Brett Gibson — Initialized
We talk about his journey from entrepreneur to VC, Initialized Fund Five, areas that he is excited about, how blogs may benefit from crypto networks and more!
Brett Gibson is a General Partner at Initialized, an early-stage firm with over $700M in assets under management. Previously Brett co-founded the blog platforms Posthaven and Posterous (acquired by Twitter) and later wrote software for Y Combinator, building their essential internal software systems.
We talk about his journey from entrepreneur to VC, Initialized Fund Five, areas that he is excited about, how blogs may benefit from crypto networks and more!
Thanks to Oleg for the intro!
NA: Thanks for joining me, Brett. I saw you founded a couple of companies, and would love to hear about the journey from being a founder and then becoming a VC, how was that for you?
BG: Yeah. I mean, it was pretty interesting but felt mostly fortuitous. I started a few companies and one of them was in the summer ’08 Y Combinator batch, the last batch in Boston. That’s where I met Garry Tan. The company I founded called SlinkSet was folded into his company, which was a blog platform called Posterous.
I ended up being a co-founder at Posterous once we merged and joined forces. Garry and I, we both left before Posterous was acquired by Twitter. After Twitter bought Posterous, they decided to shut it down, so we started a new service called Posthaven, which was a new blog platform to give our users a place to migrate.
At the time Garry was working at Y Combinator and Paul Graham left, and there was an opportunity to join Y Combinator and take over the software team there. The software team to date was mostly Paul Graham, and Garry had written an internal social network, but most of the software that ran YC was part of Hacker News and PG didn’t really let many people touch it. When he left, I took over most of that code and pulled it out of Hacker News. I guess that was my first experience in venture capital generally, I was still writing software, but the software was selecting the people that got into the batch. It was pretty involved in managing that.
Garry and I left YC at the end of 2015 and then he went on to raise fund three for Initialized. The first couple of funds he actually had while he worked at Y Combinator, more like angel funds to follow on investment in the companies he’s worked with. As part of raising Initialized, the goal was to be helpful in the same way as Y Combinator but at a slightly later stage. He wanted people around, who had experience working at startups.
I took a year off and did a little more work in Posthaven, actually took a lot of online courses, mostly in computer science stuff that I’d never actually learned. When I was looking for a job, he said, “Hey, you should just join Initialized, you can advise companies in engineering and spend some time working on our internal software systems”, that’s what I did in 2017.
From there it became natural that I’d sit in on maybe a little more technical pitches where I could help. The arc from there was to start taking pitches on my own and advocating for deals internally. I guess transitioning from a primarily advisory role to a higher investment advisory role that most of the partners that Initialized now perform.
NA: Yeah definitely can see how you found yourself into it fortuitously. How did you get into investing in the crypto space?
BG: I joined in 2017 and that was right in the craziness and I had a bit of a background in crypto. I’d heard a bit on Bitcoin early on, I think just from being a pretty close follower of Hacker News over the years. My first actual involvement, in the sense of purchase, was when I saw Coinbase was part of the YC batch and thought I’d try it out. I bought a tiny amount of bitcoin at the time and didn’t pay a lot of attention to it.
When I joined Y Combinator, it was during one of the first alt booms, like 2014. It was something we talked internally and that we followed, I ended up owning very small stakes in a bunch of those alts that seem to all universally go to zero.
After Y Combinator, in that time that I took off, one of the things I actually did is, Posthaven is an interesting project in that it’s a blog platform, but also, we’ve promised to keep it online indefinitely.
So far, that’s just a pledge, but it’s something Garry and I discussed and he had been talking to people around the Ethereum presale and what’s going on there. Obviously, we knew the BlockStack team from Y Combinator and the Protocol Labs team.
I spent a decent amount of time in that year, sort of researching, trying out early smart contract development and seeing what it would mean to put a blog network on a decentralized network in a meaningful way.
I decided that this isn’t viable at all. The UX issues are far too enormous for any real user, but that made it such that it became natural to start routing all the token deals we were seeing in 2017 to me.
Being more technical, being willing to read white papers and having a little background in the space, for a while that just became my focus within the firm. I look at other types of deals, but I still do crypto investing largely for Initialized.
NA: I think it was just over a month ago, Initialized announced Fund Five. Could you talk a little bit about the thesis of the new fund?
BG: At a high level, Initialized tries to be fairly generalist as a firm. We don’t target any specific vertical, and there’s not even necessarily anything because that we rule out. Although, there are personal constraints in terms of what we feel like we can meaningfully diligence.
I think the answer is born a little bit more out of the staff than any specific firm-wide thesis. We all have different beliefs about the world, but we also are believers that you need to be open to founders showing up and telling you what the future is going to be.
It’s strong opinions, weakly held. We have a general sense of where things are moving, but are flexible. Most of us come from software startup ecosystem backgrounds, so we have a bias towards things with a heavy software component.
Although not every investment we’ve made is heavily on software. Within software, we’ve done consumer stuff, done plenty of B2B and enterprise stuff. I think that we’re willing to entertain most of it, we haven’t looked too hard at many things that were like biotechnology or hard technology that was outside of software.
We’ve done a few hardware things. I tend to look at things where it’s helpful to have been a developer. So, crypto, and then, developer tooling and cloud infrastructure. I’ve been looking at a lot of the AI and ML startups lately and a little bit on the robotics side.
NA: Could you talk a little bit about the process that Initialized goes through, from receiving a deck or receiving an intro? and then if you’re interested all the way to actually making the investment.
BG: Generally there’ll be the first point of contact with some member of our team, most things, naturally come in via email.
Most of the time, there’s a first meeting with one or two of our partners. Then, that person takes the lead on the deal and does a little bit of research and discusses and brings it to the partnership to talk about.
From there, we schedule follow up meetings. We vote as a team. It’s actually like a couple of rounds of blind votes that are facilitated by the software we built. From the entrepreneur side, they’ll meet with one of us, we’ll circle back internally and then follow up and then they’ll meet with most of the team. From there, we try to decide pretty quickly. We think at seed moving fast is in everyone’s interest to get to some specific answer.
We definitely don’t like leaving teams hanging in where we’re at if its a no we try to get to the no quickly. Sometimes there’ll be some follow-up diligence points, like references or customer calls or, more digging into what we think about the market. But once we’ve met everybody, we’re definitely working towards coming to a decision in a week or so, or something like that.
NA: Blind voting is quite cool.I’m quite interested to hear your thoughts on this, you’ve been part of the blogging space with your startups previously and you’ve looked into how you could get your blog on to a decentralized network, how do you think, the blogging space can benefit from the community building aspects of crypto and the crypto community?
BG: Yeah, there’s a lot of aspects to this. Obviously, community building is not new to crypto, nor is centering communities around economic alignment. But I think that crypto has really unlocked, this economic alignment as a vehicle and as a sort of rallying cry for community.
There are two sides of it, one is people feel more involved cause they’re like owners in a sense. There’s nothing that motivates a group to act en masse than it is in their economic best interests.
I still am not exactly sure, how that maps to social interactions and things like blogging. I don’t have my head around exactly how these new crypto incentive structures map to, what psychological research I’ve read about the difference between economic and non-economic incentives and how humans switch into different modes of behaviour when systems become economic because it undermines, some types of intrinsic motivators that draw and bind communities. I’m as fascinated as you are to see what’s going to happen. I have a fun, hard time predicting it, right away.
A couple of things come to mind, one is having worked on things with highly social components, like Posterous, at scale, most of what the company is providing is spam and abuse prevention That’s what running a platform like Twitter really is, once it’s big enough. What’s going to do that without a centralized actor and they’re like an open crypto network. I guess economics is the answer, if it’s too costly to spam or abuse, then you’re not going to do it, which is really interesting.
I think that what is definitely relevant to publishing and blogs about crypto networks is not just the community aspect of the censorship resistance aspect. Both the free speech and just platform dependency, that was the motivation behind Posterous in the first place.
If Twitter owns your blog platform, maybe they’ll decide it’s not economic anymore and you won’t have your blog anymore. Even if you don’t have free speech issues, you might have your kids baby pictures, taken down issues and so putting these things outside of the control of a single entity, offers some very interesting possibilities, again with abuse downsides, obviously.
NA:Those are some interesting insights. You mentioned you’re not just looking at crypto deals, you look at, various other deals, various other sectors. What are some of the areas that you are excited for right now?
BG: As a developer, I’m always excited about things that are cool that I would want to use. I still write code once in a while though I don’t get a chance very often, I still do. I have a soft spot for a developer tooling and things that are fun to play around with and especially I really like things where that’s the go-to-market. You’re able to build a business around the fact that you put it out there and it resonates with hackers to want to hack on your product or use it in their flow.
So developer tooling. Related is also cloud infrastructure. When I was atPosterous, I was the de facto ops person. I am interested in cloud infrastructure, a lot of that these days is around the Kubernetes ecosystem, which I never really fully got into. It was after my time and running a lot of servers.
There are obviously so many interesting things going on in machine learning and deep learning and AI. I think there have been some phases of people building out AI tooling, and the next phase is this deep verticalization where people will just take AI and build a business around it because it modernizes some industry.
I think there are people who believe that the end state is that some machine learning will be just in most software companies’ toolbox in the same way that web applications are in everyone’s toolbox.
I think that that has a lot of interesting implications and just teaching computers to figure things out for us. I’m excited to see where that goes.
NA: Those are definitely some interesting areas. Could you tell us what is the latest, publicly announced investment you’ve made and why did you make it?
BG: It actually was Atomic Loans. There have been some that we haven’t announced. I often kinda over-index a little on the teamand I was just excited about the opportunity to work with the Atomic Loans team. They’re just very smart, but also, I think that what interests me was, and there’s a lot going on in DeFi, but people didn’t really focus as much on what’s possible natively in Bitcoin.
I guess by natively, I mean, using Bitcoin scripts directly. I think that Bitcoin being what it is as still the dominant asset ecosystem means that there’s still a lot of interesting use cases and just new technologies coming out with the upgrades they’re happening on Bitcoin, there’s going to be even more possibilities.
I think that those guys had some deep insights about how to write scripts and how to move things cross-chain, and be able to provide a loan product. Now, I don’t think they’ve announced it, but they’ve got some exciting new products coming out that they’re working on and in the same vein they’ve been doing a bunch of work with DLCs and it’s been exciting to see what they push out there.
NA: Yeah, they definitely seem like an interesting company. How does Initialized work with a company post-investment?
BG: I think a lot of what we sell companies on is our support and as a VC firm, we really pride ourselves on actually being helpful day-to-day. Pretty much all the companies, in the portfolio, will have a single point of contact, one of our partners.
They’ll meet with that person at some regular cadence, generally, at seed, it’s every four weeks or so on average. Whoever talks to them talks through what’s going on, helps advise them in what’s going on in business and then facilitates access to the rest of the team as needed.
So our partners come from a bunch of backgrounds. We have expertise and product and PR and marketing, legal, growth, to engineering. We make sure the companies meet with everyone on the team, and then you leverage the rest of our network.
We also spend a lot of time around specific events, we’ll make sure to bring the partnership together and meet with the team at inflection points. If they’re considering some big decision or more often around their next fundraise we’ll make sure we meet with them, go over where they’re at, talk through their pitch and help them refine it. Then, go introduce them to all the investors we know who might be interested in Series A.
NA: That’s great. Thanks so much for joining be Brett, it was a great chat!
BG: No problem, thanks for having me on!