Transcript

At the beginning I was like who's this new guy? He seems very arrogant and I was like I'm not sure I like him. And then I look at his startups 1 batch and then two batches and I was like OK picks the best startups in the batch and I told him so I was like I didn't like you at 1st and now I think you're the best partner I YC today and he was like oh you say this to every partner. I don't but everything he touches. You know I'm not investing with my eyes closed. But I thought. I should have a very very very close look to everything he selects. Welcome back to another special episode of Gabriel and Laurie talking about why. See what's been going on? It's the summer, but why is he still active? And so are we. We've got a lot of stuff on the docket for today, so let's dive in. Laurie, thank you for being here once again. Yeah, cool. Thanks for having me. So the first thing we're going to look at from what's happened over C in the past month is they released another request for startups. It wasn't put under their main category of requests for startups that they do in line with. To the matches this is a special collaboration with the re industrialized summit and the new American industrial alliance, but was a request for startups and motivated by a single belief that America needs better physical technology, there is a big. Assumption around Y Combinator startups that they align with what are the moment or just software or just consumer apps, but this is a real regression away from that. And so why C is clearly looking for founders interested in applying kind of modern software capabilities to the stack of industrial production. And so as an investor, I just wanted to get your take on that. How do you underwrite those deals? How do you think about those companies because the way that they show up to demo day or would show up to demo. Is going to be very different from say a consumer or B to B software application. Well, so thank you for for for that first topic. It's, it's very cool to talk about that because like you said, people think NYC is a bunch of AI tech Bros. And to be fair, why is he does have a lot of AI startups. They do follow the latest trends. They actually set the latest trends as well. I want to say that it's not you for anyone who really does follow YC around that they do hardware. They did hardware companies already 10 years ago. You know, they did boom supersonic, I think it's 2016. That's nine years ago. And it's an amazing company now with a plane actually, you know, flying in the sky. They did a lot of a lot of different physical products. And it's interesting to see it come back a lot more. And this techno industrial RFP is not the first example in the official request for startups from the past few batches in the last 4-5 RFS. They already talked a lot about hardware products that they were interested in. For example, they talked about. Robots to build data centers, basically lights off data centers with no humans in the dark, only built and maintained by robots. They talked about infrastructure to help build and develop the latest chips. They talked about, you know, all of those things they wanted to have in the batch. And we add lobster Capital, for example, invested in Inversion Semiconductor, which is competing directly with ASML, the, you know, $270 billion giant from the Netherlands and trying to build the next generation. Chips in the UO. That's the first part that I wanted to reiterate. NYC is not only AI, they also do AI, and they should, and that's great, but they do a lot of things. And there's this popular sort of debate on Twitter now acts, what's the YC of, you know, Europe? What's the YC of New York City and what's the YC of hardware? And most of the times, the answer is why C is the YC of hardware. That's what Gary Tan, I think tweeted. NYC is also the YC of Europe. The best European founders, they end up at YC. YC does accept European founders less than American, but they accept them. Especially if they want to build in the US. So why is the wife of hardware? They've had many hardware companies, including in very recent batches. What's interesting is they tend to group them together. So we are now heading towards summer 25. The previous one was spring 25, almost no hardware, but the one before winter 25, a lot of hardware. And so those companies benefit from attending and doing YC together because they can learn from each other. Not to your second, maybe even more important question. How do you look at those deals? How do you underwrite them? They probably don't show U at demo day with the same results, the same progress as software companies. Well, in a sense, I sort of disagree with that because that's the beauty of what you see. They tell you it's not because you're a hardware company that you're not allowed to have results in three months. You should be able to get results in three months. You're not necessarily going to be able to build a full, you know, ready to to sell a product in time in three months, but you should have prototypes and you should have binding Lois. Or sign contracts. And so that's the main difference with most hardware companies outside of NYC and WISC incubated hardware companies, they show up with a lot of Lois with some serious demand and traction. Obviously an LOI is not as good as an actual signed contract, but you know many software companies report their AR sometimes they've been there, they've been selling for three to six months. So AR is. Annual annual recurring revenue. It's only projected AR and you know, everyone knows that it's not, it's not that like they're lying, but just to say Lois are not the real deal. Projected ARR is not the real deal. You want to get an idea of where it's going, who it's interesting and how well and fast they're able to sell it. So I had the founders on my podcast of space Mim who ended whiskey. The billion dollars in LOI and it's interesting because my initial reaction was like, that's gonna be a bunch of fake Lois that don't mean anything. That's completely the opposite. It's actually binding Lois with clear deadlines and receivables and they're actually on track to deliver on those. And so again, LOI is just three letter, you know, yeah, you can dig deeper into how you what, what, what are they? Feeling so? To sum U, it's a great it's great news. US needs that I'm excited and there's a lot of things like energy that US the US really lags behind the US is going from 1:00 to 2:00. Is it terawatt What whatever the the the. The unit is, I think it's already going from 1:00 to 2:00. In the meantime, China is going from 3 to 8. So and, and energy is really important if you want to have 100 million robots in every home to help you, if you want to have better drones for defense and running better models to train those drones like energy is really important. And the US is really, really behind. So I'd love to see more energy companies that I see. I haven't seen many in the energy sector specifically. I've seen a few, but not many. So it's great news. NYC is once again proving that they're not just doing one thing, but able to do many things and do them well. And they're not stupid enough to just say, oh, we just do AI, we're going to ignore hardware. So overall, great and I'm interested in those deals. Again, like I mentioned earlier, we've invested in those types of very difficult hardware deep techs. Overall, everything's super exciting. And when it comes to those particular startups, like how do you think about timing and things on the macro regulation scale? Because so for example, it's obviously very topical at the moment to talk about things like manufacturing, to talk about things like energy in the United States, as you know, with the Trump presidency is putting a lot of those things back in shore. There was. They're similar kind of energy around, you know, pardon the pun, around climate startups previously and then when Trump came in and the first presidency to kind of pull out of Paris records and all those kind of things really upset that market. And those are not necessarily things that you can predict, but where regulation and where policy at the same time as it creates opportunities for new startups like ensuring and manufacturing, ensuring of energy, that kind of thing. How do you? Take that into account when those kind of startups are much more prone to say political or regulatory headwinds than perhaps, you know, a consumer application, they are, you're right. You could say. Pure B2B SAS could be prone to regulations as well. You know, it could be a neo bank and then or a crypto thing and then suddenly crypto regulation change or even financial regulation for individuals change. You know, it's interesting because hearing your question, I'm thinking to myself, if you ask anyone, would you rather live in a very weak, like would you rather live in in a version of Ukraine that everything is green, but you have no weapons, no way to defend yourself, you're gonna get invited? Or would you rather live in the US That pollutes a lot the US of today that, you know, drill, baby, drill. And it's not great for the environment. But actually we have means of defending ourselves. Obviously, ideally you do both if you could have, you know, energy. And defense and not mess up the planet, that would be great. But when you know, push comes to shove, I think. Well, I don't think the US. Regardless of the president, if Democrats come back to power, etcetera will ever say we need less weapons, we need less defense, we need less energy. Maybe it's sad that we don't live in a peaceful world, but that's it. It's the truth, right? We have China, we have Russia, we have North Korea, Iran, et cetera. So the world, the, the, the war theater completely changed since 2022. It's, it's completely different world. You've seen this and there's a company I see right now that has this at the, at the first, their first liner, $500 drones are used today to destroy $100 million assets. Like huge, you know, Bombardier planes $100 million cost. Completely rendered useless by $500 drone. So it has completely changed and today the missiles that are used by the US Army to try to intercept those drones, each missile is like 100 grand. You can send 100 grand missile to product 100 million asset against $500 drone because if you're in a direct war against China, China is going to send a million drones literally for one target. They could just you know, it's like so. Everything's changed. We're living in a different world and the US needs to adapt. the US is not in direct combat right now, but still needs to modernize this a lot of threats to the US and you know, so I don't think we'll ever go back to a world where we say, oh, you know, that's fine. Let's not invest in technology in in military technology. Let's not events in invest in defense. We're fine. I don't think we ever come back to that. And same thing with energy, same thing with chips like. We, you know, I was a huge believer in. You know, globalization, World Trade dependencies, It's it's, it's, it's perfect. But you see that the results today with China and rare earth metals with solar panels. If it's or just with, you know, medicine and, and, and masks for COVID, the mask would come from from from China and the some components for the vaccine, you know, Pfizer vaccines and modern etcetera came from China. Without China, the US wouldn't have been able to manufacture them. And so if it's national interest, if it's national security. If it's your army, you should probably not depend on anyone else. Well, by the way, you know, I'm French. I think everyone knows that. That's the case for France we have. I think a very decent army but. Because. Because some parts come from the US. There's a lot of stuff. And that was the case for Ukraine, I think we gave whatever long range missiles, but a tiny piece, a tiny, tiny piece was made in the US, not even an important piece, but it was still a piece of it. And so the US vetoed the use of those weapons. You don't have sovereignty if it's not your own weapons. So I've always been this big, big, big believer in world global trade and globalization, but. For many specific things you need to ensure. And again, I think that's regardless of any president of any, you know, Republican versus Democrat. And again, most like the biggest dependency on the US in the industrial front is China. If it was dependent on, you know, Denmark and I don't know Mexico or Canada, I guess that's probably fine, probably for now. But when it's China? So yeah, that's how I see it. I don't think. There's a big risk there. On all of those industries that are. That are, you know, making headlines right now energy defense AI chips. These are important whether you're, you know, Republican, Democrat, anything. A lot of those startups. Or that kind of investing has typically been very specific funds and now because of this sentiment in the US particularly, there is more of a general pool to generalist?