We don't want to negotiate with people of evaluation and you could talk to any of the nine companies that got in and asked them.
Yeah, we didn't negotiate value.
We just gave them what they sell on the app.
We never talked about it.
It was really the application.
Like, there was no discussion.
Because I don't want to do that.
No, don't negotiate evaluation with founders.
This is Dalton plus Michael and today we're going to get an update from standard capital.
So you funded a bunch of companies.
You know stuff now that you didn't know before.
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?
I mean, look, the, the idea for standard was to take what we know worked well from Y Combinator and apply it to the next round.
To series A's because look, we,
How many companies have you and I funded at YC?
Part of the job at YC was to help founders raise the A. And so I had a pretty good mental model of what they were experiencing.
And we also raised A's ourselves.
It's funny how little 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 kind of the same thing.
So how many companies did you own the funding?
So far, we have funded nine companies, and that is not announced anywhere, in fact.
Maybe by the time we release this video, breaking news.
So far, two have been announced and are on our website as of the moment we're recording this.
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.
I think what really surprised PB and Brian and myself is the following.
How many times have we coached founders on launching?
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.
So just like keep launching and it'll take years.
And then someday maybe people will hear.
Know the name of your customer.
And so this was kind of like my internal thing, which is, you know, some folks would know about what we're doing, but I didn't.
And the good news is we were surprised that 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.
Basically, I scheduled them.
Small amount of time to read applications.
I need about three times as long as I had scheduled.
You were fucked by applications again, Dolby.
You just keep on doing this to yourself.
I keep doing this to myself after doing this.
But again, I had a smile on my face as I ruined another family vacation.
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 kind of messed all of our schedules up in a very high quality way.
And what was cool is we were like, wow, these are really good companies.
And what I learned is this had good word of mouth.
Like founders heard about this and we're pretty excited.
You know, it's funny because I remember hearing the story of standard capital and kind of equating it to all the experiences we had and all the conversations we had with VCs who were like, no, our process is great.
Founders love our process.
And just being like, that's not what I'm hearing on the ground, you know, in the trenches.
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 of applying.
Give me a bit of a timeline here for when I knew I was going to have a series A and walk me through that timeline.
So within, let's call it five days, seven days of the application deadline, everyone that we did a first round of interviews with, we did the first round of interviews.
So we're talking about about a week after the application deadline.
So you read the applications and in first interviews then a week.
Yeah, or we got the invites out by the invite.
Yeah, but we did them all immediately.
And then the way the standard process works is there's two meetings.
So then we had a second meeting for the folks that were most promising from the first round.
And so we met with everyone in person.
And then we made the final decision two days after that.
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.
The first interview, which is longer than a YC interview, it's 20 minutes.
And then a second meeting, which was in person and was 30 minutes.
And so if you just think about how much time did the founders spend?
Well, they had to spend a lot of time backshanneling, right?
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, but in terms of how much time they spent.
What is a good application?
After reading applications, give me a sense of what you felt like a good application time wise would have taken a right.
I actually asked a couple of founders.
There's one where it took a little bit more for her when I talked to her about it.
But I think similar to the YC application, it's kind of smart to fill it out and answer the questions for yourself.
There's a lot of questions about how this gets really big.
And I think every founder should go fill out.
And so it's actually a little different than a YC application in that sense.
Cause we're asking more product market fit type questions.
I would recommend going through the exercise.
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. Yep.
I'm just thinking about the number of times where you and I spent four hours talking to each other, just our time talking with the founder.
About the series A. About the series A. Not deck editing, not pitching, not back and forths.
And again, a lot of these cases, like we really, we did do diligence.
And so that meant, you guys like to do trust.
Well, we were like, send us a bunch of stuff.
are properly run, it should not be hard to send us some stuff.
And so it's our job to like dig through it to do all the diligence, but from the founder's perspective, it was like, okay, cool, here are the docs.
You're going to have a new application cycle.
What is an interesting piece of advice you would give future applicants?
We are setting this up to really reward multiple time applicants.
where once you apply once, if you want to apply again, just use mostly the same application.
And then just change the things that are different.
And we would actually encourage folks to apply earlier, if they're not even sure.
That was a big YC one too, right?
Two data points is so easy.
Like, oh, what's changed in the last three months?
That was just so much easier to get excited.
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.
And some folks had a really easy time with that and picked really good valuations relative to their traction.
Like some folks that had tons of traction picked higher valuations, some folks would like traction picked lower.
And those were the people that got in.
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, and again, just to be super clear for the record here, we don't want to negotiate with people over valuation.
And you could talk to any of the nine companies that got in and asked them, we didn't negotiate on valuation.
We just gave them what they sell on the app.
We never talked about it.
It was really the application where like, great.
Like there was no discussion.
Because I don't want to do, I don't know, negotiate valuation with founders.
And so I do think there are some folks, maybe some feedback to have other folks that might want to think about that a little bit.
And I tried to dig into it when I spoke with them.
And I think they would often admit they hadn't thought about it much and they were just kind of basing it on other rounds that they had heard about.
it's a cool and different model to kind of ask the founder to make this question versus like theoretically the market 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?
Yeah, it sounds kind of good.
Yeah, it's pretty straightforward.
But I could see, you know, and we love the mid-wit meme, right?
Well, Dalton, okay, I haven't pitched VCs yet.
And I know that if I had a competitive round that I could raise at this crazy price.
And my competitor, this other company raised at this crazy price.
So shouldn't I be pricing this, the valuation I would need to not consider pitching other investors
Do you have an Excel spreadsheet I can use to fill this out?
You know, I could see kind of a mid-wit way of thinking about that, and like, hey, it's my job as CEO to get the right price for my company, right?
So like, where am I overthinking this?
I think it's folks were shocked that we'd just reject them instead of negotiate over price.
So we're just like a misunderstanding of like... I think they... It's like, cool.
Because again, we have so many applicants, we're going to spend our time with folks where again, some folks had higher prices, but that crazy traction.
So we'd rather spend the time with the fastest growing startups that are growing 10X year over year on the higher prices.
I think the missing information was like, yeah, we're not going to counter, we'll just not.
It's almost funny because from that perspective, it's kind of like read the manual.
Like this is, we don't negotiate these deals.
Yeah, I mean, and you should think about it linearly, which is if someone was to choose a 120 post, their odds of acceptance, the bar is twice as high as 60 post.
It's not like equally likely to get in with the same company.
So if you're growing twice as fast, you're twice as good of a market, blah, blah, blah, blah, sure.
Totally, and there's 120 post companies that are great companies we want to fund them, but man, it's got to look very exciting.
It's funny because 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.
And I was kind of like, no, no, no, like, it's completely up to you.
If you don't want to do it, don't like, don't do it.
And it was just, oh, this isn't like normal.
Like we purposely built this to not be like normal fundraising.
This is a way to opt out.
This is like an opt out move, which is you could do this or you could do that.
It's like it's a different thing.
And those are the folks that did, that got in.
Again, like the folks that were really successful with our process.
They were like, we haven't talked to any investors.
And if we get in, we're going to do it.
And that's exactly what happened.
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, interesting.
I don't know that I put that on the top five most important skills 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, like we know everyone is good, which I just remember that was what people felt with YC.
It's like, well, obviously it's going to be full of shit companies because we know all the good founder.
And again, think about the ramifications of that.
You actually think you know all the good companies
Shut down your fund, please.
Because you're admitting it's a zero-sum game with no margin.
Like if that's your mentality, leave the industry.
Because it means you're so disillusioned with the work.
You're less than commodity dollars.
That's a sign you shouldn't do this anymore.
So last but not least, when is the next time people can apply?
And the question I always got.
The next deadline is going to be in early January.
And so we're going to open up applications and sort of like late December.
I presume for a lot of folks in their time of the year.
So good time to work on your application there.
And then yes, you can totally apply late.
I read all the applications that come in, definitely looking at the late ones.
The advantage for us of folks all applying around the deadline is we can just crank through these things super fast and do a ton of interviews in one day.
And so that is the benefit.
But yeah, I've been reading every application as they come in.
I always love when we got that question to YCU.
The number of times we got the question,
And I apply late and I'm like, there's a thing on there.
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.