winter 2024 batch of Y Combinator, and it feels really, really different, doesn't it?

   9. JFJared Friedman1:01

      It does. Let's talk about how this batch is so different from the batches that we've funded in the past.

   10. GTGarry Tan1:07

       Some of it is, you actually need to know where we've been and where we are right now in order to actually figure out where we're gonna go, and a lot of people watching right now are trying to figure it out. Like, "How do I go to where the hockey puck is going? How do I get there before everyone else?" The best way to figure that out is what happened in this batch.

   11. DHDiana Hu1:27

       We're gonna connect the dots with actual numbers that I don't think we ever shared before, by stats of batches from four years ago, and contrast them with the numbers for this batch.

   12. JFJared Friedman1:39

       So you can see the actual trends, the way they're playing out, here in the center of Silicon Valley.

   13. HTHarj Taggar1:44

       Yeah, I'm curious, like, what are some of the trends that we've seen? What's made this last Winter '24 batch different to previous

2. 1:51 – 2:40

   AI companies in the batch

   1. HTHarj Taggar1:51

      batches?

   2. JFJared Friedman1:51

      Well, the strongest trend, the one that everyone is writing about, is AI. That's definitely, like, the big mega-trend in the past year.

   3. HTHarj Taggar1:59

      Yeah, I was surprised, uh, when we were pulling up some of the numbers. It's just under 70% of the ideas are AI.

   4. JFJared Friedman2:05

      70% of the batch.

   5. HTHarj Taggar2:06

      Yeah, that's wild.

   6. GTGarry Tan2:08

      That's wild.

   7. JFJared Friedman2:08

      Yeah.

   8. DHDiana Hu2:08

      It's about 170 companies.

   9. HTHarj Taggar2:10

      Yeah.

   10. DHDiana Hu2:10

       Versus Winter '20, we only had 8% of the companies. Maybe one of the notables from Winter '20 that you worked with, Jared, was, uh, Replicate.

   11. JFJared Friedman2:18

       Yeah, those Replicate founders, they were into AI before it was cool, which was really awesome because they got to then ride this wave. But the first three years of Replicate was slow-going 'cause there weren't a lot of people working on AI. They were building tools for people working on AI, there weren't many customers.

   12. GTGarry Tan2:36

       And we didn't call it AI as much back then. We called it machine learning.

3. 2:40 – 4:46

   Consumer ideas

   1. JFJared Friedman2:40

      Machine learning, totally.

   2. HTHarj Taggar2:40

      Let me say, one thing I've noticed that's different about this batch is, uh, consumer ideas. Um, they are certainly coming back. Like, I've gone from working, it feels like for many years, with- working with zero consumer startups to now, just even in the group of companies I'm working with, several of them, I've noticed founders who are pivoting during the batch are pivoting into consumer ideas, whereas previously, I think they would have pivoted into, like, a enterprise, B2B SaaS idea. And I'm not sure what to think about that, actually.

   3. GTGarry Tan3:14

      Do you think it's bad or good? (laughs)

   4. DHDiana Hu3:16

      (laughs)

   5. HTHarj Taggar3:16

      I'm not sure. Like, here's ... I- I'll make-

   6. JFJared Friedman3:18

      Harj and I have opposing viewpoints on this question.

   7. HTHarj Taggar3:20

      Okay. (laughs) I, I made the case for why it may be bad. Like, I think you could argue that pivoting into consumer ideas is sort of lazy because so many of the canonical tarpit ideas are these bad consumer ideas, where it's like, it's-

   8. DHDiana Hu3:36

      Travel planning. (laughs)

   9. HTHarj Taggar3:36

      Travel planning or splitting the bill at a restaurant or finding a roommate or all these kinds of things, right? And people gravitate to them because it's so easy. You're like, "Ah, I just want to build..." It's the advice of, "Build something you want," which is great advice, but it means that you can often build these, like, very easy ideas, and it's really hard to get lots of users for them. Whereas when it felt like people didn't want to work on consumer ideas, went, "Oh, okay, I- I actually have to go out and become, like, an expert on something. Like, I have to go out and figure out how expense management works and see if there's any interesting ideas there." It led to lots of really, really good startups being funded. So, I, I partly worry that people will pivot into tarpit consumer ideas because it's easy.

   10. JFJared Friedman4:17

       My perspective is I find it so refreshing that consumer is back 'cause when YC got started, when we all did it, the 2005 to 2012 era, there were tons of consumer companies. In fact, the first YC batch was, like, 80% plus consumer companies. What happened is all the consumer ideas basically got done, and there were no good consumer ideas left, or very few. And so we went through this whole supercycle where the only non-tarpit ideas were B2B ideas.

4. 4:46 – 6:45

   B2B ideas

   1. JFJared Friedman4:46

      And the problem with B2B ideas is they're a little boring.

   2. GTGarry Tan4:49

      (laughs)

   3. DHDiana Hu4:50

      (laughs)

   4. JFJared Friedman4:50

      (laughs) Let's be honest, like, B2B SaaS is, like, a little boring. If you think about what, like, drew in, like, young tactical founders, like, like, the original founders in the early YC batches, they were building consumer apps 'cause they were fun.

   5. DHDiana Hu5:02

      Both, uh, you and Garry, when you went through the batch, had consumer companies, right?

   6. JFJared Friedman5:08

      Yeah. Yeah, we- we both started consumer companies 'cause tho- those weren't tarpit ideas at the time. The problem was in, like, in 2020, starting a- a US-based consumer idea was ill-advised. If you were doing it, you were probably working on a bad idea.

   7. HTHarj Taggar5:21

      Well, the- the other factor here was just Facebook sucking all the oxygen out of the room, right?

   8. JFJared Friedman5:25

      100%. Yeah.

   9. HTHarj Taggar5:25

      Like, it felt to me like... That era you guys are talking about, so 2007 through to 2010 maybe, there was just lots of optimism around building consumer ideas.

   10. GTGarry Tan5:35

       That sounds familiar.

   11. HTHarj Taggar5:36

       (laughs) Yeah, right.

   12. DHDiana Hu5:36

       (laughs)

   13. JFJared Friedman5:37

       (laughs)

   14. HTHarj Taggar5:37

       But then it felt like... For a period, it just felt like, hey, anything you build, Facebook is gonna, like, clone or crush, and it just seemed not exciting to get crushed by Facebook.

   15. GTGarry Tan5:47

       You could argue that a foundational model might come along and crush that, but... You know, if you're working on a consumer idea. But I'm just kind of skeptical that that's true. There's a lot of white space in there to actually build real revenue.

   16. HTHarj Taggar6:00

       What would you advise, say, if- if a founder came to you, Garry, and said, "Hey, like, uh, somebody told me that I shouldn't work on consumer ideas because Facebook is just gonna crush..."... anything I do.

   17. JFJared Friedman6:10

       Well, OpenAI.

   18. HTHarj Taggar6:11

       Or OpenAI now.

   19. GTGarry Tan6:12

       OpenAI today might do it.

   20. JFJared Friedman6:13

       I think, yeah. Open- OpenAI is the Facebook of... Yeah.

   21. GTGarry Tan6:15

       (laughs)

   22. JFJared Friedman6:16

       Today, in this- in this regard. Yeah, exactly.

   23. DHDiana Hu6:16

       GP5 is coming out soon, so what should we tell founders? They come up to you, it's like, "Okay. Should I really work on this?"

   24. GTGarry Tan6:23

       I guess it's early enough that it hasn't happened yet. I mean, when I see Facebook actually, uh, come after Replika in the AI boyfriend-girlfriend space, then I'll sort of believe it.

   25. HTHarj Taggar6:34

       (laughs)

   26. GTGarry Tan6:34

       But some of it is the capability expands the ability of computers to sort of operate with human beings in such a broad way, that they couldn't possibly be in all the places.

5. 6:45 – 13:37

   Developer tools

   1. JFJared Friedman6:45

      Another big trend that we've seen is more developer tools. And Diana, you've worked with a lot of those. Do you want to talk about why- what's happening with developer tools?

   2. DHDiana Hu6:54

      Yeah. In this batch, we funded about 30% more dev tools than four years ago. This is like one of the largest dev tool batches we'd had in the recent years. And I think a couple of reasons is I think there's, uh, attracting a lot of the super technical founders that want to build this future with AI, and before you build it, you need better tools, right? It's kind of like this, uh, technology trend, where you have like two phases. I think it comes from this, uh, it's from this book from industrial revolution. It's, uh, from this economist. I think it predicts a lot how technology cycles happen. The first cycle is sort of where you're laying like the railroads, infrastructure, all the tooling, before the installation and prolifi- prolification of apps. There's a lot of this kind of like tooling, because even right now if you're building a AI app, there's so much plumbing you need to do and customize it. And right now, there's certain patterns that are emerging, like RAG and doing a lot of the query and indexing and getting results to be more accurate and fine-tuning. Those are not well-known patterns, and everyone is building the same stuff to build the actual end application. So we have a lot of founders that are like really good tool builders that are excited to kind of build the hammer. Like it'd be really cool to see at some point, all the way from distributor systems to like evaluations to even as hardcore as probably at some point custom silicon. Like we could probably at some point see the next NVIDIA being funded and gone through YC.

   3. HTHarj Taggar8:34

      One thing that's really interesting is I remember in 2010 when I first started working at YC, dev tools were not seen as a good idea to work on because people didn't think they would ever make money. It was only when Docker, um, started taking off, then MongoDB started taking off. There was sort of this era where it was like, oh, like dev tools are things you can actually work on.

   4. JFJared Friedman8:54

      Well, and for open source companies, in- in particular, because it was very unclear at that time that open source projects could actually be successful companies. Like Red Hat was like the only example at that time.

   5. HTHarj Taggar9:02

      Yeah.

   6. DHDiana Hu9:02

      Mm-hmm.

   7. HTHarj Taggar9:03

      And so I think this is a great, like dev tools is just a great example of the build something you want for yourself, and if you're an engineer, you can just be very self-indulgent and build like the tools that you want. Yeah. And there's actually a business there.

   8. GTGarry Tan9:16

      Well, in that respect, dev tools is basically B2B SaaS but, uh, consumer style, so you only have 20 million people who you have to actually market to, and you actually have to market to them in the same way you would to, for a consumer, uh, product, but instead of a billion consumers, you're talking about 20 million developers. And the cool thing is, uh, most of those 20 million at some point are on Hacker News. (laughs)

   9. JFJared Friedman9:43

      (laughs)

   10. HTHarj Taggar9:43

       (laughs)

   11. GTGarry Tan9:43

       Which is a YC website.

   12. DHDiana Hu9:45

       It's like The New York Times for hackers.

   13. GTGarry Tan9:47

       That's right.

   14. HTHarj Taggar9:48

       There's a lot of parallels because, uh, consumer ideas are not judged on how much money they make typically, consumer social in particular, right? Like it's all-

   15. JFJared Friedman9:56

       Right.

   16. HTHarj Taggar9:56

       ... just like growth and daily active users and monthly active users, and what I've noticed about, uh-

   17. DHDiana Hu10:01

       Open source, right?

   18. HTHarj Taggar10:02

       ... open source, the same thing.

   19. JFJared Friedman10:03

       ...

   20. SPSpeaker10:03

       The same.

   21. HTHarj Taggar10:03

       Yeah, Diana, how do, how do investors judge whether a open source startup in the batch is doing well or not?

   22. DHDiana Hu10:09

       Some of the early signs is whether this is getting adopted by the tastemakers, and that happens to be in a GitHub project. You have a lot of, uh, GitHub star growth, and also if you have actual like hardcore developers that are good using you, and early signs of getting in production with companies. At this point, like consumer, early, in the early days for infrastructure and dev tools, you don't really make money, because things like installing a new database is such a big bet for a company that you need to make sure that it's battle-tested. So a lot of, uh, open source companies take a little bit longer to monetize, kind of like consumer, where it's all about user growth, right? And the second thing I would say, um, is ultimately open source companies win when they really have the developer mindshare. It's sort of like Facebook won with the network effects, with capturing a lot of the users, like I don't know, it was like a third or half of the world uses Facebook. Same thing for dev tools. It's like if anyone thinks of, let's say, building like a full stack application and easy deployment, they could think of, uh, Supabase. I think they've done a really good job, and I think you worked with them, Jared. What was it at the beginning when they were doing the batch and what does it look like now?

   23. JFJared Friedman11:23

       Well, the cool thing about Supabase is literally what got Supabase off the ground is Hacker News. They had built this open source project that was an open source competitor, um, to, what's it called? Google the...

   24. DHDiana Hu11:39

       Firebase?

   25. GTGarry Tan11:40

       Firebase.

   26. HTHarj Taggar11:40

       Firebase.

   27. JFJared Friedman11:41

       Firebase, yeah. Which is a YC company.

   28. DHDiana Hu11:42

       They acquired.

   29. JFJared Friedman11:42

       It got acquired by Google and then became a really big like product in- inside of Google, and they were building an open source challenger to Firebase, and they built it, and like how do you get users for something like that? Well, the thing you do is you launch it on Hacker News. And so this, they had this blowout Hacker News launch, and to your point, Diana, it was clear if you literally just read the comments on the Hacker News post, it's clear that really good developers are like, "This is exactly the thing that I wanted. Thank you for building it." And that was what like launched them into the stratosphere. And there is a recent stat about the percentage of the batch that's using them. We'll have to pull the number, but it's like a third of the batch is using-

   30. DHDiana Hu12:16

       73 companies.
6. 13:37 – 16:41

   Technical founder

   1. DHDiana Hu13:37

      So the other cool thing about this batch at Colari of getting a lot of, uh, founders getting excited to work on AI and dev tools, this is the most technical batch ever, right? It's like 99% of the companies have a technical founder in the current batch, versus just 88% during the pandemic. Let's talk about why that is. I mean, we talked about some of the driving factors from ideas, but I think there's a couple more things at play.

   2. HTHarj Taggar14:04

      I think one thing that feels very different now versus if we go back to the pandemic COVID era is, I think, there was this whole, "The software eats the world," idea, which originated with a Marc Andreessen blog post, like, I can't remember, like maybe 2012, something around that, um, or a decade ago.

   3. GTGarry Tan14:23

      Great essay.

   4. HTHarj Taggar14:23

      Yeah, great essay, right? But I think what it boosted was this idea of, hey, not every business is going to be a core software company. It'll be like software eats the world. It'll be software that sort of enables non-software businesses to become software.

   5. DHDiana Hu14:39

      What do you mean by that? Is there kind of more businesses that are operations heavy, sort of like...

   6. HTHarj Taggar14:43

      Yeah, let's give you examples.

   7. JFJared Friedman14:44

      Yeah, like examples would be good, yeah.

   8. HTHarj Taggar14:44

      Like, like Flexport I think would be a great one, right? Like, Flexport was, "Hey, there's this giant trade and freight brokerage business moving things around the world, and so much of that is done manually with humans filling out forms." And Flexport was, "Hey, like, well, that could be... Why don't we just have, like, a software team that builds software to help the people who are managing, like, the freight and the brokerages do this more efficiently?"

   9. GTGarry Tan15:07

      It's tech enabled.

   10. HTHarj Taggar15:08

       Tech enabled. And I think, like, a consequence of that is that it, they... And especially with sort of the ZIRP era where it just felt like there was lots of money available to fund ideas, that the profile of founders became a little bit more tilted towards, like, can you... Do you have domain expertise in a non-software business? Like, are you, like, someone who's in the shipping industry who now wants to start, like, a tech company? Something... Spectacular examples of this would be, like, WeWork, right? Like, probably the poster child-

   11. DHDiana Hu15:33

       (laughs)

   12. HTHarj Taggar15:33

       ... of, like, tech enabled. But I just think the, the profile of founder shifted a little bit away from, like, geeky engineer.

   13. DHDiana Hu15:39

       Adam was not technical.

   14. JFJared Friedman15:40

       (laughs)

   15. HTHarj Taggar15:40

       Yeah. Right. Right. Exactly. Right?

   16. DHDiana Hu15:42

       He does not look like a nerd at all. (laughs)

   17. JFJared Friedman15:43

       Well, well, and, and, and, and actually to that point, this whole trend is, like, somewhat controversial about these tech-enabled businesses. And there are some that seem to be on the right side of the line where they actually were tech enabled, like Flexport, which is working, and there are some that were on the other side of the line where they claimed to be tech enabled but really weren't, like WeWork, and those ones didn't go so well.

   18. HTHarj Taggar16:01

       But I think AI is a force in the complete opposite direction, right? Where it feels like if you want to work on a good AI idea, you need to be at the cutting edge of actual AI technology and tooling, which means you-

   19. DHDiana Hu16:15

       It's a table stake. (laughs)

   20. HTHarj Taggar16:16

       Yeah. Right.

   21. DHDiana Hu16:16

       Because all this stuff is cutting s- cutting edge.

   22. HTHarj Taggar16:19

       Right.

   23. DHDiana Hu16:19

       Which I think it gives a bit of, um, edge to a lot of founders that don't have baggage, because everything is so new. All of the latest progress in AI is just, like, one, couple years old. And this is one of the batches that also has, uh, shifted the median average age of the founders also a bit younger.

7. 16:41 – 20:31

   Platform shift

   1. JFJared Friedman16:41

      There's another version of this story that I've heard told, which is that in the, like, 2020 era, there hadn't been a technology platform shift in a long time.

   2. DHDiana Hu16:48

      Huh.

   3. JFJared Friedman16:48

      Venture capital funds had billions of dollars to deploy. They had to deploy it someplace. The best place to deploy it was these tech-enabled businesses that were going after industries and companies that didn't really look like the traditional tech businesses that venture capital was set up to fund. But there weren't a lot of great new tech opportunities because there wasn't a new platform shift. Now there is. And so it's a much higher ROI use of those venture capital dollars to fund stuff like RAI companies than stuff like WeWork. (laughs)

   4. HTHarj Taggar17:15

      Yeah.

   5. GTGarry Tan17:15

      I think, uh, one of the interesting subtleties is, um, in my head, it's a little bit less about whether it's tech enabled or not. Um, that is certainly one frame, and a lot of VCs actually really stick to that. I mean, there are some, uh, really famous firms that famously only want to fund pure software businesses that are, uh, monthly or annual recurring revenue. And that's a whole strategy. There are a bunch of those firms that we've all heard of that are our friends, like, that's all they do. And then, you know, there are just as many who, uh, actually look at it and say, "Oh, I... Actually, I'm willing to do tech enabled." But there are a lot fewer of those people. And then I think the real subtlety, I'm sort of a little bit more in the latter camp, because what it real- what really matters is actually the, um, gross margin. So if you look at a Palantir, for instance, you can have a 90% gross margin or 80% gross margin type of tech-enabled, you know, quote-unquote almost consulting business. But if your gross margins are extremely high, then people are actually, you know, willing to give you good multiples and you're actually able to raise money at a, a reasonable valuation. I think what's funny is when we give the T-shirts at Y Combinator, like, when, when you come to YC, you get a T-shirt that says, um-

   6. DHDiana Hu18:32

      I'm wearing it right now.

   7. GTGarry Tan18:32

      ... "Make something people want."

   8. JFJared Friedman18:33

      Yeah.

   9. GTGarry Tan18:33

      Yeah, there you go.

   10. JFJared Friedman18:33

       There we go.

   11. DHDiana Hu18:35

       Because it's the end of the batch.

   12. GTGarry Tan18:36

       What's funny is, uh, notice n- none of this mentions anything about whether you're tech-enabled or not, whether you're a software business or not, or even gross margin. It's just purely a function of if you make something people actually want, uh, people are gonna pay for it, and then the rest is just sort of details.

   13. DHDiana Hu18:51

       (laughs)

   14. HTHarj Taggar18:51

       I mean, you can actually look at the, to-date, the biggest YC companies by, let's say how they've gone public, um, Airbnb, DoorDash-

   15. DHDiana Hu19:00

       Instacart.

   16. HTHarj Taggar19:01

       ... Instacart. It's not clear that they, on the surface at least, like, the technology is what sets those apart so much as it was for Airbnb. Like, you know, it's a website, but the core thing is building, like, a, a network and a reputation system. DoorDash-

   17. GTGarry Tan19:13

       The most powerful network effects ever.

   18. HTHarj Taggar19:15

       Yeah. Right?

   19. GTGarry Tan19:16

       Exactly.

   20. HTHarj Taggar19:16

       DoorDash and Instacart are the-

   21. JFJared Friedman19:17

       Are arguably more logistics companies than, like, true tech companies.

   22. HTHarj Taggar19:21

       Yeah. They're the best example, actually, of maybe this... The, the tech-enabled label is a tricky one-

   23. JFJared Friedman19:25

       Yeah.

   24. HTHarj Taggar19:26

       ... because those are actually probably technology companies, but you could... One lens you could put on them and say they're tech-enabled, but they're also two of, like, the biggest companies we've ever funded.

   25. DHDiana Hu19:34

       But they come from a different era when a lot of the rest of the world was still coming up online, right?

   26. HTHarj Taggar19:40

       That's what it feels like to me. We... Like, just how we're talking about trends, it just seems to me, to your point, Jared, that it was... There was a period around 2006, 2007 where it was just pure software businesses. Then everyone was like, "Hey, software's going to be bigger than just pure software," and we got-

   27. JFJared Friedman19:54

       Mm-hmm.

   28. HTHarj Taggar19:54

       ... kind of DoorDash and Instacart and these interesting businesses. And then maybe it... Like, really, maybe it pushed too far where there was, like-

   29. JFJared Friedman20:01

       WeWork.

   30. HTHarj Taggar20:02

       Yeah, WeWork-
8. 20:31 – 31:56

   What has YC funded less of?

   1. HTHarj Taggar20:31

      (laughs) So what have we funded less of this batch? What have we seen move in the opposite direction?

   2. JFJared Friedman20:35

      Well, we funded a lot less stuff going after local markets. So in the 2015 to 2020 era, YC, and just, like, the world in general, funded a ton of companies that were ba- basically the second wave of all these online to offline things. So the first wave was, like, DoorDash and Instacart in the US, and then the second wave was like, "Well, what about DoorDash if you're in Brazil?" (laughs)

   3. GTGarry Tan21:01

      Should work. Make sense.

   4. JFJared Friedman21:02

      They want their food delivered too. What about Instacart if you're in India? (laughs) And so there's a whole wave of taking these models and copying them in international markets.

   5. HTHarj Taggar21:11

      Fintech too, right? There was like... We saw Coinbase, Robinhood, um-

   6. DHDiana Hu21:16

      Neo banks.

   7. HTHarj Taggar21:16

      ... neo banks.

   8. JFJared Friedman21:17

      Banks.

   9. HTHarj Taggar21:17

      Monzo in the UK.

   10. JFJared Friedman21:18

       And there was two waves of that as well. There was a first wave primarily in the US, like Brex, for example, but a lot of fintech businesses are actually local because regulations are so different-

   11. HTHarj Taggar21:28

       Yeah.

   12. JFJared Friedman21:28

       ... in each country. And so then there's a second wave of, like, the international copies of all the US-based things.

   13. HTHarj Taggar21:34

       Yeah. Definitely during that period, like the 2020 to 2022 period, we were funding a lot of international teams that were, like, Robinhood for LATAM or, like, a local crypto exchange, or yeah, like DoorDash for X market. Lots of these kinds of things.

   14. JFJared Friedman21:50

       Yeah. And a lot of those were really good. YC funded some amazing epic companies there, like Monzo, which banks some ridiculous percentage of the people in the UK.

   15. HTHarj Taggar21:59

       Gro in India, which is Robinhood for India, is doing phenomenally well.

   16. JFJared Friedman22:02

       Zepto, which is the fastest growing YC company of all time, which does 10-minute grocery delivery in India.

   17. HTHarj Taggar22:08

       I, I think that's a really interesting one actually, because it's like... It's very easy to say Zepto is like Instacart for India, but it's not quite.

   18. JFJared Friedman22:15

       It's not.

   19. HTHarj Taggar22:15

       Right?

   20. JFJared Friedman22:15

       It's not. Yeah.

   21. HTHarj Taggar22:15

       Because their actual model is different.

   22. JFJared Friedman22:17

       It is, yeah.

   23. DHDiana Hu22:18

       By the numbers, specifically around the 2020 era, Winter '20 batch, only about 45, 45% of the batch was international, and now it's only 25.

   24. HTHarj Taggar22:29

       Yeah.

   25. DHDiana Hu22:29

       So-

   26. HTHarj Taggar22:29

       This is the more US-centric batch we've had in a long time. Most of the teams when they applied are in the Bay Area, like, so about 29%. Um, which interestingly, so sidebar, also means, like, San Francisco is definitely back. So we looked at the numbers, and pre-COVID, around 29% or so of the companies were in the Bay Area when they applied to YC.

   27. DHDiana Hu22:50

       And it was half of that during pandemic.

   28. HTHarj Taggar22:52

       Yeah. Right?

   29. DHDiana Hu22:52

       So like-

   30. HTHarj Taggar22:52

       It went down to, what, like, 14%?
9. 31:56 – 41:42

   New initiatives

   1. HTHarj Taggar31:56

      But, like, this time around, I think working in this batch with so many AI companies, it's felt very real. Right?

   2. DHDiana Hu32:02

      The products are, were very tangible. There was a cool experiment we ran with Harsh in this batch. We ran product day, where we had all of our companies come and do a demo, run through of the product-

   3. HTHarj Taggar32:15

      On stage.

   4. DHDiana Hu32:16

      ... on stage.

   5. JFJared Friedman32:16

      Of those of their product, yeah.

   6. DHDiana Hu32:17

      Running. And a lot of the products were beautiful. I was very impressed with the progress they made from the time they applied to what they had. Because one of the stats is, um, in this batch, over 80% of the batch had no revenue. Basically, the product was on launch before they came in. Versus, uh, in winter '20, about only 62%. So we funded even earlier, and in the span of just a month-ish, these products were, like, pretty impressive, right?

   7. HTHarj Taggar32:47

      Yeah. I mean, I remember that when we did product day, just some of the moment, it just felt like constant wow moment after wow moment. Like, someone would demo, like one of the companies, Fume, demoed, like, their AI software engineer. And their demo was literally, "Hey, like, you can basically tell this AI software engineer to implement dark mode on this website." And they showed, like, a website, just regular layout. And like, Fume engineer goes and implements, like, in CSS and everything, like, the dark mode. And then you go back to the website, and there's a toggle to turn dark mode on. And it's just like, wow, like, you could see it writing the code and doing all of this stuff. And it was like, y- you could tell this is something that's very real.

   8. JFJared Friedman33:24

      And there's another thing that we did that, like, returned YC to its focus on products. Do you, do you want to talk about the Bookface launch live events that you started this batch?

   9. GTGarry Tan33:32

      Yeah. During the batch, I really felt like, well, these demos are so cool, I'm totally gonna steal your idea ...

   10. JFJared Friedman33:38

       (laughs)

   11. DHDiana Hu33:38

       (laughs)

   12. GTGarry Tan33:38

       ... for this next batch, where, you know, I definitely, I, I think that we should do this type of demos, uh, across the whole batch. And then, uh, I also did Friday, every other Friday, we would pick the people who had the most impressive launches on our internal social network, and we'd have them actually demo exactly what they built, uh ...

   13. JFJared Friedman33:58

       In front of a live audience.

   14. GTGarry Tan33:59

       Yeah. And then I would actually ask very detailed implementation questions. (laughs)

   15. JFJared Friedman34:02

       (laughs)

   16. GTGarry Tan34:02

       Because literally, a lot of these things, it's the first time you've ever been able to do, like, that demo, for instance. And being able to understand, well, what did you do? Like, how did you use, uh, retrieval augmented generation to do that? Like, what were the prompts? What was the workflow? You know, how do you test that kind of stuff? Like, going back to the dev tool argument, like, we're literally trying to figure out how these things work. And then there's going to be a whole new reset in even a matter of months with GPT-5 and the next generation. Like, this is very home brew computer club type stuff.

   17. JFJared Friedman34:36

       Yeah.

   18. GTGarry Tan34:37

       Like, we just suddenly had this thing that could happen, and next week, some other crazy thing's gonna happen.

   19. JFJared Friedman34:43

       I love that because it really felt to me like a return to the YC that I did in 2006, 2007. The focus of YC was really about the products because we were inventing new things that you could do with software. And then in the decade afterwards, it ... Because there's so many software-enabled businesses and the technology became commoditized, there was less focus on the product and more on growth and sales.

   20. HTHarj Taggar35:05

       I, I hadn't thought of that. You know what just, just sprung into my mind as you're saying that is 2007, when I first moved to San Francisco from London, um, in my YC batch in winter 2007 were Weebly and Zenter. Um, and they were pushing the limits of what you could do with JavaScript.

   21. JFJared Friedman35:21

       Yeah.

   22. HTHarj Taggar35:21

       So, Weebly was a website builder. And Zenter, which would get acquired by Google, was like a web PowerPoint.

   23. JFJared Friedman35:27

       That was cutting edge stuff.

   24. HTHarj Taggar35:28

       Yeah. Like-

   25. JFJared Friedman35:29

       Seriously.

   26. HTHarj Taggar35:29

       It was really felt like every week, I remember you'd come to a YC dinner, and you would go and check out what the Weebly and Zenter teams had done the previous week. And you'd be like, "Wow, like, you can, like, create, like, a slide, you can create a slide with an animation in the browser?"

   27. JFJared Friedman35:45

       Yeah.

   28. HTHarj Taggar35:45

       Like, "It's crazy." And-

   29. GTGarry Tan35:46

       And it even works in Internet Explorer? That's insane. (laughs)

   30. HTHarj Taggar35:48

       Yeah, yeah, yeah. Yeah. That was the thing was that you can do this across all browsers. And it felt like, yeah, I hadn't thought of that until you said, Jared. But yeah, that was so much of the energy was you felt like you were around people really inventing stuff. It actually, that team, those two founders then basically kickstarted all of the Google Docs suite, like Doc-, Docs, Sheets. And then when you think about it, back then in 2007, it wasn't clear that you could replace Microsoft Office with, like, a bunch of applications in the web. That would have sounded insane.
10. 41:42 – 42:21

    Outro

    1. JFJared Friedman41:42

       to.

    2. HTHarj Taggar41:42

       Yeah.

    3. GTGarry Tan41:42

       So in summary, we are just getting started. That's all the time we have for today, but Y Combinator is actually accepting applications for this summer. So if you're thinking about it, those questions will help you shake out, "Is this the time? Do I have the co-founder? Do I have the idea?" And at the end of the day, now is the moment to start. So we hope we'll see you this summer, and we'll see you next time. (instrumental music)

Episode duration: 42:21