SPEAKER_01: You actually can make some significant progress with like half a million dollars in three months.
SPEAKER_02: The best hard tech founders do have very high clarity of vision around the future.
SPEAKER_01: For hard tech companies, you have all this technical risk.You don't know if you're going to be able to mine asteroids, but you have no market risk. If you can mine asteroids, it's going to be freaking huge.
SPEAKER_04: I think this is a call to action for a lot of the very hardcore engineers that this is your chance to build something huge and to really change the world literally.
SPEAKER_00: So this is the kind of energy we need in society, solving some of the biggest problems that face humanity. Welcome back to another episode of The Light Cone.You probably know Y Combinator for a lot of our software investments like Stripe, Airbnb, or Coinbase.But it turns out YC has a lot of wins not just in the electrons world where you're slinging bits around.Some of our best companies have actually been incredible at slinging atoms.
SPEAKER_02: So I'm curious, what's some of the advice you give to the hard tech companies in a YC batch?Like in particular, how is it different the milestones they need to hit during the three months and what metrics they might present on demo day?
SPEAKER_04: Well, one of the obvious things is they won't be able to build a rocket, let's say, in time.So they won't have actual revenue.So one of the things we tell them is they still have to show some form of commercial traction.It won't be necessarily actually selling and getting revenue in the bank, but it's a different kind of form.I think we talk a lot about demonstrating that the customers that ultimately they will sell to want this.And it's typically a form of a LOI that is actually significant with actual values, with actually legit logos.
SPEAKER_02: I've definitely found LOIs, like letters of intent, are something where everybody knows they're obviously not the same as actually signing up a customer.But for the software companies, if a software of a company says, oh, we got a customer on an LOI for a... $1,000 MRR contract, that's not going to be impressive.But if you can get an LOI for a $100 million contract, that is actually quite impressive.
SPEAKER_01: The way that people tend to get this wrong out there in the world is they... They're building some hard tech thing, and they're like, oh, well, I need $20 million to build my thing.And then they look at YC, and they're like, well, YC invests half a million dollars.Well, that's not enough.I can't do YC.How would this make sense at all?And one of the interesting things that I've learned from working here is... that actually YC works extremely well for hard tech companies and that for every hard tech company, no matter how crazy the thing you're working on, whether it's a supersonic jet or inventing fusion power, there's always like some small part that you can peel off that is like the very initial stage that you actually can make some significant progress with like half a million dollars in three months.Like always.
SPEAKER_02: My experience, I feel this is familiar with the hard tech companies, is that they start YC and they always come in with this.The essential pitch is we need to raise it.There's no way we can make this company work unless we raise like $50 million.And so like
SPEAKER_01: Harj, can you tell me how to raise $50 million this week?Introduce me to some VCs who are going to give me my $50 million.
SPEAKER_02: And my go-to line is always, no.
SPEAKER_04: That's your first office hour.Just show me the money.
SPEAKER_02: Yes, basically.It's like, no, you're not going to be able to raise $50 million off the bat.You are going to have to think like a software company, actually.How can we do this cheaply, quickly, and show something on Demo Day? And I just find it's always actually, at the start, it's a bit of a fight, honestly, to get them to think that way.And then in the second half of the batch is when they finally get some insight, because we've just been pounding on them to think fast, cheap, less money.And then something clicks.And then they actually have a plan for the second half of the batch.
SPEAKER_01: MARK BLYTHEYORE- And the remarkable thing I found is actually how well it works.Once they make that mental switch, and they realize that they can do something in three months, then they go do that.And then they have, it's not just an idea anymore.They've got something real and they can go to investors who maybe didn't want to fund them before YC.And now all of a sudden, like, People just want to put money into this thing because they've actually like, it's actually like going someplace.
SPEAKER_00: The weird inversion for hard tech, I think, is it's not about why.The why is often there's a problem and it's sort of obvious.And then the why now even is often kind of obvious. where there's some cost curve, there's some bomb costs that change, the build of materials got cheaper, there's some breakthrough.And so the actual question is not why now or why, it's actually why you?And I think that links up to what you're saying, which is if you can show that it's you, and it might be LOIs in hard tech, and especially the people who might spend a lot of money on atoms, they tend to be a little bit more diligent about only signing LOIs with people who are for real.But it's not just the LOI.
SPEAKER_04: I think the other piece is they actually need to build a plan and demonstrate the unit cost actually makes sense and have that whole financial viability aspect of it.And I think the other thing is actually besides LOI is proving that they can actually make it. Because a lot of things are like, to answer the why you, can you show me a kernel of truth of the idea that you actually can build?So besides LOI, the second thing is a technical milestone.Of course, you can't build the whole thing. plane let's say yeah rocket or build the giant um decarbonization container thing but maybe do it on a small scale maybe if you were aiming to capture at some point i don't know 700 metric tons of carbon maybe just do it like one or hundred seven grams yeah or seven grams right demonstrate that you can actually do and know the science and can actually build it
SPEAKER_02: Yeah, I have a trick for helping the hard tech founders present this to investors that I stole from one of our software companies.So let's start with the software company.It was Brex.So Brex's Demo Day presentation was a lot about showing how they were able to move really quickly on getting a banking deal and the regulatory aspects of starting a fintech back then.And as I remember it, their presentation had a timeline of, here's how long it takes a regular company to get the banking deal and go live with a real credit card or charge card.And then they were like, and we did it three months, whereas the actual time was 12 months.So I tell hard tech founders to think about it as, what's the timeline to build your product for a regular company?Maybe it's 12 months.
And with cost as well, would it cost a regular hardware company 50 million bucks and 12 months to get to like this proof of concept stage and prove that you were able to do it in like three months for 500K.And like that visual I find is always like effective for answering the why you question actually.It's like, oh, okay, there must be something special about this founder if they're able to do this like with less money and much faster.
SPEAKER_01: The cool thing is that if people can build that habit during YC, it doesn't just help them raise money during demo day, but it actually creates a habit that then changes the operating cadence that they work at forever.And a lot of our best hard tech companies, they still have that way of operating, which is they're constantly pushing new things faster and cheaper than anyone thinks is possible.
SPEAKER_02: Should we talk about some examples of companies that have gone through YCE and done this successfully?
SPEAKER_01: Yeah.And I think for each of these, the idea is we're going to talk about... where they are now, and then we're gonna talk about what they were able to do during the three months of YC.Yeah, that's cool.Yeah.Let's do it.So I thought it'd be fun to start with Boom.Boom is a company that we funded in the Winter 16 batch, and they are building a supersonic jet, supersonic passenger jet, to replace the Concorde, because this is a very strange area in which humans have gone backwards in terms of technological progress.Like, young people watching this might not realize, but like... Regular people used to regularly fly supersonic from New York City to London in like two hours at like Mach 2 point something.
And then we stopped doing that because the Concorde was discontinued.And Blake, the founder of Boom, he just thought that this was unacceptable.I remember when Boom was in the batch. they had this crazy idea to build a supersonic passenger jet, which would cost literally billions of dollars to do.And so the question would be, how could you possibly make any progress on this insane idea with three months and a few hundred thousand dollars?He did two things during the batch.He tried to de-risk the technology and he tried to de-risk the commercial interest.And you might think that It's inevitable that there would be commercial interest in this because like supersonic jets, of course, everybody wants a supersonic jet.But the thing is, you can't sell a supersonic jet directly to people.
You have to sell it to airlines, which means this is only viable if an airline actually wants to buy the thing.And there was legitimate question as to whether airlines, which are capital constrained and risk averse, would actually want to take a bet on a crazy new technology like this that would be very expensive. And so the way Blake de-risked it during the batch is he basically spent the batch trying to get an airline to make an early bet on Boom.And at the very end, just a few days before demo day, he finally was able to get introduced to Richard Branson. from Virgin Airlines.And Richard Branson gave him $100 million LOI to buy the first boom planes.And that was absolutely critical to his ability to raise money because he showed that the deep-pocketed customers that would ultimately have to place a bet on this were excited enough to sign an LOI like that.
SPEAKER_04: So Jared, where's boom today?
SPEAKER_01: So the really crazy thing is eight years after they went through the YC batch with their styrofoam scale model, They've literally built a supersonic jet, and it just took its first flight last week, and it worked.
SPEAKER_04: Wow.
SPEAKER_01: For those of us at YC who have been part of the boom story since the very beginning with the Styrofoam scale model and everything, seeing them actually build and fly a supersonic jet was just an unreal, otherworldly experience that they actually pulled it off.That's awesome.It's so cool.
SPEAKER_00: So you can just literally think things in your brain and then manifest them in reality.
SPEAKER_01: Gary, do you want to talk about one of YC's first, earliest, and most successful hard tech companies, this company called Cruise?
SPEAKER_00: Yeah, of course.So Kyle from Cruise, of course, was one of the early co-founders at Justin.TV, which became Twitch.Famously, he was the guy who figured out the GPRS and edge modems in a backpack so Justin Kahn could wear the little camera on his head all day.
SPEAKER_04: Kyle worked on the hardest technical problems of Twitch which is with a lot of the video streaming and encoding where he made it so efficient and to this day Twitch runs their own video servers is what made them profitable too.So it was like the key thing that he unlocked and just for a bit of background he's like this technical genius basically.
SPEAKER_00: Oh, definitely.Polymath, it turns out.I remember interviewing him for YC.The interview room was Sam Altman, myself and Jeff Ralston, incidentally, the subsequent presidents of YC, which was kind of funny. And I remember it was a very short interview.He came in and said, well, I worked on the MIT autonomous car team.I really like that.And I think that it's possible for us to make a commercial version of this.He left the room.It was a great interview.
And we looked at each other and said, well, We have to do it because it's Kyle, but it's probably a research project.And we shut our laptops and went to lunch.And of course, it became the biggest, fastest liquid exit of almost any Y Combinator company at the time.How much was it sold for?Almost a billion dollars, which was really wild.And just how long after you interviewed him?
SPEAKER_02: I mean, it was a matter of years.
SPEAKER_01: Just a few years.
SPEAKER_02: It was like two years maybe from interview to a billion dollar exit.It's pretty amazing.It's pretty wild.
SPEAKER_04: Even more than any other company at YC at that time, even in the software companies, because companies like Dropbox, Airbnb hadn't exit until later after their acquisition, right?
SPEAKER_00: Yeah, and I think one of the things that's kind of lost to the sands of time now that you can literally walk down any street in San Francisco and there are self-driving cars is that this was not something at the time that people thought was even commercially viable.It was sort of locked away.We knew about the Google X project for self-driving cars that would end up becoming Waymo. But it took, again, like someone with an idea in their head deciding, you know what, I'm going to work on this thing.You can actually manifest things that, frankly, are on their path to remaking every city in the world.And we're still in the early innings of that at some level.
SPEAKER_02: Do you remember what Kyle had at the start of YC?
SPEAKER_00: He had a control system for an Audi S4, which was fortuitous because I was driving an Audi S4 at the time, too.And I think to the commercial point, we actually this was a little bit during the era of the Kickstarter campaign.So that was actually what helped him raise his seed round was Audi. uh getting commercial validation that you know we didn't need to build a full self-driving car on day one we're going to build a highway adas just assisted driving as a retrofit for audi s-force and that was sort of the initial thing that during yc he did but of course once he got those resources and he ended up raising his series a he could expand his vision significantly
SPEAKER_02: What did he pitch on Demo Day?
SPEAKER_00: It was actually, I believe, the retrofit kit for Audis.It actually makes a lot of sense.
SPEAKER_01: And that was smart because if he had pitched full self-driving, it might have been hard to raise money because, like, People would have been like, well, how are you going to get the $10 billion that you need to actually make this real?And so the fact that he had a shorter-term path to commercialization on a normal amount of venture dollars was actually a really good way to bootstrap the big long-term ambitious idea.
SPEAKER_02: And so was the pitch that they'll take these like assisted driving kits and sell them to Audi?
SPEAKER_01: No, I think sell them to individual Audi owners.
SPEAKER_00: Yeah, so I remember putting down my credit card for one of these things.I didn't end up getting one.But if you visit the Mountain View campus of Y Combinator, there is actually one of the original cruise retrofit cars.
SPEAKER_02: Oh, interesting.Interesting.
SPEAKER_00: And so I think that that really illustrates exactly commercial validation with basically fantastic why now, and then they proved to the world the why you.
SPEAKER_02: And two different types of commercial validation, interesting.Boom was like, we're going to convince a huge airline And it probably seemed quite scary right up until demo day on whether they were going to get anything or not.And then Cruise is like, we're not going to sell to Audi.We're just going to go directly to individuals who want this, which was probably like much more like a bite-sized chunk approach.
SPEAKER_00: That's what it takes to sort of create something, basically create a new industry from scratch.
SPEAKER_04: Another way hard tech companies are viable is they're going after a known commercial space, but doing it a lot cheaper than the current incumbents.And for example, launching satellites to space costs like billions of dollars because there's like these giant satellites that take multi years to assemble.Tell us a bit about Astranis.And they had a technical innovation as well.
SPEAKER_01: Yeah, a lot of people don't realize that YC has actually funded some of the most successful space companies in the world.And one of the first ones we did was this company called Astronis.And Astronis builds telecommunication satellites.And their core insight was that you could make satellites a lot cheaper if instead of making a few big satellites that did everything, you made a lot of small satellites that just did a few things.It's kind of like when commodity servers replaced mainframes.It's basically the same concept, but for satellites.And they were in the Winter 16 batch, the same batch as Boom, actually.Their goal for the batch was to build a fully functioning satellite that they could put into space.Yeah.
in three months, which is like the hardest point about like typical timelines, like the typical timeline to build even a demo satellite is years. And they were like, we're going to build it in three months, and then we're going to launch it into space.Because by that time, SpaceX was offering space flights for small cargoes.And so you could actually book basically a one-way ticket on a SpaceX rocket for not that much money for a small CubeSat.And so their demo day photo, you can actually see the satellite that they built during the three months of YC.That's Ryan holding it up.
SPEAKER_04: They actually launched it after the batch.
SPEAKER_01: They actually did, yeah.The cool thing about Astronis is that telecommunication satellites are actually a really good business.It's actually super profitable.And so from pretty early on, they were able to generate real revenue from customers and actually make money putting satellites into space.And they now actually have several satellites in space over our heads. a really cool chapter of the story is that they actually are in the Astronis offices just across the street from the YC office.And it's not just some headquarters place where they designed the plans for the satellites.They actually manufacture the satellites across the street. from our office and- We can actually see it from our set right here.It's right there.
And so I love to take the founders in the current batch on a tour of the Astronis office across the street and show them that you can go from your Demo Day CubeSat to like a satellite factory in a few years.That's awesome.
SPEAKER_00: The cool thing about space is, you know, partially because of SpaceX and a lot because of the massive increase in launch capability, there's just this ecosystem now, kind of like, Astronis is a great example of it, that now that you can get to space, there are all these things that you can actually do in space that are very valuable.
SPEAKER_01: And there's a really crazy one that you funded, Gary, when you were at Initialize called Astroforge.I'd love to hear about that one.
SPEAKER_00: Astrophage is really interesting because they have a pretty scary huge ambition, which is literally to be able to fly a satellite to an asteroid.Some of these asteroids have something like 15,000 times more concentrated precious metals like platinum than on the Earth. And then they're actually using robotics to refine the ore directly on the asteroid and then take that asteroid and fly it back.And the funniest thing about it is you don't actually have to land it.You could just fly the asteroid straight into the desert and then mine it out of the crater and potentially mine hundreds of millions of dollars or billions of dollars worth of precious metals.
SPEAKER_01: So are they going to try to bring the whole asteroid back to Earth or just like a little chunk of the asteroid?
SPEAKER_00: Just the precious metal itself.Just the precious metal, okay.They're early in their voyage, but I just really love extremely ambitious people.I always talk about, especially right now because we're prepping people for Demo Day, the best pitch is relatively small, simple ideas when you put them together. And you zoom out, like that's actually a really big story that's totally achievable.And so I feel like Astroforge, you know, is one of those examples.
SPEAKER_02: As an investor, like how do you think about the risk of investing in a company like that?As a software company, it's sort of, you know, right?Can you get customers?What's your sales plan going to be?But mining precious metals on an asteroid in space and bringing it back safely, how do you think about the risk?
SPEAKER_00: I think some of it is all they have to do in the shorter term is actually fly to an asteroid and come back.And ideally, it would be great if they could prove that they were able to pick an asteroid that actually had precious metals in high concentration.And there's a weird, interesting regulatory aspect to it, too, in that I believe the United States has actually... spoken to this saying, if you land on an asteroid, you actually confer ownership rights to it.So there are many ways to monetize.And I think that that speaks to what you were saying earlier.We want sort of achievable tranches that are not outrageous.You don't have to do self-driving cars on day one.You don't have to actually fly back a billion dollars worth of platinum on day one.You have to show that there is a clear path to build the tech to get there.
SPEAKER_01: So Relativity Space was also in the Winter 16 batch.Amazingly, we actually had $3 billion aerospace companies in the same batch.Isn't that wild?Yeah.Wow.Winter 16, that was a special time.And I think the reason is what Gary was saying, which is like this confluence of factors, like 2016 turned out to be an amazing time to be starting an aerospace company. And Relativity Space, they make 3D printed rockets.And the founders were super young.They were like 23-ish years old when they started it.
Basically, their Demo Day goal was to prove that they could 3D print a rocket engine.Not one that you could actually take into space.That's impossible.But just like a scaled model to prove that the thing was feasible technically.And I remember Jordan and him walking around... demo day carrying this rocket engine.And it was small, but it was a real rocket engine.It had all the injectors.It had the right nozzle design.It was actually a thing that you could fire up and would produce thrust.
SPEAKER_04: It is such a wacky idea.Who would have thought that it is possible to 3D print a rocket to space because there's so much of the tolerance with heat dissipation, energy, and to get everything at the right manufacturing, super high precision.
SPEAKER_01: And the cool thing is they actually did it.In March of last year, they actually launched a full-scale rocket that was almost entirely 3D printed.It's the first time anyone's ever done that.
SPEAKER_04: Wow, that's so cool.
SPEAKER_02: So we talked a bunch about aerospace companies.Another area we've invested a bunch in is climate and energy companies.Diana, I think you worked with Hart Aerospace, right?
SPEAKER_04: Oh, no, that was Gustav that worked with it.So he worked with Hart Aerospace, which is a winter 19 batch company.What they're trying to build are fully electrical planes.And that sounds doable, but it has not been done.Part of it is that the batteries in planes are too heavy and don't have enough range.And what they figure out is that a lot of regional flights... are the sweet spot because actually today with regular planes, fuel-based planes, regional flights, they're actually losing money and they're subsidized by the government.And what they figure out is they're going after the market.And during the batch, they signed a bunch of LOIs with a lot of airlines because this is actually a burning problem for airlines.They're actually losing money in all these flights.
And the other interesting thing on the why for them, they're actually located in Sweden. And Sweden and Nordic countries are one of the most progressive countries in the world.There's a goal for them to fully electrify all flights by regulation by 2040, which is a huge thing, talking to the Y now and making the pain even bigger.What they achieve is actually to this, it's been four years later, they actually build a version of it.They even have a test pilot.
SPEAKER_01: Wow, that's a big plane.
SPEAKER_04: Yeah, I think it's a 19-seater.
SPEAKER_01: wow, their first plane is going to be a 19-seater.
SPEAKER_04: MELANIE WARRICK- So they actually have built models for it already.That's pretty cool to see, right?And the other cool thing about hardware companies, as they progress, you need a lot of funding to get this going.And VC funding is not going to be enough.You have to get customers to pay you for it.So they actually got purchase orders from United, Air Canada, and other regional airlines locally. as well as government grants.Remora is a very interesting company.It is another of these wacky ideas that is trying to retrofit semi-trucks to be carbon neutral, to sequester all the carbon while they're moving, which sounds like wild.So how do you do that with a truck?
Because truck emissions in the US is about 3% of the total emissions.The US emits close to 6 million tons per year.And they could make a huge dent.So the way they went about it was first principle.Paul was very interested in working in climate.And he studied and looked at all the emissions in the US.And the top one was transportation. Then he found this thesis from Christina, who is the world expert and published his PhD in 2019 on mobile carbon capture for heavy-duty vehicles.It was like the only thesis in the world.And he basically got in touch with her and convinced her to be his co-founder.
SPEAKER_03: Wow.
SPEAKER_04: And it is a wacky idea that there's nothing built like this in the world.You see now where they are.They actually built it.You see these giant tanks that's actually capturing right now 80% of what gets exhausted in a truck.Now, Seabound is this other company, sort of like Remora.So Seabound is basically retrofitting cargo ships to reduce CO2. emissions, and they're the only solution today that's possible.And the other thing to why now, there's actually regulations that came up that they're forcing cargo ships to meet carbon goals as well.The cool thing about them during the batch, I worked with them in winter 22, is they were able to close a bunch of LOIs with ship owners, which is really hard industry to break in.
And now after the batch, they actually just had their first pilot here, as you can see.They did their first run.
SPEAKER_01: This is them on an actual cargo ship?
SPEAKER_04: Yeah, just this year.
SPEAKER_01: An actual container ship?
SPEAKER_04: Last year, actually.
SPEAKER_00: So this is the kind of energy we need in society.If you are a top 150 IQ or above person who wins math Olympiads and things like that.
SPEAKER_01: Instead of going and optimizing ads at Facebook, why don't you go work on something like this?
SPEAKER_00: Solving some of the biggest problems that face humanity, which is pretty important for people watching to know to whom much is given, much is expected.
SPEAKER_04: So, Jared, we talked a lot about hardware type of companies.What about chemistry?
SPEAKER_01: So YC has funded this company called Solugen that I worked with in summer 16.And I think Solugen is one of the coolest companies I've ever had the opportunity. experience of working with and what they do is they make industrial chemicals they started with the smallest possible scale that you could imagine making these chemicals at and then they just scaled up in like successively larger and larger scales until they ended up where they are now with this like massive chemicals plant in houston and i remember when they applied to yc what they literally had was a beaker like this big and they had made like one beaker full of hydrogen peroxide Just to prove that they could do it, just to prove that the thing worked at all.And then their demo day goal was basically to go from like a tabletop scale to a garage scale.And they literally took over their garage, I think is in like Mountain View. And they built this garage-scale production platform where they were able to make gallons of hydrogen peroxide.And one of the coolest things about Solugen is, unlike a lot of the earlier chemicals companies that were venture-funded that tried to raise a huge amount of money before selling anything, the Solugen founders started selling their product during the YC batch.So when they were making a few gallons of hydrogen peroxide, they would literally go out and they would sell it. And so they were revenue generating literally from day one.
And they never sold the product at a loss.They always figured out some way to sell small quantities where they were at least not losing money on the actual thing that they were making.And as a result of that, they've actually been really capital efficient for a company like this. And today they have a really healthy revenue generating business that like makes sense as if you don't look at it as some like sci-fi startup.It's just like it's a thing that actually makes a lot of money.
SPEAKER_02: That's awesome. I actually have a couple of companies in this current YC batch that I wanted to talk about because I need to build off some of the lessons that we've just been discussing about all these companies.So the first one is Kscale Labs.And so Kscale, the vision is to build consumer humanoid robots.Very cool.Optimist for the rest of us.Yeah, basically.And you get all kinds of ideas around this. In the future, we'll all have a robot that's cleaning our house.I want one.
Yeah, exactly.It does all of your chores for you.What's interesting about it is it follows a pattern we discussed earlier of where Ben, the founder, came in and said, I have to raise a huge amount of money.And then there's a competitor in the space figure, which has just closed a huge round of funding because the founder is... he started successful companies before and he's probably just like a natural fundraiser and very well connected, right?And the first few office hours were all about, you cannot like, you have to think like a software company, like how can we build this company, improve stuff out without raising like a hundred million dollars series A. It took a while to figure out what that would actually be.And eventually, like about halfway through the batch, we found it.And the answer is like what Kscale really wants to do, what they're really excited about is building a new foundation model for perception in robots.And this is what the founder, Ben, had worked on at Tesla, actually.
In Optimus.
SPEAKER_04: Yeah.
SPEAKER_02: Yeah, Optimus, he put the first perception model into the Optimus at Tesla.But in order to build the best model, you also need it running in real hardware, right?Like you need actual robots out there that you're gathering data back from to improve the model.And so the idea he came up with is they're going to build the first 10 of these human robots themselves.So it's pretty low scale and they'll run their models in those. but they're going to open source the hardware designs.And what they found is that there's a lot of excitement amongst the engineering community to build their own humanoid robots.People just need the designs.And so you open source the designs, you build a community of people who already want the how-to kit on building a humanoid robot.And all of those robots will run Kscale's foundation model
on them.And this is sort of like the plan for how do you get to like... So it's like crowdsourcing the costs to build them.
SPEAKER_01: That's a very clever hack.
SPEAKER_02: Yeah, I think so.Right.And it's a work in progress and we'll see how it plays out.But what we do have really strong early signs of, people want this.Like hacker news is a pretty common thing.Like people talk about, hey, I really wish I knew how to build like my own prototype, my own humanoid robot.And soon they'll be able to.
SPEAKER_00: If you look at early interviews with Steve Jobs and Steve Wozniak, they talk about how they never wanted to start a company.They just were selling breadboards and plans and the Apple One was a bag of chips.
SPEAKER_01: Two hobbyists is actually very similar to this.
SPEAKER_00: And explicitly, Steve has gone on the record saying, we never wanted to start a company.We were just sick of building these things for our friends.So we thought we needed to start a company.And so it sounds like Homebrew Computer Club, again, but for robotics.
SPEAKER_02: It is exactly the same pattern, and Diana can attest, it's the same sort of founder profile, like somebody who is just very enthusiastic about this technology and what it can do for the world.And I feel like the help we've been able to provide is how do you funnel that excitement into a path that shows commercial viability within three months. Another example would be Astra Mechanica.It's one of the companies in the current YC batch.And so they've created an actual real tech breakthrough.They've built an electric engine that is efficient, electric jet engine that's efficient at every speed. which is incredibly hard to build.Because if you think of current jet engines, for every speed, it's a totally different set of optimizations.You have different amounts of air coming in and out.You have different compressors you need to build.
You make a fundamental trade-off to be efficient at any specific speed.So it's an electric jet engine.
SPEAKER_01: So is the idea that it's going to power fully electric jets?
SPEAKER_02: Yes, yes and no.The thing that's exciting about astromechanica is if you have an engine that's efficient at every speed, you can use it to power different types of aircraft.So you could have a subsonic aircraft that's just much faster than a traditional jet engine aircraft, or you could also use it to power potentially a supersonic aircraft all with the same engine. The actual plan, the big picture vision for Astra Mechanica is to replace Boeing and to be like the next Boeing with like the engine as the core of it.And you're like, we might need a next Boeing.So the timing is good.It's definitely timely.With the news.Right.
SPEAKER_04: But they did a lot of simulations, right?And software to be able to really prove that they can run this engine in multiple speed, which is like a huge technical accomplishment.Yeah.
SPEAKER_02: I asked Ian, the founder, on how have they been able to, things like software companies, just move very quickly on the technical front.And he said one of his key insights was that you want to innovate on as few things as possible in the hardware. You want to try and buy as much off-the-shelf hardware as possible and just pick the one or two things that you actually really want to innovate on and put all of your energy into those, but have as much off-the-shelf components as you possibly can.And then on the commercial side, what they've done is they... you have this big vision, right?Like we want to compete with Boeing.We've got this like brand new engine that could be used for like a thousand different potential things.But instead of trying to build, for example, a commercial aircraft right now, they're focusing on one very specific use case, which is launching payloads into orbit.So if you have this engine that's efficient at every speed, you can launch things into space far more efficiently and cheap. And so they're going to focus on just that.
They've already signed up LOIs for quite a lot of money and use that to like fund their future plans, right?Which is sort of, it's like the Tesla strategy where it's like you start with the Roadster and you use that to fund the development of like the Model S and use that to fund the development of the Model 3.
SPEAKER_04: I think the cool thing about a lot of the founders we highlighted, I think they've been building a lot of the tech on these products in their head for a long time.I think the thing that stands out to me a lot of times is reading a lot of these applications for the founders, they're actually super well thought out. And a lot of the science and engineering, it is exactly as it plays out as the company year one, year two, year three.Even for Astran, it's just reading their application.It is what they have built right now.They do the six panel design and it is what they have.And I was thinking Seabound, the design of doing carbon capture with calcium looping.It is what they've done at a large scale. And that's the cool thing is I think a lot of the risk here is actually more how do you take that first step?And I think you said something cool was that secretly a lot of hardware companies actually think like software companies.
SPEAKER_02: Yeah, I do think that the best hard tech founders do have very high clarity of vision around the future.And I think where we help them a lot is on the sort of the compressing the timelines and like think about things in a more commercial, like how can you prove that people will pay for this?But the actual like, the they live in the future already somewhat like they already know where they want to get to and i think that is probably different to many software companies where you can have a fuzzier vision of the future and iterate and figure it out as you go along whereas with hard tech companies like you kind of you often have the vision of the future in your head and it's just proving that you can get there before you run out of money
SPEAKER_04: I think that's the thing is like, can you build the road?It's like, what is the first step, the second step?And I think the first one is also very daunting because you have this super clear image of what the future looks like with how your company changes the world.Because a lot of these companies we talked about, When they succeed, they're going to be huge and they're probably going to be a lot bigger than our software companies too.They're going after massive industries like energy, one of the top expenditures in economic GDP index, right?
SPEAKER_02: Yep. Astroforge, when you're talking about Astroforge, Gary, the thought that went through my mind is as investors and to some extent as founders, you're thinking of the expected value of your company.You know there's a very small chance of it succeeding, but hopefully the outcome of it succeeds is quite big.But when you think of a company like Astroforge, the odds of being able to successfully bring back mined precious metal from space seems pretty low.But if you do that... You own the whole asteroid.That company could be absolutely gigantic.So the expected value ends up actually being really high.That could be one of the most valuable companies on the planet if it actually works.
SPEAKER_00: And then zooming out, that's sort of the job of every hard tech founder, period, is that in aggregate, the amount of risk might be this much.And then we're saying that day one, you don't have to take on this much risk.You need to take on this much to show that you could take on this much to show that you could take on this much.And so it really is about how do you break down the problem, which is itself, great engineers are very good at decomposing problems to begin with.
SPEAKER_02: If you are skilled, if you have the skills to build real things, to really go at it as a startup, you want to think as big as you possibly can.Don't make the tea-making robot build the thing that goes into space and brings back precious metals.Then you can actually have a shot at the expected value works out in building one of the most valuable companies, and it makes the risk worth it, I think.
SPEAKER_01: An interesting thing that I've noticed looking at the YC portfolio data is that even though there's this reputation that hard tech companies are really risky, when we look at it in terms of our success rates funding these companies, it's actually about the same.Our success rate is actually about the same.And I think for space companies, it's actually higher than other segments of our portfolio.Like space companies is like one of the highest performing segments of YC.And I think the reason is... It's just two different kinds of risk.For hard tech companies, you have all this technical risk.You don't know if you're going to be able to mine asteroids, but you have no market risk.If you can mine asteroids, it's going to be freaking huge.
The asteroids are there.They've got platinum.The only question is whether you can get it.It's like a machine that turns lead into gold.
SPEAKER_02: Exactly.Yes, that will be valuable.
SPEAKER_01: Our software companies, they may have no technical risk.Of course, you can build a website.But they have all this market risk.Nobody knows if people want this website at all.And there's often a lot more competition.And so it turns out when you compare those two things, it actually turns out to be kind of a wash.
SPEAKER_04: Because it's these two variables on our saying of make something that people want.The want is already clear.
SPEAKER_01: The want is already clear, yeah.
SPEAKER_04: And all of the rest is stacked up on the make.Can you make it?And I think this is a call to action for a lot of the very hardcore engineers that this is your chance to build something huge and to really change the world literally because these are... atoms and huge industries that you can go after solving climate, creating a lot more efficient chemicals, going after being interplanetary species into this whole vision of space.It's like so many cool things that are also very inspiring.I think the other cool thing about founders like this, when you talk to them, they generally have this level of excitement. is they really believe in it and they're very good storytellers to really convince not just like investors at the beginning but later on like they have to hire very hardcore technical experts like blake right he didn't come from blake from boom didn't come from aerospace but he has this level of enthusiasm and clarity that he was able to convince really legit experts to join him and the ability to recruit tell the story is a huge superpower that founders here need to have.
SPEAKER_01: I think Blake is actually a really powerful example of this because Boom is actually Blake's second company.And he started both kinds of companies.So his second company is Boom, the supersonic jet company.And his first company was basically a Groupon clone.It was this like social buying site when like Groupon clones and social buying sites were all the rage.So it was like a quintessential typical startup-y kind of startup.And so he's had both experiences and he came and he spoke at a YC dinner and he sort of contrasted what it was like to run both a super typical startup and a super out there, insanely ambitious, hard tech company.And I'll never forget what he said at the dinner is really stuck with me.
What he said is you might think that running boom was much harder than running the social buying site.And actually it wasn't.Cause like with the social buying site, It was really easy to get the thing live.You can build a version of a V1 of that in a week, and you can launch it.So it was really easy to build the thing and launch.But then what?Now you need to hire great employees to convince them to join.It's really hard to convince great engineers to work at the seventh social buying site.It's really hard to convince investors or users or anyone to care about your site because it's just not that interesting.
And so everything after launching is actually really hard. And with Vumu, it's the opposite.Like, it's super hard to actually build a supersonic jet.But if you just tell people that that's what you want to try doing, like, the world will, like, rally to the cause.And, like, investors and employees and partners in the press and, like, everybody wants to talk about it and everybody wants to help you.
SPEAKER_04: For all those examples that we highlighted, that is the case for Seabound, likewise.The two founders are young women out of college, and they were able to really assemble a team of hardcore industrial engineers to really pull it off because what they're going after is very mission-oriented critical.It's really solving the climate crisis and going after the shipping industry. No other companies that are solving climate are trying to touch that industry because it's so hard to sell to, but they've been able to do it.And not just the employees are taking a chance on them, but also the shipping owners.These owners are signing the pilots, the LOIs for them because they really take this bet on the founders.
SPEAKER_02: I think zooming out in general, like another tailwind for the whole high tech startups is just like the cost of prototyping things is coming down over time.There's a good chance that I feel like with AI being able to run simulations and just abstracting away some of like maybe even like the middleware involved in building robots, for example. all trending in favor of it becoming easier to do things with less money and in faster timescales.
SPEAKER_00: Yeah, the platforms really seem to build on themselves.
SPEAKER_02: Which is what actually space, if you think about space portfolio, that's probably what's happening there.I think if you zoom back five, six, seven years, we wouldn't have predicted that space would be the area that the big hard tech wins would be in.And you can speculate that what's going on is SpaceX set the scene for, hey, you can build a company in the space.There's a bunch of engineering talent that works there for a bit and leaves, as is the case with our portfolio companies. that talent starts companies, builds on just like everything that's come before.There's probably another vertical out there in hard tech that's going to be like the next space.Possibly robotics.Probably robotics.Robotics would be my guess.
SPEAKER_00: And NVIDIA at its market cap with virtually unlimited access to capital is probably one of the biggest accelerants to compute, and then as a result, that sort of robotic future.What a time to be alive.
SPEAKER_02: There's a piece of advice Paul Graham would give way back in YC where it's sort of when you're fundraising, some people are natural fundraisers and some people aren't.And if you're not sure which bucket you're in, you're not a natural fundraiser right so i kind of feel like one of these things is there is clearly an like elon musk path to building one of these huge companies which is being at a fantastic fundraiser who is able to just attract like you know hundreds of millions of dollars and go and build tesla and spacex but like there is if you're not elon musk there is also a path to doing that it just requires what we've been talking about here it's like thinking like a software company And I actually think a consequence of that is like the people you want to surround yourself with may actually be software people and like people or at least like investors who will push you in the right directions.Because I think it's another thing I see with founders is, hey, like the advice they want to hear is, yes, of course, you need to raise like $50 million and I can teach you how to do that.Like the advice we give them is, no, you have to go through the pain of figuring out how to do it with like $3 million, not less. $50 million, right?And I think that can be, that's the right playbook if you're not Elon, which is most people.
SPEAKER_00: And then at the same time, that teaches a discipline that sets people up to actually run businesses that are real businesses and not money-raising exercises.Well, we're almost out of time, but I hope that all of the examples we talked about today give you the great builder out there The sense that you don't have to be a multi-time billionaire.You don't have to have all these exits already.You don't have to be an Elon Musk.You just have to be smart.And you can surround yourself with really smart people who will help you figure out the rest.So with that, we'll see you next time.
