Y Combinator Startup Podcast
00:00:00 · Garry Tan
[00:00:00] S0: Frankly, some of the most powerful and badass founders that we've been seeing lately, they're... Might be in their late thirties, forties, even fifties. I mean, there's a sort of resurgence of the experienced founder. A lot of people seem to say that they wanna be YC for solo founders, but it turns out YC is the YC for solo founders. What a weird moment we are in history where you wake up in the morning, you, like, wire up a new model, and then these things that even a month ago, you're just like, why isn't it working? It just starts working. Welcome back to another episode of the Light Cone. At YC, we work with thousands of founders per year, which means we start to see things before they're obvious. So we wanted to share some of that with you today. What's the state of the art, and what's coming next? What should you, the builder, know? Let's get started. Diana, you have a few things to share with us.
00:01:05 · Diana, Jared Friedman, Garry Tan
[00:01:05] S1: So we did a bit of an analysis for all the companies we accepted in the last eighteen, twelve months, and we have some pretty shocking stats to share with everyone. So, one of the big ones is the number of hard tech companies that are in the batch. It has gone from 8% to 20%. There's a lot of underlying reasons why that has happened. We will go deeper into that. The other one is the rate of growth of companies and what YC does to the companies has accelerated. So the median YC company, when it gets accepted, is at zero in revenue. It's pre revenue, pre product. And by the end of the batch, in the past, companies would get to about eight k median revenue. And now the companies in median are getting to 20,000 monthly revenue as opposed to 8 k. So those are the top two that we can dive deeper into. [00:02:02] S2: Yeah. Let's dig into hard tech first. Like, what are these hard tech companies, and what's what's driving this? [00:02:08] S0: Things that actually touch atoms and not just bits. [00:02:10] S2: Yeah. And I I I think you have the the the category breakdown of the hard tech companies. Right, Diana?
00:02:10 · Jared Friedman, Diana, Garry Tan
[00:02:10] S2: Yeah. And I I I think you have the the the category breakdown of the hard tech companies. Right, Diana? [00:02:16] S1: Yeah. So specifically, robotics has been a big one. It has gone from 1% of the batch to about six, 7% of the batch. Industrial manufacturing building things back in The US has been a huge trend. It has it has gone from about 4% to 10% of the batch. The other one is defense. It's a big one. We all have been working with a lot of defense startup. It has gone from about 1.5% to about 5% of the batch. The other big one is there's this compute need that the world is getting into with AI. So there's a lot of companies building the semiconductor stack or photonics. It has gone from about 1% of the batch from a year ago to about close to 4% of the batch. And the other one, below the stack of compute, is power. So there's a lot of power infrastructure as well. It has gone from also 1% to about close to 3% of the batch. So all these numbers across the physical ATOM stacks have somewhere triple or quintupled. [00:03:15] S0: Yeah. This is the age of the machine, I think. [00:03:18] S1: Mhmm. [00:03:18] S0: That's... I mean, as the world goes, you know, our our motto, the t shirt says, make something people want, and people sure do want those things right now. [00:03:28] S1: And the other interesting factor about all these companies that are going deep into ADAMS is that we've been funding more technical founders and with more expertise than ever. Right, Jared? We have this fun stat about the current summer batch with...
00:03:28 · Diana, Jared Friedman
[00:03:28] S1: And the other interesting factor about all these companies that are going deep into ADAMS is that we've been funding more technical founders and with more expertise than ever. Right, Jared? We have this fun stat about the current summer batch with... [00:03:45] S2: In the current summer batch, one in six of the founders actually has a PhD. It's way more than that's been historically, and it's because, yeah, if you're doing, you know, something with like silicon photonics, you're probably gonna need a pretty strong research background in that, and so we've been funding a lot more of those founders. And those founders, I think, have disproportionately been doing, like, especially well.
00:03:45 · Jared Friedman, Garry Tan
[00:03:45] S2: In the current summer batch, one in six of the founders actually has a PhD. It's way more than that's been historically, and it's because, yeah, if you're doing, you know, something with like silicon photonics, you're probably gonna need a pretty strong research background in that, and so we've been funding a lot more of those founders. And those founders, I think, have disproportionately been doing, like, especially well. [00:04:05] S0: I think AGI compounds this in a really fascinating and awesome way in that, like, you might think in the past, you actually... Like, hard tech was hard because you had supply chains, you had an incredible software component often. I think Palmer Luckey talked about this a lot when it came to Anduril. It's like having code gen means that suddenly, even all the things that they do at Anduril can happen much much faster. Right? Even three or four years ago, you would talk about software engineering and like the top tier software engineers as one of one of the limiting reagents to being able to do really really top tier full stack hardware. And that's less and less true. I mean, you still need one or two of them, or you need, like, a small team, but you don't need to hire a thousand great engineers versus Google or Meta or whoever else, and that really changes the economics.
00:04:05 · Garry Tan, Jared Friedman
[00:04:05] S0: I think AGI compounds this in a really fascinating and awesome way in that, like, you might think in the past, you actually... Like, hard tech was hard because you had supply chains, you had an incredible software component often. I think Palmer Luckey talked about this a lot when it came to Anduril. It's like having code gen means that suddenly, even all the things that they do at Anduril can happen much much faster. Right? Even three or four years ago, you would talk about software engineering and like the top tier software engineers as one of one of the limiting reagents to being able to do really really top tier full stack hardware. And that's less and less true. I mean, you still need one or two of them, or you need, like, a small team, but you don't need to hire a thousand great engineers versus Google or Meta or whoever else, and that really changes the economics. [00:05:01] S2: I mean, that's the that's the true bull case for Hartech. It's that it's not just that people are shying away from funding software businesses, but it's actually that the super smart models that we have now are actually accelerating scientific research and making it possible for startups to have bigger research breakthroughs earlier, and that therefore these deep tech companies will actually work better.