JC

YC Founder • Advisor • Investor • Builder • SMB Owner

[JC @shiftj]

A bit about me: YC Alum. Eng turned CEO.

- I raised $3m in 14 days.
- No decks. No board seats.
- I built to $1m+ ARR
- Turned it profitable
- Now spinning off more companies

Follow if you want unfiltered founder takes.
The kind of stuff founders can't talk about.

[JC @shiftj]

If you’re looking to build a startup, build an AI Native Service.

my favorite AI playbook by far.

Instead of selling AI products, use it yourself.

You’ll reap far more benefit that way:
> higher prices
> larger market
> better product
> more defensible

These days it’s hard to tell what companies will stand the test of time.

These companies will.

[Y Combinator @ycombinator]

Some of the biggest companies of the next decade won't be software businesses. They'll be services companies like insurance carriers, law firms, and tax practices rebuilt from scratch with AI doing most of the work.

In this episode of Startup School, YC Visiting Partner @CharlieWarren walks through the playbook for building AI native services companies, covering how to pick a market with the right traits, why variance kills these businesses faster than anything else, and the P&L math that’ll transform your business model.

00:00 — Intro to AI Services Companies
01:01 — Picking the Right Market
02:55 — Markets YC Likes Right Now
03:43 — The Sam Altman Test
04:35 — The Right Founding Team
05:28 — Building the Product
06:19 — Variance Is the Existential Problem
07:08 — The Early Demand Trap
07:53 — How to Price AI Services
08:41 — The P&L Walkthrough
09:33 — AI Operating Leverage
10:27 — Don't Buy Your Way In

[JC @shiftj]

Successful founders are rarely good at just one thing.

When you look at their life you’ll find several areas in which they excel; often being in the top 5% of that field.

It’s never JUST business.

They’re successful in anything they take seriously.

Ex:
> D1 athlete
> world class gamer
> top-tier programmer
> top performing student
> exceptional salesperson
> competitive poker player
> military special operations
> nationally ranked chess player

—
There are exceptions to every rule.

But if you've never been great at anything, it's hard to believe you'll suddenly become great at startups.

[JC @shiftj]

I’ve been spending more and more weekends with SMBs, helping them adopt AI.

So far I’ve helped:

1) a law firm save thousands per month and 2x case load capacity

2) a small business identify 50 franchise worthy locations worth >$1m

Who should I help next?

[JC @shiftj]

I helped an SMB owner make $1M this weekend. 

here’s the story 👇

A small business owner was looking to expand to 4 more locations.

if successful, this would net him $1m/ year.

The problem?

If it fails he’s millions in debt and he was relying on:
> gut feel
> personal experience
> randomly clicking thru google maps

So I helped build an AI agent that scouts locations.

We combined:
> his 10+ years of industry knowledge
> data across population, demographic, income, competitor, comparable businesses types
> 30+ factors from a decade of experience.

Then ran it across every subdivision in the United States.

The result? We overshot.

By a lot..

We ended up finding 50 exact-match expansion opportunities.

The exact profile he was looking for.
He was stunned.

4x locations makes him one million/yr
this list is closer to $10M.

But here’s my favorite part:

These capabilities used to be reserved for large companies but are now rapidly becoming available to those with less resources.

This kind of sophistication you’d normally expect from a company like Starbucks.

Now available to a small business owner.

Giving opportunities to people who didn’t think they had them.

The type of scale he didn’t think was possible.

Pretty damn cool.

[JC @shiftj]

Probably the most common advice I give on slide decks.

That plus: make it simpler.

[Aaron Epstein @aaron_epstein]

Common fundraising deck mistake: using boring slide titles like "Team" and "The Problem".

Instead, state the conclusion that you want investors to take away from the slide, and use the body as supporting evidence.

If an investor only read the titles on your slides, would they understand your business and want to invest?

[JC @shiftj]

Money doesn’t solve problems, it accelerates what’s working.

Dangerous to think otherwise.

[Garry Tan @garrytan]

A founder kept saying "if only we had money we'd do X."

Money is not the fire. Money is gasoline you pour on a fire that already exists.

You don't have a funding problem. You have a "people don't want it yet" problem. Go make the first fire.

[JC @shiftj]

Don’t be scared of crowded markets.

Empty ones are far worse.

Competition usually means:
• real demand
• real budgets
• an unsolved problem

Empty markets are empty for a reason.

[Paul Graham @paulg]

@charliermarsh Sometimes they're a good reason to work on something. When people say a market is "crowded," what that often means is that there's a real problem and none of the solutions are good enough yet.

[JC @shiftj]

@noahiglerSEO What are the top use cases you’ve seen outside of lead handling?

[JC @shiftj]

Seeing this trend in a lot of successful YC companies.

The playbook:
1) approach a traditional business
2) find a repetitive revenue-driving workflow
3) build the solution (often leveraging AI)
4) showcase proof of revenue increases
5) sell solution to to PE companies

Some companies don’t even sell the solution.

They acquire the company, implement the improvements, and capture the full value themselves.

Either way.. lot of opportunity outside of tech.

—
What businesses do you think gain the most from AI?

[Noah Igler @noahiglerSEO]

We built an AI agent for an HVAC company in the southeast last month.

They were doing around $3M a year and growing fast, but their CSRs couldn't keep up with the lead volume.

Form fills were taking 4-6 hours to respond to. LSA messages and Yelp inquiries went 12+ hours sometimes. They were losing jobs to whoever responded first.

Here's exactly what the agent does:

When a homeowner submits a form on their website, sends a message through their LSA listing, fills out a request on Yelp or Angi, or texts their main business line:

> The agent responds within 30 seconds with a personalized message acknowledging the specific issue (no AC, furnace not heating, capacitor replacement, whatever they mentioned)
> Sends it all through blue iMessage texts, so the homeowner thinks they're texting with a real person at the company
> Asks 2-3 qualifying questions: zip code, residential or commercial, what type of system they have, when they need service
> Pulls their calendar in real time and offers 3 actual available appointment slots based on tech routing
> Books the appointment directly into ServiceTitan if they accept
> Texts the customer a confirmation with the tech's name, photo, and ETA window
> Notifies the CSR team only if the lead is high-priority (commercial, multi-system, replacement quote, etc.)

What changed in the first 30 days:

> Average lead response time: 4 hours to under 1 minute
> Booked-to-lead ratio: 22% to 41%
> CSR hours saved per week: about 18
> Owner now actually sleeps because after-hours leads get booked without anyone touching them

Most HVAC companies are spending $30-60 per LSA lead and then losing 30-50% of them to slow follow-up.

AI isn't perfect and it shouldn't fully replace humans in your sales process. But there's no reason not to use the best tech available to make your business more money.

[JC @shiftj]

@LajmiRihab That man has a way with words.

[JC @shiftj]

@christophersaum It's pretty easy for YC to find you without sleeping on the street..

1) they take applications
2) it's their job to find good companies

so build a good company and fill out the application..

[JC @shiftj]

@stochtinkerer Smart and hard worker, unfortunately aren't the characteristics associated with success.

It's more along the lines of grit and perseverance.

If you can hang in long enough, your odds start to change.

[JC @shiftj]

Tech startups are NOT the only way to build wealth.

In fact, it may be one of the worst ways:
- low success rate
- long time horizon to success
- difficult to exit / capture monetary value

It’s not the most efficient but it is the most popular.

And most folks haven’t seen the alternatives.

Here’s one👇

[JC @shiftj]

If your only aim is to make money, a tech startup isn't the most efficient way.

It's high risk, high reward.

Most don't make make.

[JC @shiftj]

@arian_ghashghai Good founders can change their odds, that will always be true.

[JC @shiftj]

@zeeitthru Definitely one of the better ones.

[JC @shiftj]

Appreciate the perspective but personally? I don't hate SMBs at all, I quite like them.

That's coming from someone who's not only built a career in tech but also owns SMBs.

(it's worth stating that being the owner of a construction company is far different than working in one - I probably wouldn't like being a construction worker in all fairness)

[JC @shiftj]

@ron_brener1 100%

[JC @shiftj]

If your only aim is to make money, a tech startup isn't the most efficient way.

It's high risk, high reward.

Most don't make make.

[JC @shiftj]

@charlie_he_ Agreed.

[JC @shiftj]

@__alexlazar__ 100% - could really f*ck with your life

[JC @shiftj]

@milesgr_ Asymmetric upside - high risk, high reward.

[JC @shiftj]

Startups aren’t the only way to build wealth.

Buying a business is arguably less risky, more straightforward, and higher rates of success.

If your goal is to make money it’s best to explore the options available.

What other options are there?
What did I miss?

[JC @shiftj]

7/ Buying a business is not all gravy

There’s risks to this game that don’t exist as deeply as tech startups.

- you need capital to grow
- capital requires loans and debt
- debt often requires personal guarantees

Unlike buying a home where the home is collateral; businesses don’t have many hard assets.

Meaning if you default on the loan banks come after you - not the house.

That’s not a risk to be taken lightly, even if the risks are arguably lower.