Silicon Valley's earliest stage companies are getting a major boost from artificial intelligence. Startup accelerator Y Combinator -- known for backing Airbnb, Dropbox and Stripe -- this week held its annual demo day in San Francisco, where founders pitched their startups to an auditorium of potential venture capital investors.
Y Combinator CEO Garry Tan told CNBC that this group is growing significantly faster than past cohorts and with actual revenue. For the last nine months, the entire batch of YC companies in aggregate grew 10% per week, he said. It's not just the number one or two companies -- the whole batch is growing 10% week on week, said Tan, who is also a Y Combinator alum. That's never happened before in early-stage venture. That growth spurt is thanks to leaps in artificial intelligence, Tan said.
App developers can now offload or automate more repetitive tasks, and they can generate new code using large language models. Tan called it vibe coding, a term for letting models take the wheel and generate software. In some cases, AI can code entire apps. The ability for AI to subsidize an otherwise heavy workload has allowed these companies to build with fewer people. For about a quarter of the current YC startups, 95% of their code was written by AI, Tan said.
That sounds a little scary, but on the other hand, what that means for founders is that you don't need a team of 50 or 100 engineers, said Tan, adding that companies are reaching as much as $10 million in revenue with teams of less than 10 people. You don't have to raise as much. The capital goes much longer.
More on YC’s Winter 25 AI-focused cohort on CNBC
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