How YC Rewrote the Seed Playbook with Garry Tan

09/29/20 • 76 min

We're joined by Posterous co-founder, former YC partner and current Managing Partner of Initialized Capital Garry Tan to go deep on how YC changed the game for company creation and seed investing, how they thought about building the "cult" of startups, and what lies ahead as the early-stage world continues to globalize and evolve more quickly than ever.

Sponsors:

Statsig: https://bit.ly/acquiredstatsig24

Topics Covered (among others):

How the recruiting challenge for early-stage startups led to outside-the-box thinking
- Peter Thiel’s “crazy” (but not actually crazy) offer to Garry to join Palantir
- Leveraging “cult” startup culture into a magnet for specific types of people
Y Combinator’s path from fringe to mainstream
- Insight that those same cult recruiting techniques could be applied at a meta-level to recruiting company founders themselves
- Initial strong reactions to YC, and knowing they were on to something
- The beginning of “influencer investing” with Paul Graham’s essays + Hacker News
The blooming of Seed as an asset class alongside and around YC
- The landmark deal with SV Angel and DST / Yuri Milner to “auto-fund” every YC company starting in 2011
- YC scaling from ~10-12 companies per batch to 70-80 and now 200+ per batch
- Starting Initialized Capital within YC, and then spinning it out into one of the largest independent seed funds
Influencer investing and startup evangelism going mainstream
- The impact of The Social Network movie
- Exporting the ~”YC message” to the entire world: you can start a startup
- The power of direct, bi-directional access to people via the internet

Links:

Paul Graham’s Essays: http://www.paulgraham.com/articles.html
Hackers and Painters: https://www.amazon.com/Hackers-Painters-Big-Ideas-Computer/dp/1449389554/
Hacker News: https://news.ycombinator.com
Garry's (great) YouTube Channel: https://www.youtube.com/channel/UCIBgYfDjtWlbJhg--Z4sOgQ

Sponsors:

Statsig: https://bit.ly/acquiredstatsig24

Topics Covered (among others):

How the recruiting challenge for early-stage startups led to outside-the-box thinking
- Peter Thiel’s “crazy” (but not actually crazy) offer to Garry to join Palantir
- Leveraging “cult” startup culture into a magnet for specific types of people
Y Combinator’s path from fringe to mainstream
- Insight that those same cult recruiting techniques could be applied at a meta-level to recruiting company founders themselves
- Initial strong reactions to YC, and knowing they were on to something
- The beginning of “influencer investing” with Paul Graham’s essays + Hacker News
The blooming of Seed as an asset class alongside and around YC
- The landmark deal with SV Angel and DST / Yuri Milner to “auto-fund” every YC company starting in 2011
- YC scaling from ~10-12 companies per batch to 70-80 and now 200+ per batch
- Starting Initialized Capital within YC, and then spinning it out into one of the largest independent seed funds
Influencer investing and startup evangelism going mainstream
- The impact of The Social Network movie
- Exporting the ~”YC message” to the entire world: you can start a startup
- The power of direct, bi-directional access to people via the internet

Links:

Paul Graham’s Essays: http://www.paulgraham.com/articles.html
Hackers and Painters: https://www.amazon.com/Hackers-Painters-Big-Ideas-Computer/dp/1449389554/
Hacker News: https://news.ycombinator.com
Garry's (great) YouTube Channel: https://www.youtube.com/channel/UCIBgYfDjtWlbJhg--Z4sOgQ

Previous Episode

VC Fundamentals Part 3: Company Building

We continue our VC Fundamentals series with Company Building — everything that happens after you write the check. We catalog the different categories, strategies and tactics for VCs to "add value" to their portfolio companies, from direct involvement to portfolio services to simply doing nothing (often better than many alternatives!). For both of us, this is the best and most fun part of being an investor, and we hope that shines through in this episode. Here's to building great companies!

Sponsors:

Statsig: https://bit.ly/acquiredstatsig24

Topics Covered:

The goals of Company Building:
1. (Obviously) add value to your investments
2. (Less obviously) increase your odds of finding/winning your next investments
The four categories of company building:
1. "Direct" work by the GPs
2. "Active" platform and portfolio services teams
3. "Passive" brand halo effect
4. Simply "doing nothing"
Activities you actually do:
- Board work (both governance and strategic/operational planning)
- Planning and orchestrating future financings and exits
- Recruiting, closing deals and "selling"
- Cofounder/executive disputes and departures
- Pivots and company shutdowns
And perhaps the most important company-building advice of all: Don't Freak Out.

Links:

Our interview on the main show with Doug Leone: https://www.acquired.fm/episodes/sequoia-capital-part-ii-with-doug-leone
Fred Wilson's great post on pivots vs. shutdowns: https://avc.com/2018/11/pivot-or-fail/

Next Episode

Book Club Discussion: Brotopia with Emily Chang

Hello ACQ2! Posting the audio recording of our Book Club Zoom session with Emily Chang in digestible podcast form. For those who weren't able to attend, we hope you get as much out of the recording as we did being there live!

Sponsors: