Uncapped #7 | Garry Tan from Y Combinator

0:00And if you can get Keith Roboi to invest in your startup, you should do a FET startup. Yeah, exactly. You know, and a few other of our friends, obviously, like if a lot will do it, like if a lot, you know, there, we sort of know all the people who can and will do it. And like if they want you to do a FET startup, you should do a FET startup with them. All right, Gary, thank you so much for doing this. It's great to be here. I appreciate you making time for it. Jack, thanks a lot for having me. Yeah, I know you're super busy, and I'm really excited to have this conversation. You're now, I think, two years in the running, my C, that's about right.

0:28And you've really been running it like a founder from my perspective. And I kind of want to start by getting inside your own mentality. And what's the headspace that lets you do that? Because you've made a lot of changes that I think have been really good, that have broadly been received is really good. But that were not easy to do. I think you've done a lot of stuff that has required the confidence of a founder and you've acted like that. So can you talk a little bit about what headspace you came into when you started running YC? Definitely. I mean, the great thing about YC is that we need to go zero based accounting.

0:59So literally if we were starting YC from scratch again, all the things that we would add, we would add in that moment, like we're keeping those things. And that's like a very freeing thing to actually have the people who support you and like are your board. For them to say that is just, you just have not totally carte blanche, but you have like as close to it as you could while not being like directly the owner of the thing. When you had that conversation and you're thinking zero based accounting for YC, like what is order of business number one? Like what must be true? First order of business for YC to thrive and do what you want it to be.

1:40I mean, I guess from an abstract standpoint, because there are lots of specifics that I want to get into. But from the most abstract standpoint, I view YC as this tree of prosperity. And then like it or not, every organization in the world, no matter how dominant could use a little bit of pruning. Like this is a garden and in order for, if you have fruit trees in your backyard, you know that in order to actually have a good bloom, you know, sort of a good crop coming out of your fruit trees, you've got to do all this pruning months or sometimes in the years in advance of that. Totally. And so, and all of that is basically really, really hard.

2:25It's really hard to say no to things and to people. And I think basically culture is everything. And when you really get into the weeds on that, it's like, well, who do you fire? And who do you hire? And who do you promote? And these are things that as a young founder, people tell you this. And then, you ran, I mean, you created, one of the defining SaaS companies in HR software. So, you know, you probably like totally immersed yourself in that and like spend a lot of time trying to help people figure this out. Totally. How do you add, what is culture? And how do you actually implement that into strategy?

3:04And, you know, how do you walk like sort of without a net? You're like, I'm just gonna do this thing. And, you know, it might be a total disaster or it might be the best thing we did. Yeah, I mean, one of the things is I'm looking back, I guess YC's been around for 20 years. And, you know, when Paul and Jessica and, you know, the early group started, it was this very small, very pure core focus on just funding early stage startups in this model that we all know is YC. And then looking back through like the 2010s, there was all this like expansionary stuff that happened. Totally. And I guess looking back, a lot of that was a big part of what, you know, has helped YC maybe blossom into what it is.

3:44But then, you know, there became this moment then kind of like you're saying of recentering to the core. And it's now much bigger and more impactful than it ever was in the past. As you're thinking about that sort of evolution and that breathing, could you imagine a moment where you go back to some of those expansionary bets over time, you know, and fixing that? Yeah, when there's another pruning cycle that happens? I don't know, that's life, right? Like you try a bunch of stuff, some things work, sometimes things go kind of awry. I will really, you know, it's actually not a surprise to me at all that like subsequent to me coming back and seeing, you know, what Brian told me, which is, you know, zero -based accounting.

4:23Like he came to our board meetings with founder mode energy before we even knew that it was called founder mode energy because he had gone through that moment in Airbnb's time where a lot of young founders go through that. I mean, pretty much all of them, actually, you know, if you're so lucky to get product market fit, then you surround yourself with some of the smartest people in the investing world and they go on your board and then they say, hey, you need to hire the person who was the expert at this other company to do this and they come with this role of decks in this way of doing things.

4:54And then sooner or later, you know, a few years into it, you look down and you realize like, well, is this my company or is it my board's company or is it the shareholders company? Like what is it? And, you know, Brian's experience was that he, you know, not everyone gets that moment. Like COVID was that moment for him to sort of reclaim and sort of reset the culture of Airbnb. And I think we're just sort of coming right off of that. And so he immediately sort of infused that into me and YC. So we're deeply thankful for that. Yeah, yeah. Yeah. But, you know, I mean, never say never. And I guess the weirdest thing that I hope for YC is that if we do it right, we can sort of regrow the tree of prosperity in a way that like, it doesn't have to be pruned quite so much.

5:46Right. Like, yeah, it's much better to prune as you go to shape it into the tree that you want instead of let it grow completely wild and then have to cut back. Yeah. And then it's already, you know, they're like entire branches that are grown in a way that, you know, might not be ideal, might not fruit. Yeah. I mean, one of the other amazing things, though, as I'm looking back, it's, you know, the early batches of YC were eight companies, 12 companies, 15 companies, twice a year. Now you have, you know, 150 or so four times a year. So, you know, the double company is still amazing. So, you know, like clearly the whole market has not been captured.

6:23So maybe that brings me to another question in mind, is as you think about growing YC, do you think about capturing more of sort of the market, making, maybe that's the wrong sort of language, but making YC a product that even more founders want to have, like, is that one of the drivers, as you think about what's next? Oh, definitely. I mean, I think both, right? Like, there's sort of the zero sum and there's also the abundance mindset, right? And the fun thing about it is like, actually, both are at play, right? There is a zero sum aspect of this. And then there are going to be people from central casting who are, you know, super cracked and have the right resume and they were like sort of shot out of a cannon.

7:08And, you know, I think that YC actually makes sense for those people and, you know, we're gonna get some of that. And, you know, on that side, we're, you know, competing with some of the top VCE names in the world. The top seed investors, like, you know, and that's okay. I don't know, it's not the end of the world. Like, you know, Jack, when you get a great super cracked founder, I'm just like, you should all get a VCE, yeah, exactly. Which would be great. Yeah, I mean, so there's that. And then the really fun part, the part that I think is the most generative sort of the thing that I think, if you talk to the YC partners, like, we're very excited about is that, you know, we're gonna do that, but also like, you know, we want to create prosperity where, you know, in the past there wasn't.

7:52And that's like sort of classically, that's what PG did. He said, very technical founders. Like, this is sort of the mispriced asset. Like, you know, lots of, there are lots of things that are mispriced, but highly technical the young founders are sort of the most mispriced. Yes. But when you think like that, in terms of maybe founder archetypes or parts of the market that you're like, okay, we know YC, YC has always been for this young founder. It's always been for outsider founders breaking in. There've been like a, I could name a set of archetypes that it's for. Do you think about any archetype founders that you think YC, you want to grow, you know, you're sort of footprint with?

8:31Like, do you think in those terms or do you just think about better product growing brand? Will you better or do you think, okay, how do we improve our product for second time founders? You know, like, it was great that Parker Rippling came through YC again, but how do you think, do you ever think, well, let's make sure we always get that to happen? Or what's inside the mind? Did you think about expanding the aperture of who YC appeals to? Man, I mean, I think it's a hard question. I mean, the hardest question is like, what do you focus on? And if you focus on all of them, like, are you, you know, really focusing on any of them?

9:02Actually, I think it's pretty clear that we're really focused on technical founders, but one of the things we need to work a lot harder to dispel is like, there's this concept now that, oh, it's for people who worked at certain companies or went to Harvard or Stanford or MIT. And it's like, some of it is like, yes, it's like for them, but it's also for people who went to Cornell, went to UIC, went to like, you know, I don't know. I, the weirdest thing, I mean, in the political landscape today is realizing, and you can open up your X -Feed and see it every single day. Like there are people who are absolutely brilliant, 150 IQ great engineers who get rejected from 15 school straight.

9:43And yeah, that's not fair. I actually spent time talking to the guy who went viral with that tweet. Oh, yeah. Today. Yeah, yeah. And I got to hang out with him last week. Oh, yeah. And he's like this brilliant guy who's like super hardworking and it just like tells you that they're not hitting all of it. And actually, to my mind, YC actually is really valuable to people who don't already have the brand in the network built in because you come in, you just like get, like, you know, shot out of a rocket in the totally. You know, just like in ballet culture. So it's definitely good for that. Yeah.

10:10But I think, I mean, universities have this problem and universities themselves sort of treat it in a similar way. I mean, maybe that's what has been broken, right? Like, historical, like I got to go to Stanford and Stanford was an awesome place to go. But, you know, I maybe, you know, child of immigrants, like not, you know, to come from a poor family, like we didn't necessarily belong. But like the reason why Stanford was awesome was you had all the people who were going to be successful in one place. And then that, you know, by sort of transference or by me being in that place, like, being a fraternity brother with Joe Lonsdale and Stefan Cohen, like brought me in touch with Peter Teal.

10:51And it's like, okay, there is something to be said for having places that have both diversity and merit in one place. Right? Like, yeah. And that's, you know, where society's having the worst debate ever about this right now. Somehow it's like, pick one or the other. Totally. I don't know. I, the ideal is like, you know, you have both in the same place. And so that's embedded in your questions. Like, where should YC go? It's like, we want to go where really great builders are. And they are like not a monolith. Like some of them do go to the top school. Some of them do study computer science. Some of them don't.

11:32And then if we're that community and we can select well, then we will actually help make a lot more of them successful. And then that will be get, you know, more people of all sorts. Like, I think the key idea that Paul, I don't think this is what he set out to do per se, but like intuitively, this is what he figured out. The world needs shelling points for, um, for just telling to the builders, for talented people. Totally. And then their capital exists, their customers exist. Yeah. They're like knowledge and support. And, you know, the best friends of your life, yeah, can you come together? I just had a lot go on the podcast the other day.

12:12And this is one of the things he was talking about is that early in your career, you will meet hopefully you're going to meet a lot of people who over the next 20 years will do really impressive things and finding those cohorts early on. It's like one of the best things about working in a company. And that's like, you know, for me, a bunch of my founder friends are YC founders. And it's like not random. Um, that that's kind of how you end up going through it. And so some of it's just bringing those networks together. This maybe I actually want to come back to the politics thing in a bit. Because I'm super interested on that.

12:40But the one last point here that I wanted to get to was, um, somebody recently made the point that, um, YC's, um, correct decision rate is very good. And obviously there have been companies that have applied, not gotten in, that have gone on to do well. I can't remember the examples. I'm sure there's like a handful and that's great. But compared to, um, catch them all, but compared to a, like a regular, compared to even like a, I would guess compared to even like us, the Koya or like a really good investor. It seems like a, like a hilariously good pick rate. And I was wondering, um, do you think that that is something to do with, um, the process you have of selection?

13:19Or do you think that's something to do with what YC does to companies after they've gotten in? Like do you have any explanation in your mind for why the pick rate seems as good as it is? I think it's not more complicated than game -recognized game, right? I think that, um, if we have partners here who are great builders themselves, you just end up getting way more reps than anyone else, right? Like think about being, uh, you know, a lot of, we both probably run across a lot of 22 -year -olds who are like desperate to become associates at VC and it's like, bro, don't do that. Please just like that idea generally speaking.

13:52Just like go start a company, like great founders want to be around other people who have actually been there. It's like that Jay -Z line. Everybody want to tell you how to do it. They never did it. And so it's just so obvious. Like don't, you know, rather than seek the trappings of this or like play the, you know, ego status money game, it's like go create things of great value. And then that that's really just all what I want YC to be. It's like someone's gonna, who has built stuff, will sit down with you and you'll have like personal one -on -one experience with them. And they're not going to say like necessarily things that you want.

14:26Like they're not going to like validate your bad decisions. They're going to say like this is what I think you should do. But it's like a soft advisor thing, right? Yeah. What is the nature of that relation that made when you think about the YC partner, YC founder relationship. And I think back on mine, I was very lucky. I had Dalton called well and Aaron Harris both were great. And I experienced them as like pretty direct, pretty honest. Like it wasn't like kid gloves or anything like. Like in a positive way is that like the, like when you think about as a partnership talking about how you're showing up with the founders during the batch, are you like, you know, we're going to be it.

15:01What are the words you use when you think about, you know, talking to your team that have her own should show up? I mean, we should sort of be like benevolent like Bodhisattvas in a way. It's like, okay, here you're on this path. And like the hard part is like, you know, Bodhisattva is probably overstating it. Because it's like, we don't know the path. Like we just know how not to die. Actually, that's the part that we can really help with. Whereas, you know, and I think that makes a really big difference. Like, you know, losing your co -founder over dumb arguments, you know, picking the wrong investor, like messing things up in terms of your first hires, like having, you know, picking too many different things to focus on and not focusing on anyone.

15:43Like there's like a billion ways to die. Yeah. And if, you know, as investors, the best thing we can do is say like, oh, yeah, we saw like 50 people die that way. In fact, you want to talk to one of them. Yep. But one of the things I loved is I feel like why is he just drilled the fundamentals? It was like, don't get distracted. Just build product. Just talk to customers. Don't die. Don't break up with your co -founder. Don't run out of money. It was like very simple, but it was constant. Yeah. And it's hard to do because, you know, what happens is it's like that meme. You know, no one who's ever tried to do it has, you know, made it.

16:14But it might work for us. Yeah. It's like that, that whole meme is basically the thing that first time founders in particular really get hung up on, right? Well, it's hard because they're so maybe I'll channel a couple of the schools of thought that maybe are not exactly counter, but are different to why C &M. I'd actually love to hear what you think about some of these. But one of them would be on this point would be like great companies are very unconventional. And, you know, they look different. And when special things happen, they start in special ways. And you can't follow the rules and blah, blah, blah.

16:45That's just people who haven't seen that thing. So yeah. So you, but you probably have a lot of founders who heard that somewhere. Right. And then they come into their partner meeting and they're saying something like that. So what's the, what is the way that that common back and forth gets navigated? Would you say? I mean, some of it is like it's not our, we're not the boss. And so, you know, there's this famous quote, even from PG, I think he was advising Jason Tan from Siff Science. It's in that book by Randall Stross about YC as one of the batches I worked. And he said, you know what, you guys do whatever you want.

17:19You're the reason why we fund 100 companies. Like if you want to drive off the cliff, go right ahead. Uh, which is like this hilarious quote in that like they didn't. It's like they ended up making a unicorn company. I don't even remember what the specific thing was. But some of the point was like, we're not the boss. Like we're here to just tell you what we think and try to be benevolent and help you. And, you know, that's, that's what the soft advisor thing means, I think. And at least my experience working with a great many companies. Like if I come in and just say like, do this, do that. Like that was the whole reason why I started a company to not have people come and order me around and tell me, you know, what to do.

18:01So, uh, you know, I don't think founders who are truly great even respond to that. So I don't know. I guess that's how I square the circles. The people who just come in, I mean, we would see this all the time. Like I remember even during my YC batch in 2008, we were some of the people who PG would either give you like the best advice in the world or sometimes like really, really bad advice. Uh, and then if you talk to any alum, all, you know, all the alums like sort of have some story usually around naming. Or it's like, oh, we're not going to do that. But like this other advice, absolutely brilliant.

18:35What I realized was like most people in startup land you run across, they will give you like very median advice. Like it's not going to change your trajectory very much because it's like, you know, I read that on the internet. There are five podcasts that already say that. So, you know, did you need to have the conversation? Like probably not. What's really valuable is to have people around who have seen enough and are intuitive enough about like ideas and technology and teams that they can give you even spiky advice or sometimes like the worst advice. But good founders are like, oh, that's bad advice.

19:08I'm just not going to do that. And I actually remember YC there was also a meta narrative was don't take anybody's advice, like carte blanche, including ours. And I'd rather get that. And then a lot of advice that contained extremes rather than just a bunch of nothing. Yeah. Another one that I'm curious is the sort of lean startup versus fat startup sort of dichotomy. I don't know if this is exactly a fair characterization, especially as YC has gone into more hard tech companies. But they're, they're, you know, there would there could be a characterization that there's the lean, iterate sort of like raises little capitals possible.

19:40Keep your team as small as possible. And like fine product market fit through your customers. And roughly speaking, that's why I see. And then over on the far end of the spectrum, you have the fat startup where it's like you plan the whole movie, you hire up the whole team and you like come, you, you push something into the world. Totally. How do you think about that dichotomy? Is that an accurate representation? Do you disagree? Do you think it is based on some startups should be one? Some startups should be one. I mean, if you can get Keith Reboy to invest in your startup, you should do a fat startup.

20:05Yeah, exactly. You know, and a few other of our friends, obviously, like if a lot will do it, like if a lot, you know, we sort of know all the people who can and will do it. And like if they want you to do a fat startup, you should do a fat startup with them because they're, you know, I mean, I think that's like network and investor dependent. Like if you have access directly to Vinod. Yeah. Yeah, you should do a fat startup. Like if he wants you to do one, like you've been blessed. And then for the great many, you know, millions or billions of the rest of us on the planet, like not totally clear.

20:37Like you can believe that you will. And maybe you could do it. But how would you even get to the point where you could be a fat startup? Well, you got to do it, lean. Yes. I love that. Couple more because I've got a couple more on founders and startups. These are good questions. Because you probably at the moment, you know, you go in and out, but you're right, you know, the last couple years, you're probably seeing as many companies as possible. You know, and so I want to hear your current view of if you had to name the couple archetypes of a special founder. And the couple things where, you know, you, you have most frequently recently been like that is, you know, a source of greatness for a founder.

21:18What are the things on your mind right now that you think create those archetypes? If you had to boil it down to a couple. I mean, the founders that I've been able, I've been lucky to run across, especially the last couple years, they can just sit down with people who have a particular need. And it's like, they're just like yanking out like the requirements right out of the customers. And then the interesting thing about like being able to do that in the first few meetings is that after a while, when you're coming back with product and, you know, you're in market with them or you're like deployed with their customers with real customers, like, you know, basically that yanking turns into like, they're pushing.

21:59And that's product market fit. So yeah, I think of that as like commerciality. Like there's some people who just know this is where the problem is and I can just find it somehow. So yeah, I mean, it's kind of counterintuitive in that I think a lot of people think of founders as like forceful, but like this is actually a very like sort of opposite of forceful. It's like, it's like, it's like, it's like, how a great seller is like the best listener of all time. It's like that kind of totally. I think that's exactly how that works. Yeah. And then so it's it's odd because like the cargo cult around great founders is like, oh, let me listen less.

22:33Yeah. And it's like, oh, no, no, no, actually, you have to listen 10 times more than the other people who don't listen. How do you know that when you see it so early? Because I think this is one of the things that I think a lot of people struggle with. I certainly struggle with it is it's hard to see it like because you're, you know, you're see you're trying to call that about a founder before you've seen them do it. Yeah. So how do you do that? I mean, sometimes you just hear there other stories. And, you know, spiky people are just spiky in all sorts of weird ways. Like Serena, gay from Data Curve is like one of my favorite recent founders from the last year.

23:09You know, they dropped out of Waterloo at I think age 19 or 20. And then she had already built like one of the number one rock climbing apps in the app store. But at like 16 or something. So you're like, oh, yeah. These people have varied like they're like, and you know, sort of a mile, like they're an inch wide and like a mile deep on very specific things. Like unusual people do unusual stuff. Oh, yeah, starting early. Yeah, yeah. I like that's one of the YC app questions. Isn't it like something that you've done? That's like a core question I feel. Yeah. Well, the big one is, you know, what are some human non like some hacks?

23:44You know, there's sort of the strain of like our people a little bit naughty. Yeah. Yeah. Which is interesting. Yes. And it's kind of related, I think, maybe, but a little different. Yeah. What else? If that's, I agree with that bucket completely. Obviously, is there any other thread that's equivalent to that that you're looking for? They're trying to smell out in somebody. I mean, the world is like really, really full of systems. So, you know, it might just be like the same side of like that other coin. Like, basically, if you're very, very much a systems thinker and you think, you know, basically all the world is like somewhat rational.