Y Combinator startups are fastest growing, most profitable in fund history because of AI

Published

5 months ago

March 15, 2025

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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.”

The growth-at-all-costs mindset of Silicon Valley during the zero-interest-rate era has gone “out the window,” said Tan, pointing to a renewed focus on profitability. That focus on the bottom line also applies to megacap tech companies. Google, Meta and Amazon have gone through multiple rounds of layoffs and pulled back on hiring.

While that’s shaken some engineers, Tan described it as an opportunity.

It’s easier to build a startup, and the top people in tech don’t have to prove their worth by going to work at big tech companies, he said.

“There’s a lot of anxiety in the job market, especially from young software engineers,” Tan said. “Maybe it’s that engineer who couldn’t get a job at Meta or Google who actually can build a standalone business making $10 million or $100 million a year with ten people — that’s such a powerful moment in software.”

About 80% of the YC companies that presented this week were AI focused, with a handful of robotics and semiconductor startups. This group of companies has been able to prove earlier commercial use compared to previous generations, Tan said.

“There’s a ton of hype, but what’s unique about this moment is that people are actually getting commercial validation,” he said. “If you’re an investor at demo day, you’ll be able to call a real customer, and that person will say, ‘Yeah, we use the software every single day.'”

Y Combinator was founded in 2005 by Paul Graham, Jessica Livingston, Robert Morris and Trevor Blackwell. The firm invests $500,000 in startups in exchange for an equity stake. Those founders then enter a three-month program at the San Francisco headquarters and get guidance from partners and YC alumni. Demo day is a way to attract additional capital.

The firm has funded more than 5,3000 companies, which it says are worth more than $800 billion in total. Over a dozen of them are public, and more than 100 are valued at $1 billion or more. More than 15,000 companies apply to get into the accelerator, with about a 1% acceptance rate.

More of these venture capital incubators have popped up throughout the past decade, and more capital has flocked to early stage startups. Despite the competition, Tan argued that Y Combinator has an edge thanks to its strong network. He pointed to the number of highly valued portfolio companies rising, and pushed back on the idea that specialized incubators were taking business.

“About 20 to 30% of the companies during YC change their idea and sometimes their industry entirely. And if you end up with an incubator that is very specialized, you might not be able to change into the thing that you were supposed to,” Tan said. “We think that the network effects and the advantages of doing YC have only become more bold.”

Technology

Circle shares fall after stablecoin issuer says it will offer 10 million shares

Published

14 hours ago

August 12, 2025

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Circle shares fall after stablecoin issuer says it will offer 10 million shares

Circle Internet Group Initial Public Offering at the New York Stock Exchange in New York City, U.S., June 5, 2025.

NYSE

Circle Internet Group stock tumbled more than 5% in extended trading Tuesday after it said it would offer 10 million Class A shares to the public.

Of the total stock being offered, 2 million shares will be offered by Circle. The remaining 8 million shares will be sold by stockholders.

The stablecoin issuer’s shares have soared more than 450% since it went public on June 5.

As part of the offering, Circle is offering its underwriters a 30-day option to buy an additional 1.5 million shares.

Circle shares closed Tuesday up 1.3% after the company reporting its first quarterly results as a publicly traded company. While charges tied to its IPO weighed on its second-quarter results and led to a loss of $4.48 per share, it saw revenue rise 53% on the back of strong stablecoin growth.

Don’t miss these cryptocurrency insights from CNBC Pro:

Technology

CoreWeave shares drop even as revenue tops estimates

Published

15 hours ago

August 12, 2025

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CoreWeave shares drop even as revenue tops estimates

Mike Intrator, co-founder and CEO of CoreWeave, speaks at the Nasdaq headquarters in New York on March 28, 2025.

Michael M. Santiago | Getty Images News | Getty Images

CoreWeave shares fell about 6% in extended trading on Tuesday even as the provider of artificial intelligence infrastructure beat estimates for second-quarter revenue

Here’s how the company did in comparison with LSEG consensus:

Earnings per share: Loss of 21 cents
Revenue: $1.21 billion vs. $1.08 billion expected

Revenue more than tripled from $395.4 million a year earlier, CoreWeave said in a statement. The company registered a $290.5 million net loss, compared with a $323 million loss in second quarter of 2024. CoreWeave’s earnings per share figure wasn’t immediately comparable with estimates from LSEG.

CoreWeave’s operating margin shrank to 2% from 20% a year ago due primarily to $145 million in stock-based compensation costs. This is CoreWeave’s second quarter of full financial results as a public company following its IPO in March.

CoreWeave pointed to an expansion in business with OpenAI, a major client and investor. Also during the quarter, CoreWeave acquired Weights and Biases, a startup with software for monitoring AI models, for $1.4 billion.

In May, management touted 420% revenue growth, alongside widening losses and nearly $9 billion in debt. The stock still doubled anyway over the course of the next month.

CoreWeave shares became available on Nasdaq at the end of the first quarter, after the company sold 37.5 shares at $40 each, yielding $1.5 billion in proceeds. As of Tuesday’s close, the stock was trading at $148.75 for a market cap of over $72 billion.

A CoreWeave data center project with up to 250 megawatts of capacity is set to be delivered in 2026, the company said in the statement.

Executives will discuss the results and issue guidance on a conference call starting at 5 p.m. ET.

This is breaking news. Please check back for updates.

WATCH: Citi’s Tyler Radke’s bullish call on CoreWeave, upgraded to buy

Technology

White House says it’s working out legality of Nvidia and AMD China chip deals

Published

17 hours ago

August 12, 2025

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White House says it's working out legality of Nvidia and AMD China chip deals

U.S. President Donald Trump (L) invites Nvidia CEO Jensen Huang to speak in the Cross Hall of the White House during an event on “Investing in America” on April 30, 2025 in Washington, DC.

Andrew Harnik | Getty Images

The Trump administration is still working out the details of its 15% export tax on Nvidia and AMD and could bring deals of this kind to more companies, the White House’s Karoline Leavitt said Tuesday.

“Right now it stands with these two companies. Perhaps it could expand in the future to other companies,” said Leavitt, the White House’s spokesperson.

“The legality of it, the mechanics of it, is still being ironed out by the Department of Commerce, and I would defer you to them for any further details on how it will actually be implemented,” she continued.

President Donald Trump confirmed on Monday that he had negotiated a deal with Nvidia in which the U.S. government approves export licenses for the China-specific H20 AI chip in exchange for a 15% cut of revenue. Advanced Micro Devices also got licenses approved in exchange for a proportion of its China sales, the White House confirmed.

“I said, ‘If I’m going to do that, I want you to pay us as a country something, because I’m giving you a release,'” Trump said Monday.

“We follow rules the U.S. government sets for our participation in worldwide markets,” Nvidia said in a statement this week.

Trump said the export licenses for AMD and Nvidia were a done deal. But lawyers and experts who follow trade have warned that Trump’s deal may be complicated because of existing laws that regulate how the government can charge fees for export licenses.

The Commerce Department didn’t immediately return a request for comment.

The H20 is Nvidia’s Chinese-specific chip that is slowed down on purpose to comply with U.S. export relations. It’s related to the H100 and H200 chips that are used in the U.S., and was introduced after the Biden administration implemented export controls on artificial intelligence chips in 2023.

Earlier this year, Nvidia said that it was on track to sell more than $8 billion worth of H20 chips in a single quarter before the Trump administration in April said that it would require a license to export the chip.

Trump signaled in July that he was likely to approve export licenses for the chip after Nvidia CEO Jensen Huang visited the White House.

The U.S. regulates AI chips like those made by Nvidia for national security reasons, saying that they could be used by the Chinese government to leapfrog U.S. capabilities in AI, or they could be used by the Chinese military or linked groups.

The Chinese government has been encouraging local companies in recent weeks to avoid using Nvidia’s H20 chips for any government or national security-related work, Bloomberg reported on Tuesday.

WATCH: Access to Nvidia’s H20 won’t hand China an AI advantage: Analyst