Y Combinator Startup Podcast
00:15:37 · Garry Tan, Harj Taggar
[00:15:37] S0: The moats are intact for now. [00:15:39] S3: Yeah. Like if you have a thing that agents can use, that is actually valuable. If anything, you'll just, like agents will use software a lot more than humans will, and that seems to be driving Salesforce growth. And so kinda takes us back to the other trend that we've talked a little bit about is if you think of agents as your customers, and you make things that agents want, and your software as something that agents want to use, then that seems like the right type of software. [00:16:04] S0: Yeah. Salesforce is super interesting because I think they started releasing their own Slack harness, Slack AI harness. And so I think we're right at the beginning of, like, the next AI harness wars. It's like Codex wants to be it, Claude Code wants to be it, OpenCode could be it, Hermes, OpenCode. It seems like there are going to be a bunch of them, and it's not gonna be quite like the browser wars, and that the browser wars tend toward, like, one winner. But, you know, I guess it's anyone's guess. And then, yeah, Benioff has a pretty big advantage in that, you know, a lot of the most AI appealed people and companies in the world still use Slack. And, you know, if the harness is in there and it's your system of record for how people collaborate, then you have like this mega data moat. And then, you know, SaaS can still be as valuable as it's ever been valued if those moats hold.
00:16:04 · Garry Tan, Harj Taggar
[00:16:04] S0: Yeah. Salesforce is super interesting because I think they started releasing their own Slack harness, Slack AI harness. And so I think we're right at the beginning of, like, the next AI harness wars. It's like Codex wants to be it, Claude Code wants to be it, OpenCode could be it, Hermes, OpenCode. It seems like there are going to be a bunch of them, and it's not gonna be quite like the browser wars, and that the browser wars tend toward, like, one winner. But, you know, I guess it's anyone's guess. And then, yeah, Benioff has a pretty big advantage in that, you know, a lot of the most AI appealed people and companies in the world still use Slack. And, you know, if the harness is in there and it's your system of record for how people collaborate, then you have like this mega data moat. And then, you know, SaaS can still be as valuable as it's ever been valued if those moats hold. [00:16:55] S3: Yeah. I thought you had a really interesting tweet maybe a week or so ago about how the software or system of record companies will have to become, like, harnesses Yeah. [00:17:01] S0: Effectively. Mean, and that's... That was about Slack, I would It's like, basically, if you are a system of record, you either will be preyed upon, like, you'll release an MCP, and then maybe, like, the data... You know, you lose your moat around the data, the data goes elsewhere, like, becomes very trivial to switch. Or you kinda have to be a harness. You have to be the way people not just read and write, but actually do their work inside, you know, your system of record.
00:17:01 · Garry Tan, Harj Taggar, Diana
[00:17:01] S0: Effectively. Mean, and that's... That was about Slack, I would It's like, basically, if you are a system of record, you either will be preyed upon, like, you'll release an MCP, and then maybe, like, the data... You know, you lose your moat around the data, the data goes elsewhere, like, becomes very trivial to switch. Or you kinda have to be a harness. You have to be the way people not just read and write, but actually do their work inside, you know, your system of record. [00:17:27] S3: And get the most value out of it. I mean, it's a lit... It's a little bit like the model companies. Like, was the... Was it ARC-AGI was the benchmark where... Or there was a benchmark where the... [00:17:36] S1: ARC-AGI v three? [00:17:37] S3: Yeah. Where the pre or pre Astra ChatGPT model didn't do well, but then they say, that's just because it was plugged into the wrong harness. Yeah. So it's like the model plus the harness gets you the output. [00:17:47] S0: Oh, yeah. I mean, with a custom harness, they claim Astra got to nine... North of 90% on Arc AGI three. [00:17:54] S1: Yes. I think a couple months ago, this was in the low two digits [00:17:58] S0: Right.
00:17:58 · Garry Tan, Diana, Harj Taggar
[00:17:58] S0: Right. [00:17:58] S1: Which is an impressive leap. And I think you have a very good point around software. It's not that software and SaaS is dead what people claim on the Internet. It's just that it has transformed. We're actually seeing this in the batch. The percentage of companies we accepted that do sort of full stack end to end work or a task has gone from just 10% to over 25% of the batch. This has to do with actually doing the job. The agent does the job, not just like a point solution, which old SaaS in five, eight years ago was just like a point solution, and you needed you needed someone to operate the SaaS software. Right now, it just runs by itself. And, actually, in the batch, this is where we're seeing a lot of the growth in revenue. I think I gave that stat of the median startup when it gets into YC is at zero in revenue. And it has gone from... By the end of the batch, was about 8 k in MRR. Now it's, like, about 20 in MRR, and a lot of [00:19:02] S3: these are [00:19:03] S0: huge jump. That's, like, nontrivially big jump for the median. Right? The average is even higher.
00:19:03 · Garry Tan, Diana
[00:19:03] S0: huge jump. That's, like, nontrivially big jump for the median. Right? The average is even higher. [00:19:08] S1: And it has to do with doing the full end to end job with, for example, doing insurance broker, actually doing the clinical intake, doing the full end to end workflow of, I don't know, medical billing, etcetera. And these are the ones that are growing a lot. And I think there's another factor where that's happened. I think we talked about this in couple episode ago. We, right now, are about almost a year since agentic coding started to work since Opus 4.5 that we're seeing these workflows fully blossom. And the result are basically people want their job just be done and are willing to buy software that just gets the job done.
00:19:50 · Jared Friedman, Harj Taggar, Garry Tan, Diana
[00:19:50] S2: I think when people hear these revenue numbers growing so fast, an easy knock on it is like, maybe it's just AI hype, and these companies are just like shelling out money for AI products because it's like the cool thing to do. And to be fair, that's probably some of that. But I think, like, the bull case is actually something that we said in an episode, like, two years ago when agents were really just beginning to be a thing where we were like, actually, the products are just gonna be more valuable. Like, if they automate the whole job, they will actually just be more valuable than some, like, system of record that tracks the job but doesn't do the job. And therefore, companies will just, like, pay more money for the... For for further product. I definitely see that in companies that I work with where, yeah, they just go to a company, and like the value proposition is so great that like large enterprises are willing to write big checks very, very early. [00:20:37] S3: Yeah. A company that I'm seeing having this effect is Juicebox, an AI recruiting tool. [00:20:42] S0: Oh, yeah. [00:20:43] S3: It's been on incredible rate for like the last couple of years now. But they'd started out as, I mean I would say it was essentially sort of LLM powered people search. Like the thing that they did was you could type in sort of the spec of the type of person you wanted to hire and it did a really good job [00:20:55] S1: of