Why Investors (including YC) Can’t Fix Your Company

**Michael Seibel** (0:00)
Hey, Dalton, your pre-product market fit, do you have five-year financial projections?

**Dalton Caldwell** (0:04)
That's a great example of that. Financial projections may be a good idea later stage, but to even ask me if I had financial projections, I was like, what's a financial projection?

**Michael Seibel** (0:15)
This is Michael Seibel with Dalton Caldwell, and today we're going to talk about why investors, including YC, can't fix their company.

**Dalton Caldwell** (0:24)
For some folks, it's like telling them that Santa Claus isn't real. They're like, hey, we finally get some time with you. No one wants our product. What should we do? Here's our designs. Can you help me design this so growth takes off? And I have to tell them the unfortunate news, which is I have no idea.
And I went through this too when I was a founder, that I really believed that once I raised from the top investors, they would tell me whatever secrets they were holing out on the world.

**Michael Seibel** (0:58)
What's unfortunate is that there are a lot of investors out there who aren't former founders, right? Who haven't really lived these mistakes themselves.
And so...

**Dalton Caldwell** (1:09)
If you haven't been humbled by having a crappy startup like we did that failed a lot like we did, it's easy to sort of like think your hot shit.

**Michael Seibel** (1:23)
It's easy to think that your advice can make companies work.
That like you are the magician. And what's interesting is that over the years, a lot of YC founders will kind of start following the advice of these people, and they'll make very, very common errors. And you can almost track it back to like, oh, I kind of understand the type of person who is giving you this advice, because I see what you're doing now, and like this matches one to one. So one of the most common types of investors is the investor with a finance background, someone who's like never run a company, never operated in a company, pure finance.

**Dalton Caldwell** (2:01)
When all you have is a hammer, everything's a nail, and so if what you know is money, the solution is usually involved money. So raising more money, spending more money, throwing money at the problem, right?

**Michael Seibel** (2:13)
Hey, Dalton, your pre-product market fit, do you have five-year financial projections?

**Dalton Caldwell** (2:18)
That's a great example of that. Financial projections may be a good idea later stage, but to even ask me if I had financial projections, I was like, what's a financial projection?
Like, Michael, how many years in your start-up did you learn what a balance sheet and shit was?

**Michael Seibel** (2:36)
Long time.
Actually, and I resisted it.
I resisted it. Our COO Kevin was like, this is important for you to learn. I'm like, you know what's important for us to learn? How not to lose money every month before we die.
And the balance sheet is not really telling us that. It's that we make no money and we spend money. So that's what the problem is.

**Dalton Caldwell** (2:55)
And for these folks, I get it, right?
You spend time in spreadsheets, especially if you're doing stock market investing or private equity investing. 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?

**Michael Seibel** (3:13)
I mean, we see this all the time, which is like scaling negative, you can take a unit of economics or spending a ton of money in advertising with ever worse payback periods or no payback period ever. It's really like getting people to work on things that are not making a product good.

**Dalton Caldwell** (3:34)
I mean, remember Patrick Collison was talking about this when he came to speak at a batch recently, where he's like, listen, let me be blunt.
Too many founders treat product as an afterthought. They're basically trying to do financial engineering and the product is like delegated.

**Michael Seibel** (3:52)
I think what's also tricky is that like this strategy isn't always wrong.
Like for successful companies, there is usually a point where throwing money at it is a good idea. It's just kind of knowing when to give that advice and when not to. It's when you always give that advice is when things get really tricky. All right. Here's the second type that's common in the investing world. The big company exec.
The person who's seen companies at a thousand plus people and have a lot of experience and have done like great work in those companies and now become investors.