CEOInterviews.AIA Conversation with Garry Tan

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Bill Gurley0:01

So, first of all, if you don't know, I moved back to Austin about four years ago, and I'm a frequent participant here at South by. I'm a big Austin fan. I went to business school here in '91 to '93 and try and get back as often as possible. So, thrilled to help out. I'm elated to be able to share the stage with Garry and get to talk to him. Y Combinator's impact on the startup ecosystem is somewhat miraculous. I think if you had heard the idea at the beginning, it'd be hard to anticipate everything they've accomplished. And I think there have also been many lookalike attempts at recreating what Y Combinator's done and none of them come anywhere close to the output that you guys have been able to achieve. So, it's remarkable. Like, it really is. And if you'll allow me, I want to dive into that just a little bit. Let's start by just talking about the applicant process. Who might you want at the top of the funnel that doesn't know they should be at the top of the funnel?

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Garry Tan1:17

I guess everything's changed now. I'm about 55 days into my own transformation from earlier, you know, I was you sitting in the audience or actually I couldn't afford the badge so I couldn't be in this room in 2009 with my startup Posterous. And what I realize is that now one person can do the work of, I think Steve Yegge had a blog post recently that the average Anthropic engineer is 2,000 times more productive than a Google engineer at the height in 2009 or whenever it was. And I think that's, everything just changed, right? And so we have a lot of rules, we have a lot of things that we picked up over the course of 20 years, YC just celebrated 21 years actually last week, and one of those might just be actually like we don't know what the resume looks like anymore.

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Bill Gurley2:20

So it might be changing under your feet right now.

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Garry Tan2:22

Yeah. I mean, I care less and less what university someone went to or even where they worked at. I actually want to see your GitHub repo.

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Bill Gurley2:33

Yeah. So, prior to the new AI-enabled applicant, just to get it in our foundational mindset, what were like the three or four things that would really make someone stand out pre-AI in the applicant process?

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Garry Tan2:52

I mean, these things are still true. I don't think anything changed. It's just that those can't be the only ones. I mean, the classic one that I think we get a lot of flack for on the internet is we really want you to have a co-founder. And that one's sort of a double-edged thing. Like you have people like Pete who created OpenClaw, my partner Raphael just did a great interview with him like literally right before he got acquired and that was a solo guy. He did like a hundred other projects and just out of pure volume, you know, he was able to create something that set the world on fire. And so we're sort of in this different moment, like maybe two years ago we'd say you absolutely must have a co-founder and I think that that will help you, like everything else being equal you should have one because this journey is long, hard, and difficult and having a co-founder means that you're not alone. And you know, our reality is totally socially constructed, starting a startup is so hard because you're surrounded by people who don't believe that you could do it, that the systems are all fixed, that it's all zero sum, that there's no way that you, an individual human being, could do it. So, of course, having a great co-founder next to you would help you make you much more successful.

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Bill Gurley4:06

What else in addition to a co-founder, what causes a candidate to spike pre-AI? I mean this is actually an interesting one that, you know, given I'm curious like how you've thought about how investing has sort of changed over time. I think VC and myself included, people attack YC constantly about like oh you only care about the Harvard, Stanford, Google, Meta engineer.

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Garry Tan4:33

And I think that critique is fair and like I think we're going to go away from that. Like I think that that's less and less important. Because now again it's like dude you can just write 10,000 lines of code in a single day. You can do the work of 2,000 people. Which actually is pretty wild to think about. You know how many employees are there at Meta, like tens of thousands of people on any given thing.

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Bill Gurley5:03

Yeah.

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Garry Tan5:03

And I think we're starting to enter this other age where we need to boil the ocean. Like we need to do 10 times or 100 times or actually 2,000 times more. And that's what I'm seeing right now. Like I'm still holding down my full-time job like managing and running something like a portfolio of almost a trillion dollars. That's like my day job. And then at night, like 6 am to 8 am or 6 am to 7:30, I get like 10 workers going and then they're going and then I check in throughout the day. And then around like when I go home, on the commute home, I hop in a Waymo in San Francisco and I get to check in on the workers. I get to and then I can get like five or six revs in. And so in any given day, I can do my full-time job doing like eight, nine hours of meetings and get 10,000 lines of code done on like three different projects right now.

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Bill Gurley6:04

All right. So I'm not trying to delay the move to AI, but I did have just a couple quick questions about the YC. So the process is 13 weeks now, right? You shortened it for a while, but you're back to 13. If you were asked to summarize for someone what's so special about, because this doesn't seem like that long a period of time but it clearly has a massive impact on the people going through it. So what's the secret sauce of the 13 weeks?

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Garry Tan6:32

I guess my favorite thing about it is people come in basically with a different value set. Like you come in and I imagine when I was 23 years old I was a PM at Microsoft and you come in with an idea that here's like this fixed amount of work that I can do and actually I'm not even allowed to talk to my user and there's a bug database with like 800,000 bugs in it and like oh don't go and look at that. And then basically during the 13 weeks, what everyone is running in the direction of is just how do I make something people want? That's literally the t-shirt that you get on day one. And it sounds subtle. It sounds like you should be able to do it yourself, but again like what I've learned about YC and this was true for me, reality is socially constructed and then when you are surrounded by other people all of whom are trying to do that and you know there are very few other distractions that's all you're doing, you can actually run fast and you learn to run fast. And as an, I actually spent five years away from YC as a seed investor built Initialized Capital to be multi, almost a billion dollars under management. And I remember doing seed investing and pre-seed investing and I would sit in their office and we would meet like sometimes several times a week and I could never, it was like a Groundhog Day where the main character tries to save that guy and like he never.

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Bill Gurley8:01

And you couldn't create the same fabric that exists in those 13 weeks.

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Garry Tan8:05

And I would get frustrated because I'd seen it done. I saw it happen during the 13 weeks.

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Bill Gurley8:09

How much of it is co-learning? So you learn fast because you can learn with everyone else versus maybe a bit of peer pressure that's put on you by wanting to do as well as everybody else.

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Garry Tan8:21

Oh, I think it's all of the above, right? Both of them. You know, I mean it is like a very very concentrated form of college and you know the good thing that honestly like if there are investors in the room like if you have some companies that you see incredible potential but hey like if they just sped up a little bit or if they changed a few things about what they believed about building a startup this would work like they have all the engineering chops or they're slinging 10,000 lines of code a day but they're sort of doing it on the wrong stuff like my pitch would be send them to YC and that's what I did and I had multiple companies go from like it was going to die to like worth hundreds of millions.

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Bill Gurley8:57

There's a cultural transformation that happens by being a part of that ecosystem.

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Garry Tan9:01

I think so. And I mean, it takes a partner. I mean, at YC, you have one partner who picks you and is like sort of your person for the, you know, YC owns a decent chunk of the company. And so what I've been trying to get people at YC to be totally aware of is like, actually, we changed the name of partner to general partner. So, we're more like you, Bill. Like I mean you got Benchmark is like the quintessential VC partnership and I want YC partners to be just like you guys and we're actually an equal partnership too.

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Bill Gurley9:31

I appreciate that. What are there elements that are more like structured education? Like are there certain things that you want to get across to the group in the 13 weeks?

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Garry Tan9:43

Honestly like the thing that I'm trying to do now, I just open sourced how I use Claude Code called GStack. I got to about 9,700 stars in the last couple days. And then I think that that might be the way to do it. It's like I put my body on it. Obviously Opus 4.5 was a revelation from Anthropic. And then I think people are like this one person can do the work of 2,000 people is like really really new. And if you're in this room or you're listening along, it's like less than 0.1% of the world understands this yet.

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Bill Gurley10:18

Yeah.

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Garry Tan10:18

And so my attempt at making this open source is actually like sort of an invitation. Like this is exactly what worked for me. And it's hilarious because I'm getting a lot of hate for it. It's like unbelievable amount of hate for people saying like a Claude Code skill. If who here actually has used Claude Code?

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Bill Gurley10:39

All right we got, I mean you guys use skills yet?

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Garry Tan10:43

Oh yeah.

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Bill Gurley10:44

Yeah. I mean if the people, if you do not get it yet, go talk to the people who raised their hand like a skill is just markdown but it's very different now because it's actually the computers can read it and it's turning complete and you can have it run code.

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Garry Tan11:00

Yep.

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Bill Gurley11:01

So it's actually, I mean that's sort of the transformation that's happening.

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Garry Tan11:07

So I'm going to quit resisting. We'll just go straight in. Sorry about that.

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Bill Gurley11:10

No, it's all good. So, one thing I've said to people when I've been out promoting my book is this notion of are you so fascinated with something that the learning comes for free? You just feel like you have to do it. And I would say if you're a technical founder and you're not doing Claude Code and these things you're talking about, you know, you should really question whether you're even made have the right substance for this because the world is moving in this direction. And it's moving so fast and you have to be on the edge of it. So talk through this idea of why Garry Tan, you got a lot going on, why you felt the need to go write code at night with your AI-enabled self.

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Garry Tan11:53

I mean what's funny about it is we've been, you know, we fund a lot of companies way out on the edge and I mean if watch our Lightcone podcast we've been talking about vibe coding for years at this point. You know startups that have provided this service for a while, I mean my favorite story of it is actually Replit, it's actually really wild. They started I think in 2019 kind of as an IDE that's like hosted in the cloud so if you're even at, you know, I bet a lot of your kids actually use it. It's installed by default in your Chromebooks. You know this sort of idea that anyone can code and if you don't want to have to like get bogged down in setting up Unix servers and things like that. And then they're like this wild story where you know it was working, it was working well but you know it's very very hard to make money in education and along comes GPT 3.5 then 4 and then vibe coding happens, you know Andrej Karpathy starts talking about like you know what like you should just try clicking accept all changes like nobody clicks on that but I started clicking on that and it started working. Karpathy is a genius man like in last week or so he's figured out auto research which is this new thing where overnight he's actually coming up with new machine learning techniques and breakthroughs just by prompting, just by setting up a harness. So that's sort of like the extreme bleeding edge of what's going on right now.

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Bill Gurley13:25

So there are many people in the venture community that believe this is the biggest wave in the history of their career, including people my age. You're a generation younger. I assume you agree with that.

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Garry Tan13:38

Oh yeah, definitely.

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Bill Gurley13:38

Yeah. So that's part of why it's so transformational and that's why you're saying like even how you look at the candidate pool might change after 21 years just because this is so different and these skills are so critical. Some VCs are taking it to the point where if it's not AI, they don't want to talk to them. Are you guys at that hardcore level?

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Garry Tan14:01

I mean I guess it's becoming sort of 80, 90% of the companies are software, about 10 or 15% increasingly are hard tech, they're working in defense, they're working in all kinds of places but even in that case you would want them to be AI enabled and they are. I mean it's wild like they are, you know, Palmer Luckey talks about it from Anduril that this age means that software is no longer the thing that holds back hardware and you know frankly it does. I mean I have friends in hardware who are basically vibe coding. I mean, vibe coding right now still has this tinge of, oh, like you shouldn't do that. I think Pete from OpenClaw just tweeted this this morning was like, oh, no, no, let's just not call it that anymore. He's like kind of sick of fighting that war. And I would take the other side. I mean, I love Pete. I think that like we should just call it that and like know that we're in a different moment right now. You know, last year, two years ago when this term was sort of invented, it wasn't that useful and it was hype and it's like, you know what, like everything caught up in November, like Thanksgiving or so, and I found out about it because a bunch of my friends started playing with it and then basically they disappeared from their families during the Christmas holidays, apparently.

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Bill Gurley15:14

What are, I don't know, three to six tools that you think people, founders should 100% be rolling around in right now?

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Garry Tan15:24

I mean Claude Code and Codex are sort of obvious. What's funny is like I haven't, I've been doing, I sleep like four hours a night right now. My wife's in the audience in the front and she's like what's going on with you man? I have cyber psychosis but I think like a third of the CEOs that I know have it as well. And once you try it, you'll realize it's like I was able to recreate my startup that took $10 million in VC capital and 10 people and I worked on that for two years and I took anti-narcoleptics like I remember sort of being on like modafinil in Austin, Texas in 2009 like trying to look for users, go to parties and like find investors and I don't need modafinil with this revolution like I'm up like I slept at 4:00 a.m. I woke up at 8:00 a.m. And my wife this morning was like she's like, 'Did you sleep?' And I was like, 'I slept enough.' Like I wanted to sleep more, but I couldn't because.

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Bill Gurley16:23

Because you wanted to get in and check on see how things were going.

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Garry Tan16:26

Yeah. Let's see what's going on with the 10 workers. I got like three different projects going right now. So, it's.

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Bill Gurley16:31

And why 10? Why not 100? Is there some management overhead?

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Garry Tan16:35

There is. Like so one thing I just figured out is instead of using Claude, Claude likes to use Chrome through MCP and it's so slow it's basically unusable. And so I just vibe coded in like half an hour. I was like why is it so, I literally only had this conversation. It was like hey Claude I want to use Chrome to test this thing. I know that you're smart and you can do manual testing for me. I have like the branch ready to go. It's like this whole feature and it's just on the web like go log in as a user and do this thing and test all the things. Why can't you do that? And it was like 20 minutes later it's like oh like it's not working. You're out of context. It's just not working. And I said like well can't I just use Playwright directly? Like can you use a CLI? Meaning like can I just do it a different way? I was like oh yeah that's interesting. Why don't we do that? And so I had a branch it made this thing. I was like, 'Oh my god.' And then it worked. Like I made this whole feature and then because we, Claude and I figured out this one thing which is like why don't we just use Unix and like make a little command line tool that wraps this other library. It was fast. It was like 200 milliseconds back to back. I was like oh shoot this is crazy. I can not only can I, like I had all the other pieces like the beginning part that I have, it's actually a CEO mode. So all the things I had to do as a startup founder I have a Claude Code skill for now. So I mean some of it is like you should try it like if you load Claude Code open a new thing and then load GStack which is on GitHub. You can literally just say like hey I want an app that does blah and then let like for instance I want to post on Craigslist and I want to make an iPhone app. Right? You just open up Claude Code. You load up this GStack thing and then you just say that in plan mode and then you go plan CEO review and my skill has actually, it basically is like Brian Chesky in a box. It's like, oh, well, what are we trying to do? And maybe we should do this. And it actually goes out and plans out like, let's think of the platonic ideal of the startup that you want to make, and then let's work backwards from that. And then what can we do right now? And then one thing you'll notice though is all of the time frames it quotes, it's like, well, it'll take about a month to do this. It'll say that. It'll straight up say like and they use human terms because like it would take a human being one month to do this like 10,000 lines of code because the average number of lines of code that I could write even on modafinil and like being really all the way like 20 hours a day kind of coder was maybe like 100 or 200 lines of code useful that's useful and it's like to be able to do 10,000 now it's completely nuts.

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Bill Gurley19:26

And are you seeing modern AI founders learning to do more than just coding with Claude? So sales, distribution, marketing, all the other elements of the business.

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Garry Tan19:38

I mean, I think that's it. Like I think that I haven't worked on that yet, but like it's probably something that someone in this room could do. And that's going to be actually how, I mean what I'm glimpsing at is like, you know, there's a CEO mode, there's a manager mode, and then I figured out this QA engineer mode where it's like go use the product. And it's smart. It like does screenshots. It'll say like oh well for this case it's this. Oh, like let me I need to write an automated test for this. It's like it's unbelievable because I spent years and years and I'm surrounded by people for whom like this is all I've known this for like my entire professional career that like there is this magic thing that startup founders get to do like that Tony Hsu at DoorDash got to do that, you know, I mean all of these founders that we all look up to like this is what they did. They just like asked very simple questions. They directed it and then you know an incredible amount of money and time and venture capital dollars went to like how do I access like an executive who then can hire like the 10 people below them who then can hire like thousands of people for that and then you know that was, you know, capital as a bludgeon was sort of a big thing and I think like that might be gone actually like the actual missing is.

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Bill Gurley21:00

Because I love this phrase because that's how I felt when I was living through it. Capital is a bludgeon and there are structural things in the venture capital community where the later stage firms are getting bigger and bigger and bigger and most of the rounds that they do are proactive. So the founder didn't decide to go raise money. Someone knocked on the door and said here's $300 million. And at least in the capitalist bludgeon world that I lived in, if you don't take it, they threaten to give it to the competitor. And so you have a top-down situation where the money just kind of shows up on your doorstep. And this, you know, is about to intersect with the point you're making that the company may not need that many employees. So how does that solve? Where does the money go? If you're highly autonomous, highly AI-driven in all areas of your business and someone insists on giving you $300 million, what do you do with it?

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Garry Tan21:57

I mean, I think about Sam Altman from OpenAI, his essay of 'The Intelligence Age' was what really opened my eyes to what I think we should do from here, which is I think it's time for us to boil the oceans, right? Like there is so much going on right now in society. And I think that, you know, some of the people who run the Frontier Labs, maybe in order to raise the money are using more doomerism than they should. The risk is certainly real. I wouldn't say it doesn't exist.

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Bill Gurley22:32

How does doomerism help them raise money?

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Garry Tan22:35

I mean, it gets people going, man.

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Bill Gurley22:37

Because you describe it as magical and they want to invest in magic. Is it?

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Garry Tan22:42

I mean I think people, well, I would say that I like to invest in magic and I'm fairly certain that you have invested in things that, I mean magic is just things that are so incredible that they strain our understanding of how they could be possible like marketplaces, you know, 10, 20 years ago like you invested in all the best marketplaces and like any given one like the first time you used Uber, the first time you used DoorDash, first time you used Instacart like any of these marketplaces were like revelations for anyone using them for the first time, right?

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Bill Gurley23:11

But we never said Uber would cure cancer within 3 years, which.

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Garry Tan23:17

That's fair.

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Bill Gurley23:17

Which is what some of these people are saying.

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Garry Tan23:20

Well, you know what's.

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Bill Gurley23:21

And it'll ruin all that's positive.

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Garry Tan23:23

Yes. Yes. I like that they said that. And what I think is like maybe the wrong thing is like I think there's Jevons paradox. I think that like we will find like when there is more, when there's intelligence, it is not zero sum. It is something that allows us to do a lot more of it. And so I, you know, I'll go out on a limb and say something provocative. I think that what all of this stuff means is the us, like the people here in this room and the people listening, we are here to try to make Star Trek the next generation happen. Okay? Literally like I think about it. It's like I think that we need a post-scarcity economy and I think that like curing cancer is something that I mean everyone in this room like knows someone who was touched by it or you know a large percentage of the people in this room will get it right and it's something that's like a human problem but a human problem like that can be solved through intelligence through understanding cancer, understanding disease and then actually making it go away and that's technology and so that's why I mean the people who can create that technology. We have to come out with an affirmative view, an affirmative statement about what we're trying to do. Like we're not trying to kill all the jobs. We're not trying to upend society. We are trying to actually heal, solve problems, and actually help one another.

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Bill Gurley24:51

Yeah. One thing that Garry and I discussed in the past that you the audience may not be aware of. You can just ask your favorite AI and it'll uncover this, but there are surveys and polls done on anxiety about AI. And in the US there's like a 70% negative and in China it's like 20%. And so there's a completely different mindset about whether this is positive or negative. And I do think it's partially driven by the people that had the loudest microphones being the biggest doomerists, which is kind of a crazy reality. Which is something I've never seen before in my history of venture.

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Garry Tan25:30

Yeah. I mean, I think the tricky thing here is like I kind of get it like you could argue they had to do it because how else are you going to get a trillion dollars?

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Bill Gurley25:40

But I don't understand why being negative creates fundraising personally. But I think there's another goal, but let me try and get at it indirectly.

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Garry Tan25:47

Oh, I'm curious. Yeah. No.

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Bill Gurley25:49

So, all of the youngest startups that are moving to these AI workloads, which models are they using underneath?

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Garry Tan25:59

I mean, OpenAI and Anthropic mainly and then interestingly like people are starting to use more and more open source models and I'm surprised that there isn't an American open source model. We can talk about that.

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Bill Gurley26:11

But what causes them to get to that place where they shift?

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Garry Tan26:15

Usually actual users, right? Though, you know, the crazy thing now is like actually I think we're in a good spot. Like a year or two ago, I was really really worried that there'd be fast takeoff. There'd be one or two entities that like basically get the AGI. And I think we're actually in a really really good spot. I mean, even spending all of my time working on agentic flows and things like that, it's like I can sit there in Claude, but I could be using Codex two seconds later and it's as good. And you know, not only that, I can ask Claude Code like well for this purpose like should I be using, like Anthropic is great for super super smart stuff, but they have no low latency model for instance. So the best one for that is actually on Grok with a Q and Llama the 70B like version three is actually 200 milliseconds or something. It's an open model on Grok with a Q and that's the best one. And the thing is there will be another one that's even better and sometimes it's the Chinese model and that's okay. All of that is actually great. Like I think that what we really really want at this moment in time in technology is we need competition. Right.

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Bill Gurley27:26

And that might, so this is where I would get at this which is if you go back to the internet boom, right, you know '96, '97, 30% of your venture dollars went to Sun and Oracle because every startup wanted the best technology, they didn't want the server to go down. Five years later it was 100% Linux and MySQL and there's an innovation phase, that's why I ask you when the point of change was when they have real users and then there's an optimization phase when you start worrying about performance and price as opposed to just the product. And so, you know, I'm certainly seeing with our bigger companies when the revenue really starts to come in, they start experimenting with different models, maybe not for the whole thing, maybe for 60% of the tokens or something like that. But this is a roundabout way of getting to what I think the doomerism is all about, which is I think they want regulatory capture. But I've been saying that for years.

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Garry Tan28:24

Yeah, we've, I mean we've been fighting against that for a while.

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Bill Gurley28:27

Yeah. So I mean I think many of the companies that are really trying to boost performance and cost are experimenting with the open models many of which are Chinese and I think it's going to be really interesting to see if the big models try and use Washington to put an end to that which would be bad for startups from my perspective.

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Garry Tan28:47

Absolutely. I mean simultaneous to that like I'm hoping that Anthropic and OpenAI are highly likely to be similar to Meta and Google and Apple and the classic thing for big tech, I mean this is a whole hobby horse for us at YC like we want to fight for little tech, we want to actually fight for the people in this room who like we need distribution, you know part of the reason why there's no consumer startups going on like five or 10 years is like Google and Meta basically locked it all up and you know I guess if I were them I would try and do that too but at the same time like.

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Bill Gurley29:23

You know when you have a second price auction model you can extract like all the gross profit out of every consumer business. And so as a result it's like what happened to the ecosystem and it's going to play back again. And so that's why I think we need to continue to support open source, we need to actually continue to support open weights models because that's actually the way that is a counterweight to frankly what I have nightmares about. Like imagine you're using, I won't name the frontier model lab, it could be any of them honestly, it could be one that doesn't even exist right now.

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Garry Tan29:56

But they just raise prices and you can't switch, like Office 365.

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Bill Gurley29:59

Well, or it's like Microsoft back in the '90s, like oh well you know what a nice business you have there, I guess we'll just...

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Garry Tan30:06

Well that's happening already, right? I mean Cursor was Claude's biggest customer and now they compete head-on. So that's right, they're already moving up the stack. I think both model companies realize that if they didn't have end customer connectivity that they were at risk of being switched out. So they're being smart and they have tons of money.

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Bill Gurley30:26

Yeah. So, I mean, at YC, we're kind of heterodox in our thinking around that. It's like we believe in free markets but then a functioning free market actually requires competition and sometimes the government does have to step in and make sure that that...

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Garry Tan30:40

I would encourage, this probably isn't the place to solve it, but I would encourage everyone who shares this belief system to maybe create a consortium that can help provide legal support and protection for open models because it's going to get spicy. I think...

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Bill Gurley30:54

That sounds right. Well, find me on X, Garry Tan, and if something happens, just send them my way and we will find help. We have to stand for a little tilt against that.

So, let's... do you feel AI is... so you talked about all the ways that an AI-enabled founder is going to look different and now you're going to start testing for that at the application process. It sounds like...

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Garry Tan31:23

That's one of my projects. It's like 3,000 lines of code a day right now.

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Bill Gurley31:27

Okay. And so what do you think will change about the types of companies? And how much do you guys even care about the company idea when they get the application?

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Garry Tan31:40

Oh, we don't care about the idea nearly as much as what someone's capable of doing. But I mean I think clear communication matters a lot. I think surprisingly or unsurprisingly, I think this is actually the age of the product manager slash designer founder. Like I am technical, you know, I had to be an engineering manager and hire software engineers and sling a lot of code myself, but the reason why I'm so useful right now is like I can talk to 10 different workers, you know, maybe next week hopefully it'll be 12 or 13 if GStack keeps going the right way. Like if I can orchestrate 10 or go from 10 to 20 workers, I mean I think that's in the cards. But I can do that because I've done that job. Like that's sort of like the classic maxim for AI. When I was 16 or 17 years old I was interning at a design firm called Adjacency. You know, the founder actually created the first Apple e-commerce store for Steve Jobs.

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Bill Gurley32:39

Yeah.

G

Garry Tan32:39

And I said like Andrew how do I become like you? How do I become a CEO? He took me around like all the different jobs and he's like, 'Well, see that person, this Kristen, she's a sales manager. She's the one who, you know, this is what she does all day, right?' And I had to do that job and then I hired her to go do that job. And that's how I knew who to hire. I know how to manage her and I know if things aren't going right like I know how to fix it. And like that's the job of the CEO. Like you have to know all of the different parts. And I think that's like the perfect allegory for this moment right now. It's, you know, you need agency and taste and then also you should be a polymath. Like you don't have to, you should not, you do not need to be like, I think the time was I would give the advice to college kids like you should be a mile deep and an inch deep for the rest of the mile. And then now it's like I think the shape of what society needs is very different now in that intelligence is on tap. And it's actually sort of being able to make connections across this whole wide sort of plane, being able to be maybe a foot deep all the way across. The agents will fill in everything else, like the full intelligence that's already on the internet and open source.

B

Bill Gurley34:06

So you're making a prediction that the founder of tomorrow will be different in these ways and taste and aesthetic and this kind of nuance of elegance of design will be more differentiating.

G

Garry Tan34:17

Yeah.

B

Bill Gurley34:18

Than being able to write 20,000 lines of code.

G

Garry Tan34:21

It might be an English major, man.

B

Bill Gurley34:22

Yeah.

G

Garry Tan34:24

Which is great actually. Like that's the good news.

B

Bill Gurley34:29

Um going back to just the types of companies, do you think that'll shift in an AI age? Like will you see companies attacking different problems than they did in the past?

G

Garry Tan34:40

I think it's all the same and it's just going to be faster and more. And then that's where I think about how companies operate today. Like I think about my time at Microsoft all the time where it's like I worked on this product called Active Sync and it was how your Windows mobile phone would talk to your Windows device to get contacts and calendar and email. I was like, you know, at the same time in an office in Cupertino, there was a team of two people working on all of mobile Safari that went into the iPhone. And I'm like, you know, I think that this sort of 20,000 people can be beat by like two people or 20 people has always been true because I think about that example. It's like I worked at Microsoft and it was like this is all politics. It was all fiefdoms and I couldn't even, I remember needing some synchronization service. I remember one of my PM mentors and I went over to the Windows office and he brought a baseball bat. I don't know why, like why do we have a bat, Dan, why are we doing this? And it was like, you know, we could not get any of our bugs fixed over in that other org. It's like you think about that and you multiply the dysfunction of not being able to serve your user multiplied by 20,000 people and it's like no wonder that our software is terrible. You know, like my favorite example is like who here uses Siri? Like nobody, right? Like who here is frustrated with, you know, I love my iPhone. The hardware is great. It's beautiful. You know, the battery is great. But like the calendar app is the worst app that I've ever seen in my life. And you know, when... and so it's not even about money. Like that's the weird. It's like sort of happening all the way across society right now. Like, you know, Apple has unlimited resources, right? They could hire anyone. They could do anything. And in fact, you look at their cash and you know my favorite Peter Thielism is actually this that like, you know, he famously sat with Eric Schmidt and he said...

B

Bill Gurley36:47

Google has no ideas, like why do you have 40, 50 billion, I'm sure it's like way more now, it's in cash. It's like these are late-stage technology holding companies. These are not tech companies anymore, right?

G

Garry Tan37:00

And they're basically held back by the moats. And when I look at that it's like we could have technology, like we still don't have good large language models in our iPhone with Siri. Like Alexa is, you know, how many tens of thousands of people and it's still terrible.

B

Bill Gurley37:14

When people tell me the new Claude tool for Excel runs circles around Copilot. So yeah, same concept that the big companies now have had two years of being told this is a huge wave and they still haven't found a way to get there. Siri's kind of wild. Yeah.

G

Garry Tan37:30

Like just what, it had an eight-year head start and then it's just waiting. So, and I think maybe that's that prompt for the people in this room. It's like yes, there were moats. I mean, you know, this was always true like 10 years ago, five years ago, 20 years ago, like the only way that a tiny startup sitting in a garage could even hold a candle is like just raw aggression. It's just like how do we do 10 times or 100 times more than, you know, how do I have a deep personal relationship with my first thousand users, right? That's like actually more accessible now than ever and then that's actually exactly what we need.

B

Bill Gurley38:09

Yeah, I'm very curious if OpenAI or someone like that ends up recreating a calendar or contact database or email just to sidecar all that stuff.

G

Garry Tan38:21

Yeah, I guess if you guys like the movie Everything Everywhere All at Once, which debuted here at South by Southwest, I feel like that movie makes me feel like what a founder who is looking for really really great ideas can sort of load in their head. It's like across all this time, across all these different people, across all these different industries, like there's just stuff that is happening, like there's frustration, like there's boredom, there's anger. Like if you can step into the shoes of other people and what's going on for them, it's like what are the jobs to be done. And I think that big tech doesn't ask that question because they have moats and, you know, they self-preference and, you know, they don't have to work hard for this, right? Like that's why like some of the self-preferencing openly should just be illegal, you know, like we need to allow for new entrants, people in this room and people who are listening to create new technology and then have a direct relationship with the people on the other end. Like we don't want to work with like big faceless corporations. Like, you know, and then we're sort of at this moment where like, you know, maybe it's not even software, like maybe it is agents, maybe it is agent orchestration and helping everyone else in society have their own personal agent. Like, you know, right now, you know, we rely on someone like Pete from OpenClaw to create this new package but it's like actually like that could be built for like every industry in the world. Like look at the, you know, one thought exercise and it will be, it's like guaranteed to happen, it's like look at the GDP pie and like what percentage of that actually has any software in it at all. Like, you know, even before AI it was like I don't know like 10, 20% maybe. Like the bulk of business in the world still happens over text, email, phone, fax, like I mean literally email, like literally I think the world's shipping industry is still mainly using emailing Excel spreadsheet quotes back and forth. And so, you know, that's true right now, but it couldn't possibly be true in the future.

B

Bill Gurley40:23

And since you're vibe coding, I have a technical question for you. Do you think we reach a point where the database becomes obfuscated to the user? Like in SaaS even today they call what's the thing on top of a CRUD database, like you can take shots at it. Yeah. But underlying all these systems...

G

Garry Tan40:40

Did you come up with SaaS apocalypse?

B

Bill Gurley40:42

No, no, you didn't.

G

Garry Tan40:43

No I didn't. I didn't. I didn't. Okay.

B

Bill Gurley40:45

But all these systems have an underlying database that's deterministic. Do you think we'll get to the point where we won't have awareness of the exact database that's underneath there and trust the agents to manipulate the data?

G

Garry Tan40:59

I mean personally I don't think so. Like I think you're going to have SQL databases forever. And I had this, I mean maybe I'm the one who's wrong, like I was debating with an engineer on my team this morning. It's like he said like hey I want to make the AI agent be able to do a bunch of admin tasks for me. I'm like I mean you know even Karpathy I think said that his auto research agent that was running with full permissions dangerously skipped permissions, deleted the whole project and he had to recreate it, right? So I'm like...

B

Bill Gurley41:32

But it didn't take very long.

G

Garry Tan41:34

Yeah. It didn't take very long which was nice. So, you know, I guess I don't know. Like I think that databases are important, access control is important, and then, you know, LLMs are amazing, but like some of it is like I actually am curious like maybe it's not the final form. Like kind of like Pokemon, there's like another level or two out there. And like I, you know, I frankly hope so. Like it's actually really wild to what degree we have to build very very inefficient data centers in some sense to get this. I mean, the intelligence is so astonishing that we're willing to pay almost any price. I mean, Anthropic fast mode, it's like, who would have thought that people would be willing to pay that much? But honestly, now that I have it, it's like, give me 10x fast mode, I'd pay 10 times as much.

B

Bill Gurley42:22

Yeah. Yeah. Um, before we go to audience questions, let's hit on a couple big topics that the industry is worried about or caring about. Um, stay private forever. How, what's your opinion of this especially since there is an investment arm inside of Y Combinator?

G

Garry Tan42:41

Yeah, I think it's true. I mean, if you talk to a lot of the founders who are YC founders, I mean, you talk to the founders of Stripe or Rippling and people like they're incredible people who are very very ambitious and then the public markets sometimes do not help, do not really support founders who are like that. And so staying private honestly kind of makes sense for them. But I would love for them to, you know, go for...

B

Bill Gurley43:06

Has Y Combinator gotten liquid in a private company?

G

Garry Tan43:10

Uh yes. Yes. I mean it's very strange stuff right like the Scale AI exit is, you know...

B

Bill Gurley43:17

That but I meant, you know, just participating in a secondary transaction.

G

Garry Tan43:23

Uh, I and Initialized have done it in the past.

B

Bill Gurley43:28

Yeah. But I don't, I mean at YC we just try to, you know, we just try to be there with...

G

Garry Tan43:33

Forever is a very long time. Yeah, that's right.

B

Bill Gurley43:37

You've been outspoken on the suggested California wealth tax. You want to talk about why you're so strongly minded?

G

Garry Tan43:47

Yeah. I mean, the hard part about what they've come up with, so if people haven't been paying attention, there's going to be, on the ballot in November, it has not qualified yet, but they're going for it, a 5% one-time tax. And we all know these taxes are never one time. But it's actually more profound than that. It's actually an unrealized gains tax. So, if you're in this room and say your company, you're so lucky to get a paper valuation of 5 billion dollars and you're worth a billion dollars on paper, well, you'd have to pay 5% of your holdings at that time. And if your company went to zero actually, like you'd just be out of that.

B

Bill Gurley44:28

You'd just be sitting on a loss, basically.

G

Garry Tan44:31

And so the thing is it's also a tax on things that you already paid taxes on. So, you know, let's say you're well beyond, you know, having paid all of your taxes, like they get to double dip. I mean, honestly, like the millionaire tax that...

B

Bill Gurley44:47

And does the current version also have this thing where it measures based on voting control?

G

Garry Tan44:52

Yeah. Yeah. Yeah. So, I mean, I've had friends of mine have to leave the state, like take their families and move literally before January 1st of last year and...

B

Bill Gurley45:02

On the off chance that it passes.

G

Garry Tan45:04

Yeah. I mean, it backdates, right? So I think this is, you know, personally I don't care about taxes but I care about what's fair and what will actually help innovation. And you know California is in sort of this insane moment where it's actually a resource trap, like there's so many resources but if you look around like, you know, I spent a lot of time looking at homelessness policy, like we spend more and more money to get worse and worse outcomes mainly for virtue signaling and like we shouldn't do that. It's the things that we do in San Francisco or in LA are not compassionate. Like, and then they come at people saying like, 'Oh, well, you know, fat cats, business, tech people, like all they care about is that.' It's like, 'No, that's not correct at all.' Like, you know, I'm more than happy to pay the tax. Like, I'm a part of a society just like everyone else. And, you know, I want to pay the tax, but I want it to go to things that make sense and that actually serve one another. And that's not what's happening, right? Like we're paying for million-dollar condos that are used as drug dens and then people die in them.

B

Bill Gurley46:13

Yeah.

G

Garry Tan46:14

And that's not compassionate. Like it is illegal in California right now for the state to fund permanent supportive housing that is dry.

B

Bill Gurley46:23

Yes, I know that.

G

Garry Tan46:24

Which is totally nuts. And it's, you know...

B

Bill Gurley46:26

Even a shelter you can't drug test.

G

Garry Tan46:30

It's illegal. And so, you know, I mean, us talking about that like I think 10 years ago, like, you know, in a room like this, I don't think anyone would talk about it, but I think we need to talk about it because like no one else is going to talk about it, right? Like we're, you know, I think tech and business, like we're fine to pay the tax, but we need an effective government on the other end. And the only way we can get that is like we have to go all the way into the wheel.

B

Bill Gurley46:54

Well, and you noted this on a podcast, but that situation is set up because of the proposition process in California. So, the legislature or the governor didn't bring this. It's being proposed actually by supported by a union, the SEIU union that has put it on the ballot. But if it's voted in, they have to accept it.

G

Garry Tan47:12

Yeah. I mean, like it or not, like that's what I've traced. You know, not enough housing, watering down of our education. Did you know that it's still almost impossible to take algebra as a public middle school student in San Francisco?

B

Bill Gurley47:26

Because they killed off the...

G

Garry Tan47:28

Yeah. I mean, it's like unfathomable. It's like I wouldn't be able to, I'm the product of public schools and there's no way I would have been able to study calculus by senior year, get into Stanford for computer engineering and do anything that I did. Like I didn't grow up well off. Like, you know, we were food insecure sometimes when I was a kid. You know, I needed my public school and I needed my math teachers to teach me how to do the things I get to do today. And I want every, you know, we want our society to work and it's not working for us and we've got to vote these people out. Like we actually have tech people and people in business have to get political power and we cannot be afraid. We have to speak up because we actually can solve the problems of our state.

B

Bill Gurley48:15

You know, it's really sad in a lot of ways. I feel so fortunate to have been able to spend 25 years in Silicon Valley and be a part of the ecosystem and there are pieces of it that are just so wonderfully magical. You know, the amount of sharing that goes on, the amount of willingness people have to mentor and reach out. The way that you can fail and then just immediately be into something else and it's just so wonderful. And the thought that someone would intentionally target to blow it up is a little nuts from a high level from my perspective but...

G

Garry Tan48:53

It might be really good for Austin, honestly.

B

Bill Gurley48:55

No, it could be great for Austin. I think it already is in a certain bit but I'd like to think they could all succeed and not that one has to succeed at the expense of the others.

G

Garry Tan49:06

Yeah. Yeah, I mean for us like we want startups to succeed and you know the reason why we're still in San Francisco is that the rate of unicorns is actually 2.5x higher if you stay in the San Francisco Bay area.

B

Bill Gurley49:21

I believe it.

G

Garry Tan49:22

And like if they kill the golden goose, I mean the eggs are great. Let's eat the eggs, you know? Like let's share the eggs with everyone.

B

Bill Gurley49:30

Don't shoot the goose.

G

Garry Tan49:31

Yeah. I mean, you know, I'm sure the goose tastes really really good, but only eat it once.

B

Bill Gurley49:37

Yeah. Let's see what audience questions look like. If they can pop those up real quick. See if any of these pop for you, Garry.

G

Garry Tan49:44

All right.

B

Bill Gurley49:46

What will the world look like when 99% of people can vibe code?

G

Garry Tan49:50

I mean, that's a good question. Like some of it is like what are we going to be doing for one another? And I think it might actually be in the operating system level. So, you know, if you've watched the movie Her, like I think there's going to be this moment where our, you know, we're not going to open up our phones and look at this UI. Like, I think that we're probably going to have something that's just in time software and it's going to be very different and we're going to be shaping that.

B

Bill Gurley50:17

Okay. How's the bar raised for early stage investing because of vibe coding?

G

Garry Tan50:25

I mean, I guess we're starting to see it in the YC batches ourselves. It's like they're, you know, about half of the companies are all the way out on the edge. Like they are, you know, coding 10, 20,000 lines of code a day, just like me. And that's, you know, they're way better at it than I am actually, right? Because they get...

B

Bill Gurley50:45

It's like there's a whole new skill set that if you're not a part of, you're left behind.

G

Garry Tan50:51

And it's actually really hard. I mean, I have software engineer friends who are like in denial. They say like, 'This isn't real.' Like, it's in my mentions, too. They're like, you know, 'Haha, this is just a bunch of markdown and this is just the standard VC tripe, pump and dump scam.' It's like, guys, like I mean, the funniest thing is like, you know, YC is already good. Like, I don't know. It's like this is not a pump and dump. It's like I actually genuinely want people to be successful and this is actually probably, this is the good news actually, like the very interesting thing about this and this is I feel like it's true across all of, for creative people, all you have to do is open up and use the tool and because you know what you know, you're going to be all the way out on the edge. Like you will be a top, you know, if you're a good engineer like the 10x engineer today can be that 2000x. And you know, it's very strange to run across like the 10x engineer who refuses to become a 2000x engineer. Like it seems like that shouldn't happen, but I think like there's a mass...

B

Bill Gurley51:59

You've seen some of that.

G

Garry Tan51:59

I think that's happening like pretty consistently.

B

Bill Gurley52:02

Yeah. Change is hard.

G

Garry Tan52:05

I mean, especially if it was your superpower.

B

Bill Gurley52:07

Yeah. There's that book Who Moved My Cheese? Yes. I feel like that, you know, it's a very short, very simple book, but I think it's the defining book. One of the other things I've noticed is people that roll around in the technology come to understand what else it might be able to do. And so it's almost like there's this exponential or accelerated launch once you get into it because two weeks in, four weeks in, your mind has expanded in terms of what you think is possible and the use cases that you're using it. And so you're literally running away from everyone.

G

Garry Tan52:41

Yeah. Yeah.

B

Bill Gurley52:42

There's a question, would YC launch in other cities?

G

Garry Tan52:48

Yeah, I mean we're openly, especially because of what's happening in California, like we don't like to have all of our eggs in one basket and especially when you have some goose killers out there. So, we've got to, you know, Cambridge...

B

Bill Gurley53:02

We're likely Cambridge.

G

Garry Tan53:03

I think Cambridge, Massachusetts is probably our, you know, I mean, maybe this is the example of like look, like we're not against taxes. Like, you know, Massachusetts actually has like a millionaire tax, like I think it's 5% or 4% on every dollar above a million dollars a year in salary. I was like actually that's a normal tax, like it's not this crazy, you know, if you have super voting shares like suddenly you're going to lose like 170% of your net worth through taxes. You know, there are ways to do this that work really well and I mean Cambridge has a great school system, like it's very functional. Like, you know, I think California is way out on the edge of what is not functioning and we hope to turn it back though with...

B

Bill Gurley53:50

What will it take for you to run a batch here in Austin?

G

Garry Tan53:53

Oh my god. I mean, I'd love to. So, I mean, some of it is I need to hire a partner who's here or like, you know, we hired our first partner who's based in Cambridge full-time, Ankit Gupta, and he's incredible.

B

Bill Gurley54:04

All right. Well, hopefully we'll see that one day. There's a question, how can I avoid my startup being just another Claude skill?

G

Garry Tan54:15

I mean the great thing about it is like have customers. And like I mean again there's like 99.9% of the people on this planet are like, you know, everyone, maybe I'm online too much but like I always think of that meme where it's like they don't know and it's like a room full of people all dancing and there's one guy in the corner and he's just like they don't know that everything's about to change and that's like how I feel about all of this right now.

B

Bill Gurley54:45

And you guys are really big on get customers fast like even in the 13-week program.

G

Garry Tan54:51

I mean that's what, yeah. I mean so the answer I think is like going back to what I said earlier is like empathy. Weirdly it's like just literally if you can put your feet into the shoes of another person and totally create that thing...

B

Bill Gurley55:04

And understand what they want. Okay. This is the last question.

G

Garry Tan55:07

Last question.

B

Bill Gurley55:08

You've started companies in addition to running Y Combinator. You see all these companies. If Garry Tan were forced to be a founder tomorrow, what ideas would you be most enthralled by?

G

Garry Tan55:20

I mean, I sort of did that recently, like I'm starting, I mean, I released a bunch of open source and then aside from that, I have Gary's List, which is garyslist.org, which is right now it looks like a blog, but it's actually kind of like if WordPress and Meetup had an AI baby. And so, I think that I mean the great thing about it is like we're going to use all of that. Like one of the fun things that, and this is sort of the shape of the kind of features I feel like you can do now. We had our first launch. It was 400 people. They all had to fill out the essay, but then at the end we didn't just break and go to the bar. I had people, I did custom introductions to the other people in the room that they didn't know yet, but they needed to. And I had like here's all of their bios and here you ask this other person this question. And then we basically made everyone walk away with at least three or four new people who like they could probably go have dinner with them and just mind meld with them. And so you, I mean I think that's like one concrete example of like what I, I mean this is one of like probably a million...

B

Bill Gurley56:32

It's matching skills and meetup type things.

G

Garry Tan56:35

I think it's like that's one of like a million different things that the world sort of needs right now. It's like how do we build this software that like, I mean what do people want? They want connection. They want meaning. They want community. I was like I don't know, that's what I want. That's what YC is, that, you know, building Bookface at YC, like having these events is like that's what we do all day. That's what we do all day. And it's like we need like not a little bit of it, like I need like 2,000x more of that in our society. And if we had that in our society...

B

Bill Gurley57:07

Yeah. Well, I didn't take any time up here because I knew we wanted to focus on Garry talking about my book, but it's called Running Down a Dream and it's about how to find and thrive in a job that you actually love. And one thing that I talked to Garry about before is he is in that place for sure running Y Combinator. And Y Combinator is in good hands because he's the one running it. So, thank you very much for...

G

Garry Tan57:31

Buy everyone, buy Bill's book.

A Conversation with Garry Tan

About Garry Tan