Floodgate: An Entrepreneurial VC

By Peter Ziebelman, Amadeus Orleans
2019 | Case No. E644 | Length 16 pgs.

Mike Maples Jr. founded the micro-VC firm Floodgate in 2006, after a successful career as an entrepreneur with two startup IPOs under his belt. At the time, he had identified a group of overlooked founders in Silicon Valley: those who wanted to raise only $1 million or less, a growing group since costs involved in launching a company had been declining significantly as a result of technological advancements and innovative management approach, such as “lean startup”. In the following decade, he invested in a stream of successful companies, including Twitter, Digg, Chegg, Twitch.tv, Demandforce and Weebly.

In the mid-2010s, however, the Micro-VC category, which Maples had helped create, was quickly becoming crowded. Additionally, the sources for early-stage funding multiplied: angel investors, “super-angels”, crowdfunding platforms and traditional later stage VCs expanding into seed investing turned into competitors. The combination of intense competition and high availability of investable funds had one natural consequence: founders could command higher valuations and choose from many potential investors – it was an entrepreneurs’ market.

Determined to preserve his position as a thought-leader and successful investor in Silicon Valley, Maples set off to understand how he could, once more, positively influence the VC industry through an entrepreneurial approach. Based on deep analysis of past investments, he developed a suite of frameworks to help entrepreneurs navigate their companies’ trajectories at a time when getting to the next funding round and commanding ever-richer valuations became an obsession in the entrepreneurial community.

Learning Objective

The teaching objective of the case is to give students an overview of the challenges faced by a micro-VC investor in 2019, in the face of growing competition from other sources of early-stage funding and increasing power in the hands of entrepreneurs regarding negotiations with investors.

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