Interview with Initialized Capital’s Garry Tan on the agency’s seed funding in Coinbase, Ohanian’s departure, constructing a presence on social media, and extra — Protecting enterprise capital, software program and startups — In March 2012, Garry Tan obtained an e-mail from the founding father of a brand new startup referred to as Bitbank, Brian Armstrong.
What Initialized Investor Garry Tan Did To Turn A $300,000 Bet On Coinbase Into A $680 Million Golden Ticket For His Investors
Garry Tan received a message in March 2012 from Brian Armstrong, the founder of a brand new startup called Bitbank, asking him to meet with him. Aside from Armstrong being a former entrepreneur himself who became a venture partner at the renowned startup accelerator, Tan is also familiar with him because he held a key role at Airbnb, one of YC’s most famous alumni companies and one of the buzziest home rental services.
‘I’ve been coding like crazy for the past few days,’ Armstrong wrote Tan, along with a link to the project he was working on, a banking app for Bitcoin, the digital currency. It basically boils down to the fact that I am looking for a co-founder for my startup. Would you be able to tell me if you have seen any other applicants working on projects involving bitcoin? ”””
Tan replied cryptically: “You already know your future cofounder.” Armstrong did not know yet that he had a big fan in Tan, who secretly ranked Armstrong with an infinite score in YC’s admissions software to ensure he was accepted into the program. He eventually attended, not as Bitbank but as Coinbase. Investing in Coinbase’s first round of capital, Tan’s new venture capital firm, Initialized Capital, saw Coinbase as the next big thing.
A few hundred thousand dollars turned into millions of dollars in a historic venture.
During its public offering, Initialized held 0.66% of Coinbase thanks to its $300,000 combined seed-stage check. After adding 2015 and 2018 checks, that stake rises to 0.8%. Coinbase listed on Nasdaq on Wednesday. Initialized’s seed investment returned 2,200x its capital at Coinbase’s first day of trading of $328. With $1.3 million invested, Initialized turned $680 million into a stake. This is YC’s stake, and Tan is involved in billions of gains.
By investing at such a price, Initialized will have been able to return its initial capital by over 80x just on its seed investment. It is it’s the validation he needs to look to develop Initialized into a powerhouse that can go toe-to-toe with Silicon Valley’s biggest VC brands, including Alexis Ohanian and Harj Taggar, and develop it into a sizeable company that can function independently of its three cofounders.
“Now that I have the golden ticket, I feel as if I have won the lottery,” Tan says. “What I’m most excited about is that we’re going to build the next big platform, and I’m looking forward to it actually having something to do with it.”
Tan, Ohanian, and Taggar were doing double duty when Armstrong passed through Y Combinator in 2012. Not only were they partners at the accelerator, they were also running a $7 million initial fund while also working as partners at the accelerator. During the early days of Bitcoin, Ohanian and Tan were intrigued by the potential of the currency, with Ohanian speaking to skeptical media outlets about the advantages of cryptocurrencies, while Tan experimented with the leading exchange of the time, the Mt. Gox. After buying his first bitcoin, he recalls the feeling of feeling as if he would be scammed and would never see the money that he had spent hundreds of dollars on ever again. Almost like a timer, if you were a bad engineer, within a year or two you were going to be hacked if you were a bad one.”
Armstrong was a good choice to resolve that issue because he had engineering experience first-hand working on Airbnb’s own payment system. The one thing that made it more difficult for Initialized, as well as a handful of other seed investors, was to raise only $600,000 of the $1 million Armstrong was targeting when Coinbase raised its first seed funding in September 2012. “It didn’t seem to bother Brian too much, because this was such a young area, and he didn’t need to hire that many people right then,” Tan explains now. “The space was so new, and he didn’t need to hire as many people as he did.” “But yea, it was not a hot startup when he hired as many people as he did.”