Early-stage VC firm Initialized Capital loses last co-founder as Y Combinator gets a new CEO
It was meant to be a venture firm built to last the “next 100 years.” Interestingly, none of Initialized Capital’s three co-founders have stuck around long enough to see whether it would even get close.
As Garry Tan is named Y Combinator CEO Geoff Ralston’s new successor, Initialized Capital is losing its last remaining co-founder.
Tan had set up Initialized with a flagship $7 million fund with Reddit co-founder Alexis Ohanian and Auctomatic co-founder Harj Taggar. At the time, 2011, it was a side project to their work at Y Combinator (Tan and Taggar were YC partners at the time, while Ohanian was an ambassador and was still with Reddit), though it would turn out to be a lucrative one. That initial fund, while small, had delivered capital to Coinbase, Instacart, and GOAT in their earliest iterations, and it ended up handing out a nearly 60x return to LPs, Tan would later go on to share on his YouTube channel. Tan had served as a mentor to Coinbase CEO Brian Armstrong when he was going through Y Combinator, and several of the firm’s other big bets have been tied to YC.
Since those early days, Initialized has grown to $3.2 billion in assets, and is currently backing more than 200 companies. Last December, Initialized raised $700 million for its latest two funds. Twenty-two of the companies it backed at the earliest stages have since gone on to become unicorns.
But even as the firm experienced its initial success, its co-founders began to part ways after only a few years. Taggar left Initialized in 2014 to found a company, then return to Y Combinator as a partner. In 2020, Ohanian left and went on to raise his own fund. Now, in 2023, Tan will reunite with Taggar, one of his “old friends” as he puts it, back at YC—but this time as its chief executive.
“There was only one job that I would take outside of Initialized, and it’s this position with YC—it’s a once in a lifetime opportunity,” Tan told me in an email, noting that the only reason he considered it was because he knows Initialized had the right leadership in place. Tan will remain a strategic advisor at the firm after his departure.
In his stead, Tan is leaving behind Jen Wolf and Brett Gibson to run Initialized. Wolf, who joined in 2017, was most recently the firm’s president, where she has actively sought to bolster diverse hiring initiatives and recruit more talent as well as invested in AptDeco, Cohere, and Narrator. Gibson, a former Posterous co-founder with Tan and a self-taught coder, also joined Initialized in 2017, where he has been focused on crypto, SaaS, and development tools investing as a general partner. Now, he will be broadening his scope across all investment sectors. Gibson has invested in Bison Trails, which was acquired by Coinbase, Cointracker, and Depict.ai, among other investments.
It’s unclear how Initialized’s limited partners are weighing the departure of the firm’s last co-founder, or whether Tan’s departure could trigger a “Key Man” clause for its limited partners—meaning an agreement in which limited partners are eligible to ask for their money back if certain individuals leave the firm. When Ohanian left in 2020, the firm said the departure had not triggered the clause. In this case, an Initialized spokeswoman declined to comment apart from noting that the firm is “in close contact with our LPs on this transition.” Three of the firm’s limited partners did not respond to a request for comment.
Tan maintains that Wolf and Gibson, as well as the rest of the team he has built out over the last 11 years—which include general partner Alda Leu Dennis and partners Kim-Mai Cutler and Parul Singh—are more than capable to deliver Initialized into its next iteration. “The only reason I considered the position at YC was because I knew Initialized had the right leadership, team and infrastructure in place,” he says.
Y Combinator says it began the search for a new chief executive earlier this year, once its current, three-year captain Geoff Ralston decided to focus on new things. “The pandemic was actually really life changing and perspective changing,” Ralston says in an email. “It illuminated how I want to spend the next arc of my career focused on new things. It simply felt that this was the right time.”
As Tan heads to Y Combinator—or, shall we say, returns to it—he will be leading it in a market of lower valuations and less capital to go around. The accelerator program has reportedly downsized its class size amid the reduction in capital.
Tan, who will move over to YC in 2023, says the firm “is the most powerful place when it comes to human potential,” and is looking forward to getting started.
“I’ll spend the first few months meeting with people at YC and solely listening. More to come,” Tan says.
See you tomorrow,
Jackson Fordyce curated the deals section of today’s newsletter.
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