Letter #297: Paul Buchheit and Dalton Caldwell (2025)
Standard Capital Cofounder & Google Employee #23 and Standard Capital Cofounder & Imeem Founder | Introducing Standard Capital
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Paul Buchheit is a Cofounder of Standard Capital. He started his career at Intel, before joining Google as employee #23, where he created Gmail. After Google went public, Paul left to found FriendFeed alongside three other Googlers (including future Facebook CTO, Salesforce Co-CEO, and Sierra Cofounder Bret Taylor), which is known for creating the “like” button and was acquired by Facebook. Paul briefly joined Facebook after the acquisition, before joining Y Combinator as a Partner.
Dalton Caldwell is a Cofounder of Standard Capital. Dalton started his career at VA Linux, before leaving to start Imeem, which was acquired by MySpace. He then founded Mixed Media Lab, where he started App.net, a social network similar to Twitter but focused on user and developer subscriptions rather than advertising. He then joined Y Combinator, where he served as a Managing Director, Architect, and Group Partner.
KG Note: The deadline for Standard Capital’s first ever funding cycle is tomorrow, 9/17/2025 at 9pm. If you’re at or near your Series A fundraise, I would highly recommend applying.* (The application is designed to not require more than 1-2 hours.)
*I have never met Paul or Dalton, but I think highly of both of them. Paul is one of my favorite writers, and Dalton is perhaps the early stage tech investor most similar to me (I don’t angel invest often**, but of the early stage tech companies I have invested in, Dalton has later invested in ~58% of them).
**I do (selectively) angel invest. That said, I add zero to very little value, in three core ways: 1) I leave you alone (I especially don’t send you links of “competitors” asking “What do we think?”), 2) I’ll buy you dinner once a quarter (or whenever we’re in the same city), and 3) I can (hopefully) entertain you with interesting stories about investors, founders, and operators (this can sometimes be helpful for cap table management purposes).
Today’s letter is a transcript of Paul and Dalton introducing their new firm, Standard Capital. In this video, Paul and Dalton share how Standard Capital works, the Standard application process, why they don’t take board seats, group office hours, what they’re looking for, their standardized documents, their long-term vision for the firm, why they target 10% ownership (instead of the typical 15-25%), and funding cycles.
I hope you enjoy this conversation as much as I did! This is a particularly interesting video (and firm) for several reasons, including the fact that they are both looking to disrupt a model (Series A fundings) and building atop an existing model (Y Combinator).
Have a reason for existing. Ironically, investment firms are always thinking about company differentiation amongst their stocks, but never think about it for their own firms.
In this regard, venture capital firms are just like hedge funds. However, in this short video, Paul and Dalton highlight the key differentiators of their firm, thus answering the eternal questions of why their firm should exist and why founders should apply (and choose) them. There is a bevy of lessons to draw for anyone looking to build an investment firm, from philosophy to design to communications, and beyond.
[Transcript and any errors are mine.]
Related Resources:
Meta
Meta Podcast (2 hours) [Free]
Meta Deep Dive (Full report: 166 pages)
Meta Business History (~18 pages)
Y Combinator
Transcript
Dalton Caldwell: Standard Capital is a new Series A firm started by three of us: you and me and Brian Berg, and we are building an entirely new way to do Series As.
How Standard Capital Works
Standard Capital has an application process, and anyone in the world can just apply, and you don't need permission, and--maybe, please don't email us--we don't want pitch decks. I know this is the opposite of most firms. Please don't send us your pitch decks or cold emails or warm intros. Use our application process. We're gonna get back to people quickly. We'll have an interview format. Do you want to give them a quick overview of how we interview startups?
Paul Buchheit: One of our big priorities is we just don't want to waste your time, so we're only going to interview companies where we think there's at least a reasonable chance that we might want to fund them, and then really, we just dig in on how good is this founder, how big can the idea get? And actually, that's one of our big focuses is we're interested in companies that are going to be, or have the potential to be, historically significant, companies that could be worth $100bn or even $1tn.
Standard Application Process
Dalton Caldwell: This is something that we always taught founders at YC, which is, you want to minimize the amount of time you spend fundraising, because when you're fundraising, you're not actually creating any value. You're not talking to users, you're not making sales, you're not growing. It's net negative. And so part of the way we constructed Demo Day at YC, of course, you know as well as me, is to just compact fundraising into a very small window of time, and it's tremendously successful. This is one of the reasons YC works, is that demo day works well at taking a year worth of fundraising and squeezing it into two weeks. And that's tremendously valuable for the startups in many ways. We're trying to do the same thing for Series A, which is compacting what is normally a multi-month process into effectively one or two weeks to get a decision. That's super helpful to founders in a lot of ways. It's kind of fascinating that you can still innovate on a fundraising process.
Paul Buchheit: The reality is that Series A hasn't changed since the 90s. It's the same product that it's been all along. The reason, I think, is just that investors haven't been forced to change--until now.
Board Members
Paul Buchheit: As many founders know, the really only job of a board member, or the most important job, is to fire the founder. If we're just helping you, we actually don't need a board seat to help you. And obviously, one thing we've learned through many years is that founders actually don't like being fired, so we think that'll be a big feature.
Dalton Caldwell: Did you do some market research on that?
Paul Buchheit: We did market research, yeah.
Dalton Caldwell: Well, it's funny, because remember, before YC existed, it was normal to give away a board seat in the seed round. I did that as a founder, I gave away a board seat in the seed round, and then YC came out and changed everything. And you'd have to--it's not a great sign, I guess is a nice way to say it, if you give away a board seat in the seed round.
Paul Buchheit: Yeah, exactly. So it's been long enough now that people don't even realize this, but 20 years ago, when YC was being started, it was normal to give up a board seat, and actually raising the seed round was a huge hassle, because you need to find a lead investor, you need to gather them all together, and a founder could easily spend months gathering that up, and then, such as yourself, end up actually losing a board seat, as well as relatively high dilution. So our belief is right now, Series A is kind of in the same place where a seed round was 20 years ago, where it's a slow, painful process, takes too much equity, and you give up a board seat. So the same thing we did 20 years ago, of changing how seed funding works to where now no one gives up a board seat, and you actually just go out and raise on your own terms.
Group Office Hours
Dalton Caldwell: Tell the audience more about the group office hours format--I guess, for context, folks out there, PB actually invented group office hours at YC.
Paul Buchheit: Yeah, so back in probably 2012 I would say, I started doing group office hours at YC. And honestly, the original motivation was just, I found regular office hours a little bit lonely, and so I thought, Well, why not just get together a bunch of startups and maybe a couple of partners and do it all at once. And it worked far better than I had anticipated. And the reason for that is actually that founders love helping each other. And so when you have a group of, let's say, six startups together, and you're talking about, What are your biggest challenges, what are you focused on? Very often, if one founder has a problem, two other founders in the same group will have solutions. And so it kind of just magically works. And of course, you know, these are very ambitious people, and they all want to help each other out, but they all also want to be the best. And so there's a kind of virtuous competition where everyone is kind of encouraging each other to level up.
What We’re Looking For
Dalton Caldwell: So basically this ties into kind of what we're looking for at Standard Capital is you've seen what great looks like at these early stages. What does great look like?
Paul Buchheit: Well, so what we're looking for really boils down to three ingredients. So the first ingredient is: Great founders. And again, having funded thousands of companies, one thing that we've learned is that if the founders are only mediocre, even if it's a great idea, it's not going to work out. Someone else will win. So we have to believe that that the founders have the potential to really scale up to building this kind of company. Secondly, it needs to be a huge idea. It has to be something that has the potential to to be worth, yeah, $100bn, to where I can look 10 years into the future and actually see this is a core part of the future in the same way that I routinely take out my phone and order DoorDash today. It's just become a part of my everyday life. And then finally, the third ingredient, because we are doing Series A, is we want to see that there is product market fit. So this is the real line that separates Y Combinator from Standard Capital, is product market fit. So people who just have an idea, or maybe less than an idea, that's really a sweet spot for Y Combinator. But once companies have graduated, whether they went to Y Combinator or not, and they have reached the point where it's clear that they have made something that people want, that's the right time to apply to Standard Capital.
Standardized Documents
Paul Buchheit: So, Standard Capital, does that mean everyone gets the same terms?
Dalton Caldwell: Great question. So, no. The terms are different. As part of the application, there's a text box where the founder will actually type in how much money they want to raise from us in exchange for 10%. And so we are happy to pay market rate--that doesn't mean way more than market rate, and that doesn't mean below market rate. We think founders will be very thoughtful about choosing the right amount of money to raise from us--and all those deals will be for 10%. What is standardized, though, is the documents themselves. We are creating documents with our attorneys and putting them on our website so every founder will be able to see our term sheet, as well as our Series A documents before even applying. And the benefit of that is everyone will know exactly what the deal is, and also save all this legal hassle. You remember in the bad old days before YC and before the SAFE, used to have to hire lawyers to close 50k convertible notes. Before the SAFE existed. It was like really hard, and it was just duplicative legal work. And with the invention of the SAFE, every SAFE can just be signed. It doesn't need a lawyer. We are aiming to do the same thing with Series As. And to put our money where our mouth is, when we fund a company, assuming they use our documents and don't mark them up a lot, we are not going to charge any legal fees to founders. And that may seem obvious, I don't know, maybe some of the listeners out there, but one ugly truth about the VC industry is that VCs bill to the founders their own legal fees. It's usually about $30,000 per transaction. They invest in you, and then they give you the bill for their legal fees every time. And so we are not going to do that, which shows the efficiency of the Standard Series A.
Long-Term Vision
Dalton Caldwell: Tell everyone about kind of the long term vision and how building this community of founders is going to be more valuable over time, like just walk through what this turns into.
Paul Buchheit: Absolutely. So again, part of the value that we've seen at YC is when you actually just get together a group of impressive founders, people who are on the same level, the value of that community is tremendous. And so what we want to do is build this community of really the top up and coming AI founders, and we're targeting top 2% of companies coming out of YC. And so what you're going to have is a very select community of people who are really working together to build the next generation of great companies.
Why 10%?
Dalton Caldwell: PB, I know dilution is an important topic to founders. Obviously, it's good to own more of your company. What are Standard Capital's thoughts around doing a 10% deal, and why is that the right number than how most Series A work, which is higher?
Paul Buchheit: Sure, absolutely. So traditionally, Series A is the most expensive round. Venture firms usually want 20-25% stake in a company, and when that's combined with the employee option pool and everything else, that causes a lot of founder dilution. And our view is there's no reason. Why should Series A be more expensive than seed or more expensive than Series B? So 10% is the number we chose because we think that works for our model, and it leaves plenty of room for pro rata, for seed investors or anyone else, without causing excess dilution on the on the founders. One thing it's important for founders to remember, though, is that that 10% is still at what we consider to be a market rate valuation. So if you would raise, let's say, $10mn at a $50mn from a different firm, that would give you a 20% dilution. If you would instead raise $5mn at $50mn, that would be a 10% dilution. It isn't that you should come to us and expect to get $10mn at a $100mn valuation.
Dalton Caldwell: This is one of those little tricks that I think investors were able to pull off, is to have founders brag about the total amount raised, but neglect to mention the important detail of what valuation they came at. And this creates an incentive to take more dilution, because it's a bigger number to brag about on Twitter or what have you, but man, when you're sloppy about how much you raise, we saw this at YC demo days, when you're sloppy of not paying attention to dilution, that ends up causing regret.
Paul Buchheit: Yeah, it's always very tempting to just keep grabbing more money, but remember, you hope to have higher valuation in the future, so you really only want to raise as much as you need right now.
Funding Cycles
Dalton Caldwell: So, we're going to do around 20 investments a year. How is that going to work?
Paul Buchheit: Right. So we do four funding cycles--every three months. We're going to have another call for applications. Of course, you can apply anytime, but if you apply by the deadline, we will quickly review your applications and get back to you, let you know if we're interested in interviewing or or not.
Dalton Caldwell: Great. Thanks, PB.
Paul Buchheit: Thanks.
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Wrap-up
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