Introducing Initialized Capital | Hacker News Reader

Introducing Initialized Capital

initialized.com

548 pointsernestipark149 comments

Hi HN! Happy to answer questions here, which is funny because this is where it all really started for me back in 2007 when I was first thinking of starting my first company. I started as an HN reader working at a friend's startup, applied to YC and got in, became a YC partner, and then an early stage investor.

We're engineers and designers and product folks, and most investors aren't still (which is crazy, right?) so we figure if we can do what we're doing while being the investors we wanted when we were founders, that's about as good as it gets.

Congrats to you and the team. I take it your primary focus is SF. Will you look to invest in the broader US? And are you interested in specific areas/industries or more in finding great teams/founders?

We've funded companies all over the place, and it just so happens many of them are in SF. If anything, the ongoing housing crisis that's systemically being ignored by local politicians is making it that much more likely our next startups don't start out in SF.

We've always been pretty sector agnostic, but we're software folks so that's what we know best. A lot of the things we're spending the most time with are "file cabinet" industries — any market where if you walk into the dominant player's office, you see lots of file cabinets or fax machines. A software-enabled startup will probably do a lot in those spaces. What's funny is you can pretty directly extend that to any business that still mainly runs on Microsoft Excel and email too.

Founders matter, but so do markets. We've seen so many of our talented friends end up working on new capabilities that don't solve a specific problem, or don't have a real market. It definitely takes both.

Thanks, appreciate the detailed response. Look forward to seeing how it all plays out.

Hi Garry, congrats and good luck!

My question: will you follow other investors pattern for whom only warm introductions matter?

I read in the press other SV investors stating that exactly zero investments were made as a consequence of a pitch through the contact email. Will this be true to you as well?

thanks!

We're trying to figure out ways to get around this for later stage seed investments. We don't have a solution yet, but we're working on it.

In a thread below I talk about file cabinet industries — industries that basically have no software, and are horribly inefficient. Investing is absolutely one of those, but only using email and calendaring. The main bottleneck for investors is number of hours in the day, because there are very few people making all the decisions. Warm intros are the only way a non-software system can work.

So, spoiler alert, software. :-)

"So, spoiler alert, software. :-)"

This got me thinking... I really do think that better tools for sourcing deal flow are a foundational component of the next age of entrepreneurship. Crowdfunding isn't working as precisely as some have hypothesized. I'd be really curious to see how companies like AngelList & Mattermark are parsing their data to determine correlative attributes of "fundable" companies. Any thoughts/ideas on traction toward successfully automating dealflow?

I have been building my own mini version of Mattermark as a curiosity project. I'm not even interested in deal flow as much as being able to predict rising startups. In terms of being a software engineer, I look at this is a career tool.

I'm sure the bigger VCs and accelerators are building interesting things in this space but I haven't found much that's open source.

As data points, AngelList and Crunchbase are good starting places, but the AngelList API is private and the Crunchbase API is paid.

VC tweets is also a great signal. Not perfect, but great. You can most tweeted startups every week here: https://chartups.com/topstartups/

Great signal for what?

There's https://aleph.vc/meet-ampliphy-our-aleph-operating-system-47... - but AFAIK it is homegrown and not being offered to other funds.

>We're trying to figure out ways to get around this for later stage seed investments.

Does that mean that seed stage companies should not bother contacting you unless they can get a warm intro?

Whether stated or not, this is basically true of all professional VCs. That doesn't mean it's right or wrong, only that if you want to get funded, figure out a way to get an introfiction. It's far from impossible, even starting from nothing, and it's much easier than 10 years ago when far fewer VCs wrote/tweeted/commented in public.

By late stage for us, I was thinking that you still also have YC for the earliest stage and it's still the best way in the world to "cold pitch" someone but still have a chance to get funded and identified with no existing connections. It worked that way for me, anyway.

Regarding software, have you guys used Gust [1]?

[1] https://gust.com/investors

Hi Garry. I've invested in over 100 YC startups (mostly through Wefunder/FundersClub/Angel.co). Can I invest in your fund? Obviously I believe in the business model. If not where else should I be investing?

We're spoken for, but I appreciate it. I highly recommend YC demo day and checking out YC-backed Funders Club.

Hi Garry, congrats! As an entrepreneurial startup software engineer, this firm is pretty interesting to me.

Can you discuss what each GP's focus is? Are there certain categories of companies you would handle vs Alexis, etc?

Alexis is amazing with all things product, marketing, and community. Alina is best with engineering, hard tech challenges, and hacking growth. I focus most on product and design. Kim helps people with marketing and PR.

We all help people with their ideas, helping founders manage the difficult psychology of starting something new, and making sure that the startup can get to the next milestone: engagement, growth, and profitability.

How early is your "early stage"? Also, what's the best way to pitch to you?

Please email me directly - garry@initialized.com

Hi Garry - awesome news! Couple of questions: you mentioned about funding outside of SF, do you invest outside of the States too (i.e. the UK)?

Also, great to hear about support for smaller team sizes and investing pre-team as it were, but what's the plan for growth sizes? Pushing for unicorns or some of the portfolio aimed at smaller niches?

Edit: also, used to be a Posterous user, and actually had a product in a similar space which Arrington read out on your TWIST episode :)

We've been spending some time in the UK and really think the ecosystem in London is impressive and growing with real companies doing great work. We haven't invested any UK-based startups yet, but have funded many UK founders, if that's worth anything? :-)

We wanna invest in folks early. The fund isn't for investing in B's or C's or later, since there are plenty of people who are good at that.

Hi Garry, Its inspiring to see you started here in 2007. I've never talked to investors before. What would be your advice, if I need to get started?

Try to use plain spoken language to describe what you do, who needs it, and ideally what you've done already. Doing that alone will get you to better than 80% of pitches out there.

Thanks for the answer, Garry! Very simple and direct.

Two quick questions: Of the investments Initialized has made, what percentage of them are non-YC alums? Of those, how did they connect with Initialized? Cold email, warm intro, etc?

About 1 out of 3 startups from our last fund were not YC. Many came from warm intros, but a few I scouted and found myself. I went out and recruited Bannerman to YC personally (they're focused on security, which fulfills a key role on Maslow's hierarchy of needs), for instance, and then later invested afterwards.

Cold inbound emails haven't worked well for me, but that's where software down the road should help.

so a quick follow up: how many startups of the last round were not located in SF? Sometimes as a non US citizen it seems like the whole startup world is all centered in SF...

I'd say 2/3rds are in the SF Bay Area.

SF/SV is still the most concentrated place for startups, so when you want to grow fast it's still probably the most concentrated place for talent and capital. You can certainly start a company anywhere (and people are, and that's great!), but when you want to grow fast many people still move here, now increasingly at the Series A.

I love the bay area. Worked at startups there off and on for over twenty years. But it's precisely because its the center of the universe that when I start my next company, I'm going to do it somewhere else. I do love it there though.

Hi Garry, Do you guys hold office hours for startups in your portfolio or anyone can schedule some time with you? And what should one do to be prepared for the office hours?

Thanks

We're working on a system to do this, and will announce it when it's ready. Sign up for email notifications at initialized.com to see when it's up.

Big congrats, Garry. I've been a lurking fan of yours for many years now and this day honestly feels like an inevitability, even though I know it's required a ton of effort largely invisible to me.

Clearly one unique value proposition of your fund is that sweet combination of check amount, time to close, and stage of investment. That's certainly appealing.

But I've learned over time that I care most for my fellow founders in the trenches. I love my people. And with your fund, the people involved – especially those in your portfolio – appears to be a huge draw.

I've had the privilege of interacting with at least a few founders of your portfolio companies and to a person they are all stellar. Fred of Rainforest and Brad and Matt of SendWithUs were all kind enough to come on our fledgling little podcast (thanks again!). And I first spoke to Jarrett of EasyPost as he dove into responding to my support emails; still wear my EasyPost t-shirt all the time!

Some questions that popped into my head while reading:

- One of YC's great strengths is your community of peers. How do you plan to create such a community within your portfolio?

- How strong a hand do you expect to have in guiding your investments? (Trying to get the mental model right of where you'd sit between an AngelList syndicate, a YC, or a full-service firm like a16z.)

- Do you expect to be amenable to alternative exits, for example distributions at some multiple, a la Indie.vc?

- Why are your checks typically in the $500K - $1M range? (Personally not sure my company would need that much capital, so I would like to be careful of being cash rich as much as cash poor.)

Hi Josh, thanks so much! I feel the same way - fellow founders are our peeps. Great questions.

Community is of course amazing to have, and very necessary. We've all been to those horrible mixers where everyone runs around talking about how they're KILLIN' IT. Those are huge wastes of time. It's always done through the little things - events, mixers, dinners where smart people hang out and know that they can trust each other and share what's really happening. YC has worked incredibly well because everyone knows that you can trust each other since if you violate that trust, you'll get kicked out of the community. It's something more people should do. Of course since we're later stage, the founders will be spending a lot more time with their teams than with each other.

We're probably in between YC and a16z. We're a smaller fund, so we can't afford as many operating partners and staff, but we'll be able to do a lot. My goal is to spend almost all of my time with the 20 or so companies we work with in a year, so it'll be more concentrated. That's what will be necessary to get companies from seed to Series A, across that dreaded funding gap.

We've always supported founders to make the right choice whether they want to sell, or not. In terms of alternative exits we haven't gotten there yet, because that model is pretty unproven but I really like what Bryce is doing and I really want it to work, because its clear there is a lot of stuff out there that should exist but can struggle to get capital.

Most seed rounds we see come together are between $1M and $3M these days, so that amount of capital lets us get our percentage ownership (which is necessary for portfolio construction) while also letting a good round happen with other good seed investors. Most folks want at least 18 months to 24 months of runway to get to a solid Series A or profitability, so a lot of these numbers work backwards from that.

Thanks again for your questions Josh! Hope we can be helpful to you down the road.

Thanks for the great answers here. This definitely provides a lot of context to how you're positioning the fund. Some of this was signaled by the round size, but certainly didn't want to assume any of that.

Really hopeful to see Bryce's model work, as well. Am keeping an eye out to see if your fund experiments with similar models.

I just read your team page and you feature Palantir somewhat prominently/proudly (you and Alina). If I feel uncomfortable with mass government surveillance, should I simply not apply for any sort of funding from your fund? I see no ethics sub page, could you outline your basic ethics code (what sort of companies won't you invest in, will you invest in competing companies etc.)

This is a serious question, I hope it gets read and answered and not down voted into oblivion.

I think what you want so say is:

"How does ethics enter into your investment choices? I see you feature Palantir prominently and I have strong feelings about mass government surveillance."

If this is a serious question, maybe don't start with something so aggressive?

You're mistaking Palantir for the NSA. Palantir has rock solid access logs and access control that actually prevent the government from breaking with due process without court orders.

Personally I'm anti-surveillance and have been for a long time, particularly the kind of stuff Snowden and others have exposed where there are warrantless wiretaps and long term storage of private citizen information. I've blogged about it many times on my blog. Palantir didn't have anything to do with that and to my knowledge never has.

Initialized doesn't invest in alcohol, tobacco and firearms as a rule because of a mandate from some of our limited partners. Just rationally we believe in funding things that do help people. We generally stay away from investing in directly competing companies and when that does come up (usually through one company pivoting) we make sure that a single partner is assigned to each and those partners are particularly careful to firewall sensitive information. It's similar to what YC and SV Angel have done for years and it works well.

For full transparency: I was Garry's Chief of Staff for 2 years before joining YC.

Garry and Alexis are the most founder friendly investors I've ever had the pleasure of working with. Late nights and early mornings in every time zone were normal for them. When I managed Garry's schedule, he held 3-5 hour blocks every single day to talk to founders. Then, in addition, we'd squeeze in as many calls and meetings the schedule would allow to speak with founders who reached out cold asking for general advice. A nightmare logistically sometimes, but a true testament to just how much they care about helping others.

When stereotypes of fund investors are that they are sluggish to make investments, quick and impatient when it comes to vetting teams and products, it is refreshing to see that Garry and co consistently break that view with their founder-first approach.

It might be an understatement for me to say that I'd recommend Initialized to any founder!

We met Garry, Alina, and Alexis at YC16 investor day. After talking for twenty minutes, they said "we're going to go talk about you behind your back, then give you an answer."

They made a decision in 2 minutes.

That's what it's like working with other founders. There's no bullshit. They proactively ask how they can be helpful, are empathetic and understanding when we go through tough times, and push us in a great way.

I'm pretty critical of a lot of Silicon Valley, but we are big fans of Initialized.

I’ve known Garry since 2010. Even though he didn't know us at the time - he met up with us to help us hone our YC pitch. He later became our adviser. Awhile after, when I showed him our growth numbers, he offered to invest, which then triggered a round. He didn't need to follow anyone else to decide. When we had an announcement, Alexis helped get us press. There are tons of helpful moments like this.

When I talk to other founders, I keep hearing how helpful they are. This is one of the most talented and genuine groups of people in the valley.

Congrats on the raise!

I met Garry in 2014 during YC. After our first office hours with him, I knew Garry would be a valuable go-to. He's a legit advisor because he can dig in at any level with you - founder stuff, company, go to market, users, working with big companies, design/code, hiring, raising money, prioritization, etc, etc. Part of that comes from being a YC partner and seeing that large sample size of startup problems. But he has also built inspiring products, led teams at large companies, is a brilliant developer and designer, and flat out an all around great guy.

So for me, this announcement is bittersweet. Initialized will be great for so many early stage founders, but now I don't have a simple way to book office hours with Garry. Well actually, I bet if I shoot him a message, he'd still be glad to help anytime.

Thank you so much Paul! Yes, you know where to find me. :-)

hey - this is apoorva from instacart s12. we'd not have been in YC had it not been for Garry Tan! full story here: https://techcrunch.com/2012/08/18/how-instacart-hacked-yc/

really happy to see this happen. i think this will be great for the community.

Congratulations Garry!

A few questions.

1. An obvious question is: Why start out on your own rather than via YC as you've done for a while and seems to have succeeded for you.

2. Would you actively seek investments from outside the United States? As you may well know, emerging markets are gaining a load of attention. In 3 months Nigeria would have hosted Zuckerberg, YCombinator and 500 Startups. (You're always welcome :D)

3. What's the investment thesis of Initialized. Didn't see an Investment Thesis on the website.

Congratulations and all the best!

PS: Not sure if you remember me but you were in the panel that interviewed me for YC in Summer 2014

YC is awesome and I remain a super big supporter. I owe half my career and most of my friends to what an awesome family YC has become. What I realized was just that I could help companies the most in that 9 to 18 months you have after YC is done. I have a pet theory that in the next ten years, you're going to see the YC alumni turn into the most powerful set of investors in tech, and that'll be a good thing because we have a pretty strong shared culture around being good to founders and helping, and frankly doing no evil, which seems like it should be a basic thing for early stage investors but really isn't.

We have no specific mandate for US-only, and we think startups are absolutely happening everywhere and we want to help them.

An investment thesis at the early stage is really hard to do because we don't know what people are going to start when they're just a few people starting out. E.g. it would have been impossible to write an investment thesis that would include Coinbase early on because nobody was thinking about cryptocurrencies.

Thanks so much for your questions Oo!

Story time folks! I have known Garry and Alexis for many years now. They lead our seed round and we invited Alexis to be on our board for a brief period of time.

So, when we were raising Series A, the negotiations with some new investors were getting a little tenuous. I knew and appreciated that investors are professional negotiators and do this for a living. I on the other hand was a first time CEO. So, for some time during the process, I was feeling a tremendous amount of pressure.

So, one morning I come in to the office feeling sick and questing my ability to withstand the kind of pressure a growing company's CEO has to endure. First thing I see is this short email from Alexis "How's it going? How can we help?". I had talked to Alexis and Garry a few months before about raising a Series A but I was sure that famous people in the valley with full-time jobs had more important things to do than check in on a small, pre-series A company with 10 employees.

I welled up. It was the first time in months that I had felt like someone had my back. In the end we were able to raise a successful A followed by a successful B as well but I still go back and read that 2 sentence email from time to time.

Garry and Alexis are not only awesome investors but wonderful human beings.

Congrats Garry -- I just wanted to chime in with others to say that Garry was an incredible investor in our seed round -- always helpful, and has been very loyal in good times and bad. If you can work with him I highly recommend it.

Is there a reason why the startup list is a giant image rather than a table of links? It'd be nice to hit each startup's landing page as I'm browsing your list of clients.

Not that big of a deal, though. Interesting VC being product people instead of finance people :)

Working on it. :-)

I met Garry while he was a part-time YC partner during S11. Office hours with him were always helpful and productive. He gave thoughtful product feedback, facilitated countless fruitful introductions, and helped us navigate fundraising and an acquisition. He’s laid back, easy to talk to, and doesn’t bullshit or play games. After YC Initialized invested a small amount in us and he continued to be one of the most value-add investors we had. I can’t stress enough how much value these guys bring to the table. I’d be honored to work with them again.

Garry was one of the first investors in Coinbase and acted as my CEO coach for the first ~6 months of the business, during a very stressful time. He was incredibly helpful to us early on! Would recommend them as a firm.

This is fantastic news for entrepreneurs everywhere.

Garry has been instrumental to the success of my company from the earliest days when we were back in YC W11 through to the present day - I'm so excited for all the new founders who will get an opportunity to work with him as a result of this new fund. Garry is not only an extremely kind person, extremely smart,but also completely understands what it means to have ups and downs as a startup since he's been there and helped hundreds of other companies through those ups and downs. So when you need someone in your corner he's there every step of the way. If you're an early stage founder I couldn't recommend Initialized and Garry more highly - super excited for what Garry and team are going to build.

If you haven't met Garry, Alexis or the rest of the team, by now you will have read that they have all worked very hard to earn all this good will that's reflected in the comments. And if you're wondering how you can be like them one day, it's really very simple - pay it forward and be kind. Obviously, it helps if you're also incredibly smart and experienced, but the first two items alone will get you very far.

I first met Alexis in 2011 in Austin, and to this day my wife and I often reference the many different nuggets of wisdom he shared with us. A couple of years later, I met Garry at YC, and his support far exceeded the typical business stuff - we were having a hard time at one point, and his help made all the difference.

What I appreciate the most about people like this group is that they are setting a high bar for everyone who's trying to be a value-adding investor - and people are also stepping up to the plate. The amount of help that my current startup has received from people with no skin in the game is truly remarkable, and people like Garry are the real reason why building a startup in the Valley is easier than anywhere else.

Just wanted to echo the sentiments about having an investor/friend who sticks with you through the thick/thin. I think some investors are all about downside protection and it usually manifests in legal instruments that benefit the investor if anything goes wrong, but more importantly, you can tell by the way you're treated. It's rare that investors don't have the "game" change them. They start to focus on their returns, care only about a few number of winners (when in fact, writing the check is just the beginning to making sure you have an active winning investment). Lots of these investors completely forget why they are VCs in the first place.

When Esper was changing from an AI assistant company to a calendar analytics company, we went through one of these moments. Some investors were immature frantically trying to find an edge, while some others did everything in their power to help us transition. When things get tough, you realize who has grit.

I remember thinking that Garry was uncannily nice with us during this trying time (to be fair, I've known him since we were both founders and consider him one of my best friends in the bay area). He was always solutions oriented, introducing us to people, thinking through problems and just giving more of his and the Initialized team's time than probably we warranted. The reason why he was that way was because he cares about you (the founders and the team) to tackle a problem you care about. He would always say that when he started investing - "I'm just afraid of being a straight vampire" i.e. an investor who is just leeching off a growing beast.

In a weird way, he's the type of investor, similar to how PG describes great companies - they're kind of like non-profits. They just want to solve problems and it'll work out. That's probably the reason why he's done so well.

Anyway, respect him because he sure as hell respects you.

This comments section feels like an Amazon review page of a product that launched a month ago with 1000 5 star "received product with discount here is my unbiased opinion" reviews.

If by received product you mean we invested in early stage companies and helped them grow, then yes?

It's because Garry really cares about (a) other people and (b) what he does. That kind of thing produces this sort of comment section.

The effect is amplified because many of the people Garry has helped are part of this community. That includes me personally, not to mention various things he's done for HN itself over the years.

Congrats Garry, Alexis and team. Just to add another anecdote: We are backed by Initialized coming out of YC S16 batch. Incredibly awesome to work with such founder friendly investors. I'm sure the perspective that Garry/Alexis gained by going through YC themselves gives them this sort of empathy towards other founders.

Just a quick note to say congrats to Garry and Alexis. Garry helped us out a ton at 7 cups. He said a startup is like a magnet. The more users you attract, the more powerful your magnet becomes. Alexis has also always been very encouraging and helpful in figuring out things that are not obvious. I highly recommend Initialized!

> He said a startup is like a magnet. The more users you attract, the more powerful your magnet becomes.

It doesn't matter what I swap out for 'users' in this analogy, I can't make it make sense. It sounds impressive though.

network effects. If you are a marketplace or service you need both sides ramping up fast- the more users you get the more valuable it becomes and easier to attract more and so on.

...and this is like a magnet.... how?

Might be something like adding an iron core to your magnet? Not sure, the analogy is sketchy at best.

One talk I like to give at college campuses is such: A startup is like the obscure 1990's Playstation game Katamari Damacy. You start off with a small magic ball about the size of a pencil eraser. You can pick up anything smaller than you, but if you try to pick up something too big, you bounce off and get smaller. You start picking up paperclips and chess pieces, and then by the end of the game (spoiler alert) you end up picking up skyscrapers and continents and such.

It's like that. You start with bringing your cofounders together. Then you add your first customers. Then maybe you raise a little bit of friends and family money, and that lets you put more money into customer acquisition, which gets you more cofounders, which lets you get more revenue to hire a few more people, and raise more money, and so on.

So startups are like katamari damacy, and if you win, you end up picking up an entire industry.

Upvoting this because of the Katamari Damacy shout out!

Unrelated, but did you ever play Nobi Nobi Boy from the same creator?

Yes, a long time ago — I forgot what it was called but thanks for the reminder! My 15 mo old at home will love it!

Hahah! Yes he will. Happy to help.

Congrats to Garry and the Team. Garry was one of our partners during YC W15 - he was incredibly insightful on product and design, generous with his time, and just plain nice throughout.

Thank you so much Dan! Really appreciate it.

Sanjay here from Boosted S12. Garry and Alexis and team were one of our first investors and have been some of the best people we've worked with. I am so excited for them and for all the new founders who will get to work with them.

Our company was part of YC S12, which was a huge batch before YC sharded itself into clusters. During that summer, Garry was one of few partners we actively sought out for advice. He was always extremely helpful, especially with product and UI suggestions.

Initialized was one of our earliest post-YC investors and we've been incredibly happy with their support for us during the many years since YC. We're happy to have them onboard and still talk with the partners quite frequently relative to many of our other investors. I'm excited to see what these guys will accomplish with their new fund!

Has one of the GPs directly invested in each of the startups listed on the "About Us" page or are some of those startups listed because of an advisory relationship or indirect investment (e.g. carried interest)?

We've invested in all of them, almost all of them in the earliest possible seed stage. (Small nit: Carried interest doesn't have anything to do with advisory shares.)

The sentence was a bit ambiguous. I should have written "or other indirect investment, like carried interest" to be clear.

Did you guys recycle a domain name? Blocked due to security concerns. You may need to work with the big vendors to get yourselves off the naughty list for actions taken by prior domain owners.

We finally got the initialized.com domain this year. What are you seeing? Let us know and we'll take care of it. Thanks for the note.

I wish I could be more helpful but I'm not aware of what vendor supplies my work proxy / site access rules: it's not part of the error message. I asked if the domain was parked for a while because it's flagged as potentially a placeholder domain.

It has been great to work with Initialized so far. When we had bad times, other investors acted poorly, they supported us. When we were going through a pivot, Garry gave us weekly office hours during a very busy time in his life. This allowed us to keep pace like we were still in YC even though it was 3 years after still under the same company and it set us up properly for the crazy growth we had for the next year. I would highly recommend them to anyone who has a chance to work with them.

Garry, Alexis, and Initialized have been extremely helpful and hard-working investors in my company for ~5 years. I love that they're founders themselves, which means they know what it takes and they work really hard to help their portfolio companies. These are the investors you want on your side, particularly when you run into road bumps. I highly recommend them as investors, and I'm happy to answer any questions (my email is in my profile).

They sound like amazing guys to work with. I'm sending you an email.

I feel very lucky to have had an opportunity to work with Garry and Initialized. They are incredibly helpful investors and I expect big things to come from the new fund.

This is fantastic news for founders. Survata (S12) was pumped to have Initialized in our Series A last year. Garry worked the closest with us of all YC partners, and Alexis had already been a customer! They make valuable customer intros, always offer time to help, and have such a pro-founder view of the world.

Hi Garry, and congrats on your new firm.

the age old question comes to mind; how do you value startups with a prototype with little traction. assuming the target market is the size of markets for airbnb,facebook,dropbox, etc.

do you guys follow YC with a fixed rate, (7% for 120K) like 10% for 1M; do you have a min and max for equity and valuation?

Thanks,

At the early stage this is always classically difficult. For both founders and early stage investors, you're balancing dilution vs. percentage ownership.

We think buying 5% of the company is the right level for a given seed fund. It's enough to be significant to return the fund, but not so much that you're crowding everyone else who you would want in the round. It takes a village to build a great startup and we particularly like to help founders put together a good syndicate of angels and seed funds, all of whom can help with advice, connections, customers, employees and just general support.

It's basically binary whether a company gets to metrics that help it either be profitable or get to a Series A— so that's why at the early stage (all the way to Series A really) most VCs work backwards from percentage ownership. So we write checks of as small as $300K for earlier companies at lower valuation, up to $1M or more for companies later stage.

It's enough to either get to the next milestone, or put together a good round. All of the real work happens after the raise, and it's usually a huge relief to founders to be able to get back to work.

Garry and the Initialized crew are simply the best!

You can really judge investors by how helpful they are during adversity. Through ups and downs, but especially the downs, Garry and Initialized have been the absolute best!

If you're a founder and you have an opportunity to team up with them, do it without hesitation!

Initialized is venture capital without the attitude. Garry has been an incredible advisor to us ever since our first YC interview (he and Alexis were both there actually). Could not imagine a more down to earth, insightful and energetic group. Congrats!

Garry - way to go!! Raising a fund of 100M+ while being so founder friendly is not easy. Of course building a stellar team helps. Nicely done!

I read your farewell letter when you left YC - you hit the nail on head by saying you haven't decided what to do because that would obviate the "founder's perspective". Founders who are going to a known from a known will never know the unknowns faced by a startup.

Everybody I've talked to has raves to say about you. We're solving the problem of paper Checks. People and Businesses are still writing paper Checks. Contrary to popular opinion, Checks moved 5X the money as VISA and MC combined in 2014. We're already seed funded but would love to talk more.

Thanks for the note. I'm happy to talk more — garry@initialized.com.

Congratulations to Garry, Alexis, Alina, and team! Such an awesome group---and an immense pleasure to work with. You won't find a more beloved group of partners in the entire Valley. So excited to be sharing in this journey together!

Seeing that minority black founders/teams only represent on average 3% of YC batches and you're current portfolio represents almost 2/3 YC, how would you suggest a founder who just so happens to be black navigate success or an opportunity with Initialized?

Also, if warm intros are the most effective lead source for deals but most of the YC network is non-black how does that at all address the huge diversity issue thats happening in Silicon Valley that everyone swears they are attempting to fix.

Does Initialized remotely care about this? If so, what are the numbers you can show to prove it?

We absolutely do. Kim-Mai Cutler has been great here making sure that we invite a diverse set of folks to our happy hours and events. We don't track ethnicity in our portfolio but do have many Latino, Latina and African-American founders. We are gonna do more here.

This site needs to be recategorized https://www.mywot.com/en/scorecard/initialized.com

Thanks for this. Working on a fix.

I don't know these guys. I just want to say kudos for launching a VC fund the way they did:

-Announced in public and on VC website.

-Who you are

-What you look for

-What you offer ($ size and intangibles from partners)

-What track record/prior vintages look like

-How to reach you

Too many VC funds are too opaque or they ask founders to go hunt down a random mutual connection, bother that 3rd person and then circle back to get introduced to the VC.

I like Initialized approach here and wish you a lot of success.

P.S. If nitpicking the website isn't exactly the most impressive looking. Doesn't bother me one bit. KISS. Hope founders look past that too.

This is great news for future startup founders! Having worked with Garry personally I can absolutely attest he is top notch. (disclaimer / cred: our startup is a part of the Initialized portfolio)

Garry and Alexis have been a huge help in getting Priime started, and have consistently given us solid feedback along the way. I can't say enough how excited I am to see them launch. Congrats guys!

Garry is bar none one of the best investors I've ever had the privilege to have worked with. Garry is down to earth and a great advisor. Highly recommend working with Garry to any entrepreneurs.

I still remember the time we came to office hours with Garry to get some advice on how to approach designing a new product, and in 15 minutes he sketched out an entire design -- which we used.

Congrats, Garry! It's a rare treat to get to work with people as smart, savvy, helpful, and kind as you and your team. I'm glad more founders will have the chance w this new fund.

Garry saved my company … twice. There is nobody like this team.

Super stoked to see this announcement, I know Garry has been cranking on the new fund.

Canadian founders, Garry+Alexis are super canuck friendly, some of the best investors we have :)

Congratulations Garry, Alina and Alexis! We feel incredibly lucky to be backed by them. Super founder friendly, tremendously helpful and always have your back!

Garry and Alexis were early believers in Cleanly and have been incredible seed investors. Highly recommend them if you can get them on your side.

Could not recommend an investor more strongly. Incredible how they've progressed since we met them with their Initialized hats on in 2012.

Few investors I've met feel like they're completely on your side. Garry and Alexis are two of few, and there is absolutely zero doubt.

Garry and Initialized have been amazing to work with. So happy for you and can't wait to see what awesome companies you invest in next...

Another upvote for Garry and Alexis from a YC alum! Garry was such an empathetic, helpful person throughout our startup journey.

Can't recommend Garry and the team highly enough. They've been incredibly helpful and we owe a lot to them!

Garry & Alexis are two of my favorite investors. They came on early in our startup and did everything you would want from a good investor. Besides being 2 of the nicest people on earth they're smart, connected, and will do everything they can to help. Love these guys.

I'm curious to know if there is a specific market you are focusing on (in terms of target market, such as IoT, Security as well as regionally).

How would someone make the determination that you are the right firm to pitch to? How would they bend your ear? What's the best way to get your attention? I'm missing a lot of this from your site.

We built software companies, so that tends to be what we know the best.

I think the question of sector is really hard for this stage of investment because early on I learned that the best companies to invest in aren't the ones who are hitting some specific buzzword like IoT, etc. Great startups don't work that way — they start with founders going after some specific problem and then later they become trends.

So that's why we think of meeting founders as just "doing the work." We have no choice but to talk to as many people as we can, and then meet them in person when it's useful, novel, or real. Please email me directly — garry@initialized.com.

Garry, this is a big fund. What can you do for founders with a large fund that you can't do with a small one?

There are lots of small seed funds now! And many of them are new. This way we can lead seed rounds and so when a founder gets our money, they know they'll be done soon (lots of smaller investors will follow on quickly) and will be able to get back to work faster.

Fundraising is always the worst, so anything that helps founders get done faster is the right thing.

Garry is an amazing investor and a great advisor! Wishing these guys the best of luck!

Garry is an amazing investor and advisor! Wish these guys the best of luck.

Hey Init! Congrats on the launch.

Curious, have you funded any startups under Init? If I had to guess, "Our Startups" are startups you (Garry / Alexis /et al) personally invested in.

I noticed that and felt it was a bit disingenuous; it's not as though Instacart (for example) interacted with or benefited from Initialized Capital in its early stages, and the relationships between Instacart and the Init team members who once invested in them are not necessarily good proxies for the type of service Init will provide new startups.

That's not actually true, we invested in their seed round directly from Initialized Capital. Apoorva's in the thread above with a testimonial. :-)

I stand, corrected.

What percent of company do you expect in return. YC has a pretty deterministic formula. Do you have a similar formula? Or do you decide (or negotiate) on a case-by-case basis

It really varies based on the company, stage, market. Check size typically $500K to $1M. We typically try to be the biggest investor in someone's seed round, and when we invest, the founder knows their round will be closed soon and they can get back to work!

I want to pen IT management office in Armenia can you answer me about startup amount

Are you actively seeking startups or do you wait for them to come to you?

What would be your Ideal investment and are you investing in Food Tech startups?

Garry was our group Partner in YC S'14 and I am lucky enough to know Alexis as well. Fantastic team that you want on your side.

Congrats Garry!! Curious who else is on the investment team?

"We’re founders who are engineers, designers, and product people. "

It's just me, Alexis and Alina. :-)

Salute Garry and team.. congrats Q:how founders will get in touch with you? Via referral like the rest?

I'm at garry@initialized.com!

garry and alexis are two of the best in the valley! a big congrats for all your hard work :)

congrats Garry and team! Any entrepreneur is lucky to have your team in their corner.

The news is out! Congrats guys!

Congrats Gary! Will you be sharing your deal flow or syndicating any of your deals?

We're trying to figure this out now — we're friends with both FundersClub and AngelList folks and it's something we've been talking about.

Huge congrats Garry. Maybe we will find a way to work together in the future!

Dude yes. Congrats on the ongoing success!

very cool. i know you guys mention startups, and IMO thats a pretty generally encompassing term. would that include game development?

Probably not. They're looking for companies with upside potential in the billions of dollars and game development doesn't really do that.

Unless you're aiming to build the next Unity or game dev/hosting platform, it's unlikely you'll get a Silicon Valley VC to invest in gamedev.

We've definitely spent some time and talked to a number of startups there. I'm happy to talk with you and help you with your pitch, and if we end up investing then all the better. garry@initialized.com

What are you looking for in your portfolio?

Congrats Garry!

any interest/aversion to hardware or hardware/software?

We've definitely funded hardware and hardware that's software-enabled. The economics and and execution required are very critical, so the bar just gets set higher, I think.

congrats guys! great partnering with you and look forward to seeing where you dig in with this fund

Congrats guys!

Dear Garry - is any VC really "founder friendly"? VCs expect founders to work for zero or minimal salary. Even a below-market salary is incredibly painful in any metro.

My question -- will VC-funded startups ever enter the realm of the non-wealthy and/or beyond bro's willing to bunk up in a studio apt?

That's incredibly not true. Sure you have to put in some work to get funding, but if you have a good enough idea+team+story+market, or existing product with traction and lots of room to grow, no one is going to expect you to cover your cost of living.

Not true at all. The general opinion of investors in Silicon Valley is that is that after a seed round, founders should take a salary where they aren't worried about their bills but aren't getting rich.

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