← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: How To Do a 10x Seed Fund in 2025 | Three Frameworks to Evaluate Startups an Founders | Lessons from Losing Billions Missing Airbnb and Pinterest & Investing Lessons from Charlie Munger with Mike Maples @ Floodgate
01:10:00
Mike Maples is one of the OG seed investors of the last two decades. As a co-founding Partner at Floodgate, Mike has been on the Forbes Midas List eight times in the last decade. Some of Mike’s investments include Twitter, Twitch.tv, Clover Health,...
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- [00:00]
Mike Maples
To me, in all investing there's two right? One is you got to get paid for the risk you take and the other is always play offense with your money. 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. You have to play the game that's on the field, but you don't have to play the way everybody else plays. Ultimately, 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?
- [00:32]
Harry Stebbings
This is 20 VC in the first 20 VC of 2025. What a show we have in store for you today. Going back to our roots of early stage venture. And who better to join us than the true OG of seed investing, Mike Maples. As a co founding partner at Floodgate Mike has been on the Forbes Midas list. Check this out. Eight times in the last decade. Some of Mike's investments include Twitter, Twitch, Octa, Applied Intuition, and more. I always love my discussions with Mike. I think he's the most thoughtful seed practition in the business. But before we dive in today, it can be difficult to build a team that's aligned on everything from values to workflow. But that's exactly what Coda was made to do. Coda is an all in one collaborative workspace that started as a napkin sketch. Now, just five years since launching in beta, Coda has helped 50,000 teams all over the world get on the same page. With Coda, you get the flexibility of docs, the structure of spreadsheets, the power of applications, and the intelligence of AI, all built built for enterprise. Coda's seamless workspace facilitates deeper collaboration and quicker creativity, giving you more time to build. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to execution in record time. To try it for yourself, go to Coda iO20VC today and get six months free of the team Plan for Startups now that your team is aligned and collaborating, let's tackle those messy expense reports. And don't even get me started on the month end panic when you realize you have to reconcile it all. Well, Pleo offers smart company cards, physical, virtual and vendor specific so teams can buy what they need while finance stays in control. Automate your expense reports, process invoices seamlessly, and manage reimbursements effortlessly. All in one platform. With integrations to tools like Xero, QuickBooks and Netsuite, Pleo fits right into your workflow, saving time and giving you full visibility over every entity, payment and subscription. Join over 37,000 companies already using Pleo to streamline their finances. Try Pleo today. It's like magic, but with fewer rabbits. Find out more@pleo.com 20VC. And with your finances under control, don't forget to secure trust with your customers. Trust isn't just earned, though, it's demanded. That's why over 9,000 companies, including Atlassian, CORA and Factory, rely on Vanta to automate their security compliance. So Vanta helps businesses achieve certifications like SoC2 and ISO 27001, turning months of tedious work. Beautifully fast and straightforward process, their platform automates compliance across over 35 frameworks. It centralizes workflows, and it proactively manages risk, all while saving you time with automation and AI. So whether you're just starting or scaling your security program, Vanta connects you with auditors and experts to get audit ready quickly and build trust with your customers. Get $1,000 off your first year by visiting vanta.com 20vc. That's V-A-N-T a.com 20v.
- [03:42]
Mike Maples
You have now arrived at your destination.
- [03:45]
Harry Stebbings
Mike, I cannot believe that we finally.
- [03:47]
Ann Miura-Ko
Get to do this in person. You've known me for.
- [03:51]
Mike Maples
That's right.
- [03:52]
Ann Miura-Ko
Thank you so much for joining me.
- [03:54]
Mike Maples
I've known you since probably before you got a lot of downloads.
- [03:57]
Harry Stebbings
Oh, my God, Literally. I think you and my mother were.
- [04:00]
Ann Miura-Ko
Probably the first few.
- [04:03]
Harry Stebbings
But I want to start with the seed ecosystem today because it feels harder than ever.
- [04:08]
Ann Miura-Ko
And I just want to start with the statement of. Do you think you can have a seed fund that's under $100 million today?
- [04:14]
Mike Maples
You can, as long as you're way less than 100 million. So I think that you can do investments of less than 100k. And we've talked about this before, right? I mean, I imagine now with your major fund, Harry, you probably don't let angels come in for much more than 100k, right?
- [04:31]
Ann Miura-Ko
No way. Not a chance.
- [04:33]
Mike Maples
If you say, hey, I'm doing 750k rounds and I'm a. I'm an angel. And Harry, let's go do deals together, you might say, hey, that's great. Good for you. I'll see you out there. But are you going to do that person any favors? Probably not, no.
- [04:46]
Ann Miura-Ko
But because with the 500k that someone needs from a smaller fund, I get five amazing angels in 400k each.
- [04:52]
Mike Maples
Yeah, but, but I suppose if, if you're investing less than 100k, let's say Tim Ferriss comes to you and says, I'm willing to do 100k in some project that could benefit from his brand and publicity.
- [05:04]
Ann Miura-Ko
Probably 100%.
- [05:06]
Mike Maples
Yeah. And so if you, if you say, hey, I'm doing 100k checks, I think that could work. But that's a fun size of probably $10 million. Right? That's not 100.
- [05:15]
Harry Stebbings
I completely agree.
- [05:16]
Ann Miura-Ko
Why is your fund 150 when it was 70 80?
- [05:20]
Mike Maples
Basically, to me, your fund size is your strategy. And I guess I'm kind of famous for saying that for a long time. I don't know if I've ever really expressed why that is. So here's why. The power law is real. People don't realize that Pareto is not just 80 20. It's a curve. It's a continuous curve. So 80% comes from 20%. But it's also true that 4% yields 64%, because 80% squared is 64% and 20% squared is 4%. And so when you have a fund, let's just use ballpark figures, let's say you have 25 investments in a fundamental. Your best investment is going to have to return 64% of all returns that one deal. So if you want a 5x fund, that one investment by itself needs to return, you know, 64% of five times the fund in profit. That's why your fund size is your strategy. Your fund size is basically, it's kind of like if you're a pole vaulter, it's the height of the bar that you set that you promised to jump over. And if you don't jump over that height, you have a bad fund.
- [06:25]
Ann Miura-Ko
Did you ever feel like your fund size was not aligned to your strategy?
- [06:28]
Mike Maples
I never really did. You know, it's weird. We're better at 150 million than we were at 75. I don't think that was really due to fund size. So, like, trace our history. Our first couple of funds were just awesome. Tapped into the Zeitgeist and hit the market at exact right time. You know, I was making a video this morning for Josh Koppelman's 20th anniversary and just marvel at the fact we used to hang out at Il for Nio and just marvel at the fact that nobody realized what a great business, business opportunity this was. We're like, are we just stupid? Are we just having delusions? Because nobody seems to think this is a good idea. And this just seems like one of the opportunities of the century. Just right here. And every time I would see something, I'd show it to Josh. And every time he saw something, he showed it to me because neither of us had any money. Like we were just seeing all these things. Well, fast forward a few years. I'm on 22 boards. I just didn't have the sharpness of mind. When your phone's blowing up all the time and there's. If you're on 22 boards, it's blowing up all the time, there's always something totally screwed up. You're not as awake to the possibility of what Pinterest could be when you get pitched by Pinterest. Right. And so our next two funds at about 75 weren't as good. And I remember at the time having some angst about it. So we flew out to Yale because the Yale endowment is one of our LPs. It went to Dave Swensen and said, hey, look, I'm going to have regrets if I don't tell you. Here's the mistakes I think we're making and what we're going to do about it. And part of it was getting our fund size to an amount where we thought that we could really execute our model well. But we made some changes. We changed the way we did follow on investing. We had a dedicated partner, Iris Choi, do follow ons and that's all. And she's accountable for follow on returns, which more seed funds should do.
- [08:13]
Ann Miura-Ko
I don't understand that if I'm totally honest, because the point of the follow on. So we don't do follow ons at all. If you look at the data, we grossly overestimate our ability to pick our winners. But the point is you have asymmetric information and you should be able to pick better because you know the company better. So why would you lose that asymmetric information?
- [08:29]
Mike Maples
Well, yeah, so the pro rata rights are right. And so the high order bit to me in all investing, there's two, right? One is you got to get paid for the risk you take. And the other is always play offense with your money. And if you're a seed fund, in theory, your first checks, you're playing offense with your money. If you're not, you've got no business. You're just not in business. Right? But there's the occasional situation where you know, you own shares in a great company. Applied intuition, Figma, Twitter, Okta, one of these. And sometimes you just kind of know. And yes, the prices get bid up, but they're great firms are coming in. You have a choice whether you want to exercise that right. And keep in mind, it's a right that you have that nobody else has. To me, that would be an example. Playing offense with your money.
- [09:13]
Ann Miura-Ko
The hard thing is when the rounds are priced as they're priced and your fund sizes are still small, exercising that right can be several million dollars.
- [09:21]
Mike Maples
Correct. What I came to believe was that the first question you got to answer is, do I want to do follow ons at all? You know, you can't have it be zero. That's one option. But you're giving something up when you do that, you're giving up a right that's worth something. The other way to look at it would be to say, I think it's probably higher than zero. And so then the question is, just how much higher? And so we settled on 70% upfront, 30% in reserves. But Iris is accountable for that 30%. Ann and I can't strong armor into trying to, you know, protect some investment that's not working. She's like, look, Maples, you know, you guys are holding me accountable for returns on this basket of money, but you.
- [10:00]
Ann Miura-Ko
Don'T think there's so much context that's lost. So, like, you know, you could look at the numbers, you could look at the data, but actually, I know the founder better than anyone. I know the speed of contract progression. I know all of these nuances which aren't in the data that Iris doesn't know.
- [10:14]
Mike Maples
Well, Iris knows, right? She's part of Floodgate. She gets to know the founders, and she looks at every investment that we make as if it were her pipeline. And so some of these, like applied intuition, she actually bought super pro rata. She found ways to get more ownership than our initial first check because she's like, look, this is the best company in Fund 6, and we should own as much as we can. Here's the thing, right? Most seed funds would say, I know more about this company than the market knows. That's why I'm going to give this company money even though it can't raise. And in those cases, I used to say, you know, I think you know things that aren't so right. So I give the market writ large a lot of credit for knowing what a good series A deal is. You're talking about firms like Benchmark and Sequoia and General Catalyst and A16Z. If none of them want to invest in a given company in our portfolio, I'm like, okay, who's more likely to be right about the progress of that company? Having said that, if they decide they really do want to invest aggressively, that's a pretty strong signal too, because they're picking not just from the companies we invested in, but from every seed investor. And so they're judging that to be among the very best outcomes of all seed investments. And in those cases, I think you got to at least look at do I want to exercise my pro rata. Right. You can't just blindly follow Sequoia and Benchmark and folks like that. But if they're saying, hey, I think this is one of the best projects in the private landscape right now, having the right to invest in that is worth something.
- [11:46]
Ann Miura-Ko
Do you not think you should just blindly follow if you got a tier one?
- [11:49]
Mike Maples
No, but. But that's closer to right than not. If I Look at Fund 1, what was our top performer? It was Demand Force who followed me in Demand Force? Bill Gurley at Benchmark. What was the second best performer? Twitch. Who followed us in Twitch? Ethan at Bessemer. Okay, let's talk Fund two. What was number one? In fund two, it was Lyft. Who followed us? Naveen at Mayfield Fund. Founders Fund. A16Z. Okay, what was the second biggest winner? Okta. We did that with a16Z. Then Sequoia came in. Greylock at Sequoia. And so one way to think about it is your follow on dollars might be best thought of as a subset of where the best firms follow because we've had the best firms follow and the companies not do well. Veragesale Sequoia aggressively followed and it didn't do well. One way I think about follow on investing is for a seed fund, it's closer to index investing than people think. And if you say, okay, I'm going to index off of the very best funds, as you kind of point out more often than not, if that's all you did, you'd have massively better follow on returns than most most firms. If the LPs knew if they, if they tracked what's the return on follow on checks versus first checks, there'd be pitchforks and like revolts in the street. It's so bad.
- [13:04]
Ann Miura-Ko
Do you agree with the ethos that every check has to be a fund return?
- [13:08]
Mike Maples
Ish. Here's the way I would phrase it. 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, your 10x fund. Now, the loss ratio is about the same between a 3x fund and a 10x plus fund. What matters is the magnitude of your big winners. But it kind of goes back to this Pareto idea. If your best company returns, say, 64% of your fund, the follow on check in that company is going to probably be a 20 bagger.
- [13:44]
Ann Miura-Ko
The hard thing with this assumption is that it presumes that you know outcome scenario planning and you never know how big your winners can be.
- [13:51]
Mike Maples
You never know, but you can say, we have a way to hold ourselves accountable. Ann and I, we're measured on what we call picking skill, which is what fraction of our first checks become 20 baggers or 100 baggers. Iris is measured on what fraction of follow on dollars go in the best companies. And that's completely objective, right? You can just say, here's a stack ranking of the companies by their current value. What percentage of our dollars are in those top companies that made a big difference in our returns?
- [14:22]
Ann Miura-Ko
So do you do outcome scenario planning when you're investing?
- [14:25]
Mike Maples
That sounds fancier than what we do.
- [14:26]
Ann Miura-Ko
Do you think, hey, how could this be a $5 billion company and work your way there?
- [14:31]
Mike Maples
No, I say for this to make 100x on the first check, what would have to be true? The way I think of scenario planning on a first check is I say, okay, given that it's 85% likely, it's not in the top 15%, you know, if I say every investment is going to be in the top 15%, it's just simply not true. Right? It's not grounded in reality. The better discussion to have is to say, look, given that it's 85% likely to not be the 15 top percent, how big does it need to be if it is in the top 15%? And is there a world where that could happen? What does that world look like? And this is why, you know, there's all these, I believe, false debates about valuation. Everybody says, well, if the company's awesome, you could pay any price. And I'm like, that's true to the extent that you can make 100x on the first check. To me, that's the high order bit. If we're going to invest 1 to 2 million bucks, can we make 100x on the first check? And if we're doing it at 40 post like we did, applied intuition, okay, they just raised it 6 billion.
- [15:29]
Ann Miura-Ko
The thing that I find really worrying with that though, is that that assumes that companies are going to be $5 billion companies, because there's a couple of inbate assumptions here, which is that you're going to get diluted probably quite a lot, say half or more or more. And so if we're doing that, it needs to be a $5 billion business.
- [15:46]
Mike Maples
So we forecast that. But. But this is why price matters, right? So it's a lot easier because our.
- [15:52]
Ann Miura-Ko
Entry price is 25.
- [15:53]
Mike Maples
Now, in the case where that's your entry price, that's what the exit needs to be. Yeah, yeah. And there's no escaping that. And people say, well, that was then, this is now. I'm like, no, I've studied venture returns for the last 50 years and the physics of what a good fund looks like has not changed.
- [16:09]
Ann Miura-Ko
Do you just think that ventures are less attractive investment category then?
- [16:13]
Mike Maples
I don't think so. I just think that a lot of people have forgotten what the right goal is. I sit there and I say, look, I need to make 100x on my first check. There has to be a way I can do that if everything goes my way. I'm not going to get that by acting like an efficient market operator. To the extent that seed investing is an efficient market, it's not going to be a good business. And so you got to find inefficiencies for it to be a good business. And then people say, well, what if I can't find inefficiencies? I'm like, okay, then you shouldn't be a seed investor. Because the idea is not to invest as an active investor in efficient markets. Right? Like, if you're an active investor, you have to find inefficiencies in the market or you got no business investing.
- [16:55]
Ann Miura-Ko
I mean this with total respect. You sit in the middle of San Francisco in the heart of the seed market, in the most efficient market. It was inefficiencies when you and Josh started and it was those early days. Neither of us are in inefficient markets.
- [17:07]
Mike Maples
The mistake that people make is to think of startups as a quote, unquote market. More of the companies are fully priced today than they were when Josh and I got started. But to me, that's just part of the fun of it. That's part of the spirit of the game, is to see what other people aren't seeing or at least try to do that, or maybe occasionally to get into something that not everybody can get into. But to me, that's the fun of it. It's like solving a puzzle or a riddle. There's so many startups, there will always be 30 or so every year that are great.
- [17:37]
Ann Miura-Ko
Will you do a much smaller check if you think it can still be a hundred bagger?
- [17:41]
Mike Maples
I'm more likely to do that. Yeah.
- [17:44]
Ann Miura-Ko
So you're right. Okay. So you can get 100k in a super hook.
- [17:47]
Mike Maples
I'm unlikely to do that. Like, I need to think that it could move the needle on the fund. You know, I need to, you know, probably about as low as I would go as half a million bucks.
- [17:56]
Ann Miura-Ko
Have you lost great companies because of that?
- [17:58]
Mike Maples
That's a great question. You know, I can't think of a.
- [18:00]
Ann Miura-Ko
Single time it's been our biggest mistake. Now, we could have done 11 labs, which is a $3 billion company, probably the best company coming out of Europe now.
- [18:09]
Mike Maples
Yeah.
- [18:09]
Ann Miura-Ko
Could have done it at 25.
- [18:11]
Mike Maples
Would it have been 100 bagger?
- [18:13]
Ann Miura-Ko
Now 150.
- [18:14]
Mike Maples
Okay. You should have done it then.
- [18:15]
Ann Miura-Ko
Yeah, yeah, yeah. And we could have done a 250k check.
- [18:18]
Mike Maples
I believe that there's always. And I don't know what your fund size was back then. It's probably okay. You should have done that deal.
- [18:24]
Ann Miura-Ko
Yeah.
- [18:25]
Mike Maples
I like to say, you know, our business is hard but not complicated. 100 baggers on the first check, 5% of the time. In order to do that, you have to. You have to pick opportunities that can be big enough if they work, but you also have to care somewhat about the price.
- [18:38]
Ann Miura-Ko
How do you think about these inception rounds? Adsim calls them inception rounds, which is like the $10 million starting round. We see many, especially in AI, that are much more than that. How do you think about them?
- [18:49]
Mike Maples
Can it make 100x on the first check?
- [18:51]
Ann Miura-Ko
Will you do these rounds if I.
- [18:53]
Mike Maples
Think it can make 100x? If it was Cass or Eunice, I would. But I'm like, okay, so this will happen. Sometimes some of our younger folks will come to me and say, hey, look, here's a round that's done at 10@40post. And we did applied intuition at 10@40post. Then I say, okay, is the founder Cas or Eunice? Because I think Caster is one of the best founders I've ever worked with. They're like, well, I don't know if he's cash or good. And I'm like, okay, it's not worth 40 post. You know, 40 post was like, a real stretch for us. And we're like, this company is going to have to be worth north of $5 billion at least for that bet to have been justified. Because here's the other thing, Harry Is, let's say that I thought, okay, I can't make 100x, but I can make 20. And he's that good. There's an opportunity cost, right? My fund, I only get 40 shots on goal, and if I take one shot that I don't believe has any chance of being 100x, now I have 39 shots on goal, and I have one fewer way to make 100x. If I'm going to raise under $50 million, I need to know what game I'm playing, and I need to be honest about it and play that game with integrity. There's a few things that give you a real advantage today that didn't matter as much then. I think today having a temperament advantage makes a big difference.
- [20:04]
Ann Miura-Ko
What do you mean, a temperament advantage?
- [20:05]
Mike Maples
So, like, in 2021, we're seeing all these projects, and they're. They're raising money at 30 and 35 and 40. Ann and I are just looking at each other like, we don't have to do that. Some of the young associates and principals are like, we haven't done any deals this year. I'm like, that's okay. You know, we haven't found any that meet our conditions. I think that Ann and I have done this long enough to be like, okay, we don't have anything. We need to prove to each other, and we don't need to, you know, have points on the board this quarter, this month, this year, Silicon Valley will make more. We'll be there. And so I spent a lot of time, as does Ann, thinking about what's our circle of competence? What are the situations where we've made money historically, and what are the situations where we think we're well set up to make money in the future, and we need to see projects that meet those conditions.
- [20:51]
Ann Miura-Ko
So do you agree with Gurley that you play the game on the field or not?
- [20:54]
Mike Maples
You have to play the game that's on the field.
- [20:56]
Ann Miura-Ko
But what if the field is not your conditions?
- [20:58]
Mike Maples
Well, if the field's not your conditions, you just have to be more discerning. Buffett said it well, once. Investing is like a game where there's no called strikes. And so you can just let pitch over pitch go by. And everybody says, swing, you bum. Everybody else is swinging. And you say, no, I don't have to swing. Like, I don't see my pitch. I'm just going to wait until a meatball comes over the plate and just swing at it with all my might. And if one doesn't come, well, I'll Wait, some will someday. This is a great way to think about pacing, because in 2009, everybody was in the fetal position and Ann and I were seeing deal after deal where we're like, this totally meets our criteria. This is awesome. Ann funded Lyft at five and a half million post money. How hard was the check she wrote 750k. So she did pretty well on that, right? She made like 250x maybe on that investment. But we were in an environment where people were afraid to invest. People thought the world was going to come to an end. But because we were like, okay, this is the type of project that we think is attractive, when we see one of those, we don't care what the market's doing. We're going to. We're going to say yes to those. Similarly, in 2021, I only made one investment the whole year, this company, Hadrian. Why is that? Well, I just didn't find any companies that met my criteria. And so one thing that's interesting about having a circle of competence, and I actually learned this from Buffett Munger, is if you know what your circle of competence is, if everything's systematically overpriced, you do fewer deals, because fewer deals meet your conditions. If everything's systematically underpriced, you do more deals. But that's the situation you want to be in.
- [22:30]
Ann Miura-Ko
How do you think about when playing the game on the field is just fundamentally a new game? And what I mean by that is, you know, when you look at AI today, the prices are nuts. The fervor, the excitement is nuts. But if this is the next generation of technology, as everyone has told them, this is the most exciting time in 30, 40, 50 years. Benioff says the most exciting time in his career. Play game.
- [22:50]
Mike Maples
You have to play the game that's on the field, but you don't have to play the way everybody else plays. Ultimately, 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? That's what we're paid to do. We're paid to find opportunities that are going to make money. Nobody's interested in indexing the broader overpriced seed market. That's not a good business. And so you got to find attractive opportunities for us. A lot of that in the AI arena has been some of these enterprise, you know, so Applied Intuition was one. A more recent one was Cicero, which is kind of more focused on legal tech. But we had a very specific set of conditions for what kinds of AI investments we would do and not do?
- [23:34]
Ann Miura-Ko
Were they crazy priced?
- [23:36]
Mike Maples
Well, Applied was expensive. It was 40 post.
- [23:38]
Ann Miura-Ko
When you look at your best deals, have they been the most expensive?
- [23:42]
Mike Maples
No, the reverse is true, but I don't know if that would still be the case.
- [23:46]
Ann Miura-Ko
Were they hot?
- [23:47]
Mike Maples
Well, Applied was hot. Casser would have raised money from anybody he pitched. He was that good. And his idea was that good. He was that well prepared. So he pitched two firms, got term sheets from both, decided to work with Mark, Mark joined the board and I kind of said, okay, probably the Series B round is a little bit de risked here. And so I should probably put in as much as I can get in on the round. And so that's what we did. And then immediately, as soon as our check cleared, Iris was trying to buy more.
- [24:15]
Ann Miura-Ko
Have you ever done a deal where you've bought Common, not prefs? We're seeing more and more.
- [24:19]
Mike Maples
Yeah.
- [24:20]
Ann Miura-Ko
Of this, I've done that.
- [24:21]
Mike Maples
Yeah. And then the other thing I've done is I've. I've been in a situation where the founder wanted me to do something with them and I said, I'd like to work with you too, but the price is too high. And this is one of the things about convertible notes is I could say to that person, look, you know, you can issue a convertible note any price you want. You know, if you're raising at 20, you can sell me half of it at 20 and half of them at 5. They might say, well, other people may not like that very much. I'm like, I understand that. But like, you can, you, you can decide, but I'm not going to pay. I'm not going to pay that price that everybody else is paying. You know, you learn quickly whether they value your involvement in a differential way.
- [24:59]
Ann Miura-Ko
Or not on the Commons, and perhaps so you would buy Commons because we had Nick Charles on from notation.
- [25:04]
Harry Stebbings
It was like, we think you should be more aligned.
- [25:06]
Ann Miura-Ko
You should buy Common. I really like Nick, but I think that's bullshit.
- [25:09]
Mike Maples
I would, if it made a difference meaningfully in my ownership early, I'd do it.
- [25:16]
Ann Miura-Ko
It's the difference between winning and losing the deal.
- [25:18]
Mike Maples
It's not so much that it would be. Maybe I can say to the founder, hey, look, this is a way for us to have some type of a joint gain. I know you need to get the price you want to get. There are reasons that you want to get that, but maybe we can get some type of a blended price. If I buy preferred plus common and then I own more, I'M taking more risk. But if I believe in the company, I've never made money or lost money based on common or preferred ever in the ones that worked.
- [25:45]
Ann Miura-Ko
Will you do uncapped notes?
- [25:47]
Mike Maples
Only in very rare cases have there been any. We would have done one for Applied, like right after the Series A. We wanted to own more. And so there are times when doing an uncapped note works to your favor. If you say, I have so much conviction, I'll pay a discount to whatever the next price is. I don't care, you know, Otherwise, why is the founder going to give you any kind of preferential treatment when the round comes together, if you believe in the company, you got to position yourself for the next round.
- [26:13]
Ann Miura-Ko
Have you ever done a Chris Sackett and done a nom nom? I call it the nom nom, which is when you go to Twitter employees and you just eat up, eat up, eat up everyone's early stock.
- [26:23]
Mike Maples
I've never done that. No. I was tempted to at times, but I never did.
- [26:27]
Ann Miura-Ko
You said there about kind of Ann's incredible investment 750 into Lyft, you got to sell for that to be a 250x, respectfully, Mike, because I don't know what Lyft's market cap is today, but it wouldn't have been a 250x if you sold today. How do you know when's the right time to sell?
- [26:41]
Mike Maples
Yeah, so I think that there's a couple of things. And by the way, this is something we haven't really talked about yet that is good for seed. So let's imagine it's 2015. Lyft stock at the time in the private markets was about 25 bucks a share. It was worth more than it is today by a meaningful amount. At the beginning of the year, we said, you know, we need to sell some of this. We're behind a billion and a half dollar preference stack. We're in this thing at a five and a half million dollar post my valuation. We're competing against Travis Kalanick, who's a freaking maniac. He's not a fun guy to compete with. This thing is going to impact our fund. Right. We are way in the money on this thing. And so Ann had a post it note on her monitor that said IQ test. And we put it on in January that year. And the IQ test was, I need to find a way to sell some of our lift stock. So she ended up selling a fair chunk of it, I don't think half of our stake, but a fair amount. In 2015. So one thing I think that a lot of seeds, 25 bucks a share, let's say 45 billion, something like that. Yeah, it was really good. Like the highest it ever got.
- [27:43]
Ann Miura-Ko
That returns the fund straight away. No.
- [27:45]
Mike Maples
Yeah. Oh, yeah. So we were like, okay, we need to sell enough to return all fund to. So she did. One thing that I think a lot of seed funds don't get is there's two ways to make money. One is on entry pricing inefficiency. But the other is to arbitrage exit price inefficiency. And like with Lyft, a 16Z was in Lyft, they couldn't have done that because the problem is, A, it would have sent a signal, and B, selling a couple hundred million bucks or whatever, it doesn't matter to a 16Z. It doesn't affect their fund enough. And so one of the things that seed funds can do is they can start to say, hey, is the market about to value this thing as if it executes perfectly for all the next five years? Because the capital markets are such that there's so much money that a lot of these companies, no matter how exciting they are, are going to get fully valued as if they're perfect for a very long time.
- [28:37]
Ann Miura-Ko
Do you think there's exit price inefficiency today, given the incredible excitement around AI?
- [28:43]
Mike Maples
So that's the thing, right? Like, this is the other thing I found, is that when the times you should be selling into some of those rounds, everybody wants a share of the company. What I learned was that it's actually a win win for the founder. Because you say to the founder, you can't just do it on the fly. You can't be transactional. But if you say to the founder, hey, look, let's be realistic here. You're better off in the fullness of time if certain players are in your cap table and not a seed fund, Fidelity or folks like that. So what do you say we get strategic about it? How about we put ourselves in a position where we can get somebody like that in? When you raise your next round, if it clears a certain threshold, what usually ends up happening is at first they're like, hmm, I don't know. But what ends up happening in reality is by the time the round comes together, the founder is coming to you saying, dude, you gotta do me a solid. You said you were gonna sell. I need you to sell more. Because everybody becomes pigs. Everybody wants in. Nobody pays attention. So ironically, the times that it's easiest to sell in, these really up rounds is probably the time you should think seriously about it. When you're a seed fund. Iris came up with a term for it. Actually we call it an initial liquidity event. So it's an event that has the same impact on fund economics as an IPO. So it can't be just 10 million here, 15 million there. It's got to be something where it has the same impact on your fund as if the company went public.
- [30:05]
Ann Miura-Ko
The counter to that, if we were just jousting until, actually would be. Brian Singerman often has talked to me before about the value of the next double. And actually a company going from 2 to 6 billion is much easier than having another 4 billion in enterprise value gain in the rest of the portfolio. And actually it can happen quite quickly. And if you look at Bessemer selling all of their Shopify stake at whatever it was, two to three.
- [30:27]
Mike Maples
Yeah.
- [30:28]
Ann Miura-Ko
That was probably the worst financial decision ever. They will say the same. I'm not.
- [30:32]
Mike Maples
Yeah. You never make a trade that you don't somewhat regret.
- [30:36]
Ann Miura-Ko
Well, you crushed it with Lyft, Mike.
- [30:38]
Mike Maples
Yeah, but you know, Lyft. Lyft traded up to like 75 when it went public and lockup, we got out at like 75. And so we would have done even better, but it was still the right decision. It was still the right risk adjusted decision. Once your fund's in the carry and you're in the money and it's like you've still got that upside, does your.
- [30:59]
Ann Miura-Ko
Psychology change when you're in the money?
- [31:01]
Mike Maples
I think it does a little bit, but I think that the other thing is it's like you get into these situations where the variance in the potential outcomes is so great. So I agree with Brian Singerman in one sense, which is some of these things can ride a lot farther and higher than you think. I agree with that. The issue though is that sometimes both can be true. Right. You can be in a situation where you're 100 times in the money in five years and no matter how good the company is, it's just valued to absolute perfection. In those cases, I look at it like even if the Brian Singerman outcome happens and it doubles again or even quadruples again, just have enough stock so that you know you're going to benefit from that upside too. I just think that when you're 100, baggers are pretty rare, right. I keep track of them. So I have a list I can show you on my laptop. Right. 100 baggers of the last 20 years.
- [31:54]
Ann Miura-Ko
How many have you got?
- [31:55]
Mike Maples
There's a little over 100 that are exited and there's a little over 100 non exited that I track. Most of them I don't track because I don't think they're real.
- [32:04]
Ann Miura-Ko
How many hundred baggage have you got?
- [32:06]
Mike Maples
Let's see, how many have I got? I've only got like 3 or 4. Twitter was a little over 300x and gets all the credit for Lyft. That was 205x. Applied is probably encroaching on 100x in the first check which got close but not quite there. It got to 94x and there's a few others that I think have a shot.
- [32:25]
Ann Miura-Ko
Would you start to sell Applied when it gets to 100?
- [32:28]
Mike Maples
Yeah. But here's the key. You got to do it in a way where you're not just being selfish about it. You want to do it in a way that in fact we did sell some applied, but we did it in a way where it was in full cooperation with Gasser. Right. I was like, I'm not going to do this behind your back or I'm not going to do this against your good wishes. And so is there a way we can make this a win for you? But you can't have that discussion the day the round closes, right. You got to, you got to be like, hey, here's how I'm seeing things. Am I making sense? You know, Casser is a grown up, right. He's like, hey, I get it. I understand. You got a business to run. So do I, 100%.
- [33:03]
Ann Miura-Ko
The best founders generally do understand that.
- [33:05]
Mike Maples
They do. Especially if you don't surprise them and you're just not greedy and transactional about it.
- [33:09]
Ann Miura-Ko
We'll do it behind their backs.
- [33:10]
Mike Maples
Yeah. And if you say to them, if you say to the founder, hey, look, can we agree that all things being equal, this would be a good investor to have in your cap table after the next round and this is a good way for you to get them without getting crazy, massive dilution. What do you say we try to engineer those circumstances?
- [33:26]
Ann Miura-Ko
How does your psychology change when you're in the money?
- [33:29]
Mike Maples
Hopefully not much. I think that sometimes the place where I would also agree with Brian Singerman would be sometimes you get in the money and you lose sight of the fact that you can get a lot more in the money.
- [33:41]
Harry Stebbings
I think more you see the side.
- [33:42]
Ann Miura-Ko
Of you can be more in the money and you lose. Downside. I always think that, you know, very close to the guys at Sequoia and team there. I think the reason they're so successful is because they've done so well, they're not fearful of downside, they just see what it could be and it almost enables them to have this enlarged and perceptional vision.
- [34:02]
Mike Maples
I think it kind of goes back to the first principles, right? You can make money on the buy and you can make money on the sell. And what most people don't understand is that the seed funds are actually better positioned to make money on the sell than anybody. Better position than the multi stage by a wide margin. That requires though, for the seed manager to be much more sophisticated than most are being. Most are just like, should I sell, should I not sell? What you want to do is have an opinion, right? And you want it to be grounded in the facts. Why do I collect information on hundred baggers? Because I'm like a train spotter. I'm like, you know, in Britain, right, you have those train spotters.
- [34:35]
Ann Miura-Ko
Do you like the structure to the sellings? We had Avi from entree on and he's like, I sell a third, I'm going to butcher it. But a third in a growth round, a third pre IPO and a third post ipo. There's a real structure to it. Do you like that kind of structure or do you think it's a case by case?
- [34:50]
Mike Maples
I think it's case by case. I think you should say to yourself, okay, there was a time when we were sober and we kind of said, if the following things happen, we might be sellers. And that's happening now.
- [35:01]
Ann Miura-Ko
So what was the least sober decision you made?
- [35:05]
Mike Maples
Most of my mistakes have been in our early funds. We followed on in too many rounds in the companies that weren't going to make the difference.
- [35:12]
Ann Miura-Ko
What was the least sober decision?
- [35:14]
Mike Maples
Our biggest failures have been failures of imagination. You know, it's like when I passed on Airbnb Datadog.
- [35:20]
Ann Miura-Ko
Do you blame yourself for passing on Airbnb though? And my reasoning around that is like, it was a nuts idea. He wasn't from a blue chip company. It wasn't a straight down the fairway deal at the time, it was cracker. And you had to see some real.
- [35:33]
Mike Maples
The way I look at it is I need to understand what I didn't see and I need to be really tough minded about that. That's not about beating myself up. It's just saying, is there a set of frameworks that we embrace today that would have caused us to say yes, but we do that not just with Airbnb, we do it with all the hundred baggers. We do these hundred Bagger Deep dives. We did one on Marketa, we did one. On Zoom, we did one.
- [35:58]
Ann Miura-Ko
What do you learn from them?
- [35:59]
Mike Maples
So what are the things we track is okay. 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? Then you say, okay, here's our frameworks. One of our frameworks is, did they have an insight? One of our frameworks is, did it harness an inflection? One framework is found. Or Future fit?
- [36:20]
Ann Miura-Ko
What is Future Fit?
- [36:22]
Mike Maples
Okay, so like, I'll give you an example. So, like, Zoom, Zoom, we didn't see, but started out as this consumer everyman conferencing thing called Sasbury. And that's when you would have had to invest in the seed round. So did it really harness an inflection? Hard to argue. Did he have a fundamental insight? Hard to argue. His initial vision for the product was just wrong. But, like, Eric had been at Cisco as part of WebEx for 10 years. He'd been thinking about video conferencing all the time. So his founder, Future Fit, was actually quite good. So, like, what I founder Future Fit is, it comes from William Gibson. He says, the future's already here. It's just not evenly distributed. And what he means by that is that great startup ideas don't come from trying to think of a startup. They come from a founder who's living in the future and who notices what's missing in the future and builds what's missing in the future. And it reminds me of Isaac Newton. He was supposedly at a party, asked, when the apple fell on your head, why is it that you all of a sudden had this insight about gravity? And Newton said, it's because I was thinking about it all the time. And so the founders at FounderFutureFit, they're like obsessed train spotters in a rabbit hole thinking about this stuff all the time.
- [37:34]
Ann Miura-Ko
Do you know what I find really hard is I've learned from you so much over the years, so many things, literally. But you literally shape something I do every day, which is I always ask, what's your insight development? How do you see the world in a way that's different to other people seeing it? The challenge that I have, Mike, is that so few can articulate it well in any way. And so even if they have it, I worry that I'm missing it because they can't articulate it.
- [37:58]
Mike Maples
It's really hard, right? I think there's a few apart from Just do you think the founder's great? There's a few signals that are interesting. Right. One, one is, does it harness inflection? Lyft harnessed the iPhone 4s had a GPS chip in it. So that happens outside of the startup. The second thing we look for is what do you know about the future? That's non consensus and. Right. And then the third is founder future fit. One of the things that I've learned in looking at these hundred bagger studies is some of these things become clearer later and you have to figure out what's the real signal at the time. You have to decide. And so you want to get a time capsule of that startup. You want to know what was the founder like at the time? What was the pitch deck like at the time? What was knowable about it at the time? And quite often I found in doing these that 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.
- [38:50]
Ann Miura-Ko
And just so I get it, it's is the background of the founder commensurate to what we believe successful founders in this space will have?
- [38:57]
Mike Maples
Yeah. So like, I look at it like almost every great startup is pursuing a future that's meant to be. And there is usually one team that's ideally suited to that future. So I'll give you a couple examples. So like Okta. So I meet Todd McKinnon and he's with Todd and Freddy. He says, I've been at Salesforce for all this time. All the early adopters of the cloud use Salesforce and now they're using other cloud apps. There's going to be identity management problems for cloud apps, and I'm going to build a system. And I'm the VP of engineering at Salesforce. These customers trust me, I know what their problems are. And I'm like, okay, it's a good pitch. Pretty damn good pitch, right? And I'm like, okay, if anybody can do it, he can do it.
- [39:39]
Ann Miura-Ko
And if anyone knows, he knows.
- [39:41]
Mike Maples
If anybody knows, he knows. So what was true about Todd? First of all, he was living in the future with those customers. And when you live in the future with those customers and you're intrinsically motivated by that future, you're more likely to understand what you should build, number one. Number two, you're more likely to attract early believers because you're more credible. And so I look for founders who are living in a valid future, are intrinsically motivated by the future they're pursuing, are more likely to notice specifically what to build and are more likely to convince people to believe that they've built the right thing if that team is present. I say, is this team the most likely team in the world to make this future real? The quickest?
- [40:22]
Ann Miura-Ko
Does that exclude first time founders who've not done anything before?
- [40:26]
Mike Maples
No, because let's take one. Marc Andreessen, right. He was at the University of Illinois. He'd never run a business before. He was in a supercomputer lab at the time. The Internet had just been made legal for business, so it could only be used at universities and academia. And Mark is trying to make a collaboration software for a team of researchers. And so he starts tinkering with the early technologies of the World Wide web and he creates a browser. But was Mark going after a market for browsers? Heck no. Mark didn't know what markets were at the time. Right. He was just trying to build what was missing about the Internet. He was, he was trying to make the Internet immediately more useful for him and his team. So why is that important? Well, Mark was living in a time machine. It turns out that he was using machines similar to the machines everybody would have soon. He was on a network similar to the kind of networks everybody would be on soon. And he was using the type of web protocols everybody would be using soon. And so his knowledge about that, that domain knowledge of the future was more important than any business person's knowledge of improving the present. Everybody thought AT and T is going to build the digital highway or that Time Warner or Microsoft network or AOL or maybe the government should build the digital superhighway. Everybody just assumed it would be a top down extension of what is. And nobody assumed that some kid making minimum wage as a programmer in a supercomputer lab would have the better answer. It wasn't going to be tops down. It's going to be a messy bottoms up web of stuff. And that was the paradigm, that was the winning paradigm. Mark's advantage was not born of his experience in business. It was born of his experience with the future.
- [42:05]
Ann Miura-Ko
Where is your biggest weakness in how you analyze founders today?
- [42:09]
Mike Maples
My biggest weakness has always been that I'm too optimistic about whether people can pull it off. It's just exceptionalism is so rare and so few people are truly great. And so few people just have the willpower and the grit and just the will.
- [42:25]
Ann Miura-Ko
You invest in people if you don't like them?
- [42:27]
Mike Maples
Oh yeah, yeah. It has nothing to do with it. There is an aspect of great founders quite often where they're disagreeable because when you think about it, a breakthrough startup is a provocative act. It's a disagreement with the present. And the more of a breakthrough it is, the more disagreeable it is. Quite often these founders are disagreeable people because the present will fight back and it won't fight back fairer.
- [42:50]
Ann Miura-Ko
What do you do when you lose faith in a founder? When you invest in a company, they don't turn out to be what you thought.
- [42:55]
Mike Maples
I have this saying, detach with love. So I'm like, hey, you know, it seems like I'm not able to help much here. I'm not just going to sit here and tell you that you're not doing a good job and that we disagree about everything. And so that's okay. It's nothing personal. And if you change your mind and I can be helpful, let me know.
- [43:13]
Ann Miura-Ko
Do you find the messy middle is where the most value often lies? I found that, you know, the winners very clearly from the offset are in the messy middle because the ones that really break out, clubhouse hopping, be real. It's unsustainable. And then the losers are very clear. The win is immediately obvious.
- [43:31]
Mike Maples
No, but you can't affect it that much. Regardless. I've never worked with a company that got product market fit that wasn't wildly successful. And so that's kind of the only thing in the early days.
- [43:42]
Ann Miura-Ko
I don't get that. I've heard you say that before. But I have several companies with product market fit which are not successful. We mentioned them, Clubhouse. I got product.
- [43:50]
Mike Maples
I don't think they have product market fit.
- [43:52]
Ann Miura-Ko
Really?
- [43:52]
Mike Maples
No.
- [43:53]
Ann Miura-Ko
I mean they have millions of users engaging daily for hours at a time. I would say that was product market fit.
- [43:59]
Mike Maples
Do they still.
- [44:00]
Harry Stebbings
Absolutely not.
- [44:02]
Mike Maples
No, but. So they didn't. They just had a temporary. They were like a solar flare.
- [44:05]
Ann Miura-Ko
So then how do you what sustainably define product market fit?
- [44:08]
Mike Maples
It's funny, I was talking to buys you bought last week. You know, one of the co founders, Robinhood.
- [44:13]
Ann Miura-Ko
I like him, love that guy.
- [44:15]
Mike Maples
We were talking about product market fit and he goes, when we got it at Robinhood, I was like, oh, that's what product market fit looks like.
- [44:22]
Harry Stebbings
And so I just think it's like stages.
- [44:24]
Ann Miura-Ko
It's like a chapter in a book and you have to continuously own the next product market fit chapter.
- [44:29]
Mike Maples
But, but like if we go back to the kind of the, the notion that I think you were getting at. Can I help the founder get product market fit? Not that much, in my opinion. There are some things I can do part of what I can do is addition by subtraction. I can remind them that, you know, no matter what everybody's saying, that is the thing. It's like Vince Lombardi, you say, winning isn't everything, it's the only thing. Product market fit isn't everything, it's the only thing. Get product market fit, eliminate distractions. What can I do to help? And last time we talked, you said, this is the bottleneck between us getting strong product market fit. And today, is that still the case? How can I be helpful there? The other thing, though, is, and I've heard some of your prior guests get to this, being a founder is not a fun job. It's almost like being an artist. You know, it's almost. Sometimes it's almost more of a curse than a blessing. And it's almost like you have to do it because you're called to do it. But it's a hard freaking job. And it's not a fun job. It's a shit job.
- [45:23]
Ann Miura-Ko
One of my biggest concerns right now is that we are seeing a generation of growth investors, or funds that were Series A, who've now raised billions and billions, who assume that the efficiency of dollars is the same regardless of company stage or how much they have raised. And so they go, fuck it, we need to deploy 50, 75, 100 million.
- [45:42]
Harry Stebbings
Sod it.
- [45:43]
Ann Miura-Ko
Let's put it in this company that's doing really well. I know we're paying well ahead of time. I know we're paying two years out.
- [45:50]
Harry Stebbings
But we can still see a 3x.
- [45:51]
Ann Miura-Ko
If we pay 3 billion from here, sold it. But when you drop 100 million into a company, suddenly they do 10 other things.
- [45:58]
Harry Stebbings
They hire.
- [45:59]
Ann Miura-Ko
And that 10 billion exit massively reduces in likelihood because they're now way less.
- [46:03]
Mike Maples
Right? And this is why I really appreciate some of these founders that I've worked with who've done a good job. You know, like Casser, I mean, he has enough money to do whatever the heck he wants. But in fairness to the CEOs of those companies, a lot of them never had any influences around them that said, hey, you're about to raise a bunch of money, that's cool. But, like, let's not you and I be breathing our own fumes. We don't have product market fit yet. We. We don't have an objective way to say, yes, check the box. We have product market fit. And so if we're not careful or.
- [46:35]
Ann Miura-Ko
Even if we do have product market fit, taking in $150 million, you got to find a way to use that.
- [46:40]
Mike Maples
Yeah, but what, but what usually happens that's even worse is these companies raise a lot of money before they have legitimate product market fit and they hire ahead of achieving it. And now all of a sudden they're doing a bunch of wacky nonsense that's not contributing to product market fit. And they just become culturally broken, right? They just, they just end up never developing any muscle memory for what an attractive customer is, how you should find one. What, which ones to avoid, what features are going to be added to this strategy? Which ones won't?
- [47:10]
Ann Miura-Ko
What happens to the generation of companies that have raised these hundred million dollar plus rounds at billion dollar plus prices where they didn't really have product market fit? What happens to them?
- [47:19]
Mike Maples
I think most of them won't clear their preference stack, but they've got five.
- [47:22]
Ann Miura-Ko
Years of Runway, seven years of Runway, so they just kind of keep going. And GPS are just telling LPs it's fine, it's fine. They're.
- [47:28]
Mike Maples
The problem is there's an element of this where everybody in the game has an incentive to keep, keep the plate spinning. It goes back to the first thing we were talking about. My business is hard. Your business is hard, but it's not complicated. Hundred bagger on the first check. And it's like, if we get one or two or three of those in a fund, we're going to be successful.
- [47:48]
Ann Miura-Ko
Have you ever had a company without product market fit be successful?
- [47:51]
Mike Maples
Oh, yeah.
- [47:52]
Ann Miura-Ko
What one comes to mind?
- [47:54]
Mike Maples
We had one that was struggling and we were about out of money. Co tweet. And so this is kind of a funny story actually. So talk about in the US football, right? I have this expression, I call it a forward fumble. So Steve Anderson, a baseline, is talking to this company co tweet. And he's like, hey, you know, what do you think the valuation ought to be? And I said, I don't know, man. They don't have a lot of traction. I don't think I would do much more than 3 million pre if I was you. So Steve comes back and says they accepted our offer. And I was like, what do you mean our offer? I thought you're just looking for my just side about just what the price ought to be. I didn't say I was offering anything. He's like, come on, dude, you can't leave me hanging now. Jesse's like, we're both in this thing. And so I'm thinking, shit, I really like Steve a lot. I think he's really, really a great guy. Brilliant. I was like, I'm kind of interested in it, I guess. And I don't know. And I need to think about this. At least the price is pretty good. So we do this thing together, you know, I probably put in a few hundred thousand bucks and Steve put in more. Not that much later, co tweets, pretty much out of money. And Steve's like, hey, we kind of got this problem. We're almost out of money. And I'm thinking to myself, damn it, you know, I can't believe I let him talk me into this. This is the dumbest. I'm never gonna make this mistake again. And then next thing I know, Steve says, hey, well, it looks like Exact Target is gonna buy this company. At the time, I've never heard of Exact Target. They're going to buy them for stock. And I'm thinking to myself, great. The last thing, at least we're not out of business. But now I have Exact Target stock that I've never heard of. Some company in Minneapolis, Exact Target buys them, and then Exact Target goes public. And I'm like, wow, they're going public. And I'm like, how soon can I sell, right? Because I know nothing about Exact Target. Well, before the lockup expires, Salesforce decides to buy Exact Target. So we end up making 23 times our money. It was like when you fumble the football, it just bounces end over end up. The field just keeps going and going and going. And every time we're like, oh, man, I wish I could get out of this. We couldn't. And it just kept going.
- [50:02]
Ann Miura-Ko
I love that. So listen, I want to do 2024 in review. I'm going to say a couple of different statements and you're going to give me your thoughts. What was the company of the year in 2024?
- [50:12]
Mike Maples
SpaceX, they are starting to blast a lot of rockets into outer space. I mean, what they have done is just so incredible. And I don't have to squint too hard to see a world where they're the most valuable company in the world. I mean, because if you're the most important dominant company in outer space, that's a big deal. You look at like North Carolina, you know, has this hurricane. We've passed some what it was at $40 billion. Build broadband better. Bullshit, Bill. Nobody's built any broadband connections I'm aware of. And everybody's like, elon, can you help? Puts his satellites above and like, you know, kind of makes it free. You know, he helped with Ukraine. You know, it's like, she worry about.
- [50:51]
Ann Miura-Ko
The power that one man has, he controls the digital town hall. Now with Trump, he controls the physical town hall.
- [50:56]
Mike Maples
Well, that's a different question. But, but like, if you're asking me company of the year, it's SpaceX, in my view. You know, if people are saying, look, the problem with SpaceX is they're too powerful and that they dominate the skies and all that stuff, to me, that kind of underscores the year they had, but also just like the impact that they have. Right? Just their ability to just provide broadband arbitrarily anywhere, anywhere in the world. And by the way, it's not going to be just broadband. They're going to be able to launch payloads of all kinds of things. Baiju Bhat's new company, he's trying to have these satellites that have these solar panels that beam lasers down to earth for energy anywhere at these base stations. And so who's going to put those things up into outer space? It's going to be SpaceX, you know, putting the payload out there. And so, you know, you get to a world where SpaceX becomes a platform dominant supplier for outer space, and I think that's pretty, pretty impressive.
- [51:52]
Ann Miura-Ko
What do you think was the fund of the year?
- [51:54]
Mike Maples
I'm going to go with 20 VC, dude. $400 million fundraise. Fist bump for the win, man. I mean, it's very, I mean, just barely, not even a kid. And you know, you're doing this in Europe And I mean, 400 million bucks in Europe, that's something you should be proud of, what you did.
- [52:10]
Ann Miura-Ko
I remember when we met in the battery years ago, I was desperate for you to give me a job. Like.
- [52:18]
Mike Maples
Well, if you had come to America, I would have done it.
- [52:20]
Ann Miura-Ko
That's very, very kind of you.
- [52:22]
Mike Maples
It's interesting. I don't know if you feel this, but some situations I've had when things worked my way, you didn't always let yourself be fully aware of it at the time. You didn't stop and say, hot damn, that was something. I really did something there. And you know, maybe you're not doing that when it comes to this $400 million fund, but give yourself some time to come up for air and be like, hot damn, I did that.
- [52:46]
Ann Miura-Ko
I feel the desperate responsibility.
- [52:48]
Mike Maples
Yeah.
- [52:49]
Ann Miura-Ko
Like, it's a huge, huge amount of money, which I'm very grateful and appreciative of. But like, the work starts now.
- [52:54]
Mike Maples
Yeah. But also, it was legendary. What you did was legendary. You still have a lot to do every now and then. It's good to come up for air and take it in from you.
- [53:04]
Ann Miura-Ko
That means the world to me.
- [53:06]
Mike Maples
Founder of the year Elon. You know, an investor of the year. As an homage, I'd say it's Charlie Munger because I think the world's really going to miss him. Probably of all the investors you know, I'd say that Charlie Munger and Howard Marks have influenced my view of how to be a good all around investor more than anybody.
- [53:28]
Ann Miura-Ko
How has Howard Martz most influenced you?
- [53:30]
Mike Maples
His memos for Oaktree Capital are just insane. A lot of the ideas in Pattern breakers were a realization that startups are all about being non consensus and right, but in a much more massively disruptive way. And so 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. But what startup capitalism is about is refusing the premise of the current rules and showing up out of nowhere and changing the subject. And the only way you can do that is to be non consensus and right. You can't. Only by being radically different can you make a radical difference. And a lot of that thinking I internalized from Howard M and A or.
- [54:12]
Ann Miura-Ko
Exit of the Year.
- [54:13]
Mike Maples
I don't think I have as good of an answer for that.
- [54:16]
Ann Miura-Ko
I'm going to go with loom 975 million. It's a lot. Yeah, that's pretty great timing.
- [54:22]
Mike Maples
I think they definitely optimized their outcome predictions for 2025.
- [54:27]
Ann Miura-Ko
What will we see?
- [54:28]
Mike Maples
I continue to be intrigued by what could happen with bitcoin. When I think about the way venture capital has thought about crypto. Most of the really smartest people I know have been focused on Ethereum and Solana. And I look at bitcoin and it just feels to me like it's the thing hidden in plain sight. It feels to me like there's a world where bitcoin becomes more valuable than gold and then some where there's an entire financial ecosystem and rails around it. And if that happens, bitcoin's got a lot of room to run. But I think that there would be a lot of startups that could create an ecosystem around it. That would be interesting.
- [55:03]
Ann Miura-Ko
I asked Reid hoffman this morning, 2025, end of year, what is the price of bitcoin?
- [55:08]
Mike Maples
End of the year or the highest point in the year?
- [55:10]
Ann Miura-Ko
End of the year 130. He went with 200.
- [55:13]
Mike Maples
Yeah.
- [55:14]
Ann Miura-Ko
What happens with Doge success or not a success?
- [55:17]
Mike Maples
To me, success would be it changes the cultural norms of what's acceptable from an accountability standpoint? Like, I don't think that Elon is going to be able to do what he did with, say, Twitter and fire a bunch of people and change all.
- [55:31]
Ann Miura-Ko
The rules and bring in a sink.
- [55:33]
Mike Maples
He might be able to do that.
- [55:34]
Ann Miura-Ko
Am I the only one who saw the picture of him bringing in a sink going, oh, God, you were thin.
- [55:38]
Mike Maples
Yeah, let that, yeah, let that sink in. Here's what I think is happening. And by the way, it's not just Doge, but like, I think, for example, what Lonsdale, Joe Lonsdale is doing with his project Cicero is really good. One of the problems that we have with government in the US Is you'll have a government entity that has a bunch of money that produces terrible results that are only getting worse, and they keep hoovering up more money. At some point, we need to get to a place where we can say, can we agree that if we put money into something, we should have a goal? If the entity achieves the goal, it gets more money, and if it doesn't achieve the goal, it gets less money. Can we agree that that's true? Republican, Democrat, whatever. Can we agree that we should even at least try to see what the goal is, hold people accountable for making those goals? Now, you'd be surprised. Imagine the crappiest company you ever saw. Now imagine that company, and the worse it does, the more money it gets. And the worst departments in the company get the most money because they say, well, the problem is that we're underperforming because you guys are under investing in us. That's what like so much of the government is like today. And so it's not just Doge in terms of the federal government. What Elon's doing, what Vivek Ramaswamy is doing, what Lonsdale is doing is important too, because he's trying to take it to the local level. You're not going to be able to solve this stuff overnight. But what you want to create is a culture and a set of mechanisms for accountability and for a natural way for things to recede when they're not effective. And if you could create a permanent change on that front, that would really be a big deal.
- [57:13]
Ann Miura-Ko
I think what damaging element of venture.
- [57:15]
Mike Maples
Needs to recede right now? There's just too much money. But I don't think it's ever going.
- [57:21]
Ann Miura-Ko
To be getting worse.
- [57:23]
Mike Maples
I think it might be, yeah.
- [57:24]
Ann Miura-Ko
I speak to so many LPs, new sovereign wealth funds, new pension funds, new endowment funds. You have sub 3% exposure to ventures day, you want to take it to 10 to 15.
- [57:33]
Mike Maples
The thing that I think that most people don't have a handle on yet is exits are cyclical too. Throughout my career you have these 15 year windows where close to half of the exit profits are made like in an 18 month 2 year window.
- [57:47]
Ann Miura-Ko
Horsey Bridge are brilliant in terms of their analysis on exit markets and they found that really ventures are very challenging asset class, but brilliant when you take advantage of very constrained liquidity windows. That is where you are able to.
- [58:00]
Mike Maples
Have, that is the business. So, so you know, every 15 years or so you get this window of about 18 months to two years. And if you want to do really well, the secret is to have a bunch of very good companies in flight when that happens. So a lot of these big multi stage funds, the problem they're going to run into is they raised money on exits predicated by 2020-2022 exits. There's a lot of evidence that's just not going to happen that there's going to be a long window of time before we ever see that again. The multi stage funds will over time feel pressure to rationalize their fund sizes. They'll do it slowly and they'll do it deliberately.
- [58:42]
Ann Miura-Ko
I do juxtapose that though, just with the thought that 15 years ago it was insane to have a $150 million seed fund. Now it's like obviously, how could you not have a seed fund over $100 million before it was in a trillion dollar company? Mike, are you serious? Well, now we have five, six.
- [59:00]
Mike Maples
Well, and the other thing that's happened is I think a lot of people have forgotten what a seed round even is. And so now you have seed rounds that are like four or five million dollars. To me. The purpose of a seed round is you have an insight about the future and you have a massive risk that you're hoping to take out. The ideal seed round is one which provides slightly more than the minimum viable amount of money and time to take out that risk. And the reason is that that's the riskiest time in the company and it's also the most expensive time to use capital because you never get more diluted than you do in the seed round. What founders should do with their seed round is they say I've got an insight about the future. That's non consensus. I need to prove that I'm right. Because once that you prove that you're right, you've taken the single biggest risk factor out of the business. You've done the most value additive possible thing you can do to the company, you'll raise it will at a much higher price.
- [59:53]
Ann Miura-Ko
I agree, but I disagree. You've proved that you're right, but then you need to scale into enterprise and then you need to prove that you're right again. And then you need. Like this is why I think.
- [60:01]
Mike Maples
But here's the problem. What happens more often is people raise 4 million bucks and they just go do a bunch of stuff. They just don't have a clear line of sight. Like what? What you want to be able to say is, I need to establish that my insight is true. And if I establish that my insight is true, now, I've done more than any single thing I can do to take risk out of this. And that is the best thing I can do to enhance value creation. If that means they raise a lot of money after that, okay, fine, so be it. That's a different discussion. Then the question becomes, what is the value strategy? Value creation strategy for Series A. But what's happening now is people are raising 4 million bucks because that's what it takes to dilute 20%. That's just stupid. It's not a good way to get started. And it hurts the founders even more than it hurts the VCs. Because the one thing you never get back as a founder is your time. And if you raise $4 million, you know, you're three years in, you're doing seed extensions, you've hired a bunch of people, you're much better off if the insight was wrong, you're much better off knowing that within a year.
- [61:04]
Ann Miura-Ko
But then raising more money gives you more time to tinker and iterate. I look at Klaviyo, I look at UiPath, I look at service title, and.
- [61:11]
Mike Maples
Most of those didn't raise a lot of money before product market fit.
- [61:13]
Ann Miura-Ko
They didn't at all. But if they had have done, they would have had more comfort in terms of.
- [61:17]
Mike Maples
I think they'd have been worse companies.
- [61:19]
Ann Miura-Ko
So did they? I asked every single founder, oh, good, okay.
- [61:21]
Mike Maples
Then they got my back.
- [61:22]
Ann Miura-Ko
Every single founder. And they were like, yeah, no, they got my back.
- [61:24]
Mike Maples
You know, constraints are powerful in the early days, and constraints are the thing that allows you to understand what the true laws of physics are for your company. And if you operate in the early days without constraints, in terms of time and profit and finding desperate customers, you'll be a worse business. You'll just be a worse startup. It just is true.
- [61:44]
Ann Miura-Ko
I totally agree.
- [61:45]
Harry Stebbings
I can talk to you all day.
- [61:47]
Ann Miura-Ko
I want to do a quick Fire, I say a short statement. You give me your immediate thoughts. What do you believe that most around you disbelieve?
- [61:53]
Mike Maples
I believe that more people should pay attention to the core tenets of Christianity. And I don't mean that in a religious way. I mean it in a philosophical way. There were some things that Christianity introduced to the world that were important. One is this idea of the forward notion of time rather than cyclical time. The other thing that Christianity introduced was human rights as an inalienable right. The other thing that it introduced is this idea of unconditional love, which is a little bit harder to explain in a soundbite. But it's sort of this idea that real love doesn't have conditions. And I think that those ideas are really important for sort of.
- [62:35]
Ann Miura-Ko
Do you believe that real love doesn't have conditions?
- [62:38]
Mike Maples
I do.
- [62:39]
Ann Miura-Ko
But if you don't set the boundaries to your love, then someone will.
- [62:42]
Mike Maples
Yeah. So boundaries are different from conditions. So, like, a condition would be I get my feelings hurt somehow, so I say something intentionally mean to hurt, hurt you back. Well, if you buy into the premise of unconditional love, you'd say, it would be irrational for me to ever do that because I love this person. Why would I. Why would I intentionally want to harm that person? If they say something bad to me, I can say, hey, look, something's clearly going wrong with this conversation. We need to have this conversation some other way. This isn't working for us. But unconditional love is a really powerful way to think about stuff because it causes you to realize that if you love somebody, that you always want what's best for them. That doesn't mean you always agree with them. That doesn't mean you always put up with their crap, but it means that you sincerely want what's best for them no matter what they do, and that you try to show up in the world in a way that. That's true. And one of the things that I really like about the teachings of Jesus was he basically said, when you step back, that's really true about everybody, that you should try to be that way about everybody. That doesn't mean if somebody's hostile to you and you got to defend yourself, you defend yourself. But you do it through the lens of saying, I regret the fact that I have to harm you because you've made a choice that gives me no alternative. But what you try to avoid is calling them names and all this other stuff. I think that that is a really profound idea. And not enough people have internalized that idea. And how powerful philosophically that was. But everything around us in the Western world, much of it came from Christianity. And by that I don't mean Jesus is a religious figure, but Jesus is more like a philosopher king.
- [64:22]
Ann Miura-Ko
I saw a picture of your father, and he was a very early Microsoft employee, I think, wasn't he? What was your biggest lesson from your father?
- [64:30]
Mike Maples
That's another good one. It was do your best. So what my dad helped me realize. So in another Brit, Adam Smith, did you ever read the wealth of Nations?
- [64:40]
Ann Miura-Ko
Yeah, yeah.
- [64:41]
Mike Maples
It's pretty good, right? Fantastic. Pretty legit. And so one of the things that he talks about in the wealth of nations is this principle of comparative advantage. I think most people have the wrong idea about competition. If you think about it, you have your strand of DNA, I have mine. Nobody in human history has ever had the same DNA as anybody else, ever. And so that means every single one of us is like a node on a network, completely unique, which means that everybody in the world, everybody, I don't care who it is, has some set of comparative advantages. And so the failure mode that a lot of people get into is they try to be the best. What I learned from my dad is that what you want to do is do your best, because there's only one you, and you can't be better than your best. I think Peter Thiel is really smart, but I'm never going to be better at seed investing than Peter Thiel. By trying to study Strauss and Goethe and Nietzsche and all these historical economic trends and macro stuff, he's going to beat me at that game. But if it's like who's the better philosopher king about seed and what makes greatness in a seed round and what makes greatness in a startup, I think I can win that game against anybody. Right. And so what I learned from my dad was that you as a person have intrinsic motivation. You as a person can provide something that the world wants, that values that you can get paid to do. Part of honoring the limited time you have in this life is to figure out how to show up every day to honor the gift of your time by being your best, by doing the best you can do.
- [66:17]
Ann Miura-Ko
Final one. And it's a hard one, but I find it quite revealing. What about the way that your parents brought you up? Did you deliberately decide to do differently in the way that you bring your children up?
- [66:27]
Mike Maples
That's a good one. Yeah. There's one thing I could tell you later, but I'd rather not say. The one thing that I think would have been good, would have been and I still need to do better about it, but just to get outside more and do more sports and stuff like that. My dad was very cerebral into computers and everything we talked about was computers and the computer business and programming and stuff. He was not like into sports. That's something that I'd like to do a better job of over time is to kind of promote that a little bit more.
- [66:57]
Ann Miura-Ko
Mike, I could always chat to you all day. It's such a joy to have you here. Thank you so much for doing this.
- [67:03]
Mike Maples
Thanks for having me. Harry. Thanks for putting up with me.
- [67:06]
Harry Stebbings
I mean, I just love my discussions with Mike. And if you want to see that conversation live in the studio, you can check it out on YouTube by searching for 20VC. That's 20VC on YouTube. But before we leave you today it can be difficult to build a team that's aligned on everything from values to workflow. But that's exactly what Coda was made to do. Coda is an all in one collaborative workspace that started as a napkin sketch. Now, just five years since launching in beta, Coda has helped 50,000 teams all over the world get on the same page. With Coda, you get the flexibility of docs, the structure of spreadsheets, the power of applications and the intelligence of AI, all built for enterprise. Coda's seamless workspace facilitates deeper collaboration and quicker creativity, giving you more time to build. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to execution in record time. To try it for yourself, go to Coda iO20VC today and get six months free of the team plan for startups. Now that your team is aligned and collaborating, let's tackle those messy expense reports. And don't even get me started on the month end panic when you realise you have to reconcile it all. Pleo offers smart company cards physical, virtual and van specific so teams can buy what they need while finance stays in control. Automate your expense reports, process invoices seamlessly and manage reimbursements effortlessly all in one platform. With integrations to tools like Xero, QuickBooks and Netsuite, Pleo fits right into your workflow, saving time and giving you full visibility over every entity, payment and subscription. Join over 37,000 companies already using Pleo to streamline their finances. Try Pleo today. It's like magic, but with fewer rabbits. Find out more@pleo.com 20VC and with your finances under control, don't forget to secure trust with your customers. Trust isn't just earned, though, it's demanded. That's why over 9,000 companies, including Atlassian, Core and Factory, rely on Vanta to automate their security compliance. So Vanta helps businesses achieve certifications like like SoC2 and ISO 27001, turning months of tedious work into this beautifully fast and straightforward process. Their platform automates compliance across over 35 frameworks, it centralizes workflows, and it proactively manages risk, all while saving you time with automation and AI. So whether you're just starting or scaling your security program, Vanta connects you with auditors and experts to get audit ready quickly and build trust with your customers. Get $1,000 off your first year by visiting vanta.com 20vc that's v-a n t a.com 20vc as always, we so appreciate your support and stay tuned for an incredible episode in just 48 hours.