Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate (Part 10)

By guest authors Irina Patterson and Candice Arnold

Irina: At what stage of a company’s development do you usually invest? Would you invest in a company that was just an idea on paper?

Mike: It varies quite a bit. We’ve funded PowerPoint pitches before, but generally speaking we don’t do that. Our basic belief is that if you consider the fact that the costs to go to market have gone way down, and the costs to experiment have collapsed to near zero, an entrepreneur should be able to demonstrate a series of experiments that they’ve already run. If it doesn’t cost anything to experiment, there’s no point in showing up to an investor with just an idea.

An entrepreneur will come to me often and say, I want to have coffee with you and talk about my idea, and I want to know whether you think it’s a good idea.

And what I always say is that, My opinion is interesting but irrelevant because I’m not a customer. The best way that we can use each other’s time is for you to tell me what experiments you have run and intend to run with customers. What facts have you gathered outside the building?

My vision vs. another guy’s vision doesn’t matter. It’s all about the facts. And since the cost of gathering facts is so low, if an entrepreneur comes without any facts, my tendency is to say, You know, you just haven’t done the work, and if you’re not passionate about doing the work, why should I passionate about funding you?

We’d like to see experimental evidence that customers will value the idea. But the reason is more subtle. We’re not necessarily saying that we only invest in things that have traction. What we’re saying is that we invest in entrepreneurs who know how to experiment and who are able to demonstrate that knowledge.

Irina: What is your view on the total available market (TAM) or total accessible market? What do you think about niche markets?

Mike: Our view is that it’s important to have massively huge markets and that without a great market, a startup has almost no chance of being great. That’s hard for some people to hear, but we just fundamentally believe that when a great team meets a bad market, the market wins. Funnily enough, sometimes when a lousy team meets a great market, the market doesn’t win and the company does really well.

You’ve probably seen some of those startups that had greatness thrust upon them, and you sort of wonder how could these bozos have made such a killing? When a great team meets a great market, that’s when everything goes right.

This segment is part 10 in the series : Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate
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