(Bloomberg) — San Francisco-based Initialized Capital Management has raised $700 million to invest in startups, a substantial sum for the early-stage venture firm founded just a decade ago.
Initialized, which also raised $230 million last year, has invested in companies including Cruise, the autonomous car startup bought by General Motors Co., and Instacart Inc., the grocery delivery startup most recently valued at $39 billion. Its standout deal, though, was an investment in Coinbase Global Inc., the cryptocurrency exchange and one of the firm’s first investments.
Initialized first invested in Coinbase in 2012. At time of the company’s public listing earlier this year, the firm’s $6 million of invested capital in the exchange was worth $680 million.
On Tuesday, Initialized plans to announce it has created a sixth venture fund of $530 million, plus an opportunity fund of $170 million to invest in its portfolio companies once they reach later stages. According to a person familiar with the matter, the firm’s earliest Coinbase investment came from its first fund of $7 million, helping bring that fund a return of almost 60 times committed capital net of fees.
Initialized founder Garry Tan is a veteran of startup accelerator Y Combinator, where he worked as a partner alongside his role at Initialized until 2015. Tan knew Coinbase co-founder Brian Armstrong because of Armstrong’s earlier role at Airbnb, a Y Combinator company, and mentored Coinbase when it went through the program. Other Initialized portfolio companies with Y Combinator ties include Instacart, Flexport Inc. and Opendoor Technologies Inc. Overall, its portfolio includes 22 companies worth more than $1 billion.
The firm tapped out its fifth fund earlier than planned because of a booming market for startups. Originally, it was supposed to last about three years.
Increasingly, “starting a company, learning how to raise capital, hire people, enter new markets, bring software with it, that’s something that’s accessible to everyone,” Tan said. “We’re going to have a lot more startups that are fundable and can get to real revenue.” When Initialized invests in companies, they are typically valued at about $10 million, a spokeswoman said.
Reddit Inc. co-founder Alexis Ohanian, who co-founded Initialized with Tan, left last year to start his own firm.
Although the economic prospects for startups seem less certain today compared with a year ago because of volatile market conditions, the firm’s partners say they aren’t worried.
“Markets ebb and flow,” said General Partner Alda Leu Dennis. “We have the luxury of being able to spend a lot of time with our companies and weather it.”
With the latest funding, Initialized now manages $3.2 billion in assets. The $700 million in new funding was raised largely from existing investors, including TI Platform Management, which manages capital for institutional investors.
“They have an amazing network,” said Alex Bangash, managing director at TI, of Initialized’s partners and its relationships with entrepreneurs. “Everyone wants to work with them.”
It’s been a big year for VC funds. U.S. venture firms raised a total of $119 billion through Nov. 30 this year, far in excess of the $86.5 billion raised for all of 2020, according to Pitchbook data.
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