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At Initialized Capital, Odd Couple Looks to Do VC Differently (forbes.com)
83 points by prostoalex 3 months ago | hide | past | web | favorite | 42 comments



Garry, Alexis, and the team at Initialized are the real deal.

In a world where most investors' first question is, "Who else is in?", the hardest thing for a raw startup to find is someone with the conviction to write the first check. They've built their whole firm on being willing to bet on companies before other investors do.

Later on, when things get tough--and eventually, things always get tough--you want somebody who's been in the trenches, knows how it feels, and can help you guide the company between Scylla and Charybdis. Garry and Alexis have been there, and they do that.

If you're starting a company and looking to raise funding, I'd strongly recommend you speak with Initialized. There's a lot of talk in venture. Garry and Alexis walk the walk.


Can we get a disclosure on your relation to Initialized?


They invested in my first company, which went through YC's S11 batch.


Article leads with a photo captioned "Garry Tan and Alexis Ohanian are looking to a build a VC firm for 'the next 100 years.'"

The closest the story comes to expounding on this that the firm has their own CRM software and that they "value doing our own research." A succinct summary of the article may be the paragraph leading "Like most VCs, Initialized says it isn't like the other VCs."


I can’t help but wonder what it is about tech people that makes them so eager to expend their precious mental cycles reinventing the CRM wheel. Anything custom you could ever want to do in a CRM can be done on Salesforce’s platform with a fraction of the effort.

Facebook, Amazon, and Google all use it to power various aspects of their back end, and yet start up culture folks continue to turn their nose up at it, while begrudgingly paying for their sales team’s licenses.

What’s up with that? Why does this community seem to hate the company that built a great product that everybody needs and established SaaS as a thing?


Salesforce is really an overpriced, over complicated, awful UX and full of quirks kind of software. Anyone with any decent taste in software would probably write their own or use something else.


Out of curiosity, when was the last time you used it, and who owned the environment? It can certainly be that with the wrong person in charge of it.

The problem is the expectation that it’s going to function like one trick consumer tech tools out of the box. To see the value, each company must make it their own. They should be creating the UX themselves, and a different one for every type of user according to their role.

People say the same thing about every piece of business software they’ve never invested time to truly understand.

Salesforce gives you the Model and the View, some basic Controls and the ability to customize all 3 with both clicks and code + APIs. Sales Cloud is an app built on it. Salesforce is a PaaS.


Reminds me of AlephVC[0] who did something quite similar. From rumours, it is quiet helpful to them and definitely a competitive advantage in the VC world.

[0] https://aleph.vc/meet-ampliphy-our-aleph-operating-system


The irony about VC is that they don’t invest in lifestyle business (except their own). Building your own CRM isn’t really rocket science. We’ve built automation and AI into our deal flow and company tracking and a bespoke search engine to help with competitive market analysis.

Want to be different? Run a VC firm like a startup: build proprietary technology to outcompete incumbents and scale in a way not possible without technology. It does’t even sound like they have a FT engineer.... Imagine investing in a startup that didn’t have a FT engineer! But that’s exactly what they (and most VCs) are asking of their Limited Partners! Sounds like a puffy and carefully managed PR piece with a complicit journalist to prime the raise of their next fund without triggering a Reg D 506c registration..

They may have great returns, smarter than most, and have higher conviction, but it’s pretty much same old same old of catching the wave of good deal flow from your celebrity network. Nothing innovative here.


Actually I am an engineer, as is Vince and Brett in our partnership. Brett and I implemented much of the software that runs YC today including the application process and the internal social network.


From the article, it mentions Matthew coming through a cold pitch but then later on it also states that he went through a referral process to get to the cold pitch.

Are you guys doing anything to vet startups minus the referrals?


Lot’s of VC partners are engineers. I’m specifically talking about the commitment to building technology in house as a core part of the business —- like Social Capital —- not a side project. You guys have celebrity brand and a great insider network so you’re already ahead but it’s likely not sufficient if you want to build a firm for the next 100 years.


How often do VC firms develop their own tech to drive research? Just curious what the split might be between firms that follow the lead of others vs firms that due their own research.


I would love to know this, but also how often VC firms build their own tech to improve their daily processes and workflow, as well as develop their community of founders.


It's more common than you'd think.

I built one of the first in-house VC research platforms at Index Ventures back in 2012 (+am now starting a new early-stage VC firm in Europe where we're building our own tech to aide sourcing/workflow).

Since 2012 most of the top VCs (or at least those with the management fees to afford it) have evaluated/experimented going down this route to some extent with varying degrees of success.

Some like Social Capital have been relatively open about it (at least in parts) but generally most have kept a low profile to avoid giving away techniques they use to get a competitive edge.


Building their own tech is very rare.


That's what I would imagine. Doesn't seem to be a good investment to build their own tech unless it's research focused.


Why? I think the real issue is that historically small VCs don’t make enough in management fees to support engineers, no one wants to sell part of the GP to invest in growth and scale, and large VCs make so much money from management fee and carry that they don’t care about the complexity. I’d be surprised if a16z didn’t have a few engineers in staff, but I know several of the big firms definetly don’t. It’s going to take a new commer stealing away their LPs to get them to change.


Could you enlighten me on your thoughts on what the engineers at a16z would do if not for focusing on getting better insight to vet deals?

Agreed on what you said, change doesn't come unless there's a burning bridge. If the firms have a current process that gets them to where they are today, they will just keep doing what they are already doing.

Perhaps a business opportunity to target the small VCs to help give them an edge.


Not every startup needs engineers. Not every valuable business has an engineering problem at it's heart. VC is fundamentally about capital allocation - funds don't necessarily need scalable or innovative internal tech to do a really great job at this. I know a fund of 6 people with no particular tech skills who are killing it because they're really smart investors.

There's a huge bias in the Valley (and obviously on here) towards hiring rockstar engineers and then trying to figure out problems to point them at. Isn't it way better to actually figure out a valuable problem first, and then hire the right mix of people (including engineers, but all the other skills also) to solve that problem?

Just in case you think I'm anti-engineer: I have been a software engineer my whole working life. My father is a chemical engineer and his father was a mechanical engineer. I love engineers, but sheesh - not everyone has to be an engineer, and not all value is created by engineers.


Walmart must have thought the same thing. Then along came Amazon. In a decade every company will need to be a tech company.


Seems like a good thing to have another VC firm that actually tries to make its own decisions. It doesn't seem particularly new or ambitious though.

New and ambitious would be attempting to beat YC at its own game. Competing head-to-head with YC for startups and trying to create a version of YC that was meritocratic and scaleable. For the good of the world, startups, and for profit.

Someone could create a version of YC that funds any startup that meets a certain level of traction for example. Or it could do funding by directly measuring the team's technical or other abilities. It could use a blind admissions system that doesn't rely on judging founders in 10 minute interviews.

YC funds just 3% of the founders that ask for funding. It's entirely likely that they fund the wrong 3% and/or ignore a huge percentage of potentially great startups.

There's only a few people in the world able to the raise money necessary to compete with YC and they all seem afraid to even try.


If someone was looking to compete with YC one starting differentiator could be to not force teams to relocate to SV for three months; something that YC has proven time and again they’re not open to budging on (aside for the mini-not quite YC program they ran). They’ve explained their rational but I don’t buy it.


It’s easy to forget how important SV is compared to the rest of the world.

SV invests more in startups than the rest of the world combined. It’s the only place in the world where people put big money where their mouth is.

I’d love to see YC definitely grow in other places but it boils down to a couple of things. A high concentration of capital, talent and a good business support.

Not a lot of places that have that or willing to cultivate that.


Or just white men investing in other white men.


Social capital is doing this now as a pilot.


Yes, now here is real innovation.


I think the point here is, a Founder-VC is better than a traditional VC because the Founder-VC understands ”the life and art of being in the trenches”.


And we ship. It's hard to unlearn solving problems via software when you've done it, especially at scale successfully, and it makes everyone at the org (and soon in the founder network) more effective and frankly happier doing their jobs.


I've seen this plastered all over my twitter feed. Similarly, story for the new book by Elad Gil.

The incestual promoting among the startup elite is a bit nauseating.


I wish I could delete this.

In retrospect, it's perfectly normal to promote your friends' startups, funds or books.


Which is pretty much the stock reasoning for SV as a concept. Being inside of it gives you the benefits of that promotion.

Of course, whether it's good or not is something else entirely.


Now imagine living among those types of people every day. That’s SV in a nutshell. Wrongthink isn’t tolerated.


GDPR-free version: http://archive.is/9LH5U


Submarine.


Exactly. I was thinking the same thing.


[flagged]


Do you have many married friends? There is frequently NO chemistry/friendship between a person and their spouse’s family. You choose your spouse but not your family, so there can be wild mismatches even with no hostility/animus.


WTF man?


[flagged]


Your citation is fake news; that footage is after I first saw her.

This is the moment when I first saw her: https://www.instagram.com/p/BP09-HFA-mb/

I wish you had the courage to re-post your previous comment. But more to the point -- this is Hacker News in 2018?


[flagged]


> But it should be okay for me to express what I saw and how I perceived it.

I get that you have a reaction to stuff that you see on TV, but so does everyone. This kind of weird celebrity gossip just has no place on this site and so we need you to please stop now. We're not here for that.


A real 100 year VC firm would be a DAO. Maybe they aren’t as forward looking as they’d like to believe. Much respect to Alexis and Garry, though. It’s not easy to go it alone.


Why would a VC firm be distributed?




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