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

[00:00] If you can get Keith Raboy to invest in your startup, you should do a fat startup. Yeah, exactly. You know, and a few other of our friends, obviously, like if a lot will do it, like if a lot, you know, we sort of know all the people who can and will do it. And like if they want you to do a fat startup, you should do a fat startup with them. All right, Gary, thank you so much for doing this. It's great to be here. I appreciate you making time for it. Jack, thanks a lot for having me. Yeah, I know you're super busy and I'm really excited to have this conversation. You're now, I think, two years into running YC. That's about right. [00:30] from my perspective. And I kind of want to start by getting inside your own mentality. And what's the headspace that's let you do that? Because you've made a lot of changes that I think have been really good that have broadly been received as really good, but that were not easy to do. I think you've done a lot of stuff that has required the confidence of a founder and you've acted like that. So can you talk a little bit about what headspace you came into when you started running YC? Definitely. I mean, the great thing about YC is that we need to go [01:00] Literally, if we were starting YC from scratch again, all the things that we would add in that moment, we're keeping those things. And that's a very freeing thing to actually [01:13] 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. When you had that conversation and you're thinking zero based accounting for YC, like what is what is.

[01:33] order of business number one, what must be true first order of business for you, for YC to thrive and be what you want it to be? I mean... [01:41] I guess [01:42] from an abstract standpoint, because there are lots of specifics that I want to get into, but from the most abstract standpoint, I view YC as this tree of prosperity. And then, like it or not, every organization in the world, no matter how dominant, could use a little bit of pruning. This is a garden. And if you have fruit trees in your backyard, you know that in order to actually [02:12] 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. Totally. And so, and all of that is basically really, really hard. Yeah. It's really hard to say no to things and to people. And, you know, I think basically [02:31] culture is everything. And when you really get into the weeds on that, it's like, well, who do you fire and who do you hire and who do you promote? And these are things that as a young founder, people tell you this. And then, well, you ran, I mean, you created one of the defining SaaS companies in HR software. So you probably like totally immersed yourself in that and like spend a lot of time trying to help people figure this out. Totally. [03:01] How do you actually implement that into strategy? And, you know, how do you walk like sort of

[03:08] without without a net, you're like, I'm just going to do this thing. And, you know, it might be a total disaster or it might be the best thing we did. Yeah. I mean, one of the things is I'm looking back, I guess YC's been around for 20 years. And, you know, when Paul and Jessica and 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 is YC. And then looking back through like the 2010s, there was [03:38] And I guess looking back, a lot of that was a big part of what, you know, has helped YC maybe blossom into what it is. But then, you know, there became this moment then kind of like you're saying of, you know, [03:48] 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? And 15 years later, there's another pruning cycle that happens? I don't know. That's life, right? You try a bunch of stuff, some things work, sometimes things go kind of awry. I will really… It's [04:14] actually not a surprise to me at all that like subsequent to me coming back and seeing you know what Brian told me which is you know zero based accounting like he came to our board meetings with founder mode energy before we even knew that it was called founder mode energy because he had gone through that moment in Airbnb's time where a lot of young founders go through that I mean pretty much all of them actually you know if you're so lucky to get product market fit then you surround

[04:44] 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, you know. [05:07] ... [05:08] Brian's experience was that [05:10] uh he you know not everyone gets that moment like kovid was that moment for him to sort of reclaim and sort of reset the culture of airbnb and um i think we're sort of coming right off of that and so he immediately uh [05:24] sort of infused that into me and YC. So we're deeply thankful for that. But never say never. And, [05:33] I guess the weirdest thing that I hope for YC is that if we do it right, [05:40] we can regrow the tree of prosperity in a way that it doesn't have to be pruned quite so much. It's much better to prune as you go, to shape it into the tree that you want, instead of let it grow completely wild and then have to cut back. And then it's already, you know, they're like entire branches that are grown in a way that, you know, might not be ideal, might not fruit. [06:10] of YC were eight companies, 12 companies, 15 companies twice a year. Now you have 150 or so

[06:17] four times a year. So, you know, the double velocity, they're still amazing. So, you know, like clearly the whole market has not been captured. So maybe that brings me to another, [06:25] question of mine is as you think about [06:27] growing YC, do you think about capturing more of the market making? Maybe that's the wrong language, but making YC a product that even more founders want to have? Is that one of the drivers as you think about what's next? Oh, definitely. I mean, [06:46] I think both, right? Like there's sort of the zero sum and there's also the abundance mindset, right? And the fun thing about it is like actually both are at play, right? There is a zero sum aspect of this and then there are going to be people from central casting who are, you know, super cracked and have the right resume and they were like sort of shot out of a cannon. And, you know, I think that YC actually makes sense for those people. And, you know, we're going to get some of them. [07:16] competing with some of the top VC names in the world. The top seed investors, and that's okay. I don't know, it's not the end of the world. Jack, when you get a great super cracked founder, it's going to be great. Yeah, exactly. [07:33] So there's that. And then the really fun part, the part that I think is the most generative, sort of the thing that I think if you talk to the YC partners, like we're very excited about is that, you know, we're going to do that, but also like... [07:46] you know, we want to create prosperity where, you know, in the past there wasn't. And that's like sort of classically. That's what PG did. He said, very technical founders like this is sort of the mispriced asset. Like, you know, there are lots of things that are mispriced, but highly technical young founders are sort of the most mispriced.

[08:16] this young founder, it's always been for outsider founders breaking in. There have been like, I could name a set of archetypes that it's for. Do you think about any archetype founders that you think YC you want to grow in? [08:29] 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, OK, how do we improve our product for second time founders? You know, like it was great that Parker at Rippling came through YC again. But how do you think do you ever think, well, let's make sure we always get that to happen or what's inside the mind? Did you think about expanding the aperture of who YC appeals to? [08:51] Man, I mean, I think it's a hard question. I mean, the hardest question is like, what do you focus on? And if you focus on all of them, like, are you, you know, really focusing on any of them, actually? I think it's pretty clear that we're really focused on technical founders. But one of the things we need to work a lot harder to dispel is like, there's this concept now that, oh, it's for people who worked at certain companies or went to Harvard or Stanford or MIT. [09:21] Also for people who went to Cornell, went to UIUC, went to like, I don't know. The weirdest thing in the political landscape today is realizing, and you can open up your X feed and see it every single day. There are people who are absolutely brilliant, 150 IQ, great engineers who get rejected from 15 schools straight. That's not fair. I actually spent time talking to the guy who went viral with that tweet today.

[09:51] He's like this brilliant guy who's like super hardworking and it just like tells you that like they're not hitting all of it. And actually, to my mind, YC actually is really valuable to people who don't already have the brand and the network built in because you come in, you just like get like, you know, shot out of a rocket into Silicon Valley culture. So it's definitely good for that. Yeah. But I think, I mean, universities have this problem and universities themselves sort of treat it in a similar way. I mean, maybe that's what has been broken, right? Like historically, like I got to go to Stanford. [10:21] and Stanford was an awesome place to go. But, you know, I may be, you know, child of immigrants, like not, you know, came from a poor family, like we didn't necessarily belong. But like, the reason why Stanford was awesome was, you had all the people who were going to be successful in one place. And then that, you know, by sort of transference, or by me being in that place, like being a fraternity brother with Joe Lonsdale and Stephen Cohen, like brought me in touch with [10:51] And it's like, okay, there is something to be said for having places that have both diversity and merit in one place. Right? Yeah. And society is having the worst debate ever about this right now. Somehow it's like, pick one or the other. Totally. Yeah. [11:10] I don't know. The ideal is like [11:13] you have both in the same place. Yeah. And so that's embedded in your questions. Yes. Where should YC go? It's like we want to go where

[11:22] really great builders are, and they are like not a monolith. Like some of them do go to the top schools. Some of them do study computer science. Some of them don't. And then if we're that community and we can select well, then we will actually help make a lot more of them successful. And then that will be get, you know, more people of all sorts. Like I think the key idea that Paul [11:48] I don't think this is what he set out to do per se, but intuitively this is what he figured out. The world needs shelling points for builders, for talented people. And then their capital exists, their customers exist, their knowledge and support and the best friends of your life can come together. [12:10] a lot Gil on the podcast the other day, and this is one of the things he was talking about, is that early in your career, [12:16] you will meet, hopefully, you're going to meet a lot of people who over the next 20 years will do really impressive things. And finding those cohorts early on is like one of the best things about working in a company. And that's like, you know, for me, a bunch of my founder friends are YC founders, and it's like not random that that's kind of how you end up going through it. And so some of it's just bringing those networks together. This may be I actually want to come back to the politics thing because I'm super interested on that. But one last point here that I wanted to get to was [12:44] Somebody recently made the point that YC's 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 them all, but compared to like a regular compared to even like, I would guess, compared to even like a Sequoia or like a really good investor, it seems like a hilariously good pick rate.

[13:11] And I was wondering, do you think that that is something to do with the process you have of selection? Or do you think that's something to do with what YC does to companies after they've gotten in? Do you have any explanation in your mind for why the pick rate seems as good as it is? I think it's not more complicated than game-recognized game, right? I think that if we have partners here who are great builders themselves, you just end up getting way more reps than anyone else, right? [13:41] We both probably run across a lot of 22-year-olds who are desperate to become associates at VC. And it's like, "Bro, don't do that. Please." Do you think that's a bad idea, generally speaking? Just go start a company. Great founders want to be around other people who have actually been there. It's like that Jay-Z line, "Everybody want to tell you how to do it. They never did it." And so it's just so obvious. [14:03] Rather than seek the trappings of this or play the ego status money game, it's like, go create things of great value. And then that's really just all what I want YC to be. It's like, someone who has built stuff will sit down with you and you'll have personal one-on-one experience with them. And they're not going to say necessarily things that you want. They're not going to validate your bad decisions. They're going to say, this is what I think you should do. But it's like a soft advisor thing, right? [14:33] Yeah. What is the nature of that role action? When you think about the YC partner, YC founder relationship, and I think back on mine, I was very lucky. I had Dalton Caldwell and Aaron Harris, both were great. And I experienced them as pretty direct, pretty honest. It wasn't like kid gloves or anything like that in a positive way. When you think about as a partnership, talking about how you're showing up with the founders during the batch, are you like, we're going to be

[15:01] What are the words you use when you think about [15:04] talking to your team about how everyone should show up. I mean, we should sort of be like... [15:08] benevolent bodhisattvas in a way. It's like, okay, you're on this path. And the hard part is, bodhisattvas probably overstating it, because it's like, we don't know the path. We just know how not to die, actually. That's the part that we can really help with. Whereas [15:25] And I think that makes a really big difference, like losing your co-founder over dumb arguments, picking the wrong investor, messing things up in terms of your first hires, picking too many different things to focus on and not focusing on any one. There's like a billion ways to die. And as investors, the best thing we can do is say, oh, yeah, we saw like [redacted address]. In fact, you want to talk to one of them? [15:55] drilled the fundamentals. It was like, don't get distracted, just build product, just talk to customers, don't die, don't break up with your co-founder, don't run out of money. It was like very simple, but it was constant. Yeah. And it's hard to do because, you know, what happens is it's like that meme, you know, no one who's ever tried to do it has, you know, made it, but it might work for us. It's like that whole meme is basically the thing that first time founders in [16:25] a couple of the schools of thought that maybe are not exactly counter, but are different to YC. And I'd actually love to hear what you think about some of these. But one of them would be, on this point, would be like, great companies are very unconventional. And, you know, they look different. And when special things happen, they start in special ways, and you can't follow the rules and blah, blah, blah. That's just people who haven't seen those things, probably. Yeah. But you probably have a lot of founders who heard that somewhere. Right. And then they come into their partner meeting, and they're saying something like that. And so what is the way that

[16:55] of common back and forth gets navigated, would you say? [16:58] I mean, some of it is like, we're not the boss. And so, you know, there's this famous quote, even from PG, I think he was... [17:07] advising Jason Tan from CIFF Science. It's in that book by Randall Strauss about YC. It's one of the batches I worked. And he said, "You know what? [17:17] you guys do whatever you want. You're the reason why we fund [redacted address] off the cliff, go right ahead." Which is this hilarious quote in that they didn't. It's like they ended up making a unicorn company. I don't even remember what the specific thing was. But some of the point was, we're not the boss. We're here to just tell you what we think, and to try to be benevolent and help you. [17:43] That's what the soft advisor thing means, I think. And at least my experience working with a great many companies, if I come in and just say, "Do this, do that," that was the whole reason why I started a company, to not have people come and order me around and tell me what to do. [18:02] I don't think founders who are truly great even respond to that. So I don't know. I guess that's how I square the circle. The people who just come in, I mean, we would see this all the time. I [18:13] in 2008. We were some of the people who PG would either give you the best advice in the world, or sometimes really, really bad advice. And then if you talk to any alum, all the alums have some story usually around naming, where it's like, "Oh, we're not going to do that." But this other advice,

[18:33] Absolutely brilliant. What I realized was like most people in startup land you run across, they will give you like very median advice. Like it's not going to change your trajectory very much because it's like, you know, I read that on the Internet. There are five podcasts that already say that. So, you know, [18:50] Did you need to have the conversation? Probably not. What's really valuable is to have people around who have seen enough and are intuitive enough about ideas and technology and teams that they can give you even spiky advice, sometimes the worst advice. But good founders are like, oh, that's bad advice. I'm just not going to do that. [19:20] nothing. Yeah. Another one that I'm curious is the sort of lean startup versus fat startup sort of dichotomy. I don't know if this is exactly a fair characterization, especially as YC has gone into more hard tech companies. But there could be a characterization that there's the lean iterate, raise as little capital as possible, keep your team as small as possible, and find product market fit through your customers. And roughly speaking, that's YC. And then over on the far end of the [19:50] movie, you hire out the whole team and you push something into the world. 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? If you can get Keith Raboy to invest in your startup, you should do a fat startup. Yeah, exactly. And a few other of our friends, obviously. We sort of know all the people who can and will do it. And if they want you to do a fat

[20:20] network and investor dependent. If you have access directly to Vinod, you should do a FET startup. If he wants you to do one, you should do it. [20:28] You've been blessed. And then for the great many millions or billions of the rest of us on the planet, not totally clear. 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 got to do it lean. [20:46] I love that. A couple more because I've got a couple more on founders and startups. These are good questions. [20:53] Because you probably at the moment, you go in and out, but the last couple of years, you're probably seeing as many companies as possible. And so I want to hear your current view of if you had to name the couple archetypes of a special founder and a couple of things where you have most frequently recently been like, that is a source of greatness for a founder. What are the things on your mind right now that you think create those archetypes? [21:22] If you had to boil it down to a couple, [21:26] I mean, the founders that I've been lucky to run across, especially the last couple of years, they can just sit down with people who have a particular need and they're just yanking out the requirements right out of the customers. And then the interesting thing about like, [21:43] being able to do that in the first few meetings is that after a while, when you're coming back with product and, you know, you're in market with them or you're like deployed with real customers, like, you know, basically that yanking turns into like they're pushing. And that's product market fit. So, yeah, I think of that as like commerciality. Like there's some people who just know this is where the problem is and I can just find it somehow. So, yeah, I mean, it's kind of

[22:13] forceful, but this is actually a very opposite of forceful. It's like how a great seller is the best listener of all time. It's like that kind of. Yeah, totally. I think that's exactly how that works. Yeah. And then, so it's odd because the cargo cult around great founders is like, oh, let me listen less. And it's like, oh, no, no, no. Actually, you have to listen 10 times more than the other people who don't listen. [22:43] a lot of people struggle with, I certainly struggle with it, is it's hard to see it. Like, because you're, you know, you're trying to call that about a founder before you've seen them do it. Yeah. So how do you do that? I mean, sometimes you just hear their other stories and, you know, spiky people are just spiky in all sorts of weird ways. Like Serena Gay from Data Curve is like one of my favorite recent founders from the last year. You know, they dropped out of Waterloo at, I think, age 19 or 20. [23:13] And she had already built like one of the number one rock climbing apps in the app store at like 16 or something. So you're like, oh, yeah, these people have very like they're like, you know, sort of a mile like they're an inch wide and like a mile deep on very specific things. Like unusual people do unusual stuff. Oh, yeah. Starting early. Yeah, yeah. Yeah. I like that. That's one of the YC app questions. Isn't it like something that you that's like a core question I feel like around this?

[23:43] There's sort of this strain of like, are people a little bit naughty? Yeah, yeah. Which is interesting. Yes, and it's kind of related, I think, maybe, but a little different. What else? I agree with that bucket completely, obviously. Is there any other thread that's equivalent to that that you're looking for, that you're trying to smell out in somebody? [24:02] I mean, the world is like really, really full of systems. [24:07] It might just be the same side of that other coin. Basically, if you're very much a systems thinker, basically, all the world is like [24:18] somewhat rational. It is not perfectly rational, but when you think about all the people in your life or all the people you'll ever meet, there's some sort of core thing going on. And then can you understand it? I'm cheating by saying the same thing, but I feel like that's really, really important. [24:40] you know, can you sit down with a person from any walk of life and then understand what are their motivations? How do they get promoted? Like, you know, what's their ideology? Like, there's just sort of this. It's a good single answer because this is also what predicts they can be able to recruit. Are they going to sell customers? Are they going to fundraise? All these things kind of come from a version of this, which is not quite the ability to sell, even though it looks like it. It's like ability to like see genuine, like, you know, a genuine interaction that will be valuable to everybody or something. Yeah. I mean, [25:10] Basically, if you're going to program the world, you have to reverse engineer the world first. Yes. Yeah, that's well said.

[25:18] the recent AI [25:21] boom has led to, I think, you know, [25:23] amazing things for our industry, obviously, and most YC companies now, I would say, are using AI to some extent. Can you talk a little bit about what you're seeing [25:34] for them and their experience. And so, like, you know, a couple of things that are coming to mind for me lately are I'm seeing like buyers in old industries that never would have wanted to even, that were like struggling to even adopt cloud or all of a sudden like super hungry for AI. Like, you know, you see this in education and health care and legal. And so you see like, that's an interesting dynamic. There's more competition than probably ever before. So anytime there's like a good idea, there's like 19 people going after the same good idea. [26:01] There's new considerations around margin. Like I think like most of building a startup is probably the same, but like some of the rules have clearly changed. So like as you're navigating this and now as most of your companies are using AI to some extent, like what are the big rule changes that you're experiencing or observing? [26:16] and [26:18] I guess the wild thing is [26:20] people seem to really need a good claim. [26:24] There's a great medical billing company, I mean, there are many [26:28] really great medical billing companies. There's one recently that I met who they now make the claim that [26:35] If you are running one of these 10 or 15 person clinics, it might be in all kinds of places, dermatology or wherever. It doesn't even have to be human. It could be a veterinary. [26:46] With their software, you can have...

[26:50] one [26:51] back office person. So you can have mainly clinicians and one back office person per clinic. And so, I mean, the type of claims that you can make and make good on with large language models today is kind of astonishing. And that I don't think was true. I mean, I think... Fan people believe you, which is what's crazy. Well, you show them the demo. And then you have five other customers who are already doing it. So I think that we're going to see, you know, [27:21] 10,000 flowers bloom in vertical AI software. Um, [27:26] And then I guess we'll see like the difficulty will be, you know, will there be roll ups like what will happen? Will there be a thousand for the next year or two? And then from a thousand, will it like get whittled down to 100? You know, as the models get smarter and smarter, what's going to happen? Do you think it will change anything like, you know, historically, it's like a market has like a one, two, three, and the one's a lot bigger than two, who's a lot bigger than three. Do you is there any reason why you think it might be different in this cycle or do you think that's the natural destination here? [27:56] I mean... [27:59] I think short of believing that AGI will happen and or ASI will happen and, you know, none and no software will exist again. Yeah. [28:09] I think all the standard rules still apply. That's what I would say to a regulator, too. It's like, you know what? This is just really, really good software. That's what I think. It's just thick software. It's very, very accessible right now. And so all the rules that we already came up with to govern day-to-day life already apply.

[28:30] And so... [28:31] Thank you. [28:31] And then on the business side, the moats are all the same, right? For sure. Switching costs, data that you have access to that nobody else has, brand network effects. I mean, there's just, what, like five? Yeah, there's not that many. So if we're in this moment where software just became incredibly sick and these markets are in some ways wide open, flowers are blooming everywhere, does that mean that once you've got a hook, you should actually go complete blitz scale mode right now? [29:01] natural conclusion from the setup. I think those are... [29:06] Basically, every founder has to make up their mind for themselves right now. We're starting to see some evidence that you don't have to. There's an alternative that's sort of brewing where maybe you can get to 50, 100 million dollars ARR and sustain it with less than 20 people. Yeah. Linear is a good example of that type of company. Totally. I mean, that's brand and [29:30] I mean, [29:31] I mean, that might be Brandt, actually. I mean, you're like, in theory, there could be network effects. I mean... [29:38] and. [29:39] Yeah, certainly some within a company. But in general, when I'm thinking about these vertical AI companies and you look at legal or accounting or finance or healthcare, pick your vertical. If there's a really good new idea happening and nine people got a clutch in the wall at the same time, I guess I wonder, does it lead to, and you're working with a bunch of these, do you then say scramble up the wall as fast as possible?

[30:09] Do you hire a giant team of people or do you just automate internal to yourself? And like increasingly, like pretty much everyone we're seeing, they're making, they're choosing to automate using their own agents internally. Yeah. Do you think that there's like a there's definitely a rise in the number of companies I think that could choose not to raise? And, you know, you'll see that kind of perspective a lot of times, you know, people saying there's going to be all these companies that don't need cash because. [30:39] and blah, blah, blah. And then... [30:42] Parker put out a thoughtful tweet about how actually that is not how it's going to work because competition means that the team that hires two teams, everything's the same, but one team hires 100 sales reps. Who's going to win? Yeah. [30:53] Well, I think it's going to be a race. [30:56] Basically, like, you can... [30:58] the people who are blitzscaling will have the benefit of lots of, you know, some of it is like at that point it has to be blitzscaling with, [31:06] you know, 150 IQ people. And so the question is, like, how many Silicon Valley companies really are able to draw that level of talent, hiring at 50 people, 100 people, 200 people, 500 people, 1000 people? Parker Conrad is... [31:21] almost certainly with Matt McGinnis and like he has like the all star team and he's able to, you know, sort of acquihire 150 IQP people into him and then integrate it and go from like zero to 10 million ARR for like all these other lines of businesses. It's like, you know, I actually think that the compound startup is possible if you can do that, if you can get that talent. But that's an if and like very few people are really, really capable of doing that. Actually, that's another good. Sorry, there's so many things here.

[31:51] another one where I'm seeing more frequently, I'm hearing the advice or even founders just wanting to organically say software is easier than ever to build. I'm going compound mega early, which is sort of the opposite of focus and be great and pure at one thing, which was always the advice, you know, I got in 2016. I think it's the barrels versus bullets thing. Something like that. Yeah. So you need barrels. Yeah. That person can do it if they can show that they can consistently hire and build that. I mean, yeah, you could say that the ramp guys did it. [32:21] a great job, right? Yeah, it's actually a good reframe of the whole problem, which is, of course, it's better to be as multi-product as early as possible as you can. If you can, right? It's kind of the same ethos as what you said around the fat startup. It's like, yeah, great. If you can raise 100 and have Keith on your board, do it. Do it, man. Do it. Why wouldn't you? But otherwise, here's a way to do it the other way. Yeah. Yeah. So yeah, I mean, I think basically that rather than have dogma, the better thing for any smart founder who's a systems thinker is, I mean, a systems thinker coming in here is not going to watch [32:51] you and me on a podcast being like, oh, they said this. A true systems thinker will actually just make up their own mind. Yeah. Yeah. Okay. Outside of AI, there's a lot of interest going into hard tech broadly speaking right now, which is amazing. Obviously, we've got like SpaceX and Anderol, but there's also another new crop of companies coming up that are leaving it. And so then you have a lot of the big VC firms putting a lot into it. And I've seen, you've said people have been like, oh, this is the YC of hard tech.

[33:21] And you're like, "We're the YC of hard tech." Yeah, totally. So yeah, talk to me about hard tech. And I know it's grown for you. I've seen a bunch of really cool companies in recent batches doing it, but what's on your mind there? Yeah, the great thing about YC is I think ultimately, you know, [33:35] Every startup founder should be thinking about how can I build a shelling point and then having a shelling point is awesome because that's what YC has. If we can get really smart people, whether it's hardware or software, to come [33:48] do this thing like uh demo day we have more than a billion dollars i think it's going on 1.2 billion dollars a year and like you know relatively like it's not totally captive i don't have like contracts over it but like you know consistently every single year this number goes up the amount of money that comes into yc demo days and so and i don't know i want that number to be two billion i want that billion number to be two and a half billion uh over the next five ten years like [34:18] tech is such an interesting like sort of purple cow especially at demo day so um [34:23] The median YC startup will end up raising a million to a million and a half bucks on Demo Day. [34:32] you know, the harder tech companies that can show a lot of real commercial validation or technological breakthrough during those three or four months. I mean, they're raising three, five, ten, like 20. It's like entirely possible to raise the amount of money you need to have a truly successful hard tech company just by coming to do YC for three months.

[35:02] companies and the hard tech stuff is very compelling. And we're seeing real success, like SoluGen, Early, Astronus, Boom, there are so many examples. When you think about [35:14] the hard tech segment, do you think of it as... [35:18] 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 slightly different set of advice or slightly different mindset with a satellite company versus with AI for law company? Well, the great thing is every single partner at YC does do hard tech. [35:46] we're starting to do more specialized programming around it. I mean, Andy Lapsa from Stokespace came back and did a hard tech mini conference for this last batch. And we're going to keep doing that. I mean, the great thing about YC is like it's less about [36:01] Thank you. [36:02] sort of the specific services, it's a lot more about the mindset and being alongside a cross-section of all the other sort of good things. [36:12] you know really good builders and um [36:15] 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 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 YC is not too different in that respect. But what YC does have is

[36:43] just this, you know, phalanx of incredible hard tech companies who can be basically right there by your side. Like, my favorite thing is when I did YC, I... [36:55] Yes. [36:56] I so needed help fundraising. Like, you know, James Lindenbaum from Heroku came and helped me, like, you know, Sereno de Bergerac our seed round. And then about nine months later, after we raised the seed, he was running a Ruby on Rails hosting platform. And they were worried about not being able to support, like, some of the biggest Rails sites on the web. And I happened to run one of the biggest Rails sites on the web. So he said, Gary, can you give us your source code? [37:26] For you, yes. That's the kind of stuff that you would do for a fellow YC batch mate. There's no way you would do it for anyone else. Totally. Yeah, the trust in there is just so valuable. [37:38] So there may be in our last little segment, I want to talk about sort of your involvement in politics and local government and the community outside YC. There is like a current as of right now, there's a bit going about you saving, you know, the city. And there's these Batman calls at your name, which I think is very good. And I've done a couple myself. Hopefully by the time this is posted, it's either died down or it's gone hyperbolic in the other direction. But a lot of that, I think, is a result of you. [38:07] taking on a lot of causes that it's like, I really want that solved. I don't have the energy and I'm glad that Gary's doing that. And I saw you doing this with

[38:18] education, you've done it with sort of like, you know, 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? Yeah. [38:41] I guess what I realized is because of my childhood, which was relatively difficult, I actually am just wired differently. And I need conflict in my life. I didn't really realize this until I actually need my limbic system really needs stimulation. Like you grew up with conflict and so you need it to feel. Yeah, I just need a baseline radiation level of being on edge in order to feel normal. So I did not realize this. That's not the answer I thought you were going to say. Oh my God. [39:11] I don't know. I mean, I think I got I started getting involved in it. [39:15] mostly right during COVID and after. Some of it was actually there was this famous clubhouse that maybe you were on with Mike Solana. And then we had Chesa Boudin, the sitting DA at the time. And just hearing him lie through his teeth through clubhouse, you know, and maybe it was just like, you know, COVID like [39:38] just isolation plus like hearing someone who's supposed to be a civil servant, someone who is supposed to be protecting people in our society, just come out and just lie to people, like just very brazenly. I ended up meeting with Nancy Tung, who was a candidate who lost against him in the prior election, went for a walk around in Noe Valley. And then I guess for me, like my systems

[40:08] is it like this? How did it get here? What's the story? There's no bench. Gavin Newsom went off to state. Ed Lee died. And then there was a vacuum of really strong leadership that was holding up the city. And so once I understood that, it's like, [40:30] Well, what do we do? We have tech, we have tech money. Everyone's afraid to say anything. Do you remember what they would do? Even the local press, literally the Chronicle would borderline libel Ron Conway, who's a close friend of ours. It's unbelievable that they would do that. [40:51] Nancy came to me and said, "You know what? Here's how it works." And then after that, she got me involved in some people who were putting together the recall of Chesa Boudin. This might be neither here nor there, but did you ever come up with a diagnosis for, aside from the vacuum of power, why there was this posturing that was going on where people were seeming so [41:15] self-righteous while sort of like, you know, annihilating [41:18] what, in my opinion, destroying schools in the city and all this stuff. Do you ever get to what you thought was the root of what was there that needed to be gutted? I mean, I hate to say it, but the media angle was a big part of it, and we still have that problem. There is a little bit of a lack of truly independent and honest media in local San Francisco and in the Bay Area. Voice of San Francisco with Susan Reynolds is like,

[41:47] one of the few people who they're like really willing to say something about, you actually do the real investigative journalism about really what is a moderate view, right? Like there was no voice. And when it became unsafe to say even moderate, reasonable things, like I want to be able to walk down the street and not be worried about being assaulted. Yeah. And it's like, you would be called a racist. Yeah. And you know, like you want your kids to like learn regular stuff. Right. Cool. I want them to learn algebra. [42:17] and middle school, and I don't want to have to send them to private school for them to get a good education. These are very anywhere in the country, you could say that. And you know what? We just got upside down for a while. It's very upside down. Do you feel like we're now through that? Do you think there's still a lot more work to do at the San Francisco level? [42:38] on this sentiment or do you think we're through what we needed there and now we can rebuild? I mean, my hope is that San Francisco, you know, I think I feel really good about Lurie. I feel really good about the current Board of Supervisors. And the interesting thing is even the unions that the public sector unions that supported this sort of what they enforced was like perfect uniformity of ideology as a purity test, because then they knew then they felt safe.

[43:08] things that were really out of whack with the public, they knew that they would not be defunded. For instance, their interests would not be. It all comes back to money and power. That's sort of the classic system. So I think it's changing. Even the unions themselves are sort of realizing like, oh yeah, we're not going to push watering down the curriculums in schools quite as hard in SFUSD [43:38] next 10 years, the coolest thing would be if someone says San Francisco Democrat and people don't think like downtown is for drug users and we don't want to teach kids math. They think, oh, that's a very reasonable thing to want. San Francisco is a beautiful town. It could be like a model for the Democrats, like reclaiming a good moderate left position. And it seems like sometimes in track [44:08] especially at this moment. But on the other hand, like in startups and in politics, we way overestimate what we can do in one year and we way underestimate what we can do in 10. So I am fairly certain this is going to come together. It'll come together in San Francisco. It's going to come together in California. And if we can fix both our city and our state, then we got the country man.

[44:38] most right now? Like when you think about this at the local, state, national level, like what's, what do you have your eyes on right now is like the thing that you'd really hope to see get improved over the next year, three, five, whatever. Oh, well, I mean, locally, I think everything's going really well. I think at the state level, I'm just like learning a lot more about it now. There's a guy named David Crane, governed for California, who I'm learning a lot about Sacramento [45:08] that there's a big opportunity for someone at the governor level and at the AG level in the next, you know, five to [redacted address] San Francisco is going. Yeah, I think we can have, we can demand. Because there's stuff in LA and there's like a lot of other stuff. Yeah, totally. I mean, I think Rick Caruso coming out of LA could be a really, really great leader, either for LA or, you know, in Sacramento. I think, you know, Matt Mahan out of San Jose, incredible. Our own very [45:38] make incredible strides in Sacramento. And if you look at the past 20 years, as California goes, those people end up becoming the leaders at a national level. But I can tell you, if Brooke Jenkins or Matt Mahan or Tin Ho, the DA out in Sacramento, or Rick Caruso or any of these people make it all the way up there, [46:01] I think that we're looking at a resurgence and abundance in the Democratic Party. And so it is possible. [46:07] Yeah. And then I guess last is national, but I guess that's probably a big picture. That's the final boss. Yeah, that's the final boss. Maybe that comes over time. Ask me in 20, 30 years. Yes, that's awesome. Well, Kerry, thanks a ton for doing this. This was really fun. I enjoyed this as always, so I appreciate making time. We'll do it again. Great. Thanks, man.