Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate (Part 11)

By guest authors Irina Patterson and Candice Arnold

Irina: So, you really don’t have a lot of interest in the niche markets?

Mike: This is another view that we have that’s a little bit subtle, but we don’t talk in terms of available markets. The reason is when I can analyze the total available market, the market’s too obvious, and if the market’s obvious, then big companies are probably already going after it.

So, we like to talk about the total potential market. To me, total potential markets are like potential energy in physics. I remember when I was a kid, studying early physics, they’d say, Okay, an object has potential energy that gets converted to mechanical energy.

For example, if you hold a brick in the air, it has more potential energy, and if you drop the brick and it hits the ground, the potential energy is converted to mechanical energy. So to me, the subtlety of big markets is as an investor, you’ve got to say, The market is ambiguous, but it’s potentially huge.

I think that that’s the hardest challenge for us as investors, evaluating a market’s potential. All the other things that we look for are pretty easy to spot early on, but assessing the market’s potential is really, really hard. I think it’s as much black art as it is science.

Irina: What level of experience do entrepreneurs need to have?

Mike: There’s a trade-off that we look for. I would say that if you had to rank what we look for in people, the first thing that we look for is authenticity. We like somebody where when you look at that person, you say, I can’t imagine that that person would start any company but this company. To us, the term serial entrepreneur is not always a positive virtue. We like people who say to us, This is the only company I ever want to do.

The second thing that we look for is completeness in the team. Experience and completeness aren’t necessarily the same thing. A complete team has a combination of business and technical vision and business and technical execution. If you have all four of those bases covered, the probability that you will be stopped by something where you had a blind spot goes down because you sort of cover the whole waterfront of expertise needed to go to market, get customers, and build product.

And then the third thing that we look for is how experienced is the team. How many times have they done before and that kind of thing. But it’s funny, those first two things matter to us more. Execution can be hired; vision can’t. So, it’s that authentic voice and a team that meshes well together in a special way . . . that’s the stuff you can’t hire and fix later. If you get it right when the company starts, then you have a better chance, in our view.

This segment is part 11 in the series : Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate
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