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Dalton + MichaelDalton + Michael

How Startups Close Million Dollar Deals

In this episode of Dalton + Michael, they discuss how founders can approach selling six- and seven-figure deals, even when they have no personal experience with deals of that size. Many founders default to building self-service products because those are the kinds of products they are used to buying. But for many startup ideas, limiting yourself to self-service can cap the size of the opportunity. Dalton and Michael talk through what it takes to sell bigger contracts, how founders can learn enterprise sales, and why closing large customers may be more approachable than it seems. Dalton + Michael is brought to you by @Standard_Cap Dalton Caldwell on X: https://x.com/daltonc Michael Seibel on X: https://x.com/mwseibel

Dalton CaldwellhostMichael Seibelhost
Jun 1, 202618mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 2:31

    Why big enterprise deals feel like a “black box” to founders

    1. DC

      And so if you charge a similar amount as a startup, and it sort of resembles the way the other vendors charge, the customer will be like, "Oh, that makes sense." It'll fit right in.

    2. MS

      Yeah.

    3. DC

      Versus when you're a founder and you try to price it in a totally weird way.

    4. MS

      [laughs]

    5. DC

      It'd be like if you were-

    6. MS

      [laughs]

    7. DC

      ... if you were, like, a hotel, and you're like, "Oh, you pay with seashells." You know?

    8. MS

      Yeah.

    9. DC

      Like, "We don't take money here." [upbeat music]

    10. MS

      This is Dalton + Michael. Today we're gonna talk about how do startups get big deals, six-figure deals, seven-figure deals, eight-figure deals. How do they get big deals? And the kind of subtitle here is, are you selling tools or are you selling outcomes?

    11. DC

      I think a very common first office hour topic for companies that get accepted into YC is some version of them saying, "Dalton, how do I get big deal?" [laughs] You know, it's like, like they, they, they haven't even Googled it, right?

    12. MS

      Mm.

    13. DC

      This is just like a-

    14. MS

      [laughs]

    15. DC

      And I think the context is that most people understand self-service-

    16. MS

      Yes

    17. DC

      ... because they've signed up.

    18. MS

      Yes.

    19. DC

      Like, who hasn't signed up for GitHub or-

    20. MS

      Yes

    21. DC

      ... signed up for Figma or, you know?

    22. MS

      Yes.

    23. DC

      We're all used to signing up for SaaS-

    24. MS

      Yes

    25. DC

      ... putting in our credit card-

    26. MS

      Yes

    27. DC

      ... and paying for stuff. And so I don't think you'd need that much direction as a founder on how to create-

    28. MS

      How to charge $10 a month.

    29. DC

      Yeah.

    30. MS

      [laughs]

  2. 2:31 – 4:18

    Enterprise buying is comparison shopping—don’t “break their brain” with pricing

    1. DC

      Usually the way I try to set this up from people that are just, like, ice cold on the topic around pricing or deal size, is I ask them to think about how they purchase most products, which is to look at, like, three to five options.

    2. MS

      Mm-hmm.

    3. DC

      Say it's stuff on a grocery shelf, or say you're looking at hotel rooms. You're like, "Oh, I need to go to New York. I need a hotel."

    4. MS

      Yep.

    5. DC

      So you, like, go to the site.

    6. MS

      Yep.

    7. DC

      And there'll be, like, you know, three to five options, say. They have different prices. They have different features. But you're sort of choosing between those small number of options, and they're all-

    8. MS

      Yes

    9. DC

      ... you know-

    10. MS

      Yes

    11. DC

      ... relatively similar. This is how most people buy expensive software.

    12. MS

      Yes.

    13. DC

      Is that they're like, "Cool, I know how much this vendor costs and this vendor costs and this vendor costs."

    14. MS

      Mm.

    15. DC

      And so if you charge a similar amount as a startup, and it sort of resembles the way the other vendors charge, the customer will be like, "Oh, that makes sense."

    16. MS

      Yeah.

    17. DC

      "Cool. It's a, it's 200K a year. Oh, that-"

    18. MS

      Yeah.

    19. DC

      It'll, it'll fit right in.

    20. MS

      Yeah.

    21. DC

      Versus when you're a founder and you try to price it in a totally weird way.

    22. MS

      [laughs]

    23. DC

      It'd be like if you were-

    24. MS

      [laughs]

    25. DC

      ... if you were, like, a hotel, and you're like, "Oh, you pay with seashells." You know?

    26. MS

      Yeah.

    27. DC

      Like, "We don't take money here."

    28. MS

      You take a bath, it costs this much. If you wanna sleep on this half of the bed. [laughs]

    29. DC

      Yeah. Like, like, you're not gonna make a sale, okay?

    30. MS

      No. [laughs]

  3. 4:18 – 4:34

    Competing with incumbents: look like a normal vendor and deliver reliably

    1. MS

      Yes. Well, and, and that's often how you get to make a big contract being a 20-person company going up against a 1,000-person company, 'cause it's like the customer's buying the same thing, and you're priced the way that the... And you can deliver the service.

    2. DC

      Cool.

  4. 4:34 – 5:36

    Tools vs outcomes: why selling the CEO’s incentive pays more

    1. MS

      But you would get to make more money. I think another thing that happens that I find frustrating as a business guy, I will put my business guy hat on, I think developers like to sell developers, and I think developers like to build tools and sell those tools to developers who like to buy tools.

    2. DC

      Yes.

    3. MS

      And I think that, like, that is the easiest construction of the world, so I'm going to believe the world is constructed that way. I think that corporate CEOs need to deliver revenue. So I think there's, like, a massive disconnect, right? The CEO's incentivized by their stock compensation to deliver revenue and increase the stock price of the company. The developer wants to deliver tools and give those tools to the developer. How do those tools translate into more revenue for the company? And I think there's two philosophies. Philosophy one is, "That's the company's problem. Good luck." And philosophy two is, "That's the vendor's problem. I need to help." I think that when you're philosophy two, you get to charge a lot of money.

    4. DC

      Yep.

  5. 5:36 – 6:16

    Palantir as the archetype: pay for impact, not headcount

    1. MS

      I've heard some incredible stories about Palantir. We have so many founders who used to be, like, Palantir engineers. And, like, the economics of some of these deals, it's like we send 10 guys in to fix your thing, and you pay us a billion dollars over four years [laughs] because fixing that thing made you $10 billion. [laughs] And nobody cares how many guys it took. Like, I don't care. If I get to make 10 billion, I'm happy to pay you one.But if you're like, "Here's a tool, go figure it out," and the engineers at that company can't figure it out, so that company loses value-

    2. DC

      Yep

    3. MS

      ... you can't ask for a lot of money. So this makes sense to- why is this so confusing?

  6. 6:16 – 7:15

    Engineers care how it works; buyers care that it works

    1. DC

      I think that the engineer mindset is to care how something works under the hood.

    2. MS

      Yes.

    3. DC

      And the non-engineer mindset is that you could care less-

    4. MS

      Yeah. [laughs]

    5. DC

      ... how it works under the hood. If anything, you're like-

    6. MS

      It has to work

    7. DC

      ... "Don't tell me."

    8. MS

      [laughs]

    9. DC

      You're like, "I don't wanna know how this works." But they really care a lot about whether their outcome is achieved as quickly as possible.

    10. MS

      Yes.

    11. DC

      If you're waiting for someone to perform a service for you-

    12. MS

      Yeah

    13. DC

      ... and they're late, and they wanna give you a really long, complicated story about how there was traffic or, you know, like, just, like, do the thing. Like, I don't care.

    14. MS

      Yeah.

    15. DC

      Like, you don't want the details.

    16. MS

      No.

    17. DC

      And so think about the way cameras used to be marketed-

    18. MS

      Mm-hmm

    19. DC

      ... versus the iPhone.

    20. MS

      Mm-hmm.

    21. DC

      Whereas, like, megapixels and, like, all the Japanese companies-

    22. MS

      Yeah

    23. DC

      ... oh, there's a new camera with this and that.

    24. MS

      Shutter speed.

    25. DC

      Yeah.

    26. MS

      Yeah, yeah.

    27. DC

      Or, like, the way Macs were marketed versus PCs.

    28. MS

      Yes.

    29. DC

      Specs.

    30. MS

      Yes.

  7. 7:15 – 7:48

    The trap: thinking big vendors ‘just sell tools’ because you used self-serve

    1. MS

      I like your vendor argument, which is like, I'm not gonna say that tools don't make money. There are a lot of tools that make money. I will say, if you're in a market where most of the vendors are selling outcomes and you're selling tools-

    2. DC

      Yep

    3. MS

      ... that's probably a recipe for disaster. Um, the other thing that I will say is I think there are a lot of companies that founders think are selling tools and they're not, right? The number of times that I've talked to a YC founder and they'll say, "Well, AWS is tools. Um, Stripe is tools," and it's like, it's so interest- Like, unpack that because when AWS is selling you as a d-

    4. DC

      Yeah

    5. MS

      ... as a startup developer [laughs]

  8. 7:48 – 8:57

    A practical test: sales teams, quotas, and $10M+ customers reveal the real motion

    1. DC

      Again, this might be semantics, but here's what I would ask yourself.

    2. MS

      [laughs]

    3. DC

      Do these companies have large sales teams? Are these salespeople compensated on size of contract?

    4. MS

      Yes. [laughs]

    5. DC

      And do they have, like, commissions and do they have, like-

    6. MS

      Yes

    7. DC

      ... quota? Do their largest customers pay them tens of millions of dollars a year, if not more?

    8. MS

      Yes.

    9. DC

      And so-

    10. MS

      Yes

    11. DC

      ... all these companies would fit that bar.

    12. MS

      Well, and if those salespeople are not talking to you, that probably means that your experience of that product is not a representative experience.

    13. DC

      That is correct. Like, signing up for Stripe for your self-service side project is different than being a very large and successful company that processes billions of dollars.

    14. MS

      And is trying to figure out, should we switch off of Chase Merchant Services-

    15. DC

      Yeah

    16. MS

      ... and strip off to Stripe with our $3 billion worth of vol- volume?

    17. DC

      Yeah.

    18. MS

      And I think that what gets people confused sometimes is that the brand of a story can often be built during the first couple years, when they might only be selling tools, and they might only be selling those tools to startups. And the number of people I talk to who are just like, "Well, obviously Stripe is just a..." Now more startups exist and more startups use them, and I'm like, "That's lazy thinking."

  9. 8:57 – 10:00

    AI era framing: outcomes get more profitable as models improve

    1. DC

      I think this brings up a related, uh, topic. I know that, um, some of the Sequoia folks put out, like, a bunch of content about selling outcomes versus selling software.

    2. MS

      Yes.

    3. DC

      And to quickly introduce my understanding of the argument, it's the following: The AI models make the value of code zero. Anyone could crank out code, and if you're trying to sell software, every time a smarter model comes out, the value of your code goes down.

    4. MS

      Yeah. Tools are getting cheaper and cheaper.

    5. DC

      But if you're providing services, if you're selling outcomes-

    6. MS

      Yes

    7. DC

      ... and you're using the AI tools internally to produce the outcome-

    8. MS

      Yes

    9. DC

      ... every time the models get smarter-

    10. MS

      Yes

    11. DC

      ... your margins get better.

    12. MS

      Yes.

    13. DC

      So you're like, "Oh, yeah, we can deliver, you know, what do you... You, you want a widget?"

    14. MS

      We'll outcome. [laughs]

    15. DC

      "Oh, we can... We have widgets galore."

    16. MS

      Yeah.

    17. DC

      And every time a smarter model comes out, it's cheaper for you to make widgets.

    18. MS

      Yes.

    19. DC

      You're, you're pumped. Um-

    20. MS

      That's a nice positive feedback loop.

    21. DC

      I'm not sure that's the right framework for literally every startup. I think that's a stretch, but I think it's an interesting way to think about the difference between high-value outcomes sales-

    22. MS

      Mm-hmm

    23. DC

      ... versus selling SaaS.

  10. 10:00 – 10:48

    How to promise outcomes without knowing every business: ask customers and copy comparables

    1. MS

      So I wanna give you a challenge here. So I think this is a question that, that can scare people. As I'm moving from selling tools to selling outcomes, you know, I'm imagining a world where I have thousands and thousands of customers. How can I understand each of their businesses well enough to be able to promise them an outcome? That seems scary. W- w- how would you unpack that kind of question?

    2. DC

      Well, I would start with how the comparables or competitors in your space think about this.

    3. MS

      Mm-hmm.

    4. DC

      And I would ask the customer, "How do you evaluate outcome?" You know, this is [laughs] this is, like, the classic phone-a-friend.

    5. MS

      Yes.

    6. DC

      If someone asks, you know... You just ask the customer.

    7. MS

      Yes.

    8. DC

      So it'd be like, "Cool, how are you guys evaluating outcomes?"

    9. MS

      Yeah.

    10. DC

      "And what does success look like, and what does not success look like?"

    11. MS

      Yes.

    12. DC

      And I would basically get your customers to educate you on this one.

  11. 10:48 – 12:45

    Big customers aren’t infinite: your top accounts can be huge, and patterns repeat

    1. MS

      Embedded in a lot of startup founders' minds is a volume of important customers that I wonder whether that's actually true.

    2. DC

      Hmm.

    3. MS

      I'll pick on a company like Snowflake. Like, how many customers pay Snowflake over fif- $50 million a year?

    4. DC

      I don't know.

    5. MS

      I don't know, but I don't think it's thousands. And so I think that basically, one, I think it's a simpler problem than it looks, because not all customers are actually unique snowflakes.

    6. DC

      Yep.

    7. MS

      Um, and probably things that work for one company industry would work for another company industry. But I also think, two, your biggest customers can get really big. Like, I've got a company that I funded, and they do logistics coordination for commerce, and it's like, you know what? You know how many Walmarts there are? [laughs] You know, like, there just aren't that many. So, like, the reality is, is that most of their customers, um, are gonna be big, and there aren't that many big customers. So I think that's another way that you can kind of unpack it, where it's like you probably don't have to solve this problem for 1,000. I think the second way that I would unpack it is you might have more intel than they do. Because you get to operate horizontally across a lot of your customers, you get to see how they're using your products to make money. You get to see the other things they're doing to get money. You might have a better view on what's going on-... than they do. What's funny is, like, you might not need to be an expert in their company. You might need to be an expert in how people are using your product-

    8. DC

      Mm

    9. MS

      ... to make money, and then you can communicate that to your other end customer.

    10. DC

      Is there an example of, like, an outcomes-based company that you like to reference in Office Hours?

    11. MS

      Palantir is, like, the, the, the obvious one.

    12. DC

      I think the problem with Palantir is it's so secretive that no one really know- We shouldn't explain it in this video, but, uh [laughs]

    13. MS

      Well, what's funny is, like, all you have to do is talk to people who worked at Palantir about their individual products.

    14. DC

      Okay.

    15. MS

      Like, not what Palantir does, but just, like, "Tell me about one of your projects," and then immediately you're like-

    16. DC

      Okay

  12. 12:45 – 13:58

    More examples of outcomes selling: hyperscalers and packaged ‘custom’ solutions

    1. MS

      ... "Oh, like, this general used this to kill these people over here, and it worked really well? Oh, f- okay." Like, and so to me, they're an obvious, clear example. I think the second one that I end up hearing about a lot is whenever you talk to salespeople for the hyperscalers.

    2. DC

      Mm.

    3. MS

      When the hyperscalers are selling other big companies, often non-software companies, it's a completely different conversation.

    4. DC

      It's not like pay-per-API call.

    5. MS

      No, no.

    6. DC

      [laughs]

    7. MS

      No, it's a completely d- And it's all these, like, services they're gonna provide and, like, "Oh, like, you do this thing, and we'll package our little thing here. We'll package our here, and, like, we're gonna develop what to you looks like a nice custom solution, but to us is just picking up pieces." I think Workday tried to do this.

    8. DC

      Yep.

    9. MS

      Right? It's like, "Oh, what is, what's your HR process? Our entire thing's flexible. It can change as you grow, as you da, da, da, da, da." So to me, there are so many examples, and what's frustrating to me is it's too easy to copy the tactics that make people $10 million, but that never make them a billion. And I think that's the thing is, like, the number of founders I've talked to, it's like, "Well, this company made 10 billion, and they raised a series B. If I just do what they do, then we'll win."

  13. 13:58 – 14:47

    How startups actually land seven-figure contracts: keep selling up-market and iterate

    1. DC

      Yeah, you know, I think my advice in Office Hours about this, if I'm just reflecting over the years-

    2. MS

      Mm-hmm

    3. DC

      ... was I would always advise early-stage companies to try to sell up-market.

    4. MS

      Mm-hmm.

    5. DC

      'Cause it usually wouldn't work, but if you try every few months constantly-

    6. MS

      Yeah

    7. DC

      ... every time you get a little bit closer to landing the big customer.

    8. MS

      Yeah.

    9. DC

      And so if I'm just reflecting on companies that I've worked with that ended up closing seven-figure contracts-

    10. MS

      Yeah

    11. DC

      ... it's not that they showed up one day and they just got it-

    12. MS

      [laughs]

    13. DC

      ... the first time they tried. It's that they kept trying to sell a seven-figure contract.

    14. MS

      Yeah.

    15. DC

      They got a no. They understood why.

    16. MS

      Yeah.

    17. DC

      And then they changed something about their product or process, and they tried again.

    18. MS

      Mm-hmm.

    19. DC

      And it's us- usually it'll take, like, a year or two to-

    20. MS

      Yeah

    21. DC

      ... to, to get to that stage, but if they wouldn't have been hitting their head against the wall trying it a bunch of times, there's 0% chance they would've figured it out.

  14. 14:47 – 18:11

    Balancing fast growth with slow sales cycles: run big deals in parallel

    1. MS

      Zero. Well, and you bring up another thing that I think generates so much fear. Dalton, you told me I have to grow 7% week over week, and now you're telling me it's gonna take a year to figure out if I s- close this deal? But [laughs] you're, you're setting me up to fail. I should just sell startups s- software. I should sell-

    2. DC

      Why are you trying to trick me? [laughs]

    3. MS

      Yes. I should sell software to startups.

    4. DC

      Have you guys never ac- Why didn't you tell me this was gonna be so hard?

    5. MS

      [laughs]

    6. DC

      Look, there's a lot of effort that you have to put into things that may not work.

    7. MS

      Yes.

    8. DC

      But you learn.

    9. MS

      Yes.

    10. DC

      And it's kinda just part of the sales cycle, and so you have to do both.

    11. MS

      Yes.

    12. DC

      Hit the growth goal and try to build and sell things that won't be successful the first time.

    13. MS

      That's the game.

    14. DC

      It's just the game.

    15. MS

      And I, the way that I communicate to founders on this point is, in some ways, the sales cycle being slow is a gift because you can operate a lot of these in parallel. "Oh, yeah, that person you talked to, they're gonna take a two-week vacation. D- like..." I think that, like, what founders often get frustrated by is, like, the mental load of keeping a big customer in their head causes them to be afraid of talking to many of them.

    16. DC

      Yep.

    17. MS

      But the reality is the time is in that s- [laughs] you know, if you got two-week gaps between meetings, you could talk- [laughs]

    18. DC

      You got, you could put more on your calendar.

    19. MS

      Yeah. [laughs]

    20. DC

      No, that's a great point. I'll sometimes be like, "Oh, let's pull up your calendar. Let's see what," you know.

    21. MS

      Yeah.

    22. DC

      And sometimes I look at 'em like, "Oh, I don't have any ideas," but sometimes there's a lot of blank spot on the calendar.

    23. MS

      Yeah. Yes, and I think that if I can get founders to think, "Oh, I'm hedging. All these deals aren't gonna work. Let's talk to 10 of them, and we're learning. We can compare notes." Once we're talking to 10 of them, if two of them are assholes, you know what we can do? Stop talking to them. [laughs]

    24. DC

      Yes. [laughs]

    25. MS

      If we're only talking to one and they're assholes, it's like, "Oh, we gotta slug through."

    26. DC

      Yeah.

    27. MS

      And so, um, but what's tricky is, like, if you know this is where you're gonna end up, I, I don't even wanna tell you how to get there. Just don't lie to yourself.

    28. DC

      [laughs]

    29. MS

      You're gonna have to get here at some point. [laughs] And, and don't tell yourself this fake story that, like, "Oh, Stripe just sells software to startups." That's verifiably false. [laughs]

    30. DC

      Again, just go ask ChatGPT who has sales teams and how big the sales teams are.

Episode duration: 18:12

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