Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate (Part 13)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you think about exit strategy at all when you’re investing?

Mike: Not really. We think, Who might buy this company someday? Could it be public someday? But the thing that we’ve learned is that exit’s going to be so far away that what you believe is true today about exits will be fundamentally different in the future.

Have you ever read a book called “Fooled By Randomness”? It’s one of my favorite books. One of the things I learned from that book is, we like to make fun of people who are too confident in their knowledge of things.

The tools that we use to invest are not tools for figuring out what’s going to happen. We try to use tools to cope with our own ignorance. We kind of start with the premise that the world is a really chaotic, random place that’s hard to understand, and that we’re trying to get our bearings just a little bit in what’s going to happen. Really, we’re just hoping that if the company’s going to be explosive, the exits will take care of themselves.

Irina: Do you know Basil Peters, a Canadian angel? He’s written a book called Early Exits. His philosophy is that early exits are good for entrepreneurs and good for angels.

Mike: It sort of depends on what you’re passionate about. He may – I don’t know what his returns have been – but I would not be able to get excited about, I’m investing in this company so it can have an early exit where I’d get a quick return. That’s not what I’m in it for. I want to find the Thunder Lizard companies. That’s why I come to work. I want to invest in the companies that turn the news business upside down or the textbook business upside down or IT management upside down. I want to find the next Godzilla.

Irina: His premise is that entrepreneurs are great at inventing, but big enterprises are great at scaling.

Mike: He might be right. Systemically, he might be on to something that generates good returns and is a robust way of looking at things. You know Steve Blank voices similar thoughts.

Irina: What is your biggest investment to date?

Mike: Probably the one that people talk about the most is Twitter. The one that’s had the best realized returns would be probably Solar Winds. You know, the other ones that people talk about a lot are Chegg, which is the textbook rental site, Reputation Defender, Spice Works, ModCloth, and then, of course, Digg. To be honest, we’ve been pretty lucky. We had a good run of beginners’ luck for sure.

This segment is part 13 in the series : Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate
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