Key points
- Hard tech now 20% of YC's batch, up from 8%, with median company hitting $20K MRR by demo day.
- Garry Tan says systems of record must become AI harnesses or lose data moats in the coming harness wars.
- Over a dozen YC companies make $10M+ selling data and RL environments to labs spending $1B.
Hard tech now fills a fifth of every YC batch
Y Combinator's batches are a leading indicator, and they show startups moving from software to atoms. Hard tech, defense and manufacturing went from fringe to a fifth of each batch, pushed by cheap compute, a generation shaped by war and SpaceX's IPO. Cheap AI building also doubled median demo-day revenue and created a business selling training data to the labs.
Takeaways
- Hard tech now fills a fifth of YC batches. Hard tech went from 8% of a batch to 20%. Robotics rose from 1% to 6-7%, industrial manufacturing from 4% to 10%, defense from 1.5% to 5%, and semiconductors and photonics to nearly 4%. One in six summer founders holds a PhD.
- Median YC company now reaches $20K MRR. Median monthly revenue at the end of the batch rose from about $8,000 to $20,000. Full-stack, end-to-end companies went from 10% to over 25% of the batch. Some now reach seven figures in three months, where it once took eighteen.
- Three trends pushed founders from bits to atoms. Diana credits SpaceX's successful IPO, which created a generation of space founders, and the AI compute build-out. A generation raised with war in the news also turned toward hard tech. Compute demand outstrips supply, so NVIDIA A100 hourly rental prices are appreciating.
- Selling data to AI labs became a business. More than a dozen YC companies each make over $10m a year selling data and RL environments to the labs, which reportedly spend about $1bn a year and sign eight and nine figure deals. Scale started this in 2016, then Mercor and AfterQuery.
- Systems of record must become agent harnesses. Agents will use software far more than humans do, so a system of record that agents can operate inside keeps its data moat. Garry Tan expects harness wars among Codex, Claude Code, OpenCode and others with no single winner, and calls Slack Marc Benioff's advantage.
- Solo founders now approach a fifth of the batch. Solo founders went from about 5% to 18-19% of the batch, after precedents like Instacart and Brian Armstrong at Coinbase. Harj Taggar says these founders gain traction first and add cofounders later, so equity differs from the traditional fifty-fifty start.
The atoms companies in the batch
- Icarus builds a solar-powered, U-2-style spy plane and holds seven-figure Department of War contracts.
- Nine Mothers makes an anti-drone shotgun turret with computer vision that Special Forces buys to protect elite troops behind enemy lines.
- Knox Metals is rebuilding America's metal supply chain in idle Detroit factories, growing fast because defense tech customers outpace the sleepy incumbent suppliers.