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Rex SalisburyRex Salisbury

Startup Ideas Are Boring Now (Ex-YC Partner Dalton Caldwell)

Anyone can vibe-code a clone today, but that won't save your startup. Dalton Caldwell explains why finding genuinely weird ideas is still the only way to win.

Dalton CaldwellguestRex Salisburyhost
Jul 17, 202656mWatch on YouTube

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Transcript

  1. 0:00 – 1:28

    Why Vibe-Coding a Clone Is Not Enough

    1. DC

      With AI, anyone could vibe-code some bullshit. That is not enough. You have to combine that with something inspired, in my opinion, that delivers real value to users.

    2. RS

      Dalton Caldwell spent over a decade at Y Combinator as a partner.

    3. DC

      I remember, you know, sitting in YC interviews 15 years ago. There was a lot more zany stuff than you would see now.

    4. RS

      He has sat in thousands of office hours, and he recently left to start his own Series A venture firm.

    5. DC

      We also are doing 10% dilution rounds, where we, we take 10% ownership. That's what founders want. That's kind of like what the dream request is.

    6. RS

      YC advice on how to build startups has been canon in Silicon Valley ever since Paul Graham started blogging. Today, I'm sitting down with Dalton to discuss the extent to which YC's standard advice still holds up in the age of AI.

    7. DC

      The secret is [beep] [laughs] .

    8. RS

      And here's what he had to say. Hi, I'm Rex Salisbury, founder of Cambrian. Welcome to the channel. Before we dive in, a quick thanks to our presenting sponsor, Plaid. They have now combined their financial data network, which is the largest in the industry, with foundational models. That has unlocked some great new capabilities. The added context behind transactions and the financial behavior powers now better credit decisions, more fraud detection, reliable bank payments, and I think the thing that all of us at FinTech care the most about, which is unlocking more personalized and safer consumer experiences. So with that in mind, thanks, Plaid, and let's dive in. Well, Dalton, it's really great to have you here with us today.

    9. DC

      Yeah, thanks for having me. It's great to be here, Rex.

  2. 1:28 – 3:24

    Is Standard YC Advice Still Relevant?

    1. RS

      Thing I wanna cover is, you know, how standard YC advice is changing or evolving in light of AI. And so why don't you dive in, and maybe you can just tell us how, you know, like is there some 5D chess game going on in the background about how this stuff has changed? Like what, what are your thought overall in terms of how YC advice might change now that just the way technology is being built and companies-

    2. DC

      Yeah

    3. RS

      ... are being built is changing so much?

    4. DC

      So the initial thing I would start with is the secret is there is no secret [laughs] . And so many folks over the years that we would accept to YC would expect that we would have some hidden knowledge, or we would tell them in something in office hours-

    5. RS

      Yeah

    6. DC

      ... that would blow their minds. And, um, part of being indoctrinated into YC culture is to realize there is no secret, and that the goal of office hours is to test your own thinking. And, um, you know, the metaphor I use in a lot of the Dalton and Michael videos is, um, like a coach. You know, they're not teaching you [laughs] . You already know how to throw the baseball. You already know how to run around the bases. Um, and so, so it's more of like helping you hone your craft than-

    7. RS

      Mm

    8. DC

      ... to teach you something that's mind-blowing you've never heard before. And so it also makes me think of the midwit thing, where a lot of folks overthink stuff, and that's the, that's the big trap for most founders is ending up in the middle of the old bell curve, where they're overthinking everything.

    9. RS

      Yeah.

    10. DC

      They're stressing out, versus doing the most, uh, you know, the most simple approaches. So, so to begin with, that's the crux of YC advice. Um, still think it's true, but just like when YC started, uh, the ideas that most people were working on were like web-based versions of desktop software [laughs] .

    11. RS

      Mm-hmm.

    12. DC

      Like pre-cloud. That has obviously changed a lot. Um, there are aspects of the advice you, you probably wanna update because the ideas are changing.

  3. 3:24 – 10:10

    How Do You Find a Unique Startup Idea?

    1. RS

      Yeah.

    2. DC

      You know?

    3. RS

      And, and I think great advice, and same with great writing or great pieces of text, it's like the text and the advice doesn't change, but you can read the same thing in a new environment-

    4. DC

      Totally

    5. RS

      ... and have new insights from that thing. And so I feel like that's where we are. It's like you've gotta go back to some of the basics-

    6. DC

      Yep

    7. RS

      ... and then revisit and understand what they look like today. I, I mean, the place that most founders start with is just picking an idea, and I know you've talked about this on your YouTube channel, you know, with Dalton and Michael. H-how do you think about getting a unique startup idea? Y- this has always been hard. It's always something founders have to do.

    8. DC

      It's always been hard.

    9. RS

      But now there's so much noise out there in the ecosystem with how AI is broadcasting everything, how there's tons of AI-slopping content out there. So like-

    10. DC

      [laughs]

    11. RS

      ... how, how are you seeing people effectively approach finding a good idea?

    12. DC

      Yeah. I think to start with, when YC first came out, there was no content machine about startups [laughs] . Um, and this is part of why Paul Graham's blog took off so much, is there was nothing really like it. Um, I would argue Andreessen Horowitz also kind of grew out of Marc Andreessen's blog. I remember reading it when I was a founder. Do you remember those blog posts? Hilariously, he like took them down.

    13. RS

      Yeah, they're amazing, and just his presence on Twitter as well, uh, later on.

    14. DC

      Yeah. Well, it was pretty days Twitter. I mean, I remember the pmarko blog. It was like blog.pmarko or whatever, you know. Anyway, I think he, he unpublished it. But I remember it was really, really, really good, and, um, as a founder, I knew him more from that blog than, than from anything else, like way before I ever met the guy. And there just wasn't content or writing about startups then, and so the, the demand for this stuff was huge, okay? And so when I think a- about startup ideas that we would come up with back in the 2000s, you know, when I was a founder coming up with startup ideas, it was generally limited to the set of ideas that resembled other stuff that got VC-funded, or stuff that investors or advisors or, you know, people on your college campus would tell you are good startup ideas.

    15. RS

      Mm-hmm.

    16. DC

      Um, or you would just make up some totally zany stuff [laughs] . And so I remember, you know, sitting in YC interviews 15 years ago, and, um, there was a lot more zany stuff then [laughs] , um, than, than you would see now. And part of my theory is there's so much content and people are exposed to startups, um, so often- That there's a smaller aperture of conceivable startup ideas that people start these days.

    17. RS

      Mm.

    18. DC

      And in some ways that's good, because it's bringing up the worst ideas. Like, instead of the, um... I remember there was someone that applied to YC and we interviewed, and their idea was something about they had a truck that would deliver fresh-baked goods to you. Like, they would bake the muffins in the truck so that when they got to your location to deliver it, they would be fresh out of the oven. You know?

    19. RS

      Yeah.

    20. DC

      Like, that was like, "Oh, that's a startup idea. Let's apply to YC with it," right? [laughs] There's less of that.

    21. RS

      [laughs]

    22. DC

      And so the, the bottom of the tail has been brought up. Um, but there's also less outlier, kind of unique, perhaps good ideas if everything fits through the aperture. Um-

    23. RS

      Yeah

    24. DC

      ... you know, I can tell you firsthand, imagine trying to pitch OpenAI to someone the year that they started that thing.

    25. RS

      Yeah.

    26. DC

      [laughs] I mean, you- you were there.

    27. RS

      I mean, OpenAI's definitely weird.

    28. DC

      [laughs]

    29. RS

      It's like a nonprofit and it's research. At the same time-

    30. DC

      It-

  4. 10:10 – 14:03

    Why Must the Best Startup Founders Be Weird?

    1. DC

      I think it's a great point, and I guess to give some context to that, um, one of the things that's cool about the job is you get to know a lot of founders, and you get to get a sense of who succeeds and who doesn't. And you get to recognize just how strange these people are that are running these companies, in a good way. And so I learned to really appreciate unconventional people with unconventional ideas that are very hard to put in a box and perhaps are quirky, or whatever word you want to use for them. Those tend to be the people where every aspect about them is unconventional, [laughs] and-

    2. RS

      Yeah

    3. DC

      ... including the ideas they come up with. And so again, if you look at, if you look at like Mark Andreessen, you know, he's on my board. I know the guy. He's, he's an unconventional guy, and everything he comes up with is unconventional. Uh, Paul Graham, same way. Uh, Elon is the same way. Like I, I talked to him and he just talked at me for two hours about SpaceX, um, before SpaceX existed. He talked... What he said to me when I met him was, "My plan is to die on Mars, hopefully not on impact."

    4. RS

      [laughs]

    5. DC

      And I think he used that line... Yeah, I think he uses that line a lot. It's not like I'm the first person-

    6. RS

      Yeah

    7. DC

      ... to hear it, but it was like, this is a weird guy. [laughs]

    8. RS

      [laughs]

    9. DC

      Like he made a big impression on me. This is like 2008. 'Cause I, how many people do you meet where their opening line is talking about dying on Mars?

    10. RS

      Yeah. Or how many-

    11. DC

      Right?

    12. RS

      ... people do you meet who-

    13. DC

      [laughs]

    14. RS

      ... that is the thing they will talk about with, with anyone they meet? [laughs]

    15. DC

      Yes.

    16. RS

      For two hours at the bank-

    17. DC

      He didn't know who I was. I'm just some guy

    18. RS

      ... they just want to talk about. Yeah.

    19. DC

      He just wanted to tell me about colonizing Mars, and the freaking guy's doing it. And so where I'm going with this is that those type of people tend to come up with unconventional ideas and have unconventional-

    20. RS

      Yeah

    21. DC

      ... you know, returns. But folks that are very career oriented, and they've lived their life- Leveling up, you know, valedictorian of high school. Leveling up, trying to get into an elite college. Leveling up, getting a fancy job at, like, a top place. Leveling up, getting an MBA or something.

    22. RS

      Yeah.

    23. DC

      Those people are very good and they're very smart, but they tend to struggle the most on the ideation stage, um, because everything they've done their whole life is within the aperture. [laughs]

    24. RS

      Yeah.

    25. DC

      And so doing an idea that's outside the aperture is just... It's so far afield-

    26. RS

      You don't get external validation

    27. DC

      ... that they don't even know.

    28. RS

      Especially not in, like-

    29. DC

      No

    30. RS

      ... a quick feedback-

  5. 14:03 – 20:09

    What Makes a Good MVP in the AI Era?

    1. RS

      Yeah. So after picking an idea, the next big phase is to build the thing and launch an MVP. What it takes to build an MVP completely is different now, because the genic coding tools are so good.

    2. DC

      Yeah.

    3. RS

      So what do you think makes sense in terms of the type of MVP someone should build today versus, you know, four or five years ago when it was a lot harder to ship code?

    4. DC

      Yeah. I mean, I can, I can even trace this back into very ancient YC history where when I first started a company, there... It predated Amazon Web Services and the cloud. And so part of being a startup founder was to rent colocation space and buy servers and rack servers. [laughs]

    5. RS

      Mm-hmm.

    6. DC

      And that was just, like, part of being a founder. Like, "Oh, you better go rent your colo and rack your servers." And then Amazon Web Services came out, and I remember the first person to really promote it to me was Paul Graham, and his point was, "Don't waste your time buying servers. They're really expensive. And don't rack them. Just pay per API call, and this will allow startups to move faster." And again, this seems obvious now, but I had never really heard anyone, um, promoting AWS as a toolkit for building startups before.

    7. RS

      Yeah.

    8. DC

      And basically, everyone in the YC batches started doing it. And one of the reasons it worked is it was so much faster to build a product if you used Amazon Web Services, 'cause you-

    9. RS

      Yeah

    10. DC

      ... could just ship stuff to S3 and you're, you're good to go. Um, and so-

    11. RS

      So that was the, kind of, first... The cloud era, which we even forget that was an era for some people now. [laughs]

    12. DC

      It was.

    13. RS

      It was like cloud versus on-prem.

    14. DC

      Well-

    15. RS

      And it's like, okay, build things in the cloud.

    16. DC

      And some of the same criticisms-

    17. RS

      Now everything's in the cloud. We don't even think about it, but you can use these coding tools and they'll just-

    18. DC

      Some of the same criticisms apply then. Um, like, oh, this is just a thin wrapper on AWS. [laughs] Like, like Dropbox was considered a thin wrapper on top of AWS. A lot of the other YC startups were too, where it was like, wait, you're just building, like, this little web front end.

    19. RS

      There, there's some great Hacker News commentary, I think, on Dropbox's launch. [laughs]

    20. DC

      Yeah. [laughs]

    21. RS

      Where they're like, "Isn't this just, like, a wrapper on this open protocol?"

    22. DC

      Yeah.

    23. RS

      On, um-

    24. DC

      And, and so what's cool is the cloud made everyone more productive and made it much easier for just two people in a garage to launch a startup, and that changed the advice, which is to, A, use the tools, and B, make the most out of using those tools to compete and beat legacy competitors that were not able to ship as fast, right?

    25. RS

      Mm-hmm.

    26. DC

      'Cause when the cloud first came out, no one was using it, man. Like, [laughs] it... Most companies iterated on a very, very, very slow pace, and so this was a comparative advantage. Um-

    27. RS

      Yeah

    28. DC

      ... I guess the downside of the cloud is that it wasn't that hard for everyone to build the same product, which is basically, like, a CRUD app. I don't know if you know the acronym, but, like-

    29. RS

      Yep

    30. DC

      ... like a web app [laughs] where you can, like, upload files and download things and have a web view. You know, very basic stuff. Um, I think the downside is everybody could build that, so that was no longer special, okay? Sim- similar thing happened when iPhone apps came out, which is everyone kind of built the same app over and over and over again, and there wasn't as much demand for that. And if you look at the big winners from the iPhone app era, it wasn't necessarily the people that immediately launched obvious iPhone app ideas.

  6. 20:09 – 26:18

    Is Building Too Many Features a Trap?

    1. DC

      Um-

    2. RS

      Yeah. And then what about the co- complexity, just the complexity of product? 'Cause it used to be you wanted to be feature constrained because features were hard. Today, features are cheap. So should you-

    3. DC

      Yeah

    4. RS

      ... go to the extreme? Should you build incredibly highly featured things, or do you still need to practice discipline and boil it down to the simplest possible thing?

    5. DC

      So to put the advice, do things that don't scale, into cultural context, um, it's that when I was a founder in the 2000s, every VC would ask me if my startup scaled, because so much of what they learned from the dot-com era is that websites don't scale very well, and this meant scale in a number of users perspective, like can it get millions of users, as well as literally scaling servers. [laughs] Like a-

    6. RS

      Mm-hmm

    7. DC

      ... like scaling a website to, to be as big as Google is actually very, very, very hard. Um, and so as an engineer, my context was I need to build a very scalable website and make the engineering really, really, really good, um, so that it could get, you know, a billion users. And the crux of the Paul Graham advice, which is so good, it's still so, so true, is that if you spend all your time building scalability, it's gonna distract you from making what people want, and you're gonna end up with, like, a really hard to explain, overengineered piece of junk that no one wants. And so he w- the point of do things that don't scale at the time when he came up with the phrase, in my perspective, again, I can't speak for PG, but it was basically to say, "Don't build any of the scalability crap. Just build the things that are the, the pure essence of what delivers value to users, and you can figure out the scale stuff later." So, like, the impressive-

    8. RS

      Yeah

    9. DC

      ... part of Google is not that they built a really scalable backend. It's that they built something that users really loved, which is a great search engine. Okay?

    10. RS

      Yeah.

    11. DC

      And so to update this advice to the modern age, um, I think it's a given that with vibe-coding tools, you can build a ton of features, and if users are demanding all this stuff out of you, you can build all of it, like no sweat. That's not the problem. The problem is to cut through the noise as a founder and make people care about your product and use it for the first time and be satisfied with it. And a product that has 80 unfinished or half-finished features is not a product that, that people are gonna start using, and you'll never get the shot as a founder to build all the other stuff. Does that make sense? So I think this, I think we can trace this all back to it's very hard to start with a low-quality product that people don't like and add more features to it and make them start liking it, and this is just always-

    12. RS

      Yeah

    13. DC

      ... [laughs] this has always been the case.

    14. RS

      Yeah. I think there are kinda two pieces in that.

    15. DC

      Yeah.

    16. RS

      One is just good UX. You can't have... It can't be too cluttered, or you don't know-

    17. DC

      Correct

    18. RS

      ... what to do. And then there's the thing that's separate from UX, which is just understanding the problem, and it takes a lot of work to make things simple to solve a problem. That means you really understand the problem. Whereas-

    19. DC

      Yeah

    20. RS

      ... if you have this really complex approach, it means you like, you know it's there, but you're just trying to, like, slap stuff on, and that's a different, like a very different way of, I think, identifying problems and solving problems. Uh-

    21. DC

      Yeah. I mean, just to give a couple of examples, I funded PostHog at YC, which is a multi-product company. It is pretty complex, but it started with just product analytics, and it was very simple. And so they took something s- simple, they made something that people wanted, and they just kept adding more and more rings around it-

    22. RS

      Yeah

    23. DC

      ... until it became phenomenally useful. I would argue this is the case of most fintech super apps. I, I know you've invested in many. You have context on them as-

    24. RS

      Yeah

    25. DC

      ... usually you, usually there's a thing that causes them to take off. [laughs] You know, in the case of Robinhood, it was free stock trading, remember? Um-

    26. RS

      Yeah

    27. DC

      ... and then that, that causes- ... everyone to wanna download it and then like-

    28. RS

      It was just a website. Like, it wasn't even live.

    29. DC

      [laughs]

    30. RS

      There was a wait list.

  7. 26:18 – 30:48

    Should Founders Still Build in Public?

    1. DC

      should.

    2. RS

      Yeah. And, and actually, the Robinhood and Coinbase examples are great 'cause they are, they're two very trade stocks for free, buy Bitcoin, and now they're-

    3. DC

      Totally different

    4. RS

      ... they're huge, right? They're both, you know, close to 100 billionaires dollar companies, but it started with that one very simple, um, idea, which is... So I think the MVP is still kind of the, the same. Related to the MVP, um, is this idea from YC, which I love, which is you should launch now, and you should build in public. Um, I think launch now, like you should still launch now.

    5. DC

      Yep.

    6. RS

      I think maybe there, you know, is a more interesting conversation about should you build in public [laughs] when anyone could build anything a lot faster-

    7. DC

      Yeah

    8. RS

      ... than they used to be able to.

    9. DC

      So I have definitely given a fair amount of build in public advice, so happy to talk about it. I think that there are so many startups that most people don't care about any one startup. Like, I think it's easy as a founder that's not done it before to overestimate how much people give a crap about your random startup. [laughs]

    10. RS

      Yeah.

    11. DC

      Even if you raise money, people still don't care about you. Um, and so marketing is hard, and a lot of founders think that the way to do marketing would be to, like, pay a marketing expert to do marketing things. Like, they have, they have a very, like, theoretical notion of marketing, when in fact, talking about what you're building is a form of marketing.

    12. RS

      Mm-hmm.

    13. DC

      Um, and it's a way to build community and awareness. And for a lot of developer tools companies, posting about it on Twitter or Hacker News about the thing you're building is how you get all of your early customers, um, and how you get any awareness, right? And you're totally right. People are afraid about competition, and maybe now it's a, a bigger deal than in the past. Happy to address that. But in general, y- most startups die not because someone copied your idea. It's just because no one ever heard that you existed. [laughs]

    14. RS

      Yeah.

    15. DC

      You're just like, y- it... Yeah. Your customers were not aware you existed, so they didn't even have the chance to [laughs] to say no to it, okay?

    16. RS

      Yeah.

    17. DC

      And so if you just post about the thing you're doing a lot, it is a way to, to create luck for yourself and to create opportunities. Um, in the case of open source companies, you're already giving away the code, so I'm even less worried about you being copied. Um-

    18. RS

      Yeah

    19. DC

      ... for marketplace companies, for things that have network effects, I'm less worried about being copied because hopefully you have more network effects than your competitors. And so I will grant you, there are some types of businesses that are easily clonable that perhaps it would make sense to not talk about, um, a lot.

    20. RS

      Yeah.

    21. DC

      But I think you have this problem anyway, right, man? [laughs]

    22. RS

      Yeah. I, I guess if you look at your portfolio now as a Series A investor, I think you're-

    23. DC

      Yeah

    24. RS

      ... pretty close to, like, 20 or so.

    25. DC

      Yep.

    26. RS

      Are any of those 20 you're like, "Ooh, I kinda wanna... What they're doing should be, like, quiet for a little bit longer"? You're like, "No, like, all of them should be building in public." For me, I think the answer is, now I'm more pre-seed and seed, there's, like, 1 out of 40 where I'm like, "I don't know if I wanna [laughs] talk about it-

    27. DC

      Yeah

    28. RS

      ... just yet," 'cause there's some pretty interesting things that are new. But that means 39, the vast majority-

    29. DC

      Yeah

    30. RS

      ... it's like, go for it, you know?

  8. 30:48 – 36:59

    Can AI Agents Replace Talking to Users?

    1. DC

      Um-

    2. RS

      Yeah. Okay. So we've talked about finding an idea, launching. Next is scaling go-to-market, or at least scaling the initial bits of go-to-market. One of the most important bits of YC advice is, is talk to users. I think in this age of AI, there's this interest question of like, what does that mean? [laughs] 'Cause-

    3. DC

      Yeah

    4. RS

      ... talking to users could be mean spinning up agents and talking to thousands of users agentically. Millions of users. But, but maybe that's also just spam. So like, how do you think about user and engagement today-

    5. DC

      Yeah

    6. RS

      ... when the tools for talking to users are completely different than they used to be?

    7. DC

      I, I would do the same thing where if we looked at history, why did PG have to say talk to users? Why was that counterintuitive when he first wrote the blog post about that? It's because, and God knows I was guilty of it, most founders were building websites with viral invitation flows, or were doing SEO-

    8. RS

      Mm-hmm

    9. DC

      ... or were doing, uh, ad buys. And so the easy way to launch a startup is to make a website, go buy some Google ads, see if anyone converts, and then try to make a viral signup flow. You still with me?

    10. RS

      Yeah.

    11. DC

      And that's what... That's the kind of startup everyone was building in the 2000s when PG did this talk to users thing. And the reason it was so counterintuitive is it seemed silly and unscalable to talk to users one at a time if you're trying to build a website with 100 million users.

    12. RS

      Yeah.

    13. DC

      Like, it's, like, absurd. That's like saying-

    14. RS

      So, so maybe you would push back and say, actually, Rex-

    15. DC

      [laughs]

    16. RS

      ... this isn't, this isn't different. It used to be you could buy users with ad dollars.

    17. DC

      You could.

    18. RS

      Now you can-

    19. DC

      And, and, and build viral flows

    20. RS

      ... you could still buy them with ad dollars.

    21. DC

      Yeah.

    22. RS

      Um.

    23. DC

      And so where I'm going with this is, like, his advice would be like, dig, dig a hole with a spoon, where you're like, "Wait, PG, that's, that's stupid. Why would I dig a hole with a spoon? There's an excavator. I can just, like, back up the truck and dig a hole really fast." And his point was, if you don't take the time to sit down and talk to people, there's all this nuance and context that you don't get from sitting down with a user and just, like, explaining what you're doing and hearing what they're doing and, you know, reading their body language and... There's just, like, all this context that you don't get if you're just staring at a web analytics dashboard.

    24. RS

      Mm-hmm.

    25. DC

      And so I think the reason this is so important now, if not more important than ever, is it's even easier to hide behind the keyboard and, yeah, buy a bunch of ads and do some viral stuff and pay influencers on X to tweet about your startup. Just kidding. Um-

    26. RS

      Yeah.

    27. DC

      [laughs] There's a lot of that going on.

    28. RS

      [laughs]

    29. DC

      And, and get a bunch of signups. Um, and to miss all this nuance, uh, from talking to people, and that counterintuitively sitting down and talking to 20 or 30 people is gonna give you more information about if you're on the right track or not, than signing up 10,000 randos from Google Ads.

    30. RS

      Yeah.

  9. 36:59 – 44:14

    Why Is Fundraising a Pure Status Game?

    1. DC

      Yep.

    2. RS

      What do you think is different about how you raise in today's market? And some people are like, maybe you don't need to raise 'cause things are growing.

    3. DC

      Yeah.

    4. RS

      But, but in today's market, oftentimes you might see a competitor who raises a ton of money. I think that's the other interesting thing is like, okay, if you can scale without raising, awesome, but then what do you do when you see a competitor raise a ton of money? Um, I think it's also an interesting time for you to talk about what you're doing at Standard Capital, 'cause you are that next step for doing the Series A.

    5. DC

      Yeah.

    6. RS

      And you have a different approach in both how you underwrite, but also the amount of ownership you take doing it. So anyways, you know, building-

    7. DC

      Yeah

    8. RS

      ... launching. Series A is usually where you're past the handful of initial customers. You're starting to get some degree of scale on the go-to-market. Like, what do you think that founders should be thinking about when they're, they're raising now?

    9. DC

      Look, I've seen a lot of market cycles [laughs] uh, on the upswing and downswing, and I have seen, um... I raised a lot of money as a founder, for better or worse. Um, I think I made it to Series G, uh, in my first startup, and so have lots of context there. Um, I think to start with, fundraising has unfortunately become the ultimate status game, uh, by the types of folks that we mentioned earlier. Um, they want to be the aperture of what's legible to other people, and bragging about how much money you raised, bragging about what valuation you raised at, and bragging about who you raised it from is extremely legible, right? Like, that's something-

    10. RS

      Yeah

    11. DC

      ... you can put on your LinkedIn. [laughs] You know, that's something that you can explain to your parents, uh, you can show to the folks back home to argue that you're doing really well and you're really successful and you're not wasting your life working on a startup. And so for whatever reason, um, this is the part of being a founder that really attracts certain people. Like, they, this is the part they love the most of being a founder is the fundraising part. They love hanging out with, with VCs. They love the game. You know, this, some people just, like, eat this stuff up, and they, and they really enjoy it. Um, some folks really don't like it, and they think the whole thing is a little bit, it's, like, awkward, I guess, in the same way that I guess dating can be awkward or interviewing for jobs can be awkward 'cause you're in this social dynamic where there's all these rules about how you're supposed to be, and if you break any of the, uh, unspoken rules, then you're, [laughs] then you're, you're rejected. Um, and look, YC has always catered to the latter category [laughs] because if you were good at the first one, you would never do YC. Does that make sense? Like, you're s- [laughs] you're like, you're not even in the, in, in the, in the game, okay? And so, you know, the idea of YC was to take the pain out of fundraising and to take... help people that have no idea how to pitch it, they have no idea how to meet investors, and to just kind of put the whole thing on rails. You still with me?

    12. RS

      Yep.

    13. DC

      And usually what happens in a market is that if your company is hot or you are well-networked, fundraising is-

    14. RS

      And YC has done a great job of that 'cause the number one criticism-

    15. DC

      Totally

    16. RS

      ... you hear from VCs is, "Ugh," it's like, "it's way too expensive," and other stuff, which is basically a way of saying-

    17. DC

      I know

    18. RS

      ... that YC has done a good job of putting your fundraising-

    19. DC

      That is correct

    20. RS

      ... process on rails.

    21. DC

      100%. It works.

    22. RS

      Yeah.

    23. DC

      The system works. Um, [laughs] yeah. And, and weirdly, that's great marketing for YC. I don't know if people realize that, but investors complain about-

    24. RS

      [laughs] I know. They're like, "Thank you."

    25. DC

      ... YC valuations.

    26. RS

      You're like, "That's, that's the product."

    27. DC

      It's, it's amazing. We love it. Yeah, we always loved that type of complaint because it's the best marketing. You know, money can't buy that kind of marketing. Um-

    28. RS

      Yeah

    29. DC

      ... so if I were raising money at the pre-seed, at the very earliest stages, um, I think less is better, um, because it forces you to have constraints. And as per my earlier points about building an MVP, um, we w- there's a very common anti-pattern where you take almost like a pre-idea company and you give them 5 million bucks, and they will invent ways to spend the money [laughs] which are not actually conducive to building an MVP, right?

    30. RS

      Mm-hmm.

  10. 44:14 – 49:08

    Why Is Caldwell Taking Zero Board Seats?

    1. RS

      know-

    2. DC

      Yeah

    3. RS

      ... lower dilution-

    4. DC

      But what they have in common-

    5. RS

      ... big chunk of capital

    6. DC

      ... is they're staying in that dilution band.

    7. RS

      Yeah.

    8. DC

      What you don't see is people raising 20 on 40.

    9. RS

      Yeah.

    10. DC

      [laughs] Like, I wouldn't recommend that. I think that's a bad idea, you know. Yeah, lots of downsides there. And so that's generally the, the dilution band. Um, in terms of what we're doing with Standard, um, the key thing we're trying to offer founders is a very fast process that is exactly modeled on the YC process, which I worked on for all those years, in that it's an application process. You don't need to do a warm intro, you don't need to network with us, you just apply on our website. Um, you specify your price, very similar to YC. When you're fundraising at demo day at YC, the founder states their cap, and then investors say yes or no. Very clean process. We are doing the same thing. So founders put in their valuation as part of the Standard application, just to make it very clear, um, for both parties what we're talking about. Um-

    11. RS

      Yeah

    12. DC

      ... m- much less painful. Um, we also are doing 10% dilution rounds, where we, we take 10% ownership. Um, works for our business, and again, I know that's what founders want. That's kind of like what the, the dream request is from what a founder would want from a lead investor, is 10%, and so we're doing that. And then we're also doing-

    13. RS

      Yeah

    14. DC

      ... [clears throat] instead of taking a board seat-

    15. RS

      As a pre-seed and seed investor, I, I'm very happy with the 10%-

    16. DC

      Yeah. [laughs]

    17. RS

      ... dilution Series A as well. [laughs]

    18. DC

      Yeah. Um-

    19. RS

      Less dilution for me.

    20. DC

      Yeah. Well, think about it. When, when YC started, uh, the average seed investor was taking 20 or 25%, and YC took way less, and somehow it still worked, shockingly. Just kidding. Of course it worked. But, uh, effectively, smart founders, um, tend to choose less dilutive options when, when, [laughs] when given the option-

    21. RS

      Yeah

    22. DC

      ... just like I would do, uh, when I was a founder. Um, and we're not taking a board seat. Instead, we're creating these peer groups based on group office hours, which is something we did at YC. My co-founder, Paul, uh, invented group office hours. And the, the thesis here is that founders are more likely to learn from peers doing the same thing that they respect than, um, a professional investor whose job it is to, is to just, like-

    23. RS

      Yeah

    24. DC

      ... talk at board meetings. Um, [laughs] you know. Um, and again, this was something that YC did a very good job of. It used to be entirely normal for seed investors to take a board seat, and Paul Graham did not do so, and he was widely criticized by other investors at the time. "Oh, how are you gonna control the company? How are you gonna force them to sell? How are you gonna replace the CEO?" Like, there was all these, like, reasons that was seen as bad, and obviously PG was correct, completely, which is all those, all those protections are, um, unnecessary if you fund the right people, and founders don't like those things. And so, [laughs] um, we're creating this, like, community of-

    25. RS

      Yeah

    26. DC

      ... of Series A founders, and then once a year we're reshuffling which group the companies are in based on traction, so that after several years, the highest traction companies will be combined with the highest traction companies. Okay?

    27. RS

      Yeah.

    28. DC

      And so to go back to how does this fit into the advice I would give as a YC partner, I'd be like, "Okay, fast process, including if you get a no, you get it really fast." Oh, check. Um, "10% lead, you name your own terms." Uh, check. [laughs] Um, you know, "Published docs, clean term sheets, no gotchas." Okay, check. And then, oh, no board seat, so the founders ma- maintain control of the company, and then you're in this, like, group office hours with other companies. I'd be like, "Check."

    29. RS

      Yeah.

    30. DC

      And so as a, as a startup advisor, I would say, "This sounds great." [laughs] Like, you know, you, you should give it a shot, right?

  11. 49:08 – 51:34

    What Is the Secret to a Huge Acquisition?

    1. RS

      Yeah.

    2. DC

      Yeah.

    3. RS

      Yeah. All right, cool. So we talked about the raise process. Another point, and w- the terminal point, although not for all companies, is, like, how you think about selling your company.

    4. DC

      Yeah.

    5. RS

      Um, how do you advise founders, if they're deciding to take that route, what it looks like to walk through that process?

    6. DC

      Yeah, so-

    7. RS

      I can't imagine AI's changed very much here.

    8. DC

      No. Um-

    9. RS

      Even though may- maybe...

    10. DC

      I think it's very similar to fundraising, where the most high leverage thing you can do is to make your startup work better, and then that fixes all problems. So the best way to sell your company is to grow so fast that you're destroying your competitors, which will cause them to want to buy you, and the worst way to sell your company is to spend all of your time networking with corp dev people. You know?

    11. RS

      Mm.

    12. DC

      Like, that's, that's not gonna make them wanna, wanna buy it. I mean, I think about something like YouTube. Why did Google buy YouTube? Because it was beating the crap out of Google Video.

    13. RS

      Yeah.

    14. DC

      Remember? [chuckles] Like, it was... YouTube was just, like, hockey stick growing. Um, the-- Why did Facebook buy Instagram? You know, because they were, like, friends or something? I, I don't think so, man. Like, I don't think [chuckles] I think it's because-

    15. RS

      I don't think [laughs] Zuck buys things.

    16. DC

      [chuckles] I think it was because it was a frightening threat to Facebook, and he, he, he was exactly right. He was right to take that threat out.

    17. RS

      Mm-hmm.

    18. DC

      And so my, my advice to founders, uh, for if you wanna get bought for a lot of money, is to be so frighteningly successful that people are desperate and are willing to give up huge amounts of money to, to acquire your company. Um, and if you're doing that, you probably don't wanna sell either, by the way, right? This is why Facebook never sold, [chuckles] is that Zuck believed in what he was doing and didn't wanna sell. There was lots of options to sell the company. Um, but that's basically how you realize large outcomes, is to not need to be acquired. [chuckles]

    19. RS

      Yeah.

    20. DC

      Um, that's the counterintuitive part. Um, yeah, I'll pause there. But that's the, that's the large acquisition advice, is be so successful [chuckles] that you don't need to be acquired, and then you will-

    21. RS

      Yeah

    22. DC

      ... people will try to acquire you.

  12. 51:34 – 53:53

    Do Startups Still Need to Hire Engineers?

    1. RS

      Yeah. You know, I realize we skipped to step two, which is we talked a lot about-

    2. DC

      Yeah

    3. RS

      ... building the company and the product, but we didn't talk about growing the team.

    4. DC

      Yeah.

    5. RS

      I'm curious what you're seeing about how folks are growing teams now that you could arguably outsource a lot of this to, to agents. You might not need as much headcount to reach as large-

    6. DC

      Yeah

    7. RS

      ... uh, of outcomes.

    8. DC

      So much of this has been said elsewhere, so perhaps this isn't groundbreaking advice, but look, the fact that Anthropic keeps hiring engineers means there's still, uh, incremental value in hiring engineers. [chuckles]

    9. RS

      Yeah.

    10. DC

      Like, we'll know, we'll know that we should revisit that claim when the labs start, stop hiring engineers, okay? And so the way I think about it is, is there incremental value from a hire that you wouldn't be able to get, um, from, from not hiring someone? So whether this is sales, whether this is marketing, whether this is growth, whether this is engineering, I still think there's huge value in, um, hiring. People are still doing it. Maybe the nuance here is it seems like a lot of middle management is going away or being repurposed into other tasks. Um-

    11. RS

      Yeah

    12. DC

      ... specifically, a lot of what a middle manager's job would be is to keep track of what everyone on their team is doing and synthesize it into reports for senior management. And I know folks at, you know, that work at big tech companies, and they don't need that anymore. [chuckles] You know, they can basically use-

    13. RS

      Yeah

    14. DC

      ... AI to see what all the ICs are doing and to interact with the ICs. And so it, it does sort of seem like middle management is not as much of a thing. Right?

    15. RS

      Yeah, and I think this is definitely true. I interviewed the chief product officer at Ramp, but it's also something you can just I think intuit. It... Management used to be how context was shared 'cause context was messy and text. And if you have the right information-

    16. DC

      Yeah

    17. RS

      ... architecture, you can get context as an executive, and a lot of the job to be done of middle management is attenuated as a result.

    18. DC

      Right. So that seems, again, I, I know what I'm saying is not earth-shattering, but I think that's the case. But look, man, everyone's hiring, so I do think it's a little bit-

    19. RS

      Yeah

    20. DC

      ... overspoken, or it's oversold. "Oh, you don't need to hire employees anymore." I just, I don't see any evidence, um, of that. [chuckles] Um, of the, the smartest people in the world are still hiring people, so yeah.

  13. 53:53 – 56:00

    Are Founders Burning Out on AI Psychosis?

    1. RS

      Yep. Yeah. Um, also, I think last bit of YC advice on the, uh, podcast of essential YC advice is get sleep and exercise. Should people still be sleeping if their-

    2. DC

      [laughs]

    3. RS

      ... uh, agents can't code while they sleep?

    4. DC

      Yeah. I mean, look, I know that's a little facetious, but let me, let me address that head on. Um, look, man, a lot of what actually kills startups in practice is the founders give up hope, and they burn out, okay? And it is so easy to get burned out as a startup founder, um, and it's probably a bigger problem now than ever, which is if you're using these tools, it's so exciting. What do they call it? AI psychosis?

    5. RS

      Mm-hmm.

    6. DC

      You can just end up not sleeping because you're so excited and having so much fun talking to Claude, you know, and feel like you're, you're revolutionizing the world, that you can end up in pretty bad shape. And so the reason this was such a key part of YC advice is we saw the ramifications of what would happen to founders that don't sleep and don't take care of themselves and don't exercise. And so we always baked this into this. At the start of every batch, we would give a talk about how important it was to sleep and exercise, and I would just reinforce the point as much as possible. And obviously, I still stand by that. Like, I worry, um, that a lot of folks are getting even more burned out because of how fun it is to vibe-code, you know?

    7. RS

      Yeah. Yeah, the downside of being, uh, incredibly excited is you're staying up late. You don't even realize how tired you've gotten.

    8. DC

      Right?

    9. RS

      And productivity, creativity, uh, takes a hit.

    10. DC

      Well, and you feel like the window's closing. Like, "This is my moment to, to do XYZ. The market's moving so fast." And so, yeah, I, I'm not... It seems like a lot of people aren't taking care of themselves that well right now, and I don't think that's-

    11. RS

      Yeah

    12. DC

      ... I don't think that's good.

    13. RS

      Yeah. Awesome. Well, Dalton, thanks so much for coming on. Really appreciate the conversation.

    14. DC

      Cool. Thanks, Rex. Thanks for having me. [chuckles]

    15. RS

      And I look forward to following the, um, your guys' channel. Dalton, Michael, you guys have some great content out there, so we'll throw a link to that in the show notes as well, as well as a link to Standard Capital, 'cause I love what you guys have built, and wish you the best of luck.

    16. DC

      Thanks. Appreciate it. Thanks, Rex.

Episode duration: 56:00

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