- Today, I've got huge news to share.
Initialized, the venture capital firm I started
almost 10 years ago, just raised $700 million
for our newest funds.
530 million of that is for brand new investments
at the earliest stage, before it's obvious.
In 10 years, we've funded more than 200 companies,
and 22 of them are unicorns
worth more than a billion dollars.
Five of them are actually decacorns
worth $10 billion or more.
And what's really unique about that is
that we funded all those people at the earliest stage
when they were just an idea
or just a few people starting out.
You'll hear of a lot of VC funds that fund a lot
of unicorns, but very, very few of them
have ever done it the way we've done it.
What's the future for 2022 and beyond?
Today, you're going to meet my partners,
the people I've worked with to help fund
this next generation of truly great startups.
And we're going to talk about what's coming around the bend.
The future is almost here, it's you.
You have to build it.
Let's get started.
Most VC firms only do 2X to 3X return at most.
3X is considered good by most standards,
but for us, our first fund returned almost 60X,
and we've now returned over $600 million
to our limited partners across all our funds.
Limited partners are the people who give us money
and we go ahead and invest that in startups.
And as they say in the biz, we put some moolah in the coolah.
We think Fund Six is going to be great, but that's up to you
whether we get a chance to meet and fund
what you want to make.
Can it be something that touches a billion people?
It's easy to get lost in the numbers, though,
and think VC like all the other financial jobs
out there is just private equity.
After 10 years, what I've learned is
that the legal docs are the same,
but the day-to-day on how you do it is completely different,
especially this early when nothing is obvious.
To get a sense for this,
here's Initialized President and Partner Jen Wolf.
- It doesn't matter if a company, a startup is going through
some tough times, still trying to figure it out.
That's what early stage is about.
And I think you have to be someone
who can really have the fortitude to relentlessly stick with
and believe in someone's business after we invest
so that they can kind of keep going
and build a really great company and culture.
And I think a lot of the companies in the portfolio
prove that out again and again
that that's what early stage is about.
It's about having that belief and that confidence
when no one else will.
And sometimes for longer than anybody else will
in the beginning.
And I think that really helps us have great relationships
with our founders and with one another,
because we can even count on each other
to continually help push founders
and their companies forward.
You can really rely on everyone on the team.
- What I realized is that most VC funds end up
running either as solo capitalists,
where that person calls all the shots,
or they run as a loosely confederated pack of people
who only sort of like each other
and they just incidentally work on the same team
but on totally separate deals.
And when they do that, neither of those situations can help
the way Initialized can and loves to help.
We've got teams built up to help you with press, sales,
how to tell your story, how to raise your next round.
And that's on top of the very specialized expertise
of every partner you're going to see today.
- The benefit of having a team, people who have been there,
is that we really understand that it's not about
doing everything a particular way
or for us to give you the exact map to the answer,
because when you're entering a new industry,
a new business or trying to create something new
and innovative that hasn't been done before,
so what's most beneficial is for us to give you the tools
to think through it, keep you going,
understand how to measure it, understand how to track
how it's going and decide what to do next.
And that's for us to kind of help coach you
through that process and not for us to do it for you,
not for us to tell you what to do.
And I think that's a partnership
that founders really appreciate from Initialized.
- At seed, pre-product market fit,
when you're in the idea maze trying to make sense
of the fog in front of you,
trying to get something that can grow,
sometimes you don't even know what the right product is yet
or which market to attack.
And that's where I think we really like to invest.
There are lots of people who can do your B,
your C, and later.
When it's time to hire a bunch of people,
you got it all figured out.
We're early and we're tuned to that.
It's what we really love to do.
I get to brag about my partner, Brett,
because he's a great example of
what Jen was just talking about.
He was my co-founder for our YC startup posturist,
and he's an engineer and true founder.
When we think about crypto,
we think of it as a special form of the larger story.
Software is embedding itself in absolutely
every part of society.
And crypto is software eating money.
After investing in several back-to-back cycles
of crypto breakthroughs from Coinbase to Bison Trails,
here's Brett Gibson for more on what he sees is the future.
- What we've learned in watching the last few crypto cycles
is that anything that people can kind of think up,
eventually probably is coming to pass, right?
If it sounds reasonable and sounds useful,
people are really excited, they're really engaged,
they're going to build it.
- The key thing here we think is finding builders
who can really build it.
This is actually the realm of the engineer.
And because Brett and I are engineers,
we think game recognizes game.
- It's definitely true that if you are a skilled engineer,
there's an amazing amount of opportunity in this space.
And it's not just building out things that are cash grabs.
There's a lot of really hard, really interesting technology.
The languages involved in learning smart contracts
and the underlying cryptography are highly,
there's a lot of very interesting,
very hard problems to be figured out.
And they are not entirely the domain of
just existing cryptographers
and distributed systems engineers.
So I think that anyone is excited to build
and excited about the technology, just start participating.
You can start writing contracts on any
of these major platforms and deploying them
and see what happens.
And from there, you're going to learn so much
about how these ecosystems work and how finance
in this new, sort of disintermediated world functions.
And opportunities will open up for you.
- Web3 is confusing for a lot of traditional engineers
and product people because it's so easy
to find scams everywhere you go.
Especially in the early days,
it was very easy to view all blockchain
and crypto projects as basically the same, a scam.
In time, we realized this is a space like any space
where you just need to follow the real builders.
If you can see code being written that is useful
and valuable and you respect the people building,
then you are already better than the majority of people
out there who can't build and who can't tell.
You can detect and find good projects to work on
and ecosystems that will matter.
If you're a builder, you can trust your own judgment.
Real code and your ability can be used as a true north.
And that's how we follow the builders in Web3.
If you're going to build real stuff,
you're going to ship it and it's going to solve real problems,
we want to talk to you in crypto.
We're big early investors in FinTech giants like Coinbase
and Opendoor, but we're not even close to done.
And if anything, we're realizing there's something powerful
in making financial tools and services far more accessible
than they ever have been.
To talk about that, here's my fellow general partner
at Initialized, Alda Leu Dennis.
- It seems like the rich keep getting richer.
And that's because the rich have access
to financial advisors, they have access to attorneys,
they have access to investment opportunities
that are not available to the broader public.
- The rich have bespoke financial services
that are white glove, made by people,
but it turns out, with really good software,
you can deliver the same or better quality
with far less cost to far more people.
That's the promise of technology in our age.
And you can build that software.
- For example, we invested in a company called Landed.
They are serving essential professionals like teachers,
doctors, nurses, policemen, firefighters,
people who we now know through COVID are really,
really integral to the fabric of our community.
And we need to keep them in our communities
through home ownership and provide them
with the same financial services
that everyone else in the community has.
- This is just one of many things we're excited to fund,
but we think given zero interest rates
and how software is progressing in society,
there's just no excuse when we realize
great financial technology should be available for everyone,
not just a small set of people on Wall Street.
You and I both know healthcare is a huge part
of our economy, and the crazy thing about that is
we're still in the early days of technology
even entering this field.
Our investments in health tech giants like Truepill,
Athelas and Rowe have made us only more excited
about the future of digital health and telehealth.
To better understand this, here's my partner, Parul Singh.
- Traditionally, healthcare has been mostly about barriers.
You have the three traditional sectors
or divisions in healthcare.
You've got payers, providers, and patients.
And frankly, the incentives among them
have never been aligned.
- Patients obviously want the best quality care
for themselves and their loved ones,
while payers want to lower cost and providers,
by their very nature, are incentivized
to just bill more services.
Tele-health, especially post-COVID,
with the help of software, can bring down the cost
of healthcare by as much as 40X, that's 40X.
Not only that, there's a new dynamic in the industry,
and it's already driving a lot of positive change.
- By going directly to consumers,
you've bypassed a lot of the existing structures.
So you don't have to have a sales force
that thousands of salespeople are trying
to convince doctors to prescribe something.
You don't have to wait out like 18 to 24 months
to get payers to pay for something.
You just go to consumers with a better product,
a better service, and it's really been
this amazing source of disruption.
- Patients, yes, patients now have choice.
Markets are opening up
and new innovation can finally leap forward.
If patients can choose, they can start pushing medicine
towards a future that is not one size fits all,
where medicine can be customized and personalized
for every single one of us.
- People have talked about personalization
for a really long time and precision medicine.
And I think that what the 2010s brought us
was personalized shampoo and softer products like that.
And finally, what we're starting to see and fund
are personalized real precision medicines.
Ultimately, the patients are the winners from this
because for the first time, you're really starting
to see very, very patient-friendly services
and you're starting to see businesses competing on
who can provide the best services to patients.
And you would think that that would have
always been the case, but in healthcare,
it hasn't always been the case.
So patients now have more choices, better pricing,
and also they're starting to have insurers kind of
be part of that cycle, so it's more affordable, too.
- The next billion dollar healthcare startups
will not only create new billion dollar cash flows,
they'll also greatly improve the standard of care
across our whole healthcare system.
If you're working on that, we're looking to fund it.
One of the things my partner Kim and I talk about
absolutely all the time is what world do we want to live in?
When a founder comes to pitch us and it succeeds wildly,
would we choose to live in that world?
- There's a famous chart from American Enterprise Institute
about the costs of various goods and services
over the last generation or so,
and notably, every day consumable items that you have,
like clothing, mobile phones, TVs, cars
have all gone down in relative price
over the last 20 or so years.
But certain things that are also really essential,
like education, healthcare, and housing,
have all gone up substantially and have become
increasingly unaffordable and unreachable
for millennials and then Gen Z.
- It's this thinking that led Kim down the path to find
and fund companies like Abodu that makes it possible
for people on the West Coast to build housing
in as short as 30 days, which is crazy.
It normally takes months to years.
Kim's work as a journalist actually led to the creation
of the global Y.I.M.B.Y., that's yes in my back yard.
And that also led her to finding and fighting for
more housing of every kind.
- I started getting really interested in this problem
almost 10 years ago.
I started to notice that despite all the wealth
and opportunities that we're creating here,
we were not literally scaling the physical seats
that we could get people in to participate
in the economy that we were creating here.
- Kim also led our investment in Culdesac,
which is bringing car-free cities to the world,
starting with one of the most car-centric communities
in the world in Arizona.
- We built a lot of this country in the post-war period
around automobiles in a very car-centric model
where things were sprawling out,
you had to drive to get everywhere.
And once we built all of that easily-to-access
greenfield land for a generation after World War II,
we kind of stopped building,
and housing has gone up substantially
since the '70s and '80s.
And so now we're kind of starting to rethink
and re-tinker with our build format.
- And finally, coming right out
of that crazy price change chart,
Kim and I have spent a lot of time thinking about
how we make this new economy of tech a big tent,
letting anyone, including people who didn't go
to the right schools or grow up with the right parents,
become an engineer or a data scientist
or a designer or PM or any role in tech, enter Career Karma,
which is a community online that does exactly that.
- We did the series Amlot.
It's led by an amazing relentless team in Ruben Harris
and Artur and Timur Meyster.
They are really scaling out their individual pathway
into breaking into the tech industry
for literally thousands and thousands of Americans.
- So that's housing, that's job retraining,
both things that are very important.
Kim's also been leading our early work
into funding climate and sustainability.
- But there's one really important problem
that is paramount to everything else.
It's literally the house of the planet that we live on.
If we don't have that as a basis,
it's really hard to make lots of other things
increasingly work or function in a world
where you can't know if the place that you're going to live
is going to have breathable air in 20 years.
- We're particularly early in that area,
but what we've learned is that if there are smart people
with powerful, new technologies,
then that's the path to solving that problem.
One of the key things we all care about
at Initialized truly is,
is this a world you and I want to live in?
And for that, I'm proud and thankful
to have a partnership where that counts.
When I came into tech in 1999, I worried I had missed it.
The personal computer revolution was in a lot of ways done.
And the first wave of Web 1.0 had started to look
like it had run its course.
This is something that everyone feels,
whether you're old or new to the space.
The incumbents are so big right now.
There's an established order.
In 1995, here's Bill Gates on "Letterman,"
in what was one of the first mainstream discussions of
what the internet was going to be.
- What about this internet thing?
Do you know anything about that?
- Sure.
-What the hell is that, exactly?
- Well, it's become a place
where people are publishing information.
- Now, we might laugh at this today,
but embedded in that conversation is still the future.
And the future sometimes starts as a toy,
sometimes something that is that easily dismissed.
But if you keep chipping away at it,
you keep making product, you keep getting it out there,
these things will go on to create whole ecosystems
and touch billions of people.
Right now, people are always saying
there's too much money chasing too few people
and too few good ideas, but based on
everything I've seen in the last 10 years,
that couldn't be further from the truth.
This is what I know now.
There are infinite problems to solve,
and they're an incredible number of very smart people
like you to go out and solve those problems.
And instead of complaining about too much money,
we should realize this is a blessing.
We are blessed to be deploying this fund.
I can't tell you how thankful I am for this opportunity.
And I can say without a doubt,
as Brian Armstrong at Coinbase says,
we're still only 1% of the progress bar.
So that's it for this week.
One of the things in the comments
that I know you guys are hoping to see more
is a lot more narrative style work,
and I'm going to bring that in the new year.
I hear you, I see it in the comments,
and we're going to take this channel to the next level in 2022.
If you like this, please click subscribe and the bell icon.
Every week, we're going to bring episodes like this
to try to teach you about the world of startups
in this crazy place where millions of dollars are deployed
to create billions of dollars in value.
Every day I wake up, and frankly,
I pinch myself that I get to do this job.
And I think a lot of us at Initialized feel this way, too.
Our jobs are if we find the right people
solving the right problems, the money comes
and the score takes care of itself.
I'll see you next week.