The New Due Diligence for VCs: AI Coding Ability
YC is famous for its application process. Across 20 questions and a 1 minute video it forces brutal clarity on who you are as a founder, the problem you’re solving, your solution, and importantly - action, not theory.
But now, YC has a new question on its application.
“Attach a coding agent session you’re particularly proud of”
It’s obvious why. Now, and in the future, founders will need excellent command of these tools. There’s a signal in the correlation between AI coding skills and company success. And it shows how you think about leverage and whether you can keep up with the pace of change.
How founders react to change matters more as ideas hold less weight amid rapid technological shifts.
But what about VCs? Are they able to keep up? Should LPs now assess managers on their ability to use these tools as well?
I think so, here’s why.
The Operator Debate Is Over
There’s an age-old debate about whether VCs should be operators.
Fred Wilson of USV famously argues that investors and founders have distinct, complementary roles - strategists vs. executors and that VCs don’t require direct operating experience to be effective. He believes VCs without operating backgrounds can provide a more objective perspective, avoiding role confusion.
But the gap between strategy and execution is effectively zero now.
Strategy that can’t be executed immediately is now just theory.
Just like YC needs to know that founders are iterating and improving efficiencies with these tools, LPs should care whether their fund managers can do the same.
Why LPs Should Care
I have a background in building, and those abilities have been most effective in portfolio company support. But increasingly, I’m accelerating Lobster Capital every week through tools we’re building internally.
Unlike many Fund Is, we have a full-time developer. Together with them and Claude Code, we’ve built multiple tools to support our screening, sourcing, and signaling of talent in the YC ecosystem.
Recently, we launched our first public tool, YC Roaster, which has proved popular. I believe there’s much more work to do here, and we can already see many ways this will advantage us in the YC ecosystem
Other emerging funds are doing this too. Ryan Hoover’s Weekend Fund has built a great suite of internal and external tools, and his background as a builder (Product Hunt founder) is supporting this acceleration. They’ve built Rolodex tools to get warm intros to your next hire, customer, or advisor. Tools that connect to Twitter to surface new investors.
Elsewhere, Yohei Nakajima, Untapped VC’s GP, has a unique approach as a venture capitalist by actively building in public, bridging the gap between investing and hands-on creation. Examples include AI-assisted startup research and a founder-facing GPT VC Associate.
The more we utilize these tools as a fund, the more important I think this becomes for LPs.
Not just because “we’re using these tools so we understand founders” - though of course it helps us understand the tech and meet founders on their level.
But more importantly, operating a lean, efficient, effective fund with many 10x employees thanks to agents will be table stakes in five years. Backing managers who think that way now gives LPs early insight into what that really means in practice.
VC is Becoming Interactive
Marketing is another lens that’s debated in VC. Does it make a difference to LPs? Does it really impact sourcing and returns?
We’re drinking the Kool-Aid. As I’ve mentioned many times, the media is a core strategy of our firm and honestly the crux of how we broke into this industry in the first place.
But even that future is becoming inherently more interactive.
YC Roaster is one example for our fund, and we intend to do more. But mega funds have been pioneering this approach for years, Headline (who employ 17 engineers, by the way), EQT, Index, and NFX have all invested heavily in building tools that serve as top of funnel for the fund over the past few years.
Most significantly, YC themselves was maybe the first fund using tools to drive inbound: Startup School, Hacker News, YC Job Board, YC Co-Founder Matching, Bookface. All serve the benefit of the YC brand and ecosystem.
The emerging manager ecosystem is largely asleep at the wheel here. And LPs should start asking the same question YC now asks founders:
“Attach a coding agent session you’re particularly proud of.”
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