Y Combinator (YC) funds around 250 startups per year and aims to provide a 100x advantage through advice, connections, and access to its alumni community.
YC has identified key qualities of successful founders, including clarity of vision, determination/passion, raw intelligence, and speed of execution.
YC prefers 2-3 person founding teams with diverse skills, but cautions against hiring too many employees before product/market fit and advises compassionate approaches to firing.
Greylock is excited about specialized AI applications and the long-term potential of "superhuman AI" and clean energy, while cautioning against overreliance on fundraising metrics and hype around specific trends.
Meeting Notes:
Overview of Y Combinator
Y Combinator (YC) funds and enables innovation through startups with the goal of enabling as much innovation as possible in the world.
YC funds around 250 startups per year in their core program.
They also have a fellowship program for smaller investments of one-tenth the money with less advice.
The aim is to provide a 100x advantage to YC startups through advice, connections, and access to the alumni community network.
There are now over 2,000 founders that YC has funded.
YC companies work with each other, helping in fundraising, hiring, buying products, etc. creating a tight community.
YC functions somewhere between a product company and a traditional investing firm.
The Evolution of Startup Funding
Startup funding has become more founder-friendly over the years.
YC has played a role in shifting the focus from business plans and financials to the product itself.
In the past (pre-2005), the investment world seemed mysterious, favoring business people over engineers/founders.
Greylock (Sam Altman) experienced this shift first-hand when applying to YC in 2005 with his startup Loopt, as YC cared more about the product and vision than business/financial plans.
Qualities of Successful Founders
YC has tracked and rated founders on different qualities over time to identify important factors for success:
Clarity of vision - Can the founder clearly explain what they do and why? Key for recruiting, selling, PR, etc.
Determination and passion - Founders who are relentless, bend the world to their will, and deeply believe in their mission. Crucial to overcome the many roadblocks founders face daily.
Raw intelligence
Speed of execution and decision-making, strongly correlated with YC's most successful founders who can get things done quickly. Greylock has found this "cadence" crucial even for hard tech companies like biotech and nuclear.
Founder Teams
YC prefers 2-3 person founding teams but is open to solo founders (who often add co-founders later like Dropbox, Instacart).
Solo founders face psychological challenges - it's a lonely and tough job with many setbacks.
With 2 founders, they can ride out ups and downs together where one pulls the other up during lows.
3 co-founders is fine, but 4 is harder as someone often leaves within a couple of years.
Diversity of skills and backgrounds is an advantage, but diversity of vision/beliefs on the type of company to build is problematic and often a dealbreaker.
Hiring and Firing
Hiring is difficult, but YC advises minimizing hiring too early before product/market fit.
Greylock: "Our best startups hire the least people early on."
Too many employees create organizational debt, high burn rates, internal politics, etc. slowing things down.
Firing is the hardest part of being a founder, but be compassionate and help the employee transition.
In cases where the relationship is damaged, Greylock has advised some founders to part ways.
Greylock's advice: Put yourself in the employee's shoes, treat them with respect, make it a "win" for them by lining up their next job before firing.
Pivots and Failures
Successful pivots are rare - founders either return to their original vision or uncover an organic new direction (e.g. Instagram, Airbnb).
Failure should be tolerated but not celebrated. Focus on learning from successes, not failures.
Greylock hasn't seen "whiteboard pivots" work where founders sit down and completely reinvent their idea from scratch. It's harder to pivot into a bold new idea that sounds crazy at first.
Better to return remaining capital and wait for an organic new passion to emerge.
Emerging Technologies
In the short-term, Greylock is excited about verticalized AI applications optimizing particular industries like robotics, cybersecurity, trading etc.
But someday the key breakthrough will be developing actual general intelligence and creativity algorithms ("superhuman AI").
Greylock believes friendly AI and cheap, clean energy are the two most important things to improve life for the world's poorest 50%.
Hence his involvement on the boards of nuclear energy startups like Helion Energy and UPower.
Advice and Reflections
The "days are long but the years are short" - founders should intensely focus on what matters most within their limited high-output window of 20-30 years.
When firing, treat employees with respect, be generous with severance, and help them find their next role to make it a "win" for them.
Don't overly focus on fundraising optics and valuations - what matters is the equity value once liquid in the future.
Ignore the hype around specific verticals or trends and have conviction in building something totally new that seems implausible to others at first.