Standard Capital Update

We don't want to negotiate with people over valuation and you could talk to any of the nine companies that got in and ask them. — Yeah. — We didn't negotiate valuation. We just gave them what they saw on the we never talked about it. It was right in the application. We're like great — like there was no discussion. That was the deal. It's not awesome cuz dude I don't want to dude no negotiate valuation with founders. That's no fun. — All right. 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. — Yeah. — Why don't we just start with like remind people what the process was? Like what was the process? What was the innovation for this thing? — Yeah. I mean, look, the idea for standard was to take what we know worked well from Y Cominator and apply it to the next round and series A. — Yeah. To series A's. Because look, we — How many companies have you and I funded at YC? — Oh, a lot thousand. um each a — a lot of companies — 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 it was funny how — and we also raised A's ourselves there was that um it was funny how little uh overlap there was on the process to get into YC with raising the next round it was an entirely different skill and the idea was to make it kind of the same thing — so how many companies did y'all end up funding — so far we have funded nine companies and that is not announced anywhere in fact, maybe by the time we uh 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 uh PB and Brian and myself is the following. How many times have we coached founders on launching? — What do we say? We say, "Look, founder, you're going to have to launch and launch again and no one will have heard of your thing. " — Yep. — So, just like keep launching and it'll take years and then someday maybe people will — no one know the name of your company, right? Like that's and so this was kind of like my internal thing which is you know uh some folks would know about what we're doing but I didn't. — Sober expectations. — Yeah. Precisely. Yeah. And the good news is we were surprised that um it seems like everyone heard about it and we got way more applications than we expected and I had to go read a lot of applications. I basically I scheduled a small amount of time to read applications and I needed about three times as long as I had scheduled — [ __ ] my applications again. — Dude, I had to work through — you keep on doing this to yourself. — I keep doing this to myself of doing this. Um, but again, I was I had a smile on my face as I ruined another family vacation. Uh, so that was great. And then we had to not had to, we were we had the excitement of interviewing lots of companies, way more than we expected. So again, it kind of messed all of our schedules up in a very high quality way. — That's cool. — And what was cool is we were like, "Wow, these are really good companies. " Yes. And what I learned is this had good word of mouth. — Okay. — Like founders heard about this and were 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. " And um to your point about kind of the word of mouth got out there, this was just a different process, right? So, like give me a sense from the deadline. Yep. Of applying. Give me a bit of a timeline here for when I knew I was going to have a series A. Then walk me through that timeline. — Sure thing. So, within um let's call it 5 days, 7 days of the application deadline. — Yeah. — Everyone that we uh did a first round of interviews with, we did the first round of interviews. So, we're talking about a week after the application deadline. So you read the applications and did first interviews within a week. — Yeah. Or we got the invites out by invites. Yeah. Yeah. No, but we did them all immediately. — Great. Great. — 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. — Okay. — And that was in person. so we met with everyone in person, right? — And then we made the final decision two days after that. — Okay. — And so the whole shebang was two weeks. The total amount of time that the founder spent was the amount of time they spent on the application. — Yeah. — The first interview which is longer than a YC interview. Um it's 20 minutes — danger clear my calendar. — And then a second meeting which was in person. Okay. — And was 30 minutes. — Okay. — And so if you just think about how much time did the sp did the founders spend — well they had to spend a lot of time back channeling. Right. — Sure. — Um it was time efficient and we got back to folks fast. And again, it's not

everyone, you know, the vast majority of people did not get a yes, — of course. — But in terms of how much time they spent. — Yeah. — What is a good applications? Give me a sense of what you felt like a good application time-wise would have taken her to write. — A couple hours. 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. I think she said three. 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, but I think every founder — Yeah. should go fill out. And so it's actually a little different than a YC application in that sense because we're asking more product market fit type questions. — Okay. — I would recommend going through the exercise. — So you're basically telling me in let's call it a 4 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 a founder. Just our time talking with the founder, let alone about the series A, — not deck editing, not pitching, not back and forths. That's different. — Yeah. — And again, a lot of these cases like we really we did due diligence. Yeah. — And so that meant you guys like to do send us Well, we were like, send us a bunch of stuff. — Oh, yeah. — And if you — are properly run, it should not be hard to send us some stuff. — Yes. Does that make sense? And so it was our job to like dig through it to do all the diligence, but from the founders's perspective, it was like, "Okay, cool. Here are the docs. " — Yeah. You're going to have a new application cycle. — Yep. — What is an interesting piece of advice you would give future applicants? — We are setting this up to really reward multiple time applicants. — Okay. — Where once you apply once, if you want to apply again, just use mostly the same application. — Yep. and then just change the things that are different. — That's very YC similar. — Right. And we would actually encourage folks to apply earlier or if they're not even sure. — Um — no penalty for that. it. In fact, it's good. — That was a big YC one, too. Right. Two data points is so easy like, oh, what what's changed in the last 3 months? That was just so much easier to get excited. — Exactly. Yeah. So, that's one. And then I think number two, we're doing something that no one had ever done before, which is have founders name their own price and state their valuation. — Yes. And some folks had a really easy time with that and picked really good valuations um relative to their traction. — Does that make sense? Like some folks that had tons of traction picked higher valuations. Some folks with less traction picked lower. And so that's good. Yes. And those were the people that got in. — Yeah. — 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 of valuation and you could talk to any of the nine companies that got in and ask them. — Yeah, — we didn't negotiate valuation. We just gave them what they said on the — we never talked about it. Like it was it was reading the application. We're like great — like there was no that was the deal. Isn't that awesome — cuz dude I don't want to dude I don't know negotiate valuation with founders. That's no fun. And so I do think there are some folks maybe some feedback to have other folks that — might want to think about that a little bit and I tried to dig into it when I spoke with them. — Yeah. — 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 and how much of your company do you want to sell to do that? — Yep. — In some ways kind of good. — Some way it's pretty straightforward. But I could see, you know, and we love the Midwit meme, right? Like I could see well Dalton, right? like, okay, I haven't went on pitch VCs yet, and I know that if I had a competitive round that like I could raise at this crazy price, and like my competitor, this other company raised at this crazy price. So, like, shouldn't I be pricing this like the 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 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 just reject them instead of negotiate over price. So it was just like a misunderstanding of like — I think they it's like cool no — because again we have so many applicants we're going to spend our time with folks where again some folks had higher prices but they had crazy traction. So we'd rather spend the time with the fastest growing startups that are growing you know — 10x year-over-year on the higher prices. — Yeah. — 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 we were serious — a little bit 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. — Yeah. — Their odds of acceptance. The bar is twice as high as 60 post. — Yeah. — 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. Sure. — Totally. And there's 120 post companies that are great companies. We want to fund them. But man, it's got to look — Yeah. — very exciting. — Yeah. — That's tricky. 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. Why we should do YC? " And it 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. Why? " And it was just, "Oh, this isn't like normal. " Like, we purposely built this to not be like normal fundraising. — Yes. Like that was — 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 not like a mush. It's like it's a different like this is the different Yeah. — And those are the folks that did that got in again like the folks that were really successful with our process. — Yeah. — They wanted that. — They were like we haven't talked to any investors. We haven't built a deck. We just applied and if we get in we're going to do it. — Yeah. — 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 a company with a slide deck and I'm like interesting okay sure um 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 and like we know everyone is good — which I just remember that was how people felt with YC. It's like well obviously this is going to be full of [ __ ] companies because we know all the good founders and again think about the ramifications of that. Do you actually think you know all the good companies? Shut down like shut down your fund please. Cuz you're admitting it's a zero some game with no margin. — Yes. — Like if that's your mentality, leave the industry. — Yeah. Yeah. — Because it means you're so like disillusioned with the work. You're investing commodity dollars. — You don't love the work. — That's a sign — you shouldn't do this anymore. — That's fair. — So, uh, last but not least, when is the next time people can apply? And the question I always got, can I apply late? — Yep. The next deadline is going to be in early January. And so we're going to open up applications in sort of like late December. So lots of time. It'll be kind of quiet I presume for a lot of folks in that time of the year. So good time to work on your application there. And then yes, you can totally apply late. We are — 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 like crank through these things super fast and do a ton of interviews in one day and it's super efficient. Yeah. — 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 YCO, it's like sure like just like, you know, like let's not make this. The number of times we got the question, can I apply late? And I'm like there's a thing on there, just do it. 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 2. Sounds good. Thanks, Michael. Cheers.