If you’re the founder of a new Internet or mobile startup and you’re looking for Silicon Valley investors who can contribute some star power and hands-on guidance along with their capital, sooner or later you’ll probably send your business plan to Floodgate Fund. Headed by Mike Maples Jr. and Ann Miura-Ko, the Palo Alto, CA-based firm has $74 million under management, which makes it more super than a super angel fund but much smaller than most traditional venture funds; “micro VC” is probably the most used and most accurate label for this category, which includes firms like First Round Capital, Founder Collective, Felicis Ventures, and Harrison Metal. Floodgate’s investments, which range from $150,000 to $1 million, are also in the middle range for early stage startups—-not enough by itself to get most companies off to a secure start, but enough to bridge the gap between angel funding and a more serious Series A venture round.
Maples’ investments in Silicon Valley wonders like Chegg, Twitter, and Ngmoco (acquired by DeNA last fall for $400 million) catapulted him to number 17 on this year’s Forbes Midas List, the publication’s lineup of influential tech investors. Maples tends to portray his investing success as one big lucky break. And indeed, there’s some truth to that. His background is in business software rather than consumer-facing Internet services—he worked at Silicon Graphics and Tivoli Systems before co-founding Austin, TX-based broadband software company Motive in 1997—and he got into Twitter mainly because he’d invested in Evan William’s previous company Odeo, which folded. But he has also paid his dues, working at August Capital and Foundation Capital before embarking on his own investing career.
Maples’ firm was known until March 2010 simply as Maples Investments, but it rebranded itself that month as part of a bid to become more of a fixture in the Valley, where it regularly invests alongside other micro VC funds, angel investors, and even traditional Sand Hill Road firms. The change also reflected the fact that there was more to the firm than Maples. Miura-Ko, who got her PhD in computer science from Stanford University and still lectures at the School of Engineering, joined as a co-founding partner in 2008. She’s a Yalie and a former McKinsey consultant who learned the investing ropes at Waltham, MA-based Charles River Ventures; Forbes has called her “the most powerful woman in startups.”
I’ve profiled so many of the companies that Floodgate has funded—Chegg, Okta, PayNearMe, Stipple, TaskRabbit, and Vook, to name a few—that I figured it was time to meet Maples and Miura-Ko in person and find out how they think. So back in April, I spent a couple of hours with them at the firm’s eco-conscious new offices on Ramona Street in downtown Palo Alto. I’ve boiled down my notes on the conversation into the abridged Q&A below. We covered so much ground that I’m going to break the interview into two parts: today’s part covers Floodgate’s picture of the startup world today and how the firm singles out promising entrepreneurs and business ideas. Part 2, coming in a few days, looks at specific startup trends such as incubators.
Xconomy: Let’s start at the beginning. What’s Floodgate’s basic investing philosophy?
Mike Maples: Sometimes it helps to start even before the beginning. Ann and I have this really strong belief system that there is a fundamental change underway in the way innovation is happening. People talk about “lean startups” and people talk about the low cost of going to market, but we think it’s even more fundamental than that. We think the Internet has a constellation of things that have developed around it—offshore labor, search engine marketing, ubiquitous broadband penetration, variabilized-cost Web servers—that have fundamentally democratized the process of innovation. So what it costs to prove or disprove an idea has been fundamentally altered. When you project forward what this really means, we think it’s as important as Eli Whitney and the cotton gin, or Frederick Winslow Taylor and the birth of manufacturing, or Alfred Sloan and the invention of the modern corporation with General Motors. Our view is that the people who understand this shift are going to win in the next 20 to 25 years. That is not just a statement about entrepreneurs. That is a statement about the people who capitalize their companies.
Ann Miura-Ko: That is a trend I saw coming out of Stanford, where I was doing a PhD [starting] in 2003. When I first got there, there were students starting companies based on blade servers and open source software. It was fairly expensive. But by 2007 and 2008, I had students who were leveraging Amazon Web Services and other increasingly commoditized technologies. You literally had kids starting companies out of their dorm rooms. Before that, it was figurative but not literal. This commoditization of entrepreneurship is truly profound. Now any undergraduate at Stanford or any other university can
