Y Combinator Startup Podcast
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.
00:05:01 · Jared Friedman, Diana
[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. [00:05:21] S1: I think the other factor is there's basically three macro trends that are also driving all this all this growth on Atoms, and is seeing huge companies like SpaceX have such a successful IPO, has created a generation of founders wanting to build in space. There's lots of these companies that are building across the whole stack. So there's been companies in the in the current batch in summer twenty six. This is a company that we work with called Exosat that's trying to build basically a sovereign start link solution. This other company that I worked with in winter twenty six called Beyond Reach Labs that's building solar panels for satellites in space. If you imagine companies like Startup Cloud wanting to have all these data center space, they will need to have power. So this is an obvious solution. Now the other macro trend is... I think we have a generation of current founders right now that have grown with the war That's been very front and center and spoken a lot in social media, and they want to do something.
00:06:23 · Garry Tan
[00:06:23] S0: Like, two two of the companies I'm most excited about that I funded the last couple batches, one was Icarus last fall and then Nine Mothers this last spring. And both of them were defense. Icarus is doing, like, a solar powered u two spy plane that gives Overwatch and can also do comms, which is actually really important. The future of drone war is being able to actually communicate with your drones on the ground and see what's going on. They've been able to get to 7 figure contracts with the new Department of War. And then likewise with Drone War, Special Forces has been buying Nine Mothers anti drone defense. So it's basically a shotgun turret with CV, but it's actually almost the only way that you could protect Special Forces deep behind enemy lines. I mean, these are people who have been training for years and years, you know, in a very elite special force that... You know, America doesn't have, you know, thousands of these people. You know? We we have a very, very small set, and so protecting them from what could be like a commodity drone attack is actually really existential for the Department of War. So just really cool to see this new administration actually approach defense in a very different way. Like, know, classically, there was just a lot of, frankly, capture from the big defense primes that are just doing sort of cost plus. They they think of themselves as consultants, and, you know, to be able to see new startups that can actually take advantage of all of the AI, all of the tech, all of the new ways of building things to build things that, frankly, the defense primes can't build. You know, that's a really powerful megatrend right now.