Mike Maples – Floodgate 1 of 2

“Innovation is the asymmetric weapon of the startup.” Floodgate’s entrepreneurial approach to investing is helping to fuel the democratization of innovation.

Matthew: Hi this is Matthew Wise with FounderLY.com. We empower entrepreneurs to have a voice and share their story with the world, enabling others to learn about building products and starting companies. It’s with great pleasure that I am here today with Mike Maples, founder of FLOODGATE. FLOODGATE is a venture capital firm specializing in microcap investments and startups. Prior to FLOODGATE, Mike was a founder of Motive, a leading broadband software company that went public in 2004. So, with that said, Mike, we would love for you to give our audience a brief bio.

Mike: Sure, and thanks for having me. Basically, I was a child of the PC revolution. My dad was an early IBM PC guy, when he worked for IBM and eventually went to Microsoft. Through that process I became really interested in the personal computer. I started my first little company in high school and then ran it some in college. Then graduated at Stanford and worked at Silicon Graphics for a few years, then Harvard Business School. Then got into startups again. I was involved in a startup called Tivoli Systems, which went public in 1995. Then started a company called Motive, which went public in 2004. Then crossed over to the dark side and became a VC.

Matthew: Excellent. What makes FLOODGATE unique? Who is it for and why are you so passionate about it?

Mike: It was somewhat the mother of invention. I guess they say necessity is the mother of invention. I moved up here from Austin, and I decided that I was too tired to be an entrepreneur anymore. It’s just a lot of work, and you’ve got to will that sucker into existence. So I thought, okay, I am going to see what its like to be an investor. At that time, there was this fundamental revolution happening in terms of how companies can prove or disprove an idea. I thought if I could find a place that had enough really good ideas that I could be an investor and be forever young. My model was to try to be like Jimmy Stewart in “It’s a Wonderful Life.” I thought I could make Silicon Valley my Bedford Falls and just try to find the really awesome entrepreneurs and help them any way I could. It just so happened that there was a gap in the market between angels and VCs, and we found an opportunity to fill that gap and that’s how we got started.

Matthew: Excellent. Given your experience as a founder and your knowledge as an investor, what are some of the technology and market trends that currently exist for founders, and where do you see things developing in the future?

Mike: It’s hard to say. In early 2005, it was very clear to me that the consumer Internet was about to go through a fundamental transformation, and that in contrast to the old days when I was an entrepreneur innovation trickled down from the enterprise down. But what we were seeing was a “bottoms up” trickle of consumerization upward. I believe that IT consumerization is going to start with the consumer Internet that affects every IT digital market that there is. Most of the things that we look at today are those opportunities that leverage consumer Internet go-to-market techniques and combine them with business process value propositions.

Matthew: Excellent. We covered your background and an overview of FLOODGATE and the investment climate. Now we would like to dig into the details of your story. What’s interesting about you is that you were a successful founder and now you are a successful investor. Can you tell us what inspired you to start Motive? Was there an aha moment? Did you do a bunch of marketing research that led to the opportunity? What’s the story behind that?

Mike: It’s funny. I always thought I would be an entrepreneur. I was what I call risk adverse entrepreneur. Some people I like to call psycho entrepreneurs. They just jump out of the plane and hope the chute opens, and they are convinced they are right and they can walk across the highway with the blindfold on and all that stuff. That is not really my style. I had progressively bigger jobs at progressively smaller companies until one day I was a founder. I had an opportunity to work with some really good guys from Tivoli and Next. We went through a bunch of different ideas, and we concluded that the best idea was this idea of electronic support over the Internet. We understand that everything would be connected digitally someday. Now that is obvious, but in 1996, it wasn’t quite as obvious. We had some expertise in systems management software. So we said we’ll instrument computers to talk to support centers when they have problems, and that’s how we got started.

Matthew: Who are your co-founders at Motive? How did you meet, and what qualities or talents or skills were you looking for in co-founders?

Mike: Four out of the five of us were from Tivoli. The CEO was a guy named Scott Harmon who ran marketing at Tivoli. Tom Bereiter and Brian Vetter had been the two co-CTOs at Tivoli. Then Scott Abel ran professional services at Next. So I was the token young guy, and I ended up running Marketing at Motive when we started and Harmon became CEO. One of the things that I think we benefited from was a very balanced team. We had a combination of marketing and sales. We had a combination of go-to-market and technology, but we also had a complete coverage of everything that it took to build and sell and service a product. When you have those five people in a room, you can bring the full spectrum of sensibility to every conversation. So I think that helped us a lot.

Matthew: Excellent. From idea to product launch, how long did that take, and when did you actually launch?

Mike: It took us about 12 months. We decided we were going to ship a product in a year no matter what. Before we wrote a single line of code, we did something called a time and motion study where we would go out to call centers with a stopwatch and a clip board and just study everything a call center person would do when a support call came in. The idea was to take all of the manual processes that were occurring and make them digital over the Internet. We had a pretty good idea of what the value proposition was. We knew that $100 billion a year was spent on tech support. We knew 80% of that cost was labor, and that about 60% of that labor cost was people on the phone asking questions. Then we saw what part of that could be digitized, and it turned out quite a bit. Asking Homer Simpson about DOLs when they used Quicken the day after Christmas is not very efficient. We understood that you could instrument a computer to send that information over the Internet to the call center, and that would save a lot of time and money.

Matthew: Were they any unique metrics or social proof about Motive that you would like to share with the audience?

Mike: Not a lot of social proof. There was one sort of epiphany moment. I think a lot of entrepreneurs have this. One time I was at Netscape and I was talking to this guy. His name was Neal. Neal’s job before Netscape support, he was a pool cleaner. He’s sitting there taking these tech support calls for NT SuiteSpot server, and I asked him, “Well, why did you just ask those questions on that phone call?” He says, “Well, because Joe says so.” I said, “Well, who’s Joe?” He goes, “Well, Joe is the expert on NT SuiteSpot server.” I was like, “Okay. Well, great, tell me more about Joe.” He goes, “Well, Joe’s questions are right there.” He had taped this piece of paper to the cork board in his office. It had the ten questions to ask whenever a NT SuiteSpot server question comes in.

You looked at all the questions that he was asking. All of them could have been handled digitally. He didn’t need to ask the user over the phone. I remember peeking over Neal’s cubicle, and there were just hundreds of cubicles as far as you could see, and all the people were asking the same set of questions whenever one of these calls would come in. That’s when I realized we were going to make a fortune. I realized that we had found the value proposition. All of the other stuff we were studying was interesting, but that was the big idea. That was what we had to go execute on.

Matthew: That’s a great story. Thanks for sharing.

Mike: Sure.

Matthew: We know that founders face unique challenges when they decide to start a company. What was the hardest part about starting Motive, and how did you overcome this obstacle?

Mike: Yes. The part of it that was hard and is a little bit disconcerting was when you join a startup as a founder, there is nothing to join. I just remember that first day, you walk in, there’s no furniture, there are no computers. The only thing that was in my office was a dead bat. We didn’t have a server. We didn’t have a copy machine. We had nobody to clean the bathrooms. I just remember the first day we all got assigned what we call boy duties. I was kitchen boy. Somebody else was server boy. Somebody was fax machine boy, and all this other stuff.

You are in your office and you’re like, “Man, I used to have a career. The phone used to ring. I don’t have a phone. I used to get emails. Now I don’t have a computer.” There is sort of this quiet period of like, “Oh my God, if we don’t do something, nothing is going to happen.” I just remember that feeling of loneliness and nobody in the world really gives a shit what you are doing right now unless you just make something happen. Once you get into the melee, it’s easy. You have struggles, ups and downs, and near death experiences, but at least you are in the game. You don’t have time to be insecure about it. But the first few days, you are like, “What did I just do?”

Matthew: At Motive what did you learn about your business or customers that you didn’t realize before you launched?

Mike: There were a few things. One thing that I learned was that having a value proposition isn’t enough. When we first started Motive, I thought, well, if it’s clear to people that we can save them money on tech support calls, then they will buy our software, because there is an obvious return on investment. But what I learned is that companies have budgets. There are times that they can spend money and times that they can’t. You have got to have not just a value proposition, but you have to have a compelling event. For example, if a company is already building an e-support system and they are behind schedule, that’s a compelling event because somebody may get fired for not getting the product out on time. When I was at Tivoli we would find people who were rolling out SAP. We would say that we can help you accelerate your SAP rollout. In fact, you can’t roll it out without us, and somebody within a big company is going to get fired if SAP doesn’t roll out. Later on when we sold broadband software, we would say, “Well, the CEO of your company just promised 5 million new subs on Wall Street. How is that going to happen? Are you going to roll 5 million vans out to peoples houses?” This idea of tying a compelling event with a value proposition is something that I learned was really important. People will tolerate pain for a very long time if they don’t have to do something about it.


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