Garry Tan warns: be truthful

Y Combinator chief executive Garry Tan told founders on April 27 to “be precise, and always be truthful” when they talk about revenue. (artificiallawyer.com) Tan’s guidance broke startup sales into four buckets: pilots, bookings, revenue and recurring revenue. He said founders should not “mistake one tier for another.” (artificiallawyer.com) In Tan’s framework, a pilot is a test project, bookings are signed contracts, revenue is money recognized from delivered work, and recurring revenue is revenue that repeats. (artificiallawyer.com) The distinction matters in software and artificial intelligence startups because annual recurring revenue, usually shortened to ARR, is often treated as shorthand for traction. Tan’s post pushed founders to separate what customers have promised from what they have already paid for and renewed. (artificiallawyer.com) The note arrived as Y Combinator is under pressure over the kind of companies it is backing and how it presents them. Inc. reported on April 28 that the accelerator now faces stronger rivals, criticism at Stanford, and fallout from a startup scandal. (inc.com) That scandal centered on Delve, a compliance startup once backed by Y Combinator. TechCrunch reported on April 4 that Delve had “parted ways” with Y Combinator and was removed from YC’s company directory. (techcrunch.com) Inc. reported the same day that Delve lost Y Combinator after fraud allegations tied to allegedly fabricated security certifications. Delve’s founders said the claims came from “a malicious actor.” (inc.com) Y Combinator has also leaned harder into artificial intelligence than at any point in its history. Inc. reported last month that about 90% of Y Combinator startups are now AI companies, after cohorts were shortened from 12 weeks to 9 and expanded from two per year to four. (inc.com) Tan has argued that revenue is the clearest measure of startup success before. In Y Combinator’s 2024 Top Companies list, he wrote that the featured alumni generated $57.2 billion in 2023 revenue. (ycombinator.com) His April 27 message was narrower than that leaderboard. It was a reminder that in a market full of pilots, demos and AI hype, Y Combinator wants founders to label each dollar exactly once. (artificiallawyer.com)