The video provides an insider's perspective on Y Combinator, one of the most prestigious startup accelerators in Silicon Valley, known for kickstarting renowned companies such as Airbnb, Coinbase, and Reddit. Through a conversation with Gary Tan, Y Combinator's new leader, viewers gain insight into the Accelerator's decision-making process, highlighting its rigorous selection criteria and the immense opportunities it provides to founders during its 10-12 week program.

The narrative also explores Gary Tan's personal journey, from a former Y Combinator participant in 2008 to becoming an influential investor and now a CEO of YC. His experiences, as a child of immigrants who found success in tech, illuminate the transformative power of technology and entrepreneurship. Tan discusses the importance of Representation and innovation, emphasizing the need for diversity and inclusion in tech startup communities.

Main takeaways from the video:

Please remember to turn on the CC button to view the subtitles.

Key Vocabularies and Common Phrases:

1. Accelerator [əkˈsɛləˌreɪtər] - (n.) - A program that provides support and resources to startups to help them grow faster.

YC, short for Y Combinator, is one of the most storied startup accelerators in Silicon Valley.

2. Kingmaker [ˈkɪŋˌmeɪkər] - (n.) - A person or group with great influence over the selection of leaders.

Gary Tan is now perhaps the ultimate startup Kingmaker.

3. Luminaries [ˈluːmɪˌnɛriz] - (n.) - Eminent or influential people in a particular sphere.

It was all sort of like the Luminaries, you know?

4. Euphoria [juːˈfɔːriə] - (n.) - A feeling or state of intense excitement and happiness.

That big bump at the top of that graph...that's a moment of Euphoria.

5. Viable [ˈvaɪəbəl] - (adj.) - Capable of working successfully; feasible.

Are the things that they're trying to do, and are those things Viable?

6. Representation [ˌrɛprɪzɛnˈteɪʃən] - (n.) - The action of speaking or acting on behalf of someone or the state of being so represented.

I think Representation matters a lot.

7. Resonates [ˈrɛzəˌneɪts] - (v.) - To produce a deep, full, reverberating sound or to evoke a feeling of shared emotion or belief.

What have you found really Resonates? Like, what takes off...

8. Prosperity [prɒˈspɛrɪti] - (n.) - The state of being successful, typically in financial or economic terms.

Like, tech is this thing that can bring people out of whatever situation they're in and often into Prosperity.

9. Ineptitude [ɪˈnɛptɪˌtjuːd] - (n.) - Lack of skill or ability.

Right at the crash of Ineptitude.

10. Valuation [ˌvæljuˈeɪʃən] - (n.) - The process of estimating the market value of a financial asset or liability.

That focus on Valuation and getting that next notch of Valuation...

Inside the Iconic Startup Accelerator: Y Combinator's Legacy

Hi. Hello. How are you? Great to see you. Good to see you. I hear this is a special coffee shop. Yeah, this is just where so much stuff happened, especially for YC over really ten years. YC, short for Y Combinator, is one of the most storied startup accelerators in Silicon Valley, where Airbnb, Coinbase and Reddit all got their start. It's like an elite club for chosen founders to get access to top shelf mentors and if they're lucky, raise top dollars. Gary Tan is the new leader of Y Combinator, succeeding a short line of big names including Sam Altman and Paul Graham, which makes Tan now perhaps the ultimate startup Kingmaker.

Ever done a deal here or anything like that? You know, like YC is interesting because the deal is pretty straightforward. We just meet them for ten minutes and then decide yes or no. Yeah, that's right. So that's ten minutes and then yes or no? Yeah, that's right. Wow. How do you know in ten minutes? Well, I think you can look at, you know, what the founders are capable of, their skills. I think we're up to 40,000 applications ever. Every year. Every year, yeah. And you pick like a few hundred? That's right. It's a very, it's the lowest acceptance rate, you know, more. More selective than, you know, pretty much any selective school in the world. I feel like a lot of this stuff all started here, you know, back in really 2005. This idea that you could give very small amounts of money to just a few teams and have those teams go on to become sort of the Reddit and the Airbnbs of the World. All right, thank you. Here we go. We got a Try and a Latte. Oh, thank you. Thank you very much. It's warm. Let's go.

This is where people meet their first investors. This is where they meet their co founder for the first time sometimes. This is really important part of Silicon Valley. And you actually were in YC yourself? Oh, yeah, I lived five blocks down that Way and YC is about five blocks down this way. And when were you accepted to YC? 2008. 2008. So just at the start of financial crisis? Yeah, for sure. We raised our angel around for posteurous the day Lehman died and nobody else in our batch managed to raise any money. And you're a Bay Area guy, right? That's right. You were born and raised here? Yeah, I grew up right here in Fremont, right across the bay. And tech gave me everything I have, honestly. You know, child of chinese immigrants. You know, we were sometimes food insecure, but I just remember, tech was here, and we grew up in the shadow of all this greatness, all this technology being built from nothing. I knew that I wanted to learn to code and, you know, I cold called the Internet section until I got a job and we were living in one or two bedroom apartments. And for my parents to, you know, sometimes struggle with English, the cultural barrier, you know, my dad was foreman in a machine shop. My mom was a nurse assistant at a convalescent home. For dinner, we would sort of have the expired bread that someone would drop off to sort of help out my mom, who was, you know, working sometimes two shifts just to keep the family going.

And so I think that's one of the really important things to me that I realized, like, tech is this thing that can bring people out of whatever situation they're in and often into Prosperity. And that's what I want for everyone. You're sort of like an engineer designer by background. How does that inform your perspective? This is why YC really attracted me in 2008 was that here was the one place that wasn't about the flash. It wasn't about, you know, whether you had an MBA or, you know, you went to some school or whatever. It was just purely, hey, can you build something great? You have this picture, it's 2008, I believe you're sitting on the ground and you can see Paul Graham in the background and Mark Zuckerberg. What's going on in that moment? At that point, I knew I wanted to start a company, and YC threw this event that was a free event called startup school. And it was all sort of like the Luminaries, you know? I believe that year Jeff Bezos came and he actually launched AWS at that startup school in 2008 at the auditorium at Stanford. I was sitting on the ground. Photography was one of my loves, and I was actually thinking about either starting a company or becoming a hip hop editorial photographer.

Very different proposition. Yeah. You went on to become a partner at YC yourself. How did you make the transition from entrepreneur to investor? You know, we were doing dead simple blogs by email, posterous. And then didn't you sell that to Twitter much later, actually. I mean, Instagram came out and that flatlined our growth. And this is one of the interesting things about being an investor. You know, I think we were very much in the running to be sort of one of the major social networks, but that was because there were no really great iPhone apps yet for uploading photos until Instagram. And now I realize it's actually the role of the investor. We need to be helping them understand the historical context, like what is actually happening in the market and what are the brass rings that are going to be enduring, meaningful businesses that could be worth billions of dollars? So obviously, you worked at YC for a bit. You went on to start your own fund. Yep. Initialize.

Absolutely. You made some pretty smart bets early on. You invested in Coinbase, for example. What did you learn from that experience that gave you sort of the bonafides to be an investor? This is actually a business that requires you to see enough, and YC was just such a concentrated form of all of tech happening, and it remains that, that I think you just end up learning way more about what's doable, what's possible. So coming back to YC as CEO, is that like a dream job? Yeah, I mean, the ability to help people basically achieve their dreams, you know, that's what YC did for me. And I'm, you know, a steward here. I'm trying to figure out what can we do to help more innovation happen in the world. Ooh, I love the wall of photos. Oh, yeah, I. So this was very, very early days. Alexis Ohanian. Steve, there's Sam Altman on the left. Oh, there's Sam. Yep. That's Emmett Shear of twitch. Oh, my gosh. Justin Kahn, Steve Huffman and Alexis of Reddit.

There's a lot of lore in this one photo. That's right. My gosh, everyone looks like babies. Yeah. I mean, they really are though, too. Like just out of college. And that's the thing to emphasize here is there's sort of the next Brian Chesky out there maybe watching this right now. I walked right by this. Oh, yeah. What do we have here? Well, this is sort of the experience of every startup, right. You know, you launch and then things sort of fall out and then you have a crash trough of sorrow. Yep. Everything's horrible. Yep. Obviously you always hear about this story, but we're here to sort of try to lift people up right at that moment, right at the crash of Ineptitude. Yeah, that's right. Ups and downs are always a part of it. This is actually the photo from my YC interview. Actually, this is the stripe office right in Palo Alto. I think that's Greg Brockman of OpenAI right there. Yeah. So this is from 2009. That's me over here, and Sam's right there. Look at this. James Lindenbaum from Heroku.

So this is. This looks like the Last Supper. Airbnb stripe, Instacart, Dropbox, Coinbase cruise. So many. Who am I forgetting. Oh, gosh. I mean, there are so many. Right. The most crazy thing to me is that the next ones are still coming. This is a community that is refreshing itself with the next billion dollar startups, literally right now. So I have to call you out about something here. Sure, of course. There are a lot of dudes in these pictures. Absolutely. Where are all the women? Yeah, I mean, that's something that we're gonna continue to work on. And, I mean, there's not a single woman in this picture. Yep. I mean, 2009 was a time that it was easily a problem, and that's something that we're continuing to work on.

Is there something about the orange? This room is very orange. It's very orange. I think it was. The hex code for the color was FF 6600. Okay. So it was very simple color that you could write in code, and it turned out to be a very bright one. We read online that orange also can symbolize optimism and energy. So I thought maybe that was the reason. But of course, it's probably more wonky than that. The name Y combinator is actually an algorithm that writes other algorithms. So YC was meant to be a startup that helps start other startups. Oh, I never knew that. So many companies have come through these doors. Talk to me a little bit about the process. For those who don't understand, what exactly does a startup Accelerator do? Well, YC works kind of as a 1012 week program. Anyone can apply online. All they have to do is ideally have an idea and have a demo sometimes. And what we do is we try to figure out who are the smartest, best people who are capable, what are the things that they're trying to do, and are those things Viable? And we whittle it down to about 250 to give half a million dollars to. Right. Which is great, because when I first started, I think YC only gave me $12,000.

What does the newest class of founders look like, and what problems are they trying to solve? A good deal of them are focused on AI, bringing in large language models. That's a really exciting time for just software, period. Demo day is sort of like a rite of passage. Oh, definitely, right. What happens on demo day? It's a thousand investors, VC's, angel investors, people who have been there, and I, they often raise millions of dollars. And so that's a really powerful moment, because that big bump at the top of that graph that we saw, that's a moment of Euphoria. And then, hey, guys, it's back to work. We're going to be in that trough of sorrow for a while, but we're going to make it to the promised land. What do you say to the folks who are out there thinking, how do I get in? Well, the big thing is, I think we really like people who are earnest. What we really care about is, are you solving a real problem? Can you show us the quality of your work? You know, can you access a market that nobody else can actually access? So in ten minutes you decide whether to give someone a golden ticket? That's right. Are you making all the right decisions? Well, we hope so. And that's why demo day exists. You know, those thousand investors come back year after year after year, because you'll never find a congregation of hundreds of startups in which a dozen of them will probably go on to be worth a billion dollars or more. The hard part is, it's not really about what happens in that ten minutes, it's about the 10,000 hours that goes in beforehand. The best CEO's in the world are sort of jack of all trades, but master of one or two, and that isn't something that is in that ten minutes or in those twelve questions. That's something in someone's life.

Are you really looking for people from around the world, or do people who are here have an advantage? Lots of people come here just for the batch. They raise money, they build their community, and then they go back and become the best company in Mumbai, the best company in London. So I think that this is a story that is San Francisco Bay Area based, but also one that radiates out into the entire world. We talked about the pictures on the wall and you said, hey, you got me, we don't have enough women. We haven't had enough women for a couple of decades now. What are you seeing in the numbers now? I think Representation matters a lot. At the end of the day, you know, the types of problems that people solve kind of come out of their own stories. It is important to us, it's important to me. You know, at YC we have more than 850 women founders who have gone through the program, and you're right, that's not enough.

What are you doing to make, to change the ratio? I mean, I think I look at the process, and we want the process to be something that is as open and inclusive as possible. There's a lot to be done and, you know, we're not done. We're seeing tens of thousands of people getting laid off from tech companies. How does this play out? I think a lot of large companies started treating their employee base almost as a place to park resources and almost as a competitive moat versus the other giants. And when I think about the amount of talent that was sort of locked up in cushy jobs that could have been actually out there in the market making new technology, pushing things forward, I'm hoping a lot of them actually come over to startups and they realize, oh, this is what it's like to run fast again. What's your advice for these workers who are getting laid off? It does sound a little trite to just say it's time to build, right? It sure does. I mean, I think some of it is like, it takes stock, right? Like getting much more connected to the problems out there, I think will lead to just a lot more direct access to, I mean, building equity, building businesses that really matter.

Well, speaking of equity, for years, tech workers have been paid in stock, and that was sort of, you know, the ticket. You're taking a risk on this company. It could be worth zero or it could, you know, be worth millions. That's right. We're seeing kind of the dark side of rsus are getting paid in stock now. Do you think that's still the way it should work in Silicon Valley? I mean, that's some of the magic of startups. I think this is about labor being able to access your actual capital. And this is like one of the most direct and most awesome versions of it. Some of the bad behavior we saw from startup founders was trying to reach for that billion dollar Valuation because they wanted the headline out there saying that they're a unicorn now. But that comes at a cost, right? The focus on Valuation and getting that next notch of Valuation above all else. That comes at both a great personal cost to the founders themselves, but also to the employees. So what do you think needs to change? I think some of it is already happening, right. You know, the revaluation of startups right now is starting and it will continue. People are going to be a lot more mindful about, do I really need to do that $50 to $200 million raise?

So you're a few months into this job as CEO of Y Combinator and Silicon Valley bank collapses. What is your level of panic in that moment? Well, I remember, you know, I'm dropping my seven year old off Friday morning at 09:00 a.m. and then immediately I start getting texts and phone calls from founders saying that was my only bank account. What do I do? Because it wasn't clear to me that people were going to give a bank called Silicon Valley bank the benefit of any doubt at all simply because of its name. This is not big tech getting in an hour of need. This is a moment of little tech. This whole SVB thing is made clear. A lot of people look at Silicon Valley and see elites. Are they wrong? Anytime you have power that is accumulated in the hands of the few, that's something we should be worried about. Little tech is competition, and competition is the way that we have actually vibrant markets that give consumers new choice. And that is actually a very important thing to protect. How long do you think the downturn lasts? How hard does this get? I guess it's so hard to tell. And I'm not a macroeconomist. Some people like to play that on Twitter, though. So I underestimated to what degree interest rates rule everything around us. It affects valuations, it affected the SVB crisis. You know, if you work in crypto, you better pay attention. I mean, all of these things matter because the price of money is sort of shifting radically, branched out into a lot of things, like a lot of funds did.

To be honest, over the course of the last ten years, you're now ending the later stage investing. Does that make it harder for a lot of the YC companies to then do follow on rounds? Does that sort of clip their wings before they can even fly? Well, I don't think so. Just because the best thing we can do is take our own advice. And especially in times of sort of recentering, a reset in what's happening out there in VC, what are the things that make you truly unique and really focus on those things? So that was a painful decision to make, but it was ultimately the right one for YC. When you look at venture capital culture and the way it operates, do you see things that are broken? Yeah, I mean, I think the hardest part is often there's not alignment. Right. You know, if you're a junior VC, you're coming in, you might only be able to do one or two deals, three or four deals, period. And in those three or four deals, one better be a unicorn. And we see people bend over backwards, sort of put their own interests ahead of that of the founder, and sometimes that's systemic. Do you think it's going to be harder for startups to raise money for the next ten years? It's been a fruitful time. Is this just the new normal? Well, I think today we're in the midst of this large language model explosion, and I think that that might be the next platform.

And those platforms will actually give rise to new platforms that we don't even know about yet. So if you ask on a ten year timeframe, like will there be more technology or less? I think there's gonna be more. And if it's a one or two year timeframe, we gotta ask Uncle Jerome. Between Microsoft and OpenAI and Google and Facebook and Apple and Amazon, is there enough room for startups to run? When it comes to AI, do they have room to really compete? I think so. And some of it is like, we actually don't even know the physics of this market yet. It took many years of the search engine world and the search engine war before we figured out that Google and Adwords were going to be the winner. And I think we're right there. Right again. I would never count out the little startup who figures out a way to fight against unbelievable amounts of capital or unbelievable amounts of market power. That's how we combat this idea that big tech is too powerful. Like, guess who's going to fight against them? It's startups.

What's going to define the Gary tan era of YC? What I hope is that a thousand flowers bloom at the end of the day. You know, I also experienced this crazy place that gave me Prosperity. And ultimately all I care about is that that story continues. How much are you working here versus home in San Francisco? Oh, well, we're San Francisco based in work from home culture means that I'm in San Francisco pretty much all the time. So I hear Mister Beast schooled you on your content creation. Yeah, that's right. This was during the pandemic and I got in touch with him on Clubhouse and he gave me advice on thumbnail title and you know, click through rates and all that good stuff. Welcome to the YouTube studio. I love it.

What do we got going on here? Well, you know, the number one thing that I give people advice about is get a really big softbox. So you get like the really nice cinematic look. Everyone needs a nice cinematic look. That's right. It's important. I mean, it's sort of like wearing a suit to a nice meeting. Like having a good Zoom setup is, I think, you know, increasingly important. What have you found really Resonates? Like what takes off the number one thing for me is just actually talking about the things I messed up. Like actually saying, hey, you know, this is why my startup failed or the time I messed up my pitch to series A investors or my co founder disputes. Those all were real things that became a problem for me. And then being real about that helps people understand, like, hey, this is, again, the long trough of sorrow, and here's how you get through it. So it's being human, being authentic, and actually, I feel like some folks in tech, and I won't name names, have trouble admitting when they're wrong. That's fair. That's one of the salient features of going on Twitter sometimes.

This is my favorite part. Wow, you've got quite a view going on here. You walk down the streets of San Francisco, you have to admit it's different, post Covid. The streets are different, but right down the street is what they call Cerebral Valley, which is sort of turning into the new Silicon Valley. What is your role in San Francisco politics? I know you're doing a lot of tweeting. Oh, yeah. Somehow Twitter gets me in trouble all the time. But my Twitter, in addition to being about startups, has accidentally also become really about what is the future of San Francisco and how do we make this a place for immigrants and immigrant families to actually come and do their thing, like, for them to find their american dream here. I mean, it is expensive.

It absolutely is. There was this huge push to raise payroll taxes in San Francisco that was supposed to help the homeless problem. A lot of companies left San Francisco as a result. Stripe, a Y combinator company, for example. So now the city's taking in less taxes because the companies aren't here. And the homeless problem, it doesn't seem like it's been solved. Like, what do you think about that? I'm never about, hey, we should lower taxes. I don't think that's the issue. When we have Prosperity in tech, we should be able to share that because we want abundance and we need policies to actually get us there. I just want things to work. Can we meet in the middle? Can we find common sense things to do, common sense policies that work? Can we find politicians that represent us that are not at the extremes, but finding ways to work together? And that's what I want. People look at you like this rich tech bro who wants to turn San Francisco into a utopia. Is that not the case? I think a utopia is just another form of extremism. We have to look at what's possible. We have to look at the resources. And, you know, I think that tech probably should pay its fair share.

How do you keep the soul of San Francisco, but also make it more attractive to everyone else? For the longest time, the status quo was, let's prevent people from building. Let's stop people from coming here. Let's make it unpalatable for people to move to San Francisco, and maybe that will make it okay. And I think that that's just the wrong solution. That's not a solution at all. That's putting your head in the ground. We should absolutely be making space for everyone. That's really what America is for me. That's what America has been for my family, and that's what I want for everyone in the world. San Francisco, for life. You know it. This is the shining jewel that I go everywhere in the world, and the number one thing they want to hear about is, how do we bring tech to our city? Like, this is a gift, and this is just getting started.

Technology, Innovation, Entrepreneurship, Startups, Y Combinator, Gary Tan