How to Get Into Silicon Valley’s $600 Billion Startup School | The Circuit with Emily Chang

[Music] 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 ycee over really 10 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 white combinator succeeding a short line of big names including Sam Altman and Paul Graham which makes tan now perhaps the ultimate startup King maker I've ever done a deal here or anything like that you know like YC is interesting because the deal is pretty straightforward because we just meet them for 10 minutes and then decide yes or no yeah that's right so that's 10 minutes and then yes or no yeah that's right wow how do you know in 10 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 uh 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 the Reddit and the airbnbs of the world all right thank you oh thank you thank you very much yeah let's go where people meet their First Investors this is where they meet their co-founder for the first time sometimes this is an important part of Silicon Valley and you actually we're in YC yourself oh yeah I lived five blocks down that way and YC is about five blocks down this way when were you accepted to YC 2008 2008 so just at the start of the financial crisis yeah for sure we raised our Angel around Preposterous the day Lehman died and nobody else in our batch managed to raise any money and you're a Bay Area guy 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 forming 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 engineered designer by background how does that inform your perspective this is why ycee 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 what I see through 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 you know 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 as 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 you know what is actually happening in the market and what are 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 about 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 Bona fides 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 oh I love the wall of photos oh yeah so this was very very early days Alexis Ohanian Steve there's Sam element on the left oh there's Sam yep that's Emmett Shear of twitch oh my gosh Justin Khan 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 like 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 uh the experience of every startup right you know you launch and then things sort of fall out and then you have a crash trap 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 ineptical yeah that's right ups and downs are always a part of it this is uh actually the photo from my YC interview actually this is the stripe office right in Palo Alto I think that's Greg Brockman of open AI right there yeah so this is from 2009 that's me over here and uh Sam's right there yeah James Lindenbaum from Heroku so this is this looks like the Last Supper yeah Airbnb stripe instacart Dropbox coinbase Cruise so who am I forgetting oh gosh there I mean there's 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 uh I mean there's not a single woman in this picture yep two 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 a FF ff6600 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 and the name Y combinator is actually algorithm that writes other algorithms so YC was meant to be a startup that helped start other startups well 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 10-12 week program anyone can apply online all they have to do is you'll 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 half a million dollars to right which is great because when I first started I think YC only gave me twelve thousand dollars what is 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 and investors VCS Angel Investors people who have been there and they often raise millions of dollars and so that's a really powerful moment because that big bump at the time at the top of uh you know that graph that we saw yeah you know that's when that's a moment of euphoria and then hey guys it's back to work like 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 uh can you show us the quality of your work you know can you access a market that nobody else can actually access so in 10 minutes you decide with 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 Congregation of hundreds of startups in which you know 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 10 minutes it's about the 10 000 hours that goes in beforehand the best CEOs 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 10 minutes or in those 12 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 you know 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 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 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 the about the amount of talent that was sort of locked up in cushy jobs that you know 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 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 you know do I really need to do that 50 to 200 million dollar 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 uh you know I'm dropping my seven-year-old off uh Friday morning at 9 00 a.m and then immediately I start getting texts and phone calls from Founders saying uh 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 neat in 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 garden does this get I guess it's so hard to tell and you know I'm not a macro Economist 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 YC branched out into a lot of things like a lot of funds did to be honest over the course of the last 10 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 re-centering uh you know 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 gonna be harder for startups to raise money for the next 10 years it's been a fruitful time is this just the new normal well I think today we're you know 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 you know if you ask on a 10-year time frame like will there be more technology or less I think there's going to be more and you know if it's a one or two year time frame like you know we got to 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 to AI do they have room to really compete I think so and yeah 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 uh I think we're right there right again I would never count out uh you know the little startup who figures out a way to uh you know fight against unbelievable amounts of capital or unbelievable amounts of Market power that's how we combat this idea that big is you know 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 and work from home culture means that I'm in San Francisco pretty much all the time [Music] 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 okay 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 soft box 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 like 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 uh here's how you get through it so it's being human yeah being authentic and actually I feel like a 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 postcovid 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 uh 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 is 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 thank you [Music] [Music]

Channel: Bloomberg Originals

Views: 631,755

Keywords: News, bloomberg, quicktake, business, bloomberg quicktake, quicktake originals, bloomberg quicktake by bloomberg, documentary, mini documentary, mini doc, doc, us news, world news, finance, science

Id: 4VDZRR07Eqw

Length: 23min 58sec (1438 seconds)

Published: Fri Aug 11 2023