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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 Operating Partner for Engineering. 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.

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.

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.

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.

IMAGE: PIERRE-ARNAUD KOPP/FLICKR UNDER A CC BY 2.0 LICENSE