Podcast Summary: The Twenty Minute VC (20VC) – Episode with Mike Maples

Introduction

In the January 6, 2025, episode of The Twenty Minute VC (20VC), host Harry Stebbings engages in an in-depth conversation with Mike Maples, co-founding partner at Floodgate and a renowned figure in seed investing. With a track record that includes investments in Twitter, Twitch, and Okta, Mike shares his expertise on building a successful seed fund, evaluating startups and founders, and navigating the evolving venture capital landscape.

Seed Fund Strategy in 2025

Mike Maples opens the discussion by outlining Floodgate’s strategic approach to seed investing. He emphasizes the importance of playing offense with capital to achieve substantial returns.

“Our business is hard in seed, but not complicated. 5% of our checks need to be 100x cash on cash on the first check, 10 to 15% need to be 20x cash on cash on the first check you achieve that, you're 10x fund.” (00:00)

This power-law strategy focuses on identifying a small percentage of investments that can deliver outsized returns, ensuring the overall success of the fund despite the inherent risks of early-stage investing.

Follow-On Investments and Fund Size Strategy

The conversation delves into the intricacies of follow-on investments and how fund size aligns with investment strategy. Mike discusses Floodgate’s decision to allocate 70% of funds upfront and reserve 30% for follow-ons, managed by a dedicated partner, Iris Choi.

“We settled on 70% upfront, 30% in reserves. But Iris is accountable for that 30%, and Ann and I can't strong armor into trying to protect some investment that's not working.” (09:59)

Mike underscores that fund size dictates strategy, likening it to setting a performance bar. A $150 million fund, according to Mike, provides the necessary capital to execute their high-return investment model effectively.

Evaluating Startups and Founders

Evaluating the potential of startups and their founders is a critical aspect of Mike’s investment philosophy. He introduces three frameworks Floodgate employs: harnessing inflections, founder future fit, and having a unique insight.

“Founder future fit is the best signal. It's the most discernible way to figure out if the founder's likely to figure this out.” (37:34)

Mike explains that successful founders often live in the future, possessing a deep understanding of upcoming trends and demonstrating the ability to execute visionary ideas. This alignment ensures that investments have the potential to scale exponentially.

Lessons from Missed Investments

Reflecting on past investments, Mike candidly discusses opportunities Floodgate missed, such as Airbnb and Pinterest. He emphasizes the importance of continuous learning and framework refinement to avoid repeating mistakes.

“If you'd said yes at the seed round, what kind of a multiple would you have made? How soon would you have made it? What kind of dilution would you have seen?” (35:58)

These experiences reinforce the necessity of robust evaluation frameworks and the continuous reassessment of investment strategies to identify and capitalize on high-potential startups.

2024 Year-End Review

As the episode progresses, Mike and Ann Miura-Ko conduct a year-end review, highlighting significant achievements and events from 2024.

• Company of the Year: SpaceX – Mike praises SpaceX for its groundbreaking advancements in space technology and its dominance in the satellite broadband sector.

  “SpaceX, they are starting to blast a lot of rockets into outer space... they're starting to blast a lot of rockets into outer space.” (50:11)

• Fund of the Year: 20VC – Mike humorously acknowledges the success of the 20VC fund, commending Harry for his impressive $400 million fundraise in Europe.

  “$400 million fundraise. Fist bump for the win, man.” (51:53)

• Exit of the Year: Loom – Ann cites Loom’s $975 million exit as a standout achievement, highlighting the strategic timing and execution behind the successful exit.

  “I'm going to go with loom 975 million. It's a lot.” (54:13)

Investing Philosophy and Influences

Mike shares insights into his investing philosophy, heavily influenced by Charlie Munger and Howard Marks. He advocates for second-level thinking and identifying market inefficiencies to outperform.

“Howard looks at it through the lens of second-level thinking and knowing something that the market doesn't know when you make an investment so that you can outperform.” (53:28)

This philosophy reinforces Floodgate’s strategy of seeking non-consensus opportunities that have the potential to disrupt markets and generate significant returns.

Current Market Dynamics and AI Investments

Discussing the current venture landscape, Mike addresses the surge in AI investments and the challenges posed by high valuations. He stresses the importance of maintaining disciplined investment criteria despite market exuberance.

“We have a very specific set of conditions for what kinds of AI investments we would do and not do.” (23:34)

Mike highlights Floodgate’s focus on strategic AI investments, such as Applied Intuition and Cicero, which align with their investment frameworks and long-term vision.

Fundraising and the Impact on Startups

A critical part of the discussion centers on the ramifications of oversized seed funds and inflated valuations. Mike warns against the pitfalls of excessive capital at early stages, which can lead to cultural misalignment and dilution of focus.

“Most of those didn't raise a lot of money before product market fit... if you operate in the early days without constraints, you're a worse startup.” (60:01)

Ann counters by noting that substantial seed funds were instrumental in the growth of companies like Klaviyo and UiPath, suggesting that strategic large investments can be beneficial when managed correctly.

Personal Insights and Lessons

Towards the end of the episode, Mike delves into personal philosophies and lessons learned from his father, emphasizing the importance of doing one’s best and leveraging unique comparative advantages.

“What you want to do is do your best, because there's only one you, and you can't be better than your best.” (64:40)

He also touches on the concept of unconditional love, advocating for setting boundaries while maintaining genuine care and support for others.

Conclusion

The episode concludes with reflections on the future of venture capital and the evolving dynamics of the startup ecosystem. Mike encourages investors to remain disciplined, focus on identifying high-potential opportunities, and uphold strong ethical standards.

“If you're not finding inefficiencies in the game, you ought to be asking yourself, what am I doing? What am I in this for?” (23:34)

Harry Stebbings wraps up by inviting listeners to watch the live conversation on YouTube and reiterating the importance of building aligned and agile teams, aligning with the episode’s overarching themes of strategic investment and thoughtful leadership.

Notable Quotes Recap

• Mike Maples on Fund Strategy: “Our business is hard in seed, but not complicated...” (00:00)
• On Fund Size as Strategy: “Your fund size is your strategy...” (05:15)
• Evaluating Founders: “Founder future fit is the best signal...” (37:34)
• On Investment Philosophy: “Howard looks at it through the lens of second-level thinking...” (53:28)
• On Market Inefficiencies: “If you're not finding inefficiencies in the game, you ought to be asking yourself...” (23:34)

Final Thoughts

This episode of The Twenty Minute VC provides invaluable insights into seed fund management, the importance of strategic follow-on investments, and the nuanced process of evaluating founders and startups. Mike Maples shares his seasoned perspective, blending empirical strategies with philosophical principles, offering listeners a comprehensive understanding of what it takes to build and sustain a successful venture capital fund in today’s dynamic market.