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Inside Initialized Capital’s next moves as cofounder and star investor Garry Tan steps back

December 9, 2022, 11:51 AM UTC

It felt lighthearted at Initialized Capital this week—more than I had expected it to. After all, Garry Tan, who had been the last remaining of three cofounders still at the firm, is heading over to Y Combinator in just a matter of weeks. 

Tan’s successors, Jen Wolf and Brett Gibson, are now facing the inherent tension of any successful venture capital firm whose funds outlive the stay of the investors who initially raised them. Now a VC firm with $3.2 billion in assets under management, Intialized’s brand has always been closely intertwined with its top investor and its last remaining cofounder, Tan, who has achieved enormous returns for limited partners through early bets on startups including Instacart, Coinbase, and Cruise. 

But Initialized’s San Francisco office—a two-bedroom house they lease as a workspace with a hot tub-turned-pond—was buzzing when I stopped by on Wednesday. The night before, the partners (and Tan) had hosted a holiday happy hour for 40 of the firm’s founders and a few of its limited partners. At the office, there were cans and mugs scattered about the tables, people chatting in phone booths, and Christmas decor, including a lifesize cutout of Will Ferrell dressed as Elf.

Wolf and Gibson seemed relaxed and, if anything, excited about the next iteration of the firm under their leadership. Wolf, the six-year people manager of Initialized, will continue to oversee operations and back companies. Gibson, a former developer and the firm’s crypto investor, will manage the investment team. Wolf pointed out that Tan’s role as the next CEO of Y Combinator could help Initialized as Tan continues to make introductions or help close deals. Both partners made an effort to emphasize that they didn’t expect much to change at the firm.

“I don’t think there’s any fundamental rethinking about how we’re doing investments or how we’re supporting the portfolio,” Gibson says.

But that doesn’t mean everything will stay the same. Gibson noted that their voting system is “sort of a work in progress,” as it needs to be updated given the change in personnel at the top. The firm had also been trending towards doing some larger, opportunistic deals—whether it be in check size or later-stage investments—and Gibson says not to expect much of that moving forward.

“Without Garry, we’ll probably be doing fewer of those and just focusing more narrowly on seed stage investments,” Gibson says, pointing out that the investors want to focus more on the people they are underwriting versus the financials of an investment.

Initialized Capital’s courtyard features a hot tub-turned pond.
Courtesy of Jessica Mathews

Wolf and Gibson say that Initialized’s limited partner advisory council and a majority of its limited partners have told them they are happy about how the firm is moving forward and have expressed their support during the transition. No “Key Man” clause was triggered upon Tan stepping back, Wolf says. 

The next fundraise will reveal where limited partners ultimately land on the matter. Right now, Initialized doesn’t have plans for a new fund in the near future, as it still has a “good portion” of the core $530 million fund it raised in December 2021, Wolf says, noting that she is very optimistic that limited partners will stick by the firm when it’s time to go back to market. “All of our past funds have been very oversubscribed, and it’s been hard to get into,” she says. While Wolf acknowledged that Tan has always been forward-facing, particularly with the marketing efforts of the firm, she emphasized that limited partners have always spoken with and worked with the other people on the team as well.

As the former COO of Initialized, it’s Wolf who has been responsible for building out much of the team since her arrival in 2016 and keeping its applications for partners open. Some 50% of the investment team is made up of women, as is 80% of Initialized’s leadership.

But Initialized may have its work cut out for it as it enters 2023. The firm has always prided itself on the time it spends helping struggling founders—to the point where it emphasizes those efforts in performance reviews. In a market downturn, there could end up being several of those in the firm’s portfolio.

“We’re still in charge of delivering returns, so we can’t always bridge people as far as they might want to go, but we can always answer their emails and take more meetings with them and talk them through what’s often the most stressful time in their career,” Gibson says.

For both Wolf and Gibson, Tan’s departure is also personal. Both of them have worked with Tan for a long time: Wolf hired Tan as an intern when he was a high schooler, and taught him how to ride the bus to work, and Gibson met Tan in Y Combinator, where they ended up cofounding a company together.

“What does make Garry unique as a person is that he’s not zero-sum, right? No one has to lose for someone to win,” Wolf says. “I think that’s something he built into Initialized, and I think that’s something we kind of want to make sure we continue to continue to do…I’ve been with him a long time. A lot of what I worked with him on early on he’s gone way beyond. I try to look at founders in that same way: I’m always trying to find more Garry Tans.”

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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