Angel Chronicles: Mike Maples - the man who taught Tim Ferriss how to invest

July 21, 2023
Angel investors

In this week's edition of Angel Chronicles we look into the angel investing strategies and portfolio of the man who taught world-famous podcaster and author, Tim Ferriss, how to invest.

Meet Mike Maples.

Who is Mike Maples?

His portfolio reads like a who's who of disruptive tech giants, with early investments in companies that have reshaped industries and become household names. Some of his notable investments include Twitter, SpaceX, Lyft, Slack, Nest, and TaskRabbit.

But it's not just about the big-name successes. He sees potential where others see uncertainty. His strategic investments in lesser-known companies have turned them into billion-dollar unicorns, leaving many in awe of his foresight.

Mike Maples Jr. serves on ten boards and advisory roles, including GuideOn's Board of Directors, Mixmax, and Keepsafe. Along with his personal investments in 10 companies, he's also invested in more than 50 companies with Floodgate, which include CommonStock, Neo. Tax, and Alamanac.

Redefining how venture capital is done

Mike made a pivotal decision to reinvent how his firm, Floodgate, sought investment opportunities. Recognizing the growing competition in the field, he knew he had to find a new approach to stand out among the 2,000 seed funds that had emerged. Instead of competing directly, he chose to radically shift his strategy, questioning the traditional model of finding startups through pitches and instead exploring a different way Floodgate could identify promising startups.

Although risky, Mike aimed to predict and establish relationships with future founders even before they started their ventures. He dedicated 70% of his time to building relationships with what he called "prime movers," potential startup founders, and invested in the belief that this new strategy could lead to success.

While the long-term outcome is yet to be fully realized, initial indicators suggest that this reinvention may yield positive results. He emphasizes that the only way to win big is to be prepared to be wrong, as deviating from the consensus carries the potential for both failure and success. He's a strong believer in that those who break away from conventional paths have the opportunity to excel.

One investment that seemed like a bad idea, but turned out to be Mike’s biggest exit

In one of his conversations with Tim Ferriss, Mike shared that 93% of their exit profits have come from startups that went through mind-boggling pivots. These companies took a U-turn on their original ideas and ended up hitting the jackpot, such as Cruise.

The mastermind behind Cruise is Kyle Vogt, the genius who previously rocked the tech world with Twitch. Mike's initial reaction to Kyle's new venture was, well, let's just say not entirely enthusiastic. Kyle wanted to create a self-driving roof rack.

Naturally, Mike raised an eyebrow. He warned Kyle that he'd be up against behemoth car companies with concentrated buying power and tons of competition.

Fast forward a few months, and Kyle returns with a revamped plan. He tells Mike, "Okay, scratch the roof rack. I'm going to make the Nissan Leaf self-driving."

Mike's initial doubts kick in again as he envisions Kyle battling it out with the likes of Uber, Lyft, Tesla—you name it. But then, it hits him: Kyle had previously made Mike a staggering 84 times his investment on Twitch.

He decides to take the leap of faith and invest in Cruise, even though his fellow investors weren't exactly sold on the idea. As it turns out, Mike's intuition was spot-on. Six months later, Cruise got acquired by General Motors for over a billion bucks, and two new partners at Floodgate (Ryan and Arjun) sheepishly admitted that they should've backed the Cruise deal.

The exciting part is that at Floodgate, they don't rely on voting systems or spreadsheets. They believe in the power of love—well, love for ideas and founders, to be precise. They call it "super early-stage love conquers all." It's like a romantic comedy, but with startups!

His angel investing portfolio

  • Pulse
  • Mixmax
  • Stonks
  • Roboflow
  • Waitroom
  • OhmConnect
  • Dispatchr
  • Zeplin
  • Outreach

Mike Maples' advice to founders

  • Give power to the experts, and decentralize decision-making.
  • Processes are important, but flexibility is key. Have a plan, but be open to adjustments.
  • Post-audits are crucial to learn from successes and failures and continuously improve.
  • Development is a three-legged stool: quality, function, and schedule. Choose function or schedule, but the quality is non-negotiable.
  • Management should trust teams and give them autonomy. No micromanagement!
  • Dedication is essential. Be committed to your team and goals, and be willing to go the extra mile.
  • Hiring is crucial. Look for people who excel at what they do and are a great fit for the team.

His best tips to investors

Mike references Warren Buffet's famous baseball analogy, which advices investing only in your "circle of competence." However, unlike baseball, there are no called strikes in investing. In the VC world, this translates to exploring a few funds to identify a consistently performing strategy and gradually adapting and enhancing that strategy over time based on your own unique "circle of competence."

  • Adopt an offensive approach: Make investments when you have a competitive edge. Firstly, get in early, ahead of the crowd's interest. Secondly, leverage exclusive pro-rata rights that only you possess. Lastly, capitalize on unique knowledge that sets you apart.
  • Respect the market: Many VCs tend to overestimate their knowledge due to their familiarity with founders or understanding of a company's thesis. However, in the majority of cases, the market's judgment prevails.
  • Prioritize solving founders' problems: The key to building an exceptional fund lies in addressing the unmet needs of entrepreneurs. Floodgate's approach is never dictated by what others are doing, but rather by what entrepreneurs wish other VCs would do.

Mike's journey shows that timing is everything in the tech industry, and backing entrepreneurs with bold ideas is essential for growth. Maples has left his mark in the industry as a model for all investors and tech entrepreneurs and will undoubtedly continue inspiring the tech industry to achieve greater heights.

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