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Hello, Acquired LPs, and welcome to another great episode of the Acquired Limited Partner Show. We have a very special guest with us today, Kim Mai Cutler. Kim Mai is a partner with early stage venture capital firm Initialized Capital, which many of you will recognize the name from twice now have we had Gary Tan on, once I think on the show and then once when we released the audio from my conversation with Gary at the Collision Conf.
Many of you will know Kim Mai's name as well from her previous work as a journalist with TechCrunch, among many other fine journalistic outlets. She has a long history in the Bay Area as a technology and financial journalist and has been known for pieces at the intersection of the tech industry and public policy, often about housing in the Bay Area, cryptocurrency, lots of fun topics that I'm sure we'll have a wide-ranging conversation today. So Kim Mai, welcome to Acquired.
Thank you for having me. Yeah, it's great to have you here. I may as well start with the most interesting question for me, and I think for David, because it's the literal opposite of the direction that our careers have gone. You started as a journalist, and now you are a VC. So before asking questions about that, can you describe mechanically what happened there?
I don't know if this is actually that unusual, but I grew up in the tech industry. My parents were engineers. My grandfather was a physicist who worked for Hewlett Packard way back in the 50s.
So my family's been in the industry for 70 years in the Bay Area in particular and has worked for, you know, a lot of iconic companies of previous eras. And growing up in that, I mean, it was almost like so immersive that it felt almost kind of force fed to me as a child. And I think in the 80s and early 90s, the technology industry, I mean, in particular, goes through waves of consolidation and decentralization and
The particular wave that I came of age in, in the 80s and early 90s, was a period that where there was a lot of consolidation. So my exposure to the tech field when I was a child was like going to
like what Google is today. Basically, you walk in and it's like massive. I don't use cubicles now, but there were like a sea of cubicles. And then my parents had like seven bosses above them. It was very like centered on big tech. And what type of companies were your parents or grandparents at? My family collectively worked for Hewlett Packard for more than 100 years. But I mean, you have to recall that HP at the time from the 60s through the 80s
It was like working for, I don't know what the right company is now, somewhere between Facebook and Stripe. By the time this comes out, we probably will have just released part one of our Andreessen Horowitz series. You know, we talked about that, like when Marc Andreessen came out to the Valley in the early 90s, right at the time you're talking about, he was like, it's over, I missed it. And then like the web happened.
And, you know, when something is like so around you that you kind of want to do something totally different. And, you know, I just decided it's like, I don't want to do everything that everyone else is doing. I want to go become a reporter. And that's what I did. I like I went out and worked abroad right out of college. I covered like the financial crisis, spent 10 years like covering both finance and tech and everything.
And you were at like the Wall Street Journal. I was at Bloomberg. Yeah. I mean, I went to Bloomberg for a couple years and then covered the financial crisis and then realized after being immersed in like
The finance industry, you know, I came around to appreciate what was special about where I grew up, which is that people really genuinely love what they do here. And if you don't love what you're doing, you should quit and do something that you're really interested and passionate about doing. And that was just not something that was necessarily really ever present in other industries that I became exposed to, which were more hierarchical, stagnant, rigid, and that kind of stuff. So I came back and started covering tech. And then after, you know, a couple waves of covering that over several years in the Bay Area, I
you read about something enough for a while and you're like, I think this is how it should be versus how it is. And like, you just get that enough that you start getting involved in things. And the norms, the cultural norms around recording are a little bit different now, but definitely in previous eras, it's like, you're supposed to be really objective and you're not supposed to be involved. And then if you get involved and you're not, you know, impartial anymore, then,
And you can't really be an objective, impartial reporter. I obviously think that's shifted or changed now. Boy, is it ever. It was years ago when we had Kara Sweischer on the pod, right? And she was saying that this was her big thing. She was like, because she was at WSJ for so long. And she was like, I got to have my own perspective on things. Like, I can't just...
be totally objective. And that was out there back in the day. Right, right. I mean, well, again, this coincides with like, again, different structural kind of waves within the media industry, like the media industry or media in general. I mean, at the birth of this country, it was very like partisan. And then, you know, when media industry consolidated to a handful of channels that like consolidated effectively to advertising industry and advertisers, which only had like a select number of channels to choose from, like
you know, in the mid 20th century, there became more of a norm of being objective, which of course has fragmented apart in the last, you know, 10, 20 years. But like, even for her, like she wanted to go from like, I want, I don't want to be this like disembodied voice and above high that like has no feelings to having feelings and opinions. I was more like, I normally have feelings and opinions. I actually want to be in the weeds, like making stuff happen or change, which is even more a degree of,
even beyond her, although she probably claims that she didn't like making, which probably does. That's what I was interested in. I was interested in getting involved with companies who were actually solving the problems that I was writing about. And then also on an advocacy perspective, also just like getting involved with changing the institution structures and policies that are affecting the issues that I care about.
Super cool. I'm already going to deviate from sort of what we had decided to talk about today because I think you raised this fascinating issue where if I've got a sub stack or a podcast, I can build an audience and have a relationship with that audience and have never posted a code of ethics or certified that I don't own stock in the companies that I cover or, you know, those things are not mandated in stone or in law that in order to reach audience, I must have declared this set of things. Yeah.
And in fact, David and I wave our arms around and we're like, we do like lots of investing in public companies and private companies in our portfolio companies. And so do you think for society, it is a net positive or net negative that you have this proliferation of voices that don't have to adhere to the institutional journalistic standards that we've had to forever? Yeah, well, I would say for one, the standards were not, you know, they were not legally enforced. It was more of like,
a code of conduct, but also like, I'm not sure we really have a choice. Like, I don't know how you put the genie back in the bottle. It is what it is. I mean, there's benefits and disadvantages, right? So like benefit on the one side is like when you have someone who's has skin in the game or they're actually an operator or a builder or someone who's like behind the scenes, like making stuff happen.
There can be a much more in the weeds detailed description of what's happening on because like they know how the sausage is being made. You know, I'm working with a times reporter right now who might be writing a story about a whole area that one of our companies is in. He just like called me the other day and he's like, Oh, like how do I write a whole paragraph to describe how this whole space has exploded? Like, what are these, all these companies, what's the size of the market? And he's like, how many companies are there? What are all their names? And like, I'm thinking behind my head, like, Oh, yeah,
That company, this company that you're referring to is a fraud. It's not real. And like this, not that, I mean, I am biased because I'm invested in a particular company, but the other one is like, I know that it's like, you
You know, they're not delivering the product that they're saying they're delivering. You know, there's stuff that like, you know, from having... Or just like context too. I think because it's fresh in my mind because we recorded yesterday, like part of the Andreessen Horowitz story that's been reported. I was in Hard Thing About Hard Things is after the Opsware sale, Doug Leone calls up Ben Horowitz and is like, I just want to learn from you. Like, how did you turn around this company, et cetera? Like, yeah, I'm sure that happened. But like, obviously he was trying to recruit him to Sequoia. That's what was going on. And...
somebody who's just a journalist isn't going to necessarily like put that two and two together. No, it's not the journalists. I mean, the best ones are like super sharp. It's just, there's a different perspective from like making the sausage and then standing outside the window, like watching the sausage maker make the sausage and like, and then on the flip side, of course you don't know. And like,
Sometimes it takes a journalist to know. Sometimes I will see a newsletter writer write a clarification or a correction or something. And I'm like, I know corporate comms made you do that because they're going to withhold all access to all executives unless you did that. And it's so obvious that this is the case. And I'm not sure everyone's perceptive at reading that kind of stuff.
Because there's no reason that you would write like a walk back of a story the next day that like feels very marginal to the reader, but it's obviously significant to corporate comms. And so like, there's stuff that you see like that, that you're just like, Oh, what are some others? There's access journalism going on. Some readers are sophisticated and some readers are not sophisticated, like about it. And they might think like, Oh, well actually this executive or this company didn't make this decision for this reason. And this, because it's clarification clarified that, but like,
There is probably an access trade going on in the background, but like, it's not like access journalism didn't happen with magazines either. Access journalism. Well, and from a reader's perspective or somebody in the industry, the practice don't really care, right? Like this is meaningless to me, like this politics, right? Like the story is the story or like, maybe, I mean, I think it happens a lot with books or books about companies. And like when you, when a, like a company becomes like a high profile subject of a lot of books, um,
Some books are written clearly with the consent and involvement of executives at the company, and some are not. That leads to a totally different set of content. And so you have to be aware that if the company is participating in it, obviously, there's probably some access trade happening where you get access to the executives who get you the inside perspective. But then there's probably some stuff that's a little washed over there.
in exchange for that access. Are there any other little things that as a reader, when you're reading a story, you don't realize that is implied by language that a journalist might be using? Whereas when you're a journalist and you're reading another journalist's story, you're like, oh my gosh, I know exactly what this is saying here. I mean, I guess this is probably obvious to readers, but sometimes when somebody says something...
absurd or just, there are some journalists who are very good at like letting someone speak ad nauseum to the point where they literally hang themselves in their own words. And some of them are exceptional at that. And like, that is kind of their body, like a lot of their body work and you read it and you're like, I can't believe that person actually said that thing out loud that we know that they probably all think that they did it. They actually said it, you know, but some reporters are really skilled at that. They're really skilled at just
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All right, well, I'm going to change us over to a question that has been sort of burning on my mind ever since we thought it would be great to have Kim I on the show, which is, as you transitioned into being a professional investor from being a professional journalist, what are some things in the first like, three, six, 12 months that you realized, where you were like, Oh, I never totally understood the nuance of that or the the motivation behind that when I was writing?
There are things that you know conceptually that you've read about a gajillion times and like you've read about them the whole time. And so you know that they exist, but then when you see them in practice, they're always interesting. Just...
The power law nature of the business, like there's a lot of stuff that could be like ostensibly like profitable and growing, but just not venture returnable. But like I already knew that going into the field, it was just different to see it in practice and see the numbers and like start to see look at fund returns and see like actual, you know, actual returns and start to see how that plays out.
Other things, there's a delineation between like, I do think that a lot of journalists do have, many would have a good sensibility for investing because you just see so much stuff. And then you, over time, like having like met so many founders over the course of 10 years, you gain a sensibility of like what kinds of personalities or teams tend to break out versus not. But there is this thing about this differentiation between like,
Journalism in general probably means heavily just more to consumer applications just because they get more readership and more virality and clicks and all that other stuff. Not that reporters are necessarily motivated specifically by that, but yeah, consumer just gets disproportionate coverage relative to other areas. There are lots of
out there that are not necessarily... Don't have the sexiest story or narrative to tell, but they're great businesses. And then conversely, they're companies that just have amazing stories that sell really well in the press, but then maybe they're not as amazing businesses. It makes total sense. It's very similar to what's happening now in this direct listing market where...
At least everyone thinks right now consumer companies can do direct listings, of course, as long as they have enough cash in the bank and not raise money in their IPO. But it'll be hard for B2B companies to do these direct listings where there's not sort of retail interest because consumers don't really use the product. And that's why you need sort of the instant
institutional banker coverage of these things. You know, I think that's not playing out the way that we thought it would, given that Amplitude is going to do a direct listing and there's sort of several others in the pipeline. But that's been the... Yeah. Or there's also consumerization of SaaS, which kind of confuses both. Right. Like Slack becoming a household brand, even though it's an enterprise chat tool. Well, and also, frankly, the Robinhoodization of investing, right? Where like now enterprise companies are like whatever it is,
Retail is going to get excited because retail are active investors now. Right. I'm so curious to get your take on, you know, everything that has been going on, especially in the last couple of years with retail.
this concept of owned media within venture firms specifically. We can talk about companies, we can talk about venture firms, but obviously, you know, venture firms with you guys and Initialized has done a fantastic job with this. And Gary's YouTube channel is amazing. Other firms have different approaches. What's your view on how VC has adopted media? It's become a necessity with the proliferation of firms and funds.
Over the last 10 years, there used to be a much... I mean, I don't know quantitatively how many. There were probably fewer firms 10 years ago. I'm assuming just because there was like $3 invested overall. So I think it takes a lot more to stand out. And then we're also seeing many more specialized firms that have specialized areas or theses. And it makes sense to produce content on that. And then at the same time, the reporting field has changed. It went from a space 10 years ago where...
I wouldn't say funding rounds were necessarily rare, but there were fewer of them. And therefore it was easier for small companies to get coverage. There were more dedicated publications to covering milestones for small companies. But when the industry started to change and then you started to have like big, big, big, big tech, that took a lot of the reportorial and journalistic talent and kind of absorbed it into covering like the, not just even the big publicly traded companies, but like the big four or five companies that we all cover.
know and think about. And so a lot of journalistic talent is focused on that. And to that extent that there's just less talent, reporter talent, you know, willing to spend the time on even growth stage companies. Like I don't even know when like a 50 or a hundred million dollar round stands out. I hadn't thought about that, but like if you're a tech reporter at Bloomberg, you know, really the prize beat you want is the Amazon beat or the Apple beat.
versus the startup beef? I mean, it depends a bit. Like, yeah, Bloomberg is the financial wire for lots of traders with access to huge amounts of capital. And therefore, like, I don't know what the baseline number is now, but like even a couple of years ago, we were just very clear in conversations with them and they were like, we don't even get out of bed for anything for any round that's like less than $50 million. Yeah.
And we were like, cool. So I mean, if you're a small company that is in the process of like, you're just trying to launch or you want to acquire users, like it is helpful to align yourself with a firm or set of investors that has its own channels. That's really important. The one distinction that I would make though is like, we're still super friendly with lots of journalists. Like I don't fully get the...
you know, antagonistic take that some of the firms have taken. Like I've seen some of the recent partners like be really like dismissive of reporters, but then they'll turn around and then they're, they did a New York times interview with their, about their new crypto fund last week. So I'm like, you, you belittle them, but you also need them. So, you know what I mean?
I don't totally get that. It's also a false dichotomy. It's not one or the other. It's both. And there's some things that it makes sense for the business model of news outlets to cover your thing. And then there's the vast majority of things you do as an investment firm where it doesn't. And you need another channel to get that word out. Yeah. Media usage, I mean, you have to be thoughtful and selective and strategic about it. I mean, it does
In the vast, vast, vast majority of cases, media is not a scalable acquisition, customer acquisition strategy for companies. It is something that you can use to get your brand up there. I mean, in particular for hiring, I think it's probably the most strategic use of it for an early stage company is probably for your employer brand, to be honest. Less than customer acquisition, I think that it's better to focus on other channels, depending on what your model is, instead of relying on media heads. Yeah. And I think that's only gotten more true over time.
We've certainly found that with our sponsors at Acquired. We have great sponsors. I think we can and do deliver good value in terms of customers to them.
But the big reason I think you'd want to do it is your company brand, your employer brand with the financial community, with employees, with just sort of more writ large. I feel like the valley, both startups and venture firms completely ignored. Like there was this whole kind of 10 year plus period, or maybe you would say it even goes back farther than that, where brand was just this like dirty word and people are rediscovering it now.
I mean, for early stage companies,
particularly like, I mean, founders come to us and they're like, they kind of have like a, I need to hire for this role. Like right now, stepping back and thinking about the whole structure and approach, which is like, well, what values do you have as, you know, company culture? Like what values do you represent? What values do you not represent? And articulating what those are and then working from that and down into like what roles and job descriptions you're hiring for. And then working down into that until like,
How are you going to have an employer and company brand that like just automatically attracts talent versus just like you having to like source for specific roles and so that you have a flow of talent coming to you where you can both, you know, have a large top of funnel and then also have a high close rate at the bottom of the funnel for hires. So I think when it comes to like a lot of the standard kind of like news milestones, like
They're super important for attracting talent and recruiting talent. Yeah. Well, I'm sure we'll come back to media a little bit, but shifting away from it for the moment, are there any particular types of companies, be it sector or founders, where you feel like you're more interested in it than the venture industry at large right now? Are there particular Kim Mai type companies that you think are building the future in a way that people don't recognize? Yeah.
I would say for one role, like when you look at initialized the firm, we're more of a network driven fund than a thesis driven fund and partners sort of naturally gravitate to certain areas. We have, you know, some partners who focus on dev tools or SaaS or crypto. I kind of like these like really messy, hairy, complicated problems that are the problems that just like
everyone, like fundamental structural problems in either the American economy, like, you know, obviously driven to housing over the last,
you know, most of the last decade. I'm interested in jobs and socioeconomic mobility. And so like some of the deals that I've done are kind of focused in that space. So, you know, a company that just announced a growth run from Norwest yesterday that I did this evening was called Abodu, which is about prefabricated secondary dwelling units. And I like knew that the space would, it was more a question of timing and the right team. Like this is a space that we were going to
head in over time, like culturally, just because if you look at, you know, like housing inventory is,
at the lowest it's ever been in the recorded data for over the last four decades or so just as like millennials are starting to do family formation and household formation so that's why like housing prices nationally the median home price in california has risen from like 500k to 800k over the last year and then that's not including like some of the hot metros like in texas or in other parts of the country that people leaving california are going to what's your sense of why like why is there less supply on the market than there's been before some of
it is kind of like a hangover from the 2008 financial crisis where a lot of like mid skilled construction labor talent left the industry and just weren't effectively replaced. And so it's,
If you look into the data of like construction productivity, it actually declined materially after that. And that's probably a loss, like really skilled mid managerial talent within the construction industry in particular around, you know, at least definitely on the West coast, I don't know about the rest of the country, but,
Yeah, I mean, just the hangover from the 2008 recession meant that we just didn't... We never turned on construction or production to the level that it existed pre-1995. Listeners should know, you've spent a lot of time on this. You've been to city council meetings all around the Bay Area. I haven't been to city council. I'm not a city council member. I'm like...
The work that I did ended up forming like a bunch of state level advocacy organizations that in turn like actually changed the law in California and in other parts of the country. So if you're playing on a project by project level, sure. But like that's not the scale or like state that I'm interested in changing things that systemically. I mean, we found over time, like it was like state level work that was going to have the most impact because cities were always going to kind of drag their feet and
Some of the stuff that happened over the last couple of years was that states started engaging in creating more of what, you know, we kind of think of as programmatic housing. Back in the day when a lot of the land use in suburban areas of, you know, the country were built out, like a developer would go out and build a whole suburban neighborhood and they would usually have like four standardized units that a prospective buyer could buy from. It was scalable and that model was scalable. But then as suburbs got filled out,
You know, there was this period where, you know, the United States like banned racialized housing discrimination. And then mysteriously, a couple of years later, coincidentally, lots of cities started enacting zoning restrictions in the 1970s. You can infer what you want to infer from there. Yeah. So like zoning restrictions became really complicated and messy. And then like housing became much more bespoke to create housing.
And, you know, that's gone really far in one direction over the last generation. And now we're starting to see like some pushback against that. Like how can we make more kind of standardized products exist, particularly in full context? And so like California did this thing over the last couple of years where they made it really easy and ministerial to, you know, add a backyard unit. And like the city has to respond in like 60 days. It has to be a really fast, predictable process. And
That created an environment where you could conceivably have a company create standardized units that can be deployed, like built in factories and deployed in a predictable, fast time. And so that's why we did that deal. And they installed their first unit, I want to say like July, so like a year and a couple months ago. And now they're like all over Seattle, the Bay Area, NLA, San Diego, and more metros.
And, you know, they're doing it. They're building units. I'm getting one, you know, Alexis is getting two. So I'm going to put my mother along on it. Like this is a product that's in any like economic environment has proven like really popular in the pandemic. It was popular because people wanted to take like loved ones out of congregate settings, like their kids from college, or they needed to bring their like
home from the like, you know, the nursing home or whatever, you know, post pandemic or, you know, whatever, or liminal pandemic state that we're in right now.
you know, people are working from home now and they need more space. Right. There's the office. There's also the like cashflow yield benefit of it, where if you just want to run it as an Airbnb or whatever, then like it can help with your housing costs. Originally, you know, we thought there was going to be more of a mix of like people who wanted to rent it out, but like,
Actually, it's turned out it's a lot of people who want to use it for them or their immediate family. And I think that was a function of the pandemic. I think initially, the market split, they thought it would be a little bit different, but it's not. It's actually like... I mean, they posted something yesterday about a customer in South Bay who's like, I want to use it as my yoga studio. Cool. Okay. What is the cost and process look like for this and timeline? It depends on the city. If they're in a city that they...
have like a pre-existing relationship, you know, like a pre-approved plan with, it can be really fast. Like they get the permit the same day or the same hour. And then it's like two weeks in your backyard to do the like foundation. And then they, they truck in the unit. And if you order something, it's kind of off the shelf that they've already with no customization, like they already have units and storage that they can just install. But if you want like more customs, you want like fancy doors and you want like the nice shower fixtures and you want like
like a wolf range or whatever. Like if you want like some of the upsell stuff, then it might take a little bit longer, but it can be really fast. Like in as little as one to three months. Yeah. Yeah.
Two doors down from us in San Francisco, there's a house that was complete, you know, tear down, rebuild. Now there was the pandemic, which caused delays, but I think it all in ended up being about a three and a half year project. And it was just like a hole in the ground and a construction site for three and a half years, which is bad for so many reasons, but not to mention this is like, that's housing stock that's off the market for three and a half years. Yeah. I mean, if you're doing a custom project,
Then you need custom approvals, custom parts, custom all of it. And all of it is just a lot more expensive. But if you can do something that is more of a standardized product, it can happen a lot faster, more cheaply. So what is the cost for, let's say, just a standard unit? Their units started around $200K. But if you take a home equity line of credit, the additional cost can be a little bit over $1,000 a month.
on your existing mortgage. And that's like a two bed, three bed? In theory. So they do studios, one bedrooms and two bedrooms. So you can pick whichever one makes sense for your space. Yeah. At standard mid-rise, if you're building an apartment building in the Bay Area, the standard unit cost would probably be somewhere between $500,000 and $750,000 just to build the thing. So this is a significant... Compared to mid-rise state building or apartment building, it's actually a lot cheaper. Yeah.
in terms of production costs. So I mostly do investments in software companies, and occasionally these sort of like software real world crossovers. For something like this, as a seed investor, how did that work? Like what milestones could you possibly achieve with a few million bucks? And how does the company finance proving what it needs to prove in a seed round?
How much money did you put in? What'd they do with it? That sort of thing. I think we invested like around three months. I'm not going to get the exact number right, but around three months. And I mean, they actually had their unit design and pre-approval done when we met them with one city. And it was more of a question of like,
you know, how many units can they get to per month with how many pre approvals and how many cities across like a whole jurisdiction? And then can they improve their margin per unit? I mean, those were kinds of the questions that we had, like even from the time that this new round closed to the time to like now, which isn't that long, like,
Yeah, their ramp, even in just some terms of monthly sales and monthly... I mean, it's really... Sounds like it's working. It's working, yeah. That's great. This is investor speak for it's going very well. And I don't know what numbers I can or should actually share publicly. Yeah, yeah, yeah. Yeah, I mean, they're a really exceptional team. The founder grew up in the construction industry. What was so special about him is he just has been immersed in it from his birth.
And so like, there's just a lot of stuff that he just already knew that a founder, like coming from software into doing something like, you know, which we met many teams like that, you know, they would have spent two years teaching themselves or many years teaching themselves all the basics. We helped them find the right regulatory talent that can like really scale the whole city by city and state process.
Yeah, it's great. I mean, they're doing this all over the state now. That's cool. For other sort of like physical world products, as a seed investor, I imagine for a company like this, they needed to build a factory. No, they didn't. Really? Yeah. That's the other thing that's special. Like other companies are like spending all their time and a significant amount of capital building their own factories. There's already an existing large factory.
home industry that already exists out there, which like the most successful large one is the one like a company literally owned by Berkshire Hathaway. So like... Yeah, Clayton Holmes. It already exists out there. So the question is like, how do you design a product and like a customer experience that people love, but then you're not like spinning your wheels, making a factory work. So, and instead like working with lots of different producers to fulfill that demand. They're not pursuing that model. I mean, other companies are pursuing that model.
We just thought the special sauce was more in like, how do you create a great delivery, reliable, speedy delivery experience that customers rave about and love and sell to all their neighbors and get referrals for? I'm curious as you think about other categories to invest in,
I've heard it postulated that the first 25 years of the internet are kind of behind us. All the easy things to do, moving information around has kind of been done. So now we're in these sort of harder businesses where we need to do more work bringing software to things in the real world. And thus, we're going to have to deal with slower growth and lower gross margins and just higher fixed costs to operate real things in the real world. Does that...
sort of appeal to you or are you more like, uh, no, it's both. No, I don't think that. Okay. So maybe there are these like more stodgy industries or whatever that are being revolutionized by software. But the reality is like all the people, uh,
Working in those industries, have been using the internet for 20 years and understand what great consumer and product experiences, or at least they have some conception of what great product or consumer experiences are. And they have those expectations that they're bringing into their stodgy industry. So from that sense, it's like, okay, maybe the industry's old, but it should be theoretically easier to sell into them than say, if you were trying to do it 20 years ago when they had no concept, or maybe the workforce is like 20 years older than
or back in time than it is now, I'm less familiar with what a great product experience should be. There's also something to be said about if it's a really hard problem that's difficult to solve, there might be less competition in it. I don't know because people are probably deterred by how difficult the issue might be. I mean, there's also things that I see that we don't have a choice except to figure out how to find a solution for them. I'm thinking about...
climate or emissions or something like that, or particularly in housing, it's like, do we have a choice about this? Like someone has to figure out how to make this cheaper and more accessible. And we also have done investments that don't involve any, you know, physical, you know, real world stuff or atoms stuff in that. Well, like one of the most unbelievable investment returns of all time on Coinbase a couple months ago.
Yeah, Gary did that investment. I actually have some reported numbers and I won't ask you to confirm them. But from some research that I was doing, it looked like a $300,000 initial investment that became worth $2.4 billion at the time of IPO. So for listeners just to like, get a sense of some of the some of the successful bits investments. Yeah.
There's a YouTube video where Gary makes reference to some numbers that, I mean, you can pull up. It's actually in the YouTube. It's in the first shot, like how I turned off.
Ah, the YouTube title cards. I love it. Yeah. Two things. One, we definitely want to talk about how Initialized has evolved in your time there, and especially with, you know, now everything from Coinbase. But we have to ask about that, like the YouTube. As far as I know, really, no other VCs are like quite as active on YouTube, but I've figured out
that power of that channel yet, you know, except Gary and you guys, how did, how did y'all think about that? And the decision to make it, you know, Gary versus initialized. Gary really just loves making videos. Before he went into tech, he like, he was like a high school. Did he talk about this in this previous show? Like, should he do like,
The photographer who liked shooting pictures of bands, like when he was like in high school before college or something like that. And he just, he loves camera work. He just inherently loves doing it. I saw that like the other week, cause you said this is kind of an insider share that like, I saw that like it was VC Bragg's like negging him by like making this Maslow's hierarchy and putting at the top. Oh, pseudo philosophical YouTube channel. Yeah.
And he was like, ah, VC Brax. And I was like, this is awesome. They're like, it's so great. This is great. Like they're, you know, they think it's nag. I think it's like positive because no one else has really figured out how to do it. He just loves, he just loves making videos. If they want to put Gary at the top of any hierarchy of needs that he should be very proud of that. I know exactly. Yeah.
Any press is good press. I'll continue to press on this. And at some point, you can tell me like, stop. But how do you think about that as a partnership in terms of getting the most leverage on senior partner time when...
Gary and I have this guilty pleasure to like, I love fiddling with the dials and like editing our audio and like getting into the nitty gritty of production. And then realizing, shoot, is this actually the highest leverage thing that I could be doing right now? How do you balance that? This is even more true now in a remote world.
than it is in a pre-remote world. I mean, like post-pandemic world, which is capital is geographically diversifying. Talent is geographically diversifying. So the way that you connect and share ideas is through these
these mediums. And so what is Sandhill going to be? Right? Like, I don't... A bunch of studios for internet recordings. That's what it's going to be. I don't know. I mean, we already have this question with firms moving their offices up to the city over the last 10 years. I mean, our offices in the city...
But I'm kind of like, are people going to make... Are founders really going to make a trip there and go to the five VC firms in a row? I just can't. I don't know. I don't know. I was talking with one of my angel investments last month who's raised two rounds now. The company's in Seattle. Some of their investors are in Seattle, but most are either in the Bay Area or New York. It's great. We get to meet them. When we're raising rounds, we go pitch all of them and we do it from...
are we work in Seattle like this otherwise we would never be able to meet so many folks because we'd be spending all our time on planes and it's just so much better for founders yeah
In that context where you're getting less to face, like, is it important for him or for other folks in the firm to form effectively parasocial relationships with prospective future founders? Sure. Yeah. Yeah. So maybe you could say, yeah, that this actually is the highest leverage use because there's the sort of like scale economies of create it once and then it can get watched tens of thousands of times on the internet. Right. Or, you know, someone feels like a lot of people come and they'll say like, oh, I really...
I feel like I know Gary. If that makes people form a connection. And they do. Yeah. Yeah. Fascinating. One of the last big topics, and we already mentioned it a little bit, is Coinbase. Classically, when a firm has just such an enormous, gigantic win, it changes the firm in some way. Some good, some bad. But the only thing that's very unlikely is that like zero things change. And it might have sort of started changing before a liquidity event because people could sort of
see the win. But how would you articulate the ways in which Coinbase and hopefully Instacart in the future and some of these other just enormous successes for Initialize changed it? These were not overnight successes. As you know, these are like 10-year processes and journeys and the firm only just got started.
I think I don't remember when the exact date will be, but the firm is almost 10 years old. You know, we now have 14 unicorns funded companies worth over $100 billion. Like Coinbase is one of them. But like, if you look at their portfolio, we also had the open door IPO. We had a couple like Flock Safety raised a large up round from Andreessen this week. And it's valued is also a unicorn. We have companies like TruePill, Rho and Bodyport that are transforming digital health and, you know,
There's also Instacart and Flexport and the Hopper. And there's a lot of other companies in the portfolio. And so we feel like I joined at Fund3. And Fund3 is a very different beast than Fund1. Fund1 was like a $7 million fund. And so it's like, the question there is like, can you get on the cap table? Can you get in the round?
And then Fundfree was like $125 million fund. And so it's not just like, get on the cap table a bit like some small multi-hundred thousand. It's more like, can you actually be the lead investor, investor of record? Right. Can you get some meaningful ownership? Right. And I'm happy to say that there's a lot of incredible companies in Fundfree as well. And that's a much harder fund to return because it's so much bigger. Yeah.
Right. It's about being in those companies that have those just insane outcomes and having been a lead investor to own a meaningful percent of them by the time that they do. Yeah. And I also say like in terms of talent for the fund, like we're now in a place where we're doing open and open search for partners and principals and
And we're getting an incredible amount of talent from that. And like, so the firm brand is standing on its own. We're able to recruit just like this week, we just hired Parle who she was previously at founder collective and was involved in the pill pack deal. And is also like an engineer and founder from her founder herself. So we're like,
getting other incredible investing talent to add to the team. And so the firm is growing and professionalizing a lot more. And Gary, a lot of the stuff that he's worked on for so long, it's coming to fruition now. I think in general, we all have a very team-oriented mindset. We're not a very individualistic culture. We all do a lot to support and collaborate with each other. And so we're happy to have the successes that we're having. And then we're also...
excited to grow the pie. Yeah. I mean, in many ways, it reminds me of a post-product market fit startup, where now the job is really figure out how the brand can stand on its own, how to add the sort of, in a company, senior executives in a firm, sort of like a broad base of great partners. At this point, you're like, the machine works, and now it's time to kind of scale the machine and make sure it endures. Yeah. Yeah.
Exactly. I love that analogy. I hadn't quite thought about it with a venture firm, but like the first real exit for all sorts of reasons, you know, for brand with founders, for brand in the marketplace, brand with other venture investors, with LPs showing them, demonstrating you can actually return hard capital to them. It is like, you know, you're like cranking that flywheel until you get that first one and you're doing it manually. And then, you know, then it's about building the system. Yeah.
Well, Kim, as we wind down here, any parting words? And then I definitely want to make sure you tell us who should reach out to you, how they can reach out to you and where people can find you on the internet. We're on the lookout for more talent, both in terms of the portfolio and also in terms of the firm itself. You can email me at kim at initialize.com. I'm looking for founders who are taking on really hairy problems that affect everyday Americans. I'm
But that's housing, jobs, mobility, climate, and the firm overall, like we also look at all kinds of deal flow. We're not a thesis specific fund. So if you're also doing stuff in like marketplaces, SaaS, enterprise, we have other great partners who can look at that too. And then again, we're also doing our open partner principal search. So if you either have an investing track record or, or, you know, you're an amazing operator person who's like built up like a high, you know, gross stage company with,
specific kind of value add or skills to offer, like you should definitely look at our jobs positions. Great, great. Are you on Twitter? Yes, you can find me on Twitter. Kim, my Cutler, K-I-M-M-A-I-C-U-T-L-E-R. Great. I will link that in the show notes. Kim Mai, thank you so much for your time. No problem. Thank you. Acquired LPs. We'll see you next time. See you. We'll see you next time.
