Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: Who do you think will come and fill this $6 million to $8 million gap?

Mike: It’s a good question. I guess you could argue that as the gap widens, you could even segment the gap itself.

In theory, you could say that some investor groups should be doing investments between $250,000 and $2 million, and then perhaps other groups should be doing investments between $2 million and $5 million.

I think that firms such as Floodgate, which is my firm, and then First Round Capital, with Josh Kopelman and his team, I think that we’re filling that first segment of the gap. And increasingly, I see Union Square Ventures filling the $2 million to $5 million part of the gap. Once you raise more money than that, you’re just doing a typical VC series A.

Irina: What about syndication? Does syndication help?

Mike: Yes. I think that’s a big part of how we think about things, and I think that there are two ways we look at it. First of all, we try to be lovers and not fighters. We tend to believe that our segment of investing is underserved and that we’re better off cooperating in the vast majority of cases.

One way that we syndicate – I call it the “Ocean’s Eleven” approach. If you ever saw the movie “Ocean’s Eleven,” you’ve got George Clooney, who’s the ringleader, and then you’ve got the guy who can blow up safes and the guy who can pick locks and the guy who’s the acrobat, all these different talented people.

Similarly, we’ll go to an entrepreneur and we’ll say, Okay, you want to raise $1 million. We’ll put in $500,000 to $750,000, and why don’t we create the dream team group of angel investors and everybody who specializes in one aspect that matters to your company. And we’ll go get those people and they’ll invest with us, but we’ll lead the round. We do that quite often and it seems to work for us. The other approach that we’ll take quite often is to syndicate with the other superangel firms. For example, we’ll very often syndicate with First Round Capital or with Baseline, and we see eye to eye on many issues so they’ve been really good partners.

Irina: Let’s talk about Floodgate. Is this a regional fund?

Mike: I would say for the most part it is. If we step back for a second . . . first of all, the name Floodgate, the idea is that we’re at the headwaters of the capitalist system but that we’re not just trying to make small investments in companies with small outcomes.

We’re trying to find the fifteen special companies of the year that will be worth more than $500 million. The idea is that we’re hoping to help those companies open the floodgates to these massive wins. Our strategy is to find the fifteen most valuable companies that get created in any given year.

The vast majority of those companies, it turns out, come from Silicon Valley. We need to be close to the companies that we work with, and since a great percentage of those great companies come from the Valley, we tend to focus very heavily on that region.

Since I came from Austin, Texas, we occasionally invest in Austin-based companies as well, but our primary focus is here.

This segment is part 3 in the series : Seed Capital From Angel Investors: Mike Maples, Founder And Managing Partner, Floodgate
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