Mike Maples

Fund size is your strategy because the power law is a curve, not a slogan: Pareto compounds, so 4% of deals yield 64% of returns — in a 25-investment fund, the single best deal must return 64% of everything. Maples’ pole-vault image: fund size is “the height of the bar that you set that you promised to jump over.” A sub-$100M seed fund works only if it’s “way less than 100” — think $10M writing 100K checks.

Seed is “hard but not complicated”: 5% of first checks at 100x cash-on-cash plus 10-15% at 20x gets you a 10x fund, and the loss ratio is roughly the same between a 3x and a 10x fund — only the magnitude of winners differs. Price therefore matters despite the fashionable “pay any price for a great company” line: at a 25 post entry with ~half dilution, the exit needs to be $5B. “I’ve studied venture returns for the last 50 years and the physics of what a good fund looks like has not changed.”

Follow-on capital is closer to index investing than seed funds admit: Floodgate’s biggest winners included Demandforce, Twitch, Lyft and Okta, with several later followed by major firms. Maples treats top-firm participation as a strong signal and gave one partner, Iris Choy, sole accountability for the 30% reserve pool. His warning shot: if LPs tracked follow-on returns against first-check returns, “there’d be pitchforks and revolts in the street.”

Seed funds are better positioned than multistage to sell — “by a wide margin” — because a $100-200M secondary sale moves a seed fund like an IPO but would neither move a16z’s fund nor survive the signaling. Floodgate’s 2015 “IQ test” Post-it: sell Lyft at ~$25/share (private marks then above today’s value), returning the entire fund. The move is to pre-agree it with the founder — and by round close “everybody becomes pigs” and the founder is begging you to sell more.

From deep-diving 100-baggers of the last 20 years (~100 exited, ~100 not), founder-future-fit is often the most discernible early signal, alongside insight and inflection — Zoom began as consumer “likely SaaSbee” with no obvious insight, but Eric Yuan had lived video conferencing at WebEx/Cisco for a decade. Floodgate’s worst errors were “failures of imagination” — passing Airbnb and Datadog — not bad follow-ons; the $500K minimum check also cost them 11 Labs at 25, “probably the best company coming out of Europe,” now $3B.

Temperament is the current edge: Maples made exactly one investment in all of 2021 (Hadrian) while everyone swung, and Ann wrote 750K into Lyft at $5.5M post in fetal-position 2009 (~250x). Buffett’s no-called-strikes framing governs: “if you’re not finding inefficiencies in the game you ought to be asking yourself what am I doing.” He thinks venture has too much money, exits are cyclical (half of profits land in 18-24-month windows every ~15 years), and multistage funds raised on 2020-22 exit comps that “just aren’t going to happen” again.

2025 calls: Bitcoin is “the thing hidden in plain sight” — a world exists where it’s worth more than gold with a financial ecosystem built on its rails; his year-end guess is 130 versus Reed Hoffman’s 200. SpaceX is his 2024 company of the year and he doesn’t “have to squint too hard” to see it becoming the most valuable company in the world as the platform supplier for space. His other 2024 awards were 20VC as fund of the year after its $400M raise, Elon as founder of the year, and Loom as exit of the year at $975M.

🔗 Original source & video: Mike Maples: Three Frameworks to Evaluate Startups and Founders | E1242