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Why Investors Can’t Fix Your Company – Dalton Caldwell and Michael Seibel
17 segments available
Dalton Caldwell and Michael Seibel on common pitfalls in the advice from different types of investors and why you, the founder, are ultimately responsible for the success of your company. Chapters (Powered by https://bit.ly/chapterme-yc) - 00:00 - Why investors including YC can't fix their company? 01:56 - Investor with the finance background 02:33 - Balance Sheet 04:14 - Big Company Exec 05:37 - What does failure look like for a lot of our companies? 08:01 - Successful entrepreneur in non-tech 09:49 - Junior investor 12:25 - Influencer / Famous person 12:58 - What is the advice that founders get from other entrepreneurs? 14:25 - Founders 14:42 - founders 15:54 - Extremely young investor (Scout) 17:17 - Wrap up 17:22 - YC partner common bad advice 19:44 - Personal accountability 19:57 - Big takeaway 21:20 - Great investor advice
Segments Timeline
The Myth of Investor Solutions
Dalton Caldwell and Michael Seibel discuss the misconception that investors, including those from Y Combinator, can fix a startup's problems. They emphasize that many founders mistakenly believe that once they secure top investors, they will receive the secrets to success. Caldwell shares his own experience of realizing that investors without founder experience often lack the insights needed to guide startups effectively.
"hey dalton you're a pre-product market fit do you have five-year financial projections that's a great example of that financial projections may be a good idea later stage but to even ask me if i had f..."
The Finance-Only Investor Trap
Caldwell explains the pitfalls of relying on investors with purely finance backgrounds. He highlights how these investors often approach problems with a financial lens, leading to misguided advice that focuses on raising and spending money rather than addressing core business issues. This segment underscores the importance of understanding the operational realities of running a startup.
"former founders right who haven't really um lived these mistakes themselves and if you haven't been humbled by having a crappy startup like we did that failed a lot like we did um it's easy to sort of..."
The Balance Sheet Misconception
In this segment, Caldwell and Seibel discuss the common misunderstanding of balance sheets among early-stage founders. They reflect on their own experiences of learning about financial metrics and emphasize that focusing solely on financial projections can distract from the critical need to generate revenue and manage expenses effectively.
"throwing money at the problem right hey dalton you're a pre-product market fit do you have five-year financial projections that's a great example of that financial projections may be a good idea later..."
The Big Company Executive's Perspective
Caldwell introduces the second type of investor: the big company executive. He explains how these individuals, while experienced in scaling successful products, may not grasp the challenges faced by early-stage startups. This segment highlights the difference between scaling a product in a large organization versus the unique hurdles of a startup environment.
"it makes sense that your weapon is money and you move money around that's your leverage point that's your point of leverage what's the downside of internalizing that too much man i mean we see this al..."
Hiring Before Product-Market Fit
Caldwell and Seibel discuss the common mistake of hiring executives before achieving product-market fit. They argue that founders often misinterpret the need for more personnel when the real issue may lie in team dynamics or product development. This segment emphasizes the importance of focusing on product quality and team cohesion in the early stages.
"here's the second type that's that's common in the investing world the big company exec the person who's you know seen seen companies at a thousand plus people and have a lot of experience and have do..."
The Danger of Scaling Mindsets
In this segment, Caldwell warns against the mindset of big company executives who may overlook the potential for failure in startups. He discusses how this mentality can lead to misguided advice and strategies that do not align with the realities of early-stage companies, ultimately hindering their growth.
"he wasn't on he didn't love some of the instincts of folks that it was the same company that they worked at but the the tactics that they brought to bear when you were employee number 1000 to scale up..."
Lessons from Non-Tech Entrepreneurs
Caldwell and Seibel explore the insights that successful entrepreneurs from non-tech industries can bring to the startup ecosystem. They discuss the unique challenges faced by these founders and how their experiences can inform better investment strategies. This segment highlights the value of diverse perspectives in entrepreneurship.
"tricky because all too often this group of folks are giving founders the advice of hiring executives before product market fit it's like you need to build up the company it's like marketing doesn't wo..."
Challenges with Non-Tech Investors
Caldwell addresses the pitfalls of receiving investment from successful entrepreneurs in non-tech industries. He explains how these investors often apply their traditional business principles to tech startups, which can lead to unrealistic expectations and control demands. This segment highlights the disconnect between different industry norms and the unique challenges faced by tech founders.
"non-tech industry and and this is really common this is really common internationally in like new founder ecosystems where like the people funding them maybe didn't make their money in tech what's the..."
The Pressure of Junior Investors
Caldwell discusses the mindset of junior investors who are eager to prove themselves. He explains how their need for quick wins can lead to misguided advice, such as pushing for rapid fundraising without addressing underlying company issues. This segment emphasizes the importance of understanding the motivations behind investor advice and the potential consequences for startups.
"themselves and they're like taking things that worked for them right like they're not reading this on twitter um but it is tricky because like i think what we've learned is that industries are just di..."
Influencers and Their Impact on Startups
Caldwell explores the role of influencers in the startup ecosystem, particularly how their fame can create unrealistic expectations for founders. He discusses the tendency of influencers to treat startups like advertising deals, which may not yield the desired results. This segment highlights the complexities of leveraging influencer relationships and the potential pitfalls for founders.
"investor not have any other track record and then make some bad investments yeah like you're not gonna make it okay and so basically these folks are very optimistic that it's gonna work that you're go..."
The Illusion of Influencer Support
Dalton Caldwell and Michael Seibel discuss the role of influencers in startup funding and how founders often overestimate the impact of celebrity endorsements. They emphasize that while influencers can provide valuable distribution insights, relying solely on their promotion can lead to disappointment. Founders must manage their expectations and recognize that there are no silver bullets in achieving success.
"lot is the influencer famous person um what do you when i think about this kind of person this is the person that would come to a yc demo day and everyone would freak out to get them on their cap tabl..."
Advice from Fellow Founders
Caldwell and Seibel explore the dynamics of advice exchanged among founders. They highlight that while peer advice can be insightful, it often reflects personal experiences, which may not be universally applicable. Founders need to be cautious of advice that stems from another's struggles, as it may not align with their unique challenges.
"we got two more types here so two more types type one is other founders so this is becoming a lot more common nowadays right like founders investing each other's companies it's you know some people ha..."
The Young Investor's Perspective
The conversation shifts to the insights and challenges faced by extremely young investors, often just starting their careers. Caldwell and Seibel note that these investors may mimic trends without fully understanding the implications. They discuss the importance of genuine learning and the pitfalls of following popular narratives without critical thinking.
"i think that's like very counterintuitive to most people um the last one is the extremely young investor right the the just out of college writing a check sometimes this person's in college writing a ..."
Common Bad Advice from YC Partners
Caldwell and Seibel reflect on the common pitfalls in advice given by YC partners, particularly the lean startup approach. They caution that while some strategies work for many, they don't apply universally. The discussion emphasizes the need for founders to take personal accountability and not rely solely on external advice, as success often comes from their own belief and initiative.
"you know one of the interesting things here to kind of wrap up is that we make mistakes like we screw up there is a yc partner common bad advice kind of mode and um you know we were talking about this..."
The Founder’s Responsibility
In the concluding remarks, Caldwell and Seibel reiterate the core message that founders must take personal accountability for their company's success. They stress that while external advice can be helpful, it is ultimately the founder's responsibility to navigate their journey and make informed decisions.
"think that the big takeaway here is that as a founder it's your job to figure out"
Valuable Investor Insights
Caldwell recounts a pivotal piece of advice he received from an investor, highlighting the value of external perspectives in simplifying complex situations. They discuss how clarity from investors can lead to significant improvements in a founder's approach.
"because you figured it out all the rest of the people around who helped you they didn't figure it out dalton before we close you know we've talked about a number of examples of when investors give adv..."
Honesty Over Flattery
The conversation shifts to the importance of receiving honest feedback from investors who are not financially incentivized to sugarcoat their opinions. Caldwell and Seibel reflect on how tough love can lead to growth and improvement for founders.
"simple was super helpful dude i got great advice like that when i was a founder number one number one piece of advice we ever got was from you know someone who experienced big companies guy named gide..."