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Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate (Part 1)

Posted on Tuesday, Jul 13th 2010

By guest authors Irina Patterson and Candice Arnold

This is the twelfth interview in our series on financing for entrepreneurs. I am talking to Mike Maples, managing partner of Floodgate, a fund with the superangel approach that bridges the gap between initial seed money raised from traditional angel investors and traditional VCs, and aims to find the fifteen most valuable companies that are created in any given year.

Irina: Hi, Mike. Let’s talk briefly about your background.

Mike: I went to Stanford, undergraduate in engineering, worked at Silicon Graphics in the early 1990s, went to Harvard Business School, and lived in Austin, Texas, for about ten years. I was involved with two startups. One is a company called Tivoli Systems, which went public and was later acquired by IBM. The other company is one that I cofounded and was called Motive; it went public in 2004 and was acquired by Alcatel-Lucent.

In 2005, I went back to Silicon Valley and started angel investing. In 2006, I raised my first fund, a little over $10 million. In 2008, I raised fund two, $35 million. So, since early 2005, I’ve been focusing full-time on investing and institutionalizing this idea of superangel investing.

Floodgate is a new fund. It was launched in late March 2010. It’s just two of us, me and Ann Miura-ko.

Irina: Could you explain the superangel concept?

Mike: In early 2005, I spent time in two venture firms, nine months at Foundation Capital and nine months at August Capital.

While I was at those firms, I noticed that there was a revolution occurring in the costs required for a company to get started. I saw things like open source software and offshore labor and search engine marketing and new types of cloud-based Web services that allowed you to variablize your costs.

That was fundamentally different from when I was an entrepreneur. Back when I started Motive, you had to go buy Oracle servers running on Solaris hosted Exodus, and that cost a lot of money.

So, there was just a basic hurdle threshold to go to market. But what I was finding was you had companies like Digg, which was one of my early investments, where Kevin Rose started it for $1,500 over the weekend. Everywhere I looked, there were companies achieving traction without much money.

So, I believed, at the time, that there was a gap between angel investing, which normally had a hard time raising more than $250,000, and venture investing, which typically, would not invest in a company for less than $5 million. As fund sizes got bigger, that became even more extreme.

The idea of superangel investing was to span that gap, to span the gap between angels and venture firms, and to span it at a time when there were more companies than ever that had funding requirements in that gap. So I started experimenting with that a little bit with my own money, but then some of my early investments had some beginner’s luck and I was able to raise a fund.

This segment is part 1 in the series : Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate
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[…] some angel investors are looking for exactly the same thing as what VCs are looking for. Mike Maples calls it Thunder Lizard Hunting. In other words, these are angels looking for billion dollar opportunities as […]

Strategy Roundtable: Professional Investors Do Not Invest In $20 Million Markets | Tech News Ninja Thursday, October 14, 2010 at 3:21 PM PT

[…] some angel investors are looking for exactly the same thing as what VCs are looking for. Mike Maples calls it Thunder Lizard Hunting. In other words, these are angels looking for billion dollar opportunities as well. But there […]

Strategy Roundtable: Professional Investors Do Not Invest In $20 Million Markets Thursday, October 14, 2010 at 3:26 PM PT