Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate (Part 12)

By guest authors Irina Patterson and Candice Arnold

Irina: So, it’s not necessary that the company had on the team, previous CEO experience, or any senior executive experience?

Mike: I think it’s good to have, but sometimes I find that to be overrated.

Irina: What do you do with the deals that you don’t invest in or refer to anybody else?

Mike: It’s really hard because what a lot of people say is, Can you make some referrals? Usually, that doesn’t work because what happens is they say, Well, are you going to invest? And I say, Well, no, but I think that this team would like to meet with you. And they say, Why are you referring me a deal and you’re not interested in it?

So, usually, it ends up hurting the company more than it helps the company. It could be tricky. I think that the thing that I owe the companies, more than anything else, is just the truth with no tricks about why we can’t invest.

Maybe it’s something we think is wrong with the company, maybe it’s something we think is wrong with the team, maybe it’s something we think is wrong with the market or it might be that we just didn’t have time to evaluate the idea.

But we try, no matter what, to leave it on pretty good terms and have the entrepreneur come away from the experience with this feeling that we told the truth with no tricks.

Irina: Do you have any sector preferences?

Mike: Not really. We like companies in business and consumer markets. We haven’t done a lot of hardware investments, but we’ve done some. Fundamentally, our preferences show us that you’re going to be one of those fifteen if it goes well.

We’ve done some e-commerce, we’ve done some consumer media, we’ve done some subscription-based consumer services, we’ve done IT software, we’ve done cloud services. We actually have a broad range of investments. I think our goal always fundamentally comes back to, can this be one of those fifteen?

Irina: What is your preferred investment type? Preferred shares?

Mike: Yes. And we try to be very entrepreneur friendly in our terms. When we give an entrepreneur a term sheet, we usually say two things. We say, First of all, I’ll be very surprised if your lawyers don’t breathe a sigh of relief because our terms are going to be very straightforward, nothing fancy.

And then the second thing is, I bet you that as soon as you get this term sheet, you’re going to be the bottleneck because once we get a term sheet out, we’re ready to move fast. And usually it’s the entrepreneur getting busy or not having all of their diligence items ready that slows him or her down.

Our terms tend to be very straightforward. Straight preferred shares, none of these multiple times participation. As an investor, you either care about building the company with the entrepreneur or manipulating the cap table.

To us, if it’s one of those awesome companies, who cares about how fancy the terms are?

This segment is part 12 in the series : Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate
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