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- [00:03]
Interviewer
Gary, welcome to the show.
- [00:04]
Gary Tan
Thanks for having me.
- [00:05]
Interviewer
I realized we are some of the only people in kind of tech that are from Winnipeg.
- [00:10]
Gary Tan
Oh, right on.
- [00:10]
Interviewer
Originally.
- [00:11]
Gary Tan
Yeah, I was named after Fort Garry. My son's name is Garrison, which is kind of funny because then it's kind
- [00:18]
Interviewer
of the same thing.
- [00:18]
Gary Tan
Yeah. Anyway, nice.
- [00:20]
Interviewer
Then how did you end up in San Francisco from Winnipeg?
- [00:23]
Gary Tan
My dad moved to sort of work in the satellite boom back in the 80s and so he moved to Southern California and we moved around a lot. But yeah, I mean, basically California and tech drew our family and put food on the table and then it sort of brought me into tech.
- [00:43]
Interviewer
And then you stayed, obviously in San Francisco. What was kind of that journey like?
- [00:49]
Gary Tan
Yeah, we ended up moving to Fremont, which was, it's in the East Bay. And I took, I took Bart in to take my first computer science classes at UC Berkeley. I took Bart into 16th admission down the street right here. And I got my first coding job that way. This was All Web 1.0. I worked at a design firm that created the first Apple E commerce store for Steve Jobs called Adjacency.
- [01:14]
Interviewer
Okay.
- [01:14]
Gary Tan
And so, I mean, tech gave me everything and I'm so lucky to just be able to participate in this.
- [01:21]
Interviewer
Yeah. And then today, so you, everyone probably is familiar with you. You're leading YC really quick for people who don't know what YC is or maybe people who do. How do you describe it today when someone asks you, oh, what is yc?
- [01:35]
Gary Tan
I mean, it's an accelerator incubator. People apply online so you don't have to know anyone. And we accept about 1% of the people who apply. But when you get in, you get half a million dollars in exchange for, you know, about 7ish percent of the company. But what's more important than the money is actually getting a YC partner. Like me. I'm one of 15 people who goes out there and selects companies. Fifteen, you know, we pick you out of the, you know, out of the database. We read your application, we watch your video, we pick specific teams to meet us for. We meet for 10 minutes and we have to decide, you know, yes or no on half a million dollars within 10 minutes. It almost sounds like Shark Tank, but actually Shark Tank has, I think, $0 billion companies, whereas we are going on more than a hundred at this point, 20 years in.
- [02:32]
Interviewer
Really?
- [02:32]
Gary Tan
Yeah.
- [02:33]
Interviewer
That's crazy.
- [02:33]
Gary Tan
Yeah. So YC is, you know, sort of started as this experiment. Paul Graham and Jessica Livingston started it really just as an experiment. Like how do we give small Amounts of money to people. Literally, like almost summer internship style. Like when I did YC, we only got $13,000 or so. So you know, it's.
- [02:51]
Interviewer
That's like 500k now from an internship.
- [02:53]
Gary Tan
Yeah, that's right. But that's all you needed. And you know, that very first YC batch had Reddit with Steve Huffman and Alexis Ohanian. That first batch had Sam Altman, who created Loopt, which got funded by Sequoia, another company sold to Amazon, I believe. So, you know, that very first batch turned out to be a success and they just decided, let's keep doing it.
- [03:16]
Interviewer
Was Twitch in the first batch or early?
- [03:18]
Gary Tan
Yeah, the founders of Twitch started Kiko, which they sold that startup on ebay. Yeah, I think they made listed it and sold it. Yeah, they listed it on ebay and bought it. And then the funny thing is when they started working on Twitch, it started as Justin tv and they got Kyle Vogt's attention. He was a undergrad at mit. And the other, you know, Justin and Emmett and Michael and the other sort of co founders of Twitch, they were from Yale, but they had, you know, sold a company on ebay. And so my favorite store, you know, it's not my story, it's Kyle's story that like he found out about Justin tv because in that very first YC batch, that team had sold a startup on ebay and that was way, way more about startups than Kyle felt like he knew. And then of course, Kyle went on to create, you know, many multibillion dollar companies now in Cruise. And he's, you know, on his journey in robotics now with Botco, which is, I mean, I wish I could say anything about Botco. Like, you know, you have to see it. It's insane.
- [04:28]
Interviewer
Is, is it humanoid or. It's in the home.
- [04:31]
Gary Tan
I'm, I'm not under NDA, but it's, it is truly one of the most remarkable things I've seen in startups in like, maybe ever.
- [04:39]
Interviewer
There is some information out there. People can look it up. I'll. I'll throw whatever I can find in the description. People can dig around.
- [04:46]
Sponsor/Host Voice
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- [05:22]
Interviewer
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- [05:24]
Sponsor/Host Voice
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- [06:45]
Interviewer
And so this was all in Boston, that first batch, right?
- [06:48]
Gary Tan
Oh, yeah, that's right. And I was the last batch. I did YC in 2008, so we were the last batch in Cambridge.
- [06:56]
Interviewer
So then why move to San Francisco? How did this happen?
- [06:59]
Gary Tan
This was before Paul and Jessica had kids. And so they really loved to spend basically summers in Mountain View because of the California weather. And winter in Massachusetts is pretty brutal. Yeah, but they liked summers in summers in Cambridge. And so we did the last summer batch in 2008. And then it's funny because it's coming full circle. We just added our first partner, who's actually based in Cambridge on Kit Gupta. So he sold a startup, great company. He sold it to Ginkgo bioworks. And then he's based basically right next to mit. And so we're sort of thinking about opening an office in Cambridge. And you Know, given all of what we're seeing out there around like, you know, California being more and more sort of hostile to tech, we're realizing, you know, I'm, I'm all in on San Francisco, I'm all in on California and we're going to fight for it. But from an institutional standpoint, like, you know, they're, they're about, they're, they're going to kill the golden goose here and you know, we got to think about where, you know, where founders going to be.
- [08:14]
Interviewer
Yeah. Okay. So that it begs an interesting question. If somebody's maybe out of the loop, they don't know what you're talking about, what's going on in San Francisco specifically or in California?
- [08:23]
Gary Tan
Yeah, in California broadly, you know, seiu, uhw, which is a particular union for healthcare workers, just put on the ballot or they're trying to get on the ballot what they call the billionaire tax. I call it the asset seizure tax. Basically, you know, it's a one time tax of 5% if your net worth is above a billion dollars. So that sounds kind of reasonable, but if you read the fine print, it's tailor designed to seize the assets of startup founders.
- [08:56]
Interviewer
So how can that be true?
- [08:58]
Gary Tan
I mean Larry and Sergey both left the state because of it, you know, in the, you know, off chance, I mean I think it's you know, a real double digit mid, you know, 40, 50% chance that this actually gets passed in California. So I don't think it's something, I think it's something we have to take seriously. It's not this fringe thing. And the way it's written, it actually doesn't take your ownership. You know, Larry and Sergey have about 3% each of, of Alphabet. They actually take your voting percentage as your ownership percentage.
- [09:35]
Interviewer
And they, they still have control, don't they? Like voting control?
- [09:38]
Gary Tan
Yeah. So you know, they would get taxed 5% on 60% of the value of
- [09:43]
Interviewer
Alphabet, which is literally their entire state.
- [09:46]
Gary Tan
It would be half of their net worth.
- [09:48]
Interviewer
Yeah.
- [09:48]
Gary Tan
So I mean it's very strange because it's turned into this war. Like the, the drafters of it claim that it would not do this. And you know, they have sort of all of these sophist arguments around how you know, this won't apply.
- [10:02]
Interviewer
But why don't they just change it? Like that seems obvious. Like if you look at the rules based on it's written, it will apply this way, just change how you're writing it.
- [10:11]
Gary Tan
Well that's one of the artifacts of the proposition system. This isn't going through legislation, it's not going through the assembly or the Senate. This is not something that Gavin Newsom can veto. It's actually going to a direct, a direct proposition on the ballot, you know, probably for November.
- [10:29]
Interviewer
So if it gets voted and passed, it just gets like bolted onto the California Constitution.
- [10:34]
Gary Tan
Yep, that's how it works. I mean, you know, this is how we got Prop 13. You know, a lot of things are broken about California, but this is one of those, you know, seiu, uhw, might change it. But I think in the background, I think people who care about basically the state and you know, who want tech to thrive in the state, like, we actually have to get organized. And you know, that's what I'm gonna, I'm gonna keep working on that.
- [11:00]
Interviewer
So I think what seems to be happening is instead of paying the tax, people just leave.
- [11:05]
Gary Tan
Yep.
- [11:06]
Interviewer
Like, is. Is that an actual thing that you think could happen?
- [11:08]
Gary Tan
That's happening right now. You know, I think about a trillion dollars in personal net worth has left the state, which is about half of the billion in California.
- [11:17]
Interviewer
And the result, you're getting half the effect you thought you were getting when you put this bill into place.
- [11:22]
Gary Tan
Yeah. And you know, when you look at taxes, 76% of taxes are paid by the top 10%. I'm not saying that that's wrong, but what do you do when like sort of more than a trillion dollars of net worth leaves the state? It means that middle class people, everyone else has to pay a lot more. And so, you know, this hilarious Wall Street Journal had a quote from like a wealth manager who's a mere millionaire, which is crazy to me. And he says, well, I don't care. It doesn't affect me. But the reality is like, I'm also not a billionaire. The thing is everyone will end up paying taxes or services that are really important will get cut. And so when you have bad policy, we just have to work against it. We've got to vote the right way. And so, I don't know, I mean, coming up in tech, I never paid attention to this stuff. And then now I'm starting to realize, no, we have to pay attention. You know, we're sitting here in San Francisco right now. I think we're in the middle of a really great resurgence, but the job is not done. You know, the same forces, similar sets of people who put out this, you know, sort of asset seizure tax, they are also trying to 10x the gross receipts tax here in San Francisco.
- [12:37]
Interviewer
And that is where you don't necessarily pay Money pay taxes on revenue or income. It's based on like transaction volume of your service or something like that.
- [12:45]
Gary Tan
Yeah, and so this is exactly the tax that actually drove both, you know, stripe and you know, square a number of fintechs out of San Francisco. And you know, we have something like a 30 or 40% vacancy rate. You know, on the right over here looking out the window, it's like, you know, you will see a ton of empty space and it's just, you know, it's been sitting empty for years. How are we actually going to fix that if nobody wants to? You know, the second you get product market fit, are you going to stay in San Francisco? You know, are you going to pay literally a thousand X the tax that you would in Mountain View or Sunnyvale? You know, most smart people would probably find a way to say, you know what, like I don't have to be here. And so, and these things matter, right? Like San Francisco matters a lot. You know, the reason why I'm fighting for it is that I want startups to continue to be in San Francisco and the Bay Area. If they stay, that's the one thing that you can choose about your startup that can like change your outcome so drastically. It's two and a half times more likely if people choose to stay in the Bay Area that their company ends up being worth a billion dollars. You know, New York is about 2x and like everywhere else in the country is basically, you know, it's, you know, that's the baseline. Right.
- [14:08]
Interviewer
So just moving to New York or San Francisco increases your chances, all else equal by 2 and 2.5x.
- [14:15]
Gary Tan
Yeah. And you know, I mean there, I think there are infinity types of effects here. You're around people who you have access to capital. That's number one. You're around people who are very, very ambitious. And so you know, your ambition rises. When all your friends ambition is really, really high. You get access to way smarter people who have actually done the things that you need to do. So you know, I think the thing that's scares me is that if the state, if the city, if like the policies don't support tech, you know, it's not merely going to move, it's actually going to hurt America. It's going to hurt our ability to actually stay on the forefront of things and people sort of scoff at that. But San Francisco is where we made the self driving car. This is where Uber came up. This is where Airbnb started. This is where GPT1 was formulated by Alec Radford. Right. This is the dawn of the AI revolution. Anthropic and OpenAI started in the Mission District. And the third crazy thing that's happening that blew my mind. It was going to pass until we harnessed people on the Internet. In December, the sitting supervisor in San Francisco for the Mission District, where they came up with self driving cars and large language models, wanted to ban AI labs, ban laboratories and research and development entirely in her district. She would have made it so that you had to go to a special council probably headed by her and her cronies, to even be allowed to open an R and D lab, even for cancer research. So, you know, to me, that's a ban on R and D in the place where some of the best work in the world happened right here in our city. Like, you know, how did we get here?
- [16:08]
Interviewer
Yeah, well, even if you go back, like semiconductors, think of like intel being basically birthed and grown in the Bay Area. The Internet, all these different companies, different software companies instacart how they probably get their groceries delivered doordash. I'm sure they've stayed at Airbnb, they've used Google products, the iPhone. Apple was birthed and born here in the Bay Area. And if none of those exist, you don't have, you don't have a way to reach your constituents as a politician. You don't have a way to go on vacation, you don't have a way to access the Internet. Like all that goes away.
- [16:46]
Gary Tan
A lot of the Internet was built right here. I mean, you know, a lot of it right here in California. So, you know, I think people don't understand, like this is, it's the, you know, the golden goose. But, you know, we should enjoy the eggs, we shouldn't eat the goose fair.
- [17:01]
Interviewer
So if I want to get involved in local politics, whether it's San Francisco or anywhere, what would you recommend doing?
- [17:07]
Gary Tan
Oh, follow me on X. And I, you know, I guess what I'm trying to do is do a lot more research media. I mean, this idea, this, you know, understanding of the actual proposition, you know, I, I didn't necessarily want to break it on my ex. You know, I sent it to a number of reporters and it just astonished me. Like people wouldn't, they wouldn't publish it. They didn't think it was noteworthy.
- [17:37]
Interviewer
I mean, based on what you just described, I'm like, holy shit, that's a pretty big deal.
- [17:41]
Gary Tan
I mean, this is where I sort of wonder, like it doesn't feel like the media environment is designed to support this idea that Tech should exist at all. Like, I think that it's so unpopular with certain sets of people in society that tech could, could be a positive force that anything that might even resemble an argument to not do an asset seizure, for instance, the most mainstream business publications are starting to refuse to publish that, which is just surprising. How do we get here? But on the other hand, on the bright side, you do this all day, and I'm trying to do this all day. We get to go direct. Right. Like, what we're doing right now is not some sort of.
- [18:27]
Interviewer
I'm not gatekeeping this. Yeah, like whatever you're saying, we're putting it on the Internet.
- [18:30]
Gary Tan
We're just putting it out there. This is like what I've learned. And this, you know, I, I mean, I think that's, that's the counterbalance, I guess. I mean, you know, we used to have to go through a media and there was like a mediation of, like, how reality works. Whereas now we can just go direct and, you know, I'm not going to get everything right all the time. And I own up to that. I try to, you know, be as truthful as I possibly can be because, you know, I have to wake up and look at myself in the mirror and say, like, am I doing the right thing?
- [19:00]
Interviewer
Yeah.
- [19:01]
Gary Tan
And so maybe that's our covenant as creators on the Internet now it's like, well, I'm not going to get it right all the time, but at least like, my guarantee to the people who follow me is like, I'm trying to do it, man. Like, I, you know, I have a particular worldview. I'm not without bias. But, you know, it's a bias that's informed by. I meet with founders all day, I meet with tech people all day, and I'm meeting legislators, I'm meeting policy people, and this is what I'm seeing.
- [19:28]
Interviewer
Yeah. Plus, if you just suddenly start saying things that aren't true or aren't well researched and informed and people are just like, oh, Gary doesn't know what he's talking about. I'm not going to pay attention to him anymore. You kind of lose your credibility if you're not continuing to fulfill that promise kind of to your audience or to the people that trust you. So on the other side, there could be audience capture. You might be totally biased of only communicating things that are favorable to tech in a way. So I guess there's that argument too, which, I mean, then it's good to have the counterbalance, I guess, of all these different people with different opinions and
- [20:06]
Gary Tan
yeah, I'm not the only person that people should follow. And I would never tell people, like, use me as the only source of information that would be bad. So I just think of that meme, you know, hey, oh, the media. We're the media. Now
- [20:22]
Interviewer
you mentioned something kind of interesting with sort of these like eras of yc. You might have actually said this before we started recording, but you said there's kind of been these different eras of yc. And so maybe the first era was. Maybe it was Boston, maybe it was still the first era when Jessica and Paul moved San Francisco. What was kind of like the second act or second era of yc.
- [20:44]
Gary Tan
I mean, basically it was Paul and Jessica and Trevor Blackwell and Robert Morris in Cambridge initially. And then they started coming to the Bay Area. And then actually Harj Taggar, who's a managing partner with me at YC now, was one of the first outside partners. He was a YC alum. He actually co founded a company with Patrick Collison that went through YC the first time called Octomattic. And you know, I, I got to work with him. Paul Buchheit who created Gmail, Jeff Ralston who created Yahoo Mail. We were sort of like a set of people starting in 2011 who became partners.
- [21:26]
Interviewer
And so this was kind of like the second era.
- [21:28]
Gary Tan
Yep. So PG and Jessica were, you know, still directly involved and it was like way more than a full time job, I would say. And they had very young children as well.
- [21:40]
Interviewer
Was it like a. We're going to scale yc. We're going to try to help more founders, we're going to put more capital to work, we're going to try to make a bigger impact on the world.
- [21:47]
Gary Tan
Oh yeah, definitely. I mean, I think that first era was fascinating to see because I saw here was this place where I was, you know, a software engineer. I was working at Palantir. I designed the logo at Palantir, actually employee number 10. And then we were trying to hire away some YC alums who had just gone through the program.
- [22:08]
Interviewer
So that's how you first came across.
- [22:10]
Gary Tan
That's how I found out about YC.
- [22:11]
Interviewer
Oh, interesting.
- [22:12]
Gary Tan
So you know, Palantir, we were only 10 people and we were just really into hiring the smartest engineers. And so it's kind of funny because, you know, 2006, 2007, that was right when YC started. Okay. And so it was probably, it wasn't until maybe 2011 or so, that was when Dropbox had become a billion dollar startup. But a Lot of people said, oh, one, you're lucky. And then, you know, in 2011, 2010, 2011, that was when Airbnb became a billion dollar company. And then, one, you're lucky, two, you're good. Like, suddenly everyone in the Valley realized YC was actually really a place to pay attention to.
- [22:51]
Interviewer
So Airbnb put YC on the map just in the sense of, holy shit, they've done this twice. Yeah, there must be something there.
- [22:58]
Gary Tan
Yeah. And then that's when YC sort of went from giving people, you know, 12, $15,000 to, you know, a hundred, 120, $175,000. And yeah, it was just interesting to see the difference. Right. Like, I Knew back in 2007, 2008, like, this was where really smart engineers wanted to go start their company. It was like, I wanted to be like Steve Huffman. I wanted to be like Drew Houston. I wanted to be like James Lindenbaum, who created Heroku, which we used, and, you know, really one of the best cloud software startups of that era. And so it was already in the minds of, like, the creators and the founders themselves that, like, here's the super technical guild of all the smartest people making the things that we want to make.
- [23:47]
Interviewer
And then other people started paying attention.
- [23:49]
Gary Tan
It took like three or four years for the investors to catch up, but they caught up by 2011.
- [23:53]
Interviewer
That's kind of classic, though. Like, the investors always catch up later
- [23:56]
Gary Tan
when the true point's there, which makes sense.
- [23:59]
Interviewer
Yeah. And then you. I think there's like a famous. I actually might have tweeted this as a joke, but you, you were like, were officially a photographer at YC at one point. That was like your first kind of role. You were just like, volunteering, taking pictures.
- [24:11]
Gary Tan
Yeah, totally. I mean, I. We were applying to yc. I was actually trying to become a editorial hip hop photographer at the time.
- [24:20]
Interviewer
Really?
- [24:21]
Gary Tan
That's right. Yeah.
- [24:22]
Interviewer
This, like a portfolio work of, like, build your brand a little bit.
- [24:25]
Gary Tan
It was like a quarter life crisis of mine. You know, I had rage, quit my job at Palantir.
- [24:31]
Interviewer
Oh, really?
- [24:32]
Gary Tan
And I mean, I was just younger and, you know, I spent a lot of time on my YouTube channel sort of talking about my psychological and, like, sort of business journey, you know, And I, you know, honestly, I managed to sort of reprogram myself in a way, and in ways that, like, helped me get to where I'm at, where I'm at today. But I put a lot of credit to Cameron Yarbrough. He actually started a exec coaching startup called Torch and Torch I.O. and he was one of the people who taught me, like, oh, yeah, everyone sort of goes through whatever's going on for them, right. Like you have your 10,000 hours of human training from your childhood and your teachers and all the things that you saw. But you know, on the one hand, some people treat that as destiny. Well, that's what I got and that's it. And what I learned from Cameron was that these are things that you can actually control. Like, you can change. You can. Are you a Westworld fan?
- [25:39]
Interviewer
I was the HBO show.
- [25:41]
Gary Tan
Yeah. Yeah, with the robots. And you could freeze all motor function and then you could go into like a debug mode that, you know, that's what therapy and coaching can do. And that's something that helped me a lot. Like I, you know, basically stopped rage quitting after being able to spot, like, oh, well, this is a pattern. Like I rage quit my job working for Joe Lonsdale at Palantir. I rage quit actually my startup in 2010. And after that I realized, oh, no, no, I have this cycle where I
- [26:14]
Interviewer
will,
- [26:16]
Gary Tan
you know, sort of self abandon a little bit too much. You know, there's. For me, like the, the central core thing that I had to learn about myself was that I had this sort of mode where, you know, we might be co founders. I disagree with you on this, but rather than just saying it, I might eat it. You know, I just don't even say it right because I want us to have a good relationship. Like, I sort of mistook this idea that, you know, you always hear the advice like, oh, you better have a really good co. Found a good co founding relationship. And I mistook that for like, oh, you should never fight. Which is not true at all. Great co founders fight absolutely all the time and about everything, but mainly because they care so much and they do it in a way that like, preserves the relationship. There is never a conflict or a fight that is so much more important than the relationship itself. And you know, that could be a co founder that's in marriage, that's in like all, you know, good close friend, you know, friendships. Like, this is sort of the repeating thing. And so I learned that actually I shouldn't self abandon. And then my. My pattern would be I would keep it to myself. I'd say, like, oh, you know, I can deal with this. Some of this is that my mental model for human beings is like, there's a horse and a rider and, you know, I have a very strong rider. Like my prefrontal cortex and my language center can like control the horse. I guess it's just like, you know, I, that's. You would call that like very strong will, I guess. And this is like a very subtle weird thing where I would use that to sort of like squelch all of these other things that I knew was correct. Whether it's like, oh, the homepage should say this or actually like it should, you know, actually the startup, you know, we started like this, but we should pivot to that. Right? Like these are all things that like you should be able to talk to your co founder about. But it was on my end, like I was a terrible co founder to my, to my co founder at posturus back in 2008. That was my YC startup. And so yeah, these are things that you can control and you can change. And you know, for me I would run into a point where like I had chosen to self abandon enough that you know, to use the horse and rider analogy, the horse would just say like f this, like I couldn't eat, I couldn't sleep. Like it became you know, a somatic actually. And this happened a few times and it took like quite a bit of therapy and coaching to realize, oh yeah, this is a cycle. This is something that happens and I can actually do something about it. Like I can be aware of it. I can, you know, so today in my work with my therapist and my coach, like often I'm trying to think through like, okay, freeze all motor function, what's going on here? Like, and then if I'm very lucky or very, very astute and usually with the help of others, I'm not able to do this myself. I can place an if statement in there and it's like when my face gets hot, I'm going, you know, I'm going to stop. And you know, I might have like a default reaction like shutting it down or like, you know, I said self abandoning. Like the part that would happen would be I bottled it up so much, then I'd blow up. You know, I went into a one on one with one of my first designers I'd ever hired and I just blew up at him. And he was like, Gary, I've never been more disrespected in my entire life. Like, how did this happen? Like, where's this coming from?
- [29:51]
Interviewer
And it's probably just years of you just not voicing the thing and then it just, you hit a tipping point and here's 18 things that I'm laying on you.
- [29:59]
Gary Tan
Exactly. And that's definitely not Healthy. And so the cool thing, though is, like, I think it happens all the time. I think that it's actually one of the more fundamental things that I really want founders to understand because, like, you know, I just gave my map, and it took me many, many years to, like, sort of map that out, to freeze all motor functions, like, regularly, every single week and figure out, like, what was going on. Everyone else has, like, you know, clearly other things. Like, you know, it's my. My thing is not universal. Like, mine's specific to me. Everyone has sort of their own set of things. But like it or not, like, do you know how people talk about startups and, you know, startups themselves take on the personality of their founders?
- [30:42]
Interviewer
Yeah, I've heard them.
- [30:43]
Gary Tan
And so this is like a direct outgrowth of that. Like, if people don't handle these things and get a chance to, you know, figure this stuff out, like, it just shows up in your org in ways that are, you know, it'll just happen someplace and you'll be like, well, where did that come from? And then if you really pull on the thread, it's like, oh, because that's me. Like, that's how I, you know, who you hire, who you fire. Like, how you deal with almost any conflict. Like, that is actually how the organization deals with conflict. So on the one hand, like, most people look at this, you know, internal work, it's sort of like, oh, it's like some west coast, like, do some ayahuasca and, like, talk about our feelings type bullshit. That doesn't matter. And I'm like, no, no. Like, you know, maybe psychedelics are not for everyone. Like, be very careful about that. You know, that's my take. And on the flip side, like, no, no, no. Like, how you do anything, you know, how you do anything is how you do everything, right? And so I certainly recognize this, like, repeating pattern in myself. And I mean, I think we see it play out across thousands of companies, right? And we can't be there all the time. Being a YC partner for a company, we try to be there, but we also see these sort of repeating things, and we have to take control of ourselves. If you can be a better person, actually, you'll show up better, you'll hire better people, you'll manage better. Everyone will be more functioning, functional, not afraid, more truthful, more focused on the outcome, and then that will produce a better product and actually winning in the marketplace. So it's like, it's not this, you know, in the sky. Like, let's talk about our Feelings thing. It's actually like pretty fundamental to whether or not a startup works or not. Well.
- [32:40]
Interviewer
So speaking of that question, I feel like YC has published data before on these are the most common reasons that a startup fails. I think number one is you run out of money.
- [32:49]
Gary Tan
Oh yeah.
- [32:49]
Interviewer
Quote unquote. And then maybe number two is kind of co founder disagreement or conflict. Is that, I mean, maybe this is
- [32:55]
Gary Tan
a funny aspect of yc. YC companies tend not to die because they ran out of money, because they have some money. Usually they shut down because they get tired, they get demoralized. I mean, it's sort of real. It's honestly like often co founder issues. And so, you know, a great co founder conflict, you know, you might not agree on everything, but you're able to get to some sort of outcome. And then the outcome and decision like, leads to success and then, you know, good things beget good things. Right.
- [33:25]
Interviewer
So even if you have disagreements, you might disagree on everything at first, but you're able to come to a common understanding or decision and just do it and just move past it. And maybe not move past it in the bad sense of like burying for like talking about it.
- [33:41]
Gary Tan
Yeah.
- [33:41]
Interviewer
And figuring out like, this is actually what it mean, this is what the decision means to us or why we should do it.
- [33:46]
Gary Tan
Absolutely. And then the nuance is like, honestly, you're, I like the analogy of an idea maze. You know, you're at the beginning, you're. You're actually at a maze. Right. And how do you, you know, you're trying to get to product market fit, you're getting to it. You want to create something that people want. Make something people want as the T shirt that we give everyone.
- [34:06]
Interviewer
Oh, you actually get T shirt.
- [34:07]
Gary Tan
You literally get the, like, that's the. If you had to sum YC up in one sentence, one mantra, it's make something people want. Like, you can just think on that. Like, you know, say, you know, we should just make people say, make something people want, like as a, as a Hail Mary or something. Yeah. It's like, here, we give you absolution. Just say make something people want 1,000 times and meditate on it and your startup will succeed.
- [34:31]
Interviewer
So, but then you start thinking of like, make something people want. Like, what do people actually want?
- [34:35]
Gary Tan
Yeah.
- [34:35]
Interviewer
Like, I feel like some people you just forget. Like when I, like when I started this podcast, it was like what I want to hear in a podcast. Like, it's not just, you know, what's the checklist of what you should do when you Make a podcast. It was more of like, what would it be fun to talk to Gary about? Like, what would I actually want to hear if I had him? Come on.
- [34:52]
Gary Tan
Awesome.
- [34:53]
Interviewer
So you kind of just, I think with that, with everything, it's like, make some people want, I guess.
- [34:57]
Gary Tan
Yeah. You start with the verb, like, make.
- [35:00]
Interviewer
Right.
- [35:00]
Gary Tan
You got to make something. And then what's funny is make something is too short because it's missing the interaction with other people.
- [35:10]
Interviewer
Oh, yeah. So then you, I guess we're continuing the phases of yc. So you joined at some point.
- [35:16]
Gary Tan
It was like after 2011.
- [35:19]
Interviewer
So you had Rage quit and then you were suddenly like, yeah, I Rage quit my startup.
- [35:23]
Gary Tan
And then Harj said, well, you're a great designer. And this is sort of the era of consumer startups still. So this is the moment when people said, like, oh, well, you need a designer with your co founding team. And so I actually came on having no intention of ever becoming an investor, ever becoming a GP or starting a VC fund.
- [35:42]
Interviewer
Oh, really?
- [35:43]
Gary Tan
I was just like, I'm really burnt out and I need to recuperate. And Harge and PG and Jessica said, why don't you just come and help a bunch of YC companies design their homepages? And then I just did so many office hours that, you know, my pet theory is like, maybe they saw how much work I was doing and they were promoting other people who were great into investing partner. And they said, well, you're doing so much work, like, we kind of need to promote you too. So I'm like, I snuck right in there.
- [36:16]
Interviewer
So unclear if you're actually good, but you were working hard.
- [36:18]
Gary Tan
This was my imposter syndrome at work. But, but it worked out. I mean, I learned a lot. I, you know, what was really cool about it? I, you know, I really love that moment because, you know, I was the same age and like, I was, you know, a practitioner right at that moment. It's very interesting to be, you know, 12 years, 13, 14 years into, like, the other side of that. Like, I think this is probably the life of many an investor. Like, you start out as, you know, a true peer to a lot of the people you're backing. And it's very funny. But on the other hand, like, I feel like I can be right back there. You know, last this whole weekend, I was just sitting there in Claude code, like making a new website and, you know, doing new interaction design. I'm like, oh, my God, I'm back,
- [37:11]
Interviewer
back in the game.
- [37:12]
Gary Tan
That's right.
- [37:13]
Interviewer
Like the investor like, truly rolls up their sleeves and they're like. And they're in the trenches there.
- [37:17]
Gary Tan
That's right.
- [37:18]
Interviewer
All the new tools.
- [37:18]
Gary Tan
Yeah. Yeah.
- [37:20]
Interviewer
So then there was a period you kind of started initialized, then you were still at yc. How did that kind of go?
- [37:26]
Gary Tan
Yeah, I mean, this was back when people could do. Be a YC partner and do personal angel investing. And then Harge and Alexis and I were sort of the young partners who had not made any money yet. Palantir was still private and Posterous had sold to or was about to sell to Twitter, but Twitter was also private. And so Jessica said, hey, you could probably be an investor by. And she introduced us to some LPs, basically. And so we raised initialized fund one, which is a $7 million fund, and we ended up returning more than 55x DPI on that one.
- [38:03]
Interviewer
Too bad.
- [38:04]
Gary Tan
Yeah. So, I mean, it was mostly Coinbase and Instacart, but, you know, I think that's probably the thing in an investor's sort of worldview that you read about it, you hear about it, and then until you see it, you don't believe it. We funded a hundred companies, and if you added up the DPI on all 98 companies, it was like 1x. And then Instacart was 1x. But we couldn't take any pro rata because Sequoia did it. And then. And then Coinbase, we took the Pro rata in multiple rounds and ended up turning the fund 53X.
- [38:46]
Interviewer
Oh, wow.
- [38:47]
Gary Tan
So when you see the power law, it is astonishing and unbelievable, honestly.
- [38:52]
Interviewer
Yeah. And then you so initialized, it seemed like it was going really well. So you stepped back from yc, like, on a daily basis and were running Initialized full time.
- [39:02]
Gary Tan
Oh, yeah, yeah, yeah. I mean, basically just like the Sam Altman era. And, you know, at that moment, you know, I had helped raise the Continuity Fund, brought in the first LPs for it, and then I said, well, YC is in pretty good shape and it's got institutional backing. It's going to keep going. And then for me, it was like, it's more fun to be a pirate than to, you know, join the Navy. But, you know, here I am, I'm an admiral again.
- [39:30]
Interviewer
So then how did that come about, where you had started your own fund? It seemed like it was going really well. I think you had probably raised your third or fourth fund. Maybe I should have looked this up again before, but it seemed like, oh, you're sat with Initialize. Why would you go back to yc? How did that happen?
- [39:47]
Gary Tan
Yeah, I mean, I guess this is a special thing. YC is not just sort of like a boot camp or it's not even just a school. It's like, it's a way of life. No, I guess more seriously, I mean, all of our wins, like 80, 90% of the wins were either YC or YC alumni for initialized, I mean, super big ones that we're still super psyched about. I mean, ended up being the first investor in rippling, you know, first seed investors at Demo day for Flux Safety. I mean, we have a ton of incredible companies that are all like, you know, today worth a lot of money. And then I looked down and realized, well, this is all a part of like this larger ecosystem. And mid to end of 2022, like, Sam had gone off to work on OpenAI. Jeff Ralston, who I'd worked with for many years, took over as sort of a caretaker president. And then he said, you know, a bunch of people from that era, especially PG and Jessica said, you know, we really want you to come back. And Brian Chesky was a big part of that, of airbnb. He said he was on the board and still is on the board at yc. And he said, gary, it's time for you to come back.
- [41:09]
Interviewer
And were you expecting that?
- [41:13]
Gary Tan
Not at all. I mean, I just, that was like, I never thought that would happen. On the other hand, it's like a dream job to me. I mean, YC gave me my start as a founder, gave me my start as an investor, was like, you know, probably 50 to 80% of my friends are like, all from this world. I mean, basically going from like being on the branch to like, you know, tending the root of the tree of prosperity. Some of it was like, if it wasn't going to go the right way, I might as well retire. It's one of those only people of a certain age will understand my reference of it's kind of like the hair club for men in many, many different ways. I'm not just the president, I'm also a client. So I both went through YC and I was also one of the investors at Demo day. And I, you know, managed to turn like multiple 10x, you know, plus, you know, sort of legend VC funds. And so I'm like, no, no, no, I understand this ecosystem really, really well.
- [42:19]
Interviewer
Yep. Yeah, because you'd almost been like every sort of like constituent that you serve in the ecosystem. You've. You've been on the other end of it.
- [42:26]
Gary Tan
Yeah. And I mean, I'M sure that most of my VC friends would, like, agree with this at this point, but that that was like a concerted effort the last two or three years to basically realize that YC is a managed marketplace, and that's a good thing. Like, basically, it's a managed marketplace for all the smartest people starting the next companies. You know, we're about 20% of all the names. All the companies worth 5 billion and up started from 2012 and later did participate.
- [42:59]
Interviewer
They participated in YC.
- [43:00]
Gary Tan
Yeah. So, I mean, and frankly, like, it's a network effects biz. So, yeah, it stayed about 20% for going on, like, you know, 15, 18 years, I would say. And why shouldn't. Why can't that be 30? Why can't that be 40? So, you know, you can, you know, mark 20, 26 on the calendar. And, you know, if I'm successful in five or ten years, like, I'd like that to be 30, I'd like that to be 50. Like, why not? You know, like, this is and should be a network effects business where, you know, it's not about the money. It's about, like, having a community of all these people who you can trust and they're there to support you. That's actively. I think of it as like, Disney imagineering. Like, Disneyland is this incredible place. And, you know, if you go down into the bowels of Disneyland, like, you'll realize, oh, there's like an incredible amount of care and thought about, like, every little detail, like, every part of the experience is designed. And I really credit Brian Chesky for that. I mean, it's like sort of the original designer founder. Having him on a board is absolutely insane because it's like mile a minute ideas about what we need to do to create. It's no surprise at all that he created Airbnb because he is that good thinking about human experiences.
- [44:28]
Interviewer
So any. Any examples of that? Like, what have you learned from Brian Chesky in terms of designing human experiences or ways to make YC a better product?
- [44:36]
Gary Tan
I mean, a lot of it is just focus, like his. I'm sure people. I mean, if people haven't seen it, like, they should definitely go and watch. I mean, you need to read Paul Graham's essay about Founder Mode. And then Brian's done a bunch of things. Like, actually, I like the one he did with Jessica Livingston on the Social Radars podcast about Founder Mode. And basically he had to remake that company from scratch, like during COVID And he basically realized that you have to, like, pres. Like, leadership is like, is presence, not absence. Like, he. The classic advice that people give to startup founders who reach product market fit is like, hire the smartest people you possibly can find and give them the keys to kingdom. And his advice like, flies in the face of it. And he's like, oh, I did that. And it almost. And it created a company that I did not recognize. Like, my directs would, like. I mean, there's just so many different things that he sort of realized. And then I think as founders, especially post product market fit, you just don't listen to, like, basically your own beating heart around what you need to do for the company. And so what he said, you know, I'm not the founder of yc, but I feel like he gave me sort of, you know, between him and Paul Graham and Jessica Livingston, this, like, incredible sense that, like, no, no, no, like, I'm not the founder, but, like, you know, we are going to run it, you know, like founder mode. Like, I, you know, I need to take like a really, really radical ownership about what is that experience? Like, what's demo day. Like, what is, you know, the application process. Like, you know, we brought back in person interviews. We moved San Francisco. We got an office right here in San Francisco. We told all the founders moved to the dog patch. Like, move to the center of where all the stuff is being built and be surrounded by all the other people who do that. You know, we were. When I came back, it was a remote program we do. Basically the batch is not remote at all. You cannot do YC remotely. But, you know, it wasn't really working as a remote program.
- [46:51]
Interviewer
You know, so when you talk about that 20% number, like, did it, did it start to dip or did you feel like you were losing that 20% and it wasn't going up anymore?
- [47:00]
Gary Tan
I mean, that's what it felt like, honestly. Right. And I mean, some of it is, you know, we did a lot of really amazing things. Like, you know, YouTube started becoming a really big factor for YC, but YouTube is not enough. Like, this is part of the reason why we're going to open an office in Cambridge. Like, we need to be on the ground with the world's best founders. And, you know, frankly, some of the best ones are right there at MIT and Harvard. And.
- [47:28]
Interviewer
But it's kind of like you. So you, you're still trying to scale. It sounds like before the answer to scaling the YC experience was online application and interviews. And, you know, maybe it's like a little bit more decentralized. I think I saw a chart of like international YC companies. It was kind of going up quite a bit where you guys funded more teams around the world, but now it sounds like it's, it's still trying to hold that, like in person. What makes it special. We're creating this like, network, but maybe trying to scale that, like maybe try to recreate what exists currently in the dog patch in Kingdom.
- [48:01]
Gary Tan
Oh yeah. I mean the thing that keeps me up at night, you know, some of it is like there, we, we, we mint. 99% of people who apply to YC end up getting somewhat of a mortal ego wound by being rejected.
- [48:15]
Interviewer
So I was going to ask you about that. I see a lot of like, I don't know, it's like people who are upset that they didn't get in.
- [48:20]
Gary Tan
I mean, it keeps me up at night because like, you know, it's not a good thing. Right? And this is something we've, we talk about inside yc. It's like, you know, something like a third of the batch, maybe even, you know, depending on the batch, sometimes half of the batch will have been rejected prior to getting in. And that number's been going up. People sometimes have to, you know, it's quite common for people to apply two to four times before they get in. So, you know, I think we're always worried about over rotating. Like, you know, basically being too small can be bad, being too big can be bad. We're always trying to figure out what that number is. But I think we're pretty clearly right now, like there are way more really, really capable founders who we are rejecting. And that keeps me up at night, you know, it. We should not have to ask people to be rejected like time after time. I will say though, if you can survive the mortal ego wound of being rejected, you know, once, twice or three times, you're actually made to be a founder. If you cannot be rejected even once and you like mortally hate YC after being rejected once, maybe try a different profession. Because people being a founder really does require an absolutely insane amount of resilience. And one rejection, you know, the. Get ready buddy. Like it's going to be a thousand more, you know, like in every possible way. And a really great founder just says, you know what, like, they got this wrong, but I'm going to prove them right. I'm going to prove myself right. And you know, to be frank, that is what we love. Like, we, I particularly love funding founders who, you know, we might have gotten it wrong. There's actually an example of this in fall batch, actually there's a company that, they're, you know, very active on Twitter right now. And you know, Diana picked them up for the winter batch, but, you know, both Nico and I had interviewed and we should have accepted them for fall. And so, you know, you know, if you're watching, I'm so sorry, I made a mistake and I've said that on Twitter already. So. Yeah, I mean, this stuff keeps me up at night. Like, I, you know, I don't like to hand out, you know, honestly, like, you know, how many is it? Like we get about 80,000 applications. So it really is, you know, something like 78,500 mortal wounds.
- [50:55]
Interviewer
You know, this is per year.
- [50:56]
Gary Tan
Yeah.
- [50:57]
Interviewer
So you accept probably like 200, 250, 300.
- [51:00]
Gary Tan
I know we get up. Yeah, I mean, I think we're doing about between 700 and 800 companies a year. So.
- [51:07]
Interviewer
Yes, it was about 1%.
- [51:08]
Gary Tan
Yeah, I mean, it's, it's a lot of companies. Like, we reject a lot of companies. And you know, on the one hand, like, hey, please apply again. You know, there's that meme I try to post that's like, hey, you know, getting rejected from YC is sort of the first step to, you know, kind of sort of being accepted to yc.
- [51:28]
Interviewer
Yeah, nice.
- [51:29]
Gary Tan
Yeah, it's the adventure time meme.
- [51:31]
Interviewer
So what would you reckon if somebody's listening to this and they have or haven't applied to YC yet? Like, what are some of the things that. Maybe they're obvious, maybe they're not obvious, but like, what are you looking for when someone applies to yc?
- [51:44]
Gary Tan
I mean, I love builders, so just being able to see, I mean, honestly, what Claude code can do today. What's funny is like boilerplate, like what just comes out kind of sucks. And so, you know, one of the things I'm even realizing from the last weekend of like going deep on it is that like you can still, you can create. Like, there is pretty much no excuse why people can't make beautiful, super well made stuff. Like there's sort of, I'm sort of worried like maybe this is, you know, the boomer 2010 startup founder talking in me right now. But, you know, I think that there is a craft to creating online and, you know, sort of startup experiences for people. I mean, if, if you're building software anyway, like, there's just something there that I think it's easier than ever to create. Something that is like all the way sanded down. Like the story I always think about is Steve Jobs would famously talk about how Like a cabinet maker can recognize other cabinet makers as being really great at their job. Not by like looking at the front. Everyone can look at the front. Like, you know, most everyone thinks about the fit and finish of what's in the front. A great cabinet maker will finish the back and then that's how you know, you can really like game, really does recognize game. And when I look at the partners that we have, like we have people who have sold their companies for, you know, hundreds of millions of dollars that you know, there are people who have like, you know, they're really great practitioners of getting to product market fit themselves. You know, like Tom Blomfield created Monzo, which is worth billions of dollars. It's one of the, you know, absolutely top fintech companies in the world. And so, you know, we have 15 people, all of whom I can say without a doubt, like, you know, especially after doing funding, you know, even two or three years of companies, like, you know, two or three years of YC time as a partner is equivalent to like 20 years in like venture, I would say.
- [53:47]
Interviewer
Because think about like, is it the reps?
- [53:49]
Gary Tan
The reps are unbelievable, right? Like if you are reading personally, you know, a thousand to two thousand applications every single year, you're working very directly, writing. I mean frankly like even as a seed investor, that's pretty wild. Like writing 50 seed checks in a given year, like sometimes 75.
- [54:07]
Interviewer
Like yeah, I do about six to eight a year, not quite as much.
- [54:11]
Gary Tan
So if you get those reps, like you know, the, the organization learns, you know, and actually that's sort of the reason why it works. I don't think that I can, I, you know, I can try to pull out the, you know, billion dollar idea for founders and you know, that's hit or miss. Like that just requires inspiration. Like I think that people like Paul Graham or Vinod Khosla for instance, like par excellence, incredible. I would say that like all of the YC partners are you know, top 2 to 5% in the world at like being able to do that. But on top of that, because we get so many reps and we've seen so many things, like it's actually about stopping you from blowing yourself up on like the sort of 10,000 landmines. It's like, oh, that's going to lead the co founder to conflict. Oh like be careful about taking money from that investor. Oh like you got single, single channel concentration. There's sort of like literally 10,000 things. Like the good thing is like, because we've seen everything, like we'll never freak out. I mean, that's actually really good. Investors are like that. They're like soft advisors who never freak out. They're like, oh, this is happening. Interesting.
- [55:18]
Interviewer
Like, your company is probably going to die in a month if you don't make this change. But there's three people that have actually done this before.
- [55:23]
Gary Tan
Exactly what they did. Yeah. And then you look like, I can tell you this, but also talk to the person where it happened and then that's where, like, you know, it takes a village to create these things. And so, yeah, if I look at, like, why is it that YC can do this? Like, well, you know, it. Whoever is in that batch is the top 1% of what's going on. And then if you put them in a room, like, they just like, by default create this community of like, you know, default trust. And then the partners themselves, like, you get, you know, one out of the 15 that's like, hey, we're here for you for like the life of the company and beyond. Like, we're, you know, actually there to fund the founders, you know.
- [56:02]
Interviewer
Yeah. Talking a little bit more with the app. Is there a common reason maybe between that, like, top 5% and 1%, like the. Because I know you guys send an email that's like, hey, you're in the top. I think it's either 5 or 10%. Is there like a common reason that maybe people don't quite get to that accepted, but they're ranked pretty highly? Like, is there something where you kind of usually get tripped up in the application? Or it's like somebody who maybe the first two times they didn't get in, but then the third time they get in and they're really successful. Like, are there things that you feel like they're like fringe almost make it into YC types of things?
- [56:38]
Gary Tan
Oh, man. I mean, the hard part is it's, you know, I couldn't tell you, like, every single company is such a different, unique snowflake.
- [56:45]
Interviewer
There's a lot of subjectivity probably too, where you just kind of had like a gut feeling on this one, but not this one.
- [56:50]
Gary Tan
Yeah, I mean, we often try to do re interviews, so it's actually more and more common that, you know, if one partner says, like, well, there's something here, you know, it's not. I. I don't. I can't do it. I mean, sometimes people just get full up. Like, we definitely. We don't want each.
- [57:07]
Interviewer
You each like, pick your.
- [57:09]
Gary Tan
Yeah. Each partner picks their own cohort. And, you know, basically, sometimes Our, you know, our, our eyes are bigger than our mouths and bellies, I guess. I don't know. I mean, so we try to pass, we pass it to other people who might want it. I think a lot of it is just about. Yeah, what, you know, what do you. It is that snap judgment in 10 minutes and you know, all we can really do is give you more shots to like sort of have it click for someone. Because I mean it's, it's a considered thing. Like YC done wrong. It sort of feels like, you know, random winning the lottery and YC done right is like you're meeting someone and you know, it's actually pretty high pressure for the partners because like it or not, like we're gonna get text messages and emails and like, you know, it's, we're signing up for like the long haul, like work. So it's considered, you know.
- [58:01]
Interviewer
So what is you, you talked a little bit about like you, you get into yc, there's this batch. What is, how does it kind of go just for someone who's not familiar from the outside. And then what would you recommend to get the most out of yc? Yeah, like if I just got in and I'm listening to this, I'm super excited. Maybe you tell me this when I get in. But what would you say to someone to get the most out of YC?
- [58:21]
Gary Tan
Yeah, I mean we just extended it to a 13 week program. I mean this is what I mean by like it's you know, Disneyland and like we have to imagineer this stuff, right? Like we pay attention to, we talk to people and it's like, how did it go? Like, what can we do better? We went to four batches and realized, oh yeah, actually like the batch got a little bit shorter and people need a little bit more time.
- [58:41]
Interviewer
Oh, so you added, you went from two to four and you shortened it when you went to four.
- [58:45]
Gary Tan
Yeah, yeah, we went down to like maybe 11 or 11ish weeks. 12ish weeks. We realized, oh yeah, no, we need to add like two more weeks and get this to 13. And so, you know, the first sort of nine to 10ish weeks. I would say we're just trying to find product market fit. Like let's get in market, let's nail our messaging, let's figure out who we're building it for and let's build it. Like let's get, you know, a set of real customers. Sometimes it's enterprise, sometimes it's, you know, you know, in devtools is very funny because DevTools is actually like consumer startup, but your total addressable market is like 20 million people. So now with code gen, like maybe that's 200, you know, like it's. And so yeah, AI infrastructure is growing really, really fast and you know, that's just ongoing like always changing. Like I, I think YC is like totally insane for infra and cloud startups in that respect because you basically look to your left, look to your right and look like at, you know, 800 companies that were funded the prior year and like all of those people will reply to your email and like, we'll at least give you a fair shot. Like, you know, it's not a guarantee they're going to sign on, but you know, man, the first like three to five customers matters a lot and that sort of sets the tone for the whole company. And then, you know, we actually try to keep the amount of time spent on fundraising to like maybe two weeks. Like basically. The funny thing about fundraising is like, I think the mistake that people make as founders is like considering that like the, you know, that's the finish line. And it was like, no, no, no, that's not the finish line. That's the starting gun. Guys like, yeah, you know, have a party and then like actually get back to work the next day because like, you know, safes are, you know, they're not actually debt, but you should sort of treat it like debt. Like, you know, someone gave you a million dollars, they gave you $5 million. But guess what, like you sort of signed up to say that, hey, we're going to return a big multiple of that based on the things that we're going to, you know, we're going to do from here. Like that, you know, that million dollars is going to be worth 100 million, it's going to be worth a billion.
- [60:53]
Interviewer
And you mentioned earlier, you alluded to things or investors you should take money from or shouldn't take money from. If I'm doing yc, I'm approaching demo day. Maybe explain a little bit how demo day usually goes for someone who's has only heard of this but never been there. And then how do you usually recommend somebody kind of picks what investors they should or shouldn't work with.
- [61:14]
Gary Tan
Yeah, totally. I mean, I guess the reality is people start basically towards the end we want people mainly working on the startups because that's what actually matters. And then there is sort of a starting gun inside YC for going to talk to investors. So if I were an investor, I want to sort of talk to Them that like, probably Saturday, like, you know, we sort of do the send off. Like, you're done with fundraising prep, you're ready to talk to investors, and then usually that Saturday it's like, all right, off to the races, like, let me start meeting people. And so it's pretty important. I mean, the number one thing that a startup founder can do going into YC is like make really, really valuable things and get real customers that, you know, pay and retain. And then fundraising is easy because everyone can see it.
- [62:08]
Interviewer
Yeah. Because it's like you're, you're trying to give someone like an attractive asset to invest in.
- [62:13]
Gary Tan
Yeah.
- [62:13]
Interviewer
And that's, I mean, that's what they're doing. They want to make money, they want to give you money, and then in 10 years, you give them back 100 or 1,000 times more.
- [62:20]
Gary Tan
Totally.
- [62:20]
Interviewer
That's because you made a valuable thing that's worth a lot of money.
- [62:23]
Gary Tan
Yeah. I mean, the cool thing is about 20% of YC now is hard tech. You know, defense tech is up more than 2x in the last batch. Like, you know, defense tech is interesting because it's sort of both, like you want commercial validation. Like Icarus was the, you know, one of the top companies from the last batch and they literally got, they, they booked more than a million and a half dollars from the Department of War during the batch.
- [62:49]
Interviewer
Oh, interesting.
- [62:50]
Gary Tan
So that's, you know, that's why they were one of the top companies. Like they, during the batch was able to go from here to here. And you know, I think that that's the number one thing. Like objects in motion, stay in motion. Objects at rest, stay at rest. And so, you know, YC is sort of the moment that you need to like, learn how to run fast. And this is something that we hear from like all the billion dollar companies. Even they look back and say, oh, like if they feel like their, you know, thousand person company is going slow, they try to tap that energy that they got when, you know, the first week, the first eight weeks of yc when they were running fast. Like, you know, Airbnb famously talks about, you know, they on post it notes in the bathroom, put like a little graph of like every single week. We need to grow our revenue on the site, Manage Marketplace, 10% every week. And they nailed it. And that's why they raised from Sequoia prior to demo day.
- [63:50]
Interviewer
But didn't no one want to invest in Airbnb originally.
- [63:53]
Gary Tan
Right. I mean, they got rejected from all the legends. So yeah, the funniest thing was I think, you know, Brian would always sort of obscure who the people were, but, you know, now it's such a legend story. Like, I think I saw Mike Maples post, like, oh, yeah, that was me. I, you know, and Mike has nothing to prove. He's like, one of the biggest legends in all adventure. So it's just like, part of lore now, you know, I mean, and that's what gives me heartburn sometimes. Like, man. Like, you know, if we make a mistake and we say no to a founder who ends up, like, creating Airbnb, like, I'm sure we're going to do it. The reality is, like, I'm sure we're going to do it, and I'm going to feel bad about it. And I take that shame. I take that feeling and I'm going to turn it back into productive energy to make sure that YC fixes that. How did that happen? We're going to fix that and then the next founder, we're going to fund them, we're going to get it right. And I mean, I guess that's what Brian Chesky taught me. Like, I need to exercise founder mode on this tree of prosperity. And then if we do that, then actually, well, yeah, actually YC will fund like 30 to 50% of all the companies that matter. And then if we're doing it, then we're actually even better equipped to help the next generation because, like, everything that we do, you know, we kind of have to take our own advice. Like, that's actually a common refrain we use all the time now. It's like, well, if we were a YC startup and we're to do like, option A or option B, like option A, spend a whole bunch of money and hire a bunch of people. Or option B, like, let's do it quick and dirty and see what happens. And like, take feedback and then, you know, speed of iteration. Like, let's fix it next time. Like, we got to do the startup way, like 10 times out of 10. Yeah, like, I. That's. I feel like that's my real job. It's like, no, no, no, we have to do it this way. We cannot. You know, why? See, at 20 years by default, almost always post product market fit, like, you fall into manager mode and it's like, nope, we're back to founder mode.
- [65:54]
Interviewer
So I guess if we're kind of, if we're continuing this has just been like an hour and a half conversation with the acts of yc. Maybe we're at the end or the beginning of like, Act 3 or 4 or 5. I don't know where we're at but like what does the next act kind of look like for yc?
- [66:08]
Gary Tan
I think done right. Like more and more companies. Like we, we actually just straight up want more companies to succeed. And so, you know, what does that look like? You know, I'm going to experiment with rebatching. Like I think that.
- [66:21]
Interviewer
Rebatch. What does that mean?
- [66:22]
Gary Tan
Post Series A. Like after you get your Series A, like we should give you another batch. Like I'm going to start with the companies that I funded and then if that works well, like, I mean we're just going to experiment, we're going to try things and then if they work, we're going to double down and build software around.
- [66:37]
Interviewer
Reminds me of standard capital. Like they do the YC batch style for this for series A, which no one has really done yet.
- [66:47]
Gary Tan
Are insane. And you know Paul Buchite, like just super extreme legend investor.
- [66:51]
Interviewer
Yeah, Yeah. I have a portfolio company that I think, I think it will have been announced by the time this podcast comes out. But they, they, they work with them and it was just, it was like surprising. I was like, oh, that's cool. I didn't know you guys would be up for that. But like it actually is a pretty interesting value proposition to the founders.
- [67:07]
Gary Tan
Amazing.
- [67:07]
Interviewer
So yeah, I'm excited about that. And actually one thing also, I heard that. So YC has this internal software called bookface. I heard that you actually made it.
- [67:16]
Gary Tan
Oh yeah.
- [67:16]
Interviewer
Is that true?
- [67:17]
Gary Tan
Okay, that's right.
- [67:17]
Interviewer
What's the story with that?
- [67:18]
Gary Tan
Well, basically YC started becoming a thing and then people started pretending to be YC companies. What? And then there was no way to verify it. Like we had a Google group or something. Oh, okay. Let me just, you know, vibe. Coding wasn't a thing back then. I just actually real coded it in, you know, in Rails and initially it was actually just a Facebook. And this is a little bit of an inside joke from a skit from the office.
- [67:44]
Interviewer
Office with the gym.
- [67:45]
Gary Tan
Yeah. Jim wearing. Yeah, yeah. See of a certain generation. See, I like you. You know we still have the, the 22 year olds do not watch any of our, the stuff that we came up with. So I recently had a, a showing of the Matrix for all the 22 year old founders.
- [68:01]
Interviewer
Okay. I'm like barely on. I need to go back and rewatch it. Rewatch all of them. I feel like it comes up and I'm like, I watched them once when I was a kid, but I don't remember totally.
- [68:10]
Gary Tan
It's surprisingly relevant to startup founders.
- [68:13]
Interviewer
The Matrix.
- [68:14]
Gary Tan
Oh, definitely.
- [68:15]
Interviewer
So startup founder is like, Neo?
- [68:17]
Gary Tan
Yeah, sure, yeah. Why not? Yeah. Well, no, I mean, he's stuck in this office and, you know, sort of at the whim of, like, the man. Right. Like, you know, you have.
- [68:29]
Interviewer
That's fair.
- [68:30]
Gary Tan
Yeah. You're in this, like, cubicle and you have no control and no power. And then, you know, he's a hacker, though, right. And he goes to these cool raves, and then, you know, he meets these other secret hacker types that like. Yeah, sort of understand the nature of the universe. I mean, that's. That's how I felt when I was a software engineer and then went to become a founder. Like, that's. I was like, there's nothing that felt right about me working as a level 59pm at Microsoft. And then I started to glimpse the Matrix when I worked at Palantir and, you know, working for Peter Thiel and Joe Lonsdale and all my, you know, my colleague. I was fraternity brothers with Stefan Cohen and. And Joe Lonsdale, and I could see it, but I was still, like, in the Matrix.
- [69:19]
Interviewer
Right. You're, like, on the. On the cusp of getting out.
- [69:22]
Gary Tan
Yeah. And then finally, like, YC was what helped me sort of take the red pill and make the leap. And it's like, oh, no, I can be, you know, not jacked into the Matrix. Like, I can be, like, in the real real. And that's what it feels like, though. Like, being a startup founder allows you to be directly present and in touch with, like, the market, like, the users, the customers. Like, customers can go anywhere. Like, customers don't have to use your stuff. And so, you know, being in the real allows you to create products and things that, like, actually get good outcomes. And so I don't know, to take it full circle. Like, that's why, like, this billionaire tax, they call it the billionaire tax. I call it the asset seizure tax. Like, Gavin Newsom himself, like, is just running around saying, like, guys, like, we can't do this. Why are we doing this? There are 49 other states. So, you know, people can just go. And that's what they're doing. Like, Larry and Sergey have left more than a trillion dollars of, you know, people have left the state. And so.
- [70:27]
Interviewer
And, like, once they leave, they go through all that hassle of, like, settling across the country. And they were like, you know what? Florida's actually pretty nice. Or Michigan or Montana or any of the other 49 states. Do I need to go back?
- [70:41]
Gary Tan
Yeah. So, I mean, if people are watching and they're startup founder, there would be startup founders, and they're sort of in there. You know, I too was working as a, you know, sort of cog in the Microsoft machine when I was 22 years old, and there was something about like, go, go home and watch the Matrix.
- [71:01]
Interviewer
Yeah.
- [71:01]
Gary Tan
And then realize, like, starting a company is taking the red pill and you might just turn out to be Neo1.
- [71:08]
Interviewer
One question I want to ask you. Do you have, like, a personal AI stack? Like, how are you using AI? You talked about using Claude a little bit. Just like, how do you use it today? Like, what are you taking the most advantage of? Like, if there was like, Gary's top three hacks of using AI.
- [71:24]
Gary Tan
Oh, yeah, what are you using? The number one thing, you know, I sort of learned this from Jared Friedman and Pete Kuhman, my partners at yc, but I call it meta prompting. So you can take almost anything that you might do all the time, and you just drop it into a context window and then say, you know, here's a bunch of inputs and outputs. Like, you know, maybe you have like a bunch of notes. And then for me, for instance, I have YouTube outlines where it's like, oh, you know, I, you know, Turner had a really funny tweet. Like, I, you know, would put that in the outline, and then, you know, I might find two or three other things that like, sort of flowed together. And then I would write YouTube script for me to, like, sort of, you know, go on the teleprompter and like, sort of recite so I could get it recorded. But you can take like, a bunch of these inputs and outputs and then just drop it into a context window and tell it. Write me a prompt that can act as an agent that does, like, you know, take this input and output over here and you can even introspect. You'd be like, what are things you notice about? You know, things that I did to convert this, you know, from the input to the output. You do this for, like, almost any knowledge work, and then you can just start using it and, you know, initially it's gonna suck because it's just not that smart yet. But, you know, what's funny is, like, now I also use it to, like, iterate my writing. And so, you know, for something like a YouTube script, like, you really want it to sound like your voice and so you can be, like, very direct about. Well, I would never say that. Or don't say it like this or, oh, like, you used the long word when. Use the short Word man. Like, you just like speak to it conversationally and then you, you, you know, simultaneously you start with the prompt, then you have an output, but then you can use that new output. But at right after you get that new output and you're happy with what happened, you'd be like, give me the next version of the prompt.
- [73:18]
Interviewer
Like, evolve my.
- [73:20]
Gary Tan
Yeah.
- [73:20]
Interviewer
Based on what we talked about in
- [73:22]
Gary Tan
this conversation, give me a better prompt that incorporates all the things we talked about. And you can do this with like literally everything.
- [73:29]
Interviewer
Yeah.
- [73:29]
Gary Tan
And you know, in theory, like, honestly, like, there's so, you know, there's so much about what people do day to day. Like, you could use it for tweets, like, you use it for like editing podcasts. You use it for like pretty much everything, like, meta. Like, I just have a folder now of like, prompts that, you know, I use all the time. And I'm, I'm trying to iterate. Like my YouTube prompt one is like, I think on like V27 or something.
- [73:56]
Interviewer
Oh, interesting. Okay. I have not used it a whole lot yet for content creation. I've done a lot of like, just throw into ChatGPT and it has memory. Like, it kind of gets context. But I haven't done like prompt evolution. I guess I need to master that.
- [74:10]
Gary Tan
I mean, the other thing that's great is sometimes when it's not quite working right, I'll use GPT 5.2 Pro. I'll use whatever the max thinking. Like, I'll even use Grok. And then I'll take, for whatever reason, CLAUDE seems to be the best at like evaluating the outputs. I'll take all of the outputs from all of the different, like max models and then I'll put it into Claude and I'll ask, well, given, you know, here's my, here's my prompt, here's the output from, you know, four LLMs, including yourself. Rate each response and tell me what the pros and cons of each approach are. And then it'll spit it out. And then, you know, you can sort of agree or disagree with like all. You know, I usually like to say, like, give it to me in numbered form. So I can say I agree with 1, I disagree with 2. Like 3 is this, but the nuance is blah. Yeah. And then after that you can actually just say, like, okay, well given all of this, like synthesize.
- [75:07]
Interviewer
Yeah, that's interesting. I like it a lot for rapid ideas. Like, it's just like you get a hundred ideas and one of them's good. You can kind of Give it feedback on, like, I really liked this one. Or because, like, it just comes up with stuff that you. Maybe you would or wouldn't have came up with, but it just. It just speeds up the process a little bit.
- [75:27]
Gary Tan
Yeah. And then I use Perplexity for anything that has to search the web. So, you know, I think that, like, the, you know, Claude and Gemini and these things are pretty good. But I still think my experience, like Perplexity still draws on and synthesizes way more sources. So I really like that on sex
- [75:42]
Interviewer
mode, I like that about Perplexity, where. Because one of my holdups or one of the things I really like about Google is it shows you all these sources, you can kind of see where things come from. And if you just like the default kind of chatgpt response, like, you don't know where this stuff is coming from, and, like, maybe it's like the correctness or bias or whatever. But on Perplexity, it shows you all the sources and you can jump in. So I do like that. I still use Perplexity a little bit, too. I like Perplexity for. I feel like it does the best when I say I'm having Gary Tan on my podcast. What should I ask him?
- [76:12]
Gary Tan
Totally.
- [76:13]
Interviewer
I kind of. I kind of throw it in all of them. But I feel like Perplexity always gives me the best on average.
- [76:17]
Gary Tan
Yeah. It's incredible times we live in right now. Yeah.
- [76:21]
Interviewer
Do you have one. One last question for you. Do you have a favorite CEO, founder, or business that you've gotten inspiration from over the years? Who are you drawing from the most today? And maybe it's just Brian, because it sounds like he's had a pretty big influence.
- [76:35]
Gary Tan
I love Brian. Getting to work with him on the board is insane. And then actually watching Aaron Levy from Box has been really, really wild. I only befriended him maybe a year and a half ago, and he is very, very funny. You should ask him for magic tricks if you ever meet him.
- [76:56]
Interviewer
I never. I've. So I've. I've had him on the podcast, actually. I've never met Akmo Magic.
- [77:00]
Gary Tan
Oh, my God. Yeah. But I mean, I think there's something really special about Aaron in that, like, he's stuck with Box all of these years, and then the way he's thinking about how AI is going to change SaaS I think is like, just. I mean, I really look to him for just like, how's this all going to change? And work? And he's like, really? I mean, I love his tweets, so I'VE learned a lot from him.
- [77:23]
Interviewer
Yeah. It's so fascinating where you would think all of these scaled incumbent software companies are so well positioned to just capture everything that's going to happen in AI. And maybe it's sort of like that sort of happened in some cases, but there's also a lot of cases where like LLMs have been around for three years and the product hasn't changed at all. Aside from the website saying that it has AI. Like they throw on a chat box.
- [77:48]
Gary Tan
Oh my God. What's funny is like I'm pretty sure you could just make a long short fund on whether or not the CEO is a hacker and has used Claude code and like that would be. It would outperform the S and P. Probably. Yeah.
- [78:03]
Interviewer
Well, actually right after this I'm recording with Chathan and Benchmark. I don't know if that's going to come out after or before this one. I have to figure out the schedule, but that's one of the things we're going to talk about.
- [78:12]
Gary Tan
Fantastic.
- [78:13]
Interviewer
It's like this universe of all these software companies. The TAM is like trillion dollars in software spend, especially when you consider how it's going to change with AI. And it just seems like a lot of the big players have not done anything yet. Will they win anything or will it mostly be startups?
- [78:28]
Gary Tan
Yeah, I think people are underestimating to what degree software is a very, very small part of the majority of people's lives in the world. And the reason why is that, you know, There are only 10 to 20 million people in the world who are actually good at code. And then we're about to enter this other moment where like actually, you know, billions of people can actually just very directly create their own stuff. And then the hope is like, I mean, my hope would be actually a lot of things get better, faster, cheaper. Like we need more markets and we need more ability to enter, you know, basically capitalism. Like we, we need actually not fewer markets, but more markets actually. And I think that that's what's going to happen. Like the, there's a tiny, tiny percentage of GDP is touched by software at all. And then the result is like all kinds of just loss. Just, you know, this person was there and they could have, I mean, you know, Uber or Airbnb or any of these marketplaces are good examples of there was not going to be a market and then a market was created out of thin air and then a lot more of it is done and then what's the result? The result is like I can get around like the nature of cities has changed really fundamentally. You know, millions of people, perhaps maybe tens to hundreds of millions of people, like, who maybe would have been hurt by drunk drivers. Like, that doesn't have to happen anymore.
- [80:00]
Interviewer
And now sober drivers also.
- [80:01]
Gary Tan
That's right.
- [80:02]
Interviewer
With like, with Waymo.
- [80:03]
Gary Tan
That's right.
- [80:04]
Interviewer
Like a car. Objectively, like, I will not injure a human.
- [80:06]
Gary Tan
Yeah.
- [80:07]
Interviewer
And I will just follow all the rules. And I'm not, you know, I was scratching my nose or I got distracted for a second and just objectively, like the software decides and knows, oh, this door opened and I sensed it within a split millimeter of a second and got out of the way.
- [80:23]
Gary Tan
Yeah.
- [80:24]
Interviewer
So.
- [80:24]
Gary Tan
So yeah, I mean there's basically like extreme tech pessimism. But to me it's like, I mean tech is here to make things better. And then I mean, granted, like I have a bias, like, yes, I am surrounded by the top 1% of people who earnestly are trying to build technology in service of humanity.
- [80:42]
Interviewer
Yeah.
- [80:43]
Gary Tan
And if that happens, like all of these things can happen. And so I mean even with AI, like there's sort of the dominant narrative is like somehow all the jobs are going to go away. But I really like what Ryan Peterson from Flexport says. He says, look, humans just want stuff, man. You're never going to get to the end of the list of wants that people have in the world. And technology in the hands of people who can harness it and put it into the market mechanism that actually literally improves the life and well being of like every person. Like people today, like I think, you know, middle class people today live lives that like the kings and emperors of like 200 or even a hundred years ago or even like 80 years ago, like they couldn't even dream of having the life that we have. Like just day to day, our access to healthcare or access to transportation or access to education. Like, you know, they couldn't even imagine
- [81:47]
Interviewer
that like you can fly around the world.
- [81:49]
Gary Tan
Yeah.
- [81:49]
Interviewer
Like you can literally just, you can go to bed and wake up in on the other side of the planet.
- [81:55]
Gary Tan
Yeah.
- [81:56]
Interviewer
Like that's insane.
- [81:57]
Gary Tan
And then, you know, soon it'll be the moon and Mars.
- [81:59]
Interviewer
Yeah. So actually probably like one of my most insane stats. Have you ever heard the one about firewood in the US?
- [82:06]
Gary Tan
What's that?
- [82:06]
Interviewer
Firewood used to be like 25% of US GDP. Just like the sale of firewood.
- [82:11]
Gary Tan
That's insane.
- [82:12]
Interviewer
Which, it's like that's not even a line item anymore. Like it's probably like a couple, maybe 50 million bucks that we spend a year on firewood. That used to be the majority of the economy.
- [82:21]
Gary Tan
Yeah.
- [82:21]
Interviewer
Was people buying and selling firewood.
- [82:23]
Gary Tan
I got to look that up. Yeah, I can. I'll make a YouTube video and I'll credit you.
- [82:28]
Interviewer
Okay.
- [82:28]
Sponsor/Host Voice
Yeah.
- [82:28]
Interviewer
No, you should hear in it.
- [82:30]
Gary Tan
We'll do a collab.
- [82:31]
Interviewer
We'll do. We'll do like a special. I'll try to find the tweet and I'll send it to you. But it's just crazy. And it's just like shows like this charge just kept going down and it's like 0.02%.
- [82:41]
Gary Tan
I don't know.
- [82:42]
Interviewer
Fifty years ago, whenever this chart was,
- [82:44]
Gary Tan
go back a couple hundred years and it's subsistence farming. Right. And instead we get to sit here, hang out as friends, just like talking about ideas. This is so cool.
- [82:54]
Interviewer
Yeah. This is a lot of fun. Thanks for doing it.
- [82:56]
Gary Tan
Thanks for having me and thank you for listening.
- [82:59]
Sponsor/Host Voice
And thanks to Numeral and Flex for supporting this episode. Put your sales tax on autopilot and numerol.com you upgrade to Flex Elite to get $1,000 on your first card using code turner. Hit the Waitlist link in the description. If you enjoyed this conversation, please like comment, subscribe and share with a friend who should apply to yc. Make sure to check out the back catalog of over 100 episodes with the founders of companies like Robinhood, Mercury and Box. And dozens of YC founders. Tune in over the next few weeks for guests that include Chatham Putagunta at Benchmark, Jake Stout at Surface, Mike and Akil at Footwork, and Scott Stevenson at Spellbook, the fastest growing AI company in Canada. If you don't want to miss any of these, subscribe to my newsletter. The split links in the description to get each episode plus a transcript emailed directly to your inbox every week. Thanks again for listening. See you next.