Why This Is The Perfect Time To Start A Startup

Okay, so we're going to be doing the light cone podcast on stage at Start School East. What do you guys want to talk about? I'm just kind of imagining what these Founders want. Like they traveled here on a bus for hours. The headline topic is why this is the perfect time in your life to start a startup. Why this is different than just starting a company at any other time, but now there's something special. Now, if you work really hard, you can become an AI expert. This is why it's because we're looking at the data, and like this is the moment in time for young Founders to start a startup. What do you think? Like, what's the conclusion? I'm just trying to think of what EDI... It's like, oh, that's a great point! I love that. Sorry, guys, no, it's great. We just can't use it for YouTube. That's... yeah, all right.

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This... I have a little think that...

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Hello, hello!

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Boston, welcome to YC Startup School East! It's been more than 10 years since we've actually done any event like this. So with that, I want to invite up to the stage my fellow group partners of the light cone podcast. So this is Harge, Diana, and Jared. And collectively, we've funded companies worth hundreds of billions of dollars, and we've been basically on the front line of what's going on with AI and working with people just like you doing it. Harge, what are we going to dive into today?

All right, so at YC, we fund more Founders per year than any other investor in the world, which means we work with people of all different shapes and sizes, right? We get to see what are some of the advantages and disadvantages of being different types of Founders. So what we thought we'd talk about here today is what advantages do young Founders, especially Founders in college or just graduated college, have when it comes to startups? Because that feels relevant to you.

The one thing that we hear a lot of when we talk to college students or younger Founders is, "Ah, but like, don't I need to get some work experience? Should I have some business experience or work experience before I go and start these companies?" And that's what's holding me back. I want to hear from Gary and Diana because they both worked at companies before they did their startup. What was that like, guys?

Well, so it turns out that working for Microsoft cost me $200 million. I was graduating from Stanford, I studied Computer Engineering, a child of immigrants. We didn't grow up with very much money, so it was really important to me—to my family—that, you know, my parents were proud that I had health insurance. I was about a year into my time as a level 59 PM, like apparently the lowest of the low for college graduates working at the time. Even the whole idea of being slotted into an A level 59, where there are like 59 levels and it goes up to like 70 or something, how terrible is that?

But the reason why it cost me $200 million is because friends of mine—I was 22 years old—spent a year in Seattle and friends of mine were starting a company with Peter Thiel. Now, he wasn't Peter—wasn't sort of the like demigod, you know, billionaire that he is known as today. He actually had just sold PayPal. I knew who he was, but I, you know, sort of didn't understand anything about startups. And I said, "Well, you know, my friends, they're graduating, but they don't have a real job. I have a real job. I might get promoted to level 60 next year." Peter, do you understand?

We were over dinner, and he said, "Gary, you're wasting your time. I'm going to make this a zero-risk opportunity for you." And he said he was going to write a $70,000 check for me—you know, cash this check, quit your job, and we're going to go change the world. And I said, "Thank you very much, Mr. Thiel, but I might get promoted. You know, I have a real, I have health insurance." And I got on a plane, I went back to Seattle, and it was a big mistake. It did actually literally cost me on the order of, in today's money, probably close to half a billion dollars. And, you know, Palantir was like an idea on a napkin at that moment.

Did anything about your experience at Microsoft help you when you did then go and start a startup of your own? Did anything of that experience help you with getting Posterous off the ground?

Honestly, it just taught me how to be political. I wrote 20... like I'd made nothing of substance at Microsoft. I was on the Windows mobile team for ActiveSync, which was what that even mean exactly? It doesn’t even mean... nobody knows what that is! Yeah, it's hard to play politics when it's like you and one co-founder. It doesn't really help you; it's not a useful skill.

And this happened to me when I started working at Intel too, because you're kind of this new engineer. You come in, and there are sort of like 10 levels between you and the CEO. At that point, these companies are mega, mega big and they are already post product-market fit and they already have market power. They don't need to figure things out; they get lazy, and you just become this pawn where people are just playing political games to like level up and whatever. I don't know, just get the fancy title, and you just do kind of very meaningless work.

That's what I felt; there were all these lines of codes I was writing and it never shipped. And as an engineer, that's like terrible. You get this shipping constipation, and it was mind-boggling. Things moved so slow; people just had endless meetings about the meetings. There were so many meetings about the meetings!

Whenever people talk about going to work at a big company and getting work experience, I always think of Paul Buai, who's one of the YC Partners, and he created Gmail, was very early at Google, and then he went in and founded FriendFeed, which was acquired by Facebook. And what all Paul would say is when he first moved to Silicon Valley after college, he really wanted to do a startup, but he felt that he needed to kind of get some experience. And so he got a job at Intel too, I think it was actually.

And the way he described it is he would go to his job in his cubicle at Intel, and just during the day noticed that he just felt constantly tired; that he just had no energy. And then he'd go home and start working on like his own side projects, and suddenly he'd have all this energy. He found this weird to the point where he started like leaving Intel during the day, like feeling tired, going home to work on his own projects, and just like the second he said he stepped into his house and got ready to code, he just had all of this energy.

And so I think that's like one of the other dangers people fail to realize is if you get stuck in a big company for too long, your energy level just goes down. And like if you get used to that as the norm for like five, six, seven, eight years, it can take you a while to rip out of that and get kind of like the buzz you need to get one of these things off the ground.

Maybe the more controversial thing to say is that that kind of image brings this image of being a captive animal, where you have these boundaries of you going to work and you at some point internalize that this is what good work looks like. You kind of put in the DI, come in and do that, and that kind of stuns a lot of you. This is actually a lot of the things that we need to do at YC with Founders that get work experience—it's almost to deprogram them, because they don't think doing certain things is possible. They think it's going to take... I had this office order from this team before to ship this product. They thought, "Oh, it's going to take like six months. We're not going to ship until after the batch." And we really challenged them. They were out in the industry for like 10 years, and we really had to push them. And a lot of the first office hours is to tell them, "No, you can do it," and ship this within a week.

So that's a huge benefit to not even joining the belly of the beast—you don't learn any of the bad habits that you would learn in...

I mean, Jerry, you skipped it entirely, didn't you?

Yeah, I've never had a real job in my entire life. And the thing that I think of when I think of some of the best Founders that YC has funded, people like Patrick and John Collison who founded Stripe, people like Drew Houston and Arash who are MIT grads who started Dropbox, is they've literally done nothing but startups since they were like 20 years old.

And so in their brain, they're like special-purpose weapons designed to build billion-dollar companies, and that's why they're the best in the world at it. They didn't have to unlearn any habits; they didn't start seven years behind the people who did that—they started when they had the most energy, the most optimism in their entire life, and they went all in, and they've been doing it ever since.

And that's how you start like a really world-changing company. And you know, people like Patrick, they have like... they set their own bar of excellence, and that bar is like very, very, very high. It's much higher than the bar of excellence that you'll get as an employee at any now big tech company. It's like if you join Google now, it's not like it was when Paul Buai worked there.

And the thing is when you start a company and you have that kind of bar of excellence you've defined for yourself, you can bring in other people who meet it. And if anything, push it higher. But to Gary's point about politics, like if you're in a big company, if you go in with your own internal bar of excellence being this high, there are all of these forces that want to drag it down, because they don't necessarily want you to get ahead and succeed and win. You've got to avoid contaminating yourself almost with these forces that are going to bring your own level down.

I think there's something very subtle and kind of crazy to really think about, which is when you're at some place that has zero... you know, a lot of critics of startups are like, "Well, most of these startups are zeros," but the difference between working on your own startup that might be zero right now and working on things that don't matter inside a 10-layer mimetic war of people knifing each other to get promoted and making decisions about things that will never ship or won't ever actually make a difference to the bottom line is that while most startups might not have figured something out yet, they are exactly one decision away from going from zero to one.

Going back to what PB was saying—like working at Intel, like for me working at Microsoft, I was not actually having an impact on the world that I knew that I could through technology. Like I deeply believe that we’re at this sort of moment in time even then that like software was going to change all of society and that, you know, through not a stroke of a pen or holding a gun but sitting in front of a keyboard, I could affect a billion people. That's actually the feeling that you get when you're actually a founder.

Or even, I mean, some of you—I was talking to you earlier—like you're not trying to start a startup; you're actually just trying to make a thing that other people want. And that's literally on the t-shirt that we give to you guys when you get into YC—like that's like don't try to start a startup; try to make something people want.

I'm wondering what advice do you guys have for the people in this room right now? Because again, this is your moment, and there might be—you might meet your co-founder here, like you might hear the idea that turns into your life's work today. What are things that people should be looking at?

I think one of the big things is really this is a long game. I think we talked about a couple of you, maybe one of you here will start the next trillion-dollar company! And guess what, time is at your advantage. There's a lot of this aspect of building something over a long time. It compounds—compounding exponentials power law are incredible. I mean, imagine if you do compound by VC standards, like a 3X and 3X growth per year is pretty, like, a bit low. But if you do that over like 24 years, you suddenly end up making a $200 billion company revenue.

So this aspect of you figuring things out and really having time to really get your growth and also learning to compound exponentially is something special that you can take that decision now.

Yeah, this is the advice for like if you set your goals crazy high, like you can start a good or even a great company when you're older, but if you want to start like one of the companies that literally runs like part of the world, you have to start now. Like, it's not a coincidence that like Apple, Meta, Google—these companies were all like started by people who are your age—like they're at this stage exactly. And there's just like no way you can get there unless you start there.

It just takes too long. You have to do it and make it your life's work.

Yeah, and you have to catch multiple waves. That's the other thing with like these really extreme outlying companies is that they last long enough to catch multiple lucky breaks. And then like when you compound that over like 30 years, you end up with like trillion-dollar companies. An example of that is Alex from Scale. He was in your shoes. He dropped out of MIT and he caught multiple waves. The first one he caught was building a lot of the labeling for data sets for self-driving cars. And right now, he is catching the LLM and generative AI one. So you got like two headwinds—imagine, he'll get another one and build this monster of a company he's already on the path for that.

I got another thing I want to say. If I'm worried it's going to end up on Twitter and screw me, say it!

Say it!

I know.

All right, all right. Basically, like if you actually want to win at startups, work-life balance is complete... like, it's not how you win. You don't win by having like work-life balance and being like well-rounded individuals. You actually win by being like extremely unbalanced and having all of your identity wrapped up in winning at your company. And like the reason young Founders have a very obvious advantage with this is you all have no lives. It's great!

Like, you can just like start companies and just like work on your companies all the time, and that gets like much harder when you're older to do. And so this is like... again, this is not advice to everyone; like, this is not the advice if you even want to start like a good company. This is the advice if you want to start one of like the real huge outliers. And this was, I think, the argument that made us want to start our company, which is like your 20s is the decade in your life to work really hard. Hard work compounds if you do it early in life. So your 20s is the decade when you want to work the hardest. You can enjoy the fruits afterwards.

Should we end on the stat that Gary started with, which is two years ago only 10% of the YC batch was college students, and now it's 30%. What's changed in the last 2 years? Why did we triple the number of college students? Why is this happening now?

The clear thing is AI. Like, the moment is now, because like AI has completely changed everything. And like one of the ways that advantages everyone here is like there are just more ideas to work on than ever. And so one thing we often find is like younger Founders come to us and like you haven't quite figured out the right idea yet, and we spent a lot of time during a YC batch helping you find the right idea.

And what we've just found is that there's so many good AI ideas right now that we can help you find good ones. So it's just like a disproportionately good time as a college student to start a company.

In our group office, we were talking to someone about this crazy idea called the idea maze. And it’s very useful because you're at the beginning, you are trying... you're staring at a maze that you don't even know what's going on inside of it. When you start your company, you're going to start shipping features and like sort of exploring that maze and at the end of the maze, what you're trying to do is find that pot of gold, like the product-market fit.

And the tricky thing is most startups end up in a dead end that piles up a whole lot of dead bodies. Now, most people out there who have not been around startups might say, "Because there are so many dead bodies, you shouldn't even start! It's a rigged game!" And so what's happening right now is that someone took all the walls in the maze and moved them around, and you could be the first person to find out there's no wall there now, and we're going to stroll right through.

And someone in this audience is going to do it!

D, why don't we wrap up what happened last time we gave a talk to a bunch of college students? So some of you might be in the audience, and Jared and I came here about a year ago in September. It was so incredible to see that we ended up funding 10% of all the attendees in that room. Three months later, they just finished the Winter 24 batch—10% of the students who were in the room. And so that talk went so well, and this is such a perfect moment for college students to be starting startups. Like a true once-in-a-lifetime, once-in-a-two-decade moment that we decided to come back and bring the whole partnership out here because we want to do it again.

So that's it for the light cone this time, but we'll catch you on YouTube!

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