Cold inbound emails haven't worked well for me, but that's where software down the road should help.

SF/SV is still the most concentrated place for startups, so when you want to grow fast it's still probably the most concentrated place for talent and capital. You can certainly start a company anywhere (and people are, and that's great!), but when you want to grow fast many people still move here, now increasingly at the Series A.

Clearly one unique value proposition of your fund is that sweet combination of check amount, time to close, and stage of investment. That's certainly appealing.

But I've learned over time that I care most for my fellow founders in the trenches. I love my people. And with your fund, the people involved – especially those in your portfolio – appears to be a huge draw.

I've had the privilege of interacting with at least a few founders of your portfolio companies and to a person they are all stellar. Fred of Rainforest and Brad and Matt of SendWithUs were all kind enough to come on our fledgling little podcast (thanks again!). And I first spoke to Jarrett of EasyPost as he dove into responding to my support emails; still wear my EasyPost t-shirt all the time!

Some questions that popped into my head while reading:

- One of YC's great strengths is your community of peers. How do you plan to create such a community within your portfolio?

- How strong a hand do you expect to have in guiding your investments? (Trying to get the mental model right of where you'd sit between an AngelList syndicate, a YC, or a full-service firm like a16z.)

- Do you expect to be amenable to alternative exits, for example distributions at some multiple, a la Indie.vc?

- Why are your checks typically in the $500K - $1M range? (Personally not sure my company would need that much capital, so I would like to be careful of being cash rich as much as cash poor.)

Community is of course amazing to have, and very necessary. We've all been to those horrible mixers where everyone runs around talking about how they're KILLIN' IT. Those are huge wastes of time. It's always done through the little things - events, mixers, dinners where smart people hang out and know that they can trust each other and share what's really happening. YC has worked incredibly well because everyone knows that you can trust each other since if you violate that trust, you'll get kicked out of the community. It's something more people should do. Of course since we're later stage, the founders will be spending a lot more time with their teams than with each other.

We're probably in between YC and a16z. We're a smaller fund, so we can't afford as many operating partners and staff, but we'll be able to do a lot. My goal is to spend almost all of my time with the 20 or so companies we work with in a year, so it'll be more concentrated. That's what will be necessary to get companies from seed to Series A, across that dreaded funding gap.

We've always supported founders to make the right choice whether they want to sell, or not. In terms of alternative exits we haven't gotten there yet, because that model is pretty unproven but I really like what Bryce is doing and I really want it to work, because its clear there is a lot of stuff out there that should exist but can struggle to get capital.

Most seed rounds we see come together are between $1M and $3M these days, so that amount of capital lets us get our percentage ownership (which is necessary for portfolio construction) while also letting a good round happen with other good seed investors. Most folks want at least 18 months to 24 months of runway to get to a solid Series A or profitability, so a lot of these numbers work backwards from that.

Thanks again for your questions Josh! Hope we can be helpful to you down the road.

Really hopeful to see Bryce's model work, as well. Am keeping an eye out to see if your fund experiments with similar models.

My question: will you follow other investors pattern for whom only warm introductions matter?

I read in the press other SV investors stating that exactly zero investments were made as a consequence of a pitch through the contact email. Will this be true to you as well?

thanks!

In a thread below I talk about file cabinet industries — industries that basically have no software, and are horribly inefficient. Investing is absolutely one of those, but only using email and calendaring. The main bottleneck for investors is number of hours in the day, because there are very few people making all the decisions. Warm intros are the only way a non-software system can work.

So, spoiler alert, software. :-)

Does that mean that seed stage companies should not bother contacting you unless they can get a warm intro?

This got me thinking... I really do think that better tools for sourcing deal flow are a foundational component of the next age of entrepreneurship. Crowdfunding isn't working as precisely as some have hypothesized. I'd be really curious to see how companies like AngelList & Mattermark are parsing their data to determine correlative attributes of "fundable" companies. Any thoughts/ideas on traction toward successfully automating dealflow?

I'm sure the bigger VCs and accelerators are building interesting things in this space but I haven't found much that's open source.

As data points, AngelList and Crunchbase are good starting places, but the AngelList API is private and the Crunchbase API is paid.

[1] https://gust.com/investors

Also, great to hear about support for smaller team sizes and investing pre-team as it were, but what's the plan for growth sizes? Pushing for unicorns or some of the portfolio aimed at smaller niches?

Edit: also, used to be a Posterous user, and actually had a product in a similar space which Arrington read out on your TWIST episode :)

We wanna invest in folks early. The fund isn't for investing in B's or C's or later, since there are plenty of people who are good at that.

We've always been pretty sector agnostic, but we're software folks so that's what we know best. A lot of the things we're spending the most time with are "file cabinet" industries — any market where if you walk into the dominant player's office, you see lots of file cabinets or fax machines. A software-enabled startup will probably do a lot in those spaces. What's funny is you can pretty directly extend that to any business that still mainly runs on Microsoft Excel and email too.

Founders matter, but so do markets. We've seen so many of our talented friends end up working on new capabilities that don't solve a specific problem, or don't have a real market. It definitely takes both.

This is a serious question, I hope it gets read and answered and not down voted into oblivion.

Personally I'm anti-surveillance and have been for a long time, particularly the kind of stuff Snowden and others have exposed where there are warrantless wiretaps and long term storage of private citizen information. I've blogged about it many times on my blog. Palantir didn't have anything to do with that and to my knowledge never has.

Initialized doesn't invest in alcohol, tobacco and firearms as a rule because of a mandate from some of our limited partners. Just rationally we believe in funding things that do help people. We generally stay away from investing in directly competing companies and when that does come up (usually through one company pivoting) we make sure that a single partner is assigned to each and those partners are particularly careful to firewall sensitive information. It's similar to what YC and SV Angel have done for years and it works well.

"How does ethics enter into your investment choices? I see you feature Palantir prominently and I have strong feelings about mass government surveillance."

If this is a serious question, maybe don't start with something so aggressive?

Thanks

Can you discuss what each GP's focus is? Are there certain categories of companies you would handle vs Alexis, etc?

We all help people with their ideas, helping founders manage the difficult psychology of starting something new, and making sure that the startup can get to the next milestone: engagement, growth, and profitability.