tag:initialized.com,2013:/posts Initialized Capital 2018-03-24T07:53:09Z Initialized Capital tag:initialized.com,2013:Post/1263174 2018-03-19T17:24:34Z 2018-03-24T07:53:09Z Zero Lives Remaining - Reflecting on the last 10 years since losing my mom


System of a Down blaring on my stereo, I scrawled this on my bedroom wall at some point in my angsty teens. I noticed I’d always played video games better when I was on my last life. Back when video games were hard, you’d get a finite number of lives before it was game over and there was nothing like being on that last life to sharpen your focus.

I didn’t realize at the time just how important that idea would become to me, but it hit me within the first few months of founding Reddit. I’ve written about what transpired, but only recently have I started talking about the effect that losing my mother — after a three year long battle with brain cancer — had on me.

Last week was the 10-year anniversary of her passing. I called my dad like I do every year on this day and we caught up, shared memories, and remembered her. A lot has changed in the last year; she would have been so happy at my wedding. (We had it on her birthday.) Mom would be giving my wife’s mom some serious competition for Junior’s biggest fan. She’d also be really happy for me to be back working alongside Garry Tan at Initialized.

This seemed like a good time for reflection. As entrepreneurs, we are all so busy “crushing it” that physical health, let alone mental health, is an afterthought for most founders. It took me years to realize that the way I was feeling— when working on Reddit was the only therapy I had — was depression.

It was a thick fog that always lingered, muting good feelings and amplifying bad feelings. It showed up just before my mom was diagnosed, because my then-girlfriend had a serious accident while studying abroad; and it settled in for the next few years. I don’t recall when it went away, but it was sometime after mom passed. I felt lighter again. Someone turned the volume back up on life.

I haven’t felt it in a long time and I’m grateful for it, but it doesn’t take losing a loved one to feel this way, especially with the pressures of entrepreneurship. When you’re struggling, talk to someone. It can be a professional, a family member, or even a stranger can be helpful in getting you into a better headspace (that’s one reason why we invested in 7cups).

We’re all a work in progress.

Executives Need Coaches, Too

I only got an executive coach three years ago and it’s easily been one of the most valuable investments I’ve made in myself professionally, and personally. We often push founders to executive coaches and consistently check-in with them in good times and bad to make sure they’re taking care of themselves.

And why shouldn’t executives have coaches? The greatest athletes in the world all have coaches. They’re the only professionals who have real, quantifiable, undeniable wins and losses. The rest of us are bullshitting each other by ‘keeping score’ using revenue numbers, headcount, or valuations — athletes actually win or lose every day they go into work.

I’d argue every profession, especially if you’re trying to be the best, should have some form of coaching. And that makes me bullish on a company like Torch, providing those services at scale. One day, it will seem absurd to be an executive, or even a manger, and not have a coach — as absurd as it’d be to see a basketball team take the court without their coaches courtside.

You’re going to need to keep growing as a leader and getting outside perspective and guidance is a natural part of the process. Take care of yourself because you’re not getting uploaded to the cloud anytime soon. And when things do get hard, which they will, you especially need to prioritize your well-being.

Take Ownership Of Your Most Valuable Asset

Yourself. That starts with exercise and wellness for your body and your mind. I waited until I was going to be a father to start taking this seriously. That was idiotic. Moderate the garbage you’re putting into your body and commit yourself to a healthy routine — you don’t need any equipment to do a wide range of bodyweight exercises or go for a run. Founders especially will forget this because we’re so busy out-grinding one another.

Your environment has an outsized effect on your outcomes. It’s not just the people you surround yourself with (remember: you’re the average of your five closest friends) but also the places where you spend your time. Your work, your home, that amazing spot where you finally use some of your vacation time… get yourself out of situations and away from people who are not making you better. You only need an internet connection to change your perspective in a minute (see the community at r/getmotivated).

Our time is all going to be up at some point and when you’re (hopefully) looking back on it, the people and experiences you have in your life will be what you cherish or regret. I know because I saw it firsthand and getting that privilege at 22 meant I could live those years of boundless energy and optimism with some of the wisdom of someone much older.

You’ve got one life remaining, don’t squander it.

Alexis Ohanian
tag:initialized.com,2013:Post/1243814 2018-02-07T13:29:19Z 2018-03-24T07:53:09Z Alexis, Fully Initialized

Today, I’m very excited to return to Initialized Capital as a full-time General Partner alongside my longtime friend and collaborator Garry Tan.

Here’s a little history first. Initialized launched in 2011. Before that, Garry and I were having success as angel investors and founders kept telling us we were providing more value than other much better funded investors.

Before long, we’d raised $7 million for our first Initialized fund, which made seed investments into startups like Instacart and Coinbase. We were on to something.

Since then, we have grown to manage more than $250 million, which is invested in companies that are now worth more than $20 billion (including six unicorns, or startups that are worth over one billion dollars). We’ve recruited a remarkable team of partners, and built a ton of software to scale all of the traditionally high-touch, and less scalable parts of the venture business to better serve our founders.

We want to be the first check and we want to do the work — we aspire to be the kind of investors we wish we’d had when we were founders. And after more than three years of serving back at Reddit, my first “baby” is in a much better place and has a great team in place.

Now I’m back at Initialized with even bigger ambitions than when we started. As a new father of a five-month-old little girl, I want to make sure the world she inherits is as great as possible. This depends on the entrepreneurs of today and tomorrow building companies that truly matter.

Photo credit: Chuck Revell

Alexis Ohanian
tag:initialized.com,2013:Post/1236184 2018-01-22T19:29:51Z 2018-03-24T07:53:09Z Taking Care of Your Health While Running A Startup

The first time Zachariah Reitano founded a startup, he went through the Y Combinator program and found himself rushing back and forth between New York City and the Bay Area while struggling to get the company up and running.

“We fell into the stereotype of young founders who felt they needed to stay up all night. We often pulled all-nighters unnecessarily,” he said. “Sleep is not a gas tank. You can’t run it to empty and sleep all day on Saturday.”

He pushed so hard toward exhaustion that he walked into a hospital and literally fell asleep — only to be revived by getting an IV plugged in.

“That was a definite wake-up call.”

This time with his next company Roman, he’s doing things differently. It’s a common experience we see at Initialized Capital — that second-time or serial founders become more disciplined about the way that they manage their health and well-being while running a company.

Kim-Mai Cutler
tag:initialized.com,2013:Post/1209167 2017-11-28T21:15:50Z 2018-03-24T07:53:09Z How charging for our product originally hurt — but ultimately saved — our startup

Five years ago, my co-founder Claire McDonnell and I founded True Link Financial, and did two things that that were totally unorthodox for the time.

First, we didn’t build a startup for teenagers.

We built it for seniors. (We’re a financial services firm that offers debit and Visa cards and investments management for aging Americans.)

Secondly, we charged our customers actual, real money for what we had built.

This was not common practice at the time. Around 2012, we and a whole cohort of other startups — Simple, Plastc, Swyp, Coin, Final, Stratos, Clinkle, and others — were getting card-issuing companies off the ground.¹ We also launched a Visa card — but our goal was to protect older folks from fraud, a $36 billion problem that affects millions of Americans, including my grandmother. Our cards would automatically decline scammy transactions so seniors like my grandmother would be able to still carry a credit card, preserve their independence, and spend their own money — and in order to decline the transactions we had to become the issuer of the card.²

Kai Stinchcombe
tag:initialized.com,2013:Post/1197340 2017-10-10T15:38:43Z 2018-03-24T07:53:09Z Investing in the future of retail with Standard Cognition: Bringing real time computer vision to all brick-and-mortar stores

Standard Cognition is building the retail experience of the future, where you just walk out to pay for whatever you’re carrying out of a store. It’s seamless, checkout-less shopping for consumers and retailers all over the country.

We’re proud to announce that we just joined Charles River Ventures and Y Combinator in backing the company through an initial $5 million round.

In their first proof of concept, they use cameras to identify who walks in, what goods they’re carrying and what they ultimately purchase. All of these processes are handled on-site at the local store using computer vision techniques Standard Cognition is developing.

The most interesting innovations happen when technology cost curves hit magic levels where they become possible in new packages for the first time. Realtime computer vision with off-the-shelf GPUs has just reached that level now, and we are excited that this team is bringing it to reality today.

The team has not only founded a company together before, it has three PhDs in mathematics and nuclear science and its CEO Jordan Fisher led a team at the Securities and Exchange Commission developing quantitative tools that could make sense of the agency’s data.

For retailers, this will lead to reduced prices, no lines, better stocked shelves and fewer misplaced items. Every year, retailers lose $45 billion to theft, so even before the holy grail of checkout-without-lines, Standard Cognition can make a huge dent in anti-theft in a way existing solutions have only dreamed.

Technology cost curves unlocking new capability is only half of it. To bring amazing tech to market, you also have to have a strong business motivation to do it, and frankly we’re there today. Traditional American retailers face an oncoming crisis as e-commerce continues to take mindshare and revenue directly from brick-and-mortar retail. Standard Cognition is such a powerfully better customer experience that this is the kind of thing that goes from cool to must-have in very short order.

Garry Tan
tag:initialized.com,2013:Post/1196270 2017-10-05T19:42:53Z 2018-03-17T07:26:55Z Instacart’s Lead Product Designer on Creating A Design System

Jordan Staniscia tried — and claims he failed — multiple times to create a single, re-usable design system for all of Instacart’s visuals, icons and interactions over many years at the company. 

We at Initialized Capital frequently get asked about how startups should create style guides that define the brand identities of their companies, and so we asked Staniscia to share some lessons with portfolio companies this week. 

So, first off, what is a “design system”? 

Staniscia prefers to use the word “system” because it implies that this is something re-usable; it’s a framework. Design systems are, in Josh Clark of Big Medium’s words, “containers for institutional knowledge.” 

It sits between the design and engineering teams as a common language that helps them stay on the same page. Otherwise, designers will end up in a situation where they have to explain their product vision over and over again and engineers will have a hard time ensuring they’re building an efficient system. 
Kim-Mai Cutler
tag:initialized.com,2013:Post/1186325 2017-08-24T22:07:45Z 2018-02-23T09:14:05Z Why We’re Backing IUNU in Creating The Next Generation of Greenhouse Systems
IUNU founder Adam Greenberg, who is building the next generation of greenhouse technologies with modern sensors and machine learning.

At Initialized Capital, we will get on a plane if we hear of company that we think can return our entire fund. We really mean it. Our third fund has invested in ten companies outside the Bay Area.

Eric Woersching
tag:initialized.com,2013:Post/1175478 2017-07-20T15:50:29Z 2018-02-23T09:14:05Z Why Initialized Capital Invested in Open Listings

Buying a home has gotten easier, faster & more attainable with software

Homebuyers don’t want an agent. They want a home. Here I am in my home, thanks to Open Listings.

In 2015, I needed help buying a home in San Francisco and turned to the founders of Open Listings. It was quick and painless. I knew what I wanted, and they were able to get me that home on my terms.

A few months ago, we caught up with them again in LA to talk about their business, and it became quickly obvious that they had made a lot of progress. What these founders have done since graduating Y Combinator in the Winter of 2015 is remarkable. They’ve built a product that delights customers — they closed over 64 homes last month alone — and saved buyers millions. (Open Listings splits 50% of the commission with homebuyer, which is $8,000 on average).

It’s a win-win situation for their buying agents as well. The key? Efficiency.

Traditional agents normally spend 80% of their time looking for new clients or driving potential buyers around. Since buyers come to Open Listings directly and browse homes on their own time, agents only have to focus on getting offers accepted. This allows them to pass the savings along.

With housing prices steadily increasing, this commission refund is real money for the young families, first-time homeowners & immigrants that turn to Open Listings. As house hunting becomes more digital, software efficiency should save buyers time and help make home buying more affordable. We continue to be excited by founders who show relentless discipline and commitment to making something people love. They’ve done the hardest part, and now it’s time to focus on growth. The Initialized team is thrilled to roll up our sleeves and dive in.

It certainly doesn’t hurt when one of us is already a very happy customer.

Go ahead, start househunting!

Alexis Ohanian
tag:initialized.com,2013:Post/1174867 2017-07-18T21:13:04Z 2018-02-23T09:14:05Z Why Initialized Capital Invested in AdQuick

We love the idea that file-cabinet industries are doomed. People are used to world-class software for taking photos of their kale salads at lunch, but come back to the office to do their jobs using terrible or no software. That’s an opportunity. You can see the theme in our seed investments investments like FlexportOpenDoor, and Bellhops. Today we’re announcing that we led the seed round in AdQuick.

Buying out-of-home advertising is no exception: information asymmetry, multiple phone calls, and dozens upon dozens of emails and attachments. And it’s a $40 billion global business that’s not going away if you believe we will keep leaving our homes. It’s also the only growing traditional ad medium.

Wasted time, human error, and unnecessary costs can be curbed with software and Adquick was the first of these companies promising that future who actually delivered a quality software product in the present. I’m no stranger to buying billboards, so the concept resonated with me immediately, but it wasn’t until Garry and I sat down with the founders (former Instacart [Fund I] employees) that we saw how diligent they’d been with little to no funding.

We’ve seen pitches for this business for almost a decade, but this was easily the most impressive technical execution and at a remarkably early stage.

Starting a company in the internet age means you don’t need to open a factory, you only need to open a laptop, but far too few founders have as much to show for it as Matt, Fahim, and Connor did. A modern, searchable map interface combined with unique tracking data to help marketers show elusive ROI on out-of-home ads made this a really formidable pitch despite only being a 5 month old business.

It helped that I’ve ordered some outdoor advertisements, but the reference checks ranged from incumbents like H&R Block to upstarts like OVO all came back effusive. If a range of customers, who learned about you organically, love your b2b product that much and you’ve only just begun — we’re interested.

Alexis Ohanian
tag:initialized.com,2013:Post/1170735 2017-07-05T20:49:40Z 2018-02-23T09:14:06Z What To Do If Your Product Isn’t Growing
How ‘Critical User Journeys’ can help a product take off

As a founder, product lead at Pinterest and PM for a couple products at Google, as well as a growth partner for Initialized Capital, I’ve seen many product teams struggle to grow. Many products start out with a bang. Some find product-market fit with sustained growth. Few have gone through spurts of hyper-growth. But more often than not I’ve seen most of them linger then fizzle.

Throughout these experiences, I have noticed a common pattern that almost every startup founder falls into as they begin this journey. Founders launch their product, wonder why it isn’t growing like gangbusters and then immediately try to fix their growth problem.

They turn to growth tactics like optimizing their on-boarding funnel, SEO or push notifications before really understanding what they are building and who they are building for. This may create an initial burst of short-term growth. But it ultimately leads to high churn of your possible customers, while ignoring problems in the core product.

Before trying different growth tactics like throwing spaghetti at a wall, startups need to take a fresh look at their users, evaluate their product end goals and re-define the journey they want their users to take to get there. Here are some tips that can help define a path which will clarify the different steps needed to unlock product growth.

Map out your ‘Critical User Journey’

Many startups build a product without knowing what path they want their users to go down. If you look up the phrase “Critical User Journey,” you’ll find a plethora of UX frameworks and user maps. These are great, but can be overwhelming and daunting.

Early startups should start simple and make sure they know the optimal journey they want their product to fulfill for the user.

Your Critical User Journey should focus on a single use case with a specific goal and include the surrounding context for the user. For example, one of the journeys that Pinterest is focused on is helping a user find ideas around their own personal style. A Pinterest user typically starts from browsing a large visual catalog of style ideas, and then progresses to discovering the right looks that fit their own style.

Then Pinterest allows users to curate their own look books, style boards and eventually make it seamless to buy those looks, whether that’s directly on Pinterest or through a deep link to the merchant. The happy case is that the whole journey is completed on Pinterest. Now Pinterest has grown over the years to become a large company and fulfills multiple user journeys.

Pinterest guides users through each step of Personal Style Discovery: Browsing, Filtering, Curating, and Fulfilling

Founders starting out need to have clarity on the specific ‘Critical User Journey’ they are fulfilling. Then they need to understand how their product helps users along each step of that journey.

Measure your ‘Critical User Journey’

Once founders have a crafted a user journey, they need to be ruthless and specific on how they measure it. All successful startups have a plethora of top-line metrics (or KPIs) they measure and there are many great tools to help visualize this. For startups just starting out, it’s very easy to fall into choosing vanity metrics like MAU (Monthly Active Users) or a sum total measurement metric that looks like it is growing and lose sight of what is actually happening.

source: https://blog.kissmetrics.com/throw-away-vanity-metrics/

Instead, early startups should start with actionable top-line metrics to measure each step of the Journey. Start with two metrics: One user acquisition metric at the top of the funnel that measures how many new users are signing up and taking their first action. And then one user engagement metric further down the funnel that measures how often these new users engage with the product over time. Together, these two metrics define a product’s activation rate in how it graduates new users into becoming active users. From here you can add additional top-line metrics that are specific to your product and user journey.

The more specific top-line metrics are to a product’s user journey, the better they are at helping startups make decisions.

For example on Google Assistant, we measure user activation based on the user making at least one successful query that day on a specific surface (i.e. Pixel phone) in a specific country (i.e. U.K.) using a specific feature (i.e. Ask about “My Day”) within their first two weeks.

Identify ‘product levers’ that help move users along their journey.

Many startups chose top-line metrics but are not able to directly move any of them in a measurable and systematic way through projects and work streams. Having numbers to measure is only good if you know how to move them with the right product levers.

A product lever is something that is moveable and measurable that connects projects your team is working on on to top-line metrics that you care about.

For example, one of Initialized Capital’s portfolio companies I worked closely with chose the top-line metric ‘L7 Engagement,’ or the number of days a user has been active on the product during the last seven days). They chose the primary product lever to drive this as “Additional Actions taken per User.” They narrowed down the projects they were working on to only ones that drove additional actions per user (such as showing more in-line suggestions, creating off product promotions, sending contextual follow-up notifications, etc.) and cut the ones that didn’t. They saw their L7 Engagement rate turn around after a few experiment cycles and they expanded their focus to an additional product lever to drive L7 Engagement.

Don’t add so many features that the ‘Critical User Journey’ becomes obscured.

Another common pitfall all founders are pulled into is to “fix” growth by adding more and more to your product to “see what sticks.” Growth by product addition is hard to measure and rarely scalable.

For example, I worked with one portfolio company that had a great product serving a user need. They were driving a meaningful metric yet they were seeing stagnant month-over-month growth. Upon looking closer, we saw that they had built multiple convoluted activation flows on top of each other. Each flow they released showed slight overall gains, so they kept going and building more flows on top of each other. Soon enough, they couldn’t tell which flow was directly responsible for retaining or losing users. Their product became a Rube Goldberg machine spitting out one user at a time.

A Rube Goldberg machine — complicated mechanics for a simple output

Once we simplified the product down to one activation pathway with each flow directly moving a specific product lever, their conversion rates went way up. This was mostly because their product became simpler. It was easier for users to understand and easier for the company to see what was going when users got stuck.

Taking a step back to simplify and focus freed the product to grow.

Let your most engaged users show you the way.

This one may seem obvious, but sometimes users have done the hard work for you. Startups should look at their most engaged users and deeply understand the actions and pathways they took to get there.

Find a cohort of your most engaged users and look backwards. Identify what actions they took the first day, the week, the first month, and subsequent time periods to get to their state. Identify these actions as pivotal moments you want new or casual users to take at each step of the journey. For example, if taking four actions in the first week led users to be more engaged the second week, prioritize these actions for new users in their first week over anything else.

Create engagement loops around these actions to encourage users to continue down the pathway to take another action after completing a previous action. And of course, measure and monitor how many users are taking these actions at each step of the journey to see the holistic engagement picture of your product.

If you know exactly what actions and steps your best users took, you should try to replicate their journey for others.

Defining one ‘Critical User Journey’ for your product is a start and will serve as an early guide to define metrics, clarify what users need to do at every step, and help prioritize the right product levers to create sustainable growth.

When you are ready, this framework can expand to several user journeys that either deepen engagement of existing users or broaden use cases to reach new sets of users.

Austin Chang
tag:initialized.com,2013:Post/1164368 2017-06-15T22:15:06Z 2018-02-23T09:14:04Z Welcome Alda and Brett!

I’m pleased to announce that Alda Leu Dennis and Brett Gibson have joined the Initialized Capital team.

A common refrain at our firm is that we’d be a pretty killer startup if we weren’t busy funding and advising tomorrow’s best early stage startups. Our partnership has expertise in almost every essential discipline needed to build high growth startups: engineering, design, product management, operations, legal, finance, communications and marketing.

We’re proud to say Alda and Brett are helping us get both deeper and wider on that front.

Alda Leu Dennis joins us as Partner & COO. She’s bringing decades of sharply honed legal and operating experience to both Initialized and our portfolio companies. She previously was a managing partner at 137 Ventures where she led investments in Planet Labs, Wish and CourseHero. Before that she was COO at Airtime, General Counsel at Founders Fund, Assistant General Counsel at Peter Thiel’s Clarium Capital Management, and practiced as a litigator for IP disputes at WSGR. She graduated from Stanford with bachelors degrees in economics and political science, and a JD from UCLA.

Brett Gibson joins us as a Partner. He’ll be working closely with our portfolio helping them build world-class software teams, as well as build software that supercharges what we can do as a partnership and founder community. He co-founded both blog platforms Posthaven and Posterous (which was acquired by Twitter) and also worked closely with me on the Y Combinator software team, where the two of us built and re-wrote many of the essential software systems that run interviews, applications, events, and the internal alumni social network. He was a founder in the YC S08 batch with Slinkset, a link-sharing community site. Prior to that he cofounded DrawHere, a browser drawing startup acquired by DeviantArt in 2006. He graduated with a BA in philosophy from University of California, Santa Barbara.

Most venture capitalists end up lone-wolfing the way they do their business. We’ve built our team in a way where the opposite is true — when Initialized funds you, you’re not alone. You get the full force of our partnership to help you think through the engineering, design, product, marketing, legal, and strategic challenges that every startup must overcome.

A newly funded Initialized portfolio founder recently told us they got so much out of our team that they wanted to double check that they weren’t going to get a consulting bill. We laughed and said our investment check to them was all the compensation we needed.

Garry Tan
tag:initialized.com,2013:Post/1165876 2017-06-01T18:07:00Z 2017-07-18T17:50:56Z In Seattle? Come hear Garry Tan talk about going from a Level 59 Microsoft PM to startup founder, then investor

Space is limited. Please RSVP to events@initialized.com if you can make it. 

Initialized Capital
tag:initialized.com,2013:Post/1147335 2017-04-18T16:00:06Z 2017-07-31T15:10:13Z Why Initialized invested in Better: Software that files medical claims for you automatically is indistinguishable from magic

Health insurance remains one of the most file cabinet-y of file cabinet industries in our modern age. 

This is the realm of fax machine and call centers, and the quality of service you get from these modern day bureaucratic nightmares can vary greatly. Most disturbingly, the poor user experience is possibly intentional— random call drop rates for some phone requests can be as high as 20%, which really reduces the chance customers actually get their claims actually paid out.

Luckily, when a smart team comes along with a software-first approach to tackling such a file cabinet industry, we love to roll up our sleeves and get involved. 

We’re proud to lead the $1.1M seed round in Better alongside Designer Fund and top angels including Karma & Tapjoy founder Lee Linden, Rock Health founder Halle Tecco, and Mixpanel cofounder Tim Trefren

The team has filed around $1,000,000 worth of claims on behalf of patients since starting late last year. Users just download the app (Better — Health Insurance Claims Made Simple) and upload a photo of their insurance card and any medical claim you might have. Better takes care of the rest, and advocates on the user’s behalf so that they get reimbursed, and will also correct any billing errors found in the process too. 

The service works great for all kinds of out-of-network medical expenses, and has been used across all types of reimbursements including therapy, psychiatry, acupuncture, chiropractors, dentists, lab tests and medication. 

“In America, patients frequently can’t afford to access the care they need and get trapped in a bureaucratic nightmare whenever they try to use the insurance they pay for,” CEO Rachael Norman said. “Better’s mission is to make healthcare simple by supporting patients.”

That’s what we particularly love about this founding team: how truly mission driven they are. Rachael previously managed operations at analytics startup Mixpanel and Bitcoin hardware company 21, and John Stockdale was a site reliability engineer and open source advocate at Facebook. They started working on this when they realized how many maddening hours are lost fighting with health insurance companies over bills that should obviously be paid. 

Patient advocate platforms have existed for years, but they historically have been just as paper-oriented as the health insurance companies they try to save their customers from. Healthcare remains a $3.2 trillion per year industry, and at 18 percent of US GDP, at least thirty cents of every one of those dollars is spent on people, systems and processes that manage administrative tasks. If a smart software system can streamline this process, it can do a whole lot more than just make our lives more convenient. 

You can also read more about what founder Rachael Norman learned while building Better, or read their launch article at TechCrunch.

Better is available now and is currently free during the beta at https://getbetter.co.

Garry Tan
tag:initialized.com,2013:Post/1140310 2017-03-21T03:47:07Z 2018-01-20T07:46:50Z Why Initialized invested in Plate IQ: Software Eats The Restaurant Industry

Restaurants spend billions of dollars every year without knowing where it goes. Bhavuk Kaul and his cofounder, Ram Jayaraman, have spent years designing and creating product at top companies, now they’re applying their expertise to help restaurant owners.

We are proud to be investing in Plate IQ, a YC graduate that is re-imagining how restaurants manage their expenses.

Restaurants are not an easy business. But they are big one. U.S. restaurants gross $799 billion restaurant revenue each year. Despite the scale, the technology available to the average restaurant owner isn’t much more advanced today than it was 20 years ago. Thanks to Plate IQ, that’s about to change.

Using OCR, Plate IQ is able to automatically process invoices and drastically simplify back office operations. Plate IQ automates payments and to date has saved its customers over 135,000 hours in time that would be spent on manual entry and bill paying. On top of that, they connect each restaurateur with their real time spend, identifying key trends and foregrounding unusual fluctuations. To date, their platform has processed over $675 million dollars worth of invoices, tracking changes in prices across every purchase a restaurant makes.

This previously untracked data allows restaurant owners to understand the real costs of discrete menu items in real time and adjust price and recipes accordingly. Because they are deployed across such a large range of restaurants, from Sprig to French Laundry, they are able to surface price averages for every item in each restaurant vertical. This gives owners never before seen visibility not just into their own restaurant but into the industry as a whole.

As a firm we frequently talk about the divergence of user experience between consumer and enterprise software — people use a beautifully designed application to take a picture of their kale at lunch but use inefficient, antiquated software for 8 hours a day. With Plate IQ we hope all restaurant owners can have a world class experience managing their business and are finally able to replace file cabinets storing year’s worth of invoices with great software.

Try Plate IQ now on your iOS device — http://apple.co/plateiq-tip, and read more about the company on TechCrunch.]]>
Garry Tan
tag:initialized.com,2013:Post/1132434 2017-02-18T22:37:14Z 2017-07-18T17:50:56Z Co-founder Conflict

This post was originally posted on TechCrunch here.

Here’s how it felt in the weeks before I resigned from my last startup: I couldn’t sleep. I couldn’t eat. Resting pulse at 120. I had reached a point where I couldn’t agree with my co-founder over the future of the company. I had to step away from the startup that I shed blood sweat and tears over for years. I didn’t want to do it, but I reached a point, physically and bodily, where I couldn’t handle the stress anymore.

This is the first public post I’ve ever talked about it, and through advising hundreds of startups I’ve learned that my story is not uncommon.

Every co-founder situation is different, but one common problem that keeps popping up really revolves around how the founders engage in conflict: either not enough, or far too much.

Being successful will mask co-founder problems

Founder drama happens even in situations where you wouldn’t expect it to crop up. Success will cover up many sins. When things are going up and to the right, things might be going wrong underneath and you won’t be aware of it. It’s the black ice of startups. It’s dangerous because every startup will hit the skids sooner or later. You can’t count on good times forever. Winter is coming.

Posterous, the startup I cofounded in 2008, grew 10X yearly and became a top 200 Quantcast website in that time. But by the end of 2010, growth had flatlined.When things were going well, we were too busy keeping the site online to have anything to disagree about.

I learned the hard way that if you haven’t prepared for conflict in your co-founder relationship, you’ll be at each other’s throats right at the moment when you most need to be working well together.

The mistake that my cofounder and I made was in avoiding the dynamics of our co-founder marriage altogether. We rarely spoke directly and honestly with one another. We didn’t stop to reflect on what he needed or I needed. We never sought professional support to ensure the health of our partnership. When the honeymoon ended, there was no healthy foundation to support the company.

During my time as a partner at Y Combinator, we always looked closely at how well co-founders knew each other before they started. Most people think of good co-founding pairs in purely functional terms: a business person paired with a technical person. This is deeper than that, because when conflict does arise (and it always does), if you have nothing in common other than the startup, you’ll struggle to find common ground at the worst of times. It’s necessary for founders to have something in common, but not sufficient in and of itself.

In my case, I had known my co-founder for over 8 years and we had been friends since college. We had history, but we learned history is not enough — you’ve got to maintain it like any relationship. It isn’t enough that you have been friends for years. It matters what your relationship is like now.

Avoiding conflict

With hindsight, I now realize my rift with my cofounder was entirely preventable. We stopped spending time together because we were avoiding conflict. I wanted so much for us to succeed, and I wanted so much for us to be great co-founders (and to maintain the narrative that we were close and and had a good partnership) that I skipped the hard work that it takes to get that relationship and do our best work: embracing conflict and resolving it. It’s a problem that I’ve recognized over and over again in founders whom I’ve worked with both as an advisor and investor.

If you haven’t spent time together outside of work, ask yourself why? If you see your co-founder coming down the hall, do you alter your course to avoid them? Do you try to keep your interactions at a minimum? If so, that’s a clear sign you’re avoiding conflict by just avoiding them period. That’s just not going to work.

Founders sometimes take the avoidance route to an extreme. One recently told me that he decided to talk to his co-founder only once monthly, claiming it to be the only valid way forward. This was a pretty extreme case of avoidant behavior! I told them they had to either radically spend 10X more time working through issues and resolving them, or prepare to split.

It’s the same script all over again: co-founder conflict is bad, so if we minimize how often it happens, that’s the best possible case. It’s a trap!

My executive coach Cameron Yarbrough points out that this is usually the moment the Four Horseman of the Apocalypse show up: Defensiveness, criticism, contempt and stonewalling. When psychologist John Gottman (author of the Four Horseman concept) identifies those behaviors in marital relationships, he’s able to predict relationship failure with uncanny accuracy. The same thing holds true for cofounders.

Successful co-founders actually embrace conflict, and are constantly in the process of resolving it. If you can’t argue and arrive at the best solution, you’re not doing the work to actually have a real, healthy working relationship.

You have to actually lean into the conflict and come out with a solution that makes sense, over and over again. If you find yourself avoiding it, then you have to consciously expend effort to fight that default behavior.

Don’t agree on something? Don’t leave the room until you have a resolution.

An hour not enough? Cancel your weekend, go on a hike, and figure it out.

In these situations, there’s nothing more important than for you and your cofounders to do the work and come out of it stronger.

Too much conflict? Boundaries

Of course fighting all the time is no good either. It’s a recipe for a frayed relationship sooner or later. When founders are in a situation where they are fighting about everything all of the time, it usually means that their individual roles are not well defined enough. Two hacker founders refuse to give up ground over an architectural decision — product oriented founders with similar skill sets fight over direction, and so on.

Here’s the best way to handle it: Make a list of all of the areas needed for your business. Then figure out who is best at each part, and assign one person to it. If someone’s better at sales, then they should own that. Likewise for DevOps or any other specific kind of task that is core to your business. That person is officially the owner of that thing. Everyone agrees to hear each other out when a decision comes up, but once the owner decides, all debate is over. Everyone moves on. You can’t debate things forever, and co-founders need to be able to trust each other.

Embracing conflict, fighting fair

If this is your first company, this might be the first time you’ve had to make decisions at this stage. What does it actually mean to embrace conflict? What is fighting fair?

Embrace conflict instead of abandoning yourself. Some founders know what they want, and know what’s right, but end up giving up before the fight even starts. If this sounds like you, don’t feel bad about it— that was me too. I’ve always valued harmony in my interactions with everyone I work with. But with time, and again sometimes the hard way, I’ve learned you can’t sacrifice what you know to be right in order to get to that harmony early. You’ve got to fight. Don’t swallow your words. If you have a point, make sure you are heard.

It’s not aggression either. You shouldn’t bulldog your way to a decision. The loudest in the room shouldn’t necessarily and automatically be the one who wins. This is actually conflict avoidance of a different stripe— One that doesn’t give any space to any competing idea at all. You may be sure you’re right, but in a fair and balanced conflict, there’s no downside to listening first and letting the other side know you hear them.

Fighting fair is collaborative and data-based. One concrete thing before you start to work through conflict is to always remind yourselves: you’re on the same team. Everyone in the room wants to win, and all of you want to make this company successful. With that, you’re ready to go talk about the problem as a process, where different viewpoints are aired out and evaluated directly. You fail at this only when you try to skip to the end, either by giving up before you begin (self-abandonment) or asserting you’re right before anyone even gets to get a word in edgewise.

One concrete way to get more direct experience with this is what’s called a T-Group, which is a technique developed for the Stanford GSB’s Interpersonal Dynamics program to train people in precisely this kind of fighting fair. Nonprofit Innerspace regularly hosts them and many founders describe the experience to be extremely valuable.

Get help

Some of you reading this will have been through all of the exercises above, and more. For those of you who are at the end of your rope with your cofounders, I have one final piece of advice: Get help! Talk to your most trusted friends, investors, and mentors. Startups are crazy things, after all. You’re trying to do something nobody else has done, and it can feel very lonely, like you’re the only one who has ever had this problem. Trust me, it helps to get outside of your head here and talk through what you’re seeing with other founders and friends.

Don’t be afraid to bring in the pros. Be open to getting professional help, either individually (to help you respond to the ongoing conflict) or as a group (similar to how a marriage counselor can save a marriage). I can’t recommend executive coaching enough for founders, especially when a company-killing conflict is on the line. You have employees and customers who depend on you to make the right call, and you owe it to them to make sure you do. Athletes have coaches and trainers who help them get to peak performance. Knowledge work can be just as demanding, and I’ve seen many founders find their partnerships saved this way.

Cofounder disputes are the #1 early startup killer, but it doesn’t have to be that way

Cofounder disputes have historically been one of the top reasons why startups fail at the earliest possible stage. Most that do fail happen because conflict (either too much or too little) is left unresolved for too long, but with these tools, you’ll be at least a little more prepared against that possibility.

Embrace the conflict, just the right amount, and you’ll get through this too.

Thanks to my executive coach Cameron Yarbrough for reading drafts of this.


Initialized Capital
tag:initialized.com,2013:Post/1129141 2017-02-06T20:51:40Z 2017-07-18T17:50:56Z Feeding people more efficiently is a billion dollar business — Why Initialized invested in Shelf Engine

Stefan Kalb ran a multi-million dollar business in selling sandwiches and salads to Seattle area cafes and supermarkets. As an actuary by training, he couldn’t help but notice the profits in the business were driven by how closely his team was able to match supply to demand. Every unit unsold was cost that would not be recouped. He paired up with a friend, Microsoft Hololens engineer Bede Jordan, to figure out a better way.

We’re proud to announce our newest seed investment in their startup, Shelf Engine. We led this $800K seed round with participation from our friends at Liquid 2 Ventures and Founder’s Co-op.

This is a great example of a strong business founder with domain expertise working together with a strong engineering co-founder to tackle a big business lying in plain sight. Both sides of the equation here are exposed regularly to supply/demand mismatch: both food producers (manufacturers and distributors) and food retailers (cafes and grocers). The ordering process today remains a manual one, with nearly all orders still done using traditional methods: phone, fax, or often just pen and clipboard.

When using traditional methods, it’s up to regular operations folks to decide when to up an order or reduce it— but that results in whiplash. If you over-order, then you’ve got waste. If you under-order, then you don’t sell as much as you could have. Individual managers end up increasing or decreasing order size based on what just happened (one data point), which means there’s whiplash as order sizes change dramatically over time.

Food wastage costs grocers as much as 12% of overall revenue, and when large grocers like Kroger average 1.4% long term profit margin, that represents a multi-billion dollar problem that needs to be solved. Shelf Engine has created a food ordering and prediction engine that has already increased annual profit by 7% for an early pilot, and is going live now with beta customers in the Seattle area.

This early stage startup is tackling precisely the kind of file cabinet business we know desperately needs smart software, and we’re proud to be backing this team.


Initialized Capital
tag:initialized.com,2013:Post/1123704 2017-01-17T15:00:02Z 2018-03-11T08:37:56Z Welcome Eric, Vince and Jen to the Initialized Capital Team

The Initialized team has grown, and we’re very lucky to call these talented people our partners. It’s always been a priority for us to bring on people who are experts at what they do who also happen to be genuinely good, kind, and empathetic.

We’ve gone out of our way to find people who can help with the nitty-gritty of building a company — in going from zero to one. Successful startups are able to navigate not one or two, but thousands, of landmines that stand between them and building a successful company.

With these new additions, we have just upped the ability of our founders to diffuse problems on this path. When a startup reaches the other side of product-market fit, it’s magic, and we are happy that with these great folks, more will be able to cross over.

Eric Woersching, General Partner

Eric is able to help startups understand their metrics and put together operating models that make sense as they hit scale. He is a seasoned financial analyst and investor, and worked for legendary investor Peter Thiel for 9 years, first managing the trading desk at Clarium Capital Management and then as a portfolio manager and macro analyst at Thiel Macro. Eric has also been an angel investor in Y Combinator startups. He is a CFA charterholder and has a BS and MS in Electrical Engineering from Stanford.

Vincent Chu, Partner

Vince has consistently built distributed systems that have handled world-class scale, while also having the empathy and product vision to build software that deeply satisfies what users need. A physicist turned software engineer, Chu worked with me as Director of Engineering at Posterous. At Twitter, he worked on the backend systems that power the public API and consumer-facing features for the home timeline. More recently, he was an early employee at Clara Lending, building its mortgage lending platform. He has a AB in Physics and Mathematics from Harvard, and a PhD in Applied Physics from Stanford.

Jen Wolf, Partner

Jen is a talented interaction designer who can also build, manage, and inspire teams of product managers and designers to build products used by millions. She was recently Chief Product Officer at Reserve, a hospitality platform that connects restaurants and diners. A startup veteran, she was previously the CEO and Founder of a boutique product and design consultancy where she worked on successful projects with companies like Apple, Twitter, Chase, Nordstrom and Starwood Hotels. She has a BA in International Studies from the University of Washington.]]>
Initialized Capital
tag:initialized.com,2013:Post/1112106 2016-12-01T12:30:02Z 2018-03-11T08:37:56Z Why Initialized Invested In WorkRamp & The Future of Employee Training

Work is changing a lot, and great software remains at the heart of that. Around the Initialized offices, we often talk about how easy it is for someone to share a photo with a friend with great consumer software, but nearly impossible for very simple things to happen at work. 

Today, we’re announcing that we’ve invested in WorkRamp, a graduate of the most recent Y Combinator batch, that is re-imagining how companies train their workers.

Imagine for a moment: A room full of 100 people looking at PowerPoint slides together. The dull videoconference where half the people have the browser minimized. The long-winded email that managers spend days agonizing over, but most folks skimmed briefly and archived immediately. Incredibly, the best option for folks who wanted to train their organizations was to use MailChimp to send the email and check the open rates! 

Enter WorkRamp. The company has built a knowledge management tool that lets employers easily create training guides. These are living documents that are actively pushed to large teams, with sections that train people through tasks, tests and videos. These guides can be revised over time into a master plan that folks use for new employee onboarding, rolling out a new sales plan, or even for engineering teams to share the best security practices. 

Managers can get real feedback about whether the guides are useful, and if their teams actually retain the knowledge presented. For instance, a salesperson can shadow calls with senior sales people and get certified in their skill pitching people, using video, all inside of WorkRamp. Once a whole team has been through the training, the VP of Sales can easily see who’s up to speed and who might need some extra coaching. 

We love that WorkRamp guides are the obvious replacement for the dumb out-of-date wiki, a painful all-hands, and the boring videoconference. Their smart learning management software is already helping companies like Square empower more small business owners, and Off Grid Electric bring electricity to more homes in Africa. 

WorkRamp’s CEO Ted Blosser previously led teams at Box and Cisco, and his cofounder Arshdeep Mand was Director of Engineering at YC-funded SpoonRocket. It’s a winning combination: product/engineering founders who can sell. Here’s what Ted had to say about starting WorkRamp now with more experience:

My first company failed and I promised myself that I would go learn from the best before taking another shot at starting my next one. I spent almost 5 years at Box, learning and doing everything I could — from sales, to product management and go-to-market. I was able to work with top leaders like Aaron Levie and see first-hand what you needed to do to make your company successful. Right before my fifth anniversary, I felt the market opportunity was right and my skill set was developed enough to make the leap again. Building a company is a long journey (especially in enterprise SaaS), but there hasn’t been a day so far where I’ve regretted the timing of my decision!

We’re very excited to be investors in this startup with great co-investors and friends like Leo Polovets at Susa Ventures, Semil Shah at Haystack, Wei Guo at Wei Fund, Mike Ma and Mike Miller at Liquid 2, and super-angel Elad Gil. 

WorkRamp is available now at workramp.com.

Initialized Capital
tag:initialized.com,2013:Post/1105313 2016-11-21T18:21:43Z 2018-03-11T08:37:56Z Flexport CEO: The corporation is a relic of a bygone military era

Ryan Petersen founded Flexport, a shipping logistics company that manages and tracks inventory as it crosses the globe by ship, plane, truck and warehouse. They recently closed a $65 million round after taking seed investment with Initialized back in early 2014.

The genesis of the company is rooted in Petersen’s teenage years, when he was buying and selling products from mainland China by arbitraging costs between marketplaces like Alibaba and other U.S. sites. His second company, ImportGenius, played off the first one, when he and his brother realized that all manifests for ocean freight shipments entering the U.S. were a matter of public record. He started digitizing these documents — around 300 million so far, made them searchable and began selling subscriptions to that data.

But when Petersen started Flexport, he didn’t want to just re-think shipping. He wanted to take a wholly different approach to structuring a company.

Companies as Biological Organisms

While in business school, Petersen wrote an essay, called “Out of Control By Design.” 

His idea was that corporations, as we know them today, are a relic of a bygone military era. They have teams that are siloed and split by function, which centralizes decision-making power and makes companies less nimble and responsive to customer needs. 

But as the nature of warfare and security threats changed, the military adapted. They’ve created special forces and squads that flexibly operate where traditional top-down control structures once dominated. Companies haven’t.

Petersen argues that the militaristic approach of the past has to be replaced by a more accurate metaphor. Businesses, made of people, behave much more like biological systems. 

“We want our company to behave like an immune system, where people see a problem and kill it rather than waiting for permission,” he told me.

Making Customer Service Central, Rather Than Peripheral

And so, rather than having siloed teams in sales, customer service and operations, Petersen and his onetime business school classmate, COO Sanne Manders, structured an organization where small teams or “squads” of account executives, account managers, operations associates and customs compliance specialists work together to address client needs on the fly. It’s totally different from how customer service is usually a more peripheral function inside tech companies.

“Companies often treat customer service as something that can be like a coin-op. They don’t empower reps to solve problems,” Petersen said. “But employees would rather be much more than a cog in the machine. You want bottom up decision-making, not top-down control.”

Every Flexport customer has a lifetime relationship with just one team or squad. And every customer service rep has autonomy within the squad to make on-the-spot decisions to make customers happy without needing to go up a hierarchical chain of approval or following a rigid protocol.

“When I reflect on bad customer experiences I’ve had with companies, it’s always because the person I was talking was not empowered to do the right thing to help solve my problem,” Petersen said.

In Flexport’s case, a customer can have an extraordinarily valuable lifecycle. Earlier on in his career, Petersen learned that the yoga brand Lululemon has used the same freight forwarder from when they were doing only $1.5 million in revenue. Today, Lululemon does more than $2 billion in revenue. 

While Lululemon isn’t a Flexport customer, this realization ended up informing Petersen’s strategy. The goal is to lock in valuable companies as customers when they’re young and to grow up with them. Petersen estimates that Flexport’s clients could spend up to 5 percent of their revenue on freight.

Tracking Your Net Promoter Score

To make sure his customers are happy, Petersen measures Flexport’s net promoter score or NPS daily on Delighted. The net promoter score measures how many customers would refer a friend, colleague or client to the business. Flexport’s current score is 79, which would put the company among brands such as Starbucks and Apple. 

“In the old world, the executive committee or a CEO was in charge. In our world, the customer tells people what to do,” Petersen said.

Kim-Mai Cutler
tag:initialized.com,2013:Post/1105379 2016-11-07T19:18:24Z 2018-03-11T08:37:56Z HR Incentives and Unintended Effects on Hiring Engineers

When Harj Taggar founded Triplebyte a year and a half ago, he wanted to take lessons from evaluating thousands of startups as a former Y Combinator and Initialized Capital partner into helping companies put together the very best technical teams -- regardless of background or pedigree. 

He started Triplebyte, a company that does the first pass of evaluating engineers through programming tests and interviews. Since starting last year, Triplebyte has evaluated 12,000 candidates. Of those, Triplebyte has interviewed 2,000 engineers and sent 15 percent through to the final step of being introduced to companies in their network. At partner companies like Dropbox, Cruise and Stripe, Triplebyte is seeing offer rates on candidates that are above 60 percent. (You can read the company's post about it here.)

As part of the Initialized portfolio, he shared a few observations he's made over the years at how growth-stage technology companies build engineering teams, and where they can miss the mark in creating incentives for recruiters.  

“The metrics of success you give your recruiters or your recruiting team can have unintended consequences that can harm diversity efforts,” Taggar said. 

Here are metrics that CEOs emphasize to recruiters that Taggar thinks can sometimes have unintended effects:

  • The on-site offer rate: This is percentage of candidates who come to on-site interviews who you ultimately end up approving and offering positions to. Taggar says some CEOs tell their recruiters to optimize for this. But the problem is if you’re trying to maximize on-site offers, recruiters will end up becoming more conservative. They’ll go for safe, recognized engineering schools rather than lesser-known ones that may produce a more diverse engineering team, but a lower on-site offer rate. “Recruiters will dig in, and start making sure they’ve only gone to certain schools, which reinforces their pattern-matching and could hurt diversity efforts,” he said.

  • The offer acceptance rate: This is the percentage of offers that are being accepted. Because you’re putting recruiters on the hook for closing candidates, they’ll get penalized or feel bad if few people or no one accepts the company's offers. When CEOs emphasize this metric, Taggar says recruiters will start advocating for avoiding making offers to candidates that they think won’t accept deals, which means a company could miss out on good potential hires. 

  • The “culture fit” rationale is probably overrated: When Taggar started Triplebyte, the company made the deliberate decision to only screen for technical skill rather than soft skills or “culture fit” on top of that. Even with this decision, the company still has a 60 to 70 percent placement rate for the candidates it forwards to startups. “For engineering hires, this suggests that the bottleneck isn’t “culture fit,” it’s just getting people who have the skills.”

Here are metrics or practices Taggar thinks CEOs should optimize for:

  • Minimizing response time to candidates: “From a procedural perspective, the best engineering organizations never seem to leave a candidate waiting for more than 24 hours,” he said. “Usually, founders have no visibility into this.” Taggar said if he were starting another company, he’d try and monitor response times to candidates through Lever (another Initialized-backed startup) or e-mail. “I’d monitor how long it takes my recruiting team to get back to candidates and relentlessly optimize that,” he said.

  • Keeping the hiring process centralized as long as possible: Early on, it’s very easy for startups to have a centralized decision-making process where founders and early team members can have input on every new hire. But this obviously becomes more difficult as a company grows. “When you don’t centralize your process, it’s hard to maintain consistency. If you don’t have consistency, you will be more likely to miss out on good people,” he said. Taggar said Coinbase and Mixpanel still have centralized processes where a single-person has input in end-decisions on hiring. 

  • Emphasizing the match between candidates and technical projects they’re interested in over selling the grand vision of the company: Taggar says the best engineering organizations pay a lot of attention to matching the personal interests that every candidate has with what they end up working on inside a company. “It’s less about selling the big vision of the company and more about being really specific and getting people to work on something they’re really excited about.”

  • The false negative rate: Taggar says growth-stage CEOs could start measuring the percentage of candidates that they reject that go on to get offers at companies whose hiring processes they respect. “This is somewhat tricky to do,” he said. “You can check LinkedIn profiles of candidates, and look for companies they end up getting jobs at and try to get the rate of misses down over time. I think companies just completely overlook this.”

Kim-Mai Cutler
tag:initialized.com,2013:Post/1104632 2016-11-01T17:49:20Z 2018-03-11T08:37:56Z Last minute tips for YC Interviewees

This is the first week of interviews for the Y Combinator Winter 2017 batch! So I thought it'd be helpful to folks to get down in writing my lessons from being a partner doing interviews at YC for almost 5 years. 

Congrats on getting the interview. You've made it past the most significant cutoff in the YC applicant process. Based on your team, idea, and traction, you've made it into the top 5% of all people starting startups at this time. You're one 10 minute interview away from being in the top 1.5%. 

Here's the list. You'll notice that each of these is usually addressable through practice, and preparation. When you pitch an investor for half an hour or an hour, you have a margin of error. With 10 minutes, you don't. 

Use plain-spoken language and start concrete

You don't have a lot of time to explain what you do. Ten minutes is not a lot of time. Don't let your desire to fit some idea of what a startup should sound like obscure what you actually do. If you're making  software that connects retailers with consumers, that's fine, but that's not specific enough. Better to say that you help brands like Gap or Aeropostale directly sell to customers online through YouTube stars. 

...Then zoom out, and be sure to show why that could be something much bigger

The best founders are able to start off with very concrete and real progress, but then once they've established themselves as real, they can zoom out to show what the product could become. So you might be helping Gap sell through YouTube now, but because Gap is such a great lighthouse customer, it means that the Fortune 1000 is now willing to sell direct through you as well, and that could be very big. 

Traction gets you in the door, the big future gets you the check

Smart investors never fund things because of what you've done so far. What you've done just gets you in the door. What makes people get out the checkbook is how big you can become. 

This fact is important because the top broken pitch problems end up being related to exactly this. Some pitches start with the grandiose future, but the team has nothing rooted in reality or what they've done so far to show that they're the folks to make it happen. Others focus almost entirely on talking about the traction now, but never talk about what it could become. 

It takes both. 

Know your numbers

What is the cost of what you're doing? How much does it cost to acquire a user? How much does it cost to service one customer? How much money do you make per unit sold? It's fine if you're not profitable initially, as long as you have some story where you can certainly be profitable down the road. 

The most obvious way to tell if someone is serious is that they've thought through the costs and pricing of their business. Great founders never neglect that part, because at the end of the day, the bottom line is how you tell if a business is good, or a business at all. 

What do you understand that nobody else does? 

Having big dumb competitors is good because it shows that there's a real market or problem that's being solved, and YC partners have a long history of seeing firsthand small teams of smart people outperforming big dumb companies for years. It's a well known playbook. But it's not enough to call them big and dumb. What can you do that those incumbents can't or won't? 

If you don't have competitors, that's OK too. What do you replace? What were people doing before using your product or service? One thing this question tends to capture is whether people actually want it. 

The tricky part is when there are actually smart competitors who already exist. Then you've got to be even more direct about why you are better. These are cases where in particular you have to be 10X better, not just 10% better. The road to startups is littered with many failed teams that have a product that is only marginally better. 


These tips work great for all pitches (including pitches to us!). Being prepared in the above ways is helpful for founders in the same way the 12 question YC application helps founders of all stages— because these are the things that naturally help people make things people want.

YC remains the best place in the world for eminent founders to create new things and join one of the most valuable founder communities, and we've been lucky to have a front row seat to the great things that have come through. Let us know how we can help.

Best of luck to all the interviewees. 

Initialized Capital
tag:initialized.com,2013:Post/1098555 2016-10-24T14:00:00Z 2018-03-20T13:23:54Z Initializing Initialized Capital...

Welcome to Initialized Capital. We’re proud to announce we're investing out of a new $115M early stage seed VC fund. 

We’re founders who are engineers, designers, and product people. We’ve built startups from scratch ourselves, and we want to help you do the same. When startups work, they look like miracles, but they are in fact the result of impeccable execution in every aspect, from the team, to the idea, and ultimately to the product itself. There are a thousand landmines that every founder, no matter the experience level, has to navigate. If we can help point out those landmines, and help folks along their journey, then more miracles can happen.

We invest in early stage companies with a typical check size of $500K to $1M. This should either be plenty of funding for a small team to show traction from nothing, or the start of a strong seed round syndicate with other smart investors we know who can help in complementary ways. We’re happy to be the first check into your seed round and we won’t ask you that thing everyone else always asks: "Who else is investing?" We make up our own minds. 

We believe great companies emerge from many industries and disciplines, and from anywhere in the world. We are best at funding small teams just starting out, when they have zero to 10 employees. You should have a great team pointed at a great idea, but we’re not afraid to invest even if you only have an early demo.

Come talk to us. We’ve done more office hours with more startup founders than most anyone you’ll find. If we can help you avoid some landmines and find the right path, then that’s what we’re here for.

—Garry Tan
Cofounder and Managing Partner

Initialized Capital