20VC: Behind the Scenes at Y Combinator: The Interview Process | What the Best & Worst Do in the Program | Do the Best All Raise Pre-Demo Day & YC's Fundraising Advice to Startups | Why the Value is in Application Layer AI with Tom Blomfield

22:24That's okay. We adjust for that. I mean like, and why that you may miss stuff if it takes sometimes 20 minutes and to come out of their shells a little bit maybe but it's not just the interview that we go And I'd say the interview is like 10 or 20 % of the entire process We make them write a long application form So we get all of their academic and career backgrounds We ask a bunch of weird sounding questions to try and pull out stuff like that That's the weirdest questions. Tell me about a non -computer system. You've hacked to your advantage So what system in your life have you figured out the intricacies of in order to use fewer advantage?

22:57That's a capital. Yeah, you started, right? And that's the kind of thing we would love to see as a, what were you 17 years old or something? I started a podcast in a bedroom in London. In a bedroom I did 400 episodes without making a penny in revenue, but I got this amazing roller dex and then I parlayed that into raising a fund and becoming a VC. Amazing. That's the kind of exceptionalism that we're looking for in some area of their life. and it might come out through the application, it might be the interview video or the interview itself, but we're looking for that spark that they are not average.

23:27They haven't just gone through standard steps of, you know, good high school, gone to Oxford or Cambridge, gone to McKinsey, just like boring, boring, boring, all the way through that at high school, they taught themselves to code and built websites for estate agents. That's what we said, the early signs of exceptionalism. Yeah, in some way, you know, Patrick Collison creates his own list dialect at age 15 or 16, or whatever, right? That, it's stuff like that. And so then we have 25. They're all in the valley with you, correct? Yes, more or less require everyone to relocate now to San Francisco in the dog patch where we have our office and spend three to four months there.

24:00See, I think that is so important. I agree. My question is, when you speak to the other partners, especially I guess going through COVID where it was completely remote, do they have any lessons observations from the complete all remote YC to the all -in person? Everyone's a lot happier now with the all in person. There are elements that we have retained of the remote batches, so we had a few that were fully remote. Doing demo day with remote presentations, like record live, but on -zoom presentations, with an investor reception in the evening, seems like a really good balance of the two. All on Zoom versus all in person, sitting through two days of presentations in a stuffy lecture theatre, where the AC doesn't work well, it's not a pleasant experience.

24:38That's one thing. Remote interviews. We used to fly everyone to San Francisco for interviews, which seems insane now. But overall, the in -person experience is dramatically better. Having in -person office hours, group office hours, even cooking for people. Like the act of cooking dinner for a group of people you invest in and then serving them with your own hands. An act of care that creates just an emotional bond. That's the trust as well. Totally. I trust you not to give me food poisoning. When it's just a 20 -minute zoom every week, it's so transactional and empty. I really feel like I know these founders now after four or five months.

25:12That in brilliant video, poutine and she, you can both let cheers, and then put it down. You know, yeah. Okay. Okay, so we have the 25, I'm sorry for us, but I actually, I listened to a lot of startup, I didn't hear this. What does the time look like then for you with the 25? One hourly meeting per week? So, why is he split into four groups? So it's not the whole I see, it's four separate mini -wices, it's sharded. You'll get a very different experience in each one of them. The partners are specific, and then we have our own speakers. One night a week will be your group event, and you'll get someone like Brian Chesky or Paul Graham or we had Kevin Sister on the Instagram founder come and talk to our founders.

25:47So you've got the, you've got Tuesday dinner, you've got pre -scheduled office hours sort of one -on -one or one company with one partner every two weeks and then group office hours every two, the alternating two weeks which is a really great mechanism I think was introduced in 2011 where you have seven to nine companies who all come for a sort of one and a half to two -hour session and they're organized thematically. So we had a FinTech section and then a biotech or whatever it might be, ideally all at roughly the same stage of company life as well. And then you basically the founders are sort of problem -solving with each other, you know, how do you find a banking partner in FinTech or how do you deal with government regulation or how do you sign your first enterprise deal as a B2B SaaS company?

26:24So these group office has a really good way to share knowledge between founders and then set goals. So you say in front of these 20 -odd people, we're gonna go from 25K at ARR to 50K in two weeks and you come back in two weeks and like the public pressure, even though it's only 20 people in a room, pushes people to work harder than they ever believed was possible. It's really those three things. So the Tuesday night, or the dinners, the individual office hours and group office hours, that's the core of YC. There's a bunch of other stuff. So there's an incredible internal knowledge base, a forum, a user manual, and how to run startups.

26:54But for the in -person stuff, it's those three things. What do you think are the most common mistakes that founders make in the batch process when they are working with you in that three to four months process? Not launching early enough, very often. being too afraid to get something out there and iterate. I agree. I saw a tweet the other day, though, saying, actually, it's never been harder to capture consumer attention than stay. And so actually, this idea that you can release an imperfect product is not true because you release that imperfect product. Tom engages with it, goes, eh, that's not great.

27:24Turns, it's so hard to get them back. I disagreed with it. Yeah, I think you need to make the scope narrower. I differentiate between breadth of functionality versus a level of quality in polish. So I would encourage founders to go for a very, very, very narrow feature set. Like even narrowed and they possibly could imagine. Polish it to a very, very high level of quality and get people. Only a few people, a few hundred people, really excited and really narrow thing. And then broaden out. What way too many founders try to do is they're competing with Google Docsale or something. And they try to replicate every single feature of Google Docs to a mediocre level of quality and then release that.

27:58And the surprise when no one likes it. So keep your initial product super, super, super narrow so you can build it quite quickly. but keep the quality bar super high. A lot of founders worry, yeah, but I'm gonna have a super specialized product then, and I can't sell that big vision to VCs. What are you saying to them? Yeah, so this is a key skill of a founder. Holding these two realities in your head simultaneously without cognitive dissonance or driving yourself crazy. One is the big vision of the 1 % best outcome if this really, really works. What could this become? Holding down your head, and for Monzo it was, we're building a bank for a billion people around the world.

28:30That's the big vision that you have to hold in your head. and then you have to hold the, what is my top priority today and this week and this month, which is very, very different from this billion people around the world, right? And you have to execute on that, get your team to focus on it. But you have to have both. If you only have the big vision and you think that's today, you're a bullshitter. You're just full of hot air, none of it's real. Whereas if you're too execution focused and you continue that for several years, you build a small business. You build a very successful, or rather, a medium -sized, small business that's very profitable, it's never going to get big.

28:59So you have to have both simultaneously. How many of the companies pivot in the badge? 25 %? What are the successful ones do that the others don't? Pick an idea and stick with it. It's simple as that. The worst pivoting founders just can never get the conviction to stick with anything. And they just pivot and pivot and pivot. Because they overthink it and they hear this more and more from young founders like, I'm not sure this is my life's work. I can't commit to it because I'm not sure I'm passionate enough to spend my... Dude, I'm asking you to spend six months on this, not your entire life.

29:30I thought what I'd say is that it's dating. No one goes to the first date being like, you are my partner for life. It would be terrifying. Yeah. Dolson tells me very funny a couple of weeks ago, pivoting is like divorces. Maybe one or two is reasonable, but if you're doing it multiple times in a row, maybe the problem is you. I like that a lot. What are the big challenges for you advising these batches? Is it that VCs come early and you're like, don't take their money, don't take their money? Is it that shutting down continuity, our growth fund has enabled to have a much more collaborative relationship with multi -sage PCs.

30:05Previously, it's very competitive. So that's fine, I think everyone behaves pretty well. What's the deal? A lot of your batches get approached while in batch. 100%. Yeah. The trope was always, I was always, everyone raises before demo day, which is like the best company's absolutely always raised before demo day. And so now we've just set a deadline like two weeks before demo day and said, you may start fundraising on that day two weeks before DemoDay. And they're not allowed to stop before then. We strongly encourage them not to and will be very, very disappointed if they do, because it's not in their interest, because running a competitive process with lots of people bidding is going to get them better terms.

30:37And what happens is nervous founders will fundraise early, because they're like, well, what if DemoDays isn't at well, so I just talked to some early. And then what happened, either the VC looks at you without much progress and writes you off because you've not made enough progress, all they like you so much, they give you a preemptive offer. But the valuation is not as good as you would get by demo date because that's why they're doing this right? So they give you an offer of two million on pick evaluation. I don't know X right 10 10 2 on 10 and the founder This is feed price. This is more money than I'd be the seed price You guys seen 10 you see that?

31:09No, no, no, not for a while, huh? No, but the nervous founder is like 2 on 10 Wow, there's a more money that I've ever seen in my life They can't turn it down. They don't have competitive offers. They can't turn it down so they accept this preemptive offer and they've just screwed themselves. And this happened to a couple of my companies this batch where crazy all -star team, ridiculous, every pedagre you'd want, amazing product, profitable, more than a million in revenue. And just the founder was just so nervous about fundraising that she took. It was fine, it wasn't terrible, but it was heartbreaking for me because I knew that if she just trusted the process and waited till this sort of auction process she'd get a bet around.

31:47Okay, so you mentioned better and better and better and better and like kind of the more auction process I can see where this is going What would know my question actually before I just parlay and just lay into you Is actually what is the biggest advice that you get founders when they say how should I think about structuring this round ahead of this two Weeks of conversations before demo day. Yeah, this is an area where I think it's way too easy to say why sees advice is X Why see advice is custom for every single company? I'll answer the question, but with the caveat that this is not advice that we will tailor it much more specifically.

32:24The trends we've seen over the last few years are that founders were getting way over diluted in their seed round. They're giving away 25 or 30 % of their company at seed. That's too much, I agree. Keeping dilutions slightly lower is probably better for them. I think some founders have taken that way too far and, you know, aggressively will only give away 8 or 10%. So this is my trouble, I see 10 % in the whole time. And I'm just like, how enough do you expect to grade and bastard to really, really be a partner with you? Yeah, but they're going to get six, because you also want to have these angels in.

32:53It's not going to happen. The more nuanced truth is not why CSTellin founders to only raise 10 or 12%. We are telling founders that over diluting a seed is not good for them, and that retaining control would be good for them. And they can make progress towards a series A milestones with probably a million and a half or two million. And the valuations they might get at demo day around 15 to 20 million, which roughly ends up at 10 % dilution. But if a great partner comes in, top tier fund or someone that has a specialist and they really, really like and they'd want 15 % ownership or even 20 % ownership, absolutely consider it.

33:24I wouldn't write anything, I wouldn't rule anything out. And I think this is where it gets misunderstood that YC's rule is only 10%, and it's absolutely not true. We've had Sequoia and Andrii Senaccel and Founders Fund and Google Ventures and all of these funds leading rounds in companies in the last batch. And it's just about having a reasonable conversation with the founders to say, where's the flexibility and where can we meet in the middle? I find one commonality I've done 170 investments now. One commonality is when the seed round is large, they lose urgency. Totally execution speed goes down.

33:55Totally agree. Always 525 is kind of the sweet spot. Do you agree with that? Yes. We push founders to raise less in general because most of our companies at DemoDate are pre -product market fit. They've got some in clink that some things working, but they're certainly not in the scale up phase. More capital pre -product market fit does not help. People just end up hiring tons of people, which slows everything down and stops them being so nimble. So really our advice is to raise slightly less money pre -product market fit. Absolutely, once you've got product market fit, poor gasoline on the fire, go go go.

34:28But yeah, raising less early is probably best for most companies. Do you see bad investor behaviour? Oh a lot. Do you? You got a huge amount. I thought would be quite worried about that. They are. But then why would they let you stick? Because they haven't, it's got better and better and better. What is the bad investor? Because often people talk about this, but I'm like, I don't see it. YC has an investor database, which has 10 ,000 people in it. I'm sure you're a networking perhaps, look it up. And it has reviews from all of the YC founders that have taken investment from them, both on their process and what they would like to work with after the investment.

35:00And it has a rating. All YC companies have a huge amount of inbound investor interest and before they book meetings they will look at each investor up in the database and see have you treated found as well or have you not? And if you've not treated found as well you're not getting meetings with YC companies. And some investors get why, why is everyone ignoring my emails? It's like well dude because you've fucked over these companies again and again and again. Very typical bad investor behavior would be something like making a binding handshake offer. We have a protocol on this you know I offer this amount of this valuation and yes I agree.

35:25And then not wiring the money. Or just saying oh I'm of course I will only wire when the round's full. Let me know when and you've got the full -round completed and then overwire. You've signed it safe, you have to widen my straightaway. Or being extremely onerous in terms of like, you must meet with us every two weeks or whatever. Like I want to be helpful and being a little too helpful. The biggest annoyance to me is actually when people don't understand the weight of their check, and what I mean by that is that when a small 50 or 100K check wants 10 diligence meetings, and then wants 15 references, and you're like, dude, you're a fucking addendum to this round.

35:59Yep, know your place. Yeah, and we are actually going to start publishing this data internally for our founders where we know How many check it for us? This is what I'm doing right now with another our partners Brad We have data on how many meetings each VC takes how many investments they actually make and what the checkered sizes And so we can tell our founders what is a percentage of chance of conversion and what is expected value of each meeting I mean you look like of the most intelligent routing system then where you're like hey for those that want the easiest cash I'm sure it's the highest converting jacks of these.

36:31Here are these 20 investors. If you meet with Sequoia, Andrewson, or Founders Fund, it's going to have a 3 % chance of conversion. And on average they're going to invest 2 .7 million. I'm making these numbers rough. But we have that data now. And we are going to all of the top funds to work with them to make sure their understanding matches with our understanding that they actually have made three investments. They actually did take 163 meetings. And then we're going to publish a data to our founders. Are the companies that get the supremely hot rounds, the ones you think will. In other words, can you predict the ones that will be hot?

37:01Yes. And that's because of founder, space, everything, yeah, combo, I've traction. Yeah. It's not one for one. You can't predict 100 % of them, but you directionally, yes. Do you ever have one way or that one's going to be a rocket in terms of investor attraction? And then it's like crickets. Sometimes the vast vast majority of YC companies end up raising their target anyway. Some might take a little longer than you expected, and some might go very fast. But something like 80 or 85 % will raise their full sort of target amount, which might be two or three million or something like that. And then for you, you have these 25 batch, which you really craft and work with.

37:33You have the carry on that batch. It's all shared. It's shared like a equal partnership. Yeah, fascinating. And so do you get involved with other people's partners? Like, absolutely. You want to pick the best companies for pride, and also it's more fun to work with better companies than worst companies. Do you start granking each other? No, no. That would be interesting to see. You need a long time period to really know. You would, but you could get interesting signals from who raised the most from the best, the amount that converted that didn't. Yeah, we have that data and we ignore it because it's just so easy to...

38:09Easy to game a five for sure. Yeah, who cares that you raised 10 million from XYZ investor? We don't want to incentivize people to raise that money. If you could change anything about the YC process in that three to four months, what would you change? The thing I am trying to change, I ran an experiment last batch where I randomly matched groups of six to eight founders across groups for dinner and just sent them out for dinner. It turned out to be unbelievably difficult to get a group of eight founders to organize anything for themselves. It was astonishing. And so this time round, we are doing way more of the curation where we'll literally tell you, turn up at 6pm at this restaurant and you will meet seven random YC founders and you can chat about your start -ups.

38:46So the thing that I found most valuable as a founder in London was meeting groups of peers that I would then share experiences with So we're trying to curate those experiences for people so they get more of a Community if it works the batch will start doing it for alumni as well So you can say I'm in London. We're gonna do 20 YC dinners next week of all the YC alumni So they get to meet each other and just make that network of YC even more powerful I do want to move to the the theme of the day, which is obviously AI I mean every YC company is also an AI company now 70 % 70 % there we go. Is the hype surrounding AI, a hype cycle?

39:20Or is it justified? I think it's justified. I am so excited about what the future holds. I was really annoyed actually back in like 20, when I was studying GoCardless and Monzo, I was so annoyed that I wasn't around the dawn of the internet, you know, like 95 to 2001. I was like, I always heard about Netscape in 95 and I'm like, yeah, we're way too late. It felt somehow like all the ideas were not taken. That's just a silly thing. I get it. Yeah, yeah. But like, we missed it out. We missed it out on that time. And what I actually realized is that Monzo rode the smartphone wave. You know, smartphones and apps were 2010 to 2020 say.

39:57And that was the predominant like technological wave. We are now going through another, which is AI, which is going to be as big as the internet, I think. Really, there's a technological revolution that I think will impact every part of our lives in small ways the next year or two, and in very, very large ways over 10, 20, 30 years. And I think it's gonna transform every industry and there's so much opportunity to build right now. There's kind of two opposing camps at this time, I think, which is like having interviewed many different people on both sides, which is really interesting, actually having a different perspective.

40:24But those are the things that can sustain innovation, which is like an add -on to Adobe, notion, all the existing, and it enables a better experience for existing products. And then there's others who say it's disruptive and it creates entirely new categories and markets. I'm gonna cop out and say kind of both. I do think big incumbents with distribution who can add sort of AI copilot functionality will make their products more effective, but I think there are huge new categories that will be created as well. I'm really excited to see what it does to consumer behavior because consumer companies tend to be winner takes all or win takes most and they tend to be created when a new technology shift happens so internet or smartphone and we haven't had a lot of exciting new consumer companies for like the last five or six or seven years because they all started like 2011 to 2015.

41:08Clearly AI is that technological shift and I think it enables a whole generation of new consumer companies to be created and I don't even know what they are yet but I think they're like they're going to be created this year and next year and year after. Okay I just want to then kind of unpack that a little bit because there's obviously the sustaining versus disruptive and then there's also kind of infrastructure versus application. Yeah if we start on infrastructure layer we see so much money going to the core providers today, your open AI, your Mr. Azure Anthropics. Do you think there's money to be made investing in foundation models?

41:37I don't know. The best case for me and for YC probably and for you, and like humanity I'd argue, is that roll forwards 10 years and there are like five or six foundational model companies, and they're probably attached to Google and Microsoft and Amazon and Facebook and Apple because they have the funds to power them, and they are all about as good as each It's like how, you know, GCP versus AWS versus Azure, they kind of do this, you know, it's slightly different. But there's great functionality and commodity pricing because they've all like beaten each other down on price. And that is not so great for the investors who invested in those companies, but great for the world, great for humanity, great for startups.

42:15I think this is exactly what happens, which is they realize that actually the cloud services is where the cash cow is. You acquire them, it's like the tools that help you acquire amazing customers, but absolutely, they're kind of at qualifiers to aid the core cash cow business. Yeah, maybe the other ones themselves are kind of part of that infrastructure, but I see them being in the case that's good for frankly for YCN for most of the world, I think, is that they're more or less equivalently good and you could build on any of them, you could swap any of them out. I think the dangerous case... I say any impress, I was meaning a company the other day and they were talking about how quickly they swap out different models to a real -time basis for different use cases.

42:52Yep, it was the language that happened. It was that you like we used 12 different models at once and varied in real time The US has made like non -competes even less enforceable now People talent is gonna jump between these places so quickly So you discover an innovation at one place weeks or months later. It's replicated everywhere else I think unless you really believe that raising a trillion dollars to train your biggest model is gonna be the advantage And who knows? But I think it's quite dangerous the world if there is one singular god -like AGI that we're all beholden to Okay, so we move then to like the application layer up that sits on top of foundation models Yep, which is where proshoot your exercises.

43:26Yeah. What why is that because most it's a rapper. It's non -sustainable Why yeah, there are clearly some rappers You know if you can build it in a weekend at a hackathon and make a bunch of money Probably not defensible the most Businesses building on top of these models. I see it so you know you can describe the last generation of startups as like MySQL wrappers or AWS wrappers or something like, you know, it's the same kind of logic applies. I think where the sustaining value lies is identifying an industry, deeply understanding the regulation in that industry, the tooling, the language, the all of the training, how people sort of work and behave and act, and tailor your software to fit into that industry in a way that's extremely deeply embedded.

44:11most people are building application layer stuff in an AI, say it's 80 to 90 % traditional software with 10 % AI. It's working in construction and figuring out how Pro Core works or how the Salesforce CRM works or a some Oracle database. I don't think OpenAI is going to come and steamroll the construction company AI companies because they're not going to deeply integrate into the processing of the software that exists in each of those industries. So I really believe everyone works with a computer, will have an AI co -pilot assistant thing in the next two or three years, whether you're like an oncologist or a law professor.

44:45The thing that worries me a lot of it is that you see a lot of these service providers, but we have a better user experience, we've got a better soundproofer, and I'm just going to get it, but the trouble is you don't have distribution. What I worry about is distribution trumps products in this world, which is where Microsoft Office just bake it in, and because of Microsoft's distribution capabilities into all, was it on colleges or dentists or whatever we want to use as that famous dentist example. Fucking dentists. Poor dentists. But, do you see what I mean? I do, but I don't agree. Because I think Microsoft Office, like by definition, has to be a general product.

45:20It will be the best word processor for sure, but it's not going to be the tool that the dentist is actually using to write their clinical notes after a meeting. That is a specialist piece of dentistry software, the 3D modeling software that some architect is using to design a skyscraper. Microsoft Office is, it will benefit for sure Google Docs and Microsoft Office as a general document writing thing, but one of our companies was called Solve Intelligence, which is a tool for patent writing. So taking scientific inventions and papers and turning into really really high quality patent submissions are very likely to be accepted.

45:51I don't think you can tell me Microsoft Office is going to help write those patents. No. So I think that is that vertical focus. Was that an incredibly hot company? It was a normal hot YC company and that's the bread and butter of the stuff I love to invest in. Find a vertical where you are a domain expert and you're nerd out on it really really hard. You can talk to these people and build something that's so specifically tailored for their needs. Do you find the advice that you're giving these startups is different the advice that you gave in a completely pre -AI world? Yes, big companies are now more willing to spend money on this stuff than they ever were.

46:24The previous advice of like go and sell to other startups I think is not good for very, and maybe a DevTool startup you're going to sell to other startups, but in general I push companies, B2B SaaS companies to start mid -market and go up as quickly as they can. Every manager of every big company in the world is being asked by their boss what is AI going to do to our company? And many of them do not have a good answer and they're looking around for startups to help them. And for sure it's innovation budgets and proof of concepts and all this stuff, but where it works they convert to real contracts.

46:54I've seen companies go from zero to like half or a million of revenue within the YC batch, with really, really big companies, like Fortune 500 companies, and turn them into recurring contracts. This is real, this is saving people so much time, it's astonishing. Do you think he knows that you're a good investor now? I don't think I am, I don't know. I don't know. Do I think I'm a good investor? I was having this chat with Tom Human, he was like, dude, I just don't know if I'm good at this after all this time. I don't know either. I think I'm a good founder and operator. I'm not sure I'm like that temperamentally suited to being a coach or a mentor.

47:31I still have that fire Like do you want to go back and found another company? Absolutely not Really I love it, but it ruined my life Life in a way like honestly like I love the earlier stages. I love work with smart people I love building stuff I love having my hand on the steering wheel and making decisions quickly and feeling the whole company moving at pace And I think I'm good at it. The problem is when you're good at that stuff, it turns into a big company And then you have to run a fucking big company which sucks. It really really was sucks most I'm so proud of Monzo I think it's an amazing product and company But that was like startups on hard mode because it was regulated We built a product we thought people loved customers gave us incredible feedback It was profitable and still the regulator comes in and says no, no, this is actually this is really bad for customers Despite all the customers loving it, it's actually really bad for them and we have to protect them and so you've got to change all your plans.

48:23Having this random team rolling in hand grenades every two or three months, you know, you think you're talking to customers and doing the right thing and then you just get blown up all of a sudden because the regulator decided for some reason it's not treating customers fairly. It was astonishing. What advice would you give Nick at Ravolute on getting regulated? I'm not sure Nick would take any advice I gave him so. It's totally irrelevant. I don't know, I think Revolut have acted in a certain way for so long that it is hard for them to change course really honestly. We intended to be regularly to bank them very, very start.

48:56Now ten years on, we are reaping the rewards of that. Final one, you mentioned there about kind of the impact it had on your life, obviously founding companies, and I've heard you talk about the ability of balance before. And I've never agreed with you on this one, Tom, I'm really sorry. I'm like the reason my mom's an Ango car, this was successful, is because you didn't to have balance. And nothing great is created actually with value. You have to be exceptional. That's what makes it a great agree. I agree. I agree over a short to medium time period. I don't know how founders do it over a 10 or 20 year time period because I cannot work for that intensity for that long.

49:30Absolutely. First two, three years at Monzo, we were working like crazy people. I mean, the first 50 people at Monzo were so spectacularly talented. They bear the scars of it, you know? They like worked so hard and gave part of themselves this company to make it exist. It was really annoying actually when we got to like a thousand people, people are joining and like demanding work life balance and you know asking them to go a four day work week and the first 50 or 100 people are going what the fuck is going on? Like it feels like we begin limbs to this company and then these newcomers are demanding like they want to work 25 hours a week or something like what the hell's happened.

50:04So yeah it's tricky. Did you fall in and out of love with what you did over that time? I think people always say are fans, you're always so in love with what you do. I think that's a bit of a lie. I loved the product all the way through, but by the end I hated the company because it got so big, so over -regulated in my opinion. It wasn't as simple as identifying something cusp is wanted and building an amazing product that they would pay for. That was not enough. There was this other whole like crazy language that we didn't speak, called financial regulation, and you had to keep these regulators happy as well.

50:34I was not good at that really honestly, and I think T .S. the new CEO and T .J .R. of the COO, I'm spectacularly good at that, as well as maintaining the culture and the products. And they've just done such a good job taking it over the, you know, where I left it over the next four years that I couldn't have done. Final, final and ever. Do you have a challenge in terms of loss of identity? I don't go on holiday because you're detached from work. And you mentioned me, Science and Seventh, I've never, ever done anything else but this. So it's really uncomfortable actually to have 10 days or seven days with nothing.

51:03Yeah. This was a big problem for me when I was thinking about leaving. The year or so probably actually left. I couldn't imagine myself and the company not being the same thing and who I would be or what I would be or whether I would be relevant anymore or I was worried the company wouldn't survive without me which was a very arrogant and untrue thing to think it thrived without me and I had to rebuild my sense of identity my ego. And honestly going to America where no one knew who I was and joining YC is basically an intern was incredibly humbling and really positive because I had like rebuild my entire self image.

51:37At Monzo, anytime I said anything, a whole team would like spring into action. And even if I didn't intend them to, I'd be very careful what I said. Because literally I'd come back to Eastlater and find 30 people had gone off in crazy tangent. And I joined YC and I say things and people like ignored me. I'm not in nasty way, but I was just like just another person, right? I was a visiting partner, I was a teaching assistant. My ideas didn't matter that much and that was so humbling. Honestly, really, really great. Right, we're gonna do a quick fire. So I say a short statement, you give me your immediate thoughts.

52:03Let's do it. What's the biggest takeaway from PG? Relentless optimism. He will meet with founders, get so excited by their idea, and imagine the future they could build if this just works. And the 1 % chance it works, how it's gonna change the world. And he'll get so, so excited. He will excite the founders themselves, and they will come out with way more optimism and self belief than they went in with. It's a super power. It's astonishing to see how he can jazz people up and just get them so so driven and motivated and something I really want to emulate. It's really interesting. The unlocking investor enthusiasm gives to the willingness to open up of the founder.

52:41Totally. Totally made sense. You have a pessimist who wants to win more, who wants to win more? And it's the British culture. It's so easy to trash an idea and be sarcastic and it makes for great comedy, makes for terrible start -ups. You need that boundless energy and optimism. I mean, it's not a natural British state, but it is Californian. You can start one company again and choose a board member. Who do you choose as a board member and why then? If I was doing FinTech, I would choose Mickey Malca from Ribbit. They finally invested. Ribbit, I don't know if this public -culture check. They have Monza?

53:13Yeah. I love Mickey. It's so great. And I'm like the quality of thought I got from Mickey and the deep personal connection I felt with that guy was just on a different planet. I'm sad I haven't had the chance to work directly with him. Yeah, no, I listen, I think he's incredible. What ambassador would you never have on the count of days? Ha ha ha ha ha ha ha ha ha ha ha ha Probably Softbank. I had a very unpleasant experience with a Softbank London team. Just a bunch of pretty arrogant like Deutsche Bank traders turned venture capital investors. They were not fun at all. I met tons of really bad investors through my time honestly.

53:47What was the worst investor you had? There was one and I can't actually remember his name even. He was an intro through one of our existing investors and he on the first call was like raving. He's like, this is so exciting. This company is great. I really want to be in, like 10 million, I want 10 million allocation. Will you give me 10 million? And we're like, yeah, we're like, yeah, sure. Like we're raising 100 million, but yeah, we can, we can earmark 10 for you if you're that keen. You know, like go through diligence. And we got the rest of the rounds together over the next few weeks. Like a week before signing, he was like, you know, I've been looking at your numbers and the cohorts, the cohorts really aren't as good as you said they were, and really disvaluation that we agreed doesn't really make sense anymore, Tom.

54:26And really, I, you know, I agreed at one, but actually I'm only going to do this at 500 or something. And it was like three days before signing the term sheet. And I was like, okay, no worries, I'll just give you an allocation to someone else. Thanks. He's like, what are you doing? I was like, you're backing out. Like, I, we agreed on something. You, you're backing out. You're like, you've not got it. And he went fucking ape shit. And I heard from another invested, this is just standard practice for him. He will go in super, super, super happy, like supportive. I really want in. And then the last second he'll be like, oh, no, there's actually something wrong.

54:53Just trying to squeeze 20 or 30 % out of the round. I don't know what to say. Why do they? Because you've got to have ball control on the round to squeeze it 20 or 30%. Do you see what I mean? So it's like, if you're a 10 minute or 100 minute, you're not even going to be able to do that. But even if you wanted to, you couldn't without carving out a separate deal for him. Yeah. I don't know what his plan was. It was really stupid. and I was just like, I don't want to work with you. He has been blacklisted from, he's tried to invest even after I left, and to their credit, the Montso board of said, we're not working with you.

55:20And I was just like, fuck you dude. Don't treat founders like that, it's not cool. Okay, which is the most helpful angel? I know angels are different for different companies, obviously, for different, but like the one way you're like, ah, they're amazing. So like, Guy Pajani, it's Snick. For me, consistently in companies I've invested in with him. I found his love. That's a good question. For me personally, it was Eileen Burbich. I mean, not an angel of us, but our seed investor was the most personally helpful. We were obviously her biggest position. She said to make a lot of money, so, like, economically it makes sense.

55:49But she went above and beyond. I mean, she was like, offered me to go and stay in her house, cook me meals. She would, um, when we lost her chief people officer, she came and did an exact job at Monzer effectively for, like, four days a week for six months. She, like, put her portfolio to one side and just said, I'm just going to come and turn up every day and work with you at the company. I was just astonishing. So Eileen is, for me, head and shoulders, up up everyone else I've worked with. Gary's clearly fucking great. Like, when you see... Gary Tan? Yeah. When you see him as CEO of YCM, what he's done, the excitement that he brings.

56:19Especially on Demo Day, when you see him taking photos with the old school camera, and just the joy that he... I didn't mean to hardly just brought back it then to the YC community, what do you think makes him so good as a CEO of YC? YC has changed a lot in the last two years for the better, and I put it a lot of it down to Gary. He was there in the early days. When I was there in 2011 he was a, I think, a part -time partner. He helped us design our pitch deck for GoCardis in 2011 and he was taking the photographs back then. So I think he experienced YC at its purist at its core. And then really, honestly, under Samultman, I think it expanded in a bunch of different weird areas.

56:53And Sam was distracted. He was doing OpenAI from very, very early on. And so to have a CEO now who is full focus is the batch. It's a core YC. It's not some growth program. It's not something. International programme, it's not creating AGI, it's the core YC batch that Gary has experienced and loves and cares about has made it great. What is the single biggest threat to the YC model? Our complacency, I think, we could coast on our, on our laurels, rest on our laurels, I guess, not to mix metaphors for quite a long time without realizing it. You could, I think, the K -Rate would take a long time, like a decade plus.

57:29Yeah. And then we just recruit bad partners who give bad advice but continue to recruit reasonable companies and they will continue to fundraise because of the brand but then after 10 years decay we realise it's all fucked. And so just being really really having a really high bath for the partners we hire and a really high bath for the companies we fund so that we're making YC stronger and stronger and stronger every batch and not risking this like decade long decay. Which founder is not a YC partner but you'd love to have them as a YC partner? I mean I think either of the Colossans would be incredible, I think they're a little bit busy at the moment.

58:03Brian Chesky, maybe as a second act, he could come to I .C. He speaks at every batch of events in his advice to just phenomenal. Do you care about money? Now that I have more than a surplus of money, clearly, not really. Like, I cared about it when I was younger for sure. Does it make you happy in the way that you thought it would? No. Was that a hard moment when you realised? Because you do chase it to a certain extent. I chase success and money and do you know what success was? Yeah, like building a company. My dad, when I was very, very young, created his own company and it was drilled into us from a young age that being successful in life meant being rich and being successful.

58:39And so I had this huge drive to create something big and to that external recognition and validation. And the money went with it, but it wasn't the money alone. It was like, it was success. It drove me to do Monzo and drove me to stay at Monzo for a long time after I was happy. in the years since it's kind of gone away. It's weird. Like I don't, is it fraying? Yeah, it is. It really is. I don't feel like I have to create another, I felt compelled to create one, so I really did. I keep being urged to build something because I really, really love building stuff. But I don't have the urge to build a big company.

59:14I don't want to run YC. I would not want Gary's job. I have been there. I've had the stress. I've had the pack calendar. I do my work. I get to go home in the day. I shut my laptop and I can focus on my, do all of the cliched founder sports. I love cooking, I bake, I do pottery, I hike and cycle. I love that part of my life so much and I'm the happiest I've ever been I think in the last six months because I have the work that keeps me intellectually stimulated but tons of hobbies and friends and I'm not striving for it like external validation as much. I mean I still am you know. I get a buzz when I'm going to I get a tweak that goes viral or I'm an on you a podcast or in the BBC asked me to go and talk on the radio.

59:56It's like a little bit of a rush. I think it drives me much less than it used to. What do you miss most about London? Friends, friends and family. Yeah. A big part of me leaving honestly was my friends all got to the stage of life where they were getting married and moving to the suburbs and having kids. It makes a big change to friendships. Kids are wonderful obviously, but I really know some of my friends when the kids happen, like the friendships fall away. Totally and it happened in like a two or three a period where I genuinely found myself in London thinking I don't have friends to hang around with now I've got to make a new friendship group and that for me was a catalyst to move countries Just like if I'm gonna have to make new friends I might as well take this opportunity to move to a new country as well And have that out so ten years time final one is 2034 Why do you want to be then is is torn back in London running a fund is Tom not running another company?

1:00:45Hopefully not running another company. You're just running a fund? Not really, no. All of the funds I've seen have pretty horrible politics, and I think YC has the least politics of all of them. I don't want to run YC. I'm very, very happy not having Carrie's job. If I'm still doing YC, that would be great. I would like to be able to split time between San Francisco and New York and maybe the Caribbean a little bit. I love sailing in maybe London. I would love a long -term partner, and I would... I think I'd like kids. My brother has two children, and they're one and three years old. Before I came to work today, I went into the living room and the two of them were sitting there playing, just like very, very blond, very cute one and three year old and the eldest runs up to Uncle Tom, Uncle Tom, I've drawn you a, this picture and it's like my heart melted.

1:01:27It's like, oh my god, I can see what these things do to you now. Yeah, if I meet the right person, I'd love to have a family. Over the next 10 years I met someone great and we had a family. That would be happiness for me over creating another billion dollar company, like who needs another one of those? Tom, I've loved doing this. Thank you for letting me just peppy -y with questions. Thanks, Harry. I have to admit that show is so much fun to do. Now, if you want to see a resemblance, then you can check out the video of the interview. Apparently, we look slightly like twins. You can find that on YouTube by searching for 20VC.

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