Mar 7, 2018 · 59m · y-combinator
Dalton Caldwell - Startup Investor School Day 2 · Y Combinator
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In Day Two of Y Combinator's Startup Investor School, Dalton Caldwell and Jeff Ralston present practical frameworks for managing an early-stage investment process, developing contrarian conviction, and conducting professional founder meetings. Through instructional lectures, a live mock pitch, and an interactive Q&A session, the workshop teaches angel investors how to evaluate startups cleanly and build founder-friendly decision-making habits.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The partners hold 73.8% of the talking time here. How this is scored →
The partners as informed peer 1.5 Guest teaching 0.6 Guest disagreement 0.2 The partners pushing back 0.9
speaking balance: gold is the partners, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 36:46 Defending against the telecom graveyard premise
Ben firmly counters Dalton's observation that independent ISPs are a historical startup graveyard by detailing how decentralized capex loans insulate Necto from infrastructure costs.
Hardest push from the partners ▶ 46:29 Rejecting milestone tranchesDalton rejects an audience question suggesting milestone-based investments for angel checks, advising founders never to take such complex restrictive deals.
Biggest teaching moment ▶ 32:41 Educating on modern wireless economicsBen explains to Dalton and the room how newly available wireless gear has dropped the capital cost to start an ISP down to $10k-$20k.
The partners hold their own ▶ 38:25 Crystallizing the platform analogyDalton synthesizes Ben's complex pitch into a punchy conceptual framework, comparing Necto's asset-free ISP approach directly to Uber's and Airbnb's operational models.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The partners as informed peer | Guest teaching | Guest disagreement | The partners pushing back | Why |
|---|---|---|---|---|---|---|
| Welcome and Day Two Housekeeping Announcements | 0 | 0 | 0 | 0 | Jeff Ralston delivers opening administrative announcements and housekeeping logistics for day two of the workshop. As an opening monologue segment, all dynamic interaction scores are zero. | |
| Establishing an Investment Process Funnel | 0 | 0 | 0 | 0 | Dalton Caldwell presents a solo lecture on structuring a venture investment funnel and budgeting capital allocation. As a monologue lecture segment, host and guest dynamic scores are zero. | |
| Defining Investment Criteria and Decision-Making Burden | 0 | 0 | 0 | 0 | Dalton Caldwell outlines core evaluation criteria such as founder quality, market size, and domain expertise. This is a solo instructional presentation. | |
| Resisting Groupthink and Developing Personal Conviction | 0 | 0 | 0 | 0 | Dalton speaks on avoiding herd mentality and rejecting conditional commitment tactics like promising to join only when rounds fill. Solo lecture segment. | |
| Decision-Making Anti-Patterns and Achieving Conviction | 0 | 0 | 0 | 0 | Dalton details negative decision-making patterns including slow responses and moving goalposts. Solo lecture segment. | |
| Scheduling and Structuring Effective Founder Meetings | 0 | 0 | 0 | 0 | Dalton covers practical mechanics of scheduling meetings and asking foundational first-principles questions. Solo lecture segment. | |
| Meeting Evaluation Frameworks and Founder-Friendly Behavior | 0 | 0 | 0 | 0 | Dalton discusses post-meeting assessment criteria and warns against unwanted advice or excessive introductions disguised as value-add. Solo lecture segment. | |
| Communicating Decisions and Keeping Deal Terms Simple | 0 | 0 | 0 | 0 | Dalton instructs investors on how to deliver clean nos and prompt yeses using standardized handshake protocols. Solo lecture segment. | |
| Mock Investor Meeting: Pitching Necto's ISP-in-a-Box | 8 | 4 | 1 | 4 | Dalton runs a live mock pitch with founder Ben, grilling him on how Necto avoids the high capital expenditure failure modes of past telecom startups. Dalton demonstrates strong expertise by crystallizing Ben's business model as the 'Airbnb of ISPs'. Ben responds constructively with operational details. | |
| Interactive Audience and Online Q&A Session | 7 | 2 | 1 | 5 | Dalton and Jeff field practical questions from audience members regarding milestone-based investments, ethical breaches, and fundraising momentum. Dalton firmly pushes back against milestone financings at the seed stage as bad terms for founders. |
Statements from this episode (23)
Ralston: SAFEs Benefit Founders By Being Simple, Fast, and Cheap
“Why would you do a safe? Well, because it's simple, it's easy, it's fast, and it's cheap. It's better for founders.”
Caldwell: Face-To-Face Meetings Drive Most Angel Investment Decisions
“The face-to-face meeting is pretty much where everyone that's done a lot of investing, that's the meat and potatoes of how you tend to make investment decisions. You do a bunch of qualification, and then the face-to-face meetings are where you decide whether y…”
Caldwell: Angel Investors Without Predefined Budgets Make Suboptimal Decisions
“If you don't know how much you want to invest and what your budget is, you're probably gonna be making suboptimal decisions. So it's good to think, here's how much I'm willing to invest across a bunch of startups beforehand versus being like, well, you know, I…”
Caldwell: Stringing Founders Along Is Worse Than a Fast No
“Something that we see a lot as an anti-pattern in investor behavior is folks that just do meeting after meeting after meeting after meeting and don't ever make a decision. And that's actually worse for founders than just saying no.”
Caldwell: Backing Out of Commitments Severely Damages Investor Reputation
“Trying to back out of the deal after committing is a huge faux pas and will, you know, have far-reaching negative reputational effects.”
Caldwell: Diverse Investment Criteria Better Reveal Outlier Startups
“A bunch of people with different criteria are much more likely to find Really interesting outlier companies and generate great returns versus if everyone has precisely the same criteria.”
Caldwell: The Best Startup Investments Look Deeply Unappealing to Most
“Really good investments are often contrarian or unfashionable, or somehow are deeply unappealing to everybody else, right? Those are the really good ones, is that you see something that other folks don't, and that, that, the fact that it's deeply unappealing i…”
Caldwell: Conditional Commitments Are a 'Cheap Shot' Founders Despise
“So one thing that we hear a lot of, especially for folks that haven't done much of this, is they say, okay, I'm in, once you go find the rest of the round. And this is the cheapest of cheap shots that you can possibly do because what you're actually saying is,…”
Caldwell: Excitement Without Checks Signals a Failing Fundraise
“That is all the recipe for a failed fundraise, is a lot of people telling you how much they like your business and how, like, exciting it is to talk to you. If no one is writing checks, it means it's not going well.”
Caldwell: Basic Punctuality Puts Angels Ahead of the Pack
“Just scheduling meetings in a non-painful way will put you ahead of the pack from a lot of other angel investors. Being on time and picking a convenient location will put you ahead of the pack versus most angel investors.”
Caldwell: YC Interviews Always Begin With Foundational Questions
“To this day, this is how we do YC interviews, and we make all of our investment decisions, is we ask, we always start with the basics. What does your company do? Who's on the team? What progress have you made? You know, how much have you raised? What terms?”
Caldwell: Basic Questions Test How Founders Narrate Their Own Story
“Cause it's not, maybe you already saw their deck, or maybe you already read about the company, it's not necessarily about learning what you didn't already know, it's about hearing the founder tell their own story and their own words. And that's such a good rea…”
Caldwell: Conviction Drops When Continuing the Conversation Lowers Excitement
“And one thing to look for in your own gut is if you feel more or less convinced the more you talk to the founder. Because it could be you hear about an idea, you see their demo day pitch, and it seems great, and you're a yes, and the more you talk to them, the…”
Caldwell: Investors Should Treat Pitches as Job Interviews For Themselves
“In terms of bad meetings one thing to think about is pretend that the investor meeting is your job interview, where they're interviewing you for a job, and not the other way around. There's often a lot of power dynamic things of making it feel like the founder…”
Caldwell: Distracted Investors Ruin a Double-Digit Percentage of Pitch Meetings
“A very common thing we hear a ton from founders is that investors that just look at their phone the entire meeting, or otherwise act super distracted. Not recommended. Very basic, but holy cow is that common. That happens in a double digit percentage of meetin…”
Caldwell: Unsolicited Criticism After Passing on a Startup Is Unhelpful
“If you write them a check, then your advice is a lot more valued, but if you're just meeting with someone, and it's a no, and all you're doing is telling them how everything they're doing is wrong, that is not value add.”
Caldwell: Making Introductions After Passing Wastes the Founder's Time
“Like, you know, you do one meeting, you don't invest in the company, and you introduce them to, like, 20 people to seem really value-add. That is not value-add. That is wasting their time.”
Caldwell: Small Syndicate Angels Asking for Complex Terms Stall Deals
“If it's a very small amount, and you're just part of a large syndicate don't make it hard. It's only going to foul up the process, and often the founders will just push back on all this stuff.”
Caldwell: Successful Angel Investments Demand a Ten-Year Liquidity Horizon
“Even the companies that go really well, we are talking about a 10 year time horizon. PB's about to talk, and like, you know, a lot of the investments that he made in 2008, 2007 are still hanging out there. He's getting no liquidity from it.”
Caldwell: Founder Defensiveness About Competition Is a Major Red Flag
“Usually if the founder is super defensive and flips out about it, that is a good red flag for you, right? That is a very good red flag if the person has a very hard time Speaking on an even tone about competition, or is unwilling to admit the competition eithe…”
Caldwell: YC Urges Founders to Secure Wires Before Investors Flake
“We definitely encourage founders to get the money wired from the investor. We, every, there's so many sad stories that we know, where someone commits to invest and then disappears, or like never actually wires the money. And so we do encourage people to say, o…”
Caldwell: YC Tracks Progress of Rejected Startups to Iterate Decisions
“We keep track of everything we fund. We keep track of things we don't fund. We track their progress. We keep track of who does really well and who doesn't do really well. And we take ample notes on everything. So we do a lot of reviewing our process, and we tr…”