Mar 7, 2018 · 28m · y-combinator
Michael Seibel - Startup Investor School Day 2 · Y Combinator
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In Day 2 of Y Combinator's Startup Investor School, YC CEO Michael Seibel outlines key strategies for angel investing, including check sizing, decision speed, deal sourcing, and founder evaluation. Joined by Geoff Ralston, Seibel offers practical insights into navigating YC Demo Day, cap table health, and the realities of early-stage portfolio returns.
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 77.7% of the talking time here. How this is scored →
The partners as informed peer 3.2 Guest teaching 0.2 Guest disagreement 0.6 The partners pushing back 0.2
speaking balance: gold is the partners, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 12:11 Ralston's counterpoint on conviction before check size
Ralston gently pushes back on Seibel's advice to write larger checks, arguing investors should deliberately start small until they build genuine conviction.
Hardest push from the partners ▶ 16:47 Seibel jokes about Ralston missing more dealsWhen Ralston begins elaborating on missed opportunities, Seibel jokingly interrupts to point out that Ralston has missed even more deals than he has.
Biggest teaching moment ▶ 12:25 Ralston reframes evaluation around founder resilienceRalston educates the audience on looking past seemingly flawed early ideas to assess whether founders have the grit to take a punch and keep fighting.
The partners hold their own ▶ 18:10 Seibel details post-Series B cap table mathSeibel demonstrates deep operational expertise by outlining exact dilution mechanics and explaining how YC intervenes to clean up broken cap tables.
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 |
|---|---|---|---|---|---|---|
| Geoff Ralston Introduces Michael Seibel and Day 2 Agenda | 0 | 0 | 0 | 0 | Geoff Ralston opens Day 2 of Startup Investor School with housekeeping announcements and introduces Michael Seibel. Seibel does not speak during this introductory segment. | |
| Michael Seibel's Angel Investing Philosophy and Scorecard | 0 | 0 | 0 | 0 | Michael Seibel delivers a solo presentation breaking down his personal angel investing scorecard and charity-like mindset. Because this is a monologue presentation, host-interaction scores remain at zero. | |
| Core Lessons for Angel Investors: Check Size, Speed, and FOMO | 0 | 0 | 0 | 0 | Seibel continues his lecture, outlining the importance of meaningful check sizes, speed in decision-making, and avoiding hesitation on friend rounds. There is no guest interaction during this monologue. | |
| Navigating YC Demo Day and Post-Demo Day Opportunities | 0 | 0 | 0 | 0 | Seibel concludes his presentation by explaining how to navigate Demo Day hype, conduct diligence beforehand, and track post-Demo Day opportunities. No guest or audience interaction occurs until the final transition. | |
| Q&A: Check Size Scaling and Building Investment Conviction | 5 | 1 | 2 | 1 | Seibel answers an audience question on scaling check sizes. Ralston adds a gentle counter-perspective, arguing investors should stay small until they develop true conviction on founders. | |
| Q&A: Characteristics of A+ Investors and YC Startup Metrics | 6 | 0 | 1 | 0 | Seibel explains what distinguishes an A-plus investor using concrete historical examples from Socialcam and Justin.tv, then openly defers granular YC cohort stats to Aaron Harris. | |
| Q&A: Why Investors Miss Great Startup Deals | 6 | 1 | 1 | 1 | Ralston asks why Seibel missed major YC winners. Seibel candidly admits to being slow and distracted by supporting his own batch companies, with Ralston chiming in on the grueling work required to win deals. | |
| Q&A: Cap Table Health, Party Rounds, and Acquiring Talent | 6 | 0 | 1 | 0 | Seibel demystifies party rounds and details how YC models multi-round dilution to ensure founders retain sufficient equity motivation. Ralston helps reframe an audience question about talent acquisition. | |
| Q&A: Investment Decision Process and YC's Internal Operations | 6 | 0 | 0 | 0 | Seibel outlines the diminishing returns of over-intellectualizing pre-seed pitches, explains YC's open application advantage, and details how YC conducts internal retrospectives and alumni office hours. |
Statements from this episode (20)
Ralston: Founders must target problems so dire users accept imperfect solutions
“You need to find problems so dire that users are willing to try half-baked The one imperfect solutions.”
Seibel: Angel investing is a form of charity, not money-making
“I'll tell you straight away that I'm not doing it to make money. In effect, I feel like where I came from on the East Coast, when people want to give back, they give money to charity and they go to Gallus which I never understood. And strangely, here in the Va…”
Seibel: His 4.5-year angel record includes 50 deals and one billion-dollar exit
“I've been angel investing for 4.5 years. I've made 50 total investments, invested in four angel funds, 47 companies, ah, only three of them were not YC companies. 46 of them were early stage. One was, ah, late stage. It's a little company called Reddit. I hope…”
Seibel: Stopped Writing $25K Angel Checks After Treating Them as Mistakes
“I've kind of made the mistakes of writing 25,000 dollar checks. And I don't do that anymore.”
Seibel: Grade-A investors wire money fast and shut the hell up
“An A investor, grade A investor gives you money quickly, signs the paperwork quickly, shuts the hell up. That's an A investor. There are very, very few A plus investors in the world. There are very, very many less than A investors.”
Seibel: Write a Check if a Friend's Startup Would Cause Billion-Dollar FOMO
“If one of your friends is starting a company, and you would have FOMO if it would become a billion dollar company, just shut up and write him a check.”
Seibel: The most hyped YC Demo Day startups rarely perform best
“The most hyped investment on Demo Day is often not the best one. Very, very often. I think what's interesting is that the crowd on Demo Day is just not as smart as it appears”
Seibel: Gusto Outperformed Hyped Startups in YC Winter 2012 Batch
“In my batch in winter 12, I, my company was by no means the best investment. Justin was in my batch as well. He raised it uncapped, super hyped, also wasn't the best investment. If you were investing in my batch, you probably wanted to invest in a company call…”
Seibel: Angel checks should carry enough bite to sharpen decisions
“I do also think there's something to an investment having a little bite. Like, it, like, just a little bite. Just a little, like, mmm to make you think a little bit more sharp, sharply about whether this is a good thing you should be doing.”
Seibel: It is extremely rare for an investor to have truly big impact
“So I would say that it's extremely rare that an investor can have truly big impact.”
Seibel: Paul Buchheit's advice is why Justin.tv and Twitch exist
“Paul Buhite, he basically threw a piece of advice as the reason why we built a video system, which is the reason why Justin TV could exist, which is the reason why Twitch could exist.”
Seibel: The vast majority of Y Combinator startups will fail
“What I will say is that we tell the batch that the vast majority of YC companies will fail.”
Seibel: Only 20% to 30% of YC startups raise follow-on funding
“And, you know, from my kind of memory of the numbers, Series A's tend to happen between 12 and 24 months post-demo day. And between 20 and 30% of companies will raise follow-on funding post demo day.”
Seibel: Founders with under 20% equity post-Series B lack exit motivation
“So, in terms of how much equity the founder should have, I think the way that I think about this is I model out a series A that's gonna be between 20 and 35% dilution, and a series B that's gonna be between 20 and 35% dilution, and I look at where the founder'…”
Seibel: Y Combinator frequently helps incoming startups fix damaged cap tables
“Interestingly at YC, oftentimes some of the work that we have to do when we ingest companies is help them clean up their cap tables and help convince their previous investors that the way the company is set up right now is actually harmful. So that, that's act…”
Ralston: The best startup founders are often unemployable
“One thing to remember and keep in mind is that often startup founders are unemployable. Not always, but often. The best ones.”
Seibel: YC believes a founder's ability to network simply does not matter
“I think investors believe that having the skill to network to an investor is an important characteristic of a good founder, and I think, ah, kind of YC's core position from the beginning is that it's not.”
Seibel: Value of founder networking and raising large capital is declining
“Especially in the days now where you can write software with relatively little money that has relatively large impact. Like the value of networking and being able to raise large amounts of money is less and less.”
Ralston: Investors who claim to be 'A-plus' are not A-plus investors
“One thing that, ah, for founders, it's easy to tell when an investor is not an A-plus investor is if they claim to be an A-plus investor.”
Ralston: Picking multi-billion dollar startups does not prove investor skill
“Just because you've made a lot of money investing, do not forget there's a significant component of luck. Involved. And it's great if you all are the lucky ones that pick the one or two or three companies in this batch or YC, for example, that become multi-bil…”