Floodgate's Mike Maples on backing 'thunder lizard' founders — and why freshmen and seniors beat everyone in between

just asking about your own activities uh yeah I don't know what was he expecting a surprise there like that is is such a funny such a funny result uh anyway we have Mike Maples from Floodgate Capital in the reream waiting room we will bring him into the TV ultra Mike how what's going on welcome to the show how you guys doing we're doing great thanks so much for hopping on uh I don't know if you read that article uh that interview with the Chevron CEO did that surprise you.

No, I haven't. You know, I got to say that um it's a little bit out of my lane. I'm I invested way too early in startups and so uh Chevron is not top of my not top of your radar. Um yeah, Jordy, what? Uh well, yeah, I I still think it's fun to use AI to research yourself.

Chevron CEO was researching his own business activities and to to validate, I think, is uh but I'm sure it's fun to look up uh some of your best investments in Chad GPT. But it's great great to have you on the show. Yeah, thanks for having me.

I've been fans of what you guys have been doing even even when it started as the Tech Bro podcast. Long time ago, nine months ago. That's right. Yeah, I think we might have replied to one of your posts. We had some fun with that. It was a good time. Um yeah.

Anyway, uh what uh h how are how would you uh introduce yourself to the audience? what what what what's the right way to think about your position in the in the ecosystem right now? Yeah, I'd say that I'm I'm kind of one of the OG seed investors and so uh you know seed investing wasn't really a thing 20 years ago.

You know, you you either scared up a few dollars from angels and friends or you went straight to raising 5 million. And so guys like myself and Josh Kppelman uh started to create these seed firms and things have obviously changed a lot. Now, nobody questions whether they're seed investing.

Now, there's like 2,000, you know. Now, if you go to LinkedIn and type seed investor, I think you get more of those than there are founders now. So, it's changed a lot. Yeah. What's been the uh uh what's been your strategy for dealing with the change in uh in the market structure.

I mean, some firms have been like, I need a massive growth fund so I can ride my winners all the way up. I need to, you know, really like incubate stuff and like get huge ownership stake at the early stage with less capital. Uh what's been most uh enticing to you?

Yeah, you know what I what I started to realize was I always say to founders um you have to avoid the comparison trap at all costs and that you know startups role in the world is not to be better but to change the subject. Mhm.

So, I realized about 10 years ago that I was a hypocrite giving that advice because here I was one of 2,000 seed funds. And so, I was like, you know, I'm playing the comparison game all the time. And so, what I started to do was to try to um say that I I don't want to be pitched anymore.

That I want to uh find founders before they figured their ideas out and get to know them uh and and come up with ways to help them evaluate whether they really want to pursue the idea or not. And so, um, you know, uh, um, there's that famous essay that Paul Graham wrote and Brian Chesy talked about, uh, founder mode.

Um, I like to find people who are in builder mode. Builder mode. Sorry. Little little sound effect for you. Yeah, we'll have a complimentary one for for builder mode, I suppose. But I like that. Who are, you know, pursuing something almost to an unreasonable degree. They're down some rabbit hole.

They're not sure it's a business yet. uh but they're doing it because it's interesting for its own sake.

or you know people who are living in the so that's really what I try to do is find the what the prime movers to be and and this may this may appeal somewhat to your all sensibilities particularly you know some of the founders fund adjacent stuff right but you're trying to you know I just think that that um some people just have this very rare blend of determination and original thinking and those people to me are the prime movers and my job is to find those people before the rest of the world believes do you have particularly really favorite uh lakes to fish in.

You know, there's the folks that are uh you know at Stanford and Waterlue constantly. You know, the Teal Fellowship is pulling from pulling kids out of college. Uh YC pulls a lot of new grads. Cast a really wide funnel.

Chris Dixon was famous for kind of hanging out on Reddit and finding like these little pockets and communities where, oh, there's a bunch of people doing 3D printing online. let me go find a 3D printing company uh or VR or whatever else is where the Coinbase investment I think came from saw saw the community there.

Uh there's other people that are uh specifically great at at pulling founders out of big tech big tech companies. Uh what how do you think about the different lakes to fish in for the next generation of founders? Yeah, one of my mental models, I call it freshman and seniors.

And so, um, you know, like, uh, when I first met Justin Khan when he was doing Justin TV, which became Twitch, he's a year out of college and he's sold his prior company with EMTT Sheer on eBay. Yeah. And you know, these guys didn't know much about business. They sold their company. You don't know the story? No. Yeah.

Their first YC company. I mean, you can tell it. You know it better than I do. Oh, yeah.

So, so I'm I'm sitting in a coffee shop with the Weebly guys and they were pitching me and the pitch is almost over and I see this guy show up in the door the coffee shop and I and he's wearing a baseball cap and a camera on it and wires going into a backpack and I remember thinking that's kind of a strange dude.

I wonder what's up with that guy. And you know as as the meeting's wrapping up he's walking into the place and David Rossenko of Weebly goes did you get your email earlier today? I was like what are you talking about? Well, we got this friend Justin Khan. He's got this new idea, Justin TV.

And right then, Justin sits down and turns his laptop around and I'm on the laptop screen because his camera is looking at my face and he's I'm going to do a 247 reality show of my life and broadcast on the internet. And I and I was like, Justin, that's that's one of the dumbest things I ever heard.

Like, that's not even how reality TV works. You know, reality TV, they script it and they condense it down. Nobody wants to watch you like you're some fish cam all the time, right? Like that's not like like you're not even describing what the business is. And he's like, you're supposed to be a CEO G.

Why are you [ __ ] on my idea? And I was like, you know, it's terrible, but like what's how do you even do it? What's in your backpack? And so he showed me how Kyle Vote, right, who was a genius, uh, had designed this thing that did EVDO cellular combined with internet software.

And so that night I was just like researching them a little bit more. And I'd seen that Justin and EMTT had sold their prior company on eBay. So they had a calendar company called Kiko and uh as an Ajax calendar at the time and Google decides to do Google calendar and they're like, "Okay, we're we're out of business.

So why don't we try to sell this? " And they they try to sell it normal ways. Nobody will buy it. So they just put the company on eBay and they sell it to two cows for $250,000. There we go. Isn't that incredible? And I thought, you know, just common sense.

we want to sell something, I don't know, put it on a big marketplace. But one of the things back to kind of where do you look for things? Um I like I call those freshman founders because they they they they haven't been polluted by uh the conventional wisdom echo chamber of the valley yet.

They they think that all you need to do is build stuff and sell stuff and the rest of it is a waste of time. they don't even know that there's time to waste other than doing those things because they don't have to unlearn anything. They don't know much yet.

Uh and that ends up being really valuable because they end up caring about the right things. And then um sophomores and juniors I have less luck with. So the sophomores are like they read a few too many blogs, they spend a little too much time on Twitter, they know a little bit too much that's not worth knowing.

Uh and then the juniors are the worst.

They've um worked at Google and Facebook and a bunch of fancy companies and they decide it's time to be anointed as a founder and so they raise a $5 million seed round and pay their buddies quarter of a million bucks a year each and uh usually, you know, run out of money halfway into it, raise some more, and then they decide not to do it because they can get a bigger job that pays better back at Big.

It's also interesting, too, with Justin. He he didn't have enough experience to realize that it was a dumb business opportunity to stream his life. But then it turned out, you know, over a decade later, some of the most popular streaming content is people just filming their entire lives.

Like he was just living 20 years in the future. Yeah. Yeah. Justin wanted to be an influencer before there was such a word, right? He wanted to be internet famous. And so what you realize in hindsight is he was trying to solve the problem he had.

And and those are the the types of freshmen that I've had the best luck with, they're scratching their own itch, right? They're living in the future. Uh they they don't really even think at first that it's a business opportunity.

You know, Mark Andre when he did the Mosaic browser when he's 21 years old, he's just trying to make the internet useful and it wasn't. And so he built what was missing. Uh, and then the seniors I've had luck with too, like um, uh, Casser Ununas at Applied Intuition. Oh, yeah. He's a little bit of luck.

I love I love him. Every time he comes on the show, it's so much fun. He's great. Yeah. And so so like the thing about Casser is he was experienced enough that he knew that what matters is building and selling and all the other stuff is window dressing.

And so, ironically, the the freshman and the seniors have the same priorities, but for different reasons.

You know, the freshman have the benefit of the beginner's mind and they don't know a bunch of stuff that gets in the way of them succeeding and then the seniors know enough to know that some of it's not important that it's Yes. And so they they focus on the stuff that matters.

And I I love working with both because with the freshman founders, you're trying to help them avoid avoidable mistakes. Whereas with somebody like Casser Ununice, you're trying to help him run up the score, you know, because like, you know, he knows what he's doing.

Uh, you know, he doesn't have to learn business 101, but um, you know, there there are other things where you could be helpful. Yeah, I even noticed that my my first my first company uh, an ad network was like very freshman mindset.

I mean, I was uh very young at the time, but it was like, get something for one price, sell it for another, and just do that over and over, and you're going to have a business.

And then my second company was like, "Oh, we need a wedge product, and we need to do this and that, and like if we're going to do this, and then that. " And then, uh, that that's a really, you know, created something complicated because maybe I had read too many uh memos on on tech Twitter or whatever.

And then third, being TBPN, it's like we just we have a daily show. We try to make it better every single day and we just do that over and over. So I think you can see that kind of freshman or senior mindset even across an entrepreneur's companies. Yeah.

And I think the other thing you guys did well I don't know you I wasn't there when it happened but I imagine that when you started it you weren't super attached to how successful it had to be.

It was like you you take a small enough risk that it you're not attached to whether the risk pays off or not and if it starts to go your way, you just do more of it.

And a lot of the a lot of the great startups that I've gotten involved with had that quality where um you know, you didn't try to think of a startup, you were just doing something that was interesting and it just kind of fed on itself and then one thing led to another. Yeah.

Who else sticks out as that freshman archetype that you've worked with in your career? Um, I'd say uh the guys at Weebi were that way. So that was a very uh that was a very uh fortuitous two hours, you know, in that coffee shop.

One one after the other, two deals done, two deals in one hour, you know, that both did really well. Just do that every day and you'll produce trillions of dollars in return.

talk to me about about uh Weebly's business, how it grew, the actual economics of that industry and then I want I want to bridge to like your take on the new crop of site builders because we've been having this debate over the lovables and the and the different companies that are playing in this space, Vzero, there's a whole bunch and we're kind of going back and forth on like is it just such a big market that everyone wins and everyone builds a huge business or is there some sort of winner or take all dynamic.

So, uh, if you could walk through the Weebly story and then kind of bridge to modern web development, I'd love to hear that story. Yeah. And the Weebly, it it may not satisfy our modern uh desires, but it's it's uh it's kind of interesting. So, these guys were about to graduate from Penn State.

Uh, and I think we invested I think I think they raised at um $650,000 at $2 million pre- money. And it was like Anderson and Iden Senit, a couple guys. Yeah. And uh th those were back in the days when Paul Graham would call you and to make sure you were going to show up at demo day, right?

At at Y because the batches be like 10 to 15 companies. And and so so I remember it's like two months after uh the money's cleared and have another site visit with them and I and I'm like, "Huh, you know, we ought to start thinking about what we're going to need to do to be ready to raise a series A.

" And I said, "So, what do you guys think we need to do to be ready to raise series A? " And they look at me like, "What are you talking about? " And I say, "Well, you know, you've raised $650,000. " And they look at me like, "I know, right?

" And I realized that like to them, $650,000, it might as well been $650 million, right? It was more money. They they they were surprised it was legal for them to have that much money. Yeah. And so they they ended up um they ended up not raising money again until many many years later from Sequoia.

And at that time I think we were like 65 times in the money on the investment. So uh I don't know that it it it gives any lessons for today's world other than just um I I've kind of I kind of make fun of my ability to predict how these things are going to turn out. And that's why I'm so founder focused, right?

I just think that that determination is just such the high order bit.

Do you do you think uh do you think venture is a easier or harder game than it was back when you could get you know invest 650k to two cap into some great founders because in some ways it's like it's much more competitive now but also the nature of there being more capital means that uh and for extra reference Weebly uh I mean I'm not sure if this is 100% right because AI overview but acquired by Block Square for $365 million in cash and stock in April 2018 18 $365 million.

That's a seed round nowadays. Oh yeah. Getting extreme. So there's no question it's gotten harder as investor, right? Um and I think even as a builder, I think there's a lot more distractions right now for the founders and there's a lot more uh sloppiness on the playing field.

And so you got to play the game that's on the field whether you're an investor or a founder. I think, you know, back in the days when um you know, Justin was and EMTT were doing uh Twitch or you know what what became Twitch or the David and those guys, Dan doing Weebly.

Uh I think it was more of a an act of rebellion to start a startup, right? The dot meltdown had happened about five years prior. You know, startups were not a popular sexy path for people. It was it was the path for people who didn't want to have a job in a normal company.

And that was, you know, the only way they could avoid it. It's incredibly trendy right now. Uh it has become like it's trendy and it's comfortable. It's tracked. Yeah.

It's com, you know, if somebody can quit their job in big tech and then maybe they're not making quite as much but but they've got a nice office and they can, like you said, hire all their their friends. I will throw out a counter to this, which is I was thinking about the Elsaundo companies and the hard tech companies.

I don't know if you've spent any time with those folks, but it that feels like, you know, Mountain View in 2008 to me where these these founders are taking extreme risk. There's not going to be a $10 billion aqua hire from some mag company for your rain cloud seeding company.

Like, if it fails, you're look, you're getting a normal job. Uh, and and and and you're not doing tons of secondary and raising a ton of money and hiring everybody. And so you really are burning more of the ships when you do one of these crazy hard tech companies.

But I don't know if you spent any time with others or you have a take on It's funny you say that. So I think it may have been the only company I invested in in 2021. Certainly in the second half was a company called Hadrien. Oh yeah. Yeah. And like I just think Chris Bower is a stud, right?

And like you know what we're describing about the the types of founders who overcome obstacles and can move the world down a different path. He's one of those. Yep.

And so, uh, but but he's a perfect illustration, right, of what you're and I mean I I don't know if 2021's the exact year, but like there were a couple years there where like you could see the toll that the business was taking on him.

Like he was working extremely hard and you could tell that it was not there was not some cushy soft landing for him. It's like either you build the thing, you get it to work and it becomes really big or you're kind of screwed. I don't know. Being a real founder in some ways is more of a curse, right?

Like most people it's just like it's not a fun job. It's kind of a [ __ ] job and it's like if people really understood and and it's but it's like you're you're called to do the thing and so you can't not do it.

So it's it it doesn't feel like you have any choice but to do it because the you know there's no way Chris isn't going to do Hrien, right? He's just too he's just too high agency and too high commit commitment to to let it fail, right?

And so yeah, you ask any any founder what the lowest point in their life is and it's probably has to do with their business, right? Maybe some family thing, but almost always they have like a specific moment where they're everything was Yeah. Z Yeah. Zooming out.

Um, I I was I was reading the uh the Caesar's Palace coup this weekend about the birth of Apollo, the private equity group, and I was thinking about how these these there's these eras in finance when there's booms like the LBO boom in the 80s, the high frequency trading boom, and then there's there's multiple venture booms.

But uh I was wondering I was trying to think about like is who who's the person like under 40 who's building the next great financial firm like there are lots of great young investors who are writing checks or building companies and there's a lot of founders.

Um but I was having my I was having trouble putting my finger on someone who's who's young and actually set on building a financial firm of some course. I don't know if anyone comes to mind for you.

I asked chatbt and the answer it gave me was Josh Kushner which is I would have bet Josh which is great it's true but also it's like he's an investor in OpenAI so I don't know if it's fair play but uh but is there anyone else that you've seen that maybe is taking a different tact in building a financial firm uh for the future like what what your advice would be to somebody who wants to actually make a career out of venture capital leopold's another good one I think yeah anyway yeah it's a good it's a good question um I haven't seen a lot you know the one way I've one way I would come at that question is to say um what is the financial product that entrepreneurs aren't getting y uh and and I think that it's probably some combination of venture capital meets project finance and so I think you have some of these that are you know in the world of Adams and bits and it it only seems like Elon Musk and Palmer Lucky and a few other guys have been able to pull them off and and you could say well that's because there aren't many of those and that I think that's true but another way to come at that might to ask uh you know is it is it a good thing that Elon had to basically bet his entire PayPal fortune to make Tesla a possibility and but for that there would be no Tesla uh because he had to bet all of his winnings on that and I think Palmer probably similarly invested a lot but he also had help with the founders fund folks who were pretty pretty you know off the beaten path at the time.

Yeah. So, so I do think that there is um there's a legitimate argument that says that a lot of our institutions that combine the worlds of atoms and bits need to be reimagined. And people say why does a venture capital do that? But I don't think venture capital as it's designed today is is tailor fit for that.

I think it's probably some type of new innovation, right? And it would be almost the opposite direction of YC. It'd be something that is more in the upstream capital markets rather than lean startups and that kind of thing. But I think I think that could be kind of interesting. I'd like to see somebody do that.

Yeah, we're starting to see a little bit of that with I mean you hear a lot about those uh hard tech rounds where it's very clear that the headline number is a mix of debt and equity and that's usually two different firms and then uh and then there's always been this question of like is there a way to bring some sort of uh like Silicon Valley technologist mindset to essentially a turnaround of a legacy company where there are some assets but there's something that the company can stand like that was what Chris Power at uh at Hrien was working on before he was doing a search fund.

Yeah. Yeah. And it's and it's interesting, right?

There there are some people that I looked to um another guy would be the the Stefan Bonsel of Madna, you know, like you have someies like like one company I was involved with back in the day was Octa and when you saw Octa, you're like, "Okay, these guys are from Salesforce. They're really smart.

They're saying there's going to be lots of cloud apps. They're going to need identity management. " And I was like, "Sounds good to me. " Right? Like, but you you're like, "That's a very plausible future. " And they're the perfect guys to do it.

There are other futures that are going to take a lot longer to happen and much more divergent from the present. I think that MADNA was that way, right? 10 years and$5 billion before they ship a product. Uh SpaceX is that way, Tesla's that way.

And so um to me the interesting question becomes can you come up with uh technical risk takeout gates where you'd have funding that follows the initial funding and then you don't have to have somebody like Elon Musk be a miraculous fundraiser going throughout the world trying to find money wherever it exists.

People forget that's how it was 10 years ago, right? Even after they went public. And so I I'd like to see the capital markets part part of what was good about seed investing back when I was doing it at first or Josh was that we were doing something that entrepreneurs needed that they weren't getting.

And so to me most of the good answers in financial innovation have something to do with that. You have somebody who would make great productive use of capital who's not getting it somehow and the the the markets have a gap in their ability to supply that capital in that way.

Well, I think in the case of Hrien, isn't aren't the capital markets working quite well in the sense that he raised a bunch of risk capital and then was able to derisk certain customer relationships and process and then now he can access more traditional, you know, forms of of debt. For sure.

And and I imagine if uh you know, the American Dynamism team at A16Z was watching this, they'd say, "Hey, Maples, what you just described, that's what we're doing. " Uh, and there's there's a lot of truth to that. So, you know, I'm not sure Chris could have done Hrien 10 years prior. Yeah.

And so, I think that, you know, there were some changes that were happening that were creating the conditions, but I but I'd still like to see more, you know, like, for example, I I personally invested in Boom Supersonic because I think that Blake is just wildly ambitious.

We just need more people like that who you know we we need we need to have permissionbased innovation in the world of uh atoms and not just bits and the more we can do that I think the better. Yeah. And so that's that's what I think's missing. Yeah.

I mean at a high level it feels like entrepreneurs are pretty catered to on the capital market side. Like there is a there is dollars at every scale every order of magnitude.

Uh, I mean, we're Yeah, I don't know any hundred billion dollar rounds and then people can snap their fingers on axe and raise 100K in the DMs if they need to. Yeah. I don't think I've met I've not I haven't met an incredible founder in the last 5 years.

Somebody that, you know, just personally I feel is incredible that hasn't been able to raise. Yeah. That has that part of their origin story. Like they might have other struggles.

Oh yeah, we got in a lawsuit or you know, oh, we, you know, we had to pivot entirely because some company steamrolled us or we misanticipated the progress of some underlying technology. But the the the the oh yeah, we couldn't raise for five years. Uh that's not really a story right now.

Maybe the the bigger question to answer in just the broader Silicon Valley is like how do you get more of those those freshmen, those weird thinkers, those people who are going to go and do go from group on to building supersonic planes. Uh that's a crazy move. Yeah.

How do you get people that aren't just seeking status? People less base hits, more swing for the fences. Yeah.

And by the way, I think part of the reason that the the people who succeed at it do is like I think Elon's great superpower among many is that he only pursues business ideas where he existentially refuses to fail. And so like Elon never starts a company and says, "Well, I hope it works out. Easy come, easy go.

If it doesn't, you know, he's like, I'm I'm only going to tackle problems where I will never freaking back down ever, no matter what. " Yep. And so like if you say, "Hey, getting to Mars is the most important accomplishment I want to achieve in my life. " You don't sit there and handicap the odds.

You're like hand solo, right, in an asteroid. You're like, "Don't tell me the odds, right? You're like th this is worth pursuing even if the odds are against me.

" And and that has a way of impacting the odds, right, of of your ability to succeed where others can't because if if you'll even countenance the possibility of failure, it changes the equation, right? It changes the the whole risk that you take.

Um, where do you where do you think we are on the on the AI hype cycle, the Gartner hype cycle, peak of inflated expectations, or are we headed for the uh the trough of disillusionment? Oh man, probably all the above.

uh you know um here's a here's what I've been thinking a lot about is um in the era of uh the microprocessors you had mass computation and then the internet you had mass connectivity and what got commoditized with micro age was the transistor and then you had the packet get commoditized and so what I'm interested in is what happens in a world where we have mass cognition and where you know the inference unit co you know becomes commodity because right now everybody's talking about the inputs, Nvidia chips, the hyperscaler models, do we need more energy and all those things are valuable, but it's just like in the early days of the PC era, everybody talked about the hardware.

People didn't co talk about software until much later. And so I think what's interesting to me is to ask not what's happening, but what is going to become scarce given all the stuff that's happening. Uh, you know, what will the new scarcity be? Um, I don't think that's been determined yet.

So I that that gives me a lot of optimism, but it's not the latest model dujour and it's not the latest chip dujour. It's not the it's not the latest scaling factor that makes things more abundant. It's the thing that becomes rate limited in a world that where it's a given that the new abundance happens.

And so that's that's what I'm looking for these days. So you know in a world where microprocessing is free, software becomes scarce because you have to make all these machines useful that are everywhere.

And in a world where the packet is free, what becomes valuable is the owners of these networks that aggregate attention and users and create network effects and become the systems of record. And so, okay, what will be the monopoly AI companies in a world where cognition is abundant?

I don't think we know yet, but that but but to me that is the question that is really interesting. That is that is 100% the question. That is that is fantastic. I love that. I'm going to be digging into that for years.

That's a fantastic he wrote the microcosm and then the teleosm like I wish George Gilder would write the cogntocosm right and talk about like what's going to be uh the new scarcity that complements the new abundance used to be that uh f you know that we didn't have enough Reddit threads on niche topics and now now the LLMs will just hallucinate one for you.

It's crazy. Uh anyway, we we're we're keeping our next guest waiting but this was fantastic. We we'd love for you to hop back on and and continue the conversation. I really enjoyed this. I hope you hope you have a good trip to the coffee shop later.

Hopefully you meet the next Justin Justin and the Weebly founders deals out of it. I could get another twofer in the next three months. I'd be happy. We're rooting for you. Hopefully hopefully in a two cap again. Yeah. Yeah. Here's Yeah. Bring back the two cap. Bring back the two cap. Yeah. It's going to be my new M.

Yeah. Two two twofur in one in two hours and a two cap. Incredible. Well, thanks so much for hopping on, Mike. We'll talk to you soon. Cheers, Mike. Have a good one. Talk to you soon. Let me tell you about adquick. com. Out of home advertising