Silicon Valley’s early platform companies are getting a major boost from artificial intelligence.
Startup Accelerator Y Combinator – Known for Backing Airbnb, Dropbox And Stripe – held its annual demo day in San Francisco this week, where founders picked their startups for a auditorium of potential venture capital investors.
Y Combinator CEO Gary Tan told CNBC that the group is growing quite rapidly compared to previous cohorts and with real revenue. For the last nine months, the entire batch of YC companies increased by 10% per week, said.
“This is not only number one or two companies – the entire batch is growing 10% weeks a week,” said Tan, which is also a combinator alum. “This has never happened before in the initial stage venture.”
Tan said that this growth spirt is thanks to the leap in Artificial Intelligence.
App developers can now close or automate more repetition tasks, and they can generate new codes using large language models. Tan called it “vibe coding”, a word for the model to take wheel and generate software. In some cases, AI may code the entire app.
The ability to subsidize heavy charge for AI otherwise has allowed these companies to manufacture with fewer people. For about a quarter of the current YC startups, 95% of his code was written by AI, Tan said.
Tan said, “It seems a bit scary, but on the other hand, for founders this means that you don’t need a team of 50 or 100 engineers,” Tan said that companies are reaching $ 10 million in revenue with teams of less than 10 people. “You don’t have to lift that much. The capital goes for a long time.”
Zero-Boy-by-the-rate of Silicon Valley’s growth-the mentality of all the people “has gone out of the window,” Tan said, pointing to focusing renewed on profitability. The focus on the lines below also applies to the megacap tech companies. Google, Meta And Heroic Put on several rounds of trimmed and have pulled back when hired.
While some engineers are shaken, Tan described it as an opportunity.
He said that it is easy to create a startup, and the top people in Tech do not need to prove their qualifications to work in Big tech companies, he said.
“There is a lot of concern in the job market, especially young software engineers,” Tan said. “Perhaps it is an engineer who cannot do a job in meta or google, who actually manufacture a standalone business that makes $ 10 million or $ 100 million per year with ten people – this is such a powerful moment in software.”
About 80% of the YC companies presented this week were AI -focused, with a handful of robotics and semiconductor startups. This group of companies is capable of proving earlier business use compared to previous generations, Tan said.
“There is a ton promotion, but what is unique about this moment is that people are really getting commercial verification,” he said. “If you are an investor in Demo Day, you will be able to call a real customer, and that person will say,” Yes, we use software every day. “
The Y Combinator was founded in 2005 by Paul Graham, Jessica Livingston, Robert Morris and Trever Blackwell. The firm invests $ 500,000 in startups in exchange for equity stake. Those founders then entered the three -month program at San Francisco headquarters and received guidance from partners and YC alumni. Demo Day is a way to attract additional capital.
The firm has funded more than 5,3000 companies, which states that it costs more than $ 800 billion in total. More than a dozen of them are public, and the value of more than 100 is $ 1 billion or more. With approximately 1% acceptance rate, more than 15,000 companies apply to go into accelerator.
More of these venture capital incubators have pop up in the last decade, and more capital has come for initial stage startups. Despite the competition, Tan argued that Y Combinator had an edge for its strong network. He raised the number of highly valuable portfolio companies, and pushed back the idea that special incubators were taking business.
“About 20 to 30% of companies change their views during YC and sometimes change their industry completely. And if you end with an incubator that is very specific, you may not be able to convert into what you were going to do,” Tan said. “We think the benefits of network impact and YC have become more bold only.”
