Garry Tan of Y Combinator: How Innovation Is Changing
The Golden Age of Startups: Insights from Garry Tan on AI, Lean Teams, and the Future of Innovation
At Interplay, we’re constantly exploring where the entrepreneurial ecosystem is heading. On a recent episode of the podcast, we had the privilege of sitting down with Garry Tan, President & CEO of Y Combinator (YC), one of the most influential institutions in the innovation economy. Garry’s perspective is unique: YC processes over 600 startups annually, making it a pulse point for spotting macro trends before they hit the mainstream.
The New Frontier: Vertical SaaS and Vertical AI
Unsurprisingly, AI dominated our conversation. But Garry pointed out something less obvious: the massive opportunities lie not just in AI itself, but in vertical SaaS and vertical AI — applications deeply tailored to specific industries. As Garry puts it, we’re entering an "age of abundant intelligence," where specialized solutions can thrive in corners of the GDP that were historically underserved.
Smaller Teams, Bigger Impact
We discussed how startups today are scaling faster and leaner. Thanks to AI tools, companies are moving from idea to $1M in revenue with just a couple of people, and hitting $12M ARR with teams as small as six. The old mantra of "blitzscaling" massive headcount is being replaced by a smarter, more efficient model where software, automation, and customer success tools take center stage.
YC’s Approach: Community, Not Curriculum
Unlike traditional programs, YC doesn’t "teach" founders in a lecture-hall sense. Instead, they foster peer-to-peer learning among some of the brightest minds at the bleeding edge of technology. The approach is simple yet profound: connect great founders early, encourage rapid experimentation, and let the community push the frontier forward.
Why AI Adoption Is Still in Early Innings
Despite all the hype, Garry emphasized that we're barely at the second pitch of the first inning in AI's broader societal impact. Adoption rates are modest, retention is low, and it’s clear that simply adding a chatbot isn’t enough. Real transformation will require rethinking workflows and user experiences — and will play out over the next 10 to 20 years.
Geography Still Matters (But It’s Changing)
While talent is global, Garry shared that having even a toehold in San Francisco correlates with a 2.5x higher likelihood of building a unicorn. That said, we're seeing vibrant innovation hubs sprouting up in cities like London, Paris, New York, Denver, and LA. And as AI levels the playing field, we're likely to see an explosion of successful startups beyond the Bay Area.
The One Skill That Matters Most
At the end of the day, there’s one universal truth: founders succeed if they build products people actually want. It's not about credentials. It's not about resume lines. It's about relentless focus on users, learning fast, and iterating even faster.
FAQ
1. What is vertical AI and why is it important?
Vertical AI refers to artificial intelligence solutions customized for specific industries. It allows startups to create highly tailored, high-impact products for niche markets that have historically been overlooked.
2. How is AI changing team structures in startups?
AI enables startups to achieve massive scale with fewer people. Tasks traditionally requiring large teams—like customer support or operations—can now be automated, allowing startups to grow lean and fast.
3. Is it still necessary to be in Silicon Valley?
While remote work and global hiring have made location less critical, having a base or foothold in San Francisco still significantly increases the odds of building a unicorn, according to YC’s data.
4. How early are we in AI adoption?
Very early. AI’s economic impact is still small, and widespread, transformative use cases are expected to unfold over the next 10-20 years.
5. What’s the biggest mistake new founders make today?
Building a product without a clear understanding of what users want. Rapid, iterative user engagement remains the cornerstone of successful startups.