Paul Graham, Founder, Y Combinator

Carolyn, I'm really excited. It has taken a couple years, but we have Paul Graham back on the show for part two. Part two. Yay. Hey Paul. Here I am. You'd think it would have been easier for me since I'm your wife, but here we are. The shoemaker's children. The shoemaker's children excited. Oh, I say that all the time. Uh I say that all the time about YC, how shoeless, we're always shoeless. So we had a great

conversation the last time. And we kind of had left off. We had talked a lot about the history of Y Combinator. And we talked a little bit about what you had been up to after Y Combinator, but we didn't get into the growth of Y Combinator and what happened once we had s you know, successfully once it had gotten airborne, what happened? We had eight startups in that very first batch. And we always say we grew it organically, but let's talk about how we grew it. Well, we would just have

an application deadline and people would apply and like more and more people applied. We never r did anything all that consciously to get more people to apply, right? I mean we'd announced that there was gonna be an application deadline. We would do startup school every year, and that's I think that probably caused some people to apply. But other than that, we didn't have any sort of conscious effort at marketing. Oh, and I would write essays.

And people would read the essays and I would have this link, interested in starting a startup, apply to Y Combinator, right? So that probably got more people to apply, but there was never any deliberate plan to grow it. We would just get we would just get more applications each time. How much overlap with Hacker News was there? Because I have to imagine well, I know for a fact actually that Hacker News was a huge source of Hacker News I think I started it in like two thousand seven.

So for the first couple years it wasn't a factor. Oh, okay, yeah. And in fact When we were first getting going, there was n very little press. But then we were in the New York Times and that kind of got us out there. And you know, honestly, the only kind of it for something like YC, what this is something people don't realize?

For something like YC, the only kind of out there that you care about is whether potential applicants know about you. Do 22-year-old programmers know about you? And so if you get an article about you in the New York Times, And twenty two year old programmers aren't reading the New York Times. It might seem to you you've gotten a lot of publicity, but actually it didn't really help much, you know. I think founders talk to I think applicants would talk to one another.

I think that was why we grew, said Did did that New York Times article have a like a theme or a thesis other than just like check out this new thing? Like I don't I don't I probably read the article at some point but I don't I don't remember it. A hatchery for startups. Yeah, it was good actually. It was it described YC as this new phenomenon in the investment world, which at that point it was. So that was actually a pretty useful sort of good historical article.

And kudos to Jenny Eight Lee for getting it. No one else didn't. You were talking about how the that's not the right demographic, right?'Cause you want twenty two year old programers to know about YC, but and we may talk about this a little bit later, but you we also had the tiger mom problem, remember when Yeah. Adora actually was the first person to explain this, I think, to me in an articulate way. Like you s you also need the parents to know about it. So maybe the Times article helps.

could read the New York Times. Exactly. That was my point. Yeah. Yeah. You know, and in fact apart early on, this is probably not true so much now because now startups are a more accepted thing to do. But back then in two thousand five parents would freak out at the idea that their kids would leave school and like not get a job. It would seem like it wouldn't seem like they were founders. It would merely seem like they were unemployed. And so once YC started to have a big brand,

Then the founders could say, Look, mom, I'm not just working on my loser startup. I got into YC. There's this well known thing that I got into. I think it helped a lot back in the day. So what was the secret to our success then, in your opinion? Um, I think we actually helped the startups a lot.

And so they would tell one another, like if we had sucked, it would be like, you know, your friends go to a restaurant, right? And if the food's really good, they tell you, hey, you should go to this restaurant, the food's really good. I think people who did YC would tell their friends, Yeah, we did this thing. It was really good. They helped us a lot. They helped us get investment. Look how they incorporated our startup. They did all this like stuff for us.

I think it was simply that it helped them a lot and they would tell their friends and then their friends would do it too. And then, you know, well that's a recipe for exponential growth because then their friends do it. And then there's more people out there telling people that it helped them. The alumni were critical, I think. In the growth of Y C. Young programmer types know one another.

They went to school together, they hang out together, you know. Um, so word spreads quickly. If you please that group, word spreads quickly. And back when we weren't space constrained, I mean, we used to have alumni come to the dinner sometimes, drop by, and they'd they'd introduce the new startups to their investors, and it was just this really great community.

Yeah. And sometimes become their customers. Along the way, I mean there were there were so many ups I mean, I wouldn't say there were dramatic ups and downs, but there were some crazy stories and Carolyn and I keep it. actually. We have forgotten. But I can remember feeling I can remember feeling at the end of the day, Jesus, you couldn't make this shit up. And and I remember also feeling like this was not an unfamiliar thing.

Like stuff was there was always disasters. Stuff was always breaking, you know? Like just hacker news all the time. You forget how many how many times did I have to run off. and like run to my office and deal with some disaster happening to hack. Hated hacker news, I have to say. It was such an unbelievable source of stress. In retrospect, I s I think maybe that was a mistake. Maybe I shouldn't have done that, because It really was more than half of the total stress of running YC. Oh. Oh yeah.

Oh well wait. So do you mean technical ups like technical dramatic things or community based dramatic things? Or both. Both. Okay. Yeah. Yeah, the community, yes. That actually Running out of file space, you know, denial of service attacks, people getting into like terrible fights on the site. I mean it was like in retrospect, that was like a startup in itself. It was like I was running a startup at the same time as doing YC. Do you think Twitter impacted our growth? Maybe

When did that come around? Two thousand seven? Something like that, yeah. I think it it probably did a bit. Yeah. People probably'cause early on, especially all the users, you know, the users have gone through phases. In the beginning, it was like computer nerds, and then it was SJWs, and now it's like you know, Trump supporters or bots pretending to be Trump supporters, they're hard to tell apart, right? And so that first phase we forget now, but that first phase it was pretty technical.

Who were some of your favorite speakers? And I asked that because I remember the Twitter founders, all of'em, you know, Ev Williams, Jack Dorsey, and Biz Stone, used to come to our dinners to be guest speakers and at I used to love when they came. Who do you remember as some of your favorite speakers? You know, Zuck actually was a pretty good speaker because he was so young. He was so young when he started Facebook.

He was probably still at that point, even though he was now famous, he was probably still younger than some of the founders in the back. So they could really relate to him. I could sort of hear them all becoming more ambitious as they thought, Okay, here's this guy. He's like he's super famous and very rich, but he doesn't seem Like he's a different species of animal from me. Like, well, I could why can't I do what he did? Right? You can sort of hear him all. And he was pretty candid.

Early days. I mean I hope this is still mostly true, but back in the early days the speakers used to be completely candid. Nobody worried, nobody worried much about whether something they said would get out, because even if it did get out, that was this was before cancel mobs were invented, right? What was going to happen? What was the first year? Do you guys remember the first time he came? Like what what Yeah. Well it was in California, obviously. It was pretty early on.

It must have been like two thousand seven. Yeah. Seven or eight, I would think. Yeah, pretty early. I remember we met him at a restaurant in Palo Alto. Do you remember that, Paul?

Well this was before he had learned to imitate a normal person, right? Um like early Zuck, you know, I mean I don't know if Zuck publicly describes himself as being an Aspie, but he was He was doing a good imitation of it at any rate, and so he had this weird thing where If he didn't have anything to say, he wouldn't fill the gap with

With you know, passing conversation. Yeah, yeah. He had no concept of small talk. If there wasn't anything he felt like saying at the moment, he would just go like this. Okay. Ha ha ha ha. And it was surprisingly disconcerting. I didn't realize how important small talk was until I met the lack of it. But he would just stare at you if there wasn't anything he's like I don't have any words I want to say, why should I say words? You know? Oh. Didn't Ron set it up?

Ron well, Ron in fact warned me about this specifically. He said, All right, you're gonna meet Mark. Now I warn you, there's gonna be some big gaps in the conversation, right? When he said that, I didn't realize what he's what he meant, um, but then I felt it. I just want to compliment you. I just like him. Zuck used to come and he he would speak at our startup school events and that drew a lot of people. Yeah. He was a big driver.

Startup world back then, people didn't care so much. Like outsiders didn't care so much about the startup world. This was before like in r in you know, even now we think like if something big happens in the startup world, it's a news story. But why should it be if something big happens in the hospitality industry or the mining industry, right? Or you know

Like the advertising industry, it's not automatically some kind of big story for everybody. It's only interesting to people who are in that industry, right? The trade press right might write about it. And it was so weird to me when startups became something that the general public would be interested in. I mean, I understand why they're interested in the private lives of movie stars.

Why would they be interested in the private lives of startup founders? But they started to be and they still are. It's so weird. But back then this was before they cared. This is before that phenomenon had started. And so we were just like our own little people working in the you know, we were the computer club.

It was such happy times. I don't know when the turning There's two things that happened, right? There was then the when the press started taking notice of Silicon Valley, and then almost at the same time, wokeness started. Like in around twenty twelve. And then so they would they would be busting Y C you know, you'd have not not YC but just everybody in Silicon Valley. You'd had you felt like there was this mob, this incipient mob.

Ready to form at any moment, right? If you said or did the wrong thing, they would come and bust you and hound you. So that wasn't fun. That combination of being visible plus wokeness. I feel like if I look back on my history of YC, the thing that uh not hacker news, but what gave me the most heartburn in life was all the negative press around us and all the m Twitter mobs that were based on lies.

Yeah. Yeah. Peter Thiel is secretly running the company. Oh my gosh. Wait, oh are we I think we have to tell that story. Peter Teal's story. Sure. So Peter Teal, oh my god, what year was this? What year was this? It it was after Sam took over. But it was soon after Sam took over. Yes. It was. He was good friends. twenty fifteen or something.

Twenty fifteen. And he didn't he say, Hey Peter, will you be a part time par part-time partner? I put it in quotes, because he like did one office hours or so. Okay, no, I'll tell you the whole story. Right. So that we had this we had this thing. You probably still have something like it. Um we had this thing that I named mostly for alliterative purposes. Part time partners.

Which is people who weren't YC partners but would come in and like for no money. They had no duties. They got paid nothing. They weren't really supposed to do anything, right? But experts in some aspect of the startup world would come in and they would do office hours with the startups even though they weren't actual partners.

And we called these people part time partners, right? And we had'em listed on the website. And so Peter Thiel at one point was a part time partner and I got into a fight on Twitter with somebody. Um who I don't wanna name because he's since apologized and I don't wanna I don't wanna give him grief. But in the process of this fight he was he like picked up to to as if to throw at me like a brick the fact that

Peter Thiel was a part-time partner. And when were we going to get rid of Peter Thiel? Because Peter Thiel had committed what was in 2015 an unforgivable, like cancelable sin, which was to be openly republic. Wow. And so uh so there was this can this mob formed to try and force YC. to fire Peter Thiel and the story grew to the point where Peter Thiel was supposedly like not I mean, part time partners did nothing, right? Um

And the story was that Peter Thiel was like running YC where you know, he was like the head of the chairman of the board or something like that. Honestly. And like best friends with you, you'd met him once. Right. The funny thing was that So there was the all this mob telling YC we had to fire Peter Thiel, right? Well the funny thing was, Peter Thiel, like in the previous year had done like four office

And so Sam had been planning to fire him anyway. Fire in the sense of say, Okay, you don't seem to be actually doing anything. Maybe we'll stop calling stop listing you as a part time partner. So Sam had been planning to fire him. And then there was this mob saying that we had to fire him for being a Republican. And so it seemed like it would be a really bad idea. I told the what I told Sam about this was like, you do not want to be the one who sets a precedent in this sense.

You do not want to be the company that like fires somebody for supporting the wrong one of two political parties, right? You know, much as I dislike Trump, you don't want to fire somebody for that. And so so Sam, even though he'd been planning to fire him, how now had to not fire him because that would have seemed like giving in to the mob.

Well, and to be clear, I think it was like, Hey Peter, come help some some startups when you have time. And he literally didn't have time. He probably just didn't have time to do it. So I don't even I'm not even willing to say like the guy was bad at being a part time partner. I think he just was busy.

So he wasn't coming around. So Sam was gonna be like, Hey dude, this isn't working out like you know, we're j we're gonna take you off the website. That was literally what it was gonna be. And then it turned into this whole thing and it was like, YC, you have to fire this guy who's like like I said, practically I think the the narrative was he's practically running Y C. Well no please. Like the guy was too busy to even be around. It was so frustrating. And by the way, I and and I I um

I'm happy to stand corrected if I'm wrong about this, but like the whole partnership I I remember this day. We were all sitting around that big table in three thirty five and everyone was like No, this is like it was uh emotional because ever we felt very attacked. And it's like, no way we're gonna take them off the website just because these people are saying we have to. Like that's messed up. So

Like the other way around. We're gonna keep them on the website because they're telling us we have to take them off. Now that we're remembering all the like what it felt like to have a cancel mob after us.

And like that probably happened twenty times, right? That was pretty stressful. You know, the funny thing is, wokeness has now decreased so much. I mean, on Twitter especially, but all it just in general, that people can't imagine the shit we went through. Like growing YC. Like w the years where we were really growing YC fast was also the exact same years that wokeness was really growing fast, right?

And so, and and you know why YC got so much shit? Because we were the only like consumer brand in the venture business. You know, there's all these prestigious venture firms, but like ordinary people don't know their names. YC takes open applications from like essentially job applicants, people who are just graduating from college. So YC had to have like a consumer brand. We had to be known by everybody. We're not just like doing series A's.

Right? And so they w these people wanted to blame Silicon Valley and since they were outsiders, they didn't know who the participants were. The only people they knew in Silicon Valley were YC and so everything Like all the problems in the world were Silicon Valley's fault. the only person in Silicon Valley that they knew was me, so all the problems in the world were my fault, you know. I know. Can you imagine? Yeah. So you remember how we started talking about this? Was it actually stressful?

Yeah. I'm thinking, you know, I bet we're forgetting something. It probably was pretty stressful because I remember feeling really beaten up all the time. And I'm trying I think it was more stressful because of all all of the tax than uh the actual startup implosions. Actually doing the job was much less stress than being attacked for doing the job in the press. Right. Exactly. Still a lot of stress doing the job too. I mean.

Yeah. There was a good deal of stress. Like, you know, there was a lot of fighting that we had to do behind the scenes on behalf of the startup. 'Cause people were people would maltreat the startups and then you have to go basically it's like, you know, two kids have a fight and the parents go and talk to each other. If someone tried to maltreat the startups, we would have to go and talk to their investors and say, Come on, this isn't right. They have to back off.

Paul did that all the time. Do you remember the ad groc? Do you remember them? Well, Antonio wrote a book about this. This story will be preserved. Um Because yeah, they weren't a super, super successful startup. That this is one of the weird things about YC. People imagine because the startups, because the famous successful startups like Airbnb and DoorDash and Coinbase.

or what become known later, they imagined that during the batch we were spending all our time talking to Airbnb and DoorDash and Coinbase and no, actually, you know, Airbnb was probably in a batch of like twenty five startups and they ex got one twenty fifth of the time. At any given time I was talking to some startup nobody's ever heard of now, right?

And so the amount of trouble caused by startups is not is not remotely in proportion to how big they end up being. In fact, there's probably it's probably an inverse proportion. So you spend basically YC means you spend all of your time dealing with these really naughty problems naughty like K N O T T Y naughty naught naughty naughty. Um, you'd spend all your time dealing with these contorted, miserable problems for companies that are never gonna amount to much anyway.

But it's the nature of the business. I wanna flip this conversation in'cause I'm feeling very negative. I wanna talk about so many of the positive things that happened. Do you remember Giving any advice you gave to some of our most successful startups that really helped them? Do you remember? Airbnb. Airbnb, absolutely. They would have died without YC. I mean, they were dead when they showed up.

Um, though we didn't know it. Um but like telling them to focus on New York, like just focus on that one initial market because you need to get this ball rolling, you know. That t ended up making all a difference for the company. And so that's the best case scenario when you can tell a startup something that makes them take off and then they become you. That's the dream situation. That's not how it usually worked. Usually you would tell people something and they would ignore you.

Right? And then they would fail. That was the usual situation. That was the median case. What was that famous quote that you gave to some startup? You're like, Thank God we fund, you know, fifty startups because you're driving into off a cliff right now. Um I think they're actually doing pretty well. Who'd you say that to? No. Yeah, I think it was sift. I think they're they're quite successful. Ha ha ha. Didn't know you said that to them. Oh god.

That was that story was printed in a book, that book The Launchpad. Oh. That will be preserved too. Carolyn, were there any moments this is a very naughty N-A-U-G-H-T-Y question. Were there any emails that happened that that Paul sent that you were like, oh geez. Oh, gosh. Well probably, but No. Actually I don't think I thought that. Like, oh, this is gonna get us into legal trouble, kind of emails. No, I never would say things that we can do.

Not like legal troubles, but just like Yeah, just like, oh that's really gonna Oh I I'm sure that I was like, this is exactly like the harsh truth that this founder needs to hear. Like I don't think I ever had the reaction like, Oh, that's gonna go over poorly or Okay, that's good. I think people sometimes just need sort of the unvarnished truth from someone who's like, Look, this is what you need to hear. You know, I wanted them all to succeed. I wasn't gonna be shooting them down.

Paul, no one worked harder than you. I swear. at helping startups who are failing. You would not you would not give up on them. Uh other people would be like, whoa, just let that one go. And Paul would be like, no, I'm gonna help them with a new idea or you would just work so hard. This time will be different. When did you start taking office hours? Sort of what w remember when you built the software that allowed startups to book office hours? The booker. You built that, right?

I wrote every bit of our software. Don't you realize like up till the point where I retired, I wrote every bit of our software except the JavaScript that did the up and down up and down v buttons on on Hacker News, which PB wrote because I didn't know JavaScript. I wrote everything. If we had software, I wrote it. And I wrote every word on our website.

Yeah. Yeah. Our website was awesome. I was like, Here's white now. One of my memories, um, of that era is how you would always um well, you would frequently help c uh startups with their name. And I think we might have talked about this in I still do that. No, no, no, I know. So I'm I so my question for you is do you have a name you're particularly proud of where you're like, why don't you call yourselves this? And they're like, amazing. Imjigs IMGIX Five letters. Carolyn has no idea who MJX is.

I do. I know I I remember the name. What's what batch is it though? Oh god, I don't remember batches. Find P H I N D. Oh I remember that one. I've never seen I feel like if I had a dollar for every time you were at instant domain search with founders during during an office hours, Right. Like right on your kitchen counter. Oh my god. So I'd do it right on the island in the kitchen. So many names, so many startups' names have been found at that one corner of the island.

So you're kind of famous for blowing up people's ideas, like taking Their idea. Up in the good sense. In the good sense... Making them here's how you can be the next Google. Can you and you used to do this and some startups would take your advice, some others wouldn't. Can you remember an instance of that?'Cause I you'd come home and you'd be like, Oh wow, if you had been there, y you wouldn't believe the idea we cooked up. Yeah. It's gonna be the next Google.

Yeah. You know, I can't remember specific instances because I would do it so much. I mean, I would do it like maybe one third of the office hours I did. We would figure out how to make an idea much bigger. Yeah, it happened all the time and still does happen. Yeah, when I do office hours now I still do that. And I you know, I see these startups right in the beginning of the batch sometimes, and so there's a lot of room to expand their idea.

I want to also talk about your Matt you're you know, you're really good at working you were good at working with the startups on their demo day pitches. Tell the listeners about sort of what used to happen before demo day with the founders. One of those one of those little secrets.

We would do this thing called vertebrae office hours, where we would figure out what were the vertebrae of their demo day presentation. Because the thing about demo day is you're up there with 50 or now like 300 other startups. And so the investors are not gonna remember anything about your presentation by the time they get to the end. Their brain will be wiped clean.

And so you really can only hope that they'll remember about five sentences worth of stuff in the very best case. And so you should decide in advance. what those sentences will be. And those are the vertebrae of your demo day presentation. The rest is just filler, essentially. And so we would try and figure out what are the five sentences that everybody ought to remember about this startup that would cause someone to invest in them. They're five s sentences with a specific purpose is so like

This is going to be a giant market. We are already solving the problem better than anybody else. It's ours to lose. And when we get there, there's network effects. And so that means it's winner takes off. That's a pretty you're already wanting to invest, don't you? Yeah, sounds great. And that's the thing. Demo day presentations shouldn't be like fast talking marketing speak. They should be almost like logical proof.

of why this company is good to invest in. You know like you follow, if you agree with this step and this step and this step, they all follow from one and the other and the end result is the expected value is really high. That's a good demo day presentation. But I feel like you did more than just vertebrae. You would spend hours and hours and hours at YC and people would just come in.

I would do the vertebrae with them and sit down and think, Okay, this is what the core of your presentation should be and then they would go off and make something that said what I said to say. And then I would sit there and they would practice. before demo day, they would come to YC and take turns standing there projecting their slides and talking, and I would sit there in in the audience essentially, almost like a playwright saying, No, no, cut that right

Yes, you were like a playwright. You'd be like, no, say this. Don't use that word. Say this. It was so such specific. Slow that part down. We were always trying to get people to talk slower. Oh, gosh. Yes. Yeah, see you remember. I can remember. Wasn't there somebody who wrote talk slower on their shoes so that when they looked down, they would it was like talk on one shoe and slower on the other or something like that.

I think online I think there's um a recording of me sitting talking to Brian Armstrong about his demo day presentation. I think that might be on online on YouTube. Oh, that's pretty cool. And then I think you'd sit you'd be like a nervous parent sit sitting in the green room at demo day, um, the whole time. No, no, no, I didn't sit in the green room. I was only in the green room during the breaks. When the when they were presenting, I would be out there taking notes.

Um and I would be wondering, like, will they get this part right? Right. Because I knew what was coming in all of their presentations. You know, I mean there may be a few who didn't come into practice at YC and so I wouldn't know what they were gonna say, but ninety percent of the time I knew what what they were gonna say and w I was hoping will they get this line right? You know, will they Well it lands.

Yeah, will it land? And so I'd be sitting there over on the side, watching every presentation, seeing how it seeing if it landed. There was a lot of stuff in retrospect. Yeah. Right. In addition to being attacked constantly in the press. There was all this actual stuff we were doing. I used to say, and I've believed this, that even if your startup failed, I truly believe that anyone who came out of the YC program felt like it was a great experience and valuable for them. And I

You had to learn a lot. Yeah. If you were if you were even awake, you couldn't avoid learning a lot from the experience of like trying to build something and get it in front of users and you know figure out how to make it grow and how to explain it to investors. And then we would do a post batch survey and I remember you saying like if all they complain about is the food on Tuesday nights, we're doing it right. Yes.

We were always happy when they complained about the food, because that meant there was nothing s there was nothing more substantial to complain about. So we were delighted. I mean, the food wasn't a deliberate um canary in the coal mine, but it ended up It ended up effectively serving that purpose. I think the food's better now though. Yeah, it's all different now. Do you remember that time dinner basically consisted of hot orange cheese?

I knew you were gonna say the chickpeas with the orange juice. Well, someone at one point we had this cook who was like adventurous in a bad way, um, and made this sort of orange flavored chickpea dish, but the founders S the founders took out all the solid bits of this stew and all that was left was this sort of hot orange juice with a few

It was orange chicken. Orange chicken, Carolyn, which seems a little bit more normal. And then the veggie the veggie option was the same sauce, orange chickpeas. Ha ha ha. And the chickpeas were disgusting. I feel like Paul, you you you absolutely were like we've got something's broken here. We've got to t to change. There it the the complaints about the food are legit this time and we actually need to change something, yeah. Oh I mean the complaints about the food often were legit.

Well, you know, this is um the other thing that uh YC I think still does uh but you guys did a lot was inflection point office hours. So not just these vertebrae. But inflection point office hours and I I I'm sure there's some stories from those. I I got to sit in on one of them and um it was really interesting. Well inflection point is was sort of an optimistic name for what was going to happen, right?

This is when a startup is currently on a trajectory that will crash into the ground. And what we're hoping an inflection point is when a line bends in another direction, right? And so this is when the line's going down and we and we hope it's going to start going up. So inflection point office hours is when the startup was in terrible shape, we would get them together with like multiple partners and we'd sit there and figure out how do we save this thing.

But I'm gonna interject in terrible shape, but had promising founders. Yes. Right. Yes. Because if they didn't seem like they had any hope. Should we talk about palliative characters? Should we actually talk about it? Maybe it's time. Maybe it's okay. Okay. Because it was our thing. It's n the new partners don't use this. Yeah. Do you know about this, Carolyn? Palliative care mode? Of course.

Okay, okay. So the if this startup seemed if a startup was doing really badly and it seemed like they had hope, then we would bring them in and we'd say, All right, come on, let's figure out how to change things to make this startup succeed. If it seemed like they were doomed

And they'd be better off just having jobs working for somebody else. We would have this thing we called palliative care mode, where we would just be really nice to them. So at least as their startup was dying, they would be cheerful and happiest. Love. Um just love. Yeah. No tough love. Yeah. We would do top love if with we thought it might work.

Right. That's what I'm saying. Like you wouldn't bother with tough love for the for the palliative care startups. You just give them like gentle You'd just be really, really nice. And gentle carefully And so we knew we knew which companies we were we w we hoped we could turn around and which ones we thought were doomed and we were just just gonna be real nice to them.

Inf I love that you brought up inflection point office hours. That was such a That we did. I know. What else, Carolyn? What else do you remember? Well I remember we all went to lunch we had probably had partner lunch and we came back and we had inflection point office hours with Adora and she probably talked all about I mean I know she already talked about her whole home joy journey on when we talked to her.

Um, but then there was a second one and I'm afraid I don't remember the name of that startup, but when the founder walked in, we had a fifteen minute conversation first because you told him he looked like um a Roman emperor. I think you told him he looked like Nero. So we went at this random tangent where we all talked about Roman. Not the emperor you want to work.

like. Well, I think that's why it was somewhat controversial and we're all like chuckling and the guy and the founder was chuckling, then we're all started like googling Roman emperors and anyway, that was I don't even remember the startup or how things turned out, but Do you remember the meme that I only like to found I only like to fund founders who look like Zuck? Oh, yeah. That's what we're doing. That lasted that persisted for years in the press.

I wouldn't be surprised if it's still out there. All because we once met this because you know, now you you you're you know me. I see something. If there's something unusual about their face, I notice it and even say something. And so we were once interviewing this guy who looked who looked very much like Zuck, right? And we even funded him too. We did find that. The company the company like barely I don't think they even made it to the end of Y C. We had some co founder dispute. Yeah.

And so I j like a reporter. said there was a reporter like embedded in the batch, that batch I think, and he asked like, can you be fooled by anyone? Well and I and I jokingly, self-deprecatingly said, apparently I can be fooled by people who look like Zuck. And man, like For like five years afterwards, I was only funding founders who look like Zuck. It probably set back hairstyles in Silicon Valley by ten years.

Do you also remember when so someone asked you about like what advice would you give? I'm you know, bringing these foreign I forget where they're from, founders over. What advice would you give to them? said like make sure they speak fluent English. Right. Honestly that would that's the the most important thing you could do.

That persisted for years. Like that that you discriminated against anyone with an accent. Which the answer to that is come to a demo day. Tell us if we actually discriminate against people with accents. Oh my word. Back to the demodet thing. Do you remember you used to work with people um at Demo Day who had such thick accents that they it was hard to understand them? They like you work One founder. There was one founder that I I I eventually got to memorize her speech phonetically.

Like Abba, the group Abba used to do. You know how Abba's original their early songs sound like they're not native speakers, like they don't know the meanings of the words they're saying? That's because they didn't know the meanings of the words they were saying. They were just s singing it as sounds. And there was one founder whose accent was so strong that She had to memorize her demo day presentation phonetically. It's amazing. I want to talk a little bit about Sam Altman too today.

Okay. As long as we're talking about famous lies everyone tells about Y C. Let's talk about the lie that we've we've fired Sam. Oh, we're gonna do some myth busting. Well, let's first reminisce about Sam because Sam's like part of our history. You know, the whole time. And actually Carolyn wouldn't be sitting there if it weren't for Sam because That's right. Carolyn was Sam's lawyer. That's right. That was how we met you.

Cincinnati. Mm-hmm. Because you were Sam's lawyer. Because Sam was like the first startup that was so successful they actually had a Lawyer. That's right. So Sam we had known for years and Sam was always in the picture, even when he was working on Lube. He was he would still come to dinner. He's always around. He was always around and he definitely was our go to. Like, you need fundraising advice? Go talk to Sam.

He was the best. W even then, I mean, now my God, he's the god of fundraising, but even early on, he was like among the best. Fundraisers in Silicon Valley. Tell me what your opinion was him of him was in the very early days in the first batch. Well, Sam, some people that YC has funded, I gradually realized were a big deal, you know. With Sam, it was instant. Like Sam, I like in the first minute of talking to him.

I can remember thinking. I can remember what I thought at that time. I thought, okay, this must be what Bill Gates was like when he was 19, because Sam was nineteen then. And I r I had always wondered.

Like Bill Gates ended up starting Microsoft when he was nineteen. What could he have been like? Because I certainly was not in a position to start Microsoft when I was nineteen. And then I met Sam and I'm like, okay, this is what one of these nineteen year olds is like, right? Um He seemed he seemed like he was forty. You know, just like this m look nineteen. And so Even that bat. Like he was he was the big dog, you know, he was the one who got Sequoia to invest in him.

He was the one who raised serious money. Um already. He sort of acted like he was if that if that had been a high school class, he would have been the class president, you know? That's sort of what it was like. Even during the bat. And then after that, he was always around. You know, we would go and visit we would go and visit Luke.

and or he would be around YC and then he became available, you know. He's like I think he got bought, he got bought and he had to go and work for the acquirer for some time, but then then he was free. Um and so Sam being available at the same time um I was thinking of retiring. I thought the obvious choice, um get Sam. And I was I was right about one thing. I thought to myself, Sam gets whatever he wants in life.

If the only way he can succeed is by making Y Combinator succeed, then Y Combinator cannot fail. And so I it's not like I considered lots of options for who to be who to be president, right? Like Sam was obviously it. And I even spent like a year convincing him because at first he didn't want to do it. And the mistake that I made

The mistake that I made was that if Y Combinator is the only way Sam can succeed, right? Because he has gotten what he wanted. But what I didn't, what I should have said when I when I hired him, or when I got him to replace me. What I should have said, by the way, I want you to take over YC. And also, you could only do YC. You're not allowed to work on anything else. Well, he might have said no if you had s phrased it that way.

No, no, I think he would have taken it. I think at that point he because he at that point he didn't know what the other things he wanted to work on were. All these other schemes he cooked up were after taking over YC, right? So at that point it was just like, and there's lots of room to become giant by taking over YC. And some of his schemes were YC schemes. Carolyn's familiar with this. Yes.

Yeah. The basic universal basic income thing or redi rebuilding cities. There are all these side projects. Yeah. Yeah. One of which was was uh open AI. Open AI, right. I know you don't like us mentioning this. Oh no, I don't mind that. It's no, I just it makes me sad because it makes me sad because like really, um

Because my heart's i at YC and s and I totally get Sam and I totally get why he got distracted by other things he wanted to do. He was young and he had like a million ideas and some of them are amazing. AI is actually a huge deal. It's a huge deal. Like who are we to sit here as armchair quarterbacking this piece of it? Like I'm I'm glad, but I also, you know, it at at the time it made me sad. Okay, I'm gonna circle back to the shoemakers' children never having shoes. It does

It uh uh always feels that like the a little bit, but it felt like that a lot at the time because Sam was so distracted by these other things that really, really interested him that it felt like we were like the the barefoot child that didn't get very much love. That's how it felt, honestly. No, no, I know, I know, right? And like the the m the myth the myth out there is that like we fired Sam, right, from YC, right? And really

All like if Sam had said, okay, this AI thing, I'll get somebody else to do this so I can focus entirely on YC, we would have been psyched. We would have taken that deal. All we wanted was sim to pick. He didn't pick. He picked OpenAI. The truth was th also he never thought the open AI thing would grow to the point where it was and all of a sudden

You know how you can tell he never knew how big it was gonna be? That he started it as a non profit. I mean, what a disaster that has been for him. I think there's people out there who think like Sam was pulling a fast one by starting it as a nonprofit. My God.

His life would have been so much easier if he started as a for-profit company. And it's not like he needed it to be a nonprofit to get the money. Sam was the world's best fundraiser. Sam could easily have raised enough money to do it as a for-profit thing. It just you know what it was, and this is actually quite revealing. Nobody knew then, because this was like twenty fifteen or something when he started OpenAI, right? Nobody knew then that it would be worth spending so much on AI.

Isn't that interesting? This was before there was anything that you could that you could do with, you know, a million GPEs, right? Now AI is so valuable it's worth spending a vast amount of money on it. And therefore you have to raise more than you could possibly ever raise as a nonprofit. But the fact that you would even think you could start you could even do this as a you could be an AI thing as a nonprofit, it just shows you how small it seemed back then. You can fund it with donations.

Ridiculous. So open AY was getting bigger than he had imagined. Y C was getting a little bit neglected. Press release goes out saying, uh, OpenAI is now a for profit company and Sam's the CEO. And I remember thinking, okay, now we need to just have a heart to heart with Sam. And we had a a heart to heart with Sam. We said Can't do both. We totally get that you want to work on AI.

Do you do you agree that we need to find a successor? I remember saying that and he was very fine about it. He said, I I totally agree. And we worked on that and we found Jeff who was partner we both like Jeff. Jeff was sort of the obvious choice, right?'Cause Jeff was already a Y C partner. He was sort of established and legitimate and serious, you know. Um And he was the obvious person to take over then. But then he only did it for three years.

And do you remember how bummed we were when he told us he wanted to quit? Like, like we thought, what? You've only been doing it for three years, right? But I guess I mean. He wanted to retire. Yeah. But then it turned out We could get Gary. And we never realized that was even possible. Right, because he was running initialized. Yeah. Gary, like

had one one I mean, i Jeff couldn't help this, but he had not done YC. And really I think it's good if the president of YC has done YC, right? So they know what it feels like to be the founders, you know. trying to raise money or get growth or have demo day coming up. So Gary had done Y C Um and was n like popular with LPs. Like he was a known quantity to the LPs who trusted him because he made so much money for them and initialized. And he was like young and energetic.

ready to spend too much time working on YC. I think you've found anything he works too hard. So now, like, I don't know about you guys, but like I feel like this is the best I've ever felt about YC. That used to be for like ten years there. There was always some worry in the back of my mind, you know, some nagging worry, and now it feels like

Don't you remember we had a we had an off we had a like board meeting and we were like, wait a minute, there didn't seem to be anything wrong. You know, that was so novel. Oh my god, we have shoes. Yes, we find large news. The shoemaker's children finally got some shoes.

Right. Paul, Carolyn, you probably don't know this, but earlier today, Paul tweeted that he was going going on the show. And did anyone have any questions for him? Oh my god. I wonder if I should look at a couple. What do you guys think? Definitely. Yeah. We know that Twitter reply threads are full of fabulously valuable insights. Well maybe there's some good questions in there. Okay. Well there are a hundred and forty nine responses.

Well so I'm gonna just read a f couple, Paul, and you can sort of choose. I'll read one said can you talk about how you balanced your desire to have a family and kids with the demands of your professional pursuits? Well, that was one of the reasons I retired in twenty fourteen.

Cause we had had a second child, right, in 2012, and I was worried. I gave I I gave our first child a huge amount of attention. And I was worried I wouldn't be able to do the same for the second one, right? Now that there were two, how was I gonna do this? I didn't realize that you can't give your second child a lot of attention because anything you do with the second child, the first one wants to come along as well.

So I was sort of I didn't get that then yet. Um but I did want to make sure I could spend a lot of time. And it's funny, you know, when people get fired they always say like, no, they want to spend more time with their family. But um that really was a big part of the motivation.

I wanted to spend time with family, but I also just wanted to work on other things, you know. And that was the trouble with YC. If you're a YC partner you can have side projects, but if you're president, it's like it takes up all your time and more. So the way I would combine it. But you know, the thing is, YC was never nine to five.

You didn't like go to this office and stay there all day long and then come home and like kiss your kids and then they go to bed. Right? And so I was often at home. I was often at home. Like hanging out, playing with the kids. Um, it was it was well suited to that, well suited to having kids. And I want it I want it to be I want it to continue to be well suited.

for having kids, right? This is something like running a startup is not super compatible with having kids. I mean people do it, but boy, they don't fit together nicely. I would like it that if if being a YC partner did fit together nicely with having kids. Yeah. All right, what else you got on that Twitter? Okay, here's a good one. How do you keep a sane mind in the crazy world we live in? Keep writing smart essays and stay relevant with my skills at the same time.

How do I keep a sane mind? Um Well it's important to be married to someone sane. Um Let's go start this way. I mean it sounds like a it sounds like a strange compliment to describe someone as sane, but um You are the more the older you are, the more you realize that's actually a fairly unique quality, right? And so like. If you're married to someone, and as long as you don't both freak out at the same time, then there's always someone to calm the other one down.

That's the advantage. So I recommend to everyone marry someone say

Here's a good one. I'd love to know what you've been surprised about in the last few years that goes against your essays. You've spoken about vibe cod coding being surprising, for example. Yeah. Well everyone is surprised at the rate of progress in AI. I didn't think this would be happening in my lifetime. It didn't look in twenty ten like we would have. I mean it's it's you know, we've gotten to the point where you have to go back and read the definition of the Turing test. We're that close.

So, I mean, we have stuff that seems to me maybe you'd you'd have to really try hard to make it fail the Turing test, you know? At any given time it's pretty it's pretty much passing the Turing test with me. In fact the weird thing is how normal this now seems.'Cause when I was a kid, I was like very interested in AI.

And I would dream about this future where you'd have this computer that would pass the Turing test. You'd talk to it. It would be like talking to a person. And now you you ask ChatGPT some boring question and it gives you the answer and it's like, okay. It's so weird how we can adjust to everything. It just seems like not a big deal that we're like passing the Turing test all the time now. Um has there been anything else that falsified Well I'm I'm shocked at how young founders are.

I don't like this trend at all. I don't like this weird thing where they like want to go start a startup instead of going to college. I don't like that at all. So when you say young, in this case you mean like uh seventeen, eighteen versus twenty-two, twenty three. That's what you're saying Right. Like I mean Sam dropped out after two years, right? So Sam was nineteen when he started the startup. Big difference between that and like not even going to college. So that's that's a bit shocking.

I sort of wish I could put the brakes on that one. Maybe I can. Maybe I can. I'm thinking of writing an essay say called Go to College that explains why it's a good idea to go to college. So what else has surprised me? AI, the Youth of Founders, I'm surprised at valuation. Like demo day valuations are like sixty million dollars now, right? Oh my gosh. But yeah, probably something.

They are. I've I've heard of multiple startups raising money at a sixty cap. Um, that's twenty times the value the post money valuation of Airbnb. Twenty times. Yeah, there's just so much money now a demo day. This is a related question. Which of your previous startup advice is different, if any, given AI? It hasn't changed things super much yet.

I mean it might get to the point where starting a startup is structurally different. At the moment, the main effect AI has had is it's a source of startup ideas. It's a source of things that founders work on. You know, they work on some AI version of some product for some market, right? Or AI is the thing that gives them enough leverage to displace the incumbent. the world has changed enough because of AI. And we haven't gotten to the point yet where

you can't start certain startups. Or you can't start startups because as soon as you start them the model companies copy you know, set some AI founders to duplicate what you're doing. Um What were those German guys who would copy startups in the hope that you would buy them? Oh the Samwar Brothers? Samwores, yeah, yeah, yeah. So, you know, now we have to worry about the SAMs instead of the Samworz. Um but like

Will, you know, the model companies start like sending out armies of armies of AIs to like copy your startup? One day maybe. One day, um, you know. That would be worrying. What YC's model would be in that world. But you know, here's something encouraging. You know what the best source of startup ideas is, your own needs. Right? Think about like this was Facebook, Google, Airbnb, all these companies were originally started to satisfy the the founder's own needs. AIs don't have any needs.

The AIs aren't like desperate to pay the rent in their apartment and there's this conference and they think, okay, let's rent out some airbeds on our floor, right? That's right. The AIs aren't desperate to know like What the other kids in their year at Harvard are up to. So maybe, maybe, however good AI gets at being intelligent. It won't replace all the human founders because it doesn't have the needs that lead to startup ideas. Isn't that interesting? I have a question.

Obviously we live in England. We went back to America for a few weeks this summer in August, you know, for the month of August basically. What was your impression of the startup world? Well, every time we go back, there's more AI. A larger percentage of the companies are doing some AI idea and they're using AI to write a larger percentage of their code.

And open AI is bigger. Like every every time we go back it's like the same the same but more. The big surprise was something I already mentioned, how many super young founders there are. You know, it seemed like I was constantly doing office hours that began with fifteen minutes of, are you sure you wouldn't like to go back to college? You know, it's funny, people think people imagine Y C is like determined to like

force all these people to do startups so we can make money out of them. And here I am constantly trying to talk them into like ditching the startup and going back to school. What did they answer you when you say, please go back to college, you should go back? What are they just like, no, the time is now?'Cause that's what I'm imagining.

No, it varies. It varies from one extreme to the other. There's sometimes people who are like, No, this is what I'm gonna work on, you know, like that sixteen year old guy, Rogov, right? And you He was probably right. Um he was a very unusual guy. He was just meant to do this, you could see. Um, and then there would be other people I'd talk to and they were like, Yeah, we were sort of wondering if we should go back to school.

I think none of'em will go back to school unless their startup fails, Paul. I hate I thought that all the time. I'm like talking to our older son, being like Shit. Some of them should. And I would I wish the ones who should would. There are people working on this B to B thing where you have to I mean B to B, you have to be older, right? You have to be able to like sound seem convincing.

there were these women starting this startup who were eighteen and like they looked like they were eighteen, you know? They're gonna have a hard time walking in trying to convince some CIO to purchase their you know, purchase seat licenses for their thing. Whereas if they just Would do if they just did the same idea in a couple years when they could seem older and more convincing, they could do the same thing and it would work better.

Unless someone else does it. Yeah. Yeah. Yeah. always doing it they could work on it in the meantime they just don't have to like try and be a company And you know, there's other ideas. People say sometimes, I'll tell you, sometimes people would say, Oh, I feel like if I don't do it now, it'll be too late. Like the AI revolution's happening now. And I said, you know what? People said that two years ago, were they right? Is it too late now? They'd say, well, no, it's never too late.

You know, if it ever is too late'cause of the AI revolution, if it's really too late to ever start any kind of startup. Like we're all screwed. Think what that would I was gonna say we're in trouble. Get like a bunch of freeze dried food and a shotgun and a bunker somewhere. Nervous laughter. Cannot end on that. You know how I feel about ending on... A like really freaky note. Where how should we end? See Levy? How should we end uh And

We could talk about how fabulous YC is now. One reason it's interesting to talk about how well YC is doing is because YC is sort of like Reddit. in the sense that what you know, Reddit had a long period where it wasn't really progressing'cause the founder'cause like Steve wasn't even there, right? And it but it was such a powerful model.

that it didn't die, it kept growing anyway. And YC was kinda like that. There was like long periods where no one was paying that much attention to running it, right? And because it was so fundamentally strong, it survived And so everybody thought they had Reddit pigeonholed, you know. They thought, okay, it's like sort of a big deal, but not really. It's like a small sovereign state like Luxembourg.

In the sovereign state, but almost doesn't matter. Boy, all the Luxembourgers are gonna be mad at me. Catching strays. All three hundred thousand of them. Mm. We make it back to California and you in the kitchen all day long or having office hours with startups. Much to my dismay when I'm trying to make lunch for the kids. Or when they see how messy our house is. That's ri let's not tall our listeners about that. That's my little secret. Um secret. Yes. So we come back. What

makes you'cause y you have this infinite amount of enthusiasm and energy when it comes to advising startups. What do you get excited about by by cut when we come back and you re-engage with Y Combinator? Well, the reason I have so much energy is not because I'm benevolent and I have infinite desire to help them. I mean I want to help them, but the thing that really makes me energetic is that I'm interested in their ideas.

It's like a co it's like imagine if you were into puzzles of some kind and people s came and supplied you with a constant stream of new puzzles, right? That's what it's like. They're like, here's what we're working on. How can we get users? What could this idea be? They don't usually ask me that, I just tell them.

Um and so that's why I have so much energy. That's why I always liked working on YC. That's the part I like. I don't like arguing with um arguing with people who are trying to maltreat the startups. Um that's Gary's job now. Yeah, yeah. Poor Gary. Um only only someone who's done it knows what it's like. But I love, I'm I'll I don't think I would ever get bored of talking to founders about their ideas. Yeah. And YC it's so energizing YC's doing so well. It's really fun.

And there's a sort of z a lot of start up mojo floating around Y C that's not all that common in the English country. Uh Exactly. This seems excitingly exotic. Well, I think this was a fun really fun conversation. We did some reminiscing, some predictions, some myth busting. There's something in it for everyone. Um, thank you for coming on again. It's always fun to talk to you. Like you do every day.

Mm-hmm. Yeah. I was gonna say I'll s I'll see you downstairs for supper. What are you cooking me? Call the supper. What do you want? I don't know. Orange chicken. You're he's making orange chicken. Orange Orange. Cheers, chicken! What do you want me to make? I would like I would like something very healthy. Carolyn, I know this is probably way too much detail for you, but we have parsnips from our garden.

From our garden. Oh, that's a good thing. And so I was sort of thinking you could make something parsnips with parsnips and leaves. So let's get let's get going. Okay. Fine. Bye, Carolyn. Bye guys. Bye.