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Mike Maples of Floodgate at Venture shift 2013
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Mike Maples, Jr (@m2jr)
July 8, 2013
Thunder Lizards
Why aren’t more people trying to build Thunderlizards?
Why aren’t more seed funds focused on finding them?
Exponential Entrepreneurship
Part 1: Two Basic Laws…
Law #1: Moore’s Law
Computing Performance doubles at the same price every 18 months
Moore’s Law: What It Means
• Animates the “magic” of the tech industry
• Asymmetric weapon of the startup
Moore’s Law and Exponential Companies
PC
Client/Server
Internet
Social Networking
Law #2: The Power Law
The biggest outcome is bigger than all of the others combined, and so on…
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
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
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?
Part 2: Exponential reasoning vs linear reasoning
We are hardwired to think linearly
• Linear thinking is intuitive
• Exponential thinking is not
Exponential Reasoning
E=mc2
Intuitive Reasoning
F=ma
Intuitive, tangible Counterintuitive, abstract
Observable Experiment Thought Experiment
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
Reasoning by Analogy: Example 1
“Case method” of analysis (aka “pattern matching”)
Reasoning by Analogy: Example 2
Lean Startup / Customer Development “Religion”
Reasoning by Analogy: Example 3
Companies by analogy(ex “we are Instagram for Google Glass.”)
First Principles Reasoning: Bill Gates
Computers have always been expensive
…but someday they will be cheap
…which means software will become the valuable resource
Diagnostic Test #1
“Most people believe in X. But the truth is NOT X.”
First Principles Reasoning: Evan Williams
Millions of people write blogs
Micro-blogging is super easy
What if tens of millions create micro-blogs?
Diagnostic Test #2
What is valuable?
What is nobody else doing?
What can I do?
What valuable company is nobody building?
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
Diagnostic Test #3
What is your big “secret?”
Recommended Viewing
http://www.ted.com/talks/elon_musk_the_mind_behind_tesla_spacex_solarcity.html
Part 3: Exponential outcomes require a fundamental advantage
The Traditional View of Capitalism
• Capitalism is a system of perfect competition
The Broader View of Capitalism
• “True” capitalism and competition are opposities
“Gerry’s Law” of Capitalism
“Gerry’s Law” of Capitalism
“Don’t be the best. Be the only.”
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
www.marchforinnovation.com#iMarch
THANKS!