YC Founder Fixes $2.7T Gov Waste with AI

Mar 3, 2026

46:25

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The US government spends $2.7 trillion a year on everything from water bottles to fighter jets, yet the entire process is held together by Microsoft Word and tribal knowledge.

In this episode, we sit down with August Chen, founder of Hazel (YC W24), to discuss why he left Palantir to tackle the antiquated world of government procurement. We dive into the "missionary vs. mercenary" mindset, the reality of the 1% acceptance rate at YC, and why the "death of the paper-pusher" is the greatest opportunity in VC today.

What you’ll learn:

Why 50% of small businesses have abandoned government contracts.
The Palantir playbook: How to "deploy yourself" into a customer's workflow.
Why selling to the Government requires a "hierarchy of needs" approach.
The pivot from B2B2G to direct B2G: When the mission stays, but the product moves.
How AI is turning months of RFP paperwork into seconds of work.
Predictions for the "DOGE" era and the future of civil servant tech stacks.

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Chapters:

00:00 Million Dollar Toilet Problem

00:39 YC Roaster Ad Break

01:22 Why Gov Procurement Lags

02:50 Broken Systems Examples

04:05 Inside Procurement Tech Stack

05:30 Palantir Lessons On Procurement

07:29 YC Pivot To B2G

11:36 Selling To Government Reality

17:22 Scaling A Small Sales Team

21:29 AI For Deterministic Compliance