#226 Garry Tan: Billion-Dollar Misfits — Inside Y Combinator’s Startup Formula

The Knowledge Project with Shane Parrish

Farnam Street

Business, Investing, Entrepreneurship

4.7 • 2.9K Ratings

🗓️ 29 April 2025

⏱️ 140 minutes

🔗️ Recording | iTunes | RSS

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Summary

Most accelerators fund ideas. Y Combinator funds founders—and transforms them. With a 1% acceptance rate and alumni behind 60% of the past decade’s unicorns, YC knows what separates the founders who break through from those who burn out. It's not the flashiest résumé or the boldest pitch but something President Garry Tan says is far rarer: earnestness. In this conversation, Garry reveals why this is the key to success, and how it can make or break a startup. We also dive into how AI is reshaping the whole landscape of venture capital and what the future might look like when everyone has intelligence on tap. If you care about innovation, agency, or the future of work, don’t miss this episode. Approximate timestamps: Subject to variation due to dynamically inserted ads. (00:02:39) The Success of Y Combinator (00:04:25) The Y Combinator Program (00:08:25) The Application Process (00:09:58) The Interview Process (00:16:16) The Challenge of Early Stage Investment (00:22:53) The Role of San Francisco in Innovation (00:28:32) The Ideal Founder (00:36:27) The Importance of Earnestness (00:42:17) The Changing Landscape of AI Companies (00:45:26) The Impact of Cloud Computing (00:50:11) Dysfunction with Silicon Valley (00:52:24) Forecast for the Tech Market (00:54:40) The Regulation of AI (00:55:56) The Need for Agency in Education (01:01:40) AI in Biotech and Manufacturing (01:07:24) The Issue of Data Access and The Legal Aspects of AI Outputs (01:13:34) The Role of Meta in AI Development (01:28:07) The Potential of AI in Decision Making (01:40:33) Defining AGI (01:42:03) The Use of AI and Prompting (01:47:09) AI Model Reasoning (01:49:48) The Competitive Advantage in AI (01:52:42) Investing in Big Tech Companies (01:55:47) The Role of Microsoft and Meta in AI (01:57:00) Learning from MrBeast: YouTube Channel Optimization (02:05:58) The Perception of Founders (02:08:23) The Reality of Startup Success Rates (02:09:34) The Impact of OpenAI (02:11:46) The Golden Age of Building Newsletter - The Brain Food newsletter delivers actionable insights and thoughtful ideas every Sunday. It takes 5 minutes to read, and it’s completely free. Learn more and sign up at fs.blog/newsletter Upgrade — If you want to hear my thoughts and reflections at the end of the episode, join our membership: ⁠⁠⁠⁠⁠⁠⁠fs.blog/membership⁠⁠ and get your own private feed. Watch on YouTube: @tkppodcast Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	The world is full of problems.
0:01.7	Like, why are people sort of retired in place pulling down, you know, insane, by average American standards, absolutely insane salaries to build software that, you know, doesn't change, doesn't get better?
0:15.5	You know, sometimes I sit there and I run into a bug, whether it's a Google product or an Apple product or Facebook
0:21.9	or whatever, I'm like, this is an obvious bug. And I know that there are teams out there, there are
0:27.7	people getting paid millions of dollars a year to make some of the worst software. And it will
0:33.0	never get fixed because people don't care. No one's paying attention. That's just one symptom out of a
0:38.8	great many that is, you know, the result of basically treating people like, you know,
0:42.9	hoarded resources. The world is full of problems. Let's go solve those things.
0:50.3	Welcome to the Knowledge Project.
0:56.6	I'm your host, Shane Parrish.
0:59.3	In a world where knowledge is power, this podcast is your toolkit for mastering the best
1:03.5	of what other people have already figured out.
1:08.5	If you want to take your learning the next level, consider joining our membership program at
1:12.7	FS.blog slash membership. As a member, you'll get my personal reflections at the end of every episode,
1:19.5	early access to episodes, no ads, including this, exclusive content, hand-edited transcripts, and so much
1:26.1	more. Check out the link in the show notes for more.
1:29.1	Today, we're pulling back the curtain on one of the most powerful forces in the tech and venture
1:34.1	capital world, Y Combinator. With less than a 1% acceptance rate and a track record that
1:40.1	includes 60% of the last decade's unicorn startups, YC, has shaped the startup world as we know it.
1:47.0	Gary Tan, president of Y Combinator, joins us to break down what separates transformative founders from the rest, and why so many ambitious entrepreneurs still get it wrong.
1:57.0	We'll explore the traits that matter the most, the numbers behind billion-dollar companies,
2:02.7	and why earnestness often beats raw ambition. But there's a seismic shift happening in venture
	...

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