# Dalton & Michael: The truth about Y Combinator

**Author:** Dalton Caldwell, Michael Seibel
**Type:** Video
**URL:** https://www.ycombinator.com/library/IU-dalton-michael-the-truth-about-y-combinator
**YouTube ID:** DOez-RwJ7mg

---

With the YC S22 batch coming to a close, Dalton Caldwell and Michael Seibel reflect on the recent batch and their
experience fundraising. The two group partners also clear up some misconceptions about Y Combinator based on feedback
from founders.

## Transcript

I love I love the like well I've watched all your videos so we kind of get YC it's like guys these videos aren't YC like yes [Music] so this is Michael cybo with Dalton Caldwell and today we just finished up um a YC batch and we're getting a ton of feedback we thought it'd be great to talk to you all about that let's be critical for a second I would argue this is something that YC does poorly that

they that they very clearly pointed out they were like when we applied to YC we really didn't know what we were applying for one founder said to me we just thought it was a three-month program we had no idea that you follow on investing companies later that you have programs for helping me raise a series a or for helping me as I'm scaling we had no idea um another founder said to me we didn't even understand how YC was organized we thought it was just going to be some big online lecture like we

didn't know we would be assigned a group partner we didn't know we'd be put into groups and sections we get to meet with small groups of companies that are like in our area and like they didn't know any of this stuff and you know that's kind of a knock on us I think sometimes we assume people know but a lot of these Founders were like well I applied to YC because I talk to alums they really liked it and then when I got here I was like oh [ __ ] like this is way more stuff than I am yeah uh you know one founder

was like dude we didn't even know that you helped us hire and then today there was a meeting about the like YC hiring platform and we were like oh we didn't know we we did we spend seven seven percent we had no idea what we're getting it for I don't know why do you think we suck at that though Dalton like it's pretty obvious we're bad at it there's just a lot of moving parts and so people know about the batch because they they hurt you know oh it's

a three-month program oh you moved to the Bay Area and you spend time and even then there's confusion it's like yeah I know like you get to know us in person sometimes we're like surprised that it's really you and me that you meet they think we're like paid actors or something how many acceptables do you do where they're like so am I gonna get to work with like you yeah I'm calling you the universe what's the front guys the

real the real so I know it's really us and and so I think they know about the program I think they may have heard something about demo day but it's always way more impressive than they expect and then they have no idea that we keep talking to the companies for a while and there's all this other crazy stuff we do to give people an edge um a lot of which we kind of don't slash can't talk about and so I think that's part of the reason we don't Market it as well is a bunch of the stuff we do is meant to be secret I don't know how you Market that

and there's just a lot of data that we keep secret unless you're NYC and that is like gonna stay that way a lot of secret data you know the other thing that's that that makes it hard I've started to realize this it's too easy to think of YC as a university and when I think back you know I'm sure Yale has changed a couple ways in the last 20 years since I went but it's not changed that much right I'm sure Stanford's changed some

ways since you went but it's not changed that much and I think that when we think about a university we're preconditioned to think it's probably 99 the same year over year yeah and I think what people don't think about why C is a is as a product right if you were to look at Instagram day one and look at Instagram now it's completely different and you would expect that you would expect the product to change all the time and I think people's misconception is why I see as a university or a school yeah it's not why

she's a product I think you nailed it we talked to people about this I think they think we have some lessons we're going to teach you or something or like I love I love the like well I've watched all your videos so we kind of get YC it's like guys these videos aren't YC like yes anyway so it's not like a school where we're like here's our syllabus we're going to read you here's our lecture here's lecture four how to read these books that ain't it it's more like you're you're in the club and you get

access to the resources and if you are ambitious and you are smart the sky is the limit if you actually work with people that um know what they're doing there's doors if that opens and the bigger your ambition is the more doors are gonna open you know this is why it's a little dangerous this is a dangerous thing I'll say you know we've been accused of being a mafia and we're not a mafia right we don't break anyone's legs or anything like that

um but it's not completely false right like like if you're like made in the mafia you do get privileges that normal people don't right and and like when you get to go through YC you get access like you said to resources that other people don't right and so there and and there's a little slightly different way it's a little bit like the mafia people don't [ __ ] on you as hard

you know like when you're in the mafia like someone's not gonna rob you right like when your YC VCS don't rip you off like and so I'm not saying it's a mafia right I'm saying it's not enough we just have these very clear similarities to what I've seen on Mafia TV oh God anyways so um this kind of this part of the feedback

that we got from Founders it had it had two elements one was we didn't really understand the benefits that YC had when we were applying um it also had this um aspect of there were some really serious misconceptions that we had about YC that didn't get cleared up until we got in you know one was this misconception around like are we actually going to get to work with you personally like is there actual structure of this thing where we feel like we're getting really personalized support but but what are

some of the other misconceptions that you saw that were you know obviously I mean I would argue like obviously designed to try to convince people to not do I see like these these were like designed attacks on YC what else are you seeing out there trying to trying to encourage Founders to think that investors are what makes your company great and that you could get product ideas and product Market fit based on who you let on your cap table so you're like if I get this investor they'll Judiciary and this

investor does this for me and so well YC will do this for me and it's like guys like the way you build a company is not you're not baking a cake where you where you sprinkle in three different investors and then a cake pops out like that's like the stupidest thing I've ever heard this is a really common misconception out there which is like I hate to bring it to you you're doing all the work all the work we're not the reason the reason to do YC is not that we're going to do the work for you it's that it's a great environment to do this with other peers

and Founders and get access to these resources while you're the one baking the cake and the amount of resources you get in this network way trumps the resources you get from some random small check like yeah similar size check right like so I think that's one I think another big uh misconception was um just folks a lot of folks that apparently have the strongest opinions of telling people about YC never actually were in a batch

I don't know where that comes from so just be just like be curious because you know it's you don't like I I just found her in my group this badge and he was like well yeah everyone that was NYC was like you should definitely do YC and the people not NYC were like oh it's not worth it and he's like in retrospect he's like now that I think about it never you 'd product had opinions about it and everyone who did use my product had different opinions and I weighed

them equally yeah you know the last one for me is this crazy misconception about how far along you have to be it and and like what pains me about this misconception is that it can be destroyed through basic research it's like look at the companies who've done YC you've been successful and look at how far along they were when they applied yet over and over again people will tell Founders like oh unless you have this much revenue or unless

you're live unless you've been doing something for this period of time or like YC's for scaling but it's not for starting it's like garbage like literally 40 of the last batch came in with just an idea most of them were working when they applied we're at work working jobs when they applied it's true and again let me just say the brutal truth this is the brutal truth some company that their idea to start was to First

raise a pre-seed round and sell 30 to some random investor have some co-founder who lasted a year and then they had to fire them and now they have a bunch of equity who's gone through three pivots and burned half a million dollars and applies to YC Michael would you rather fund that or the brand new company that started a month ago they just quit their jobs the craft table is completely clean and the and the founders were just like totally jazzed and ready to start a company like who do you think is more likely to succeed uh yeah you know you

know I think if you look at the last batch it's very clear what our preferences lie yeah people that their idea that you've you know go to I go to YC once you're ready to scale or once you've done all the stuff and after that you know exactly wrong dude how many companies we funded the past few batches that they have to change their idea which is fine it's good to change writing we like it but they've already raised and they already have all this hair on the company and they think they're really

far along how much harder is it to change your idea once you have a bunch of hair on the company because you thought you were ready to scale so hard so hard I I think that like you know it's so funny but in my mind it's so clear you do YC because you want an amazing peer group you do YC because you want to not be screwed over by investors you do YC because you want honest feedback

and you want to take responsibility for the win or loss of your company and you do I see because so many other great companies did YC and extracted value out of it that you should be confident that if you're a great founder you can extract value out of it as well it's that simple and and like so many people that convince Founders the YC's bad they can't explain why taking their money or doing their program or doing their thing is

better all they can do is like neg YC and like if you ever see someone making an argument that's 100 ripping something else down and zero percent explaining why their thing is good if all of your talking points is the alternative is bad [Laughter] uh you know all you're selling is is all you have to sell and like maybe that's your business

model is selling fear um not the kind of investor I'd want on my cap table and then what's a reality like inside of YC if you're a YC company if a batch if you're getting the advice from us to prepare for demo day how'd it go Michael like like what did we notice you know first evaluations I think everyone was nervous that valuations this summer would come way down wasn't it like hashtag VC summer vacation or some [ __ ] like that was

going on where no one was around prices are almost exactly the same as they were during the last batch when it was like VC heaven on Earth and money was flowing like like crazy we saw 15 to 25 some companies raised at 30. almost no change from the last batch didn't see any change on speed you know we saw investors going from meeting to Commitment within one to two meetings didn't see any difference on terms like

you know investors weren't demanding board seats or weird craziness uh I don't know what do you see all similar stuff and I think this is like an evergreen lesson for everybody why see alums or people not NYC is it's too easy to take an anecdote that you heard from people or stuff people are saying in the group chat and think it applies to you like one of the classic mistakes we see from later stage YC companies is they base how easy or

hard they think their fundrais will be based on TechCrunch articles they read of other people raising they're like hey so-and-so just raised so I'm gonna be able to raise the same valuation and think about how much time you and I have to talk people off the ledge on how like some random company in Europe raising for like some AI whatever doesn't magically mean their fundraising to be easy right like you're it's like bad data like garbage and garbage out okay so again the advice for folks is

your mileage may vary I'm sure there are people out there having a harder time fundraise I apologize to you right I'm not saying my experiences the experiences YC companies have the same as yours but this is sort of the meta point I'm making which is too many folks think fundraising is a market like the stock market and if there's like graphs in church you can have and it all operates like an efficient market instead of what it actually is which is like 10 different things right Michael like the YC funding ecosystem is like its own little universe

own thing right it operates separately than this other stuff a lot of what people don't understand is the power of running an auction right like they just like it's so rare that you really get to run an auction you know most Founders early stage Founders are not running an auction they're begging for money like let's be frank we Dalton you and I were there right like we were we were begging for money like when you're in an auction you get to do things like name your own price

like why sea companies say to investors were raising this much money at this price are you in are you not in right like that's that's that's a foreign language to people who've like most people have raised around oh we need to lead to prices completely different for YC companies I think the other thing that happens when you're running an auction that people understand is you get inbound offers like a typical company in this batch got between 10 and I've seen 60 or 70.

investors cold emailing them wanting to learn about investing in their company I got Founders messaging me on slack Michael what's going on and I'm like oh yeah no this is just how this is what nobody told you this is what happened at YC they're like no and I'm like oh yeah this is yeah investors cold email you you don't cold email investors and they're like mind blown mind blown so I think that's what's so funny is that we talked to so many Founders who had

such a different experience fundraising often from the same funds before doing YC than after doing YC and and let's dig into that like I think you have like this great analogy around this kind of early stage investing environment like try to kind of frame what's going on here yeah my first company uh was in the music industry for better or worse and so I I learned a lot about in the eight years I worked on it I learned a lot about how the music industry works and how Hollywood Works in general and I started to see a lot of parallels

um between those Industries and Silicon Valley again kind of depressingly if I'm honest with you and it's the following a lot of the folks who are most approachable when you're a first timer or when you're just moving to the area or you're trying to break into the industry the friendly people that want to talk to you are often the most exploitative and they're the people whose business model is just just like squeeze you and like pull you up the

funnel to someone else and that and the folks that you feel like they're doing you a favor while doing yeah right they're like they're Gatekeepers but they're really friendly and you don't know you're like oh you're a talent scout oh you you like you know you like the way my demo you came to my show like whatever it is like there's folks who really aggressively um sell themselves to newcomers and part of the pitch is oh I'm really important I know all these important people I can open doors for you um you know here's some other people that I know I can introduce you to them

like there's all these like kind of promises and sadly the story with a lot of folks you know in the entertainment business is um you learn the hard way that those you you want to not talk to those people or you want to understand there's you want to make it to the to the big leagues and get again if we're talking about agents or something to the extent you can get a really good well-known agent that's like a large agency like CAA or something all right well then you made it like it's like a

key step to go from like anyway we I don't want to get too deep in the Hollywood stuff but there's commonalities across these industries and the thing I noticed in Silicon Valley in my startup experience was a lot of the characters that came out of the woodwork and that they were most successful to me is a first-time founder in retrospect we're not great no like hey give me advisor shares to introduce you to someone hey paid a pitch we have a pitch competition come in hey you know like

all these angles that weren't great and what's weird is a lot of the people you know were like medium famous and had like some social media clout like you like they did enough to seem successful or drive fancy cars or seem Rich that you would think they did actually know people I mean you had this too with like fake advisors right like yes yes God I had a fake advisor who literally took two percent of our company to

help us fail at raising around that was rescued by our existing inside investors two percent and exactly the same thing right like oh really nice so I'm helping you out oh it didn't work out but like you sign this thing or what about my consideration I shouldn't even sign anything it didn't matter and so I think this is like what's interesting is when talking to YC Founders they have so many of these horror stories of these kinds of

experiences fundraising before YC and then they're shocked when like an investor is like sure I'll sign a safe don't need Pro rata rights I don't need a board seed I don't need a board Observer seat no I'm fine you know like and the founders are like what do you mean and it's like and I think that it'd be helpful for us to talk about some of those specific horror stories that they tell us about right um company in in my um uh group that raised money

um they were desperate they raised a good chunk of money from an investor who um you know put in hundreds of thousands of dollars and bought over a third of the company straight away and what they didn't tell that founder is that every subsequent investor would say to themselves huh this investor put in a relatively small amount of capital bought so much of the company that the founders are going to get so diluted they're not going to end up owning

anything and it's going to shut off later stage rounds completely and you know these founders of course that a couple hundred thousand that wasn't enough they raised more than raised more they came in YC with almost 50 dilution and it's like from an investor who knows better but who saw that they could get leverage over a founder and so they took it this leverage point is fascinating because so much of when you talk to Founders that go out to do a lot of fundraising there's a lot of talking points that get beat into your head

and it's easy to believe them uh like oh I have to own 20 oh I have to have a board seat oh if you raise it too high of a valuation it's bad oh like and when you think about it those are actually very you know clever talking points from the investor perspective and again so many memes out there about fundraising that are be are being pushed by folks where it's convenient do you see how it's actually convenient to be like prices are down

and Founders should give up more rights than they used to give during the economy what are some other horror stories man what else you got from this badge yeah I mean I had one where the investor the founder was like Hey when we previously went out we wanted to raise a million dollars and the investor wanted us to do it as a priced round and to pay for fifty thousand dollars of their legal fees and I'm like companies raise on safes

and pay nothing there are no lawyers on this situation you hand 50k and and the even more criminal thing is great you want to do a price ground awesome their standard paperwork for that it shouldn't cost fifty thousand dollars to a priced round like you're just ripping off Founders pure and simple ripping off Founders there are other situations where someone is basically like oh I'm committing to being your round but I need to be the last money in tell me

when you've read yeah once you find another million I'm in but like you have to and you have to leave room for me I'm like what are you just making rules up this doesn't this isn't how it works right but Founders don't know we we got another one where it'll be like someone saying all right um I'm committing 500 000 of your two million dollar round you just have to go and get the rest I'm gonna lead you just have to go raise that another 1.5 million like these four these are like all horror stories over

and over from Founders in this batch talking to us about fundraising before doing YC and it's like I I know why they were shell I know why they were shocked when they did one fundraising during YC they didn't hear any of this [ __ ] and and what's tough to say is when you think about it to just go back to the to the music industry metaphor the entertainment industry metaphor for a lot of folks they were they would have been better off or people would say I was I would have been better off just like waiting longer to get better a

better agent or like be not having like a bad agent just having no agent or so having a bad manager who like stole the Masters for me maybe having and so this is what's weird is a lot of the content marketing we get from The Venture Capital industry is to convince people they need it and want it immediately it's like the message that you're brainwashed with is a is a Founder is like you can't even start without

raising a pre-seat round and we're in the business of pre-seed round blah blah blah blah right and again like I hope people never hear that from YC or they don't get that from us we say the opposite if you watch our other videos we're like yeah like you don't actually need to start with this money to like start a company and to like get customers like this is deeply part of the YC Mantra which is if your idea for how you start a startup is to First create a pitch deck and go pitch VCS you're setting yourself up to get screwed

you're setting yourself up to get taken advantage of who people uh by people who are going to have 20 different ways to rip you off versus if you do something cool um you're gonna have a lot more leverage right anyways um this was an amazing batch and I don't want YC to take too much credit here the founders at the work like we said the founders at the work and you know to one of the points you made earlier being able to see everyone in person this batch was also

just like amazing you know it was one of the things that reminded me about why this is such a fun job is being able to see everyone and interact with them throughout the batch so this is a good one right this is good we made it yeah we made it like we survived we survived at 19. kind of nuts it's kind of nuts all right man see you later sounds good talk to you later

[Music] laughs
