It feels like there's more energy around this batch than there has been for as long as I can remember for any YC badge,
like, what do you think's happening?
There's a platform shift and this is the moment where every single SaaS dollar in the world, it's up for grabs again.
The Batch 3X to ARR in three months, which is pretty cool.
That's a great thing.
growth rate.
Yep.
It's a fun time to build.
It's the best time ever.
I as a builder, it's like the technology is just such a different thing than what you expected before it.
Welcome back to another episode of The Like.
We are four group partners at Y Combinator, and we've funded hundreds of companies, many dozens of which have gone on to become unicorns.
This is Jared, I'm Gary, this 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've run into 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 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 batch.
So you can see the actual trends, the way they're playing out here in the center of Silicon Valley.
Yeah, I'm curious, like, what are some of the trends that we've seen?
What's made this last winter 24?
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 are AI.
70% of the batch.
Yeah, that's wild.
It's about 170 companies versus winter 20.
We had 8% of the companies.
Maybe one of the notables from winter 20 that you work with Jared was replicating.
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 replicate was slow going because there weren't a lot of people working on AI
They were building tools for people working on AI.
There were many customers and we didn't call it AI as much back then We called it machine learning.
Totally.
I don't usually one thing I've noticed that's different about dispatch is consumer ideas
They are certainly coming back like I've gone from working if it was 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 who are pivoting during the batch are pivoting into consumer ideas.
Whereas previously, I think they would have pivoted into like a enterprise B to be SaaS idea.
And I'm not sure what to think about that actually.
Do you think it's bad or good?
I'm not sure.
Here's, I'll make- Hargent 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 top-end ideas are these bad consumer ideas where it's like- Travel planning.
Travel planning or splitting the bill at a restaurant?
made or all these kinds of things right and people gravitate to them because it's so easy
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 like oh okay
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 partly worry that people will pivot into tarpet consumer ideas because it's easy.
My perspective
is I find it so refreshing the consumers 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 ideas after very few.
And 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, B2B SaaS is like a little boring.
If you think about what like drew in like young tactical founders like like the original founders in the early YC batches,
they were building consumer apps as they were fun.
Both you and Gary when you went through the batch had consumer companies, right?
Yeah.
We both started to consumer companies because those weren't carpet ideas at the time.
The problem was in like in 2020, starting a US based consumer idea was ill-advised.
you were probably working on a bad idea.
Well, the other factor here was just Facebook sucking all the oxygen out of the room, right?
Like felt to me like that era you guys are talking about so 2007 through 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, 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 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 you advise?
If a founder came to you,
Gary, and said, hey, it's somebody told me that I shouldn't welcome consumer ideas because Facebook's just going to cry.
anything I do.
Well, OpenAI.
Well, OpenAI now.
OpenAI today.
OpenAI is the Facebook of, yeah.
GPT-5 is coming out soon.
So what should we tell founders?
They out to use 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...
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've worked with a lot of those.
Do want to talk about why what's happening with developer tools?
Yeah, in this batch, we funded about 30% more dev tools than four years ago.
This is like one of the largest dev tool batches we've had in recent years.
And think a couple of reasons is I think there's a...
attracting a lot of the super technical founders that want to build this future with AI and before you build it, you better tools, right?
It's kind of like this technology trend where you have like two phases.
I think it comes from...
is from this book from Industrial Revolution is from this economist.
I think it predicts a lot how technology cycles happen.
The first cycle is sort of where you're laying like the railroads, infrastructure, all the tooling before the installation and purlification of apps.
So there's a lot of this kind of like tooling because even right now for building AI app,
there's so much plumbing you need to do and customize it.
And now there's certain patterns that emerging like rag and...
doing a lot of the 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...
I think it would be really cool to see at some point all the way from distributed 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.
Well, I think that's really interesting is I remember
in 2010 when I first started working out 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 started taking off, then MongoDB started taking off.
There was sort of this era where it's like, oh, like dev tools are things you can actually work on.
Well, and for open source companies in particular, because it was very unclear at that time that open source.
successful companies like Red Hat was like the only example at that time.
Yeah.
And so I think this is a great like DevTools 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, DevTools is basically B2B-C.
SaaS, but 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 for a consumer product,
but instead of a billion consumers,
you're talking about 20 million developers,
and the cool thing is 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 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 a open source starts up in the batch is doing well or not?
Some of the early science is whether this is getting adopted by the taste makers.
And that happens to be in a get up project.
You a lot of, uh, get up 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 dev tools, you don't really make money because things like installing a new database.
it's such a big bet for a company that you need to make sure that it's battle tested.
So 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 is ultimately open-source companies win when they really have the developer mindshare.
It's sort of like one with the network effects,
with capturing a lot of the users, like don't know, it's like a third or a half of the world users Facebook.
Same thing for DevTools,
it's like if anyone thinks of let's say, building like a full stack application and easy deployment, they could think of a Superbase.
I think they've done a really good job and I think they work with Lambjared.
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 What's it called?
Google the Firebase Firebase Firebase yeah,
which is a YC company They got acquired by Google and then became a really big like product inside of Google
And they were building an open source calendar 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 on a hacker news and so this they had this blowout hacker news launch and to your point
Diana, it was clear, if you literally just read the comments on the Haggard News post,
it's clear that really good developers are like, this is exactly the thing that I wanted.
Thank you for building.
building it, and that was what 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 it.
73 companies.
Superbase.
On the current batch, out of the 243, are you using Superbase?
It's like a third of the 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 the hack and use launches of these dev tool companies,
because that, again, Superbase had a phenomenal round that they raised around demo day, and it was I attribute to that.
I can use this, 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, you might just kill the close source version of it.
And this is a shot across the bow of every dominant sort of dev tool or SaaS 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 five X plus in 22 open source companies, that's a big shift.
Yeah.
And we've seen this over and over again.
I they're sort of like the Slack and then Mattermost,
they're sort of the GitHub and then GitLab, which was a YC company, you know, in sort of analytics.
We Appitude and post-vog.
Yeah,
So the other cool thing about this batch of collary of GitLab,
is that getting a lot of founders getting excited to work on AI and dev 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 sort of pandemic COVID era is I think,
I think was this whole,
the software eats the world idea,
which originally with a Mark and Drivesant blog post, I can't remember maybe 2012, something around that, or a decade ago.
Great 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 eats the world, it'll be software that sort of enables non-software business.
what do you mean by that?
It's like kind of more business that our operations heavy sort of like 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 what was the hey like well that could be
why don't we just have that built software to help the people who are managing the freight and the brokerages do this more efficiently.
It's tech-enabled.
Tech-enabled.
And I think a consequence of that is that,
and especially with the zip 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 something spectacular examples of it would be like we work right like probably the poster child of like tech enabled but I just think the the profile I
found to shift a little bit away from like geeky and and and
technical yeah right right exactly right 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 claimed 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 is a stake.
Yeah, right.
Because all this stuff is cutting edge,
which I think it gives a bit of 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 ago.
And this is one of the batches that also has shifted the median average age of the founders also younger.
There's another version of this story that I've heard told,
which is that in the 2020 era, there hadn't been a technology platform shifted in a long time.
Venture 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 businesses 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 RAI companies and stuff like we work.
Yeah.
about whether it's tech-enabled or not, that is certainly one frame, and a lot of VCs actually really stick to that.
I mean,
there are some really famous firms that famously only want to fund pure software businesses that are monthly or annual recurring revenue,
and that's a whole strategy.
There are a bunch of those firms that we've all heard of that are friends.
That's all they do.
And then,
you know,
there are just as many who actually look at 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 latter camp.
up, because what really matters is actually the gross margin.
So if you look at a Palantir,
for instance, you can have a 90% gross margin or 80% gross margin type of tech enabled, quote almost consulting business.
But if your gross margins are extremely high,
people are actually willing to give you good multiples and you're actually able to raise money at a reasonable valuation.
I what's funny is when we give the t-shirts at Y Combinator,
like when you come to YC, you get a t-shirt that says make something want.
Yeah, there go.
Because it's the end of the batch.
What's funny is,
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, people are gonna pay for it, and then the rest is just sort of details.
You actually look at the two-day, the biggest YC companies by let's say, they've gone public.
It's not clear that on the surface,
at the technology is what sets those apart,
so much as it was for Airbnb, it's a website, but the core thing is building a network and a reputation system.
What's powerful network effects ever?
than like true tech companies.
Yes.
They're the best example actually of maybe this,
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 they're tech-enabled, but they're also two of the biggest companies we've ever funded.
But they come from a different era when a lot of the, The rest of the world was still coming up online, right?
That's what it feels like to me,
just we're talking about the trends,
it just seems to me to your point, Jared, that there was a period, around 2006, 2007, it was just pure software businesses.
Then it was like,
hey, software is going to be bigger than just pure software, and we got kind of DoorDash and Instacart and these interesting businesses, and then maybe it
too far where there was like, we work.
Yeah, we work, but it's like, hey, there's no software, there's no software here at all, really, right?
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 fund things that are, but like what's interesting is like the technology.
Well, it's because there's good software opportunities again.
Like 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 reset.
We're so back guys.
So what have we funded less of this batch?
What have we seen moving the opposite direction?
Well, we funded a lot less of this going after local markets.
In the 2015-2020 era,
YCN, just the world in general, funded a ton of companies that are bait basically the second wave of all these online to offline things.
So first wave was like DoorDash in Instacart in the US.
And then the second wave was like, well, what about DoorDash if you're in Brazil?
They their food delivered to you.
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, Robinhood.
Neo Neo banks, Monzo in the UK.
well, there is a first wave primarily in the US, like Bracks, for example, but a lot of
fintech businesses are actually local because regulations are so different in each country.
And then there's a second wave of like the international copies of all the US based things.
Yeah, definitely during that period, like the 2020 to 2022 period, we were funding a lot
of international teams that were like Robinhood for Latin or like a local crypto exchange or yeah,
like DoorDash for or X market, lots of these kinds of things.
Yeah, and a lot of those were really good.
YC funded some amazing epic companies.
They're like Monzo, which banked some ridiculous percentage of the people in the UK.
Grow in India, which is Robinhood for India, is doing phenomenally well.
Zapto, which is the fastest growing YC company of all time, which does 10-minute grocery delivery in India.
I think that's a really interesting one, actually, because it's very easy to say Zapto is like Instacart for India, but it's not quite.
It's not.
The actual is different.
It is, yeah.
Buy the numbers.
around the 2020 era, winter 20 batch, only about 45, 45% of the batch was international and now is only 25.
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%, which interestingly sort of tie-bar also means like San Francisco is definitely back.
So we looked at the numbers and pre-COVID around 29%
or so the companies were in the Bay Area when they applied to YC.
And it was half of that during pandemic.
Yeah, right.
We down to like 14%, you know, like that.
And we're back up to where we were actually.
Yeah.
Even higher than we were pre-COVID.
I because there's so much about Cerebral Valley, all the AI progress happening here.
I think the fundamental reason,
it's not to be clear that we woke up in the morning and we were like, we got to fund more U.S.
matters.
That was not what happened.
What actually happened, I think, basically the best founders chase the best opportunities and why see funds the best founders.
And like, what are the best opportunities?
Well, in 2020, there were amazing opportunities to take models of a working in the US and launch them in other countries.
And so amazing founders like Otto from Zepto, that's what they worked on.
And now the best ideas are like, that trend is sort of run its course now.
And like, most of those opportunities have been done.
And so the best founders have to have to move on to other opportunities.
I'll give you a stat for that specifically.
Like winter 24, we have four times less marketplace ideas than 2020.
If we see more consumer and dev tool ideas, it also makes sense because those aren't local at all.
They're the exact opposite of your point.
if you want to build the best AI dev tool.
Yeah, there's this thing as an AI dev tool for Brazil.
Yeah, it's just like, that's the one.
Use the same one.
Yeah.
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 it.
Gary and hard.
are two of the most successful crypto investors of all time,
like Heder Lake,
like you two were the first investors in Coinbase and you made literally billions of dollars investing in crypto, billions of dollars, right?
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 Gox, like Magic the Gathering, online exchange, website in
Japan, having to, you know, do some weird wire to, you know, some sketchy country on website.
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.
thinking, well, this is a very interesting idea.
And 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.
I think what's really interesting about this zooming out is if you talk about when Coinbase applied to YC and we funded them,
there was it was a very count.
like, you had to be like, Gary, like, really into this stuff.
There was no hype around crypto.
It not seen as a very fundable thing.
And then what happened is crypto will go on these bull runs.
And when there's like, which is basically really the price of Bitcoin.
So when the price of Bitcoin tends to go on these sort of like meteoric like pumps And any time that happens,
it brings lots of people into crypto.
And think that YC, what we would see is that it would bring in lots of people applying with crypto ideas, right?
And then that's clearly what was happening during sort of the COVID 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.
really interesting about this current moment is we're going through in the middle of another crypto bull run.
Bitcoin just hit another all-time high recently, but we have not seen a surge in crypto applications.
And 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.
I AI is just dominating the mind-share of engineers, whereas previously, Bitcoin hang a new all-time high word.
Dan, don't you have a story about when you went to MIT last year that you could still
see some of the remnants of that crypto mind-share at the college level?
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 undropped out.
And dropped out to start crypto companies.
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 crash, right?
And things stopped working.
So were at top of the They like hot shots.
We dropped out of MIT.
We were just raised $5 million.
We're going to be the next Mark Zuckerberg for crypto.
And then I talked to them.
And they were back in school like normal kids.
But there was a bit of kind of like ship on those shoulders.
It was embarrassing actually to come back to school.
It was not seen as a badge of honor to you.
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, oh, I don't know yet.
I think the...
Another undercurrent behind all of this because it can be very jarring 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 anon twitter account that has like hundreds of thousands of followers doing you bought your board ape Yeah,
you got 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?
ground floor so deep, and it can be very demotivating.
The government stuff you mentioned is actually on a very crypto-specific topic.
It's a huge thing where the US has chosen this regulation-by-enforcement approach,
which is just incredibly scary if you want to do anything interesting in crypto.
Is this casting a Chilean effect because people are worried that if they're successful, they could literally go to jail?
Yeah, exactly that.
I Diana and I have a company that we just worked with in this
batch with the founders of previous-
smart technical founders who had previously started a crypto exchange and were sued by the government and they are clearly still 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 a 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.
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 I still think by far the big reason is just AI is like the exciting thing to work on.
I do see a little bit of a meme of 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 build
building because it's actually fun.
I think the sad thing is some of them really got defeated.
And hope is that they get that optimism back again,
because that's the thing that, as a founder of you lose it, it's like game over.
But they're definitely back.
We talking about this, right, where it just, it feels like we come across more applicants.
We talking about this, we on up on this.
We've funded a record number of MIT grads in the last batch, the most YC has ever funded.
So it casts a chilling effect for a year, but it's an 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, there's no rush.
You just graduate college, why you have to start a startup right now.
And the response is, well, this might be a once in a lifetime opportunity.
And I think for the first time, you might be right.
The reason this time is different, as you're going to say, this is an AI.
Oh, no, you said the magic word.
I I think, but it actually is different.
Like crypto has always suffered from a couple of problems.
One is that it's always been very hard to explain the products, right?
They to be very complicated and not user friendly and so It's just hard to explain 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 where the money comes from.
It be this sort of Byzantine complex thing, trying to figure out, like, what- I like monopoly money.
Yeah, basically, right?
That's always been the criticism.
It's always felt like these-
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 were very tangible.
It 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 run through of the product on stage,
running, and lot of the products were beautiful.
I very impressed with the progress they made from the time they applied to what they had,
because one of the stats is in this batch,
over 80% of the batch had no revenue, basically the product was unlocked before they came in, versus in winter 20, about only 62%.
So we found it even earlier and in the span of just a month-ish These products were like pretty impressive.
Yeah.
I mean,
I remember that when we did some product age just Some of the
moment It was just felt like constant wow moment after wow moment like someone would demo like one of the fume demo
Like the AI software engineer and their demo was a tree 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
Implement 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 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 you want to talk about the bookface launch live events that you started at 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 I definitely, I think that we should do this type of demos across the whole batch.
And 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.
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 retrieval augmented generation
to do that like what were the prompts what was the workflow you know how do you test
that 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 2006-2007.
The focus of YC was really about the products because we were inventing new things that you could do with software.
And in the decade afterwards,
because there's so many software-enabled business and the technology became commoditized, there was less focus on the product and more on growth and sales.
I hadn't thought of that.
You what's sprung into my mind as you're saying,
that is 2007 when I first moved to San Francisco from London,
in my YC batch in winter 2007 were weebly in Zentre, and they were pushing the limits.
So what do you could do with JavaScript?
So we believe it was a website builder and Zenta, which we get acquired by Google, was like web PowerPoint.
That was cutting edge stuff?
Yeah, but seriously.
It was really felt like every week,
I remember you'd come to a 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 clear a slide with an animation in the browser.
Like it's crazy.
And it even works in Internet Explorer.
That's insane.
Yeah, that was the thing is 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 kick-started all of the Google Doc Suite,
like 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, they would have sounded insane.
I think the other thing I remember doing the bookface live demo, I think that feeling was there.
I remember the demo of retail AI.
So were building this voice AI agents.
And the demo, they did a call to the AI agent and they pretty much passed the Turing test.
That's pretty amazing.
You have conversations with it.
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 is.
Some stuff.
Yeah, basically.
It the promise of future usage.
It someday when everybody switched to a decentralized Airbnb, it'll be really big, but no one's actually using it to rent apartments.
Yeah, but in this batch, we're seeing companies add this AI boom.
Companies are adding like real recurring revenue by selling software to legit businesses, right?
I I think,
We looked up some of the day here and you actually measured 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 part 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 making 6 million ARR.
That's like almost 300 companies.
Yeah, so the ARR of the batch, which is kind of like a funny concept.
I think we'd ever really thought about the ARR of the batch before.
That's a good metric.
But like the ARR of the batch was like 6 million in January, and by demo day in April, it 20 million.
So the batch 3xed ARR in three months, which is pretty cool.
That's a great growth.
You think of all the economic growth that got produced is 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.
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 budgets,
so much of this work is replacing labor,
and so you open up to labor budgets,
and I think all of that has just fed into this general,
if we just like go off the vibes, this batch has felt it's like being like the best one yet.
Most 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 that the in-person investor reception, which Gary created, knew for this batch.
Do you want to talk about it, Gary?
Well, so demo day is online and it works great.
But of the things we really wanted to do was thank some of the best people who have funded YC companies all these years.
And was right here in our San Francisco HQ.
It was three whole floors of some of the smartest investors in the world with our batch companies, hanging out and the vibes were immaculate.
It felt to me 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 called Octelane which got lots of investor interest and what they're doing is AI sales,
it's a sales force rebuilt if in the AI world and I just think
Investors did not want to fund sales force competitors for a long time because it just felt like,
well, how you going to compete with sales force?
But now with AI, it's like, oh, like, well, totally funded sales force competitor because AI.
It that you could actually win against sales force now.
There's a platform shift.
And this is the moment where Every single SaaS dollar in the world, it's up for grabs again.
It's an time.
Founders are more excited to build than ever.
Investors are more excited to invest than ever.
And just 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 as a builder, it's like the technology just such a different thing than what you expected before.
I this is why you have the earnest founders that love building coming back.
So, do we think that this batch was PKI?
What's in store for the next batch?
I mean,
it feels like because we talk 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 them 30%
of the batch pivoted and landed in good ideas versus in four 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 now is sort of the equivalent of 2007 when it felt like web technologies were being pushed forward for the first time.
time.
It was actually still like three years until Airbnb was started, five years until Dolash 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 but what 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 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.
