Garry Tan on YC's first Spring batch: 12% revenue growth, 110% more young founders, and the last window to start a company before superintelligence

think we are going to be up to our necks in confetti. We got a lot of confetti. We got some gifts we're going to be giving out. We got some surprise gifts, some hats. We're going to take you all through it. Gary Tan, welcome to the stream. There he is. What's going on? The president of Y Comier, Gary.

Gary Tan, good to see you. Great to see you. Always great to see you all. Uh the uh there's a line around the block still. Is that right? People are pumped. Oh my god. Yeah, it's it's absolutely slammed. Uh take us through what are you seeing? How's this one going?

Uh what's actually changed cuz we're in a different location. Break it all down. In the middle of uh this is like our HQ, you know. This is uh you know, we uh we got the spring batch together. This is the first spring batch that we've ever done. So X25 now. Yeah. Yeah. Paul Graham doesn't like X.

So we're slowly replacing it with spring. Spring. Okay, there we go. You know, when you create a place like this, I think you get to dictate little things like, you know, not liking X. So yeah. So we got to write out spring, but you know, I don't know. What do you think it should be? It could be P.

Maybe if it's not X, it's pron mathematical notation for this stuff. Bring in some like different, you know, we have the Y combinator algorithm. We need a different algorithm to define the different seasons. I think just full word, you know, winter, spring, summer, fall. Have fun. Summer fall.

The uh the energy from the founders is really electric. Honestly, it's insane. Seems fantastic. Like downstairs, uh we got a Well, the fun thing about hosting all of the investors in our house is that uh I got a whole house, our house champ downstairs.

So, so we Yeah, we got Give us an overview of the We We heard a little bit of your talk earlier, but give us kind of a breakdown of of how you introduced today. Yeah, absolutely. I mean, dude, it's like 90% AI. It's about 10% uh 11% hard tech, which is awesome.

And then the really crazy stat is, you know, how the last four batches about the last year, uh, you know, the batch itself as a whole has been growing revenue by 10%. Uh, this time it's 12. Wow. There we go. So, we're actually in up and, you know, that's what you would expect.

We're in the middle of the age of intelligence. you know, uh, six months ago, nine months ago, you know, the models were 90 IQ, you know, then they were 110. Now they're about 130, you know, we're sort of entering super intelligence zone and IQ incoming for,000.

I don't even want to talk to that, but yeah, probably very valuable. I thought um Sam's essay yesterday was very precient and that um like that's that's sort of the silver lining like everyone's sort of worried, you know, what's going to happen to the jobs.

Like to me what's going to happen is the exact uh I mean it's actually an an opening right like uh the wild stat that we're seeing is actually the number of 18 to 22 year olds applying to YC and getting it is up 110% year on year right so you know is that driven by people liking to drop out of college or skipping college entirely is that because they're they're viewing college as kind of like I mean there was always a meme about like oh what you put YC in the education section of your LinkedIn now it's Oh, wait.

No, YC could actually be the replacement. Is that intentional? Well, the extreme meme here that is interesting to think about. Like, I don't believe this, but you know, the memes among uh you know, the 18 to 22 year olds in particular is uh this might be the last time you can start businesses. Oh, interesting.

Because you know once super intelligence hits then uh you know the moes that you you know the businesses that will exist will sort of uh ensconce like the seven powers of the moes out there. Sure. Sure. There's maximally efficient. Yeah. Exactly. they just reach their terminal value immediately and maintain it forever.

So you're trying to get network effects, you're trying to build uh we're trying to we're trying to get brand, you're trying to get a cornered resource.

Uh and then the wildest thing here is that you know this uh perfect uh someone was telling me yesterday uh right now if you look at college grads uh the rate of unemployment for CS grads is actually 2x that of art history majors. I have not looked this up yet. So everybody everybody's been quoting that.

We've heard that too. We talked about it. might there might just be something crazy going on with art history majors who found some they found some hack and they're all getting employed. It's full employment for them. Uh very interesting. Um question on the AI side.

How are the companies feeling about the current battle between little tech and big tech? We saw with WWDC it feels like Apple's kind of retreating from some territory. We could be seeing more opportunities for developers for like mobile apps.

We could see another mobile app boom because Apple's saying, "Hey, look, maybe we're not the company to build every single AI experience on the iPhone. " We're seeing new hardware maybe come from OpenAI. There's different stuff going on with open source.

How what's the interplay between the average YC company and and the Mag 7 right now? Oh, I mean the good thing is we still have you know we have net neutrality.

So, and you know that thing we've you know we have seven companies in the you know mega tech world but you know what like anyone can just put something on the internet and they get distribution right so uh I think that you know the most important thing right now that I think all of us should really be considering is we need platform neutrality right you know the second that you know today you open your Siri and you don't get to choose you know do I want perplexity do I want anthrop do I want you know chat GPT on there you know no like that this is the next sort of unfolding that needs to happen.

We actually need the platforms to allow other people to enter. But if we do that, we can actually have tens of thousands or hundreds of thousands of companies each of which can get to a billion dollars net revenue, you know? Uh and like you could do it probably with 10 people, right?

So if you link up these two super mega trends, like that's the future that we want to live in, right? Like you can be 18 to 22, you know, you don't necessarily have to go and like the credential matters a lot less. You know what matters now? It matters, you know, your agency and your taste. Yes. Right.

And so, and you don't have to like go and get anyone's nature of LLM, you could actually get bet a better tutor from an LLM than you could from at times working under somebody at some big company who would maybe explain here's how you make a financial model for a software company, but now you could just talk enough with Chad GBT that you could probably figure it out even better than having like a mentor in some cases.

I want to ask about applying to YC. Have you noticed that the apps are becoming more GPT driven? Are people using AI to write their apps? Do you recommend against that? What do you think? I mean, if anything, like I think the best apps, you know, in the past, we might say, "Oh, this is AI slop.

" I think we're because the models are now smart enough like my writing process for instance has totally changed to this point. Like I am, you know, you're actually able to come up with better ideas. I think like, you know, I I would rather um I would rather people actually prompt to get like all of the ideas out there.

You know, one of the things I've been using in chat GPT lately is like give me 10 options for different concepts or ideas that might fit here. And then what I'm doing is I'm using my tech like I'm using my prompting to do that and then on the back end it'll give me like 10 things. Five of them make no sense.

Two or three of them in my brain I'm like, "Oh, I didn't think about that. that actually is a useful thing that I can put in with these other concepts that are in my head. Yeah.

And so I think it's actually uh you know the computer is a bicycle for the mind like if you can prompt really really well um you know using just I mean you have to treat it like a vehicle right it is not a destination of its own it's actually you know it's this is like the self-driving car for the mind right I mean even just treat it like a coworker all that matters is the end output and if you're working on any type of project not working with a smart collaborator is going to lead to a worse output.

Yeah. Yeah. Condensing down these ideas because I' I've read a lot of apps where it's like, wow, there's actually like some really incredible KPIs in here, but you buried it in paragraphs of exposition that were completely unnecessary.

And I know that the people that are actually reviewing the YC apps are not going to read this far. And so just having it as a co-pilot seems like a really really how have you and the other group partners push to guide uh the batch around re reporting on revenue, right? There's a lot of conversation around what is ARR?

It's sort of this flexible definition. Yeah, there's obviously a lot of pressure for every founder coming into demo day to like show results. How how do you guys kind of uh guide uh founders? Absolutely.

What we'd like people to do is put a contracted ARR if it is and then if it has an opt out clause where you know people can sort of get out they should just have a little star on it and it's like you know opt out at 30 days or whatever this I think it is very very important that founders um are just don't engage in securities fraud is like kind of a basic thing right so you know I think that it is a you amazing thing about uh the tech today is like the demos are so impressive that people are willing to take a big chance to sign up for big deals and yeah they obviously want some flexibility but but being really clear about that I mean these are non-GAAP metrics you know there is some gray area but we need to define new metrics as we move forward are you seeing companies able to pivot more times within a single batch and just iterate faster because historically it wasn't unreasonable for a company to pivot a few times to get to something great and maybe they only have two weeks at the end to really sprint and show progress now I could imagine certain companies like really really really pushing it.

Have you seen that at all? Yeah, abs. I mean something like 30% of the companies change their idea during the batch and that's actually great. I mean you start as you're researching and building. Yeah. Yeah. And I I think that that's always been true.

I mean some of the biggest companies end up being you know literally pivots from like 2 3 weeks ago and then I think that you know people might say oh that you know that kind of sucks or you know why is that? I mean I think it's good. The good news is like you know uh you can just do things.

The good news is like so so when I think of the YC mantras I think build something people want uh talk to your customers is you can just do things. A third that we're adding is that important to have that valition that that uh uh that a agency. It's the distillation of agency right I think so. Yeah.

I mean a lot of it actually I think the most important thing that uh I feel like everyone has to learn the hard way is uh to learn you know the sound of your own voice to say uh you know not to get all bicameal mind about it but you know like that's sort of where we're at do well no I mean if you uh read you know PG's old essays like one of the things that really jumps it out at me is like to what degree you know your childhood your schooling like he has so many essays about you know what high school is like being a nerd like all these things like you know really spoke to me and that um the process of becoming actually a founder is actually a journey inward to actually learn the sound of your own voice that like you can make your own way you can have agency you know just because I mean actually by definition the startups that create new categories require a level of courage that like people have to find within themselves actually you have to say actually you know what like I know the Wall Street Journal says that and you know the hater del journalists say this and all this you know you have to actually separate yourself from the default view of how the world works and then you're actually trying to divine secret knowledge by going into the markets going to talk to people that have never you know even touched chat GPT yet right like they don't know the re it's like that meme where you're you know you're the tech guy like in the corner and then like everyone's dancing and they just don't know they don't Like that's where we're at still.

Like it won't be like that for another year or two, but like for now that's still true. You go into any business in the world, they don't know this revolution is about to happen to them and we get to create it. Yeah. Yeah. Yeah.

Like last demo day, we talked to a company that was doing uh AI voice interactions to help the elderly process Medicare receipts essentially and they discovered that the the elderly were talking to their chat bots for like three hours. Yeah.

And that's just something that like you might you might be able to predict intuitively, but I thought it was just a very a very funny like discovery that only happens from actually trying to build in that in that market with the latest and greatest technology and that's what I love about YC Demo Day.

What's your latest thinking on batch sizes? Is that is that are we are we staying you know where where we're at? Uh the high level is like we want as much prosperity in the world as possible. You know Brian Chesy is on my board. Um you know Paul Graham and Jessica Livingston, Carolyn Levy.

uh the board has given me my directives. It's uh you know what we need to this is the tree of prosperity. Let's have the tree of prosperity grow. But you know I think that YC fundamentally is the managed marketplace.

You look at an Airbnb I still super I'm still you know bullish on Airbnb and that you look at the amount of space in the world. Like the amount of space that has been listed on Airbnb is still a tiny fraction of what it could be. And what does that unlock?

and it unlocks new experiences, travel like a human, like all these things, you know, it's hundred billion dollar company from nothing. And uh I think that the same thing is about to happen to innovation and venture. Um but we have to do it thoughtfully, right? Like you know, we're at demo day here.

We have uh more than a thousand of the top investors in the world all congregated here, right? We have a thousand people in this building. That's amazing. And um you know, we need to grow them thoughtfully. Like we need, you know, what I need is I need YC to continue to provide returns, right?

And you know, uh can't comment on, you know, the rumors about scale this week, but like we need a lot more things like that and we're getting it. Like this is sort of uniquely the community where that happens. Talk to us about the two new partners that were added to the YC partnership. Oh yeah, there's three actually.

Yeah, sorry. Two. Yeah. Uh Andrew Nicholas and John Shu actually. Okay, cool. Sorry about I almost announced. No. Yeah, Tyler 2. Okay. Yeah. Yeah, that's Tyler 2.

Um I mean all of them created uh companies that exited for you know hundreds of millions to you know pedager duty as you know a public company uh you know north of a billion is that's remarkable that those are exactly the kind of partners that we want at YC. It's like they've been there and they've done that.

So roughly how big is the partnership now? It's 15 partners total. 15 partners. That's great. Yeah. So you can still keep the actual uh like group sizes fairly small within the batch.

I mean that's the main you can just basically guess at what the batch size will be because each partner can do 10 to 25 companies depending on uh how hard they want to work. But uh you know I I don't think it's a numbers game.

I think it's you know we want to fund all the really really good founders and I feel a little bit embarrassed about you know we're accepting companies at a 0. 8% rate right now. Wow. So, you know, I think that we're behind the eightball actually. Like, you know, I I feel really good about this.

Like, we're going to keep growing what we got here. Um, but I also need to grow the partnership and then we need to fund better and better companies. And then, you know, this is a 10, 20, 50, 100year thing. Like, we're trying to build Y Combinator into a multiundred-year institution. And we we need it.

Have you had any companies go through this batch and decide not to raise additional capital at this point because they're just making so much revenue that they they have no need for famously uh Tom funded Axiom last uh last batch. Yeah. Yeah. And they're doing hundreds of Yeah.

Hundreds of millions of dollars in pure profit. So I saw that and I was like trying to look back through our stream and like did we did we I mean crypto's wild, man. Yeah. It's a wild west. It's a wild west. That is insane. Well, we'll let you get back to it. Thank you so much for coming on the stream. as always.

Have fun out there. Thanks. Great. Well, we will be moving into interviews with founders and VCs who are coming on the the show who are here at YC Demo Day. Stay mo. Uh while we bring in the first