The Truth About Building AI Startups Today

In the first episode of the Lightcone Podcast, YC Group Partners dig into everything they have learned working with the top founders building AI startups today. They share the ideas that are working particularly well, mistakes to avoid, and take a look at the competitive landscape among the current AI giants.
Chapters (Powered by bit.ly/chapterme-yc) -
00:00 Intro
00:41 The Lightcone Podcast
01:53 YC Recent Batch
03:34 College Students and AI Startups
04:44 AI Startup Success Factors
05:53 Opportunities in Mundane AI Tasks
07:30 Beware of "Tarpit Ideas"
09:36 AI Integration into UIs
10:30 Avoiding the "Checkbox Mentality"
11:54 Focus on Genuine Use Cases
13:45 Fine-Tuning Open-Source Models
15:20 Data Privacy Concerns
17:09 Purpose-Trained AI Models
18:36 AI Models for Prototyping
19:45 Surge in Startup Ideas
20:54 The "GPT Wrapper" Term
22:02 Importance of UX
23:39 Focus on Specific Problems
25:03 AI Agents and Open-Source AI
26:58 Resurgence of AI Researcher-Founders
30:15 Periodic Dismissal of Emerging Tech
32:06 Outro

[@ycombinator]

What are you building with AI right now?

[@PrincessKushana]

Ecommerce shopping agent & AI ethics research.

[@peterkirkham4585]

Props AI - A cost monitoring tool for Open AI spend

[@sang459]

Artificial English tutor that understands your situation and needs - writes email for your English speaking boss, prepares you for a job interview in your specific industry, etc.

[@JDreamer200-nr2ws]

How do I get funding? I want to bring AI powered Vtubers to the masses. I am also working on custom chatbots

[@arjoai]

Mitra - build AI teams that do anything

[@jorismachielse2316]

I love how this is pretty off the cuff. Gives me a good idea of the actual, unscripted personalities of the group partners, and what they’re like in a group. Awesome guys!

[@photon2724]

They feel more human haha!

[@optimyse]

Love the energy and maturity around the topic! Waiting for Ep2!

[@abdulazeez.98]

30 minutes is about the perfect length for a podcast episode 👌

[@mattm6178]

4 you. i perfer 3 hours.

[@thenovu_ai]

A lot of info

[@jasoncarman]

It's not everday that YC launches a new podcast! Love the name and the content, keep em coming!

[@BlankSlateVentures]

Excited to see where this podcast goes! lots of things to learn from you guys! thanks!

[@inovidia]

This is very insightful! Keep up the good work, team YC!

[@johnsamillano480]

Best video I watched in a while. Thank you! It's good to have validation that what we are doing is correct.

[@dmytrodance]

What a great ending, man! as well as the whole podcast

[@HunterFox2x]

Thanks guys. This video inspired me to implement LLM to a feature I’m currently building for my startup. How come i didn’t think about it that way 😊

[@BenjaminKing1]

love the modeling around "if a company isn't buying your co-pilot, just build their company with co-pilot and beat them" because if your co-pilot can't level up a company enough to be better than your potential client, then you probably aren't providing enough value.

[@ryanslab302]

The hubris in that idea.

[@salo1129]

@@ryanslab302 Exactly! These people are so delusional. What they are saying is if your little chatbot tool is good enough, you can become better and bigger than your potential client. So if I am trying to sell a chatbot to Tesla, and they don't buy it. All I should do is start another Tesla because my chabot brings so much value that I can successfully out compete any company without any experience, passion, expertise, or domain knowledge.

[@slickvik4508]

It's a moronic take.

[@janirobe]

then the company just implements the co-pilot once you start getting traction...

[@BenjaminKing1]

@@janirobe ok, so if it took them that long to catch up on one thing, you use your smaller company speed to keep ahead.

[@Protocolpimp]

Absolutely amazing talk very bright panel

[@chapterme]

Chapters (Powered by ChapterMe) - 00:00 - Intro: Differentiating Startup Ideas 00:48 - The Light Cone" Podcast 01:53 - Y Combinator's Recent Batch 03:34 - College Students and AI Startups 04:44 - AI Startup Success Factors 05:53 - Opportunities in Mundane AI Tasks 07:43 - Beware of "Tarpit Ideas" 08:30 - AI Copilot 09:36 - AI Integration into UIs 10:30 - Avoiding the "Checkbox Mentality" 11:54 - Focus on Genuine Use Cases 13:45 - Fine-Tuning Open-Source Models 15:20 - Data Privacy Concerns 16:31 - Purpose-Trained AI Models 18:36 - AI Models for Prototyping 19:45 - Surge in Startup Ideas 20:54 - The "GPT Wrapper" Term: Importance of UX 22:20 - Building a billion-dollar AI company: Focus on Specific Problems 24:16 - AI-Powered Voice Agents 25:50 - Advocacy for Open-Source AI 26:58 - Resurgence of AI Researcher-Founders 29:36 - Returning YC to Its Roots 30:20 - Periodic Dismissal of Emerging Tech 30:55 - Classic Hacker News Essay: The New Cycle of Tech Geeks 32:06 - Outro

[@rembautimes8808]

Very good summary

[@chapterme]

@@rembautimes8808 thank you 😊

[@nathanbrannan5228]

Clever ;)

[@chapterme]

@@nathanbrannan5228 Thanks 🙃

[@MrMadvillan]

now i can skip to whatever complete trash their taking about

[@philliplanos]

This is an excellent conversation straight from the source of one of the best places tech is born. Thanks for starting this Y Combinator Team. I do so many tech startup interviews myself as a host for Grit Daily mag its refreshing to see what Y Combinator sees as important to discuss.

[@jonatasdp]

"Mundane tasks and boring work"! Love this! Thanks for the inspiring conversation

[@AnthonySistilli]

Another day, another YC Classic.

[@Glowbox3D]

Thank you. Interesting times. Look forward to more episodes!

[@matiashagen194]

Absolutely phenomenal, cant wait for the next episodes

[@amorosogombe9650]

Great episode, looking forward to more!👌🏿

[@user-pv3yv2og3z]

Working in an AI startup, I can vouch for these observations. They were on point, to which we are working on right now!

[@tusharahuja205]

Really like the format and the wisdom here!

[@ChardonnayWest]

The analogy of LLM as FPGA of idea prototyping is quite apt !

Yo plz don't give up on this podcast. Looking forward to ep 100!

[@thenovu_ai]

yes sir

[@stephaneandre8262]

Thank you for this podcast, you gave me the idea of ​​taking 3 Google Cloud certifications: Cloud Architect, Data Engineer, Machine Learning Engineer to create one of the companies that you recommended to do. Your reviews are really helpful. Thank you 😃

[@bahaeddinelouchenne3463]

Thank you very much guys for that amazing episode , helpful insights ❤

[@stevenontheroad6129]

Most of the problems are like ages old. When tech meet use cases, they seem like strange to each other. So many mundane tasks are around us, and just a little bit calibration, these job would intrigue people's potential rather than make them age faster. Talk to the people in different industries, understand them, are so important.

[@TheFreeMindPod]

Thank you for this conversation!

[@dashmoondesign]

very insightful, keep it coming! thanks for sharing

[@thenovu_ai]

yes

[@HarrisonTelyan]

Love the genesis of the Lightcone name, Jared :) Looking forward to more of these chats.

[@seel1823]

I feel like this is the start of something special.

[@mattm6178]

same, in no other circumstance you have this level of intelligence converge on a podcast for any reason.

[@miasibala]

love this! keep it up ,please!!

[@sebby007]

A half hour is very brief. I'd love to hear more about how you see the world.

[@ycombinator]

Don’t worry we post a new episode of Lightcone every two weeks

[@mominsetu]

This is the best thing happening on the internet right now!🔥

[@TheTechSurfPodcast]

I love this conversation! It's about time

[@GalenMelchert]

Great to hear your insights. I look forward to more!

[@Mentioum]

Good content - Go YC! Great to see Diana there too!

[@robertoooooooooo]

This is a gem. every minute is packed with good ideas.

[@johnleesuccess]

thanks for this Gary 👍

[@sowndharyamaheswaran7094]

Thank you for this podcast.

[@emmanuelogunmoroti3348]

I love the episode, it's really insightful and would love to have more. But I would like it if most of the acronyms used could be outlined to help those unfamiliar with them add them to their vocabulary. Thank you

[@DJjussi1]

The difference is: MySQL doesn’t have a consumer facing product. And in SaaS, the user interactions are much more complex. In Chat based software, it’s the same interaction. And there’s a consumer facing app already. 22:45 This means the barriers to entry are low, which means endless substitutes, which means you'll compete on price (race to the bottom)... low margins, low top line... this isn't rocket science.

[@sang459]

Agreed

[@Duarte_martins]

That works both ways though. It means open source will likely win in the end since all it takes is one massive LLM to be trained so OAI and the like will lose their moat. I actually think access to chips will likely be the limiting factor, and I can see arguments for both OSS and closed source there.

[@larryhopeyoutube]

Love this podcast. One quick suggestion, the light cone is not exactly the definition you mentioned in the beginning. It's related to time and light speed so that have the cone shape. Just a suggestion.

[@ax_ai]

Dang! This was great pod! Keep it going guys. :-)

[@ThePeelPod]

This is an incredible episode

[@B00kman]

TY, really interesting discussion

[@dhruvsrikanth6143]

PromptArmour is actually changing the game! Can't wait to see what they do next!

[@razvangrigore322]

So is AI a solution in search of a problem?

[@justinj5021]

Light cone is such a cool and appropriate name, and the explanation deserves a little expansion: Alpha centauri is 4 light years away, so any choice I make today will only affect alpha centauri 4 years from now, at the earliest, because nothing can travel faster than light. If you plot a spacetime graph of all the events throughout the universe that I could theoretically have an impact on, that graph will form a cone shape, which is why it's called a light cone. A very apt metaphor for starting a company that will shape the future!

[@MarkMark]

I love the FPGA vs SOC analogy.

[@yusufnzm]

The tarpit idea concept is pretty interesting takeaway.

[@kasper369]

The Video Just started and ver talked about the general theory of relativity, oh boy, this be fun.

[@carloslfu]

Great episode!

[@ryanslab302]

I’m a GPT-4 customer. I’m frustrated with the overconfidence in responses that end up being wrong. I’m also frustrated with its laziness and not knowing where the laziness starts and ends. I asked it to give me a list of all the countries in the world and it was adamant that I just go to a Wikipedia page.

[@josepinzon1515]

Great job guys/gals very inspiring stuff.

[@louisbrouqueyre8345]

I love your videos, continue pls

[@inkmanworkshop]

Just curious, it's interesting how every one of you mentioned LLMs, but no one talked about CNNs (Convolutional Neural Networks). Is it because there are so few computer vision-related startups applying or generally building in this area? Great first episode, by the way. Always love your content, can't wait for future episodes - it's going to be epic!

[@ycombinator]

There are just fewer focused there but they do exist Eg Standard AI or Flock Safety

[@inkmanworkshop]

@@ycombinator Thanks for the clarification and quick response.

[@sdegueldre]

Honestly, I feel like the gold rush around AI and LLMs is creating this negative pressure on the rest of the ecosystem. I think it's pretty likely that we're going to see a huge consolidation in the LLM space in the coming years and there will be a few huge winners and lots of small losers. My hot take is that now is paradoxically the best time to found startups that *aren't* banking on AI and LLMs. Lots of people are going to waste lots of time trying to shoehorn LLMs into spaces they don't belong and fail, and it's a great time to get ahead. You were talking about AI tarpits, I think it's not that there are a few tarpits, but that AI is a giant tarpit with a few paradise-like islands. Build something great while others are swimming in the tar.

[@realnapster1522]

Every startup can be a tar pit if you can’t raise funding 😅

[@BlueRockYT]

I agree completely, it seems like the pressure is making people ignore huge red flags, such as the fact that so many startups are based on the behaviour of openAIs models that can change on a daily basis.

[@JHenao66]

Best 32 minutes i attended in a while.

[@Silentkebab]

This was excellent.

[@luk2151]

As a german startup founder I directly recognized this intro jingle 😅 - shout out to all OMR education listener ✌❤

[@cadavidco]

Key takeaway: "SaaS is just a DataBase Wrapper", golden phrase right there.

[@prave0101]

Jeez, the subtitles kept showing Rapper, first I was like what ! Then I rationalized it saying as GPTs are language models spewing words they in a light heart calling it Rapper

[@user-wh6kp6yy7w]

It is very interesting how AI is changing the way we find information and work around the world so exponentially. Investing in large companies dedicated to AI is a smart move. Many companies, are and will continue to migrate to this new technology, it saves money if a robot can do a job instead of a person.

[@JessyHoule]

First, great show. I appreciate getting into the nuts-n-bolts, but also appreciate higher level talk shows like this. Thank you. Secondly, what is the name of the Government contracting AI company/tool that you mentioned? I almost fell off my seat when I heard someone was doing this. I started this very same thing, however, it's a 50/50 split of code and AI, as I've found at least 50% of a Sources Sought response or Market Survey response is a regurgitation of what can be found through code. In any case, if I can pay for an already operational SaaS for this, I would gladly do that in place on finishing what I've been working on.

[@LeePotsang]

Great content that just answer my question!

[@chrishallnyc]

This is incredible. Everyone of you looks and sounds great too.

[@WilliamKiely]

Noting a namespace collision: Lightcone Infrastucture (often just called Lightcone) is the parent organization of LessWrong.

Many such cases

[@michaelnurse9089]

Its not a legal problem so I say go ahead.

[@joshmontoya]

3:55 - I don't believe in coincidences. I decided to finally go back to college & earn a CS degree I started years prior. And about 3 months before graduating, an old friend asked me to partner with him on an AI startup. So I'm grateful to say not only am I getting in on this once-in-a-lifetime opportunity, but doing it with a fresh current Computer Science education. Granted the timing worked out for me, but I do believe there is more benefit to earning that degree while still jumping into this world. Great video, thanks!!

[@Cygx]

AI is changing the way we access information and the way we work. Even just investing in the major public players is a great way to get exposure to AI. It simply makes sense economically if you can have a robot do what you need to pay a human to do.

[@carultch]

Who's gonna buy all the junk that robots are making, when the average person can no longer afford to pay for their housing and food?

[@agi.kitchen]

for others closer to my age (mid 40s and up), I have a course on skool called prompt-engineering , I taught kindergarten 9 years then went to computer science/ data science school/ bootcamps with the kids, now 8 years in tech, working as an ai integrated specialist

[@agi.kitchen]

On skool, I have a course called prompt-engineering , I do live zoom on Saturdays if people have questions. Not free but free stuff, you can find anywhere online

[@rocamonde]

Such an underwhelming explanation of the lightcone. It’s the space-time region that any physical entity can be causally connected to! Such a cool podcast title!

[@yusufnzm]

Note for myself: Popular ideas for AI startups that are not working(tarpit ideas) AI copilot: Build a copilot for someone's product or service. Finetuning open-source models. Ideas working: LLM security.

[@Brodragon2225]

I think you are right it's crowded place there is more ai startups than demand

[@ephreamjudegeorge8063]

Why does an AI copilot ain't work?

[@Brodragon2225]

@@ephreamjudegeorge8063 there are many industry giants already like ibm unless you want to get f up.Better do something on other products

[@VinceMarotte]

2 Things I've advised our clients to consider with AI: > Focus on the picks and shovels: Enable AI rather than create it. > Double click on a niche: Don't just focus on an industry but a niche within a single industry. e.g. Not just antiques but antique books.

[@BlueRockYT]

About the first, I think a lot of clients want all-in-one observability platforms that typically just get built by the biggest players (e.g. Azure), it seems like niche ideas may win in that field as well

[@sciboy123]

A light cone in special relativity does does not refer to the spatial cone shape produced by a flashlight. Maybe im confused abt what he meant. It actually is related to the cone shape that all possible trajectories of light produce on a local spacetime diagram. For a given starting point it defines a boundary that no object can ever cross.

[@elsantowa]

Data privacy is the main driver for customers looking into hosting their own LLMs specially in regulated markets in the EU

[@george_davituri]

we need less products with GPT wrappers, instead it is good to see open source AI model with training dataset, but it can contain some danger. anyway looking forward for appearing new AI driven companies observed - backed by YC ⭐

[@healthyaisletoasia]

Thank you

[@DHAiRYA2801]

Gary Tan is such a great listener

[@tomtyiu]

I am a geek and love innovations and cutting edge in AI.

[@lukhanyovictor]

Can you code?

[@nikolaigrin64]

Thanks, Y Combinator, for the knowledge shared. I'm exploring a niche within the LLM-based AI tool space, similar to what Agent GPT offers, but more focused. Given that broader AI tools like the upcoming GPT-5 may not cater specifically to every unique problem or audience, how viable do you think a specialized, niche AI solution is? Can targeting a specific audience with tailored solutions still be a sustainable business model despite the broader capabilities of general AI platforms?

[@J35Y1]

No for long term. The general use AI is growing and developing rapiy and becoming close to the solution people need

[@coldlyanalytical1351]

I suspect that the term 'smart founder' might scare off the young, talented but shy potential entrepreneurs. It could be a term invented by those who have already 'made it' and who have more than a touch of hubris.

[@a-iu9zO]

Great startup idea lying on the ground: make it easy for viewers to fix youtube transcript (so it can pass the touring test)

[@carolinele4027]

lol exactly what I thought 😂

[@sogogibeef]

If models become local (stored and processed on prem for mobile and desktop) Then applications serve as a literal UI layer. Apps become more lightweight going forward?

[@liamwebb124]

Love thisssss!!!

[@amiteshwarmann7556]

Curious how much should LLM API costs be for B2B SaaS built using LLMs - 10%?

[@gracesdk]

What's the third company logo in the thumbnail that's not Anthropic or OpenAI?

[@abdelhaibouaicha3293]

The third company logo in the thumbnail that is not Anthropic or OpenAI is Y Combinator (YC). Answered by Talkbud

[@Avavenger]

Highly informative.

[@cskiver]

Still percolating on "GPT Wrappers" and subsequent discussion.

[@regalx1]

Well from what I understand that AI as it stands is very difficult to implement, but even more difficult to get people to use, which is closer to my experience. The solution to this is to design an AI that the user doesn't necessarily interact with, but functions in the background (usually as an auto-complete). I think that's probably the direction to go in first, and then once we figure how to use AI as a really sophicated auto-complete, then we can properly move on to auto-gen bots that can just use the tools without supervision. Finally once it understands how to just use the tools as good as a human, then we can go into full automation, where we just give it a task, and it will complete it, as well as a human can.

[@Clyde.artwork]

Ha! I literally thought lightcone was a reference to the lamp shades hanging over their heads😂

[@helicalactual]

it's a causal horizon. a light cone, it's the maximal radius that light spreads out over the existence, of the expansion of that particular light horizon, over the course of its existence as it is plotted on a two-dimensional surface, usually a chalk board or dry erase board. the actual light cone would be three dimensional in our observational universe.

[@jaanireel]

00:02 AI startup ideas are everywhere. 02:10 YC funds a significant number of AI companies due to the preference for funding smart founders, not specific industries. 05:53 Finding a niche problem can lead to successful startup ideas 07:57 AI startups often get stuck in untested ideas, leading to challenges in customer adoption 11:46 AI startups face challenges with product market fit and actual use case adoption. 13:53 Demand for fine-tuned open source models driven by cost and customization needs 17:57 Customized models are winning in specific domains. 19:48 Startups in YC often pivot quickly to find a new idea 23:27 AI can transform the scope of software and reimagine existing applications with AI capabilities 25:18 AI voice agents are being used as receptionists by companies. 29:06 Returning to the roots of funding hardcore technical founders 30:54 Geeks drive tech innovation despite fluctuations

[@GrayCommit]

what are some good AI stuff examples done in drastically cheaper way but the conventional thought was it mi8 cost us so much?

[@jakobdango170]

What is the paper from 2017 that she mentioned called? About ai translating from other theb english

[@ycombinator]

“Attention is all you need”

[@jakobdango170]

@@ycombinator thxx 🚀🙏

[@ravenragnar]

How is a two tier system going to really work in the long run? (Paid chat vs free)

[@johnramirezvideos]

For businesses, leveraging private data with approval. But consumers face leveraging (mostly public) data without approvals (ie. using copywrited data)

[@dhrimandeka8680]

I tried applying for an idea with fine tuned LLMs replacing psycho-therapist.Didn't get selected even for interviews😭.

[@Leo_Koesters]

Wow, thanks a lot - very inspiring! Currently building a global mental healthcare ecosystem. This video gave me interesting perspectives on how to move forward.

[@aishahkamarul5882]

Amazing

[@user-xedwsg]

Whats the point of all the A.I. projects if AGI is around the corner?

[@TheBaronQ8]

I enjoy your channel and am becoming a fan. However, I often find it challenging to grasp everything because of the frequent use of abbreviations and technical terms. This approach might work well if your intended audience is intermediate to advanced users, but it might not be as inclusive for beginners. Considering beginners today could be the experts of tomorrow, I suggest making your content more accessible to a wider audience. By doing so, you're likely to attract more followers. This is just my opinion, but I do believe you're onto something great. I'm eager to reach a point where I can understand more than 80% of your content. Hope they notice this 😅 . help me out comments community 😁