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Dalton + MichaelDalton + Michael

Standard Capital Update

In this video, Michael interviews Dalton to get an update on Dalton's Series A fund, Standard Capital, since Standard's first ever application cycle was recently completed. They discuss what Dalton has learned so far, as well as some tips for founders that might be interested in applying to Standard in the future. Applications for the second Standard cycle are now open: https://www.standardcap.com 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 CaldwellguestMichael Seibelhost
Jan 5, 202613mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 0:23

    No valuation negotiation: founders name the price and Standard accepts or passes

    1. DC

      We don't wanna negotiate with people over valuation.

    2. MS

      Yeah.

    3. DC

      And you could talk to any of the nine companies that got in and ask them.

    4. MS

      Yeah.

    5. DC

      We didn't negotiate on valuation. We just gave them what they saw on the app. We never talked about it.

    6. MS

      [laughs]

    7. DC

      Like, it was, it was reading the application. We're like, "Great." Like, there was no discussion.

    8. MS

      That was the deal. [laughs]

    9. DC

      That was the deal. Isn't that awesome?

    10. MS

      It's awesome.

    11. DC

      'Cause, dude, I don't wanna... Dude, I, I don't negotiate valuation with founders. That's no fun.

    12. MS

      [upbeat music]

  2. 0:23 – 1:20

    Why Standard Capital exists: bring YC-style simplicity to the Series A

    1. MS

      All right. This is Dalton + Michael, and today we're gonna get an update from Standard Capital. So you funded a bunch of companies. You know stuff now that you didn't know before.

    2. DC

      Yeah.

    3. MS

      Why don't we just start with, like, remind people what the process was. Like, what, what was the process? What was the innovation for this thing?

    4. DC

      Yeah. I mean, look, the, the idea for Standard was to take what we know worked well from Y Combinator-

    5. MS

      Mm-hmm

    6. DC

      ... and apply it to the next round. And so-

    7. MS

      To Series As.

    8. DC

      Yeah, to Series As.

    9. MS

      Yes.

    10. DC

      Because, look, we... How many companies have you and I funded at YC?

    11. MS

      Oh, a lot. [laughs]

    12. DC

      A thousand, uh, each.

    13. MS

      Yeah. [laughs]

    14. DC

      A lot of companies.

    15. MS

      A lot of companies.

    16. DC

      Part of the job at YC was to help founders raise the A.

    17. MS

      Yes.

    18. DC

      And so I had a pretty good mental model of what they were experiencing.

    19. MS

      Yes.

    20. DC

      And it was funny how-

    21. MS

      And we also raised As ourselves.

    22. DC

      That's... So there was that.

    23. MS

      Yes.

    24. DC

      Um, it was funny how little, uh, overlap there was on the process to get into YC with raising the next round. It was an entirely different skill, and the idea was to make it kinda the same thing.

  3. 1:20 – 1:37

    First cycle results: nine companies funded (with limited public announcement so far)

    1. MS

      So how many companies did y'all end up funding?

    2. DC

      So far, we have funded nine companies.

    3. MS

      Okay.

    4. DC

      And that is not announced anywhere, in fact. Maybe by the time-

    5. MS

      [laughs]

    6. DC

      ... maybe by the time we, uh, release this video, that will be-

    7. MS

      Nice. Breaking news. [laughs]

    8. DC

      So far, two have been announced and are on our website as of the moment we're recording this.

  4. 1:37 – 3:28

    Unexpected demand: strong word-of-mouth drove far more applications than expected

    1. MS

      And then biggest thing you learned, the biggest kind of headline takeaway now that you've run one cycle, either something that's been reconfirmed or something that's new that you didn't expect.

    2. DC

      I think what really surprised, uh, PB and Brian and myself-

    3. MS

      Yes

    4. DC

      ... is the following: How many times have we coached founders on launching?

    5. MS

      Mm-hmm.

    6. DC

      What do we say? We say, "Look, founder, you're gonna have to launch and launch again and launch again, and no one will have heard of your thing."

    7. MS

      Yep.

    8. DC

      "So just, like, keep launching, and it'll take years. And then someday, maybe people will hear of it."

    9. MS

      [laughs] Will know of... know the name of your company.

    10. DC

      Will have heard of it, right? Like, that's-

    11. MS

      Yeah.

    12. DC

      And so this was kind of like my internal thing-

    13. MS

      Yeah

    14. DC

      ... which is, you know, uh, some folks would know about what we're doing-

    15. MS

      Sure

    16. DC

      ... but I didn't-

    17. MS

      Sober expectation.

    18. DC

      Yeah, precisely.

    19. MS

      Yeah.

    20. DC

      And the good news is we were surprised that, um, it seems like everyone heard about it. And we got way more applications than we expected, and I had to go read a lot of applications.

    21. MS

      [laughs]

    22. DC

      I basically... I scheduled a small amount of time to read applications, and I needed about three times as long as I had scheduled.

    23. MS

      You were fucked by applications again, Dalton. [laughs]

    24. DC

      Of course. Dude, I had to work through... You, you understand.

    25. MS

      Just keep on doing this to yourself. [laughs]

    26. DC

      I keep doing this to myself. I'm, I'm happy of doing this. Um, but again, I was, I had a smile on my face as I, as I ruined another family vacation on-

    27. MS

      [laughs]

    28. DC

      So that was great, and then we had to... Not had to. We were, we had the excitement of interviewing lots of companies, way more than we expected. So again, it kinda messed all of our schedules up in a very high-quality way.

    29. MS

      That's cool.

    30. DC

      And what was cool is we were like, "Wow, these are really good companies."

  5. 3:28 – 4:29

    The end-to-end timeline: a two-week decision process with two meetings

    1. MS

      ... you know, [laughs] in the trenches. [laughs] And, um, to your point about kind of the word of mouth got out there, this was just a different process, right? So, like, give me a sense from the deadline-

    2. DC

      Yep

    3. MS

      ... of applying. Give me a bit of a timeline here-

    4. DC

      Sure

    5. MS

      ... from when I knew I was gonna have a Series A, and, like, walk me through that timeline.

    6. DC

      Sure thing. So within, um, let's call it five days, seven days of the application deadline-

    7. MS

      Yeah

    8. DC

      ... everyone that we, uh, did a f- first round of interviews with-

    9. MS

      Yep

    10. DC

      ... we did the first round of interviews. So we're talking about a, about a week after the application deadline.

    11. MS

      So you read the applications and did first interviews within a week.

    12. DC

      Yeah. Or we got the invites out by then.

    13. MS

      Oh, invites.

    14. DC

      Again with invites.

    15. MS

      Invites. Yeah, yeah, yeah. Yes. Great.

    16. DC

      No, but we did them all immediately.

    17. MS

      Great, great, great, great.

    18. DC

      And then the way the Standard process works is there's two meetings.

    19. MS

      Yes.

    20. DC

      So then we had a second meeting-

    21. MS

      Yeah

    22. DC

      ... for the folks that were most promising from the first round.

    23. MS

      Okay.

    24. DC

      And that was in person.

    25. MS

      Okay.

    26. DC

      And so we met at, with everyone in person.

    27. MS

      Great.

    28. DC

      And then we made the final decision two days after that.

    29. MS

      Okay.

  6. 4:29 – 5:07

    Founder time cost: ~4 hours for a yes/no, plus lightweight diligence

    1. DC

      And so the whole shebang was two weeks. The total amount of time that the founders spent was the amount of time they spent on the application-

    2. MS

      Yeah

    3. DC

      ... the first interview-

    4. MS

      Yeah

    5. DC

      ... which is longer than a YC interview.

    6. MS

      Okay.

    7. DC

      Um, it's 20 minutes.

    8. MS

      Oh. [laughs]

    9. DC

      [laughs]

    10. MS

      Danger. [laughs] Clear my calendar.

    11. DC

      Um, and then a second meeting, which was-

    12. MS

      Yeah

    13. DC

      ... in person-

    14. MS

      Okay

    15. DC

      ... and was 30 minutes.

    16. MS

      Okay.

    17. DC

      And so if you just think about how much time does the sp- the, the, the founders spend-

    18. MS

      Well, they had to spend a lot of time backchanneling, right?

    19. DC

      Yeah, true. [laughs]

    20. MS

      [laughs]

    21. DC

      Um, it was time efficient, and we got back to folks fast. And again, it's not everyone... You know, the vast majority of people did not get a yes.

    22. MS

      Of course.

    23. DC

      But in terms of how much time they spent-

    24. MS

      Yeah

    25. DC

      ... that's-

  7. 5:07 – 6:25

    How to apply well: treat the application as a PMF and scale-thinking exercise

    1. MS

      What is a good applica- You, after reading the applications, give me a sense of what you felt like a good application time-wise would've taken to writ- to write.

    2. DC

      A couple hours. I actually asked a couple of founders.

    3. MS

      Yeah.

    4. DC

      There's one where it took a little bit more for her. When I talked to her about it-

    5. MS

      Yeah

    6. DC

      ... she, I think she said three. But I think similar to the YC application, it's kinda smart to fill it out and answer the questions for yourself. There's a lot of questions about how this gets really big-

    7. MS

      Yeah

    8. DC

      ... that I think every founder-

    9. MS

      Yeah

    10. DC

      ... should go fill out. And so it's actually a little different than a YC application in that sense-

    11. MS

      Yeah

    12. DC

      ... 'cause we're asking more product/market fit type questions.

    13. MS

      Okay.

    14. DC

      I would recommend going through the exercise.

    15. MS

      So you're basically telling me in, let's call it a four hours of active time investment in a founder, I get a yes/no on a Series A.

    16. DC

      Yep.

    17. MS

      I'm just thinking about the number of times where you and I spent four hours talking to a found- just our time talking with the founder. Let alone the-

    18. DC

      About the Series A

    19. MS

      ... about the Series A, right? [laughs]

    20. DC

      [laughs]

    21. MS

      Not deck editing, not pitching, not back and forths. That's different.

    22. DC

      Yeah. And again, a lot of these cases, like, we really... We did due diligence.

    23. MS

      Yeah.

    24. DC

      And so that meant people had to send us-

    25. MS

      You guys like to do due diligence. [laughs]

    26. DC

      Well, we were like, "Send us a bunch of stuff."

    27. MS

      Oh, yeah. Yeah.

    28. DC

      And if you-... are properly run, it should not be hard to send us some stuff.

    29. MS

      Yes.

    30. DC

      Does that make sense? And so it's our job to, like, dig through it to do all the diligence.

  8. 6:25 – 7:07

    Advice for cycle two: apply early, apply multiple times, and reuse your prior application

    1. MS

      Yeah. You're gonna have a new application cycle.

    2. DC

      Yep.

    3. MS

      What is an interesting piece of advice you would give future applicants?

    4. DC

      We are setting this up to really reward multiple-time applicants-

    5. MS

      Okay

    6. DC

      ... where once you apply once, if you wanna apply again, just use mostly the same application.

    7. MS

      Yep, yep, yep.

    8. DC

      [laughs] And then just change the things that are different.

    9. MS

      That's very YC similar. [laughs]

    10. DC

      Right, right? And we would actually encourage folks to apply earlier or if they're not even sure.

    11. MS

      Sure.

    12. DC

      Um-

    13. MS

      No penalty for that.

    14. DC

      No penalty for it. In fact, it's good.

    15. MS

      That was a big YC one too, right? Two data points is so easy. Like, oh, what, what, what's changed in the last three months? That was just so much easier to get excited.

    16. DC

      Exactly.

    17. MS

      Yeah.

  9. 7:07 – 9:29

    Founder-set valuation: what worked, what didn’t, and why Standard won’t counter

    1. DC

      So that's, that's one, and then I think number two, we're doing something that no one had ever done before, which is have founders name their own price and state their valuation.

    2. MS

      Yes.

    3. DC

      And some folks had a really easy time with that-

    4. MS

      Mm-hmm

    5. DC

      ... and picked really good valuations, um, relative to their traction.

    6. MS

      Mm-hmm.

    7. DC

      Does that make sense? Like, some folks that had tons of traction picked higher valuations. Some folks with less traction picked lower, and so that's good.

    8. MS

      Yes.

    9. DC

      And those were the people that got in.

    10. MS

      Yeah.

    11. DC

      There were some folks that I think did not do themselves any favors around valuation, and I don't know, maybe they didn't get advice from people or-

    12. MS

      Yeah

    13. DC

      ... and again, just to be super clear, for the record here, we don't wanna negotiate with people over valuation.

    14. MS

      Yeah.

    15. DC

      And you could talk to any of the nine companies that got in and ask them.

    16. MS

      Yeah.

    17. DC

      We didn't negotiate on valuation. We just gave them what they said on the app. We never talked about it.

    18. MS

      [laughs]

    19. DC

      Like, it was, it was reading the application. We're like, "Great." Like, there was no discussion.

    20. MS

      That's the deal. [laughs]

    21. DC

      That was the deal. Isn't that awesome?

    22. MS

      [laughs] It's really cool.

    23. DC

      'Cause, dude, I don't wanna... Dude, I... I know. Negotiate valuation with founders? That's no fun. And so I do think there are some folks, maybe some feedback to have other folks that-

    24. MS

      Hmm

    25. DC

      ... might wanna think about that a little bit, and I, I tried to dig into it when I spoke with them.

    26. MS

      Yeah.

    27. DC

      And I think they would often admit they hadn't thought about it much, and they were just kinda basing it on other rounds that they had heard about.

    28. MS

      It's a cool and different model to kind of ask the founder to make this question versus, like, theoretically the market-

    29. DC

      Yep

    30. MS

      ... in Series A land will make this determination. On the other hand, it's kind of, like, refreshing to be how much money do you want to accomplish what goal you want to accomplish, and how much of your company do you want to sell to do that?

  10. 9:29 – 10:35

    How to think about valuation: higher price means a much higher bar

    1. DC

      I think it's folks were shocked that we'd just reject them instead of negotiate over price.

    2. MS

      So it was just, like, a misunderstanding of what-

    3. DC

      I think so. I think they-

    4. MS

      Yeah, yeah

    5. DC

      ... it's like, cool.

    6. MS

      [laughs]

    7. DC

      No.

    8. MS

      [laughs]

    9. DC

      Because again, we have so many applicants.

    10. MS

      Yeah.

    11. DC

      We're gonna spend our time-

    12. MS

      Yeah

    13. DC

      ... with folks where, again, some folks had higher prices but had crazy traction.

    14. MS

      Yeah.

    15. DC

      So we'd rather spend the time with the fastest growing startups that are growing, you know-

    16. MS

      Yeah

    17. DC

      ... 10X year over year-

    18. MS

      Yeah

    19. DC

      ... on the higher prices.

    20. MS

      Yeah. Wow.

    21. DC

      I think the missing information was like, yeah, we're not, we're not gonna counter. We'll just not.

    22. MS

      It's almost funny 'cause from that perspective, it's kind of like read the manual. Like, we were serious.

    23. DC

      A little bit.

    24. MS

      Like, like, this is... We don't negotiate these deals.

    25. DC

      Yeah. I mean, and you should think about it linearly, which is if someone was to choose a 120 post-

    26. MS

      Yeah

    27. DC

      ... their odds of acceptance, the bar is twice as high as 60 post.

    28. MS

      Yeah.

    29. DC

      It's not, like-

    30. MS

      Yeah

  11. 10:35 – 11:25

    Standard as an opt-out from traditional fundraising: no deck, no VC tour required

    1. MS

      Yeah. That's tricky. It's funny 'cause I think that I remember in YC days some group of people, you know, being like, "Oh, now that we're in, it's time for you to pitch us. Why would you do YC?" And it was kinda like, no, no, no, like, it's completely up to you. If you don't wanna do it, don't... Like, don't do it. [laughs]

    2. DC

      Yeah.

    3. MS

      And it was this, oh, this isn't like normal. Like, we purposely built this to not be like normal fundraising.

    4. DC

      Yes.

    5. MS

      Like, that was-

    6. DC

      This is a way to opt out.

    7. MS

      [laughs] It's-

    8. DC

      This is like a opt out move.

    9. MS

      Yes.

    10. DC

      Which is you could do this or you could do that.

    11. MS

      [laughs] It's not like a mush. It's like it's a different thing.

    12. DC

      Like, this is a different... Yeah.

    13. MS

      [laughs]

    14. DC

      And those are the folks that did... that got in.

    15. MS

      Yeah.

    16. DC

      Again, like, the, the folks that were really successful with our process-

    17. MS

      Yeah. They wanted that

    18. DC

      ... they were like, "We haven't talked to any investors. We haven't built a deck."

    19. MS

      Yeah.

    20. DC

      "We just applied."

    21. MS

      Yeah.

    22. DC

      "And if we get in, we're gonna do it."

    23. MS

      Yeah.

    24. DC

      And that's exactly what happened.

  12. 11:25 – 12:39

    Critique of traditional VC assumptions: ‘we already know all the good companies’

    1. MS

      Yeah. I did talk to a number of VCs who were like, "No, but people, you know, one, this is an important skill, pitching your company with a slide deck." And I'm like-

    2. DC

      [laughs]

    3. MS

      ... interesting. Okay. Sure. Um, I don't know that I'd put that on the top five most important skills- [laughs]

    4. DC

      [laughs]

    5. MS

      ... for building a great company, but fair, great, sure. Or two, this was a really common one. It's like we have complete knowledge of the good companies, and we are already actively scouting, communicating. And, like, we know everyone is good. Which I just remember that was how people felt-

    6. DC

      Yeah

    7. MS

      ... with YC. It's like, well, obviously it's gonna be full of shit companies 'cause we know all the good founders.

    8. DC

      And again, think about the, the ramifications of that.

    9. MS

      [laughs]

    10. DC

      If you actually think you know all the good companies, shut down.

    11. MS

      [laughs]

    12. DC

      Like, shut down your fund, please.

    13. MS

      [laughs]

    14. DC

      'Cause you're admitting it's a zero-sum game with no margin.

    15. MS

      Yes, yes.

    16. DC

      [laughs] Like, if that's your mentality-

    17. MS

      Yeah

    18. DC

      ... leave the industry.

    19. MS

      Yeah, yeah, yeah.

    20. DC

      Because it means you're so, like-

    21. MS

      Yeah

    22. DC

      ... disillusioned-

    23. MS

      Yes

    24. DC

      ... with the work-

    25. MS

      Yes. You're less than commodity dollars and-

    26. DC

      ... you don't love the work.

    27. MS

      Yes, yeah.

    28. DC

      That's a sign-

    29. MS

      Yes

    30. DC

      ... you shouldn't do this anymore.

  13. 12:39 – 13:53

    Next application window: early January deadline, late applications accepted

    1. MS

      That's fair. So, uh, last but not least, when is the next time people can apply? And the question I always got, can I apply late?

    2. DC

      Yep. The next deadline is going to be in early January.

    3. MS

      Okay.

    4. DC

      And so we're gonna open up applications in sort of, like, late December, so lots of time. It'll be kinda quiet, I presume, for a lot of folks in that time of the year.

    5. MS

      Sure.

    6. DC

      So good time to, to work on your a- application there.

    7. MS

      Yeah.

    8. DC

      And then, yes, you can totally apply late. We are... I read all the applications that come in, definitely looking at the late ones.

    9. MS

      Yeah.

    10. DC

      The advantage for us of folks all applying around the deadline is we can just, like, crank through these things super fast and do a ton of interviews in one day.

    11. MS

      Yeah, yeah.

    12. DC

      And it's, it's super efficient.

    13. MS

      Yeah.

    14. DC

      And so that is the, the benefit.

    15. MS

      Yeah.

    16. DC

      But yeah, I've been reading every application as they come in.

    17. MS

      I always love when we got that question at YC. It's like, sure. Like, just, like, you know, like, let's not make this... The number of times we got, like, got the question, "Can I apply late?" And I'm like, there's a thing on there. Just do it.

    18. DC

      [laughs]

    19. MS

      Just do it, or don't do it. Anyways, this sounds like a great update. I look forward to learning what you guys learn after cycle two.

    20. DC

      Sounds good. Thanks, Michael.

    21. MS

      Cheers. [outro music]

Episode duration: 13:55

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