14 Minutes of SaaS

14 Minutes of SaaS

E25 – Garry Tan, Co-founder & Managing Partner of Initialized – Fixing a Broken World – 2 of 2

Garry Tan, Managing Partner and Co-Founder of Initialized, talks with Stephen Cummins on the 14 Minutes of SaaS podcast - part 2 of 2

E25 – Garry Tan, Co-founder & Managing Partner of Initialized – Fixing a Broken World – 2 of 2

This is the second of two episodes with Garry Tan, who is co-founder and managing partner of Initialized, a VC he created with Reddit co-founder Alexis Ohanian. He talks about going into companies’ offices to discover systems to be disrupted, the importance of bullshit and buzzword free communication, how there’s never too much capital because there’s an infinite amount of problems to solve, blockchain, crypto and smart contracts, as well as more companies they’ve invested in like Plate IQ (automating restaurant invoicing processes), Coinbase (a digital wallet service for trading Bitcoin) and Patreon (a platform for monetising creativity). “Hey, the world is so full of capital, and then most people think it’s too much capital chasing too few good people and too few good ideas. And to that I’d say that’s ridiculous. You know, from my Y-Combinator experience and ongoing as a venture capitalist, there’s so many super smart people that we meet all the time – and then on the flip side, look at how broken this world is. There’s so many problems to fix. And so I really think that there’s definitely infinite capital. But now there’s infant people and infinite problems to solve.”

Transcript – Garry Tan, 2 of 2
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Garry Tan

Hey, the world is so full of capital, and then most people think it’s too much capital chasing too few good people and too few good ideas. And to that I’d say that’s ridiculous. You know, from my Y-Combinator experience and ongoing as a venture capitalist, there’s so many super smart people that we meet all the time – and then on the flip side, look at how broken this world is. There’s so many problems to fix. And so I really think that there’s definitely infinite capital. But now there’s infant people and infinite problems to solve.

Stephen Cummins

 

Welcome to 14 minutes of SaaS, the show where you can listen to the stories and opinions of founders of the world’s most remarkable SaaS ScaleUps.

In the second and concluding part of our interview with Garry Tan, co-founder and managing partner of Initialized, he advises how we can go about discovering systems ready to be disrupted – the foundation of our startups. He lets us know whether he’s excited about blockchain or not, describes, the importance of communicating real value clearly, and lastly he outlines what his mission in life is.

Garry Tan

Yeah, we’re increasingly seeing late adopter industries that are really interesting – like one of our companies is called Plate IQ. So just as with Easypost which has a non trivial, significant percentage of parcel shipping going through their system…. Plate IQ actually has a non trivial, pretty large percentage of accounts payable for restaurants – and so they actually know the price of a carrot the price, the price of an onion – not just in one location but across the United States, and soon worldwide. And so this is a great example of one really super big theme that we’re looking at – there’s just a lot of industries out there that have no tech. One thing that we often say is walk into any office building in any city in the world and look at what they’re doing and… and see how they’re doing it. Are they using file cabinets? Are they using fax machines? Are they using paper still? But even if they’re not using paper, are they using e-mail? Are they using spreadsheets? And all of those businesses that are still using these antiquated business tools – they’re, going to be replaced by smarter versions that use pure software. And that’s one of our super trends. And so Plae IQ is basically applying this to one of the oldest industries – like everyone needs to eat. And restaurants frankly just never have good enough tech. So we just love companies that bring great tech to places that have never had it.

Stephen Cummins

You mentioned the very laudable goal to fund companies that have a chance to live to be a century – which is a fantastic part of your vision. Any other part of your vision going forward that you can elaborate on?

Garry Tan

Yeah. I, think the… the craziest thing that’s happening in the world is that there’s just so much money. Obviously, we’re here at the at MoneyConf – that’s sort of a confluence of that. Negative interest rates. What does that mean? Literally there’s, such an oversupply of capital at the institutional level that’s all desperate for yield. And that’s sort of yielding some of the most interesting opportunities for startups that we’ve ever seen so. You, know in particular fintech and lending has never seen more growth potential. Just this idea that at the institutional level, at the bank level, people are lending at close to zero percent or negative …. that it truly is something that should trickle down to the rest of society – to small businesses, medium sized businesses, to individuals actually.

So we’re seeing know companies like LendUp actually being able to make a really big dent in personal lending and pay day lightning. And we’re seeing other companies like Drip Capital be able to do trade finance in India for manufacturers that have really never had access to lending. And lending is such a fundamental piece of you, know doing, business. So it’s sort of this perfect mix of software, the macro state of the economy and then frankly people being able to start these startups.

Stephen Cummins

As a VC you’re working with all sorts of founders and potential founders in all sorts of different ways. With such variable activity and considerable travel – like you’re in Dublin right now – have you managed to carve out some sort of daily routine?

Garry Tan

Yeah. I. Mean to be Frank I spend most of my time in San Francisco I. Have a two and a half year old at home and we can get a lot of things done over Zoom thankfully. But, yeah, my, routine tends to be go into the office and meet with people for eight or nine hours a day back to back and – if I’m lucky – I can have lunch.

Stephen Cummins

What are you most proud of in your career so far?

Garry Tan

I mean, frankly being able to work with someone like Brian Armstrong of Coinbase very early. And then to see the chance for that to be a multi 100 million dollar company. I want to do that a lot more and I, you know, I want to enable founders who are frankly just like us. You know I had no intention of ever becoming a VC. I had no idea that… that would be something in my cards. And so now that we do have that chance, we’re going to do the most with it. We’re going to really try and basically help as many founders as we possibly can.

Stephen Cummins

So is blockchain the trend that excited to the most at this moment?

Garry Tan

Yeah, absolutely. I mean, I think when you merge this idea of open source with the actual definition of money and you can do it in a way that’s trustless and decentralized … in the way that you know, frankly half the Banks here can’t touch it, right? Like they can’t charge their fees. They can’t say no. They can’t decline your application. Or the government can’t come in and say ‘well .. no …this is bad’. I think that’s a really powerful moment, and it’s particularly powerful because with Ethereum, now that you can actually write smart contracts that represent basically any medium of exchange …. That’s really sort of the fever dream of where this is going.

Joe Lubin here from Consensus actually had a great slide up. And he actually just called out by name Uber, AirB&B, and eBay. Like these are just marketplaces – they are centralised now but, you know, for us if you look at Craigslist… Craigslist is this free thing that basically has this, you know, it’s an immovable object. It’s has the best liquidity and it basically takes no fees in pretty much all of it’s markets. And the only hard part is that you can’t actually change it. It’s very, very fixed. So what if you could add this fast iteration of open source and could make the software quite a bit faster. And it doesn’t have to be owned by anyone. Software engineers can go out and make a better marketplace. And so there’s a huge chicken or the egg problem. How do you actually get these marketplaces started? But we’re so early in this that, you know, we have to remind ourselves … in 1994 NCSA mosaic was brand new. And nobody knew what the worldwide web was.

And so if you ask someone, hey, are you going to go and buy most of the things you could possibly buy through a web browser? They would say a. What’s a web browser? And b. they would say what’s the internet?

That was the era when Amazon was born. And so I think the next great giants that are, you know, sort of going to define all things – how we buy at the societal level .. that’s happening now. We interact with that the side of it looks like that’s sort of happening right now.

Stephen Cummins

Craigslist is a great example of function over form I think. It’s lack of design almost became a virtue. I don’t think anybody would change it.

Garry Tan

Oh it’s a feature – yes. It’s like Hacker News … it hasn’t changed at all.

Stephen Cummins

Yep. Is there any other career you’d love to have … if you weren’t doing what you’re doing right now Gary?

Garry Tan

Yeah, if I wasn’t doing this, frankly I’d just be starting another company. Just because that’s the most powerful thing that’s happening. And, you know, I think I would definitely be doing that. If I didn’t also see this other aspect of ….  Hey, the world is so full of capital, and then most people think it’s too much capital chasing too few good people and too few good ideas. And to that I’d say that’s ridiculous. You know, from my Y-Combinator experience and ongoing as a venture capitalist, there’s so many super smart people that we meet all the time – and then on the flip side, look at how broken this world is. There’s so many problems to fix. And so I really think that there’s definitely infinite capital. But now there’s infant people and infinite problems to solve.

Stephen Cummins

I see that you’re a key investor in something that I find very interesting, Patreon. I think it’s an intriguing model that I haven’t really investigated for content producers. Do people publish podcasts in Patreon?

Garry Tan

 

I’m pretty sure they do. It’s really therefore anyone who creates anything. And so the obvious examples are web content creators and people on Youtube – but I think it applies to anyone who creates anything – especially on a regular basis.

Stephen Cummins

What’s one piece of advice you’d give to startups to scale up finders seeking investments with yourselves?

Garry Tan

Absolutely. I think the most surprising piece of advice that I’ve learned from my time at Y-Combinator … specifically working with Paul Graham ….was that the most important thing is actually being plain spoken. There’s so much BS out there. And, you know, frankly there’s so many buzzwords. In fact people raise money or get their sales done based on buzzwords. And that’s, you know … if that’s the only way you can do it, then that’s fine. But there’s always a way to explain something in simpler terms.

There’s always a way to basically connect with someone at a more, you know, fundamental level … where you’re actually communicating something, instead of nearly signalling things. And I think that’s the most important thing as venture investor, it’s the most important thing as a founder. It’s just the most important thing in this modern society. We are just like inundated by BS and the less we can put out the better.

Stephen Cummins

So strive for authenticity, empathy and learn to communicate that.

Garry Tan

Yeah, yeah, absolutely. I mean, you don’t have to use buzzwords like blockchain to get the sale. Just talk about how you solve a real problem.

Stephen Cummins

What type of companies shouldn’t look for investment?

Garry Tan

It’s a good question. I mean to be frank things that might not be winner-takes-all. You know, if you even a restaurant sometimes can become like McDonalds, but most restaurants aren’t. And so there’s so many cases where someone should definitely do it, and someone should definitely raise money from individuals … but they should never talk to venture capitalists that’s about it.

STephen Cummins

And last question for you Gary. What drives you in life? What really gets you up in the morning?

Garry Tan

I guess it just goes back to what we talked about it … just, you know, we live in a super broken world and it just feels like a true mission to me, a lot of things can be fixed. And it’s actually product people, builders, engineers, designers …. like they’re the ones who actually have a very strong roll in this. It’s the most value creating thing that happens in society, especially now. And so if I can be a very small part of making that happen now then that’s the most important thing that I think society needs. I mean that’s a very tech optimistic view, but I still believe it.

STephen Cummins

Gary, it was actually fun chatting with you here in MoneyConf before the interview. And it’s also been a pleasure doing the interview with you. Thank you very much for being on 14 minutes of stuff.

Garry Tan

Thank you so much for having me.

STephen Cummins

Next episode is the first of three-part mini-series with be inspirational Ysiad Ferreiras. He Rose from a difficult environment where he was arrested for gangland activity at the age of 15 in the Bronx, New York to success as the COO of Hustle in Silicon Valley, a peer to peer texting platform for conversational marketing, which he helped scale to $16M ARR (annual recurring revenue) and $42M in investment before leaving them.

You’ve been listening to 14 minutes of SaaS. Thank you to Ketsu for music provided under a creative commons license. This episode was brought to you by me, Stephen Cummins. If you enjoy the podcast, please don’t forget to share it with your network, subscribe to the series and give the show a rating.

14 Minutes of SaaS