Mike Maples of Floodgate at Venture shift 2013

1. Mike Maples, Jr
(@m2jr)
July 8, 2013

2. Thunder Lizards

9. Why aren’t more people trying
to build Thunderlizards?
Why aren’t more seed funds
focused on finding them?

10. Exponential Entrepreneurship

11. Part 1: Two Basic Laws…

12. Law #1: Moore’s Law
Computing Performance doubles at the
same price every 18 months

13. Moore’s Law: What It Means
• Animates the “magic” of
the tech industry
• Asymmetric weapon of
the startup

14. Moore’s Law and Exponential Companies
PC
Client/
Server
Internet
Social
Networking
PC
Client/S
erver
Internet
Social
Networking

15. Law #2: The Power Law
The biggest outcome is bigger than all of
the others combined, and so on…

16. The Power Law in Practice
• 10,000-20,000 companies will be funded by
Angels
• 1,000-2,000 will get VC funding
• 50-100 “won’t suck” (exit > $50M)
• 10 +/- 5 will be special (exit > $500M)
• The best company in a given year will usually
be more valuable than all other 9,999
companies combined

17. The Power Law: What It Means
Outcomes do not follow
a “normal” distribution
…they are governed by
exceptionalism
•Maples Angel
•Maples Fund I
•Y Combinator
•Exits in a given year

18. Merging the laws
Can I use the asymmetric power of Moore’s
Law to create one one of the ten best
companies of the year?

19. Part 2: Exponential reasoning vs
linear reasoning

20. We are hardwired to think linearly
• Linear thinking is intuitive
• Exponential thinking is not

21. Exponential
Reasoning
E=mc2
Intuitive
Reasoning
F=ma
Intuitive, tangible Counterintuitive, abstract
Observable Experiment Thought Experiment

22. Exponential Entrepreneurs and First Principles
• Reasoning by analogy
– Copy what others do, but with slight variations
– Characteristic of linear thinking
– Gets us through the day
– Start with a tangible idea
• Reasoning by first principles
– Boil things down to their fundamental truths and reason up
from there
– Used to figure out things that are counter-intuitive, like
quantum mechanics
– Start with a thought experiment
– Key is to solicit negative feedback relative to the first principles

23. Reasoning by Analogy: Example 1
“Case method” of analysis
(aka “pattern matching”)

24. Reasoning by Analogy: Example 2
Lean Startup / Customer
Development “Religion”

25. Reasoning by Analogy: Example 3
Companies by analogy
(ex “we are Instagram for Google Glass.”)

26. First Principles Reasoning: Bill Gates
Computers have always
been expensive
…but someday they will
be cheap
…which means software
will become the valuable
resource

27. Diagnostic Test #1
“Most people believe in X. But
the truth is NOT X.”

28. First Principles Reasoning: Evan Williams
Millions of people write blogs
Micro-blogging is super easy
What if tens of millions create
micro-blogs?

29. Diagnostic Test #2
What is valuable?
What is
nobody else
doing?
What can I
do?
What valuable company is nobody building?

30. First Principles Reasoning: Elon Musk
Cost of rocket is huge
Cost of fuel is small (.3% of
rocket)
100x improvement in cost of
space travel if you could reuse
the rocket

31. Diagnostic Test #3
What is your big “secret?”

32. Recommended Viewing
http://www.ted.com/talks/elon_musk_the_mind_behind_tesla_spacex_solarcity.html

33. Part 3: Exponential outcomes require
a fundamental advantage

34. The Traditional View of Capitalism
• Capitalism is a system of
perfect competition

35. The Broader View of Capitalism
• “True” capitalism and
competition are opposities

36. “Gerry’s Law” of Capitalism

37. “Gerry’s Law” of Capitalism
“Don’t be the best. Be the only.”

38. Fundamental Advantages
• Perfect competition is not perfect
• Can it transcend competition if it works?
• At least 10x better in some area
• Distribution strategy often flows directly
from the advantage

39. www.marchforinnovation.com
#iMarch

40. THANKS!