Dec 14, 2016 · 29m · 20vc
20VC: Garry Tan on The Biggest Takeaways From Advising 700 Companies @ Y Combinator & Why Now Is The Golden Age For The Early Stage?
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews Garry Tan, co-founder of Initialized Capital and former Y Combinator partner. Garry shares key insights from advising over 700 startups, discusses fund economics and seed-stage strategy, and explains how evaluating mission-driven founders outweighs following tech trends.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 28.5% of the talking time here. How this is scored →
Harry as informed peer 2.0 Guest teaching 2.7 Guest disagreement 1.3 Harry pushing back 1.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:47 Rejecting 'spray and pray' label
Garry firmly dismantles Harry's suggestion that Initialized uses a spray and pray strategy, separating the passive 'pray' verb from their hands-on portfolio support.
Hardest push from Harry ▶ 18:47 Challenging portfolio volume strategyHarry directly challenges Garry's high-volume portfolio construction by asking if it is just a 'spray and pray' model.
Biggest teaching moment ▶ 20:45 Thematic investing is backwards at seedGarry reframes how early-stage investing works, explaining that chasing top-down themes is flawed because real breakthrough companies exist long before media or consensus trends appear.
Harry holds his own ▶ 10:14 Demonstrating deep overlap in portfolio networkHarry asserts his own industry depth by noting he has personally interviewed several of Garry's top portfolio founders and key ecosystem CEOs like David Helgason.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Garry Tan's Career Background and Journey into Investing | 1 | 2 | 0 | 0 | Harry asks standard background prompts while Garry shares his career path from Stanford to Microsoft, Palantir, Posterous, and Y Combinator. Harry primarily listens and offers gentle encouragement without pushing back or offering deep analysis. | |
| Platform Shifts & Dangers of Early Platform Bets | 3 | 3 | 1 | 1 | Harry demonstrates familiarity with Garry's portfolio by noting he has interviewed Flexport, Bannerman, and Unity founder David Helgason. Garry provides a historical lesson comparing 2016 hype cycles to 2004 mobile platform missteps. | |
| Market Capital, Seed Dynamics, and Fund Economics | 2 | 4 | 3 | 1 | Garry explicitly rejects the popular narrative that too much capital is chasing too few good teams, reframing the issue around macro yield-seeking, PE buyout delays of IPOs, and public market contraction. | |
| Key Takeaways & Commonalities of Successful Founders from YC | 1 | 2 | 0 | 0 | Harry relays an LP question regarding learnings from YC, and Garry elaborates on founder growth timelines and mission orientation. The conversation is collaborative and informational. | |
| Portfolio Strategy: Active Value Addition & Ownership | 3 | 3 | 3 | 3 | Harry presses Garry directly on whether Initialized operates a spray and pray model. Garry rejects the characterization, dissecting the terms 'spray' and 'pray' to explain how active assistance differentiates their high-volume check model. | |
| Thematic Investing vs. Founder-First Evaluation | 2 | 4 | 2 | 1 | Garry argues that thematic seed investing is inherently backwards, teaching that early trends are formed in basements months before media coverage or consensus emerges, citing Coinbase and Airware. | |
| Quick Fire Round | 2 | 1 | 0 | 1 | In a rapid-fire sequence, Harry asks about fund discipline, mentors, and recent investments. Harry engages warmly with shared references like Chaos Monkeys and Jason Lemkin. |
Statements from this episode (16)
Peter Thiel wrote his $500K Facebook check while starting Palantir
“I got the call from Peter saying, hey, come on down, and we're starting a company. We'd like you to be one of the first engineers and flew down to have dinner with him about the same time that he wrote the 500,000 dollar check to Facebook.”
Tech networking events deliver no value due to founder posturing
“You go to your average meetup, or hangout, or dinner, or networking event, and it's basically people running around always with a happy face on, saying, how are you doing? We're doing great. We're killing it. How are you doing? And we're also killing it, and s…”
In 2008, VCs questioned why Stanford grads joined Y Combinator
“I remember in oh eight going out and pitching VCs saying, yeah, we're recent graduates of YC. And they would say, why the heck did you do that? You're a Stanford grad. You have startup experience. You didn't have to.”
Sequoia's early investment in Unity was the best AR/VR play
“On the flip side, the funny thing about AR, VR is probably the most valuable thing to invest in as Sequoia already did, which was Unity.”
Initialized is waiting for the next computing platform before big bets
“And so, you know, we are frankly are waiting for that platform and it's anyone's guess when that will be.”
The Wilshire 5000 index actually contains only 3,500 public companies
“If you look at the Wilshire 5000, there actually aren't 5000 companies in the Wilshire 5000. There are only 3500 today.”
Abundant late-stage capital creates a golden age for micro VCs
“I think that that's great because it's the golden age for the micro VC, the golden age for accelerators and for YC because there's more money at the later stage.”
Early-stage founders often take 2-3 years to reach product-market fit
“There are companies that they take two or three years even to get to product market fit. And so that's something that you just have to be prepared for at the earliest stage.”
Initialized Capital targets 20 investments per year to maintain founder support
“For us, the right trade-off is we think that we can work with about 20 companies per year and really spend quite a lot of time with them bi-weekly to monthly meetings all the way through until they're Series A.”
The 'spray and pray' seed investing model does not work
“If you're spraying and praying, it's not going to work. You can't help the founders, and you can't keep in touch to actually increase their chance of success.”
Initialized targets 5% to 10% seed ownership to accommodate co-investors
“Between five, if we can target five to 10% ownership initially, that's still enough to bring in the SV Angels or the Fuel Capitals or other great investors that we especially like to work with.”
Tan turned down being Palantir's first engineer due to media sentiment
“Why did I turn down being first engineer at Palantir? I spent a lot of time trying to figure that out, and it actually came out of this thinking, because this is why I'm very, very careful about it, that when I was 23 and I got an offer from one of the best in…”
Tech common knowledge is a delayed retelling of early founder work
“At the end of the day, what is sort of common knowledge is basically the second or third hand retelling of something that super smart people were working on in a basement six months or nine months before.”
Initialized Capital will remain strictly focused on the 0-20 employee stage
“Yeah, I think we should be disciplined around, well, We really should focus on the zero to 20 employee sort of stage. I think there are tons and tons of people out there who are fantastically great scaling operator, like series A and later investors. But for u…”
Posterous could have survived long-term if it charged for usage
“I wish Posterous actually charged money. That was my blog platform software that I worked on. We probably should have turned it into Something that charged for usage and maybe Posturus instead of getting sold could be around today, perhaps a lot like our frien…”
Mutual fund private startup valuation marks are based purely on sentiment
“We're more or less at the worst possible scenario right now. We have no information rights, no liquidity. Valuation committees at Fidelity and BlackRock basically get to mark things up and down with no information, so it's basically all sentiment.”