Standing Up For Startups - YC Goes To D.C.

What does success look like for you when you leave your Hill visit this week?

We believe that little Tech can and should exist. And, you know, done right, little Tech will actually go on to create some of the best companies out there. We don't want one or two or five of them; we want thousands of them. And that type of prosperity is the thing that solves American problems.

The wild thing to realize was, you know, every Senator or congressperson I talked to would say, "How come, you know, you startup Founders like you don't—why don't you come through? What's going on?" Like, we see lots of other people who talk about tech, but, you know, no little Tech. That's sort of what I realized: we actually do need to show up. Because what we really at Y Combinator, what we really desperately care about actually is open markets and the ability for a few people with an idea to come out and say, "You know what? I understand technology. I have a special insight about customers, and I can actually go and create something of great value."

And it'll look really small initially, but, you know, at the end of the day, it might end up touching a billion people.

Hey everyone, if you're wondering why we're in monkey suits today, we are in Washington D.C., the seat of the American government. Why are we here, Luther?

Well, I'm so excited that you're here, Gary. It's because YC is in D.C. now, and we are advocating for Founders and making sure that Founders have a seat at the table. Washington, for so long, has just been guided by the interest of some of the largest players, particularly in the technology sector. So, we're trying to really fill that vacuum and make sure that the authentic voices of Founders get heard by our policymakers.

So, for those of you who haven't met Luther yet, he's the new head of public policy for Y Combinator, and he spent many years both in D.C. and tech policy—most recently for Yelp—which is how I met you first. Like, you know, I think it was a couple of years ago, and you were one of the first people to take me down the hallways of power, as it were. I'll never forget going to the White House with you and sitting in a meeting with Tim Wu and hearing for the first time the term "little Tech." That always registered with me.

I think that's a great way to think about it because it's not like we want everybody to be little forever. It's really, but it tees up a nice dichotomy of what we're really talking about in terms of who has a voice in Washington. And thus far, you know, little Tech really has not been present. By little Tech, we mean kind of this emergent Tech and the tech with the most potential to, you know, make people's lives better.

What are some of the things that we're fighting for? The biggest one probably is, you know, access to talent. Making sure that high-skilled individuals can actually get into our country and build companies. That is depressingly not as easy and straightforward as it shouldn't be. As many in our audience know, another theme on access to talent is related to sort of non-competes.

There was recently a rule that the FTC put out doing a blanket ban on a national ban on non-competes. It's working through the courts, or some in Congress think that should be led by Congress. I'm kind of indifferent to who leads it; I think we need a national non-compete ban. In California, there's a de facto ban, and I think that's unlocked a lot of great innovation.

Connected to the non-compete ban, it gets into sort of the next high-level thing: access to markets. How do we make sure that the emerging technology is able to build without fear of facing a choke point or some arbitrary self-preferencing that ensures that consumers aren't able to see this innovation?

So, promoting legislation like the American Innovation and Choice Online Act or the Open Apps Market Act—these are legislation that would effectively make it a lot tougher if you were one of the biggest companies, biggest internet platforms in the world, to egregiously sell preference. Like, if you're having, you know, a monopoly business like search or, you know, smartphones or whatever, good for you. But you can't then parlay that dominance into these downstream markets in a way that snuffs out competition.

And then finally, AI. I mean, that's like what everybody's talking about—not just in San Francisco but in D.C. Ensuring that we don't inadvertently create conditions that squelch entrepreneurship in that. So, ensuring, for example, that open source tools and open source foundation models are safe from just getting, um, regul... criminalized? Yeah, legalized.

One of the crazier things that I think both of us— I certainly discovered coming to D.C. with you a couple of years ago, but probably dawned on you fairly quickly—was that, you know, there are a lot of people who talk about tech. There are a lot of people who have big stakes in what the government does having to do with tech. But those things are sort of separate from what might actually be great for the people or even great for startups in little tech.

One of the reasons that people get so fed up with Washington is that it's just overrun with special interests. There’s actually a great book out right now I'm reading called "The Wolves of K Street," which is all about the history of the lobbying industry and just how it didn't used to be this way. It used to be really just like consumer advocates and citizens.

But the idea is that when it comes to technology, it seems like the last 15 years, at least, have been dominated by only a handful of players. They're the ones who really have a seat at the table; they're the ones that get invited to the White House State dinners. They're the ones that are driving a lot of the policy. Sometimes that's fine for startups if, on issues, for example, like high-skilled immigration, you know, we're pretty aligned with—take Microsoft as an example—in terms of we want more high-skilled immigrants in this country.

But, uh, sometimes you're not going to necessarily agree on all these issues, and so that's why it's important to have an authentic voice. There's a perception from certainly the outside of D.C. that like, you know, how much of it is driven by money? And then there’s this term "AstroTurf."

In your experience, like, what is the thing that overcomes AstroTurf?

Well, AstroTurf is basically when you have a special interest, or maybe a pool of companies, or maybe a single large company, that they want to kill a bill that would maybe reform their industry or they want to get something passed that would give them some kind of special permission to do something.

And they know that it would not fly if it were sort of up for a democratic vote and everybody were like highly informed about what was going on. So they essentially prop up, you know, fake advocacy. They gen up letters or they just kind of do people around the issue and drive people to write in.

But AstroTurf really just is kind of like the opposite of grassroots. It's fake; it's creating a perception that people care about something when really it's just this, like, you know, invisible, often invisible, interest that's really pushing the issue. Because Washington is so overrun with asurf, it really pours gasoline on an already kind of cynical partisan system.

However, the antidote to that is authentic stories. And because Y Combinator has 11,000 Founders that, you know, presumably touch virtually all congressional districts, there are so many incredible stories in our community. That being able to directly interface and tell those stories with members of Congress, with folks at the White House, with agencies—that is actually what I think gets us to sensible policymaking.

It's because they finally have a resource where they can, you know, get some education about how this is actually going to affect, like, the small three-person team that's building something. I think the most interesting history that I think is a little bit even forgotten, both to tech people and people in D.C., is that 15, 20 years ago, Tech was like sort of this thing that happened in California.

It was like a fringe thing. The max market caps on a lot of these companies was like, you know, $50 billion, $100 billion; that was like the largest you would get. And today, you know, the S&P 500 is, you know, half companies worth a trillion dollars or more, right? By market value, Tech went from a very fringe thing to now big Tech.

So when you come to D.C., like, they're almost like, "What's this?" Like, you know, they've heard of Y Combinator; maybe their kids or their aides had applied to YC or had gone through it before—like, that's sort of the extent of it. And so that's why I felt like little Tech was sort of the perfect counterposing to big Tech because I am—I mean, in a lot of conversations, fairly surprised at the amount of ire that big Tech has, you know, sort of gained day-to-day.

Definitely! Yeah, I mean, we definitely—even though big Tech has sort of a head start in this conversation, has really been playing the game for 15 years plus, there still remain sort of bridges that need to be built between Silicon Valley and Washington. Because frankly, a lot of the people who are our leaders are not. You get ranked the longer you stay, you know?

I think a lot of the younger staff get these technology issues more than people would appreciate. I think people often point to this exchange between Senator Orin Hatch and Mark Zuckerberg where he says, "How do you sustain a business model in which users don't pay for your service?"

"Senator, we run ads."

I would bet a kidney I'm almost positive that that was like a staged kind of tongue-in-cheek moment. But I think people outside D.C. don't understand that some of the stuff is actually choreographed behind the scenes. I’m not saying it's not totally untrue that there are definitely situations where Senators themselves don't understand the issues—the internet is a series of tubes.

Yeah, that's a great example. But the staff, especially the younger staff, are surprisingly sophisticated. But if we don't show up and we're not having those conversations and forming those relationships, then it becomes a—the only folks that they hear from are representing the largest, most powerful interests.

And sometimes, those align with like the little Tech folks.

Well, if it's anything I've learned, it's a very different thing to read something on X versus, uh, meet someone in person, shake their hand, and have a real honest-to-God conversation. And, um, that's what we're here to do. So we'll see you guys next time.

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