Uncapped #43 | Garry Tan, Harj Taggar, and Jared Friedman from YC

16:45Garry Tan:What do you mean?

16:45Harj Taggar:Like you kind of don't need to have like the thousand people company anymore.

16:50Garry Tan:It's interesting. I still feel like I'm waiting for that where like, I know there are obviously some companies like Back to YC companies that are like, I'd love to, like, you know, I invested and I'd love to invest more, but they're super profitable. I'm like, okay, that's great. I'm very happy for you. But there's also companies raising bigger rounds than ever and consuming crazy amounts of capital. And in some ways it looks even more capital consumptive than ever before. And I don't feel like I have a good mental model to square exactly why that's happening.

17:14Jared Friedman:It certainly seems like it's easier to get to like a million or$2 million of ARR without hiring like anyone. Like we're used to seeing this. We get so many investor updates. And usually we're used to seeing like we just hit a million ARR and we had like 10 people and now it's just like consisting like and we haven't hired anyone. So that's like new. I agree that like the step after that though, it seems like the bees are bigger than ever. They're huge. Yeah, right? And so.

17:39Harj Taggar:Well, I mean, venture is contracting a little bit. It's like not on a dollar basis. On a dollar basis, like there's a quote unquote flight to quality. And then one of the things we've been talking about internally is like the world is actually increasingly full of these mega funds that are friends and they do great work. But it's like more and more dollars behind fewer and fewer people.

17:59Garry Tan:So fewer firms.

18:00Harj Taggar:Yeah, fewer firms and fewer people at those firms. And then the natural thing is like then capital is a bludgeon. Like the fixes in, which is great. Like often like for YC, YC is sometimes the number one, number two, and number four of any given like vertical SaaS space. And we're in the billion dollar one. We're in the half a billion dollar one. We're in the arm the rebels one that works with the partner. Like this happens over and over again. I mean.

18:26Garry Tan:So do you think in this environment then is the like king making meme is that like more true because of the capital as a bludgeon thing like is it more effective in this type of environment basically if the founders are

18:37Harj Taggar:good like the capital like helps them get there a little faster but i don't believe that like capital

18:43Jared Friedman:as a bludgeon especially when things move so quickly like you can end up having capital and

18:49Harj Taggar:then like moving like fast in the wrong direction like harsh funded giga yeah and these guys beat I mean, we love Brett. We love Sierra. But yeah, like Giga, this sort of 10-person team, beat all the incumbents for things like DoorDash. I mean, the back-to-back-to-back, it's like they have the best tech. And I think they're maybe still under 20 people right now.

19:13Jack Altman:And Jack, speaking of insiders versus outsiders, that's such a classic insider versus outsider story. I mean, what were the backgrounds of the Giga founders?

19:20Jared Friedman:Oh, like they were IIT in India.

19:24Jack Altman:they were still in India

19:25Jared Friedman:yes they were in India when they were in front of them they actually couldn't make it out here for the batch for visa reasons but they were just like brilliant they were clearly like brilliantly smart they were like the top ranked IIT students they had done their sort of as undergrads they'd done sort of PhD level research in fine-tuning LLMs before like everything really took off so they were just like clearly exceptional now yeah I mean to this point about like the king making stuff

19:47Garry Tan:and not to like talk around book too much but like you know like Logoro was a you know startup that was like coming behind something that was seems really established and they're based in europe and then they went through ic and they're doing great and so it doesn't seem like stuff is like left up immediately and that's a good example of like the price like even if you have the

20:03Jared Friedman:capital you might not build like the right product off the bat and then things change um i think

20:09Harj Taggar:the model's getting better the model's getting better so so like back to back to back like every single year the models are getting better you know the rumor for harvey is that like you know you They might have spent a bunch of money, a bunch of the VC capital on fine tuning models that are like not better than the frontier models. I mean, you don't have a crystal ball. You couldn't have guessed that, you know, it was just an idea that maybe that might happen. Of course, it did happen. And then now we're sort of in this situation where like, you know, if you have hundreds of millions of dollars sitting in your bank account, you're tempted to use it.

20:41Garry Tan:The models thing is so interesting to me because one of the things that has struck me is that a lot of the source of product market fit actually exists outside the startup delivering the service. And so it's, you know, like you take an amazing founder like Max, you put them in a market like legal where there's just a lot of uptake for some set of reasons. And then it's like you have this tailwind outside the startup that's actually driving a lot of the like aha moment, not to take away from anything that they've done. This is the case for all these startups. And so that just sort of changes some things.

21:10Jared Friedman:I think this is from the family's perspective, at least, and a reason why they're raising the bigger B rounds. I mean, there's always the case of just like bank the money while you can get it. But it just feels like the surface area for the products is bigger than ever. And they are like still fundamentally constrained on like the number of people they have to go and execute on things. And it feels like we're now SaaS era was sort of like you build one core feature and you hit product market fit with that. And maybe just run with that for a few years and then add on things. Whereas now it's like, even within the batch, people are trying to like, add like more into the product and have it do more.

21:42Jared Friedman:And so they just fundamentally feel constrained by how much they feel they should be doing. And then they have competitors and the competitors are moving faster. So haven't as yet seen that like once your post-product market fit, it doesn't feel like that, oh, people won't need to hire as many people. They're at least not acting on the belief that they need to hire as many people yet, I would say.

21:58Garry Tan:One thing that doesn't seem automated yet is sales, for example. Like it seems like you still, a lot of people thought that it would be automated by now. It hasn't been automated by now. support has but sales hasn't and so like you still need a lot of sales people seems like you know engineers are way more effective but if you've got the capital 50 engineers still going to be better than five engineers so like i think some of these things just haven't necessarily put out

22:18Jared Friedman:intuitively it's great for everyone using the products it's just like the bar for like what you expect out of like the products you use just keeps going up and up yeah it's awesome there's

22:26Garry Tan:also a lot of these markets that are so genuinely blue ocean and like they look like good ideas and they are good ideas and it's totally new. And so the result of that is 50 startups doing something similar. And I think that's like a good thing for end consumers. Obviously, you guys have a lot of companies that are in that situation like we all do. I'm curious like how you, you know, in this competitive of a market moment when every startup's got a ton of competition, like does that change anything? Like when you're working with like specific companies, do you find yourself saying you need to go faster?

22:59Garry Tan:You need to be thinking about something differently. does it update anything when we're in this type of environment? Me?

23:07Jack Altman:I felt like Gary was holding back an answer.

23:08Garry Tan:What's that?

23:09Harj Taggar:I'm hoping you guys have a good answer. I can answer my own question, by the way.

23:13Jared Friedman:I guess the reason maybe why we're pausing on it is, again, just the YC, like getting things off the ground. It's usually, I don't know, especially during the batch, we're so focused in on the, like, is this even, like, is this worth investing, like, another two weeks of your time in and sort of, like, the units of time? Is there a glimmer of plug-marking shit or not? Is there anything?

23:30Garry Tan:And that doesn't really have to do with competition. Yeah.

23:33Jack Altman:At all. Exactly. And so I feel like we actually spend the vast majority of our time talking about competition, telling founders not to worry about competition because it's all founders who are like, like imagine if the Legora founders had like not launched Legora because they looked at Harvey and been like, oh, it's over. That's what we see a hundred times about is that story. And so it's just being like, don't worry about it. Like just out execute them.

23:54Harj Taggar:Yeah. I think we always just go back to the make something people want. And that like, it says make something people want. It doesn't say, do a market map. Yeah. Based on what, you know, perplexity tells you. You could add that.

24:05Garry Tan:You could say, make a market map and then make something people want within it.

24:08Harj Taggar:We should make an April Fool's t-shirt that says that. That'd be good. It's just like, make a market map, then make something people want. It's like, what the hell are you talking about? Like, that's definitely not how you do this.

24:18Garry Tan:So like, let's say like somebody's working on customer support. Like I'm pretty, like that market is not saturated. Like I'm pretty confident that a good team that comes into customer support and is like, I'm going to go find some more customers. Like they could do it. And so basically the view is just like, hey, if you can find customers and you get it going, like don't even think about who else is out there. Just go.

24:35Jared Friedman:I think that's basically, I mean, like it's like go out and get customers. And if you have good competition, then like you have a hard time getting customers. It's like, and if I try and launch a new payment processor, I'm going to run into Stripe. And like, it's going to be hard for me to grow really quickly. And I think that ends up being a lot of the advice during the batch.

24:49Garry Tan:Yeah. I'm curious how much you guys think at like a macro level about stuff. Because I know like the most important thing, which is, I believe, obviously correct, is to think about the micro getting this startup off the ground and going and then things can go from there. I am curious about some of the like macro things. Like one of the ones that comes to mind for me is like the recent, you know, trend in public markets about sort of like SaaS multiples just getting totally hammered. Do you guys feel like SaaS is dead? Does that resonate for you? Do you see anything different in the companies you're working with?

25:22Garry Tan:Is SaaS dead?

25:23Harj Taggar:I mean, I think it's dead. the thing is, it doesn't, if you run a SaaS company, you don't have to be dead. All you have to do is embrace cloud code or you have to embrace, you know, a top to bottom, a gentic view of like how everything's going to work. Like put it this way, like the same week that I personally realized that everything was different, you know, I funded a team from a meta super intelligence who had left and they were pointing out like, you know, meta has 20 ,000 people working on reality, You know, Alexa has 20 ,000 people. And it's like, and I thought about my experience. It's like, I didn't even have like 20 ,000 people.

26:00Harj Taggar:I had five people. And like, why did it take two years? It was because like, I knew what the architecture was. I knew what I wanted to build. And then I had to farm this out, but then I had to have meetings and I had to, you know, come up with a doc and then other people have other opinions. And we have like five meetings about like the architecture and like we argue about it. And then, you know, two weeks later, like maybe something happens. But if you're in a big company, it's like three months later, something maybe happens. And it's like, look, like we don't have to do that now. Like we could just try both, like go into plan mode and then just do it.

26:34Harj Taggar:And then literally like an hour later, we will have something done that would have taken like two weeks, two or two months or sometimes two years for if you're not a tech company and, you know, you're an incumbent, like it's like two years or never that you would even make that decision. Right. So like the speed of making that decision, like how decisive you can be, like, honestly, I think like going back to the transformation thing, like that's actually the thing that I feel like I learned at YC. It's not like I didn't know how to do it. It's just that like I was, you know, I was employee number 10 at Palantir.

27:07Harj Taggar:It's like we were moving like I was sleeping at the office. The big difference was realizing like instead of, you know, getting 20 basis points of Palantir, which now is actually an astronomical amount of money, by the way. We didn't know it at the time. I was like, we'll run some math.

27:21Garry Tan:We'll put the math on the screen. It's in the billions of things. That's a thumbnail. Yeah. That's perfect.

27:28Harj Taggar:Yeah. I mean, basically, I wanted 97 % of the company that I started. Yeah. And then I think that that's like, I went from a place where it was already fast. And then being the founder and the CEO, like YC sped me up even more because you're in office hours with people. And it's like, oh, man, this person actually grew 10 % this week, 20 % this week. Like, how did they do it? I need to do it. And I think all of this is an accelerant, like, Cloud Code and Codex and being able to, like, make two years worth of product progress in about two weeks. How could that not make YC more insane? Totally. Like, the amount of things that you could try and do.

28:06Harj Taggar:It's like, honestly, you could do two years of work, realize that, like, actually nobody wants this or there's too much competition and you throw it out and then do it again and the thing is like that's not throwaway you learn something you also got better at like using these tools and then you went out and you get another shot and so what's funny about like uh like seed is you could think of people raising like two or three million dollars you know that used to be series a by the way which is hilarious now it's barely a seed yeah yeah i was like oh that's kind of a small seed it's like are you serious like that's so much money this is outrageous you don't even need this money it's crazy that you can go so much faster i actually i do want

28:44Garry Tan:to come back to fundraising advice because I feel like it's gotten into an interesting place there. But the opposite question of the SaaS dead is what do you feel is not AI but safe from AI? Like, are there areas where you feel that you think are sort of insulated from this mega trend that you're like happy to back without fear of that?

29:04Jared Friedman:I think the obvious one, yeah, I'm starting on the first one, just like marketplaces that are like aggregating people. I think Airbnb is like very safe. I think while not safe, I think there's a bunch of marketplaces since DoorDash is totally safe. It's going to be a very clear one, right?

29:17Harj Taggar:One of the things we've been talking about is what the agents want. What the coding agents tell you to do turns out to be like itself a really big moat. So GEO, like making your API docs like actually written to prompt inject CloudCode to force it to use you. I'm just joking. Like it's not clear that you can do that, but like Like if you could, you would, because it's that powerful. Like people will just, I need X. And then, you know, what's the best thing on the internet to do that? And actually, that's really powerful.

29:49Jared Friedman:Yeah, I think you might say like maybe the SaaS thing is that even within SaaS, you might say like things that feel like they are essentially databases or systems of record, things like Rippling feel like they're going to be in a good spot. And then things where they like the moat was around the number of integrations they built or like data connectors or that kind of stuff,

30:10Garry Tan:which you can now just like code in 30 minutes is brittle. Do you think it's system of record that makes payroll sticky or do you think it's touching money?

30:18Harj Taggar:Touching money, regulatory. I mean, once it's, I mean, you have systems that are working, you don't want to touch that unless you have a really good reason.

30:25Garry Tan:Yeah, because like one of the ones that comes up a lot right now is like, are CRM safe? You know, like our old, which I don't have any, I don't have actually a particular strong opinion to, but it just seems like an interesting question where it doesn't exactly touch money, doesn't exactly touch regulatory, includes a lot of information that's important, but that information also now can live in email or somewhere else like that.

30:44Jared Friedman:Yeah, I think Salesforce is probably screwed. I feel like there have been so many attempts to do the Stripe strategy of you get the startups in the YC batch using your CRM because everyone hates Salesforce, but no one could ever really grow into a big company because at some point your head of sales is like, no, I need these reports.

31:01Garry Tan:And to your point, you need the integrations badly.

31:03Jared Friedman:Exactly. And now that's all just going away. So I suspect the next Salesforce is going to come out of a YC batch that sells to all the other YC startups. And investors will say, oh, it's not going to grow because no one can really compete with Salesforce.

31:17Garry Tan:Also, all its customers are YC companies.

31:19Jared Friedman:Yeah, exactly. It'll never work.

31:23Harj Taggar:What about hardware? Is hardware safe? Hard tech is just hard. So the moat comes from it being just hard to source, hard to make it work. I mean, it's just another muscle. but the AI hasn't exactly

31:37Garry Tan:come for atoms yet

31:38Harj Taggar:yeah robotics is still a little ways we just need ASI I think we have AGI now and then ASI is coming super intelligence is just clearly just around the corner

31:49Garry Tan:you think it'll just be like a when we know we know or you think there'll be a thing that to you would say that that new moment is here I think we have limited versions of ASI right now like all the bots talking together that was crazy

32:02Harj Taggar:Yeah, that was crazy. I mean, that's a great example of like, that's the first example of like swarm intelligence. Yeah, I was like, oh no, it was bad. Like in AI research, that's like swarm intelligence is like this huge field, but like this is a huge validation for that field because, you know, it's kind of an interesting question. Like, will there be like all the main labs talk about, if you talk to the AI research, the big AI labs, they're like, yeah, we're just going to build the God model. You know, it's going to be mega big and, you know, just think about like Dr. Manhattan or something.

32:34Harj Taggar:And then, you know, biological systems and even human society are not modeled that way. It's like we have lots of people with lots of diverse hardware, a lot of different opinions about all kinds of things. And then you sort of come together and see what sticks. And that's what like research is, for instance. So I think swarm intelligence versus, you know, sort of God level intelligence is actually a very interesting thing. That's like just the beginning of that. That just happened literally last week.

33:02Garry Tan:Is there a type of project or pathway for a startup to build that you're not currently funding that you'd like to? And the example that I'm thinking of when I'm thinking about some of these hardware companies or projects at the beginning that I don't think can start with a million dollars. Some of these genuinely do need to start with 10 or 20 million dollars. Is that something that you think about? Is that something that like, is that would a divergence like that ever be worth it to YC? Or is it like we don't need to back every single type of company of all time?

33:36Jared Friedman:We would like to back every single type of company of all time if we could.

33:41Garry Tan:Yeah, that's actually the kind of thing I was curious about. It's like, is the conversation when you guys are thinking about like YC growing and all of that, is it like we have our style and we'd like to just get everything within that? Or it's like, no, we'd like to back every company of all time.

33:53Harj Taggar:We're generalists. And then the smart, I mean, YC funded Coinbase when crypto was like the weirdest thing. But, you know, Brian Armstrong was in the risk team at Airbnb. He was like, you know, in the anti-fraud team. And he was already in the family. And then he said, oh, well, how do I start a company? This is clearly the way to do it. And then what's funny about it is like you could start like 20 other Coinbase competitors, but like all of them died because it's sort of like when you're early, it doesn't matter. It matters more like who's the person and what do they believe? And then that person goes on and creates the future.

34:27Harj Taggar:So being generalist is an incredible thing. It's truly the best.

34:31Garry Tan:Is there a slice of the market or a type of company or founder that you feel like you want better exposure to that you're like actively working on?

34:39Harj Taggar:I mean, coming back to YC, one of the things we realized is like, we have a huge media presence. But on the other hand, like, on its own, if you just watch the YouTube channel, it's like, oh, this is like something in the sky. I heard it's, you know, 1 % acceptance rate, like people just kind of, you know, think that it's maybe not for them. And then what we find is like all of our best people either know someone who did YC or they met a partner directly and at an event or they actually can't be like we actually have to be in the community. We can't just be like in the sky on the Internet. Right.

35:13Harj Taggar:You can't just wait for apps to come in. So, I mean, Jared led this like you basically, you know, got us to like how many college campuses last year?

35:21Jack Altman:Over 30 college campuses. So we have a huge like boots on the ground effort now to go and talk to undergrads everywhere. We just got back from a big trip to Europe. We're going to India in the spring. To also go back to your point, though, about like groups of people that we would love to see more of. We have a big effort this year to do what we've done with undergrads over the last two years. I think it's been pretty successful. And to expand that to grad students and people who are more like Brian Armstrong's age, like more like mid and late 20s.

35:47Garry Tan:Yeah, I will say that like in a good way, like they're unbelievably impressive. But YC founders are young. Yeah. and they seem like it's like in recent batches have trended even younger potentially they have yeah which makes sense I think like AI and like a big change like this like favors younger people and for all sorts of reasons so I get it

36:03Harj Taggar:for what it's worth I'm a late bloomer I did YC when I was 27 I was 26 yeah so hey late bloomers high five the old guys but that's the old guys for YC

36:13Jared Friedman:many of like the biggest YC companies were started by founders in sort of like mid to late 20s DoorDash oh that's old yeah super old

36:20Jack Altman:you should definitely quote me on that

36:23Jared Friedman:We had tons of old people in my city.

36:25Harj Taggar:We had 26-year-olds. We started with going back to colleges. I mean, this was kind of driven by them, though. I mean, I think big tech stopped hiring. And then simultaneous to that, we have a real vibe inside the batch sometimes among the young founders that it's the last time to participate in capitalism, which I definitely think not. But it's like a powerful idea.

36:49Garry Tan:I think a lot of people feel that way. Why is that? I think there's probably a lot of people who are like, if AI is going to like actually stay on this trend, what are we going to, what are we possibly going to be better at? So I got to, I got to do it while I'm still better at something.

37:02Harj Taggar:I feel like that is so like short sighted. It's unbelievable. Like Ryan Peterson always talks about like, don't you think that, you know, human capacity for desire is like virtually unlimited? Like we're just, you know, we have a God shaped hole in our heart. You know, like we're going to want more and more stuff. And the thing is like, we can do it now. Like I was just thinking about the turn of phrase. Like I'm sure you've been in business meetings or like making decisions about products where it's like, whoa, whoa, whoa, let's not boil the ocean now. And it's like, I love that term of phrase because I've said it a lot.

37:32Harj Taggar:I've used it to like justify not doing things. But like in the age of intelligence,

37:37Garry Tan:you can just do things.

37:38Harj Taggar:Why not? Like, I mean, maybe not boil the ocean, but let's boil a few lakes. Why not? Right? Like actually this is sort of the moment. And so when you connect that to what Ryan says, it's like, that's what that would look like. You know, why, you know, if you're an investment firm and you like, you know, beat the market, you're like 20 % net IRR back to back. It's like, you know, what does this stuff mean? Does it mean that we're going to hire, like we're going to fire all of our analysts and like, we're just going to have the AI do it. And like this one person who runs the firm is going to make all the money.

38:05Harj Taggar:Why would you want to do that? Because your competitor isn't going to do that. Your competitor is going to say, you know what? We have AI now. I want 50 % net IRR.

38:13Garry Tan:That's the thing I have not understood about like, oh, we won't need capital because Because I'm like, why would you only want five engineers if your competitor has 50? Yeah. It doesn't make unless they can't do anything productive with all the agents. It doesn't make any sense to me.

38:25Harj Taggar:Yeah. I think it's just like, yeah, let's boil a few lakes first and then we can boil the ocean. Like, I think, I mean, I'm not serious about that. Obviously, there are limitations to it. But like the the invective against AI and this idea that like society is going to fall apart is so extreme. Yeah. That I'm like, maybe that is like, we need some other alternative turns of phrase than like apocalypse.

38:47Garry Tan:It's been a weird, I mean, on that, it's been just like a weird thing watching sort of the efforts to both sort of like manage, but also like impact sort of like societal, like understanding of like what AI is. And I feel like there is still a lot of like fear embedded. And like, I think outside of San Francisco, you go to other places in the country. I think like, you know, I'm from St. Louis. But I don't think everybody trusts AI fully. And whether that's right or wrong, I do think it's important to get out of our little bubble sometimes on a lot of this stuff just to know where the world's at a bit more.

39:19Garry Tan:That's for real.

39:20Jared Friedman:It's interesting though. It feels different this time because it's like clearly in our little bubble here, everyone's all pro AI. I always say my other extreme, I have like parents, immigrants, like don't speak great English. Like my mom's like totally addicted to ChatGPT because now she can just like do all this stuff that she like needs. like she can just like send letters to reply people in a way that's like super empowering for her it's like the kind of middle like the people who are like threatened by like is ai gonna like take my job hasn't really been like a threat to sort of knowledge work or white-collar people like usually i feel that people who are actually not early adopters but tend to get on the train immediately after sort of the san francisco train takes off are now resistant to it and it sort of bypassed them and has gone to like the other end i mean i sympathize with that

40:03Harj Taggar:And like, as, you know, labor that became management and capital, I like totally feel that. And I think it is actually about, you know, in the Marxist sense, it is actually about like where you fit in there. And then my argument would be like, it has been way more important to become a founder, which is like management that becomes capital now than ever. It's way more possible. Yeah. I think that like that fear of for workers about like what's going to happen, that is actually something that management and capital has to take.

40:34Garry Tan:It's a responsibility. I think so, too. I think it's like very easy to like be like, oh, in the arc of history, there's always these new technologies and people find new jobs. It's like, well, yeah, but there's like a lot of structural unemployment that happens in the middle of that.

40:47Harj Taggar:And that's like real. Yeah. But this unemployment only happens in zero sum games. Right. It happens in a case where it's like, actually, my company does X. Like I make widgets. The widgets will never change. They will never get better. There's I mean, some of it is in the context of like no competition. One of the things we learned from hard tech companies, for instance, is that like it's impossible to get like a certain block of metal. Like you have, you know, you have to get it fabricated or like smelted in China. Like America has like lost the ability to do it. Right. Like when you have a market that is so broken that you can't get it inside America.

41:19Harj Taggar:Like how did this happen? Right. And so I would go back to, you know, capital and management and say this is a lack of fucking imagination. Right. Like we're not here to like just continue to do like let's shave off like one or two percent every single year and like increase our net profit. And that's it. Right. Like we need to think way more about how can we use this technology to radically change how businesses work, how like what products are, how much better could they be?

41:48Garry Tan:I completely agree. And I think if capital management don't like take some responsibility there, like there's not just the unemployment, there's also like reduced employment. There's also like the whole world getting more expensive. Home prices are going up while there might be like pressure on wages because you can do it more cheaply with AI. And so you have like inflation happening with wage pressure at the same time. Like I do think it's like a more real thing than like our echo chamber wants. Like and again, totally for it, too. But I think it's like I think it's an important thing.

42:18Harj Taggar:I mean, that's why we've been so vocal about this idea of little tech. You know, we have Luther Lowe who used to work at Yelp and he's in D.C. full time. fighting for startups to be able to actually train AI models, to be able to enter markets. And, you know, frankly, like, I know we have lots of friends at, you know, Apple and Alphabet, and, you know, we have huge respect for those companies. And then once in a while, like, you'll see in the press, like, oh, yeah, like, we submitted an amicus about Apple and Alphabet, not because we hate those guys, but because actually we need tech to allow new startups and new entrants to come in.

42:54Harj Taggar:And so to me, it's like, it's all very consistent. It's like, we need to be way more aggressive about like what our products and services should be and can do. And then we need markets that allow those people to actually, you know, exist, thrive, hire lots of people and create new jobs. Like that's basically like, you know, a lot of people are like, oh, I work in tech. I don't know how to do this. And it's like, look, it's actually abundance. Like we actually have to build again. Like we've become a litigious culture. I'm sure you've read this book, Breakneck, about like China versus the US. It's Dan Wayne's book.

43:32Harj Taggar:It's incredible.

43:33Jack Altman:Yeah, it's really good.

43:33Harj Taggar:It's basically, you know, we built a lot in like the 40s, the 50s, and then sometime around the 60s and 70s, you know, six, seven. I mean, they literally stopped building, right? And we've been in this sort of, you know, we can't build high-speed rail. It's insane. Like why? because like basically we're totally a litigious culture that cannot like get out of its way.

43:55Garry Tan:Yeah, I saw some Peter Thiel talk about like, we built all this stuff till the 70s and then for like 50 years, nothing happened except computers more or less. And even right now, most of the revolution is in computers, which is great that it's better than nothing. And obviously other stuff is happening too, but it is, you know, you look at, you know, what China does, like standing up a city in no time. And it's like, they're really good at robotics. Like, what are we doing? On this sort of just like societal topic, obviously, you guys are very engaged with like the city and the state and things like that.

44:27Garry Tan:Some more than others. Some more than others. Yeah. Maybe like my one question on this is like, what do you think is the posture that San Francisco and California need to be taking? Like, what's the most important thing posturally that we need to be taking?

44:42Jack Altman:I mean, this is Gary's area. Gary, how do we fix California politics? Gary has a plan. I'm kidding. But like, actually, he does.

44:48Harj Taggar:I mean, Matt Mahan just announced his race for the governor. I think that he is the perfect example of someone who is not virtue signaling. He built more than 1 ,400 homes in San Jose. The year before that, he hadn't passed all of the legislation he wanted. So zero market rate housing was built in San Jose in 2024. for. When he came into office, he reduced homelessness by 20 percent, like more than a thousand people came inside and got treatment and recovery because he actually supports treatment and recovery. I didn't want to be involved in politics. But when I saw that my Asian American grandpas and grandmas couldn't walk down the street without being assaulted and killed, when I saw people like me when I was, you know, 16, 18, like, you know, I wanted to participate in tech.

45:39Harj Taggar:I knew I wanted to be an engineer. I didn't know that I would get into Stanford. Like, you know, I wouldn't have been able to do that if I didn't have algebra in like middle school, public middle school. Like my kids, like, you know, my kids go to private school, but I went to public school, you know, and we should have a government that like doesn't require you to be rich to become a startup founder or good at math even. Like, I mean, is this like, how do we get this bad? So I'm glad you're fighting

46:04Garry Tan:for it. It's very important and it's not pleasant. And I see you fighting on Twitter in a way that I would not have the stomach for and i'm glad you're doing it yeah i appreciate it yeah no i mean i

46:14Harj Taggar:think for people watching it's like look i'm not going to get all the takes right and like i want to hear when i don't get it right but on the flip side it's also like have the debate yeah

46:21Garry Tan:let's actually talk about it you have the courage to like it takes a lot of courage to say stuff that you think and you know you might be wrong about and you might get you know a big blowback on and like or even if you have it right now we're gonna get mad san francisco and california

46:33Harj Taggar:got this bad because the people who, you know, I mean, they run businesses, they have jobs, like they, you know, are trying to raise their families in California. It's like all of it was so big and so scary that we stopped paying attention. And like San Francisco is on a better path because we started talking about it. Like at dinners, we started talking about it. Hey, did you hear about so-and-so? They got assaulted. Like, did the police actually show up? Like, what happened with the judge? You know, like we're going to try to unseat some judges in San Francisco for whom like, you know, I was looking at the records like there are 100 cases and like 90 percent of the cases.

47:15Harj Taggar:This judge, she basically just like dropped it on the floor at an extreme rate. Like I think it was like three or four times higher rate of just dropping cases on the floor purely for ideology. It's like unbelievable. Like, how is it? How is this person serving the people like they're not? And then the thing is, there's a reason why we elect these people. Like there is an election coming and, you know, we have to make sure that we hold these leaders to account.

47:42Garry Tan:No, it's great. I mean, it's super important and it's like not easy work. So people got someone's got to do it. And I'm glad you're doing it. I appreciate it. Yeah. OK, politics tangent aside, although I could talk about that the whole day. I know, right.

47:53Harj Taggar:But we'll do the politics episode. Yeah.

47:56Garry Tan:Going to get you and some politicians on here. One of the things that I'm curious about that has been an obvious topic for me on other episodes has been like mega influx of capital into venture. Is that a positive or a negative for you? And in what ways do you experience it as both?

48:14Jack Altman:I think it's mostly positive for us. Why see it at its best is not competing with other venture firms for deals. YC at its best is convincing people who didn't seriously think about starting a startup to go for it and then being their first believer. YC only works if there's a large pool of downstream capital that can then fund all the subsequent rounds for those companies. And so I think actually YC does best in those environments.

48:38Harj Taggar:Yeah, we're a managed marketplace, so we need as many great investors as possible. And then actually what's funny is like in that managed marketplace, if, you know, the sort of supply goes up, like we need to go out and find the best possible people. And then we're actually really good partners to the rest of the industry. Like VC can, you know, 2x, 5x or 10x over the next 10 years. And we will meet the demand.

49:02Garry Tan:With companies.

49:03Harj Taggar:With really the smartest people of our generation. And if that happens.

49:07Garry Tan:So you're saying you feel limited by the amount of capital still?

49:09Harj Taggar:How about this? I mean, capital from VCs like you or VCs like our friends. Seriously. I mean, you got to do the work, show up, don't disappear, don't be a dick, do no harm, right? When I first came back to YC, one of the most interesting evolutions of how to deal with investors was that most investors are actually Bs, like B or B+. Like you should be so lucky to have someone who like does not mess with you. That's really good. And then obviously. The Bar Solo.

49:43Garry Tan:Yeah. I mean, basically, yeah. Just don't damage the company. Right.

49:46Harj Taggar:If there's someone who, you know, has a great network or, you know, can make the Keynesian beauty contest happen for you and your company and you're around, obviously they're A investors and, you know, they're going to catalyze something crazy for you. You know, you should work with it. Last time we were here was like, yeah, if you can get like Keith Raboy to invest in your startup and give you like 20 million dollars you should probably take that money man like you know do it right yeah but for everyone else it's like you gotta you know find people who sometimes you gotta do b plus capital it's okay you know well it's sort of interesting because you know

50:18Garry Tan:you made the point which i agree with which is that there's despite the total volume of dollars going up there's like in some ways a consolidation of the number of venture firms or players or things like that i don't know if it's like more companies getting funded or if it's just a lot more dollars going to just like a couple of breakout successes.

50:33Harj Taggar:I guess both of those help. I mean, we actively think about we need more A and A plus, you know, investors. Like humans doing the work. Exactly. I mean, and I think they're all going to be YC alums like you. I mean, I think you're great. Ilya Sukar is incredible. Dan Levine at Excel, like, you know, Yuri Sadalov now runs the program at GC and he's incredible. Like, you know, I fully hope and expect like the top like like 80 out of 100 spots of the Midas list in the next 10, 20 years will be all YC.

51:05Garry Tan:That's funny. You're like funding VCs, like just on the 10 year delay. Yeah, I mean, Liz, Liz's first round is killing it.

51:10Harj Taggar:She's incredible, right? So I think that's like, you know, scratching the surface. Like, I think we're going to have like dozens of the most legendary people and they're all going to be YC alums who like deploy all the world's capital.

51:22Jared Friedman:Increasing the number of good startups in the world is like, I would argue, just like the core founding principle of YC. like when I came when I first started working at WC in 2010 it was like the first thing PG said to me it was actually clear why he wanted to hire anyone like what like this seems like it's a nice like family business two of you working on it seems great and his whole point was that there's like the conventional wisdom in the VC industry it all comes out of Andy Ratchliffe's research like there's like only going to be 10 companies per year that will go on to reach like 100 million dollars in revenue and be significant in IPO at some point and you just have to be in one of those 10 companies every year.

51:58Jared Friedman:Otherwise, you may have just stayed at home. And PG was like, well, I don't want to like, I'm not like a VC. I don't want to like go out

52:04Jack Altman:and like fight for those 10 companies. I just like - We're going to make more of them.

52:07Jared Friedman:Yeah, he's like, there's more than, let's see if we can make like two of them. Like, why is it 10? It's just like such an arbitrary number. And I think like clearly over the last 15 years, that's proven to be true. And I just feel like everything we do here is driven by, we want that number to go up. What are the bottlenecks? Are the bottlenecks like more founders? Let's go find more founders.

52:23Garry Tan:Yeah, when you went to four batches, that was great.

52:25Jared Friedman:But yeah, that was exactly a good example of it. It's like that was a bottleneck. Like you shouldn't have to wait six months to do a YC batch.

52:30Garry Tan:What needed to be true for you guys to go from two to four? Like what was hard about that? What did you have to like change, if anything? Was it just you didn't get as much time between to like source new companies or?

52:40Jared Friedman:Maybe this is in the weeds, but like one of the structural changes we made at YC since Gary came back is to sort of decentralize YC, I would argue. Like it was pre-Gary coming back a lot more centralized. Why is there sort of like a team that sort of ran the batch and sort of things were more top down?

52:57Garry Tan:Decentralizing decisions, batch operations. Yeah, but yeah, just basically, maybe if I start from the bottom,

53:03Jared Friedman:it's like now each YC partner is essentially picking their own companies and then we club together to form a group that runs a batch. But we're just like more nimble. Like we can just sort of do things in a way that wasn't as easy before.

53:15Harj Taggar:Yeah, and plus we have 15 people now. This is like the most number of partners we've ever had. We have 15 visiting partners right now. So it's actually like something like 30, 31 partners total right now.

53:26Garry Tan:Do you feel that there's a limit to those numbers? Or do you think you could, could you double the number of YC partners and therefore double the number of companies? Like what, what do you think if you're imagining a world where you're funding four times more companies than you are today, what would you need to overcome still?

53:40Jack Altman:Well, a cool thing about the way YC is structured now, I think, I think this is something that's like often misunderstood from, from the outside. But I think when most people hear that a YC batch is 200 companies, but they imagine the batch experiences is like a room full of like 400 founders showing up every day. It's actually four batches of 50. Right. But it's actually more like each partner is running their own like autonomous mini YC. And it's, you know, 30-ish companies. We call them pods. I mean, I had my whole pod over to my house for dinner last night because like that. And it's approximately the same size as YC was when Gary went.

54:17Harj Taggar:We basically run like seven or eight simultaneous 2008 batches with PG. Exactly. And we have 15 PGs now.

54:26Jack Altman:Yeah. And so like with that kind of structure, there's no inherent change that has to happen if you go from 15 to 30 of them because it's like fully paralyzed already.

54:34Garry Tan:I mean, one of the ways I've perceived YC change, you know, over the last several years or something was there were there was this period, I guess, when like my brother was here where there were like a bunch of new projects. And then I felt you guys kind of you clearly went back to the core and then did more of it. Like I could feel that very clearly that it was like, this is our thing and we're going to refocus on that, but we're going to make it more and bigger. And I think that's been super successful. And you guys have like clearly throughput more companies. the companies are awesome you know i'm saying that as a biased person who invests in a lot of them but it feels that way to me are there initiatives outside of that core that you are interested in with the new market moment or are you like we're gonna just do more and more of this distilled core or it just depend on the day well first of all i think that's a good overall description of like

55:22Jack Altman:how yc has changed especially since gary came back is like refocusing on the core that's been sort of like the high level of the last three years but yeah we do have some big projects in the worst. I'm not sure which ones we can talk about.

55:33Harj Taggar:I know, there's so many and they're all in the worst. Come on.

55:38Jared Friedman:I don't know. It's not like we have like new initiatives that don't feel core. I still think it all falls under the umbrella of like the core thing is how to create more good startups. Yeah. And like keep pushing down on that. And as Jared mentioned, like Fellow is just an example of something we just launched last year, which is like, what's another bottleneck? There's more founders. We want to meet the founders earlier. like college students before they're ready to do startups. And so we started offering just like grants and like community to like exceptional college students that we feel like, oh, maybe they're not ready to do a startup right now, but they might be in a year or two.

56:11Garry Tan:That's a good example of like widening the base even further.

56:14Harj Taggar:Cause like, you know, it's almost like

56:15Garry Tan:you could like narrow the top and you could say, you know what, we're going to actually put a bunch of money into growth. You know, like obviously you did that. But you know, the other way to go is you could widen the base and you could say, actually, we're going to try to have some engagement with 10 ,000 founders or something like that.

56:28Jared Friedman:That's basically what we think a lot about.

56:29Jack Altman:Yes. Yeah. Because amount of follow-on capital is not really the bottleneck right now. Really, the bottleneck for us now is getting more great founders to want to do startups and to do YC, which is what the bottleneck should be. Like, if the bottleneck is anything else, something is weird about the world, that's what the bottleneck always should be. For a long time, YC was just struggling so much to just scale the operational side. We're here like a post-product market fit company that couldn't keep up with demand. And so instead of like focusing on growth, how do we get more users? We were like YouTube when it was like scaling by like 2x every month.

57:03Jack Altman:And just everyone was just like trying to figure out like how to keep the site up. That was certainly the first few years of me at YC was just like trying to figure out like how to not fall over. But now that we've like really got the operations down, we can go back to focusing on what we should be focusing on, which is like how do we broaden the base? How do we get more great people into our ecosystem early? How do we inspire more people to start companies?

57:22Harj Taggar:I mean, one of the most fun things from, I mean, I pinch myself that like I get to, you know, I had left YC and then now I get to, you know, go hang out with PG and Jessica again and hang out with Brian Chesky who's on the board. And then one of the directives from the board that's awesome is you need to make sure that we're having fun. Like, and that was true, like back in 2011, 2012. Laughter, the laughter test. Yeah, basically like that, you know, that's sort of the directive we got this year that's like not a directive at all. It's like, you know, awesome. Actually, it's like if we're not having fun, then we're doing something wrong, actually.

57:58Harj Taggar:Like, and, you know, I remember like just YC, being around YC and the partners and PG and PB and Jeff and all the, you know, it's like, it was just very, very hilarious all the time. It was like unbelievable how weird, you know, startups can be. And like, can you believe this thing happened? And then I feel like our partner lunches are that again, which is really fun. It's like, it's hilarious. And that's so important.

58:20Garry Tan:Like having like the partnership like that where everybody like trusts and enjoys each other and respects what people think. like that's just got to make the whole experience so much better.

58:29Jared Friedman:It's why everyone's a former, all the partners are former YC founders. So it's like, it feels just like a little bit more than a job for everyone. Like everyone's got sort of a pay it forward, YC changed their life in some way. Yeah. Like just adds to the good vibes, I think.

58:42Garry Tan:It is obviously an iconic and very important institution and you guys are doing a great job running it. And so I'm sure it is both like, it feels like a heavy responsibility, but I'm glad that you are, I'm glad you're having fun with it. You guys, this was really fun. Thanks for doing it. Really appreciate you making time. Thanks for having us. Thanks, Jack.

58:59Harj Taggar:So when are you going to be a YC partner? I just keep checking my inbox.