Garry Tan says founders ‘need to be in San Francisco’ as Y Combinator ditches Mountain View headquarters for the massive metropolis

Ever since Garry Tan came on as Y Combinator CEO last year, there have been changes.

Last March, Tan cut its late-stage investing and laid off 17 investors, and he shrank the size of YC’s batches. Less known is that the startup accelerator also moved its headquarters. After spending 17 years operating out of Mountain View, Y Combinator moved its operations up north to the Dogpatch neighborhood in San Francisco and into Pier 70, according to city records reviewed by Fortune and confirmed by Y Combinator.

In an interview, Y Combinator CEO Garry Tan said it was important to him that YC be as close to the cutting edge of artificial intelligence innovation as possible (OpenAI and Anthropic and “a lot of the top talent” in artificial intelligence are in San Francisco versus Silicon Valley, he says). Not to mention—the majority of Y Combinator partners, including himself, live in San Francisco, he adds.

These days, “you sort of have to be in San Francisco,” Tan says, noting the importance of the accidental run-ins that happen when people are out and about. “Chances are the people around you are thinking about and talking about technology, and especially A.I. That’s really special,” Tan says. He also pointed out that YC data shows that startups that were built in San Francisco were more likely to succeed than their peers.

The move from Mountain View, which happened in the spring, right before YC welcomed its summer batch of startups, is also part of Y Combinator’s broader effort to bring its program back to being fully in-person post-COVID. Y Combinator started doing so in Summer 2022, though its demo days have still been remote. (YC says its next Demo Day will be partially in-person at Pier 70, though presentations will still be online)

Tan doesn’t just want founders back in the Bay Area: He wants them very close by. The Y Combinator CEO says the accelerator is highly encouraging founders to get places in the Dogpatch or Potrero Hill, or at least nearby. “I think it’s actually going to be really good that people know to be in walking distance of each other, and I think the connections between the founders are just going to be that much stronger,” he said, noting that he hopes Y Combinator upping its check size to $500,000 in 2022, up from $125,000, will help founders be able to afford the high rent.

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The changes come as Tan continues to get more involved in San Francisco politics: Donating to local elections, hosting gatherings, and, of course his ongoing slew of social media posts about what he describes as “San Francisco’s corrupt political machine.”

Tan is not one to pull punches: “I’m ready for him to leave public office,” he says of Dean Preston, a San Francisco Supervisor, who is running for re-election. “He certainly hasn’t been serving the needs of tech. On the other hand, I don’t even think that’s the reason to get rid of him. His hatred of tech covers up all the things that cause San Francisco to be so derelict in its responsibility to the citizens of all classes.” (In a statement, Supervisor Preston said that he was proud of his record “fighting for tenants, affordable housing, unions, food security, and an equitable San Francisco” and said that some of his strongest supporters were people who work in tech.)

While Tan may be very critical of San Francisco’s current political leadership, in typical Silicon Valley fashion, he says he is optimistic about the years ahead, particularly with upcoming elections this March and November. And he says that he has personally witnessed the tech community rallying together right now: “We’re coming together. We’re organizing. We’re actually creating our own media,” he said. “When you go to dinners, that’s one of the things we talk about now, and like two, three years ago in tech, I don’t think that that was something we were doing.”

I asked whether Tan would ever consider running for some kind of office himself.

“Maybe in 20 years,” he told me, adding later: “On the other hand, my wife said that she’ll divorce me if I run for Mayor, so I don’t think anytime soon.”

More unicorn news…Discord has laid off 17% of its staff—170 people, according to a memo CEO Jason Citron sent to staff that was seen by The Verge. The announcement was made yesterday. “We have to face some hard truths,” Citron wrote in the memo, according to The Verge. “We grew quickly and expanded our workforce even faster, increasing by 5x since 2020. As a result, we took on more projects and became less efficient in how we operated.”

An important programming note…With an ever-changing array of emotions, I wanted to let readers know that I will no longer be writing Term Sheet as of the end of this month. Don’t worry: I’m not leaving Fortune—just pivoting into a new role where I’ll be writing more venture capital and startup features, scoops, and investigations for our tech desk, outside this newsletter (though I imagine some of my work will still be featured in here every so often!). I’m fortunate to be able to leave you in the more-than-capable hands of Allie Garfinkle, who you’ve already gotten to know over this week. She is knowledgeable, curious, relentless, and an absolute joy. We’re lucky to have her here, and so are you. Don’t worry: I won’t get all sentimental just yet. You’re still stuck with me for another two weeks.

Please note that Term Sheet is taking Monday off in observance of Martin Luther King Jr. Day. We’ll be back in your inboxes on Tuesday.

Until then,

Jessica Mathews
Twitter: @jessicakmathews
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Joe Abrams curated the deals section of today’s newsletter.

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