20VC: Floodgate’s Mike Maples on 3 Key Breakthroughs Startups Experience in Success, The Rise of Angel and Operator Funds, Multi-Stage Funds Re-Entering Seed Investing and The Insight Development Framework

Mike Maples is a Founder & Partner @ Floodgate, one of the leading early-stage firms of the last decade with investments in the likes of Lyft, Twitch, Twitter, Okta and Sonos to name a few. He has been on the Forbes Midas List since 2010 and was also named one of “8 Rising Stars” by FORTUNE Magazine. Before becoming a full-time investor, Mike was involved as a founder and operating executive at back-to-back startup IPOs, including Tivoli Systems (IPO TIVS, acquired by IBM) and Motive (IPO MOTV, acquired by Alcatel-Lucent.) In Today’s Episode You Will Learn: 1.) How Mike made his way from founding startups to entering the world of venture and the gap he saw in the market when founding Floodgate? 2.) Mike has previously said, "a startup is not a company, it is a series of breakthroughs". How does Mike define a breakthrough? What are the 2 most meaningful breakthroughs a startup can experience? Which excites Mike the most to see? How do the best startups scale pre-breakthrough to post-breakthrough? 3.) What are the core ways inflections can create breakthrough opportunities? What were Mike's learnings on inflections from investing in Lyft? What does Mike mean when he talks about the importance of "backcasting"? What did investing in Twitch teach Mike about forecasting? 4.) How does Mike feel about the rise of operator and angel funds? How does Mike analyse the re-entrance of large multi-stage funds back into seed markets? Does Mike agree with Semil Shah, "founders are voting with their feet and taking multi-stage money at seed"? 5.) As Mike's peers have all moved into larger funds, Mike did not, why? How does Mike view "fund size as your strategy"? How does Mike think about the centrality of ownership? Does Mike really believe you can concentrate capital into your winners? What are the challenges? Why does Mike feel self-promotion is one of the biggest challenges in VC? Items Mentioned In Today’s Show: Mike’s Fave Book: Superforecasting: The Art and Science of Prediction Mike’s Most Recent Investment: CommonStock As always you can follow Harry, The Twenty Minute VC and Mike and on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  So I've always said the greatest joy for me of doing the show is building amazing relationships with people that inspire me. But some really have gone the extra mile. They've always been there for me. They've always supported and advised me with nothing asked for in return, just giving back. And our guest today is that, a dear friend and mentor, an OG of OG in the world of seed investing. And so with that, I'm thrilled to welcome back to the hot seat today, Mike Maples, founder and partner at Floodgate, one of the leading early-stage firms of the last decade with investments in the likes of Lyft, Twitch, Twitter, Okta and Sonos, to name a few. Mike's also been on the Forbes Midas List since 2010 and was also named one of eight rising stars by Fortune Magazine. Before becoming a full-time investor, Mike was involved as a founder and operating exec at back-to-back startup IPOs,

• 0:43Harry Stebbings?

  including Tivoli Systems, acquired by IBM, and Motive, acquired by Alcatel. And if you have not checked out Mike's own incredible podcast, Starting Greatness, that really is a must and it's one of my favourites. But before we move into the show today, I wanted to take a moment to mention HelloSign, a great example of a company that found success in building a product focused on user experience. HelloSign is an effortless e-signature solution used by millions to securely send and request legally valid digital signatures and agreements. They raised a total of $16 million in funding and recently got acquired by Dropbox for an impressive $230 million. Check out hellosign.com/20vc to join the thousands of companies and founders who value fast, secure and simple e-signatures.

• 1:26Harry Stebbings?

  And also, everyone knows that building great mobile products is really hard and it takes time. With Headspin, product, dev and QA teams know the exact behaviour and performance of any mobile app running on any device and any network anywhere in the world. Headspin began in April 2015 when founders Manish and Brian both had painful first-hand experiences as lead engineers building mobile products at Amazon, Zynga and Google. And so, starting from a blank page, they both created a platform to give mobile teams, developers, QA engineers and product managers the ability to experience their mobile app or site the way users do, running on any device and any network anywhere in the world. And within a year, Headspin had set the new standard for mobile end-to-end testing, performance monitoring and user experience analytics,

• 2:09Harry Stebbings?

  with more than 100 of the top 200 global mobile apps relying on the platform. Join the best in mobile today at headspin.io. That's headspin.io. But that's quite enough from me. So now I'm so excited to welcome back to the hot seat today, Mike Maples, founder and partner at Floodgate.

• 2:30Speaker 01

  You have now arrived at your destination.

• 2:33Harry Stebbings?

  Mike, my friend, it is so good to have you back on the show today. You know, I always so love our chats. You can probably never escape, and you've had enough of my English accent by now, but you're stuck with it again. So, thank you so much for joining me again today, Mike.

• 2:45Mike Maples?

  Well, thanks for having me. I'm glad you'll still put up with me.

• 2:48Harry Stebbings?

  Oh, stop it. I love having you back on the show. But for those that missed our round one, I do want to hear, what was the story for your entrance into venture? And for that founding moment with PlugAid in a brief sixteen, two to three minutes?

• 2:59Mike Maples?

  Yeah, so I was living in Austin, Texas, and I was an entrepreneur, and some of the local venture capitalists suggested that maybe I join their firm. And I never thought of myself as a VC, and never thought I ever would be one. But I just spent some time with them and learned the business a little bit better. And I got pretty darn interested. And then I came up to California to see what was happening in California. This is about 2004. And I decided if I was going to be in venture, I needed to do it in California. So I came up here without a job, and my kids were in school. So I'd fly up every Sunday night and stay in California till Thursday. And my goal was to find a job in venture capital sometime during those intervening days. And so I tried that for about 18 months, until I decided to start my own firm.

• 3:42Harry Stebbings?

  I do want to dive straight in there today, Mike, because we've chatted before on a lot of different topics, to be fair. But we've chatted specifically about insight development before. And you said to me, a startup's not a company, it's a series of breakthroughs. I kind of breaking this down, how do you define a breakthrough, Mike?

• 3:57Mike Maples?

  Yeah, so to me, the literal definition of a breakthrough is, you know, a dramatic or important discovery or development. And what I like to say is that a startup isn't a company because it starts out dead and has to prove it's alive. And so I like to say there's a sequence of breakthroughs. There's the insight breakthrough, and then there's the value proposition breakthrough, and then the growth breakthrough. I've spent a lot of time in my career on the value proposition breakthrough. In fact, going back to when I first moved to California, I became really good friends with Steve Blank and Eric Reese as they were developing customer development frameworks. And so more recently, I've been working on a corresponding set of insight development frameworks, which I think need to happen before customer development.

• 4:38Harry Stebbings?

  We're going to dive into the insight development elements there. I do just have to ask you, you said that kind of starts off dead and has to transition to being alive. The trouble I'm having right now is I'm seeing honestly pre-seed completely evaporating as a funding stage itself. And you know, I'm doing a pre-seed at four million dollar raise at a 10 million pre. And I see there's more and more like, quite frankly, the best entrepreneurs can skip seed or skip pre-seed altogether. How do you think about that? And really, what it does to actually this process in terms of the insight development, the value prop and then the growth?

• 5:07Mike Maples?

  Yeah, well, I think that the problem with raising too much money too soon, if you're not careful, is you can believe that you've made more progress than you really have. I think, for example, if you invest a lot of money to grow before you're ready to grow, you'll waste your money. You'll be worse off than if you had a very small amount of money. And similarly, if you start trying to do customer development before you have a real insight, even if you get customers, the startup idea just may be too mundane to be a really great outcome. For me, it's a little bit of a thinking fast and slow kind of situation. Regardless of how much you raise, I believe that you can't really skip a step. You've got to have an insight before you do customer development. You've got to do customer development before you do smart growth.

• 5:50Mike Maples?

  And so to the extent that raising too much too soon causes people to skip those steps, I think that's when they get in trouble and start to engage in fake growth.

• 5:58Harry Stebbings?

  When you think about kind of skipping steps, like if we are disciplined and we do start at the beginning with the insight development, and then with every stage we have to transition to the next, what constitutes the right reason to make a transition, do you think?

• 6:10Mike Maples?

  Yeah, so I think that in the insight development phase, you're sort of saying, can I come up with something that's not obvious to the world? That's based usually on some type of technology inflection or maybe adoption of technology. And so I like to say if customer development is about getting out of the building, insight development is about getting out of the present. And it's about trying to put yourself into situations where you can live in the future and notice what's missing before other people notice. And so then you make this really important transition where you say, am I willing to bet that I have really come up with a breakthrough insight? Because it's a little bit Like Hertz car rental, if you back up, the tires explode.

• 6:51Mike Maples?

  And so, once you say, okay, I've gone from developing insights now to wanting to develop customers, you want to have a high degree of confidence and conviction that you're making the right bet on the right insight.

• 7:02Harry Stebbings?

  Can I ask, you know, often there's a question when you say about making the right bet on the right insight when it comes to market size. How do you think about market sizing, say, because I've had so many different variations on the show in terms of, I love a tiny market, which is the insertion point and expands and expands and expands. And then I have other people that say, it's just got to be a massive town from day one. How do you think about market analysis and that as an insight development importance factor?

• 7:26Mike Maples?

  Yeah, so I'm glad you asked about market because I think this is a great illustration of why a startup is not a company yet. So, most people in a company, when they think about markets, the metaphor they use is almost like a map. And they want to get beachheads and they want to map the market and figure out their segment and expand from there. It's almost like you're Lewis and Clark mapping the tributaries of every river and figuring out which real estate you want to own. But startups start out dead and have to prove they're alive, right? When Marc Andreessen invented the Mosaic browser, there was no market for browsers. The product defined the market. And so, what we find is that a startup starts when someone living in the future comes back to the present

• 8:08Mike Maples?

  with a new idea, a breakthrough insight, and the market becomes a movement. And the movement happens because they attract other people to join their movement who are in on the secret with them. And over time, as the conventional wisdom starts to shift to the wisdom that the entrepreneur had, the market and the movement accelerates. And so, it's really the acceleration of the movement that defines the market in startup terms. And I mean, by way of a crude analogy, people in companies think like Bible salesmen. But like, when you're starting a company, you think more like a prophet. And you're trying to get disciples in the early days to follow you. And I don't mean to get too religious, but it's kind of more like that. It's more like getting your early converts who are in on the secret with you.

• 8:50Harry Stebbings?

  I really like the analogy. I guess my question to you is if you kind of apply pattern recognition to the people that have lived in the future, you're Justin Khan's of the world with, you know, obviously Justin TV when you back them. How do you think about kind of commonalities of their background? Is it people who work at Google who see inherent problems in their current workflows? Is it people who are completely naive to industries who see a fundamentally new way to address it? Are there patterns and commonalities you see in the background and how that contributes to how they live in the future?

• 9:17Mike Maples?

  Yeah, and so Justin and Michael and Kyle and Emmett are great examples. So when we invested in Justin TV, which eventually became Twitch, if you had evaluated Justin TV as if it were a company, you would have thought it was stupid, right? It's like there's a guy with a camera on his hat, live casting his life over the internet. And I remember telling Justin when we met, this idea is stupid, but it doesn't matter to me because the insight's interesting. The insights were all about what technology would it take to stream live over the internet, which at the time was a very hostile networking environment. And so when you look at it through the lens of investing in an insight and an anti-fragile jazz band rather than a marching band, it totally makes sense to invest in Justin TV.

• 10:00Mike Maples?

  But if you tried to evaluate it for what it is through a company lens, you wouldn't have understood what the potential of the idea was. And so to me, when I think about what is seed investing really, it's not investing in a business because it's not a business yet. In fact, evaluating it as a business will give you precisely the wrong answer most of the time. Instead, what I think matters is how profound and powerful is the potential energy of the insight? And then how capable and entrepreneurial and persuasive and technically deep is the founding team? And if you can get those things together in one place, usually it's a pretty good bet, even if you're not sure how the dots will connect in the future.

• 10:40Harry Stebbings?

  Totally agree with you there. I love the kind of your focus on the insight, especially with regards to Justin.tv. I guess my subsequent question, kind of focusing in on that insight is, what's the framework for you that you think really develops these breakthrough insights? I remember chatting to you before and you mentioned four specifically. So what's the framework to develop these breakthrough insights?

• 10:57Mike Maples?

  Yeah, well, there's a few that I really like. The first is sort of the why now and it combines a few thoughts. So I like to say that almost every startup idea you could imagine has been tried before. And so I like to ask an entrepreneur, why is this the first time it's going to work? Because if their answer to that question is, well, we're just awesome and nobody's ever been awesome before. I don't love that answer. I like to believe that there are powerful forces even bigger than the startup at play. And so one element of a why now might be a technology inflection. Another element of a why now might be an adoption inflection. And maybe it'd be good if I used an example like, say Lyft, which was a company we got involved with in 2010.

• 11:39Mike Maples?

  The technology inflection was the GPS locators in smartphones were 10 times more accurate with the iPhone 3GS and beyond. So before the iPhone 3GS, you could have had the idea for Lyft and Uber. It wouldn't have mattered because you wouldn't have been able to connect drivers and riders accurately on a map. They wouldn't have been able to find each other. And then the adoption inflection was, we believe that within a few years, you'll be able to assume that all riders and all potential drivers will have smartphones. And so you could see why now was the time that ride sharing could happen. Whereas it couldn't have happened before smartphones. It couldn't have happened before apps. It couldn't have happened before accurate location chips were in the phones.

• 12:21Mike Maples?

  But now all of a sudden, all those barriers were gone. You could now envision a world where it would absolutely happen. And it didn't matter if it had never happened before. In fact, that's, I think, one of the least imaginative questions a VC can ask is like, well, 10 people have tried this and it hasn't happened. So I don't think it's going to happen. The question is, everything will one day happen. So the question becomes, when will it happen and why is this the right time for it to happen?

• 12:45Harry Stebbings?

  I guess my question to you, and I'm sorry, this is kind of totally quite out there. But when we think about like technology inflections, everyone today is comparing our current environment to 2008, 2009. And the incredible venture investments were made during that period. For me, I strongly push back on that because I think that conflating the macro economy with the technology advancements of GPS, of the rise of the App Store and of the iPhone with the macro environment that was also simultaneously happening at the same time. And so I don't think it's fair to correlate the success there to the macro. And I don't know if there's a correlation to today where we don't have those mega platform shifts of iPhone, App Store and GPS. Would you agree with me and how do you think about that?

• 13:25Mike Maples?

  Yeah, well, the way I look at it is it's a good idea to calibrate an inflection. So for example, in the case of GPS in the smartphone, if you could say, I believe that accuracy will be 10 times better in 18 months. That's a calibration of an inflection. What I see in too many startups today is statements like, well, society's just changing and they're ready for this and they weren't before. And that may be true, but I generally believe that most great startups are born of these exponential improvement curves that are beneath them. They're like gathering waves in an ocean that you surf back to the beach. And I think it's really hard without a gathering wave to really be great. The gathering wave underneath the startup,

• 14:09Mike Maples?

  it's like The Rock and David's slingshot against Goliath, right? It's the powerful forces underneath you that only you can harness because they're gathering for the first time ever. And so I think if I'm a founder, if I cannot answer clearly what technology inflections are happening that can be calibrated that I'm taking advantage of, I should either evaluate whether my insight's powerful enough in the first place or if I've just thought about it enough. Maybe I'm just not thinking clearly about it yet.

• 14:37Harry Stebbings?

  Yeah, no, I totally agree with you there. But you said there kind of about the focus on calibration. When we spoke before, you said also when it came to kind of calibrating your own bet, to bet on a present improbable because time travelers see a mispriced potential future. I guess my question to you is, how do you think about a world then where there's so many contrarians that have that futuristic mindset? And is the pricing not then adjusted as if there was no risk involved at all?

• 15:01Mike Maples?

  What I find, Harry, is that because most people make the mistake of believing that a startup is a small version of a company, they analyze opportunities by living in the present. So they look at what's true now and they try to forecast out into the future what might happen next. And you know, you see this happen a lot. I don't mean to single out MBAs, right? But like a lot of MBA startups are like this where you analyze a market, you look at all the sectors, you look at where there's white space, you try to find customer pain, you try to solve that pain. And the issue with that is if you're living in the present and you come up With an idea, it will sound plausible. So friend of mine Sarah Leary co-founded a company called Fanbase.

• 15:41Mike Maples?

  It was a social network for sports fans. Sounds great. Social networking, big. Sports fans, lots of them. This is going to be huge, but it turned out to be a mundane idea because it was like a Hollywood script. Right. It was like I'm trying to describe a sitcom and a premise for a story. Whereas most of the really great startups happen when somebody's living in the future. Like when Marc Andreessen was at the University of Illinois Supercomputer Lab. He was not trying to discover a white space in a market. He was trying to make the internet immediately useful for him because he was obsessed with it and it was in a new field. Similarly, when Bob Metcalfe was at Xerox PARC inventing the Ethernet. He lived in a world where everybody had a $60,000 personal computer on their desk

• 16:25Mike Maples?

  and a whizzy wig display and graphical user interface and a mouse. Of course, you'd want to network those and have them talk to a laser printer. And so the reason it's so powerful to live in the future is that if you see something missing in the future, your intuition is far more likely to be right because you're seeing things that normal people living in the present don't see. And so then the bet, to your question, Harry, is you're betting on a future that's more probable than people in the present realize. And that's what the insight bet really is. And that's how a startup idea can be non-consensus and right. Being non-consensus and right is not about living in the present and just saying, hey, the world is going right, so I'm going to go left. Being non-consensus and right is discovering something in the future that others don't see yet

• 17:09Mike Maples?

  and making the bet that what seems present improbable is actually more probable than the world realizes.

• 17:15Harry Stebbings?

  You said about kind of non-consensus and right there and going left when the world goes right. When you have these kind of strong theses and views into kind of your investing mindset and kind of way you're looking to deploy capital. Is there not this, I don't know quite how to phrase it, but where you almost kind of guide yourself to thinking you're right and confirmation bias in your thinking where when you find it, you believe it's right because it aligns to your thinking. How do you think about that, where the confirmation bias confirms your thesis, which may not actually be right?

• 17:41Mike Maples?

  Yeah, and I think probably more often than not, an insight will be right. Wrong, but I guess to me, the important thing is to get into the right frame of mind. So if you go to the idea of customer development, Steve Blank and Eric Ries did something really valuable. They applied the scientific method to getting product market fit. And their idea was think like a scientist, run experiments and get out of the building. And I guess what I believe is true about insight development is you want to think like a time traveler and get out of the present and see what's missing in the future. And so William Gibson, the cyberpunk author, said it well, the future is already here. It's just not evenly distributed. And so most people are living in the present, but there's a subset of people

• 18:24Mike Maples?

  who either have the opportunity to live in the future or can will themselves to live in the future. And in my experience, that's where the great insights come from. That's where the breakthroughs come from.

• 18:33Harry Stebbings?

  Can I ask, in terms of living in the future, Mike, one thing I'm honestly struggling on right now, and you know, I use this show as a personal advice mechanism for me, is the uncertainty of the future that we face moving forward. And every VC has been speaking to every portfolio founder of theirs with many differing messages. How have you been speaking to your portfolio in terms of planning for the months ahead? And how they should think about resource allocation, runway? And your advice to them, given the uncertainty, three months, 12 months, we don't know.

• 19:00Mike Maples?

  Yeah, and it's funny because I'm doing a bunch of Zoom sessions with the founders we work with over the coming weeks about how do you think about the uncertainty? There's a couple of things, Harry, that I like to emphasize. The first is that a lot of these plans that I see founders making right now, they ask questions like, should I increase my 2021 forecast by 30%? Should I drop it by 50%? How should I change my forecast? And usually I suggest to people that forecasting much out beyond the end of this year, if you're a true startup, potentially gives you false precision because you just don't know, right? You don't know what next year is going to look like. You may not even know what next quarter is going to look like. But then similarly, I believe it's extremely important to forecast with great accuracy

• 19:44Mike Maples?

  the next 90 days and ideally the next 180. And so the first thing that we've been working on with a lot of founders is creating a waterfall forecast that starts with cash. And talks about the key levers that define successful growth in the business. And how do we forecast those things month by month? And then the second thing that we do is what I would call runway forecasting. And so with a runway forecast, you say, how long is my runway? I like to assert it should be a minimum three years. And then you say, okay, how much cash should I have each month in those three years before I run out? And then from there, you work backwards in terms of what your monthly spend plan and your revenue forecast and everything else is.

• 20:28Mike Maples?

  But I think that most startups right now wildly underestimate how much runway they need and have for quite some time.

• 20:35Harry Stebbings?

  You said that about the runway forecast, Mike, and I'm totally with you in terms of kind of elongating that as much as possible. I think the funding markets will continue to dry up even more so than we have seen them already. We've seen every VC on Twitter bluntly say, open for business. I've done three deals this week, term sheets going out. And then I speak to them behind the scenes and it's a different story. How do you feel about this VC kind of marketing of open for business, business as usual? And do you think that will play out and actually funding markets will continue to be fluid and liquid over the next six to 12 months? Or do you think we will see this retrenchment in the wake of portfolio allocations being redistributed back to portfolio, not into new investments? How do you expect the kind of liquidity of funding markets to change over the next six to 12 months, given the public versus private declarations?

• 21:18Mike Maples?

  Yeah, well, I'm rooting for startups and I'm rooting for VCs to be open for business. I do think, though, there will be a pretty meaningful pullback until people can assess what the world is going to look like going forward. So we've just come out of a world where people raise money, assuming they can raise money again within 12 to 18 months in an up round. And the money would always be available if you met certain milestones. That may be true, that may not be true on a go forward basis. And so I think some VCs will wait. I've learned that as long as I focus on insights, there can still be a real chance to fund some great companies, no matter what the times are like. But I think that the people that have played the momentum game are going to struggle.

• 22:02Harry Stebbings?

  Do you think we'll see some pretty significant pricing changes?

• 22:05Mike Maples?

  I think so, but you know, I don't think too much about that. I've found that the VC tweet stuff doesn't contribute to my understanding very much, right? It's like there's just so much chatter and you don't really know what people are doing behind the scenes versus what they're saying. So for me, it's more just what kind of founders do I want to meet with? And what kinds of insights am I looking for? And then how tough minded are they about the type of runway that they need to raise for?

• 22:29Harry Stebbings?

  Yeah, no, absolutely. I do agree. I do want to ask a couple of questions, Mike, which as you know me, I always have a ton of questions for you. But if we start on like some rises that we've seen in the ecosystem itself, we've seen a huge rise of angel and operator funds. I'd love to hear your thoughts. What do you make of them? And how do you think this will shake out?

• 22:47Mike Maples?

  Generally, I like them. And so I try to do everything I can to be helpful. And so I've spent time with folks like Abrienne Kimmel and Ryan Delk and Bobby Goodlot and Jeff Morris, and just trying to share ideas of what I learned in the early years about investing and fundraising, and how do you think about upfront versus reserves and things like that? I don't look at people like that as a competitor. I look at people like that as a fact. And I just like to embrace the change wherever it's going. And so, all things being equal, I'd like to help them and hope they'll make the ecosystem better. And it'll be more options for founders to raise money. So overall, I think it's a good development. I'm not sure where it's going to go. You know, it's funny, in talking to founders today, I like to say to them,

• 23:32Mike Maples?

  if somebody's telling you they know where things are going, they don't know what they're talking about. You know, anybody who's telling you they have any degree of certainty about what's going to happen is confused. To me, the important question is, how do you feel empowered in the face of uncertainty? And how do you develop strategies to feel like you're playing offense and to feel like, rather than be exposed to the fragility of the capital markets, you're anti-fragile in how you execute?

• 23:57Harry Stebbings?

  Yeah, no, I totally agree, especially on the anti-fragility element. On the other end of the spectrum, though, we've also seen kind of the much larger multi-stage funds really dipping back into seed. Excels, KPs, the Coys, LightSpeeds. You know, I was doing a seed round the other day, and there were $3 billion funds in it. My question to you is, what do you make of their re-entering?

• 24:15Mike Maples?

  Well, it's always funny to me when markets get heated up, a lot of the conventional wisdom about focus gets changed. And so in general, I tend to believe that one firm should have one strategy. But that's just how I choose to do business, right? I've done plenty of investments with some of those funds that you mentioned, the multi-stage funds, and I'm thrilled to do so. And I hope we'll do a lot more in the future. And who am I to tell them how they should do their job, right? If they want to be in every part of it, if they want to be in seed, if they want to be in series A in growth, and someday maybe be hedge funds, that's up to them, and I wish them well. But usually, I tend to believe that the best long-term strategy is to be more focused and not less. And that

• 24:58Mike Maples?

  if you're not positive, you're focused, you're probably not.

• 25:01Harry Stebbings?

  Yeah, no, listen, I certainly agree. I always find it funny how we always say to entrepreneurs, focus, focus, focus. And then we look at our own strategies, and we're stage agnostic, we're sector agnostic, and we don't often apply the same advice.

• 25:11Mike Maples?

  Yeah, and I like to say that when you get big, you get into this mode of, I have to see every deal. I'm going to calculate my deal coverage. I've got to have lots of top of funnel, brand recognition. I've got to do all these kinds of programs and stuff. It becomes a little bit of a fear of missing out idea, where you're like, any great deal that happens that I didn't see, I missed out on. And I think that the other extreme would be what I call the joy of finding greatness. And in the joy of finding greatness, you say, look, I'm going to be comfortable with the fact that I'm not going to see every great deal. I'm going to be comfortable with the fact that I'm going to miss a few. What matters is the time that I do spend, and what matters is the people that I do decide to work with.

• 25:52Mike Maples?

  And what I should focus on is bring forward what's essential, and bring forward what's great by not doing things that aren't essential or great. And so I think that you can win either way, right? I think either strategy works. In series A, I think Benchmark does a great job of that. In seed, I have a lot of respect for Roger Ehrenberg and Steve Anderson, who I think have done a great job of that. So I think that you can win either way. It's just you kind of have to decide and not get stuck in the middle.

• 26:16Harry Stebbings?

  Can I ask Mike, maybe it's, you know, my lack of experience in the industry, but man, I feel FOMO and I feel really antagonized when I miss a deal. I mean, like really, like I stay up at night worrying about this missed deal and how I could have seen it. Do you, one, and my question to you is like, how do you get over it? Given your years of experience, did you start like me and it just transitioned out of it? Talk to me about how your relationship with FOMO.

• 26:38Mike Maples?

  Yeah, you know, it's funny, the thing that bugs me most is actually not that. It's like when I see greatness and didn't realize it. So for example, Brian Chesky at Airbnb, at the time is called Airbed and Breakfast pitched me and I passed. And I had an opportunity to invest $250,000 that would now be worth close to a billion. And I passed on pager duty and some really good companies. And so most of my anxiety comes from asking myself, okay, what should I have asked? And what did I not know and what did I miss? And so I try to go back to those people after the fact and really kind of analyze and understand what was the critical question I failed to ask that would have caused me to do it. So that's for me, FOMO is more about that.

• 27:21Mike Maples?

  It's fear of missing greatness when I see it because I just go crazy if I try to think of all the stuff that's happening around me that I can't see. It's just a path to just mind chatter.

• 27:30Harry Stebbings?

  Yeah, no wonder I'm a complete insomniac and you're perfectly healthy and very young and healthy, Mike.

• 27:36Mike Maples?

  You seem to be doing okay.

• 27:38Harry Stebbings?

  Oh, you know, it's looking like Harry Potter has its advantages, I guess. I do, I do want to ask them, Mike, you mentioned that some of the incredible companies you backed earlier from Justin TV to Lyft, the many more. You could have raised much more than you have done for Floodgate and much more like your competitors have done bluntly. And scaled fund sizes significantly bluntly. Why did you nod and why did you always want to retain the smaller, more artisanal boutique fund size that you have done?

• 28:03Mike Maples?

  Yeah, I just think it was more of a match with my personality. And so I think fundamentally in venture, you can do more with scale or you can do less but better. And you just have to decide. And, you know, when I've spun my wheels, it's when I got confused. And when we've done our best work, it was when we did less but better. And it's when we did our best work, we always asked, okay, this thing we're doing right now, is it essential? Because if it's essential, let's do an A plus job of it. But if it's not essential, why don't we not do it and bring forward what is and then get an A plus on that?

• 28:36Harry Stebbings?

  Yeah, no, that's not. I agree on the prioritization. I always actually think to kind of your fund size is your strategy as well. And so that's always very much front and center for me. The multi-stage funds earlier, and I do want to ask about an element to that, which is even if they don't come into our realm, which is obviously at the seed stage. With data transparency now, they come in very aggressively on anything that's popping. And the theory that you can build ownership over time, to me, is actually quite false. And I don't actually see it because in the companies that are obviously popping, multi-stage funds come in so aggressively that you can't actually allocate capital and concentrate capital into the winners as much as you'd like to. Would you agree with that? And I guess, how's your thinking on reserves and concentrating reserves changed over time?

• 29:17Mike Maples?

  Yeah, I'm not sure I would 100% agree. So back to the people that I'd mentioned that I respect. Steve Anderson owned a lot of, Baseline owned a lot of Stitch Fix when it went public. I don't know the exact numbers, but I think that IA Ventures and Roger Ehrenberg and his team owned a fair amount of Trade Desk and TransferWise. And so I think that people tend to overly focus on the individual anecdotes. But they sometimes do that at the expense of just saying, okay, what's the right strategy for who we are? And if you're trying to do more but with scale, you're going to do more deals, you're going to make more bets, you're going to take more shots on goal. You're going to tend to have a worldview that draws you into the direction, right, of what you were describing with the multi-stage funds when deals pop.

• 30:02Mike Maples?

  But if you kind of say less but better, I'd say there's a lot of evidence that suggests that these seed funds can own plenty. But they just have to not get distracted or buy into any of the head fakes that are going around them.

• 30:13Harry Stebbings?

  Got you. Okay. In terms of not getting distracted, I have Matt Moshari, the famous CEO coach from the Valley, who's coached some of the best CEOs in the Valley. And he spoke about boards and he said, it's the death of VCs, Harry. Don't do it, please. Obviously, we take a board seat on every check, so clearly follow his advice. But like, what's your advice on board seats? Because it's such an inherently unscalable model. How do you think about it? Do you take them on every seat? And how do you think about scaling your time efficiently, given the board seat model?

• 30:40Mike Maples?

  Yeah, it really depends. Most of the work I do with founders, I like to do outside of board meetings, but there's Something I've learned over the years, when I was first starting as a venture capitalist, since I'd been an entrepreneur in the past, I thought I can really help these people and give them some good advice and help them see around corners and things like that. But what I learned was that sometimes I was giving too much advice and even if it was right, it was too much. And most founders I've found, there's one thing that matters above all other things. That is the thing holding them back from being a great startup or a huge success. And so the metaphor I like to use is Herbie. So this book called The Goal, there's a hike and it's all screwed up. And the scout master says to the patrol leader, your patrol's out of control.

• 31:24Mike Maples?

  And you've got people marching way in front of people, you've got clumps in the middle, you've got people behind. The solution, it turns out, is to take Herbie, who's the slowest hiker, and you put him in front. Because the troop can only hike as fast as the slowest hiker without getting disorganized. And then the solution becomes how do you make Herbie go faster? And so these days, when I work with startups, it's more about that. What's your Herbie? What is the, what is the number one thing between us and strong product market fit? The most important thing. Because sometimes what you find is if you put your energy into fixing other things without the main thing, it's wasted energy, right? If you have a customer engagement problem, acquiring more customers is counterproductive. Because then you just have more unhappy customers.

• 32:08Mike Maples?

  And so then your Herbie is having a product that delights people, not having more optimized customer acquisition. And so to me, it's what's your Herbie? And how do you maintain focus on that? If every two weeks Herbie changes, that's a bad sign, right? That's a sign that we're flailing and don't really know what our agenda is.

• 32:25Harry Stebbings?

  Yeah, no, totally. And I love that in terms of the analogy. I do have to ask another one, Mike. I've been thinking a lot about with you and you know, obviously with your fantastic new podcast, which I love by the way, but also your Twitter activity, your marketing and brand game has gone through the roof, my friend. I kind of wanted to ask, it's become a lot more active over the last year or 18 months or so. What changed in your mind about the importance of maybe brand and VC marketing?

• 32:51Mike Maples?

  The reason I did starting Greatness was I felt like there's a huge variance of advice that people offer about startups. And I thought, well, the zero to one phase of a startup is just different. You know, you have a jazz band instead of a marching band and you have these breakthroughs, right? You know, the insight and then the value proposition and then growth. And I thought, well, it would be good to have a podcast that talked about zero to one and only zero to one and pre-product market fit and only pre-product market fit, because then the advice would be consistent and congruent. And then founders could self-identify with whether they're interested in that or not. But I wanted to be really focused on that. I didn't really

• 33:32Mike Maples?

  look at it as much, though, as a marketing strategy. I mean, I hope we get positive attention for it. But for example, we could do an episode every week and we could have newsletters and we could do a lot of things that you would do if you wanted to get more traffic and things like that. But my main goal is just for it to be less but better and sort of just stand for itself and just to help founders. You know, I've been taking notes on this subject for many years and I just thought this would be a fun way to get those ideas out there, but also through the eyes and experiences of the super performing founders. We'll see how it goes. I've been surprised at the reception so far, but it's more just a labor of love and let's see what happens.

• 34:13Harry Stebbings?

  As I said, Mike, I absolutely love it. And I think actually what I also love is like, it's actually very immortal content and evergreen content in a way that you could listen to it in five years' time. And actually, it's just as relevant to him, Mark Andreessen's story, starting Mosaic then, as it is now. And so I love that element about it, too. And yeah, huge congrats for that. And yeah, I absolutely love it. So awesome work there. I do want to dive into my favorite element, Mike. You know how this rolls with the quickfire round. So I say a short statement, you give me your immediate thoughts. Ready to dive in?

• 34:40Mike Maples?

  Okay, let's do it.

• 34:41Harry Stebbings?

  Okay, so favorite book and why? What must we be reading?

• 34:44Mike Maples?

  My favorite book of recent times is Super Forecasters by Tetlock. So the reason I like it is it provides a lot of frameworks for how to deal with uncertainty. And I think that that's what founders need right now.

• 34:59Harry Stebbings?

  How do you address time allocation across the portfolio? Spend time with the winners? They're the ones that return the fund? Or spend time with the losers? That's where you build your reputation?

• 35:08Mike Maples?

  I find that there's never an easy answer to that. It's always just some companies need help more now until you just try to help them. And that's why it's good, I think, to be less but better because when you write that check, is this a person I'm going to enjoy getting in trouble with because the odds are high that we will? And so I really like the founders that we work with and whoever needs help now, you just try to do the best you can and some are going to work out, some won't work out.

• 35:33Harry Stebbings?

  Yeah, no, I totally agree. I think very real time. This is an incredibly hard one and I am asking for a name, so don't be a politician on me, Mike. Operator fund manager that you've been most impressed by and why? One name.

• 35:45Mike Maples?

  I'd say Roger Ernberg at IA Ventures.

• 35:48Harry Stebbings?

  No, no, no, no, of the new generation. So you're Brian Kimmels, you're Jeff Morse Juniors, you're Ryan Delks, you're Todd Goldberg's, you're Srinath Krishnan's. Which one there that you've worked with and held seminars with? And by the way, they've absolutely loved them and they all tell me about them and say, well, Mike Maples told me this, which is always great to hear. Seriously, Mike, like honestly, all of them were like, Mike told me about this with portfolio construction. I'm like, I'm sure Mike did this. That's like totally the right thing to do. So which one are you most impressed by?

• 36:14Mike Maples?

  You know, I think time will tell. It's really hard to know without some time who's made the best investments and who's not going to work out. I just look at it as they're all doing their best to do a good job and they've taken it seriously enough to raise funds on their own. And so they deserve the benefit of the doubt and just help them where we can.

• 36:32Harry Stebbings?

  Yeah, no, listen, I do agree. Total politician's answer. My favorite is Jeff Morse.

• 36:36Mike Maples?

  Yeah, sorry.

• 36:37Harry Stebbings?

  Jeff Morse Jr. is the man. I'm totally backing Jeff. Tell me, Mike, what is the single biggest challenge of your role with Fugate today?

• 36:44Mike Maples?

  Yeah, I think it always goes back to just are we being proactive enough in thinking about original ideas that will help create great companies and really good returns? It's easy in this business when there's so many competitors around you to get kind of caught in the herd noise traffic of what's happening today all around you. And how do you just stay out of that? How do you stay out of that noise? How do you turn off that noise and hype? And try to develop ideas that you think really are original and that will yield great outcomes. And that's just gotten harder in recent years. There's just a lot more noise, a lot more people in the business.

• 37:21Harry Stebbings?

  What would you most like to change about the venture landscape today, Mike?

• 37:24Mike Maples?

  It's gotten a little bit too self-promotional, I think. So I think that a lot of people now are overly focusing on their personal platforms. And I can understand why some do, but there's an awful lot of noise out there now.

• 37:36Harry Stebbings?

  Thanks for that, Mike.

• 37:39Mike Maples?

  Well, actually, you know, Harry, the thing about it for you is you came to this business honestly, right? You started a podcast wanting to break in. It was a unique idea and a novel and surprising concept that you developed that not everybody else thought of. So I'm with you there. It's more like some of the operator angels have good newsletters, for example, and now there's like 50 people wanting to do a newsletter. And I'm just like, wow, you know, I could spend all week reading newsletters now, tweets.

• 38:05Harry Stebbings?

  No, I totally agree. And that was my thinking for sure. My thinking was always just build incredible relationships with amazing people, catalog your thinking in a kind of system of record that you could point to and prove it to people in terms of your passion and your intellect. And then hopefully, one of them would give you a job. And the law of averages would mean that after a thousand, you'd probably get one job offer. So I'm pleased that paid off. Tell me, Mike, and this is a chance for you again to not be a politician, but again, a very hard question. Who's a member you sat on a board with and why?

• 38:34Mike Maples?

  There have been some good ones. And then there are people I've learned from not in the context of a board. I would say that Bill Gurley at Benchmark was impressive on the Demand Force board. And then some of the people that I just respect the clarity of their thinking just about how startups work and how boards should work. I'd say Mike Moritz at Sequoia Capital, Bruce Dunleavy, Peter Fenton at Benchmark. But there's a lot. There's a lot of really good folks. I enjoyed working with Jim Breyer back in the day when he was involved with Motive, Bill Wood, who was at Austin Ventures. Those would be the people that I've spent the most time with in terms of understanding how they think about this stuff.

• 39:09Harry Stebbings?

  Some pretty stellar names that Mike. And then I want to finish saying on the most recent publicly announced investment fee. And why did you say yes and get so excited?

• 39:17Mike Maples?

  There's one that I like a lot that will probably start getting more attention pretty soon. It's called Common Stock. What they are is a social platform for people to trade ideas and insights about stocks and the markets. And one of the things that's interesting about it is we now live in an API centric world. And so you can connect like your Robinhood or your TD Ameritrade accounts directly to the platform. And so, for example, if you say I traded 100 shares of Tesla, it's put In the record digitally that you did, it's verified. And so when you think about the fact that you can record trades digitally and have a source of truth, there's a lot of interesting stuff that you could do with that, right? If you had a bunch of followers on Twitter, say, you could go to common stock

• 40:02Mike Maples?

  and have people pay a subscription to see what trades you made or things like that in the form of a newsletter. So I think that one's an interesting one. We'll see where it goes. It's super early.

• 40:12Harry Stebbings?

  Absolutely love it. And I'm sure it's having a boom time right now with the resurgence of the stock market investing for the general public. So that's exciting. But my, as you know, I always just so love chatting to you. So thank you so much for joining me today and this has been so much fun.

• 40:24Mike Maples?

  Yeah, thanks for having me here. It was great talking to you.

• 40:28Harry Stebbings?

  As you can tell, I just absolutely love that discussion with Mike. If you'd like to see more from Mike, you can find him on Twitter at M2JR. Likewise, the podcast that he created is called Starting Greatness. As I said, it really is one of my favorites. And if you want to see more from us, you can find us on Instagram at H Stebbings 1996 with two Bs. I always love to see you there. But before we leave you today, I wanted to take a moment to mention HelloSign, a great example of a company that found success in building a product focused on user experience. HelloSign is an effortless e-signature solution used by millions to securely send and request legally valid digital signatures and agreements. They raised a total of $16 million in funding and recently got acquired by Dropbox for an impressive $230 million.

• 41:08Harry Stebbings?

  Check out hellosign.com/20vc to join the thousands of companies and founders who value fast, secure and simple e-signatures. And also, everyone knows that building great mobile products is really hard and it takes time. With Headspin, product, dev and QA teams know the exact behavior and performance of any mobile app running on any device and any network anywhere in the world. Headspin began in April 2015 when founders Manny Shembry and both had painful firsthand experiences as lead engineers building mobile products at Amazon, Zynga and Google. And so, starting from a blank page, they both created a platform to give mobile teams, developers, QA engineers and product managers the ability to experience their mobile app or site the way users do, running on any device and any network anywhere in the world.

• 41:53Harry Stebbings?

  And within a year, Headspin had set the new standard for mobile end-to-end testing, performance monitoring and user experience analytics, with more than 100 of the top 200 global mobile apps relying on the platform. Join the best in mobile today at headspin.io. That's headspin.io. As always, I so appreciate your support, listening to the show, and I can't wait to bring you a fantastic episode this coming Friday.