Lightcone: Consumer is back, What’s getting funded now, The vibes immaculate
Summary
TLDRThe video transcript from Y Combinator partners discusses the dynamic energy surrounding the Winter 2024 batch, highlighting a significant shift towards AI and developer tools. With nearly 70% of the batch focusing on AI, it's the dominant trend, contrasting with only 8% in Winter 2020. Consumer ideas are also experiencing a resurgence, with founders pivoting towards them instead of traditional B2B SaaS models. The batch's growth is notable, tripling its Annual Recurring Revenue (ARR) within three months. The discussion emphasizes the current technological renaissance, comparing it to the early days of the internet, where the potential for innovation is vast. The partners also touch on the decline in crypto-focused startups despite a bull run in the market, attributing it to the allure of AI and the tangible progress seen in the field. The summary underscores the optimism and potential for those building and funding startups in this new era of technology.
Takeaways
- 🚀 **Energy and Growth**: There's a notable increase in energy and a sense of a platform shift in the tech industry, particularly within the Y Combinator (YC) batch, indicating a moment of significant opportunity.
- 📈 **AI Dominance**: AI is the dominant trend, with nearly 70% of the batch ideas centered around AI, marking a significant shift from previous years.
- 🔄 **Consumer Ideas Resurgence**: Consumer startup ideas are making a comeback, with founders pivoting towards consumer rather than B2B or enterprise SaaS ideas.
- 🛠️ **Developer Tools Uptick**: There's a rise in the number of developer tool companies, reflecting the need for better tools to build future AI applications.
- 🌐 **Global to Local Shift**: YC has seen a decrease in international market focus, with a return to US-centric ideas, possibly due to the current AI-driven opportunities.
- 📊 **Revenue Growth**: The batch showed impressive growth, tripling their annual recurring revenue (ARR) in three months, highlighting the potential of the companies involved.
- 🤖 **AI Product Demonstrations**: Live demonstrations of AI products during the batch showcased tangible progress and real-world applications, inspiring confidence and excitement.
- 📉 **Crypto Downturn**: Despite a bull run in the crypto market, there was a decrease in crypto-related applications, possibly due to regulatory concerns and the allure of AI.
- 🎓 **Younger Founders**: The median age of founders has decreased, with more technical individuals, including those from institutions like MIT, choosing to start companies rather than finishing their studies.
- 🌟 **Optimism and Innovation**: There's a renewed sense of optimism and a belief that anything is possible, with investors and founders alike excited about the potential of AI to disrupt and create new markets.
- ⏳ **Timing is Key**: The current moment is considered by many to be a pivotal time for starting new ventures, with the potential for long-term trends and opportunities that extend beyond the immediate horizon.
Q & A
What is the general sentiment around the YC Winter 2024 batch compared to previous batches?
-The sentiment around the YC Winter 2024 batch is that it feels very different and more energetic than any previous YC batch. There is a sense of a platform shift happening, with a renewed sense of optimism and the feeling that every SaaS dollar is up for grabs again.
What is the most significant trend observed in the Winter 2024 batch?
-The most significant trend observed is the focus on AI, with nearly 70% of the batch's ideas centered around AI, marking a substantial increase from previous years.
How has the consumer startup landscape evolved in the Winter 2024 batch?
-Consumer ideas are making a comeback in the Winter 2024 batch, with several founders pivoting into consumer ideas. This is a shift from previous years where founders might have pivoted towards B2B SaaS ideas.
What is the stance on consumer startups potentially being 'lazy' ideas?
-There is a debate within the YC partners about whether pivoting into consumer ideas is a 'lazy' approach because many consumer ideas tend to be easy to build but hard to scale. However, others argue that the return of consumer ideas is refreshing and a positive development.
What is the current state of developer tools in the Winter 2024 batch?
-There has been an increase in the number of developer tool companies funded, with about 30% more than four years ago. This is attributed to the need for better tools to build future AI technologies.
How has the perception of open source companies evolved?
-Open source companies were initially not seen as profitable, but this perception changed with the success of companies like Docker and MongoDB. Now, open source is considered a viable business model, especially for developer tools.
What is the significance of Superbase in the context of the Winter 2024 batch?
-Superbase is an open source alternative to Google's Firebase that gained significant traction during the batch. It is notable for its successful Hacker News launch and its adoption by a third of the current batch companies.
Why has the number of international companies in the batch decreased?
-The decrease in international companies is attributed to the shift in opportunities. While there were many opportunities to take US models global in the past, the current best opportunities are more focused on AI and developer tools, which are not as localized.
What is the current trend regarding crypto companies in the YC Winter 2024 batch?
-There was a notable absence of crypto companies in the Winter 2024 batch. Despite a crypto bull run, there was no surge in crypto applications, indicating that the current focus is more on AI and developer tools.
Why is there a renewed interest in building startups, particularly among younger founders?
-The renewed interest is due to the tangible and exciting opportunities presented by AI and developer tools. Younger founders see a once-in-a-lifetime opportunity and are more willing to drop out of college to pursue these opportunities.
What was the growth rate of the Winter 2024 batch in terms of Annual Recurring Revenue (ARR)?
-The batch experienced a threefold increase in ARR in three months, growing from $6 million to $20 million by demo day.
How does the current YC batch compare to the early days of YC in terms of product focus?
-The current batch has a similar focus on product innovation as the early days of YC, with an emphasis on inventing new things that can be done with software, particularly in the realm of AI.
Outlines
🚀 Energy and Growth in the Winter 2024 YC Batch
The Winter 2024 YC batch is described as having more energy and a greater sense of opportunity than any previous batch. The speakers discuss a platform shift in the tech industry, with a significant focus on AI, which is seen as a major trend. They highlight the impressive growth rate of companies within the batch, such as Bouch achieving a 3x ARR increase in 3 months. The conversation also touches on the historical context of YC funding and the cyclical nature of tech trends, with a current emphasis on consumer ideas and developer tools.
🤖 AI Dominance and the Shift Towards Technical Founders
AI is identified as the dominant trend, with nearly 70% of the batch ideas revolving around it. There's a discussion about the past, when AI was less popular, and how companies like Replicate found their footing. Consumer ideas are making a comeback, and there's a debate on whether this trend is positive or negative. The speakers also talk about the increase in developer tools and the attraction of highly technical founders to the batch, indicating a shift towards more technical and AI-focused startups.
🌟 Success Metrics for Open Source and Developer Tools
The paragraph focuses on the evaluation of open source startups within the batch, emphasizing the importance of GitHub stars and developer adoption as indicators of success. It discusses the challenges of monetization for infrastructure and developer tools in the early stages and the significance of capturing developer mindshare. The success of Superbase, an open source alternative to Google's Firebase, is highlighted, showcasing how Hacker News can be a platform for significant growth.
📈 Tech-Enabled Businesses and the Focus on Products
The speakers reflect on the trend of tech-enabled businesses and debate whether being tech-enabled is beneficial. They discuss the importance of gross margins and how successful companies like Airbnb and DoorDash may not have been primarily technology-focused. The paragraph also emphasizes the importance of creating products that people want, regardless of whether they are tech-enabled or not.
🌍 International Focus and the Rise of Local Market Startups
There's a shift observed from international to US-centric batches, with a decrease in companies targeting local markets. The paragraph discusses the past focus on international expansion of successful US models to other countries, but notes that many of these opportunities have been exhausted. There's also a mention of a decrease in crypto-related startups, despite a bull run in the crypto market.
🔄 The Comeback of Technical Innovation and Product Focus
The paragraph discusses a perceived reset in the tech industry, with AI leading the way for new software opportunities. There's a sense that the pendulum has swung back towards funding technical innovations, as opposed to tech-enabled businesses. The speakers also mention a record number of MIT grads being funded, indicating a renewed interest in technical founders and product innovation.
🎉 The Vibrancy and Optimism of the Winter 2024 Batch
The final paragraph captures the excitement and energy around the Winter 2024 batch, with a focus on in-person events and a sense of renewed optimism. The speakers discuss the success of companies in the batch, highlighting significant growth in ARR and the potential for AI to disrupt existing markets. They conclude by encouraging potential founders to apply to Y Combinator, emphasizing that the current time is ideal for starting new ventures.
Mindmap
Keywords
💡AI (Artificial Intelligence)
💡Y Combinator (YC)
💡Platform Shift
💡SaaS (Software as a Service)
💡Consumer Ideas
💡Developer Tools
💡Open Source
💡Technical Founders
💡Product Day
💡Crypto
💡Revenue Growth
Highlights
There's a noticeable increase in energy and excitement around the YC batch compared to previous years.
A platform shift is occurring, making every SaaS dollar in the world up for grabs again.
Bouch, a company in the batch, achieved a 3x growth in Annual Recurring Revenue (ARR) in just 3 months.
AI is the dominant trend, with nearly 70% of the batch ideas being AI-focused.
Consumer ideas are making a comeback, with founders pivoting towards them instead of B2B SaaS concepts.
Developer tools are seeing a surge in interest, with more technical founders being attracted to build for the AI future.
Open-source companies are being judged on their adoption by tastemakers and their presence on platforms like GitHub.
The batch has the most technical founders ever, with 99% of companies having a technical co-founder.
There's a shift from Tech-enabled businesses to a focus on pure software and AI opportunities.
International market focus has decreased, with the current batch being more US-centric.
Crypto applications and interest have dropped, despite a bull run in the cryptocurrency market.
The batch saw a significant increase in the number of open-source developer tool companies.
The median age of founders has decreased, indicating a new wave of younger entrepreneurs.
There's a renewed focus on tangible products and innovation, reminiscent of the early days of YC.
The batch's total ARR grew from 6 million to 20 million in three months, indicating rapid growth and potential.
Investors are showing renewed optimism and interest in funding innovative ideas that could disrupt established markets.
The current batch has seen the most pivots in the last four years, suggesting that there are still many untapped opportunities.
Y Combinator is encouraging founders to apply for the next batch, emphasizing that this is an optimal time to start a company.
Transcripts
it feels like there's more energy around
this batch than there has been for as
long as I can remember for any YC batch
like what do you think's happening
there's a platform shift and this is the
moment where every single SAS Dollar in
the world uh it's up for grabs Again The
Bouch 3x ARR in 3 months which is pretty
cool that's a great growth rate yeah
it's a fun time to build it's the best
time ever I mean as a as a builder it's
like the technology just does such a
different thing than what you expected
before
[Music]
welcome back to another episode of the
light cone we are for group Partners at
Y combinator and we funded hundreds of
companies many dozens of which have gone
on to become unicorns this is Jared I'm
Gary this is Harge and this is Diana we
just finished the winter 2024 batch of Y
combinator and it feels really really
different doesn't it it does let's talk
about how this batch is so different
from the batches that we funded in the
past some of it is you actually need to
know where we've been and where we are
right now in order to actually figure
out where we're going to go and a lot of
people watching right now are trying to
figure it out like how do I go to where
the hockey puck is going how do I get
there before everyone else the best way
to figure that out is what happened in
this batch we're going to connect the
dots with actual numbers that I don't
think we ever shared before by stats of
batches from four years ago and contrast
them with the numbers for this patch so
you can see the actual Trends the way
they're playing out here in the center
of silon Valley yeah I'm curious like
what are some of the trends that we've
seen what's made this last winter 24
batch different to previous batches well
the strongest Trend the one that
everyone is writing about is AI that's
definitely like the big Mega Trend in
the past year yeah I was surprised
when we were pulling up some of the
numbers it's just under 70% of the ideas
of AI 70% of the batch that's wild yeah
it's about 170 companies yep versus
winter 20 we only had 8% of the
companies maybe one of the notables from
winter2 that you work with Jared was uh
replicate yeah those replicate Founders
they were into AI before it was cool
which was really awesome because they
got to then ride this wave but the first
three years of replic was slow going cuz
there weren't a lot of people working on
AI they were building tools for people
working on AI there weren many customers
and we didn't call it AI as much back
then we called it machine Lear machine
learning totally I let me say one thing
I've noticed that's different about this
batch is uh consumer ideas they are
certainly coming back like I've gone
from working it feels like for many
years with working with zero consumer
startups now just even in the group of
companies I'm working with several of
them I've noticed founders who are
pivoting during the batch are pivoting
into consumer ideas whereas previously I
think they would have pivoted into like
a Enterprise B2B SAS idea and I'm not
sure what to think about that actually
do you think it's bad or good I'm not
sure okay here's Harge and I have
opposing viewpoints on this question
okay I'll make the case for why it may
be bad like I think you could argue that
pivoting into consumer ideas is sort of
lazy because so many of the canonical
tarpit ideas are these bad consumer
ideas where it's like travel planning
travel planning or splitting the bill at
a restaurant or finding a roommate or
all these kinds of things right and
people gravitate to them because it's so
easy you're like I just want to build
it's the advice of build something you
want which is great advice but it means
that you can often build these like very
easy ideas and it's really hard to get
lots of users for them whereas when it
felt like people didn't want to work on
consumer ideas oh okay I I actually have
to go out and become like an expert on
something like I have to go out and
figure out how expense management works
and see if there's any interesting ideas
there it led to lots of really really
good startups being funded so I I partly
worry that people will pivot into tarpet
consumer ideas because it's easy my
perspective is I find it so refreshing
that consumer is back because when YC
got started when we all did it in the
2005 to 2012 era there were tons of
consumer companies in fact the first YC
batch was like 80% plus consumer
companies what happened is all the
consumer ideas basically got done and
there were no good consumer ideas left
or very few and so we went through this
whole super cycle where the only non-
tarpet ideas were B2B ideas and the
problem with B2B ideas is they're a
little
boring let's be honest like B2B SAS is
like a little boring if you think about
what like Drew in like young tacnical
Founders like like the original Founders
in the early YC batches they were
building consumer apps as they were fun
both uh you and Gary when you went
through the batch had consumer companies
right yeah yeah we we both started
consumer companies because th those
weren't tpet ideas at the time the
problem was like in 2020 starting a a
us-based consumer idea was Ill advised
if you were doing it you were probably
working on a bad idea well the other
fact to here was just Facebook sucking
all the oxygen out of the room right
like it felt to me like that era you
guys are talking about so 2007 through
to 2010 maybe there was just lots of
optimism around building consumer ideas
that sounds familiar yeah right but then
it felt like for a period it just felt
like hey anything you build Facebook is
going to like clone or crush and it just
seemed not exciting to get crushed by
Facebook you could argue that a
foundational model might come along and
Crush that but you if you're working on
a consumer idea but I'm just kind of
skeptical that that's true there's a lot
of white space in there to actually
build real Revenue what would do you
advice say if if a Founder came to you
Gary and said hey like uh somebody told
me that I shouldn't work on consumer
ideas because Facebook's just going to
crush anything I do well open AI well
open AI now open open open AI is the
Facebook of yeah gbt 5 is coming out
soon so what should we tell Founders
they come out to you like okay should I
really work on this I guess it's early
enough that it hasn't happened yet I
mean when I see Facebook actually come
after replica in the AI boyfriend
girlfriend space then I'll sort of
believe it but some of it is the
capability expands the ability of
computers to sort of operate with human
beings in such a broad way that they
couldn't possibly be in all the places
another big Trend that we've seen is
more developer tools and Diana you
worked with a lot of those do you want
to talk about why what's happening with
developer tools yeah in this batch we
funded about 30% more de tools tools
than four years ago this is like one of
the largest Dev tool batches we' had in
the recent years and I think couple
reasons is I think there's uh attracting
a lot of the super technical Founders
that want to build this future with AI
and before you build it you need better
tools right it's kind of like this uh
technology Trend where you have like two
phases I think it comes from this uh is
from this book from Industrial
Revolution is from these economists I
think it predicts a lot how technology
Cycles happen the first cycle is sort of
where you're laying like the rail roads
infrastructure all the tooling before
the installation and prolif
prolification of apps there's a lot of
this kind of like tooling because even
right now for building a AI app there's
so much Plumbing you need to do and
customize it and right now there's
certain patterns that are emerging like
Rag and doing a lot of query and
indexing and getting results to be more
accurate and
fine-tuning those are not well-known
patterns and everyone is building the
same stuff to build the actual end
application so we have a lot of Founders
that are like really good tool builders
that are excited to kind of build the
hammer like it would be really cool to
see at some point all the way from
distributor systems to like evaluations
to even as hardcore as probably at some
point custom silicon like we could
probably at some point see the next
Nvidia being funded and gone through YC
one thing that's really interesting is I
remember in 2010 when I first started
working at YC Dev tools were not seen as
a good idea to work on because people
didn't think they would ever make money
it was only when Docker um started
taking off then mongod DB started taking
off there was sort of this era where
it's was like oh like Dev tools are
things you can actually work on well and
for open source companies in in
particular because it was very unclear
at that time that open source projects
could actually be successful companies
like red hat was like the only example
at that time Y and so I think this is a
great like Dev tools is just a great
example of the build something you want
for yourself and if you're an engineer
you can just be very self-indulgent and
build like the tools that you want and
there's actually a business there well
in that respect Dev tools is basically
B2B SAS but uh consumer style so you
only have 20 million people who you have
to actually Market to and you actually
have to Market to them in the same way
you would to for a consumer product but
instead of a billion consumers you're
talking about 20 million developers and
the cool thing is uh most of those 20
million at some point are on Hacker News
which is a YC website it's like the New
York Times for hackers that's right
there's a lot of parallels because uh
consumer ideas are not judged on how
much money they make typically consumer
social in particular right like it's all
just like growth and daily active users
and monthly active users and what I've
noticed about open source same yeah
Diana how do how do investors judge
whether open source startup in the batch
is doing well or not some of the early
signs is whether this is getting adopted
by The Taste makers and that happens to
be in a GitHub project you have a lot of
uh GitHub star growth and also if you
have actual like hardcore developers
that are good using you and early signs
of getting in production with companies
at this point like consumer early in the
early days for infrastructure and death
tools you don't really make money
because things like installing a new
database is such a big bet for a company
that you need to make sure that it's
battle tested so a lot of Open Source
companies take a little bit longer to
monetize kind of like consumer where
it's all about user growth right and the
second thing I would say um is
ultimately open source companies win
when they really have the developer mind
share it's sort of like Facebook one
with the network effects with capturing
a lot of the users like I don't know
it's like a third or half of the world
uses Facebook same thing for de tools is
like if anyone thinks of let's say
building like a full stack application
and easy deployment they could think of
a superas I think they've done a really
good job and I think you work with them
Jared what was it at the beginning when
they were doing the batch and what does
it look like now well the cool thing
about superbase
is literally what got superbase off the
ground is Hacker News they had built
this open source project that was an
open source competitor um to what's it
called Google the Firebase Firebase
fireb Firebase yeah which is a YC
company that got acquired by Google and
then became a really big like product in
inside of Google and they were building
an open source Challenger to Firebase
and they built it and like how do you
get users for something like that well
the thing you do is you launch it on
Hacker News and so this they had this
blowout Hacker News launch and to your
point Diana it was was clear if you
literally just read the comments on The
Hacker News Post it's clear that really
good developers are like this is exactly
the thing that I wanted thank you for
building it and that was what like
launched them into the stratosphere and
there's a recent stat about the
percentage of the batch that's using
them we'll have to pull the number but
it's like a third of the batch is using
73 companies super Bas on the current
batch out of the 243 are using super
base batch yeah that's crazy wild which
is really going up against the big
infrastructure clouds with AWS gcp right
yeah investors really pay attention to
like the hack and use launches of these
Dev tool companies CU that again super
base had a phenomenal round that they
raised around demo day and it was really
all directly attributed to the hack post
yes this is a free Alpha leak for all of
you out there that you could basically
take almost any close Source dominant
Dev tool or platform and create an open-
Source version of it and uh you might
just kill the Clos source version of it
and this is a shot again you know a shot
across the bow of every dominant sort of
Dev tool or SAS platform and by the
numbers in Winter 20 we only had five
companies that were open source Dev
Tools in this current batch we have 22
so that is like a 5x plus increase 22
open source companies that's like that's
a big shift and we've seen this over and
over again I mean there's sort of like
the slack and then mattermost there's
sort of the uh GitHub and then git lab
which was a YC company um you know in
sort of analytics we havee and poog
exactly so the other cool thing about
this batch at Coler of getting a lot of
uh Founders getting excited to work on
AI and de tools this is the most
technical batch ever right it's like 99%
of the companies have a technical
founder in the current batch versus just
88% during the pandemic let's talk about
why that is I mean we talked about some
of the driving factors from ideas but I
think there's a couple more things at
play I think one thing that feels very
different now versus if we go back to
pandemic covid era is I think there was
this whole the software eats the world
idea which originated with a mark
andreon blog post I can't remember like
maybe 2012 something around that um or a
decade ago great essay yeah great essay
right but I think what it boosted was
this idea of hey not every business is
going to be a core software company
it'll be like software reads the world
it'll be software that sort of enables
non-software businesses to become
software what do you mean by that is
like kind of more businesses that are
operations heavy sort of like give examp
examples like flexport I think would be
a great one right like flexport was hey
there's this giant trade and Freight
brokerage business moving things around
the world and so much of that is done
manually with humans filling out forms
and flex was hey like well that could be
why don't we just have like a software
team that build software to help the
people who are managing like the freight
and the brokerages do this more
efficiently it's Tech enabled Tech
enabled and I think like a consequence
of that is that the and especially with
s of the Zer era where I just felt like
there was lots of money available to
fund ideas that the profile of Founders
became a little bit more tilted towards
like can you do you have domain
expertise in a non-software business
like are you like someone who's in the
shipping industry who now wants to start
like a tech company
some spectacular examples be like we
work right like probably the poster
child of like Tech enabled but I just
think the the profile of founder shift a
little bit away from like geeky engineer
Adam was not technical yeah right right
exactly right he does not look like at
all and actually to that point this
whole trend is like somewhat
controversial about these Tech enabled
businesses and there are some that seem
to be on the right side of the line
where they actually were Tech enabled
like flexport which is working and there
are some that were on the other side of
the line where they claim to be Tech
enabled but really weren't like we work
and those ones didn't go so well but I
think AI is a force in the complete
opposite direction right where it feels
like if you want to work on a good AI
idea you need to be at The Cutting Edge
of actual AI technology and tooling
which a table steak Yeah right because
all this stuff is cutting Cutting Edge
which I think it gives a bit of um Edge
to a lot of Founders that don't have
baggage because everything is so new all
of the latest progress in AI is just
like one couple years old and this is
one of the batches that also has shifted
the median average age of the founders
is also bit younger here's another
version of the story that I've heard
told which is that in the like 2020 era
there hadn't been a technology platform
shift in a long time ventor Capital
funds had billions of dollars to deploy
they had to deploy it someplace the best
place to deploy it was these Tech
enabled businesses that were going after
Industries and companies that didn't
really look like the traditional Tech
business that Venture Capital was set up
to fund but there weren't a lot of great
new tech opportunities because there
wasn't a new platform shift now there is
and so it's a much higher Roi use of
those Venture Capital dollars to fund
stuff like RI companies and stuff like
we work yeah I think uh one of the
interesting subtleties is um in my head
it's a little bit less about whether
it's Tech enabled or not um that is
certainly one frame and a lot of VCS
actually really stick to that I mean
there's some uh really famous firms that
famously only want to fund pure software
businesses that are uh monthly or annual
recurring revenue and that's a whole
strategy they're a bunch of those firms
that we've all heard of that are our
friends like that's all they do and then
you know there are just as many who uh
actually look at it and say oh actually
I'm willing to do Tech enabled but there
are a lot fewer of those people and then
I think the real subtlety I'm sort of a
little bit more in the ladder Camp
because what it really what really
matters is actually the um gross margin
so if you look at a paler for instance
you can have a 90% gross margin or 80%
gross margin type of tech enabled you
know quote unquote almost Consulting
business but if your gross margins are
extremely high then people are actually
you know willing to give you good
multiples and you're actually able to
raise money at a a reasonable valuation
I think what's funny is when we give the
t-shirts at y combinator like when when
you come to YC you get a t-shirt that
says um something people want yeah there
you go there go because it's the end of
the batch what's funny is uh notice none
of this mentions anything about whether
you're Tech enabled or not whether
you're a software business or not or
even gross margin it's just purely a
function of if you make something people
actually want uh people are going to pay
for it and then the rest is just sort of
details I mean you can actually look at
the today the biggest YC companies by
let say they've gone public um Airbnb
door
Dash it's not clear that like on the
surface at least like the technology is
what sets those apart so much as it was
for Airbnb like you know it's a website
but the core thing is building like a a
network and a reputation system most
powerful Network effects ever yeah right
door Das and instacart are these are
arguably more logistics companies than
like true tech companies they're the
best example actually have maybe this
the the tech enabled label is a tricky
one because those are actually probably
technology companies but you could one
lens you could put on them and say
they're Tech enabled but they're also
two of like the biggest companies we've
ever funded but they come from a
different era when a lot of the rest of
the world was still coming up online
right that's what it feels like to me if
we like just how we're talking about
Trends it just seems to me to your point
Jared that it was there was a period
around 2006 2007 it was just pure
software businesses then was like Hey
software is going to be bigger than just
pure software and we got kind of door
Dash and instacart and these interesting
businesses and then it like really maybe
it pushed too far where there was like
we work yeah we work where it's like hey
this is there's no software there's no
software here at all really right um and
that's what it feels like has been a big
reset which AI has sort of it's almost
like AI has taken us back to that start
where it's like okay actually we just
want to fun things that like what's
interesting is like the technology well
it's because there's good software
opportunities again like we we ran out
of them that's why the Venture Capital
dollars like shifted to the wework stuff
yep and now they're back it's a platform
reset platform we're so back guys so
what have we funded less of this badge
what have we seen move in the opposite
direction well we funded a lot less
stuff going after local markets so in
the 2015 to 2020 era YC and just like
the world in general funded a ton of
companies that were ba basically the
second wave of all these online to
offline things so the first wave was
like door Dash and instacart in the US
and then the second wave was like well
well what about door Dash if you're in
Brazil work they want their food
delivered too what about instacart if
you're in India and so there's a whole
wave of taking these models and copying
them in international market fintech too
right there was like we saw coinbase
Robin Hood um Neo Banks Neo banks monzo
in the UK and there was two waves of
that as well there was a first wave
primarily in the US like bra for example
but a lot of fintech businesses are
actually local because regulations are
so different in each country and so then
there's a second wave of like the
international copies of all the us-based
things yep definitely during that period
like the 2020 to 2022 period we were
funding a lot of international teams
that were at like Robin Hood for latam
or like a local crypto exchange or yeah
like door dash for X Market lots of
these kinds of things yeah and a lot of
those were really good YC funded some
amazing epic companies they like monzo
which banks some ridiculous percentage
of the people in the UK grow in India
which is Robin Hood for India is doing
phenomenally well zepto which is the
fastest growing YC company of all time
which does 10-minute grocery delivery in
India I I think that's a really
interesting one actually because it's
like it's very easy to say zepto is like
instacart for India but it's not quite
right cuz their actual model is
different it is yeah by the Numbers
specifically around the 2020 era winter
20 batch only about 45 45% of the batch
was International and now is only 20
yeah this is the most us Centric batch
we've had in a long time most of the
teams when they applied are in the Bay
Area like so about
29% um which interestingly so TBA also
means like San Francisco is definitely
back so we looked at the numbers and
preco around 29% or so of the companies
were in the Bay Area when they applied
to YC and it was half of that during
pandemic y right went down to like 14%
something like that and now we're back
up to where we were before so you know
even higher actually
yeah even higher than we were pre pre-co
I think because there so much about uh
cerebral Valley all the AI progress
Happening Here I think the fundamental
reason it's not to be clear that we woke
up one morning and we were like like we
got to fund more us Founders that was
not what happened what what actually
happened I think is basically the best
Founders chase the best opportunities
and YC funds the best Founders and so
like what are the best opportunities
well in 2020 there were amazing
opportunities to take models working in
the US and launch them in other
countries and so amazing Founders like
audit from zpto that's what they worked
on and now the best ideas are like that
trend has sort of run its course now and
like most of those opportunities have
been done and so the best Founders have
to had to move on to other opportunities
I'll give you a stats for that
specifically like winter 24 we have four
times less Marketplace ideas than 20120
if we're seeing more consumer and Dev
tool ideas it also makes sense because
those aren't local at all they're exact
opposite of your point like actually if
you want to build the best AI Dev tool
yeah there's no such thing as an AI Dev
tool for Brazil it's just
like use the same ones yeah right
another thing that we're finding a lot
less of now is crypto and here's
something that the audience might not
know about the two of you which is that
Gary and Harge are two of the most
successful crypto investors of all time
like literally like you two were the
First Investors in coinbase and you made
literally billions of dollars investing
in crypto billions of dollars
right uh I some of it is going back to
being around y combinator reading Hacker
News and finding out about this thing
called Bitcoin reading the Satoshi
Nakamoto white paper and just saying
like well what is this you know Mount
goau like magic the Gathering online
exchange website in Japan having to you
know do some weird wire to you know some
sketchy
country on Western Union in order to get
money into this weird website that would
sell Bitcoin and having that experience
be so bad like I remember doing that and
thinking well this is a very interesting
idea and then uh again if very smart
technical people on Hacker News are
doing this and believe this might happen
well this might just be a thing so as
two of the top crypto investors what
happened why were there no crypto
companies in Winter 24 I mean I was
looking for them
so I think what's really interesting
about this zooming out is if you talk
about when coinbase applied to YC and we
funded them um there was it was a very
Counter Culture idea like you had to be
like Gary like really into this stuff um
there was no hype around crypto it was
not seen as a very fundable thing and
then what happened is crypto will go on
these bull runs and when there's like a
which is basically really the price of
Bitcoin so when the price of Bitcoin
tends to go on these sort of like eoric
like pumps and anytime that happens it
brings lots of people into crypto and I
think at YC what we would see is like it
would bring in lots of people applying
with crypto ideas right and then that's
clearly what was happening during sort
of the co era is crypto had this huge
run coinbase went public we sort of
surge in crypto applications so we just
funded a lot more crypto companies what
I think is really interesting about this
current moment is we're going through
we're in the middle of another crypto
Bull Run Like Bitcoin just hit another
all-time high recently but we have not
seen a surge in crypto applications
fascinating yeah right and it's like
it's clearly because all of those minds
want to work on something else and we
know what the something else is it's
like it's AI like I think AI has is just
dominating the Mind share of Engineers
whereas previously Bitcoin hearing a new
alltime high word Dan don't you have a
story about when you went to MIT um last
year that you could still see some of
the remnants of that like crypto mind
share at the college level yeah so MIT
has some of the smartest kids in
engineering and what was really
interesting to me there were a bunch of
kids that dropped out and UND dropped
out and and they dropped out to start
crypto companies they they dropped out
to start crypto companies they raised
like millions of dollars and they
thought they were like on top of the
universe like High Flyers and then what
happened then around that time things
crashed right and things stopped working
so they were at top of the mountain they
were like Hot Shots we dropped out of
MIT we we just ra $5 million we're going
to be the next Mark Zuckerberg for uh
crypto and then I talked to them and
they were back in school like normal
kids but there was a bit of uh kind of
like ship on their shoulders it was
embarrassing actually to come back to
school it was uh not seen as a badge of
honor to drop out of school and then and
when I asked them what they wanted to do
next it's like oh I just want to finish
school and then once I finish I'll
figure out another startup the failure
of the crypto startups gave all startups
a bad name rather than just like crypto
scams which is the actual problem
because they didn't want to work at a
startup anymore afterwards some of them
they were like there were like oh I I
don't know yet I think the there's like
another undercurrent behind all of this
because it can be very jaring you have
this kind of very bipolar experience
from going to the top you're like
getting investors to throw money of you
you have this an non Twitter account
that has like hundred of thousands of
followers doing you bought your board
ape yeah you got the all the board Apes
a collection of them and you're running
this like giant exchange and then things
just crash you get sued by the
government that could be another case
and then what's your plan B and then you
come back down hit ground floor so deep
and it can be very demotivating the
government stuff you mentioned is
actually for on a very crypto specific
topic is a huge thing where like the US
has chosen this regulatory regulation by
enforcement approach which is just
incredibly scary if you want to do
anything interesting in crypto is this
casting a chilling effect because people
are worried that if they're successful
they could literally go to jail y
exactly that I mean Diana and I have a
company that we just worked with in this
batch where the founders had previously
they Young Smart technical Founders who
had previously started a crypto exchange
and were sued by the government and they
are clearly still like traumatized by
that experience right so I think it's a
real shame because in a way this is like
a great time actually to work on a
crypto idea because at a high level it's
like hey programmable money and now
we've got like AI agents that can like
do lots of things autonomously and the
tourists are gone yeah right like this
is actually a great time but I think in
the US at least until it feels safer to
build these companies it's going to be
hard for crypto to recapture that
imagination but like I still think by
far away the big reason is just AI is
like the exciting thing to work on which
actually I do see uh I know it's a bit
of a meme of uh former crypto Founders
going into AI my hope is actually that
for a lot of these crypto Founders that
went through this ride that they kind of
get back up on their feet and get back
to building because it's actually fun I
think the sad thing is some of them
really got defeated and my hope is that
they get that optimism back again
because that's the thing that as a found
if you lose it it's like game over but
they're definitely back we were talking
about this right where it just it feels
like we come across more applic we
talking about this on our part we funded
a record number of MIT grads in the last
batch the most YC has ever funded so it
cast a chilling effect for a year but
it's and in particular now when we talk
to Young Founders and I think this is
why the median age of the batch went
down slightly right the median age was
around 30 four years ago four years ago
and now it's like 26 and I think I'm
just seeing more people being willing to
drop out of college and often what we
say to them is hey like there's no rush
like you should just like graduate
college why you have to start a startup
right now and the response is well like
this might be like a once in a lifetime
opportunity and I think for the first
time I'm like you might be right you're
right the reason this time is different
as it relates to this sort of AI oh no
you said the magic words yeah I said I
think but it actually is different I
think um like crypto has always suffered
from a couple of problems one is that
it's always been very hard to explain
the products right like they tend to be
very complicated and not use user
friendly and so it's just hard to
explain like what what even does the
crypto thing do because it tends to be
some sort of complicated lending thing
that only other crypto people understand
and the second is that it's always been
hard to understand like where the money
comes from it can be the sort of bantine
complex thing trying to figure out like
like feel like Monopoly money yeah
basically right that's always been the
criticism it's always felt like these
things weren't real often but like this
time around I think working in this
batch with so many AI companies it's
felt very real the products are were
very tangible there was a cool
experiment we ran with harsh in this
batch we ran product day where we had
all of our companies come and do a demo
run through of the product on stage
other product yeah running and a lot of
the products were beautiful I was very
impressed with the progress they made
from the time they applied to what they
had because one of the stats is um in
this batch over 80% of the badge had no
Revenue basically the product was
unlaunched before they came in versus uh
in Winter 20 about only
62% so we funded even earlier and in the
span of just a month is these products
were like pretty impressive right yeah I
mean I remember that when we did product
day just some of the moment it was just
felt like constant wow moment after wow
moment like someone would demo like one
of the companies fume demoed like their
AI software engineer and their demo was
literally hey like you can basically
tell this AI software engineer to
implement dark mode on this website and
they showed like a website just regular
layout and like fume engineer goes and
implements like in CSS and everything
like the dark mode and then you go back
to the website and there's a toggle to
turn dark mode on and it's just like wow
like you could see it writing the code
and doing all of this stuff and it was
like you could tell this is something
that's very real and there's another
thing that we did that like returned YC
to focus on products do do you want to
talk about the Bookface launch live
events that you started this batch yeah
during the batch I really felt like well
these demos are so cool I'm totally
going to steal your idea for this next
batch where you know I definitely I I
think that we should do this type of
demos uh across the whole batch and then
uh I also did Friday every other Friday
we would pick the people who had the
most impressive Launches on our internal
social network and we'd have them
actually demo exactly what they built in
front of a live audience yeah and then I
would actually ask very detailed
implementation questions because
literally a lot of these things it's the
first time you've ever been able to do
like that demo for instance and being
able to understand well what did you do
like how did you use uh retrieval
augmented generation to do that like
what were the prompts what was the
workflow you know how do you test that
kind of stuff like going back to the dev
tool argument like we're literally
trying to figure out how these things
work and then there's going to be a
whole new reset in even a matter of
months with GPT 5 and the Next
Generation like this is a very Homebrew
Computer Club type stuff like we just
suddenly had this thing that could
happen and next week some other crazy
things going to happen I love that
because it really felt to me like a
return to the YC that I did in 20062
2007 the focus of YC was really about
the prodcts because we were inventing
new things that you could do with
software and then in the decade
afterward it because there was so many
software enabled businesses and the
technology became commoditized there was
less focus on the product and more on
growth and sales I hadn't thought that
you know what just sprung into my mind
as you're saying that is 2007 when I
first moved to San Francisco from London
um in my YC batch in Winter 2007 were
Weebly and zenta um and they were
pushing the limits of what you could do
with JavaScript so we was a website
builder and zenta which would get
acquired by Google was like a web
PowerPoint that was cutting Ed stuff
yeah seriously it was really felt like
every week I remember you would come to
YC dinner and you would go and check out
what the Weebly and zenta teams had done
the previous week and you'd be like wow
like you can like create like a slide
you can create a slide with an animation
in the browser like it's crazy and even
works an Internet Explorer that's insane
yeah that was the thing that you can do
this across all browsers and it felt
like yeah I hadn't thought about it
until you said Jared but yeah that was
so much of the energy was you felt like
you were around people really inventing
stuff it actually that team those two
Founders and basically kickstarted all
of the Google Doc Suite like doc doc
sheets and then when you think about it
back then in 2007 it wasn't clear that
you could replace Microsoft Office with
like a bunch of applications in the web
that would have sounded insane I think
the other thing I remember doing the
Bookface live demo I think that feeling
was there I remember seeing the demo of
retail AI so they were building this
voice AI agents and during the demo they
did a call to the AI agent and they
pretty much passed the touring test
that's pretty amazing you would have you
would have conversations with it and
that's the moment where I think it was
just so fun to be alive now and working
on this and it's turning into like real
businesses again the crypto analogy a
lot of the criticisms were a lot of the
products were promising like high yield
risk-free high yield products and we
would take like a spread on the yield
again very complicated to understand
where the money zero SU
basically but like or it was like it was
the promise of future usage it was like
someday when everybody switched to like
a decentralized Airbnb it'll be really
big yeah but no one's actually using it
to rent apartments yeah but in this
batch we're seeing companies add like
this AI boom companies are adding like
real recurring Revenue by selling
software to legit businesses right I
mean I think we looked up some the DEA
and we actually measure it right yeah so
I pulled the numbers on this 80% of the
batch came in with no Revenue and the
majority had not launched any product at
all they didn't have any users if you
look at the start of the batch in
January the total batch all the batch
companies together if you add up their
total revenue they were making 6 million
ARR across like almost 300 companies
companies yeah so like the AR of the
batch which is kind of like a funny
concept I don't think we'd ever really
thought about the AR of a batch before
metric but like the ARR of the batch was
like 6 million in January and by demo
day in April it was 20 million so the
batch 3x ARR in 3 months which is pretty
cool that's a great growth rate yeah you
think of all the economic growth that
got produced it's kind of think of these
companies as they keep growing and
compounding and accelerating a lot of
this growth which is new is definitely
not Zero Sum it's this whole world of
creating a bigger and bigger pie or like
a new Matrix or new maze right and I
think what's getting people really
excited about the future of AI in
particular is this is not just taking
money away from existing software budget
so much of this work is replacing labor
and so you open up to like labor budgets
and so I think like all of that has just
fed into this General if we just like go
off The Vibes this batch has felt like
it's like being like the best one yet
like there more specifically it feels
like there's more energy around this
batch than there has been for as long as
I can remember for any YC batch what do
you think's happening and one time that
I felt that really viscerally was it the
in-person investor reception which Gary
created new for this batch do you want
to talk about about it Gary well so demo
day is still perfectly online and it
works great but one of the things we
really wanted to do was thank some of
the best people who have funded YC
companies all these years and it was
right here in our San Francisco HQ it
was three whole floors of some of the
smartest investors in the world with uh
our batch companies just hanging out and
The Vibes were
immaculate it felt to me like at the
reception talking to investors that
there was a real reset on preconceived
what's a good idea and a bad idea people
were just renewed sense of optimism and
it felt like everything's up for grabs I
worked with a company called octane
which got lots of investor interest and
what they're doing is AI sales for it's
Salesforce rebuilt if in the AI world
and I just think investors did not want
to fund Salesforce competitors for a
long time because they just felt like
like how are you going to compete with
Salesforce but now with AI it's like oh
like we totally funded Salesforce Peter
because it seems possible that you could
actually win against Salesforce now
there's a platform shift and this is the
moment where every single SAS Dollar in
the world uh it's up for grabs again
it's an exciting time Founders are more
excited to build than ever investors are
more excited to invest than ever and
we're just like right at the center of
it all here at YC it's awesome it's a
fun time to build it's the best time
ever I mean as a as a builder is like
the technology just does such a
different thing than what you expected
before I think this is why you have the
earnest Founders that love building
coming back and doing this so do we
think that this batch was pki what's in
store for the next batch I mean it feels
like because we talked so much about all
the progress on the current batch it
seems like it's like done and all the
good ideas are done I actually think the
opposite because this batch was the one
where we had the most pivots to 30% of
the batch pivoted and landed in good
ideas versus in 4 years years ago only
about 10% of the batch pivoted so that's
one very fast defined ideas there's
still tons of them that are good and if
we go back to the analogy with how
history kind of remixes and repeats a
bit is I think of this time more like
Facebook is still getting created in the
dorm rooms so if you all want to be the
next big AI company this is the time if
we talk about what we were saying
earlier Jared like if now is sort of the
equivalent of 2007 when it felt like web
Technologies were being pushed forward
for the first time it was actually still
like 3 years until Airbnb was started 5
years until door Dash was started six
years until coinbase was started these
Trends always play out much longer than
people think they're going to so in
summary we are just getting started
that's all the time we have for today
but why combinator is actually accepting
applications for this summer so if
you're thinking about it those questions
will help you shake out is this the time
do I have have the co-founder do I have
the idea and at the end of the day now
is the moment to start so we hope we'll
see you this summer and we'll see you
next time
[Music]
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