YC Partners Taggar, Tan And Ohanian Raise $39M For Initialized Capital | Hacker News Reader

YC Partners Taggar, Tan And Ohanian Raise $39M For Initialized Capital

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So, there's Chris Sacca's 'LOWERCASE Capital' and now 'Initialized Capital'.

Can 'ALL CAPITAL', 'MiXeD Capital', 'trailinG capitaL', and 'CamelCase CapitalPartners' be far behind?

Alexis already runs Das Kapital Capital ;P

http://daskapitalcapital.com/

File under "irony abuse" next to the Rattling Stick advertising agency: http://www.rattlingstick.com/

>CamelCase CapitalPartners

I imagined a very late-1990s VC firm, complete with swoosh logo. (http://37signals.com/enormicom/09.html)

Anyone have an idea how big the pool of institutional investors are? Everytime I read one of these funding announcements I feel like its the same couple hundred instituons giving their money to bunch of different funds...that end up investing in mostly the same companies.

I think you're asking about Limited Partners (institutional investors tends to refer to larger VCs, like Sequoia, accel, or a16z).

Off the top of my head, I'd guess around 15,000, such as endowments, trusts, rich families. Basically, anyone with a few hundred million dollars to invest.

I believe that getting into the top VC funds is very competitive and difficult, which implies to me that it's not the same LPs spreading it around. However, there are also funds of funds, which spread tens of billions from 10-20ish LPs across a range investment funds, and they would typically invest in a number of VCs.

Alexis is exceptional at giving advice around branding, marketing and brand awareness, Garry is an amazing designer and Harj is really good at strategizing. In addition, all three have vast experience as successful entrepreneurs and YC partners. They are also very well connected in the valley. Any founder would be extremely happy to have them on board. I see bright future for the fund.

  "YC Partners Garry Tan and Harj Taggar along with the early-stage firm’s “Ambassador to the East” and Reddit co-founder Alexis Ohanian have raised $39 million for a separate fund called Initialized Capital, according to an SEC filing today. 
  ...Taggar, who recently went part-time at Y Combinator, was not involved in raising this fund."

Am I the only one confused by this wording?

Harj is traveling right now. She means that only Garry and Alexis raised the money, but all three of them will invest it.

I'm with you. It's a confusing statement. Why include it?

To show that he wasn't fooling around with side projects when he was still full time at YCombinator?

The journalist wouldn't have put it had it not been emphasized by his sources. And if they brought it up it's likely because Harj giving less attention to YC is a sensitive topic for the other partners at the firm.

This makes sense; YC is all about paying a pittance to a huge number of people without experience or connections, and from that farm team a very small set of promising candidates emerge. Investing in that set would likely be reasonably profitable, especially as YC has already conditioned the founders to accept low valuations even though they are now in a much more exclusive pool.

especially as YC has already conditioned the founders to accept low valuations even though they are now in a much more exclusive pool.

Actually YC startups are conditioned (by the market) to expect higher valuations post-YC than they would attract had they not been through YC.

However YC encourages founders to care more about the value offered by investor than the valuation. At the same time, PG points out that the smartest investors double down on the best companies, no matter the valuation.

The main benefit of this fund for both the investors and the founders is that they'll be talking the same language and will be able to get deals closed quickly.

"people without experience or connections"...

You should meet some recent batches. The founders are generally pretty rich with experience and connections nowadays.

I wonder if they will invest in some companies who apply for YC but do not end up getting in.

Why don't they just do A-rounds for YC companies? Wouldn't that be the most obvious, and potentially profitable, play?

$39M sounds very low for a fund that wants to do A-rounds. They'd be out of money after about 5 companies.

While the term "A-round" has a changing meaning that has been especially fluid over the last couple years, two responses to your point: first, 4MM is (as an example) a perfectly respectable A round, and 39MM would buy 8-9 of those --- which is also a perfectly respectable number of companies for a small fund portfolio; second, full-on "institutional" lettered rounds are often syndicated, and usually want primarily for a fund to lead the round, so perhaps their play is to lead a bunch of syndicated rounds to help catalyze funding for companies.

8-9 companies would turn it into a highly speculative fund, given the expected distribution of returns for typical startups. I would expect a 39M fund to invest in "seed stage" companies, in chunks of 100k to 1M tops. I'd expect them to aim to have between 50 and 100 investments when the fund is fully deployed.

Yep, this makes sense. Still, it's enough cash for them to be involved in or even lead syndicated rounds. Either way: seems like a fun thing to be a part of.

an amazing convergence of talent to say the least

firms commit about half their capital to the first investment, and about half to follow-on financing of the winners.

Uncle. UNCLE! I was wrong!

You reserve capital when you do an A to keep your pro rata, so a $3mm A usually needs 6 or so committed.

For every investment made most firms hold at least 2x that amount in reserves for future rounds.

I believe PG has said that YC won't do follow-on rounds for YC companies due to the signaling effect that would have for outside investors. Then again, I know some YC partners invest in YC companies independently, so it seems like something of a grey area.

Correct; YC doesn't do any follow-on investing.

But all of the YC partners individually invest in follow-on rounds. (as individuals) I'm fairly sure that this is much more lucrative than what they make from YC funds.

This is definitely my thought. This must be for a Series A fund - given that is where the glut is, per PG.

But not sure that $39M will be sufficient.

Although, the more I think about it...."Initialize Capital" is an clever name for a seed stage tech fund.

I assume their investments will be pretty incestuous with YC's. At least indicated by their Google description:

"Initialized. Home. Create a free website with Weebly. Quantcast."

Weebly (YC 07)

Good catch that Weebly was YC. Only hear of it from super novice people needing to make websites and was kinda shocked when I saw that in the metadata

$39m makes it an average-sized microVC/super-angel fund, likely to focus on seed investments in the $100k-400k range as part of a syndicated round.

For comparison, you have a host of small funds like Data Collective ($10m) and Crunchfund ($20), some mid-size seed investors like 500 startups ($30m) and SV Angel ($40m), and larger seed investors like OATV ($85m), Harrison Metal ($85m?) and Baseline ($100m).

Cool.

Curiously, the simple homepage has an excessively cluttered source code.

http://www.initialized.co/

Weebly always looks like that.

I was using Heap Analytics on a Weebly site and didn't understand any of the variable names at first. They're definitely using naming conventions in the source that make it easier for them to manage (as opposed to optimizing for users).

Will this make them the go to firm for YC companies looking to raise?

Hell yeah :)

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