Initialized Capital Management- Partners

San Francisco venture firm Initialized Capital Management has raised $230 million for its fifth fund, dedicated to investing in early-stage startups.

The vehicle, known as Initialized V, plans to back about 45 startups over the next three years, co-founder Garry Tan said in an interview. Its focus will be seed investing, typically the first time a company raises money and often before it has launched a product or service.

“We love finding tomorrow’s unicorns,” Tan said.

The firm aims to lead financing rounds with checks of $1 million to $4 million. Initialized averaged 15% ownership stakes across the 45 companies backed by its fourth fund, which closed in 2018 with $225 million.

“Most venture capital firms find amazing startups later on, but we’re funding them at $10 million to $20 million pre-money valuations,” Tan said.

Initialized’s existing portfolio includes a variety of so-called unicorns, closely held startups with valuations of $1 billion or more. Unicorns that Initialized made early bets on include telemedicine startup Ro, human resources software maker Rippling, digital lending platform Blend, grocery delivery company Instacart, cryptocurrency exchange Coinbase and autonomous vehicle startup Cruise Automation.

Tan said Initialized’s support for founders runs the gamut from connecting companies with customers to recruiting board members. The fifth fund’s investment team is comprised of Tan, Brett Gibson, Alda Leu Dennis, Jen Wolf, Kim-Mai Cutler and Andrew Lee.

Tan said the fund was “heavily oversubscribed” despite the departure of Initialized co-founder Alexis Ohanian, who also stepped down from the board of Reddit, a company he co-founded. “He’s a great investor and remains a friend of the firm’s,”

Tan said of Ohanian. Ohanian is personally investing in the new Initialized fund.

Brian Singerman, a Founders Fund partner, is among the individual investors in the latest Initialized fund.

“When I’m evaluating a fund investment, what I care about is results,” Singerman said in an emailed statement. “Initialized has an insanely good track record.”

Initialized’s prior four funds have posted annualized net internal rates of return of 39%, 18%, 38% and 7% as of June 30, respectively, according to people with knowledge of the matter. Tan declined to comment on the firm’s returns. The new fund takes the firm’s total assets under management to more than $770 million.

“I think Garry’s peak is still yet to come,” said Alex Bangash, a managing director at TI Platform Management, which manages capital for endowments and charitable foundations.