The partners say nearly half of YC’s Summer 2023 batch used large language models, reflecting what founders wanted to build rather than a preference for AI applications. They describe the moment as unusually open to new founders, since no one has years of experience with LLMs.
The Truth About Building AI Startups Today
Speakers
Gary Tan, Jared Friedman, and Diana Hu, Y Combinator group partners, discuss AI startup opportunities and pitfalls on the first episode of The Lightcone.
The partners see promise in automating routine information work, such as searching records, summarizing documents, and transferring information between systems. They point to Sweetspot, which pivoted to automating government contract searches and proposals after learning that a contractor spent a workday refreshing a government website.
AI copilots can attract sign-ups and upfront payments even when customers have no clear use for them. The partners advise checking whether people use the product for a specific task; they also warn that cheaper fine-tuned models may lose customers as model costs fall, unless they offer other value such as private-data customization.
The partners argue that calling a product a GPT wrapper overlooks the value of good user experience and software design. To withstand future foundation models, they recommend solving a concrete user problem with domain-specific business logic, such as sales next steps or compliance workflows.
The discussion explores AI voice agents that handle calls for small businesses and specialized models that can run locally for tasks like coding. The partners also raise concerns about private-data security and concentrated control of AI, pointing to emerging LLM security tools and the case for open-source models.
Takeaways
- Start with a repetitive task you can observe directly, then test whether people use an automation for it.
- Treat sign-ups and early payments as weak evidence until customers rely on the product in their work.
- Make the product specific to a user, workflow, and set of business rules.
- Use powerful general models to prototype, then consider specialized models for well-defined domains.
- Factor data access, privacy, and control into AI product decisions.
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What was claimed 7
- role atJared Friedman is group partner at
Y Combinator
“one of the partners at YC”
0:00inAdvice for Hard-tech and Biotech FoundersYouTube Verified4 sources· Talk
- role atGarry Tan is runs Y Combinator full-time at
Y Combinator
“I'm Garry, president and CEO of Y Combinator.”
0:09inHow to Make Claude Code Your AI Engineering TeamYouTube Verified7 sources· Talk
- role atDiana is group partner at
Y Combinator
“this is Jared Friedman and Diana, and we're group partners at Y Combinator.”
YouTube Unverified1 source· Talk
- metric
Y Combinator: Close to 50% of the Summer 2023 batch had large language models
“for Summer 2023, it was close to 50% of the batch.”
YouTube Unverified1 source· Talk
- featureSweetspot: Automates searching for government contracts and submitting proposals
“using LLMs to automate searching for government contracts to bid on and submitting the proposals.”
YouTube Unverified1 source· Talk
- featurePrompt Armor: Wraps API calls and helps prevent private data from being exposed through LLMs
“Prompt Armor, which wraps your API calls. They've figured out ... Prompt Armor has a solution that stops it.”
YouTube Unverified1 source· Talk
- metric
Attention Is All You Need: 7 of its 8 authors started different companies; those companies are worth more than $6 billion in total
“Of the eight authors, seven started different companies, and those companies are worth more than $6 billion in total.”
YouTube Unverified1 source· Talk









