Picking the hottest 12 Ycombinator graduates with @BuggerOAF - The Michael Girdley Show Episode 28

Hey, Michael here. You will now hear some episodes of the Michael Girdley Show that we had branded differently, called Unusual Profits or some such like that. Same show, same person, just me interviewing people and producing content that could be helpful on your journey and mine as well. So with no further ado, here's the episode. Hey, Michael here. Sponsor for today's show is actually a product that I'm a part of called DM Bridge. And what DMBridge is, uh, is a service that we built, uh, to solve the problem that Twitter's direct messaging functionality is a total mess. So we built DMBridge to help you fix that. Um, a lot of the other solutions, uh, do things like requiring you to install a whole nother inbox. We didn't want another inbox, so we created DMBridge. And what it does is it takes all of your Twitter DMs and has them appear inside of your email inbox. So you can reply to them just like it's a regular email. You see them just like it's a regular email. You can search them later like it's one of your regular emails, all just by using DMBridge. So, uh, we're currently live with the product. Uh, would love for you to sign up and become a customer, uh, and check it out. So you can find that at dmbridge.app, uh, and go on there, put in your name, uh, and be either part of the beta or join us as part of the live use of the product. And again, check it out, dmbridge.app. Hey, Michael here. Welcome to Unusual Profits. This is a fun episode that I did with one of my most favorite anonymous Twitter users, Bugger Oaf, who is a Y Combinator founder. And you'll hear a bit of us modifying his voice because he wanted to remain anonymous. But we talked about the state of Y Combinator, which for those of you that don't know, is a very popular West Coast technology accelerator for startups. And then we went through and rated some of the companies from their current batch. So I learned a lot, loved Buggers' energy and opinions on stuff, and I learned a bunch and hope you will too through this episode. So enjoy it. Well, I'm so glad you're here, man. Like, you're like my number one favorite. Well, I have many number one favorite Anons on Twitter, but your account and the the level of, um, I would just say, uh, anti-institutionalism as part of it. I, I really love it, and I love that you speak your mind and, and all that kind of stuff. So it's super cool. But, um, yeah, so let's, let's pull up the list of companies and start talking about Y Combinator. I'm, I'm, I've been fascinated watching them for going on 12 years now.

So I think before we get into this, I mean, the reason why we're going through TechCrunch's choices of winter 2022 is because 379 pitches are too many for us to cover in 30 minutes or 45 minutes. And, you know, it's not even worth it because I think if you actually look at the YC, YC as a whole, what YC actually does is basically go out and act like a baleen whale for the startup industry, and it just keeps the food it can digest and then throws the rest off. And even the food it digests, it's keeping like the best microorganisms And then when it does that, it's basically growing bigger in size at the cost of all the microorganisms instead of the microorganisms growing inside it. So if you look at it, it's basically a processing system for using microorganisms or plankton, like, like startups are. And even though some startups are getting out and actually becoming bigger because they got through the Pisces and they got refined and purified, or whatever it is you want to call it, I— it's not an exact analogy in my mind, but I feel like YC grows bigger every year as its startups actually attracted, and it's got this virtuous flywheel going for it that has made it virtually risk-free and reputation-free for YC to fund any company. And now it's literally just an index on startup ecosystems that it basically controls the price on, it controls the cost on, it controls the upside on, and it basically controls— it helps control the narrative on that allows the startups to then decide to choose. Like, YC is essentially antifragile because for every failure that happens in startup, it's marketing for YC. Every success that happens in a startup is marketing for YC. Every company that actually raises money is marketing for YC. Every company that's too expensive is marketing for YC. They've literally cornered the startup early-stage market from every angle you can think of it and profit off every way a startup either navigates itself.

Yeah. I mean, is it, is it to a point now, and you're, you're closer to this community than I am. Um, I've never, well, actually, yeah, I've invested in like 2 YC companies, but like, is it to a point now where these classes are so big that it's just a tax on the startup ecosystem? Like you're just not, like, in order to get into the Silicon Valley echo chamber of funders there, like you need to go through and pay this tax. Is that, is that kind of to where we're getting with the size of these huge batches, like 420 companies or whatever?

I would counter that by saying I was a startup founder who went through an accelerator in 2014, not YC, but I can tell you that it is definitely not a tax. It is a gating fee to get in to see all your favorite stars performing on Broadway and actually be backstage with them and build your reputation and build your relationships and build your skills. 9 times out of 10, early-stage or first-time founders do not have the understanding, the emotional intelligence, or the network or the ability to even articulate what they're doing. And I'm telling you that YC takes the top 5% or 10% of those founders and then not only gives them access and opportunity to whatever they want to do, but it also helps them get a platform from which they can get an immense amount of credibility. And whatever you might say about anything, think of YC as Harvard or Stanford or Yale, as opposed to thinking about them like a tax on the ecosystem. And then you will never find a person who is successful in life ever regret going to Harvard or Stanford or Yale. And it is— you, you only have to go once. If you go to YC more than once in your startup, you're a loser, you're a failure, you don't deserve to run a company.

Uh, and, and that's just because your value prop is just—

yeah, you did not leverage your time at YC to do what you were supposed to do, which is A, A, impress the people who actually respect what YC does. B, leverage the YC name shamelessly to get into their alumni network and get into their social network because you are literally a member for life once you've done YC once. You get into Hacker News, you get into basically Bookface, you get into all of their different networks, you get into the social community, and then it's up to you as a quality of you as a person. Now, it doesn't matter if you failed at your YC startup. The quality of you as a person then determines how you leverage your YC heritage or history. Because even if your startup failed, no one cares. Even if your startup succeeded, no one cares. What they care about is you as a person, as a founder, and you as a person, as a founder, can then decide how much or how little you can leverage YC. And it's up to your own imagination to make that work for you. People have gone to tier 2 and tier 3 accelerators just because it is a stepping stone. And the best founders use YC as a stepping stone once and then leverage YC for the rest of their life. So it's not a tax in my mind. I think it's a net positive for people who don't have that access, who don't come from privilege, who don't come from that background. If your daddy went to a country club and you're from Connecticut or you're from, you're from basically, you know, somewhere there, then you should not go to YC because you don't need that access to privilege or access to that mindset of privilege. Actually succeed.

Yeah. And I mean, is your worldview at this point that it's YC and then maybe some tier 2 accelerators and won't be named and then, and then all the other ones, but YC is, you know, Harvard, Princeton, Stanford all put together above, above those other ones.

They figured out how to scale their brand. I don't, I can't think of any other accelerator who's figured out how to scale their brand. There were a lot that came close in the mid-2010s. 500 Startups was one of them. AngelPad was one of them. Techstars is probably a close second, but Techstars is also struggling to scale and their brand and they basically have a lot of— they haven't figured out succession like YC did. Techstars didn't figure out succession like YC did. And you see On Deck trying to do something like that. The problem with On Deck is On Deck has cluttered their business by starting So YC started Startup School after making a brand for themselves with a lot of exits and a lot of companies. Undated did the reverse. They started their Startup School and charged for it before they did the accelerator. So people start looking at you. So every time you charge someone for money, they look at you as a transactional person, not an emotional connection. YC has an emotional connection and therefore they can be as transactional as they want now because they were emotionally connected and involved for the first 10 years. Whereas OnDeck started transactionally and now are trying to build an emotional connection. It's very hard to build that authenticity on top of something we started out by giving money.

Yeah, you end up in this transactional bucket rather than truly the passive investor partner type bucket where you think YC—

you don't get people. Yeah, you don't get people rooting for you, right? How do you get people to root for you? That's why YC has it cornered. Startup failed is startup's problem. Startup succeeded is YC's problem.

So, I mean, you mentioned Techstars and other folks, the succession problem. What do you mean by solving the succession problem? What is, what is that?

Paul Graham is no longer at YC, probably hasn't been for 10 years. Sam Altman's not at YC. Gary Tan's no longer at YC. All of them were YC for a while, but YC is not them. And Paul Graham is probably one of the greatest succession planners because he was very clear and he's made it a culture in YC to say that it's okay for you to have opportunity cost and go do something else and still have an affiliation to YC. We won't shame you for leaving us. And it's not— everything else has been this like personality cult thing and YC somehow sidestepped it while building personalities that are larger than life alongside the brand.

It's really interesting. I mean, after Altman left, who was definitely like, I've never met him, but seemed like from everything online, like a hugely charismatic guy. Like I couldn't tell you who's running the show there anymore. Like I know there's that one guy, I could see his picture. It's Michael Siebel.

Michael Siebel. Michael Siebel is running the show and Michael Siebel has been around. See, that's the other part is when YC startups fail, those founders go back to YC and be, become mentors there and then they become partners there. Like you look at Aaron, who's running YC now, and all of these guys were YC founders. So YC went into their own community and pulled people out and said, if you want to add back to YC, we're not going to shame you. We're going to bring you in and actually have you tell people what's going on. So they actually weaponized their own founders into ambassadors to succeed rather than thinking we need to go find people better than our founders because they actually dog food their own product, literally.

Super interesting. Well, I mean, and another thing I've started to think about with YC and, and part of why, like when, when I was actively venture investing, we never invested in YC companies for two reasons. One is I'm in freaking Texas and it's like, what, what do I know about YC companies being in Texas? But number two is like they made the market so efficient.

I'm surprised you can. I'm surprised you didn't invest in Capital Factory.

Uh, they're great people. They're great people. Uh, I like, I like those guys. So the, um, you know, I think the, the thing that I'm, I'm worried about now is I look at like all these companies coming out of YC, going back to their home markets and trying to raise at like $20 million post when they have, you know, 3, 3 founders and a pitch deck. Like, I'm worried about the seed funds that have sprouted up over the past 3 to 5 years that are all like $30 million seed funds trying to write $100K checks and return their fund. Like, at what point is YC getting too efficient for the next step, like, in the ecosystem? Like, is that sustainable?

Oh, that's, that's just the tiniest. It's like the tiniest little violin for every seed fund out there making 2% on $30 million. Like, I'll just tell you, these people are not raising money back in their own country. The best companies in the world now are global at the same time, all at the same time. So you could be in Africa or Asia or Spain or anywhere, but you're raising in Silicon Valley because you're a Delaware C-Corp, because that's where your network is. But you're executing in your existing country because that's where your talent is. And at the end of the day, the seed funds have to find companies that are undervalued and are over-indexed on the right quality of companies they do. If their metric is YC, then they're not actually building any IP of their own. They're literally sitting like, you know, they're basically sitting on YC's back. And when YC suddenly doesn't want to flee on their back, the YC is going to do their own thing. Like these people have the same platform risk that Zynga built on Facebook. So are you going to be your own platform? Are you going to be your own system? Like these seed funds all have to answer the same question. Startups do when startups build on, build on other platforms, right? Which is, do you really have a differentiated product that people care about, or are you just money trying to chase some sort of opportunity? And then you're going to wail about it when the platform does what you could do, but they do it better. To me, it's not a problem with the startup problem. It is a, it's a seed fund structure problem. If you have a $30 million seed fund and you can't make a million dollar concentrated bet, then I'm sorry, then that's not really YC's problem. All the startups from them.

Very interesting. So, and you kind of casually mentioned it, you think most of those people are collecting 2% on the $30 million and that's the business for those GPs? They're not actually really, they're not actually really that convinced they're going to get into the carry?

I don't think that that's their business, but I do think that that is basically what they used to run. And instead of using that money to build something differentiated where people actually care about them, they actually using that money to do traveling to YC Demo Days and complain about the high prices without actually thinking about their structure, their seats, the fund structure. Like you could literally take that 20% of your $30 million, which is $6 million, and basically be like, you know what, screw my management fees. I'm going to basically invest in a very different convicted kind of a way. I'm going to focus on a certain market. I'm going to focus on certain demographic, I'm going to focus on a certain kind of founder, I'm going to go out and look for these founders, or I'm going to create my marketing pitch in such a way that these founders care more about my mission than they care about YC, and they're going to find me before they find YC. And then when they go into YC, I'm already in the backseat of these companies because I invested at $2 million. Let me be clear about one thing, like you are either in at $2.5, $3 million or $4 million, or you're in at $40 million. There is no half-assing it anymore. This is the reason why seed funds are— the Series A is a new seed. If you are a seed company with $30 million, you've got to be investing under $5 million, which means that you have got to be looking for companies who are not basically in YC already. If they're in YC, you missed your chance.

Got it.

And that is why they think it's hard because it's like iOS 14. It's like all these things are Google and they'll be like, oh my God, we could acquire customers on Facebook and direct-to-consumer companies. Now we can't acquire companies on Facebook anymore. How will I build a brand? You make a product that matters, you tell a story that resonates, and you go out and find those fucking customers. You don't do it by basically sitting on Facebook anymore. And that makes it hard for people because they're used to being lazy because YC set it up for them and they just knock it down.

Yeah. Well, and so something you just said, it used to be that you could set up a seed fund and, um, or a VC fund of any, any kind of subscale amount. And then you could just say, okay, I'm going to niche down to a particular sector or a particular stage, like, or you could also do a geography and are, you know, and you just say, okay, I'm going to own every deal that comes through Minnesota or the Midwest or whatever. Like, is that second option, second strategy, is that done? Or you basically, you just have to do the first two options, right? Sector, sector or particular niche. Or do you think people can still do geographic-based limitation on, on seed funds?

I'll put it differently. If what you love to do is give people money, you're going to fail as a VC. If what you love to do is actually create value in a company and you have a thesis— without a thesis, you are a bad investor now because you either need a brand, you either need some sort of, uh, some sort of a moat or a competitive advantage, a lot of money to win deals, or you need to have a brand to win money, or you need to have a thesis. Those are one of the three ways you win, you win investments, right? I'm an angel investor. I write $5K to $10K checks. I write checks all the way from $3 million valuations to $30 million valuations. I've been first check in companies that are now 20x and 30x, not because of this whole valuation growth, but because they talk to me first, because I know something about businesses that they don't and they like me. Like it's not scalable as a fund, but it is something that people look for me. Why do angels get in on deals and that VCs can't? The reason angels get in on deals is people think Angels stand for something. If you're an investor who has a thesis, or if you have a brand around something, or if you have a shit ton of money to throw at price, those are the only 3 ways an investor differentiates themselves now. And seed funds are stuck between the middle, splitting the difference between all those 3.

Yeah, it sounds hard. It's really hard. Super cool. Well, what I mean, as you look at this, as you look at this set of, of companies that came out of this class, like I was looking at the numbers you know, so let's say 400, like still close to half of them are B2B software or a lot of at least SaaS is listed as kind of the number one category. Like, how do you think about that? Because when I thought, when I see what's covered in the media, especially the startup media, like, like nobody's still talking about the media is not really talking about that as, as being the category that's, that's hot, right? Everybody was talking about NFTs, crypto, whatever. So How do you think about that in the context of the trends for this class?

Yeah, I think that the application layer on top of the consumer layer that we have right now for medium and small and medium businesses and individuals and the new trend of business being global instantly is a leapfrog time for everywhere outside the US. And that leapfrog is basically what you're seeing reflected in YC because I think what YC has also realized is The innovation now doesn't come from the US anymore. If you look at all of these companies that they say they like, like, I think probably there's 20 companies, it's probably like 10% of them that are in the US. The rest of them are all, all over the world. And the reason why is because the US is now in the optimization phase, whereas all of the other countries are still in the painkilling phase. And so Even you look at YC startups between the painkilling and the vitamin phase, a painkiller always has better value, a better chance of surviving and growing than a vitamin. And only reason a painkiller doesn't succeed is because it needs a shit ton of money in a complex market to keep surviving and figuring out how to get its business product right. I mean, it has product market fit, but getting its business model right. What YC literally does for them is give them that imprimatur which says if you hit any kind of product market fit, you can just come back to the market with YC continuity and basically figure out how to raise money. And what they're doing is literally expanding the market for any person in the world to not feel like they have a shot, to feel like they can have a shot at being just as big in 5 to 7 years as these people do. So I think what I see from here essentially is every company out there, every, every country out there thinking they can be just as good or better than a Silicon Valley company without having to be in Silicon Valley. If you look at the quality of the websites, if you click through each of these websites, you look, you look at how they're doing things. They're basically solving for real-world problems culturally based in those countries, but with the access to the value that they needed, which was initially just gatekept by manual and physical barriers that don't exist anymore.

Do you think, so there's this, I mean, the, the painkiller to vitamin kind of like lens to think about the global development of startups. Like, like, how do I, how do I reconcile the idea where I just keep seeing like Wealthfront for Indonesia as these, uh, as these like startups that are coming along? Like, why isn't like Wealthfront opening up in Indonesia by and large? Or am I just like being too obtuse with this that it's too, in most of these cases, it's too too difficult to scale globally because of local whatever.

It's kind of the same reason why Uber sold to Didi in China, right? One of those reasons. I mean, that's a very big example, but if you look at these countries, there's 3 parts to this, right? The first part is actually that the API-level integration systems that exist in the US where I can access UCC liens at the state and federal level through electronic interface, no matter which part of the US I'm trying to file in, those haven't come along as fast in those countries as they have here. And in some countries are getting there, like India's leapfrogging countries, you know, China's leapfrogging countries in technology, technical access or electronic interfaces. But that's one part of it where you have to now build kind of like hack together solutions at a local level because you understand which county is connected, which one's not, something like that. The second part is cultural for sure. Like, you know, there is these startups in India that are focused around, you know, just as much crypto as they are around gold and they understand crypto from a native level because India population has more gold than the Federal Reserve has. And so, you know, those cultural norms are not something that come intuitively to someone building outside of that country. And when you actually think of those scale markets, those are trillion-dollar markets, huge markets. And then the third part about this is actually the ability for those technologies and those cultures in those locations to both get the best of what we have and avoid the worst of what we have as they jump through these technology apertures. And when I say technology apertures, it means like, how do I not go through the cable phase of America for 30 years? How do I not go through, you know, the highway building phase of America for 30 years and jump straight to VTOL or drones or something like that? Like, you know, that technology aperture is different for different countries and we might over-optimize it a lot. And 9 times out of 10, the startup might over— might actually be overoptimistic about their timing. Because, you know, I often say this and I heard this from one of my mentors who's a venture capitalist, always tells me, he's like, your team could be great, your market could be great, your product could be great, you could have the greatest kind of business model. But if your timing's not good, your startup is fucked. Because everything's about timing. Everything's about timing, right?

You want to be early, but not too early.

Yeah.

So, I mean, do you think that we're getting to a point where, like, the Y Combinator brand will peak? Like, and I mean, you take the parallel to Stanford, Harvard that you're talking about to some extent, like, as I'm getting older, like, I keep running into, like, people that have graduated from those schools and I'm like, oh, how'd you get into that school? Because, you know, that's diminishing the brand, like, like how big can, how big can YC get? Or have we already reached that level to where, you know, I do remember a time in 2012, right, where like if a YC startup showed, showed up, those batch sizes were so small that they were particularly picky about who came in. Same with Techstars and some of the other, the other startup accelerators. But it shifted to where it's not like a golden ticket anymore in terms of raising your next round or being somebody that I know for sure, like on the investor or mentor side, is going to be really top 0.01% or top 0.1%. And like, I mean, as you're looking at this community, is it, is it devolving or is it, or is it still trending the right direction?

I think the thing that you're, you should think about is how many awesome founders can you find in a year who deserve to build a business? If you answer that question, then you know what YC's market is.

So unpack that. What is, what does that mean? What does that mean, deserve?

Yeah, so let's say there's 8 billion people in the world and let's say 1% of them were worthy of building a startup. Like they have the ambition, the drive, the intelligence, and they have the grit and the hard work to basically see it through. You're looking at probably 80 million people in the world who deserve to build a startup every year. And if you think about it, you're looking at YC funding 2,000 people a year. Got it.

So, okay, so you're familiar with the Thiel Fellowship? $200K, skip college, go build something?

Yeah. Yeah. Yeah.

So part of their core, they've been asked numerous times, like, why don't people do Thiel Fellowships for Tulsa or like El Paso, Texas? Like, why isn't that an economic model that could work where you go pick the 20 brightest in your city and you give them a stipend, say, go build something amazing? You know, or, or make their fellowship. They've also been asked that why didn't Thiel expand it and make it even bigger to have greater impact? And their belief is that the people who can do that at that young age, which is not that much younger than your typical, you know, prototypical YC founder, right? 25, 20, 24. And these, these kids are 18, 19 years old, let's say. They say there's the limitation, the upper bound there is really small. It's a couple hundred people a year. And your position and thesis would be, okay, well, are there— of the people that could potentially build the next Airbnb, there's a lot higher percentage maybe than the Thiel Fellowship viewpoint of the world would say.

I actually think that the reason why the Thiel Fellowship says that is because there's a huge amount of work that goes into taking a college kid who's 17, 18 years old and hasn't gone through like the average age of, I think, the YC founders, I think 26, 27, maybe 28. And there's a huge gap between being 17 and 27. I think that, you know, even if you're 22 or 23 and you have some kind of a degree or you have some kind of work behind you and you have some idea of how life works or some idea of how business works or some idea of how it works, YC is not looking for to basically, you know, mentor a founder or create something from scratch. YC is not looking to be a shrink or take on founders who they want to basically put in a lot of work on. YC is trying to take somebody who is 60-70% of the workday and make a bet on an average, basically on a risk average basis to see if it works out. The reason why Thiel Foundation can't do that is because then they have to basically run mentoring sessions to not just emotionally, but mentally, psychologically, and emotionally educate those college kids to first make them believe and then make them hope and then make them care and then make them succeed. And that is why he says there's only like 200 people like that who come with that emotional maturity. Whereas at YC, what YC is looking for is a survival of the fittest thing. Peter Thiel is not looking for survival of the fittest. He is looking to bet on super bright kids who don't need college to form them as human beings. That's why he says that.

So I had no idea. So implicit in what your answer there is, I didn't know that Thiel's fellowship is like actually doing a bunch of mentorship and education for these people. Is that what you're telling me goes on? I didn't know that. I thought it was like, here's your $200 grand, call us if you have any problems. But you're telling me there's actually like, they do like courses and mentoring as part of the Thiel Fellowship for these guys?

Yeah. And I'll tell you the— And I'll tell you that YC also has a version of that that has been slightly diluted, although they'll say they're trying to figure out how to scale their mentoring and their information. But I'll tell you that YC's biggest mentoring comes from the alumni network and from the founder network where like YC is like a buffet. You don't ask, you don't get. But Peter Thiel, the Thiel Foundation is different. Like it's evolved over time, but they have to groom these kids and understand who they are because they are not just taking a bet on the kids' mental and psychological acuity, but they're also taking a bet on the kid's emotional trajectory to be someone like the kid who started Figma, the person who runs the wine investment company. They're all Thiel Fellows because they are exceptionally bright kids with exceptionally mature heads.

What is consistent with what you're saying, the website, now that I pulled it up for the Thiel Fellowship, says, "We'll connect you to our network," which I think is very interesting based on what you're saying. Like, that means they're like mentoring these people and talking to them through it. And then they have 2 people out of a staff of 5, no, a staff of 4, that their titles are program director and program manager. It's like, oh, like this isn't, this isn't like $200K and hit the, hit the, uh, hit the road. This is like, we're going to run programs against you. Fascinating. Okay.

Yeah, because, because it's the alternative to college. It's not just, you know, uh, here's some money, go build some shit.

Yeah, that's totally how they pitch it though. Like they're just, but they're just giving you a different version of college. That's what it feels like.

It's a different version of college that pays you rather than you going into debt and paying somebody for a network.

It's fascinating.

Okay.

Well, I feel educated on that. Uh, so switching gears, you have a list of the, we're going to handicap the companies that came out and we're going to start with the Y Combinator, the list of the best companies out of Y Combinator per TechCrunch's opinion. So you have those up, can we go through them and I can poop on all of them?

Yeah, let's do it. Uh, and we're just going to do the 20 because I think that would be enough, but let's not do all of them. Hold on.

Yeah, maybe like read, read the, read the name and then give us like the, the, the 10-second pitch on them.

Oh, Y Combinator blog, DC favorites, day one. Here we go. So the first one, Discs Music, a mobile application aimed at the youth market that combines music with social features. Company reports application has reached the top 10 slot in app stores music category. 15,000 DAOs, tidy figure, large enough for startup to learn from its early audience. If they can keep their DAOs growing, its acquisition rate— every major social service is in awe of TikTok's ability to influence culture. Why not buy what Dix is Discs is building and found some early traction with. In reverse, Spotify is great at providing music for folks, but rather distant culture from user social strategy. So it's basically they're saying Discs is great, it's got 15,000 DAOs, but they like acquisition paid for Spotify, so please buy them. Um, I haven't been able to download any yet.

When TechCrunch thinks your best outcome is to get bought by Spotify, then I think that's cool. Okay.

Yeah. I mean, to be honest, I feel like the indie music scene is waiting for its iOS 14 moment. And I think that, you know, SoundCloud and Spotify both try to shoot it. But the thing is that you've got these terrible unit economics in the music industry that basically handicap it at so many levels that somebody who figures out how to use music to sell products and actually get the gas station model going. Okay. And so the gas station of music is something that I feel excited about, but I don't see the gas station of music in here. And Spotify has the best opportunity to do it. Some cloud has an opportunity to do it. But if music apps don't figure out how to get in music, music artists to sell product that helps them boost their, their revenue, then music alone is never going to keep a company going in my mind. And Spotify is a good example where it's not it's still struggling in, in terms of its ability to be a breakout company, in terms of its, you know, it's not a Google. Like, you should have a Google in music, and you don't, because music is a universal language.

So yeah, I'll give it a B-.

Yeah, let's call it like a, like a, like a 6 on 10 or something like that, right? Like a 5 or 10 or 6 on 10.

Yeah, that's a 6. I'll give that a 6 out of 10.

All right, Luna Joy, Atlanta-based company, provides precision mental health care for women. Targeted psychotherapy, medication management, genetic testing, coaching, and holistic wellness. Uh, why it's a fave: focus on women, underrepresented demographic, amazing traction, national insurance contracts in 5 months. Co-founder said could take up to 2 years. This is, this is a great— and, and you look at their team, you, you basically understand why, because it's an all-woman team, most of them, and they're all PhDs and MDs, and they know this, they know their shit. Know exactly what they're doing. And they get in and they just do stuff. And they know exactly how they're getting after them. Like, they don't, you know, whatever people say about YC, like, you know, maybe YC doesn't fund too many women, YC funds too little, few women, women who do get in are normally able to leverage YC because they deserve it. Not there like some dude bro who's basically gotten and raising a $30 million series A in like 6 months.

Yeah. So Luna Joy is the name of this one. I like this a lot because these are, these are the types of platforms that you build trust with your consumer customers, and then you can help sell them so much stuff and develop that personal relationship with that trust where they just come to you for, hey, I need help with this, or I need help with infertility is one of the things they have here. And the other thing I like about this one, and I, if I was on the YC selection committee, I would have taken this one. Just because of the little things that they've done right in their website. Like, it's just, they've just, that's a good signal for me, right? It's just like the way they wrote their newsletter signup. It's like, oh, like somebody took some care and did this the right way.

Yeah, it's like an 8 on 10 for me.

Same. All right, let's keep going.

Coggers is a New Delhi-based application, document scanner, PDF scanner, PDF editor rolled into one. Built for India, safe and secure, no ads, no watermarks. What you can do is scan and share a document as a PDF, store and organize as a storage space, edit documents. To my mind, feature, not a product, but you know, DocuSign went public, so who knows?

Yeah, it sounds like Evernote for India. That's what I got.

Let's, I mean, it sounds more like the Adobe Scan PDF or like a HelloSign or a DocuSign for India. Sounds like that to me. Like, it's like a Dropbox, Adobe, Adobe PDF kind of a combination. Yeah, I think they're solving a problem where in India a lot of things are physical paper, and if you want to document physical paper, you need an app. And so it's like a, it's like a super app, like a super consumer app, and they're doing it only, uh, directed at India.

So 5 out of 10.

Um, yeah, I, I would, I would say 7 and 10 as a feature, uh, 4 and 10 as a startup.

There you go. Uh, all right, what we got next? Starling. Starling Medical.

Yeah, what information do you just flush down the toilet? Building a home urine diagnostic remote patient monitoring platform you can integrate into anyone's bathroom routine.

This is fascinating. So it's a little machine that they send to your house You pee into it and then it connects to your phone.

Oh, this is like Levels. This is like Levels for urine. It's like a continuous glucose monitor but for urine. Yeah, it's like a continuous glucose monitor but for urine.

Uh, it's totally what it is. So what can it help you with? Bladder cancer. That's pretty rare, right? Chronic kidney disease, urinary tract infections. Those are pretty common. And obstruction. This is fascinating. I mean, once you have stuff in people's urine, there's not that much you can do with it beyond those few things. Interesting.

If they don't get into an insurance program or a paid insurance program, they're not going to succeed unless they get into the insurance billing.

It's interesting. This is one of those startups that if you look at their website, has been a part of every accelerator from like MassChallenge to Capital Factory to just random like company like Rice's Launch Challenge, often A&M New Ventures competition, often not a good sign. Yeah, I don't— it doesn't smell good, but it's also not Myspace. So 3 out of 10.

Yeah. To me, the company is interesting and I feel like they could build it differently. But, you know, maybe YC will help them raise more money. This company is going to need at least $15 million and a huge amount of institutional sales for them to succeed. So yeah, yeah, I would say 4 on 10 so far.

You're very nice.

Okay. Streamlined bill payments and invoice collections. Yeah, it's a hardware program. Hardware is hard. They're trying to solve way too many problems. Yeah. Average cash flow pricing.

So what the heck is this? This is this Peakflow that we're looking at. So it's P-E-A-K-F-L-O.co.

Yeah, Peakflow. Yeah, it's like a visualize cash flow health for future.

So is this just like another FreshBooks? Is that what this is? No, it's like a cash flow visualizer.

Which is different from FreshBooks because it takes data in and shows you what you're doing. Just can't tell where they're based.

Indonesia. I had a friend try to pursue exactly this business in the US to like do automated, like, cash flow modeling for your business. And he discovered nobody wanted to pay for it. So maybe they want to pay for it in Indonesia, but not in the US.

That's the reason why he's doing it along with the, with the get paid part, I think. Which is basically the AR/AP part. If these guys don't get into lending against float, against AR/AP, they're dead.

Yeah.

If they don't have a lending product, they're dead.

All right. What do you think?

I haven't seen the software yet, but based on the premise, I think 5 on 10.

Okay, I'll go with that. All right. And then we got Rhythm. Rhythm. Rhythm. Rhythm.

Rhythm.

Long COVID treatment from home. Connect with a telecare team specializing in complex illness. Access long COVID therapies based on the latest research.

Oh, these are for chronic ailments.

Yeah, this is totally— do they do more than just long COVID? It looks like it's all just long COVID.

Let me go down. Myalgic encephalomyelitis, myelitis, mast cell activation, post-orthostatic tachycardia syndrome.

Yeah.

Then they're doing other stuff too. Long COVID is, I think, their like beachhead, but I'm 100% sure these people are trying to get after the chronic care patient.

Very interesting.

All right, we're not getting in network with any health insurance carriers, are not able to build insurers, actively looking to become in network with health— like, this is the thing that I get interested in, is like whenever you get a healthcare practice inside a pre-seed company or a seed company, especially based in the US, like if you don't have an ability to get in network with health insurance or have a partnership, like, you know, if YC wants to go after healthcare or something like that, like any YC healthcare startup should have an in with these insurance networks instead of them trying to hack it on their own. The one thing I get a little frustrated about is that there are certain institutional advantages to being YC that are not available to individual startups in their groups, and that allows YC to basically— these are small things like in-network health insurance carriers. It would take YC 15 minutes to get one of their CEOs to get a phone call and get a deal done. It would probably take 5 days to get there, 5 hours, 5 months to get a deal done. But once that deal's done, like, you have literally 10x the value of every healthcare startup you've looked at. So we would give this a 4 on 10 because they're not in network, but we gave Luna Joy 8 on 10 because they're already in network. And why should that be the difference between those two companies?

Welcome to America.

Yeah, but yeah, I'm a 4 on 10 here because I think that they are good company, but they have no clue what they're doing on the insurance side.

Yeah. All right. Azuki, which appears to be the Netflix for manga. That's the best way I can describe it. Manga being the, the cartoon-based novels. Yeah. So one question I have about this, and I don't know squat about manga because I'm old, um, but the, do people actually watch and read more than one different type of manga or like, are, do they find their two or three and they just love those series? Like what, what is the value prop here for, does somebody want to read 85 different types of manga, or do they stick to the couple different universes that they like?

No, I think there's 3 or 4 things here they're doing. They're offering a discovery network for people who are not yet fully immersed in it. They're offering you an addiction so that you can go in all the time. And I think that they are looking for that engagement that allows them— again, this looks to me like, you know, manga is very, very, in my mind, distributed and spread out and broken and like, uh, you know, um, it's not— how do you call it? It's not centralized. It's not like Marvel where it's very, very segmented. Uh, you know, I think it's like Marvel is very centralized and you want Marvel's comics and then you have to pick what you like in Marvel, but it's all under one umbrella. Whereas manga has 50 different studios making content in 50 different ways for 50 different genres. And I think that that allows you to basically discover new content and new studios all the time. And if they can turn into Netflix that also does events and also does promos and merch and stuff like that. I think this will drive a lot more loyalty than like a horizontal Netflix. You see, support creators, they get 10 out of 10 from me. 7 on 10. 7 on 10. Market size. I'm a little worried about market size. So 7 on 10 for me because the product is great.

I hear you there. I have a family friend and their daughter is addicted to manga and they've had to like pull them all out of their room. So the market size is hitting close to home for me.

That's true.

All right.

But to me, I feel like it wouldn't be more than— for them to get to a $10 billion company would be a stretch.

Fair enough. Fair enough. Okay. Mintlify, which appears to be an automatically generating code documenter. Hate documenting.

It's a GPT-3 for code documents.

Yeah. And it watch— it puts, puts code in there or puts documents inside of your computer code. This is a very typical, very typical YC, like stuff only developers care about product, which I think is cool, but I wonder how you're getting— I wonder how they're actually monetizing this. It's not really clear what they're doing. You're not— are you paying, are you paying a subscription?

Yeah, this is like, it's like, to me, it's like Grammarly for, for coding.

Yeah, Grammarly is a great business, but more people write paragraphs than code for sure.

Yeah, but I think that this is Grammarly for coding.

Yeah. How much, I mean, how are they going to make money on this? It's not really clear.

So I think what this will do is basically if you take every new developer in the world, like a Lambda School graduate or anyone like that, and then they basically go into a React.js library or a JavaScript library. And they have to reuse that library to do something and they have like probably 30% idea what they're doing, not 100% idea. This helps them generate documentation for that and helps them get better because I think they are building for a world in which coders are also independent contractors rather than working for companies or salary people where that is the new future. And I think this is probably a couple of years ahead of its time, but should lean in Unless they figure out more extensions, to me, this is like a 6 on 10 right now.

I'm with you there. All right. We just got a couple more minutes. So let's do rapid fire, like 3 or 4 more. And then I know you, I know you got stuff to do.

Yes, sir. SuperSheets enables anyone to build code tools on top of your database without writing any code. Once you find the data, filter and click, build the views like pivot tables. So it's essentially like Smartsheets. 6 on 10. I don't think it's a huge difference.

Man, I've seen this. I've, you know, we— I've been involved in buying software companies and I've seen the same idea. Like, there's people are trying to sell this idea all the time as a business, and it always ends up like a $2 million SaaS business. So I'll give it a 4. So, uh, Road— but Rosebud Bioscience.

Uh, Rosebud Biosciences, micro. The company takes microorganisms like a heart on a chip but does so with the patient's own DNA, so theoretically the cells react closer. Sci-fi, biopunk vibes. Important step in the world of personalized. They basically develop therapies for rare genetic diseases in children. They model human development with the same genetic mutation, so they basically build, um, simulations, and they're two PhDs, CTO and CEO. To me, 10 on 10.

Super ambitious idea. The world definitely needs this one. So call Lux Capital and fund it. Yeah, super cool.

That's why 10 on 10 for me, because that's the kind of startup I'd like to see in here. Lenco, all-in-one finance built for sole traders, banking accounts, payments, expense management.

Yeah, this is just like, do we really need another bank? What is— what's, what's going on? What's special about this? It looks just like every other bank. I don't get it.

It looks like Brex to me. Oh, they're in Nigeria. That's the difference.

Oh, Brex for Nigeria. Okay, fine. I'll give it a, I'll give it a 7 out of 10. Humorous story. I'm, I'm hiring globally for a role right now and I'm using screening tests and I have noticed that my African applicants are the most likely to try to cheat on the tests. Like there's one that requires you to write like English to, to pass the test. And like somebody got like 100 on it, like a perfect score. And then I look at their resume and I'm like, wait a second, there's no way this person just got a perfect score on an English test. So pretty, pretty funny. It's the humorous stuff about hiring globally.

Yeah. To me, 7 out of 10, I guess.

We did, we did just talk about an idea I want to, I want to probe on, which is like this barbell theory of ideas. Like I think the good ideas either seem fantastic and they are fantastic, or they seem like horrible, but they're truly fantastic. And I think Paul G put forth this mental model, so I didn't make it up. But like so many of these Y Combinator ideas are just like in the middle of that barbell. They're just like, they're just like, okay, ideas, right? They're the ones that like, okay, this genuinely looks like a good idea. Whereas like Airbnb was like, this seems like a terrible idea. Like who wants to invest in this? So, I mean, how do you think— I mean, do you like that, that lens of looking at startups and, and how do you like reconcile that with this? Is it just bets on these teams and the spaces that they're in, or how should I think about that?

I think that a rising tide lifts all boats. And I think what has happened is because tech has innovated every single piece of our life and our business, what we are seeing now is this messy middle where you have outlier startups like Nuclear Power and Rosebud Biosciences and why she's making those bets, because those bets deserve to be made. And then you have super mundane companies that basically you would never fund, but then understand that they have unlocked something cultural or something unique like Netflix for manga or something like that. So you have two barbells on the side, and then in the middle what you have is companies basically just solving for everyday problems that you think are solved in your country or in your market, but are not solved in other places. And those things are not going to be getting to that kind of market cap that you need for it to deliver a return for a startup seed fund making a bet. But it deserves to exist in the world. And what YC has done is basically taken a startup and think about, does tech automate this? Does this deserve to exist in the world? Is this something that we can see scaling across the country? And have we seen evidence of in the world and seen evidence of this behavior in the past? Great. Let's do it. And that's where they're at. We're at the end of the entire curve right now, which is you're, you're now seeing tech become business and YC is literally just funding tech-enabled businesses because they offer the efficiencies of tech and they might be operating in big markets. My startup is that basically I am using technology to innovate just a trillion-dollar market or a few trillion dollars and then use that to basically scale the business in a way that is so efficient that it just scales. Like, that's the reason why Pilot, which is an accounting firm on crack, got funded, because they figured out how to digitize all that manual shit you do on the backend, and they can now do hundreds and hundreds of more clients, which is different from your CPA firm. And that's where you see all these fintech accounting firms buying CPA firms, because now they're absorbing those CPAs into their new way of productized kind of management. And then that's how businesses scale, which is a very different way of scaling that we've thought of. Technically, we've always thought that a company can either scale through a digital product that doesn't need too many people, or it scales through this like marketplace with a network effect that doesn't need too many people. But this third model, which is basically it can scale by actually creating efficiencies that people can use inside the company so that the company's model and the profit margin scale even though the people aren't really scaling geometrically, they're scaling proportionally so that the company scales on top of it geometrically, if that makes sense. Like if I have a 60, 70% gross margin inside even a human-driven company, that's a pretty good gross margin because some startups don't have that.

Yeah, I love it. Super cool. All right, man. Well, this was awesome. Thanks for making the time. And I look forward to your shitposting on Twitter. So thanks. Thanks for letting me be part of it.

Appreciate it. Thank you. Thank you. Appreciate it. We'll catch you later.