Harj Taggar on AI-native full-stack companies, selling to Fortune 500s, and YC's biggest batch trends

demo day to come talk to us. How are you doing?

I'm doing good. Thanks for having me.

Fantastic. Um, take us through, uh, how's the day going? What is the schedule like? And then I'd love to dig into some of the trends that you're seeing, some of the standout, uh, companies. I'm sure we're going to be talking to a lot of them, but uh, what's the what's the run of the show today and where are we in the course of the process of, you know,

yeah,

graduating these companies? So we got we got started like uh almost a couple of hours ago 10 in the morning. Um and so the founders kind of investors all gather together. They get into um the main room here at the YC office and then the founders start giving presentations talking about like the progress, what they've built um uh themselves, their background. They're pretty quickfire presentations, one minute each. Uh and then there's sort of like a break in between sort of blocks or presentations where the investors can hang out and talk to some of the founders and get to meet them and um you know obviously hopefully invest in a bunch of them. So that's kind of we're like we're just about approaching lunch so it's kind of like that part of the day where people have like listened to a bunch of companies probably got like a sense of some of the stuff that they're interested in. I see people right now like just hanging out doing deals. So it's kind of like a fun vibe. It's like live.

It's the party rounds. We love it. I wish we could be there. [laughter] Uh are are there any uh like hero metrics or or stats that uh the YC team shared this year to kick off demo day? Uh how are you how are you sharing like the shape of YC these days? Yeah, I mean um we didn't go too statsheavy this time. um around I think I mean at a high level it's just the the continuation of the theme we've seen this whole year which is just like the companies during the batch are just getting faster revenue growth are signing like contracts with like big companies in some cases like even like government defense tech like the the dollar value contracts that startups can close in like the first few months of their life are just bigger than anything we've ever seen and that's all like very directly from AI so it's like it Yeah, it's a very it's very interesting kind of approach. You can sign one big contract and generate enough revenue to go on the stage at demo day and feel confident in your pitch and have something that's compelling or you can go and get sign up a bunch of startups to something uh you know smaller plans but

post demo day like there's companies that keep growing like you're like in the SAS world you were used to sort of just consistent month overmonth like growth and now in sort of AI world you're used to like big step function growth and it might be flat for a month but then you sign like another contract and it just like leaps leaprogs Interesting. Uh yeah, help me square sort of the shape of revenue with some of the YC batch that we might talk to today because uh Paul Graham was on the timeline sort of defending this idea of selling to startups. We were in in complete agreement with that that uh selling to startups can be so much better in a bunch of different ways. But it does feel like we're entering an era where maybe it's AI, maybe it's just the maturity of the ecosystem. like it's also been easier than ever to sell to the government or to sell to Fortune 500. And so are both happening in are there specific companies that are really great at one or the other? Is there is there any advice that you've given founders on how to decide between those two paths?

Yeah, it's really it really depends I think on like the type of product you're building. So I think like the the bull case for selling to startups as your customers is like the stripe or the AWS case and like it's like you get them all early. I mean you could put gusto rippling deal into that bucket as well. It's like if you get the startups early and you can grow with them. That is one of the most powerful business models you can have, right? Like the Stripe team could go on vacation for like two years and they would just like keep growing because like the cohorts would just keep going up and to the right, right? So I don't think they're going to do that anytime soon, but they could if they wanted. So I think if you have a product like that where you can grow with the startups and you can get in early and they will just like those startups in the future will become your enterprise customers, that's like fantastic. That's absolutely what you want to do. I just think like with AI what's new is you didn't even have the option of selling to a big customer until you sold to startups and you'd build up like hey like we don't have an enterprise customer yet but we got like a thousand startups and like in aggregate we're processing like X or like we're reliable we're not going to shut down. I think now with um AI and the fact that the incumbents can't actually build the products because the engineers that work at these bigger companies don't even believe in AI. So like the startups in the batch are able to go to a big company and actually get them as a customer because they're the only ones that can actually deliver the product. And I think that's just new. So like we still give the advice. It's very dependent on the company and the product and like will you be able to scale with startups or not. But like in general there's just more options as a founder for how you do sales than there's ever been.

Let's uh let's talk about themes in the batch. two batches ago, I've it felt like a lot of the companies were at least the ones that we talked to were were uh like various like infrastructure. It was like infrastructure for building agents. Last batch was really felt like much more applied. It was like applying AI uh to very specific industries and opportunities. I'm curious um I'm sure you're seeing both of those kind of types of companies but um looking at the list of guests that we have today uh bunch of bunch of super exciting companies but curious to know kind of like broad themes across the batch. I mean, I think you say it right. I think what we've seen is that like maybe a year ago, just a year ago, it was like infrastructure, infrastructure to build agents like you're saying, like laying the foundation. Then it's like vertical agents just take off, like customer support, logistics, um like name any ver like healthcare, like all these verticals and they're just like um taking off. And primarily what they were doing is selling these agents to the companies in those verticals to make their operations more efficient. I think what seems to be a theme coming out of this batch, you'll notice um is like the companies are going the next step and they're not actually selling the agents to the like incumbents. They're going like AI native full stack. They're just actually doing the thing. So you have like um

Fernstone being like an AI native insurance brokerage. Like they're just they they are insurance broker and they're just going to use AI to be the best one. Um Saba is doing that with trust. It's like a company that sets up trust but it's doing it with AI. So I think that um that seems to be the new trend is going like AI native and not just selling your agents but using them to build the company doing all of the stuff.

Yeah, we uh yeah we've talked to a couple like law firms that have done that and also like investment banks just people who have said okay we actually need to go do the do the core thing. I'm always reminded of Justin Khan's company because yeah, uh it feels like Atrium was like just a little bit early to that model and now everyone's working on it and it's starting to maybe work and we'll see. Um

yeah, I mean thing is I think if you go back do you remember it was I mean it's like a decade ago now but it was Bagy that started this whole thing with like the full stack startup. Um,

yeah,

he like he had this blog post and like I don't know if you guys were in San Francisco at the time, but like there was this moment where there was Door Dash which was delivering food and then you had Spoon Rocket and Sprig which were like the full stack version cuz what they did is they had these kitchens like these bands which had little kitchens driving around San Francisco cooking the food right so I think like back in that era was like it was seen as being the most ambitious thing to be a full stack startup I you didn't just sell your software you did the whole thing

ultimately those companies And it turned out that being a marketplace or selling software was just a better scalable business in that era. But now with AI like I think the promise is we're kind of going back to the full stack startup idea. But this time like you know we're all hoping and kind of seems like these things will actually scale cuz you don't need to hire like a thousand people to do the work. You just keep improving your agents.

Yeah. Yeah. Yeah, I mean the the the food example is interesting because uh it feels like Travis Kalanick is maybe dipping his toe in like oh what if I did the full stack thing he's got picnic and I think it's Otter and he has cloud kitchens so maybe he's like I can do it but maybe at his scale maybe it's a scale thing I don't know but it is it is more complicated financially

I think if you if you're if you have Travis's like access to capital and his like background like operating like you can you can you can do that.

Yeah. How are how are companies or founders grappling with uh what's happening at the largest foundation model labs? Like I remember there was some uh there was some Sam Alman interview where he said, you know, uh here's how not to get steamrolled. Uh if the models if your entire business is just predicated on the model not getting better, you're going to have a bad time. But if you're doing something completely separate with the model, um, you're you're probably good. Uh, how are people thinking about it in the more modern context?

I I I think the framework people have on this stuff is that they expect, you know,

SAM and the big lab companies. I mean, Open Eye in particular to go after probably like maybe more of like the sexy consumer ideas that like capture the public's imagination. Um, and it is going to be hard to compete with them on that. But there are like the startups in the batch in particular that focus on just like the unsexy verticals like building an audit firm, building a legal firm, building insurance broker. Like the bet they're making is that like the best people at OpenAI or anthropic are not going to be thrilled to build like auditing software or auditing agents, you know, and so like

or actually sell the or actually sell the end service, right?

Yeah. Exactly. like doing it like going like all the way and like learning what that customer wants and how to do it really well and like iterating on it a thousand times together.

This is the whole thing with Google versus Amazon. Like Google did wind up building a shopping product, but they never really had that in them to be like we're going and doing warehouses [laughter] and we're going to compete with Amazon even though we want e-commerce like we don't really want it that badly. [laughter] That sounds actually sort of miserable and it's just

don't want to do it right. Like the best engineers at Google don't want to build a shopping product. They like back in the day they wanted to work on search quality. Now they probably want to work on Gemini. But like you just

Yeah. And there's and there's also just cultural I feel like culturally there are certain companies where like if you're like we do 80% gross margin work and you show up and you're like I'm the guy who does 30% gross margin work. They're [laughter] like you can leave the company actually like we don't like you at all. [laughter] But so yeah, you know your margin is my opportunity both directions sometimes.

Yeah. What uh what are what are some companies from previous batches that you really feel like are hitting their stride now? Uh we had Kalian on yesterday

for their 11 billion round. I I don't think a lot of people are even aware that they went through YC because it was so so long ago, right?

Yeah, there was that was uh 2019 I think. So yeah, I mean obviously couch couch is like the prime example of a company that just made a bet on a space early and like had to just wait for the market to actually exist for it and like those founders like super senacious went for it. I think like more recently there's a company that announced around um doing customer support called Giga um which I think is like really exciting one like they're competing with Sierra and Decacaorn like superstar founders of those companies tons of capital raise but they've been able to like beat them on head-to-heads with customers like Door Dash um

through like technology really so I think like Gigo seems to be really growing um

I mean another one like nonai that's wor like Postthog is actually like a little bit more under the radar but um

they sort of like taking the rippling approach of

Yeah, they're launching a new product like every week it feels like.

Yeah, it's like really interesting to see like they've done that from day one and it seems to actually be compounding and working in the way that it has for Rippling. So, I'm curious to see if you you start seeing more of that just like startups trying to build multiple products from day one um and have like the compound startup effect.

I I like animal themed uh companies. I like Post Hog. I like the hog themed. uh when we did our first demo day stream uh we we talked to a company called Pig and we really like Pig and it stuck with me and so I'm rooting all the swine themed startups. I hope they all do [laughter] very well but uh but thank you so much for uh taking the time to kick this off with us. Uh congratulations on the big day.

Great great to have you on for the first time. Wanted

wanted and we got to we got to do this more often. A lot of time I would love to. Thanks for having me.

Yeah, let's talk.

Have a good one. See you guys.

Goodbye. Uh we our first guest will be Clad Labs, makers of the Chad IDE. First, let me tell you about Julius AI, the AI data analyst that works for you. Join millions who use Julius to connect their data, ask questions, and get insights in seconds. Um we have chat clad labs. And

while we wait, I have some other names for uh if you're launching a startup and you want a pig themed name, swine themed name, you could have Wilbur, Babe, Hamlet,

Daisy, Peanut, and Cookie.

Okay, [laughter]

I like that.

Ham Solo.

I like Babe. I think Babe. Babe,

mud pie.

Okay, so we have the founder of Clad