Valuations are high but not in bubble territory,

a bigger worry, 30-year-old head of

's hottest incubator tells TOI's

Samidha Sharma

You'd told me last year that you want to send a YC partner to India to meet founders and startups. Is that happening soon?

YC as a fund has been actively looking to diversify itself after facing criticism for being very Valley-focused. How're you pushing this strategy?

This wasn't the case about two years back. You were more consumer- and enterprise-centric ...

Tell me as a fund where are you headed? Would you look to make growth-stage investments through the new fund which you are raising?

I want to get you in on the macro environment: Do you think the tech market is overvalued?

What's your take on the increasing cash burn across tech startups?

How are you addressing that as an investor and mentor to early-stage companies?

How much of the burn is a factor of the money in the private market?

Why do you think more tech companies are staying private?

Altman founded a location-based social networking app Loopt after dropping out of Stanford. (TOI photo)

You said too much money is killing some good companies ...

Is it a tough time for founders to remain stable headed and practice restraint?

You've been critical of VCs and even put out a $100,000 no-bubble bet earlier this year. Are we in a valuation bubble?

You think excessive regulation may impact the shared economy space?

MOUNTAIN VIEW, California: Sam Altman, president of Y Combinator, has become one of the most influential voices in Silicon Valley since taking charge from the legendary computer programmer and entrepreneur Paul Graham last year. Branded a nerd king, who's almost always spotted in a pair of shorts and hoodies, the 30-year-old is in the midst of bringing about sweeping changes at YC. Having birthed many billion-dollar babies, including the likes of Airbnb, Dropbox, Instacart and Stripe, the Valley's startup machine is now looking to get more Indian ventures into its batches. Altman, who founded a location-based social networking app Loopt after dropping out of Stanford, sat down with TOI for an exclusive chat at YC's Mountain View, California office and spoke about India spawning multiple billion-dollar startups , his upcoming India visit, cash burn and valuations at tech firms. Excerpts from an extended interview...It's actually going to be me visiting India later this year. The idea is to basically meet the best startups in the world and get them to the YC programme. India is one of the largest and fastest growing markets globally and that's why we have been investing in Indian startups (Cleartax and Razorpay) over the last couple of years. I think there will be multiple $10 billion-plus companies which will be started in India in the next few years and, hopefully, we will get a shot at funding some of those.When I think about diversity it's not just limited to funding more women or black founders because what we want is to fund the very best companies in the world and those are diverse in different ways. We fund not only software, enterprise, consumer and hardware ventures but also companies that build rockets and nuclear reactors, and a lot of high-tech startups.Yes, it's been happening over the past two years. Another way of approaching diversity is that we fund startups from India, China, and South America. Last year, we funded startups which had founders from 45-50 countries. This is really worldwide diversity. Two batches ago, we had 45% founders who were born outside the US. We are funding more startups from Europe and Asia. And also from Central America and some African countries. These are solving local and global problems. The Indian startups from our batches, Cleartax and Razorpay, are focused on the domestic market.We simply want to fund a lot more companies. Currently, we do 115 companies per batch and that's grown rapidly. Startups produce innovation and they are good for the world. If we can help more of these startups get going by funding them, it's great for the world.I can't comment on the new fund specifically but I do think growth stage is an interesting space. There are some companies which are looking to do very ambitious things which need a lot of capital. Helion and UPower are two nuclear ventures which we have funded and they need huge amounts of resources. In the biotech space, we have 20n, Transcriptic, and in the software category things like Airbnb, which are transforming communities, price of housing — they need more capital. It's a valuable place to help our ecosystem. Theoretically and personally, it's of interest to me.Overvalued at some places and undervalued in others — here I'm speaking about US startups. Things are high for sure but let's keep in mind that the interest rates here are zero so you should expect equities to be expensive. I'm still a buyer.That's my biggest concern and that's bad for the cultures of the companies. It exposes the companies to risk if the market changes later, so I'm much more nervous about the burn rates than I am about the valuations.We encourage our companies to keep very low burn rates. It's part of the YC teaching. You see this office (YC office in Mountain View), it's not a fancy one, we are frugal people and we teach our companies to be frugal. If you look at the YC portfolio, with a few exceptions like Zenefits (cloud HR startup ), it's a low-burn portfolio. These are not crazy companies that burn $5-10 million every month.One of the things I always say is that during any boom, the only people who make a lot of money are the landlords. If you look at San Francisco right now with all the startups taking up office space, the property owners are gaining enormously. But with this boom, salaries of engineers have also gone up. So as a company, you still get the same number of resources. It's easier to raise money now but then the price of everything else has also gone up. That's why I think even in this boom time, companies still do not get more.We will have to wait for a while. Eventually, these companies will go public, maybe take a few years longer. The worst thing about being a public company is the crazy shareholders on Wall Street who are very focused on short-term results. As a CEO and founder, you want to do the right thing for your company over a multi-decade period. But then you have shareholders who think on a 90-day period. They don't like investments you make to hurt the present quarter's earnings which may help earnings in 2020. So you don't want to go public till you have a predictable revenue stream and profits that you can reinvest in growth, which is scaring Wall Street. People ask me why don't I want to take YC public, and this is what deters me from doing an IPO, so I have no desire.If you raise money and do not spend it, it's OK; then it is like an insurance policy. But if you raise money and rev up burn rate, that's bad. Fab, the bargain-shopping site, is an example of that. The others are where you rely on the money to drive growth instead of making the product really good. A lot of the failed photo-sharing startups met that outcome — raised too much money and spent it too quickly.It is a hard time right now. We have to talk to our founders all the time and tell them even when the times are a little crazy, you don't have to act crazy.I got tired of all the VCs saying it's a bubble and at the same time raising larger funds of their own and signing bigger cheques, encouraging companies to go for higher valuations. So I don't think the VCs believe this bubble theory and, sure enough, none of them took the bet. As for me, I think valuations are high but not really in a bubble territory.Regulation is the biggest risk for these businesses. Over a long period of time, it will trend towards what people want but in the meantime it may remain choppy. If you look at a particular week for these companies, it can be very good or very bad, but the trend is towards greater consumer freedom. There is a hidden risk. To me that is the only major risk for these companies but it is a really big one. When investors put in money, they look at a range of potential outcomes — if you think Airbnb has a 50% chance of becoming a $100-billion company, a 25% chance of being a $50-billion company and a 25% chance of it being a zero-dollar company, the expected value is still very high.