Vanta & Y Combo Talk Future of Entrepreneurship

Please welcome to the stage Christina Cacioppo, Co founder and CEO of Vanta, and Gary Tan, president and CEO of Y Combinator, for a conversation with Bloomberg’s Emily Chang. All right. We’re about to spice it up a little, guys. So when I went to YC and Gary and I said, oh, I want to do this panel with Gary and like one up and coming. YC founder. Like, you can only pick one. I know there’s like a lot of people to pick. And they were all like, hands down, you have to have Christina. So, Christina, thank you for being. Thanks so much for having me. Why don’t we just start by you introducing yourself and Vanta and your mission to secure the Internet and protect consumer. So Christina Cassioppo founded Vanta about six or seven years ago, was fortunate enough to go through YC in the winter 2018 batch when everything was in person in Mountain View. Savanta’s the leading trust management platform. We help companies build out and monitor their security programs and then use all of that hard work and get credit with their customers through compliance certifications like SoC, TWO or GDPR or HIPAA or dozens more through trust centers, through automated security questionnaires. But then kind of we’re all about securing the Internet, helping companies build out security and then improve that trust with their customers. So Gary, you have this whole thing about big tech and little tech. What describe the environment for little tech right now is the, is the correction over, is there still a lot of pain? Like where are we in the cycle? Oh gosh, I think we’re in the middle of the craziest battle for little tech versus big tech and sort of comes back to whether or not, you know, open source AI models are going to be allowed and be allowed to thrive. Because we, you know, at YC we really believe, hey, it’s really important for more competition to allow sort of 1000 flowers to bloom when it comes to start-ups. Being able to create their own AI, to be able to fine tune their own AI, to take this very powerful technology that we’re all really thankful for. But to be able to have that, you know, really of your own, like it would be a bad scenario if we ended up having, you know, even a small oligopoly of companies that were somehow like government mandated. These are the only AIS that are allowed. Like I actually think that would stanch. You know what could be you know hopefully billions of dollars worth of companies coming out that you really need the access to the the underlying AI data structures in the. The question is how open should we be though there’s we’ve been having this debate on stage all day long like Meta and Llama, is that giving China an advantage. Reed Hoffman, Vinod Khosla think yes like we shouldn’t be giving China that advantage. Well, some of the things about these models is that literally, you know, you could walk out with a little cassette tape, something that looks tiny, that contains all the weights and models, right? So, you know, whether it’s open or not, like when you’re talking about some of these state actors, they’re going to try and get these things. It’s just a it’s in a different scenario, right? No one’s saying that there is no safety concern whatsoever. Some of it is right now in the halls of DC and in Sacramento, people are trying to put together laws that don’t quite make sense yet they sort of still live in the realm of sci-fi. And you know, the real danger is we will actually stop a bunch of startups from ever having a chance of competing out there. And you know, I don’t know about you, but I really don’t think that the world needs more trillion dollar companies on its own. Like I would like more of those certainly. But what I personally really want to see is thousands more billion dollar companies and that’s really what we’re hoping to preserve. So Christina, how do you as a startup turn AI into an opportunity and not a threat? Because right now it’s a threat and an opportunity. Yeah. And we see this across our customer base. And you know, that’s true of, you know, the companies like NYC Batch that are like 2 founders all the way up to an Atlassian. And everyone’s kind of trying to figure out both how to use AI and their product. And then once they have that, there’s this whole other challenge of trying to convince your customers that you’re not going to go, you know, use AI to do something even inadvertently malicious level, actually malicious. I just got back from setting two weeks and year. I’ve been like talking to folks, they’re like Zoom Info and they’re they’re, you know, just trying to figure out, like there seems to be this upcoming wave of regulation that’s like not settled yet, but it’s like something’s probably going to come out of that, whether it’s here in Europe. And they’re just trying to think these models are kind of black boxes. Like how do I say, here’s the data I used, here’s what I didn’t, here’s how I’ve trained. It’s really hard. And I think customers with up and down of all sizes are struggling with that. Gary Wisey is choosing its summer batch right now. Like, how many of these companies aren’t AI companies? Like are they all AI companies? There are quite a few amazing hard tech companies. There’s companies that are kind of classic marketplaces and class classic SAS software. But I think the reality is 70% of those companies are AI based. You know, about 30% might not have it yet, but we actually think that the ability for computers to actually reason kind of like a human, it’s some of the it’s one of the most important things that has been happening. Obviously. That’s why we’ve been talking about this absolutely all day, right. You know the, the wild thing that we’re seeing is that if the entire YC batch of 280 companies were you know one startup, you know it went into the YC batch in January making about $6 million ARR and I believe it was making more than 30 million by the end of that. So in over a course of three or four months. So as a startup in aggregate, that’s pretty wild to be able to have that kind of revenue growth literally in four months and a lot of it doesn’t, is on the back of being able to make these golden demos that sort of do things that are relatively magical and they’re doing it in really 1000 different fields. And is the money being poured into AI right now smart money or is it dumb money? Is there some of both? Well, we’ll find out in five or ten years, right. I think there’s two schools of thought. You know, earlier in January, a lot of people said, you know, you know, these rapper companies, the the reality is like maybe none of them will make any money because all of the smarts are going to be in the foundational models. I actually, even with, you know, internal to YC among the group partners, we’re kind of having, you know, some tarried lunch discussion about it like, Oh well, what’s really going to happen? And I think as the year has progressed, one of the coolest things is, you know, Llama Two, Llama Three came out that actually really does democratize access to a lot of these things. And that’s a powerful and really good force as far as we’re concerned. At the same time what we’re finding is that you know they’re the companies are actually out there building real revenue. And I I think that that’s what you’re seeing with your AI product as well. Like you know both Vanta can do AI compliance, but also you’re using a lot of the core technology to make the Golden Demos yourself and supercharge your revenue. So, Christina, what type and what’s reality in all goodness? I think some of both. Definitely the capabilities and what we’ve seen just even building with AI internally, Advanta, the capabilities are real. But if you’re just kind of using one of the foundation models off the shelf, you can maybe pull off the demo. You can’t really pull off a great product experience. And So what we’re finding is there’s a bunch of training and fine tuning and working with data in your organization, not necessarily customer data in our case, but like there’s actually just a bunch of work to take probably what is, you know, kind of 65% to 8590% and we’ll see what these like. In the reality sense, you can go zero to 65 just like in kind of two minutes and that is absurdly impressive. And I think that talks to the demos. But to really do something that’s like really driving value for customers and what you’re doing that can kind of take like weeks of like effort and iteration and improvement there. We’ve been talking about like Google and Microsoft and meta and Open AI think it’s it’s it’s more of an incumbent now, right, than than a challenger. Apple just released this iPad ad that’s getting like torn to shreds. Gary, which of the big tech players are most likely to be disrupted by a new challenger? Oh gosh, I mean it’s hard to look at anyone except Google and say, hey, what’s going on over there? You know, they they came up with the Transformer models. So on the other hand like you know, I have access to the same thing you guys, same Twitter feed you guys have. So you know it’s very heartening that, you know, founders like Sergey Brin are back and they’re, you know, I hear they’re coding many hours a day and that’s actually a very good thing. I’d actually asked Sundar Pichai about that on on the circuit. It’s not that that they’re looking at lost curves in back rooms and that’s like one of his favorite parts of the day. Christina, you guys are based in Hayes Valley or Cerebral Valley as it’s in no, no. Where do you think startups need to be to really have the best chance of success? Is it still the Bay Area? It’s funny. So I moved back to the Bay Area 10 years ago to start a startup because I thought you had to be here. And I think, I mean, of course, I think that’s now given my life choices, but like, I thought you had to be here. And I think you did. One of the really interesting things during the pandemic we saw in our recruiting was all of the really great undergrad, like coming out of undergrad, like new grad engineers who’d been moving to San Francisco and, you know, driving up house prices for us all or like rental prices for years, we’re going to New York City. And it was like 2021-2022, like everyone was going to New York. And in the moment, they were like, oh, shoot, like, you know, it’s like I was kind of part of the New York tech scene 15 years ago and we sort of dreamed of this. But it like, happened. I think Now actually for the new, like the folks coming into Vanta after graduating, like moving to San Francisco, we’ve offices in both places. But like, it does feel like the AI boom, the the cerebral valley Ness is real, hype aside. And we’re seeing again the, like, really bright new grads wanting to start their careers in San Francisco again. Gary, you said San Francisco is back. Is San Francisco, like, back, back. Like, are we good? Oh, Emily, we’re just getting started. OK. But more seriously, I mean I think that ultimately it’s what you said, you know, young technical engineers, product people, designers, they want to be here and then you kind of have to be here whether it’s, you know, where is Cerebral Valley and Hayes Valley or right here in Dog Patch where Open AI and Anthropic are. And we’re here like just three blocks away from where we’re at right now. So. So does that mean like, no Miami, no Boston, no Austin. Much loved all my friends in Miami and all. Every lifestyle. Yeah. Yeah, Yeah. You’re a cap out of Miami company. Not what we were promised. Yeah, seems like. But I think if you want to make something go from zero to one, you want to be where all the other builders actually are. And if you walk around in the cafes, I mean, people are talking about retrieval, augmented generation. I guarantee you that’s not happening in a Miami cafe. Yeah, your your, your tweets, Gary, are actually dominating my feet. And you are, as if tech Twitter isn’t, like, spicy enough. You have really taken on local politics in San Francisco. And why? Why, why have you wanted to wade into these very thorny, partisan, sometimes ugly issues? I I think that I deeply believe that San Francisco should be San Fransokyo. You know there’s a reason why Starfleet Command you know Gene Roddenberry who’s someone who has put together an incredible techno optimist ideology that I grew up with. You know, I grew up in the East Bay. I grew up you know taking Bart in to do to actually learn how to cut my first programming language was Pearl during the web one point O 1998. I was 16 years old, got off at 16th and 16th and Mission Bart station, heroin capital of the world at that time in 1998, apparently got on the 22 bus and you know, came to a web design firm right down the street. And that’s where I literally learned how to make web technology. And that’s what introduced me to tech and it’s what helped me. I mean on on our, on our circuit show, like we talked about, it’s like I am so thankful for tech. I realize like a lot of people in this room or a lot of people in tech, they might be from all around the world, all around the country. And I think that’s a good thing. And then the tricky thing is a lot of people came here, they made their fortunes and they went off to other places with lower tax base, lower taxes. And I, you know, I get that, but that’s not for me. I don’t have another place I want to go. Like San Francisco is my home. And then, you know, I think some of it is looking at the Internet like there’s not another way to do it. Like you actually have to have people who are willing to, I mean, get cancelled, like or I mean you’ve definitely put yourself on the line a few times. Yeah. I mean you’re here so you’re not cancelled yet, I don’t think, thank goodness. But does it sound like he’s running for me or what do you think, Christina? I think there would be a lot of folks that Gary’s impacted positively, positively in San Francisco that would stand behind and then he chooses to do that. Are you? Are you? Oh, no, 1020 years. My wife says not allowed. So. But is there is there an end game for you? For me, I mean the reality is like my main quest is YCI mean. The wild thing is, I mean even getting to see your story is so awesome. Like, you know, coming to a city with an idea, meeting all the other people that you know, you have know how you have talent, you have capital. We’re all in this one place. We teach each other how to do it here. Like the the chance, the chance of becoming Unicorn for YC company is more than two X if you stay in San Francisco and we tell that to the companies when they graduate. Now it’s it’s that significant. And so that’s why San Francisco is very important to fight over because you know, why should we leave when they’re the ones who suck. I’ll take it because we’re doing this in San Francisco. Christina, what is going to define the next generation of founders? You know there was like the design founders like Brian Chesky and and and you’re really one of those too. There’s the move fast and break things kind of founders then that got kind of unpopular like what is it? The prototyper founder, right. So like you might not be able to build, you know, the best distributed system or build your thing for scale, but you can prototype and especially with these models and get to something like getting 65% really quickly work with customers and find product market fit way faster than in the past. You don’t have to build a whole, you know, system web app to do it like you used to. You can use these models and really accelerate. How would you answer that question? The best founders, it’s just so easy to find the best ones, right? I guess the best founders that I’ve been seeing, you know, we’ve been doing interviews all all week. I come away with basically understanding the world in a different way. And so I think that’s actually it’s you need to find a secret and how, you know, we have to have, you have to believe X and nobody else believes it yet. And I think that that’s what you did with compliance with this space, right. When you were starting out, you’re saying, you know, people didn’t really believe, but you knew it was real. And then over the course of years you proved it and you know now you have like the 9 digits a year in revenue to shelf. And yeah, I I mean I heard maybe like IPO like that was not in the baking dock. I’m pretty sure that was part of the program. Why you’re here that like you know an exit horizon, how are you thinking about that? Mostly not but truly we went got a zero to 100 million in under five years and that was a lot incredible. But also you know that’s there’s a lot to go and there’s a lot to go for our customers and the stuff we want to build. And you know I think in the in the vein of startups like we did have the secret of this overlooked market, everyone thought kind of sock turned out. It’s actually great we can make it not sock too much, but there’s just a lot more to go. I also kind of been following sort of continuing my non answer to your question. This is the like sub stack like Twitter discourse around like revenue milestones for IPO. And I think it’s clear that bar is just going higher and higher and higher. When we think about it, you know we’re very happy with the 100 and under five years but like a lot of wood to chop. Well I see now has eleven public companies, right? Eleven, one of them is Reddit, you and Steve we’re talking backstage. So what’s going to define the next couple of years of this tech cycle? Is the IPO window going to fly open? Is it, is it open? Does it stay open? Is it harder to get out? Like you know, how would you, what are you expecting the next two years? You know, honestly, I would go to finance Twitter to find out. You know, let’s see what Jerome Powell feels like this morning. You know, all I know is that whether it’s a good time or a bad time, people are starting brand new companies from nothing and they’re able to do what you did. And YC is one of those places where that’s happening more and more. And I think that the more we do that, like actually that creates a lot of prosperity for not just San Francisco, but America for the world. And I think that that’s really exciting. Like you need a place that is welcoming to immigrants where you can actually raise kids and send them to the best possible public schools, right, Like, And in order to do that, you actually have to have enough housing. Like, if we have all of those things, then more prosperity in the world will happen. And that’s really awesome. Like, that’s what we need, actually. Well, here’s to prosperity. Thank you. Gary Tan, Christina Cacioppo. So appreciate you both being here today and not such.