Investing in startups with mega VC Garry Tan

August 14, 2023
Angel investors

In the fast-paced and ever-evolving world of venture capital, few individuals manage to leave an indelible mark. Garry Tan, an influential investor, entrepreneur, and co-founder of Initialized Capital, is undoubtedly one of them.

With an exceptional journey spanning decades, a keen eye for transformative investments, and a unique blend of wisdom and humor, Tan has carved a remarkable path in the world of tech investments, building substantial wealth along the way.

He also shares his experiences and learnings on his YouTube channel.

Starting out as an entrepreneur

Back in 2008, he embarked on his entrepreneurial voyage as a designer and engineer, co-founding Posterous, a simple yet innovative blogging platform. 

Within a few years, the platform gained a devoted following before being acquired by Twitter in 2012, providing Tan with a taste of early success and setting the stage for his future endeavors in the investment landscape.

Building wealth

Through his astute investment choices and calculated risks, Garry Tan has built an impressive wealth portfolio. He has invested in some of the most disruptive and successful companies of our time.

Notably, Tan became an early investor in Coinbase, the leading cryptocurrency exchange platform, in 2013 when the crypto market was still in its infancy. His prescient investment has reaped enormous rewards as Coinbase's valuation skyrocketed, contributing significantly to his wealth accumulation.

Tan also recognized the potential of Instacart, the grocery delivery platform, early on. By investing in Instacart's seed round in 2012, he positioned himself for substantial returns when the company's popularity surged during the COVID-19 pandemic. 

Tan found himself at the forefront of a financial revolution, witnessing tremendous growth in his investment, and his early bet on Instacart proved fortuitous as the platform experienced explosive growth during the pandemic-induced surge in online grocery shopping.

His advice to investors

Diversify intelligently: While taking calculated risks is important, it's equally crucial to spread investments across different sectors, stages, and geographies to mitigate potential losses and maximize potential gains.

Long-term perspective: Building wealth through investments requires patience and a belief in the potential of the companies you back. Avoid getting swayed by short-term market fluctuations and focus on the underlying fundamentals and long-term growth prospects.

Network and learn: Actively engage with fellow investors, attend industry conferences, and build a strong network within the investment community. Garry Tan attributes a significant part of his success to the knowledge and insights gained through these connections.

His advice to founders

Focus on product-market fit: Iterate and refine your product based on customer feedback and market demand. Building a product that solves a real problem and resonates with customers is essential for long-term success.

Build a stellar team: Surround yourself with a talented, diverse, and motivated team that shares your vision and complements your skills. Hiring and retaining top-notch talent is a crucial factor in a startup's success. As Tan says, "A company is only as good as the team behind it."

Embrace failure and learn from it: Failure is an inevitable part of the startup journey. It's how you bounce back from setbacks that ultimately determines your success. Develop resilience, learn from your mistakes, and iterate your way to success.

Balance passion and pragmatism: While passion is essential for fueling your entrepreneurial journey, Tan advises founders to strike a balance between passion and pragmatism. Stay true to your vision but be willing to adapt and pivot when necessary. A healthy dose of realism and flexibility can significantly contribute to long-term sustainability.

The investor's perspective

When it comes to choosing investments, Garry Tan has a keen eye for disruptive ideas and visionary founders. He seeks out startups that have the potential to redefine industries and challenge the status quo.

Tan looks for companies with strong market traction, a compelling product-market fit, and a passionate team driving the mission forward.

His investment philosophy revolves around backing companies that exhibit high growth potential and can make a significant impact on society. By carefully selecting his investments, Tan has consistently generated substantial returns and created a diverse and lucrative portfolio.

Y Combinator and Initialized Capital

Garry Tan's connection with Y Combinator has been instrumental in his journey. Initially joining Y Combinator as a partner, Tan immersed himself in the startup ecosystem, gaining invaluable insights into emerging trends and promising companies. 

This experience and his entrepreneurial background led him to co-found Initialized Capital, a venture capital firm, in 2011. By leveraging his deep ties with Y Combinator, Tan has gained access to a vast network of ambitious founders and innovative startups, allowing him to provide early-stage funding and mentorship to promising ventures.

Garry’s portfolio

His ability to identify and back startups with immense potential has resulted in solidifying his reputation as a savvy investor holding 60+ companies in his investment portfolio. 

Here are a few highlights from his portfolio:

Coinbase: With the explosive growth of the crypto market, Coinbase's valuation soared, and the company went public through a direct listing on the Nasdaq in April 2021. This investment proved to be a resounding success, contributing significantly to Tan's wealth.

Instacart: He participated in Instacart's seed round in 2012, well before the company experienced widespread adoption during the COVID-19 pandemic. Instacart's rapid growth and increased demand for online grocery shopping solidified its position as a household name and yielded substantial returns for early investors like Garry Tan.

Reddit: Tan recognized the potential of Reddit's engaged user base early on and became an investor in the company. Reddit has since grown exponentially, becoming one of the most popular platforms on the internet and achieving significant valuation milestones.

Zenefits: The company aimed to streamline HR processes for small and medium-sized businesses. Although Zenefits faced regulatory challenges, Tan's investment highlights his ability to identify promising startups in emerging industries. Zenefits went on to raise substantial funding and achieve a valuation in the billions.

Garry’s exits

Here are a few (out of 20+ exits) notable exits associated with Garry Tan:

Posterous (Acquired by Twitter): As one of Tan's earliest ventures, Posterous, a simple blogging platform, gained significant traction and a loyal user base. In 2012, Twitter acquired Posterous, recognizing its potential to enhance its platform's blogging capabilities.

While the financial details of the acquisition remain undisclosed, this exit marked a successful outcome for Tan and his team.

Twitch (Acquired by Amazon): Tan was an early investor in Twitch, the popular live-streaming platform primarily focused on gaming content. Twitch experienced explosive growth, amassing a large user base and becoming dominant in the live streaming industry.

In 2014, Amazon recognized Twitch's potential and acquired the company for approximately $970 million in cash. Tan's investment in Twitch proved to be a lucrative exit, further solidifying his investment acumen.

Cruise (Acquired by General Motors): Tan was an early investor in Cruise, an autonomous vehicle technology company. Cruise gained attention for its innovative approach to self-driving technology, attracting significant interest from investors and industry giants alike. In 2016, General Motors (GM) acquired Cruise for approximately $1 billion, with additional performance-based incentives.

The acquisition allowed GM to bolster its autonomous vehicle capabilities, and for Tan, it marked another successful exit in his investment journey.

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