July 17, 2025

Mike Maples: Your Startup Idea Isn’t Crazy Enough—And it's holding you back | Mike Maples, Founder of Floodgate

Mike Maples: Your Startup Idea Isn’t Crazy Enough—And it's holding you back | Mike Maples, Founder of Floodgate

Ever wonder why some startups follow every “right” rule and still fail, while others break every norm and dominate? Mike Maples (Floodgate, author of Pattern Breakers) reveals how true breakthrough startups aren’t built by checking boxes—they’re created by founders bold enough to reject consensus, ignore conventional wisdom, and rewrite the rules entirely. 

This episode explains why your biggest risk isn’t failure, it’s wasting years on the wrong idea. If you want to build something people are desperate for, not just mildly interested in, Mike’s insights will change how you think about startup success.

Why You Should Listen

  • How to know if your startup idea is worth years of your life—or if it’s secretly wasting your time.
  • Why “non-consensus and right” ideas create billion-dollar breakthroughs.
  • How raising too much money too soon can sabotage product-market fit.
  • The difference between playing by market rules and inventing your own.
  • Why the best startup ideas polarize rather than please everyone.

Keywords

product market fit, startup ideas, breakthrough startups, seed funding, Mike Maples, lean startup, inflection points, AI startups, zero to one, startup growth

00:00:00 Intro

00:04:12 The Real Reason “Pattern Breakers” Win

00:12:00 Stop Finding Problems Start Living in the Future

00:21:23 Why Most Founders Play the Wrong Game

00:31:01 How to Know You’re Actually in the Future

00:36:38 The Hidden Cost of Raising Too Much Money

00:46:20 The True Purpose of Your First Million in ARR

00:50:58 Three Tests to Know You’ve Found Product Market Fit


Send me a message to let me know what you think!

00:00 - Intro

04:12 - The Real Reason “Pattern Breakers” Win

12:00 - Stop Finding Problems Start Living in the Future

21:23 - Why Most Founders Play the Wrong Game

31:01 - How to Know You’re Actually in the Future

36:38 - The Hidden Cost of Raising Too Much Money

46:20 - The True Purpose of Your First Million in ARR

50:58 - Three Tests to Know You’ve Found Product Market Fit

Mike Maples (00:00:00):
I like to say it's not first mover advantage. It's first to product market fit that wins. The only way to really fail as a founder is to lose your time. And it's to, be three years in on an idea that you now realize wasn't good enough. Wasn't worthy of your time. And that happens a lot. A lot of times the founder will find themselves three years in. And they're now pursuing the idea out of obligation rather than passion. Knowing what they know now, they wouldn't have done it. The way we succeed is to, succeed conventionally by somebody's arbitrary rules and standards. But I think that when you're an entrepreneur. The way to succeed is to create new rules and new standards. It's actually a good thing if most people don't like the idea. Because, you know, if everybody likes it. It's too similar to what they already know. Which means it's too consensus. And so the best startup ideas tend to be the polarizing ideas. You know, ideas that probably most people don't like because they're not ready to live in the future. But a tiny subset of people say, oh my gosh. Where have you been all my life? I can't un-see this.

Previous Guests (00:01:04):
That's product market fit. Product market fit. Product market fit. I called it the product market fit question. Product market fit. Product market fit. Product market fit. Product market fit. I mean, the name of the show is product market fit.

Pablo Srugo (00:01:16):
Do you think the product market fit show has product market fit? Cause if you do, then there's something you just have to do. You have to take out your phone. You have to leave the show five stars. It lets us reach more founders and it lets us get better guests. Thank you. Mike, welcome to the show.

Mike Maples (00:01:31):
Oh, thanks for having me.

Pablo Srugo (00:01:32):
You put out a new book. Actually you changed like your whole. Cause I remember I used to listen to podcast back in the day. It was a different name. I think it was called starting greatness. Was that the original name?

Mike Maples (00:01:40):
Yeah, that's right.

Pablo Srugo (00:01:42):
And so now it's called Pattern Breakers. You have a new book called Pattern Breakers. And, you know, I've gone through it. So maybe we'll just dissect, like, all the different pieces to it. Maybe that's a broader question, though. Why this new focus on Pattern Breakers? What's the high level idea?

Mike Maples (00:01:58):
Yeah, I'd say that the high-level idea, and this may resonate with some of your audience. I found that a lot of the companies that I worked with that had massive success, didn't do the stuff you're supposed to do. They didn't do the business model canvas. They didn't do the kind of experiments you're supposed to run. They didn't hire the people the way you're supposed to hire them. And then I would find other companies where they did all those right things and they would have been a case study of what to do except for they didn't succeed. And this wasn't a one-time thing for me. This was a more often than not kind of thing for me. And so I thought, okay, either this is just a random business and I should retire before I get exposed for being lucky, or there's something else worth understanding. And so I spent a few years studying. How do you explain this? And so Pattern Breaker's ideas came out of that. It was really trying to understand why some startups just seem to have an opportunity that yielded a breakthrough outcome. Regardless of how well they executed and why some startups did everything right. But still didn't succeed. And, you know, is there something more to understand? Maybe there's a lot of randomness, but maybe it's not totally an accident either. And so the, pattern breaking notion came from this realization, this discovery that. A startup capitalist is a different type of capitalist that they don't create value through persistent compounding or competitive moats. They create value by changing the subject. And they break the pattern of how people do things. And only by doing that do they change the future and only by being radically different can you make a radical difference. And so I started to realize how important it is to be radically different in the ideas that you're pursuing. And I tried to spend a lot of time understanding. Therefore, what are the foundational elements of a pattern breaking idea. And how do you lean into those opportunities and how do you avoid pursuing opportunities that aren't worthy of your talent and time, even if they sound good on the surface.

Pablo Srugo (00:04:12):
And does that mean the whole Eric Ries. You know, lean startup MVP. Which I think is completely dominated the kind of startup narrative over the last. Certainly when I was building a startup 10 years ago, that was the predominant framework. Is it wrong or just overhyped or maybe misapplied? Where? How does that fit into, the panel breaking stuff?

Mike Maples (00:04:30):
Yeah. So I don't think it's wrong. I think that when the way I look at startups is, I like to say there's a breakthrough sequence. And, what pattern breakers introduced was this idea of an insight breakthrough. And so, in order for a startup to be massively successful. I believe it has to have a fundamental insight that harnesses inflections, that comes from the future, and that is non-consensus and right. And a lot of people just skip that phase. So you can iterate and execute perfectly in lean startup mode. But if you're pursuing a small idea, you'll iterate to local maximum. So the lean startup ideas are valid. Because they allow you to have a structured way to pursue product market fit in your opportunity sector. But it doesn't guarantee that the opportunity that you're pursuing is going to yield or break your upside. What it does instead is guarantee that you're not going to waste your time on ideas that people don't care about or you're not going to have assumptions about the way the world is that just aren't true. And implement a product that embodies those untrue assumptions. And so I look at it like you have the insight breakthrough. And the question you're answering is, what do we know about the future that's powerful and not obvious that leverages inflections? And then the product breakthrough is where Eric's ideas and Steve Blank's ideas come into play. You're trying to get product market fit. That's what your podcast is about, right? And it's like, I think in product market fit. You're trying to answer another question. Which is, what can we uniquely offer that people are desperate for? And then in the third phase of the breakthrough. It's the growth breakthrough. And in the growth breakthrough, you're asking. How can we grow exponentially at an unbounded rate? And if you think about it. It's like a Newton's cradle. If you have a powerful insight, that it embodies inflections. Now you have like this weapons grade, you know, sort of.

Pablo Srugo (00:06:27):
Everything gets easier.

Mike Maples (00:06:28):
Potential. Yeah, and it transfers energy into the product breakthrough phase because you're more likely to be unique, because you have an insight. You're more likely to have desperate customers because you offer a 10X or better form of empowerment for a certain set of people. And so now when, now you're more likely to have a growth breakthrough. Because, growing is now about syndicating the truth. You're not spending money on marketing programs to overcome the gaps in your value. You're getting people to shout from the rooftops, oh my gosh, this is amazing. It solved the problem I'm desperate for, I can't unsee it. They're the only people who have it. And so it is. It's like a great insight will transfer energy to the product breakthrough. Which will transfer energy to the growth breakthrough, and what you want is you want to be tearing into a category of the future at just incredible speed. As you get into this growth mode. And so I started to see that happen in the companies that I was working with that had all the success. And what I was seeing was that the ones that stalled, something wasn't a hundred percent optimal in, in one of those three areas.

Pablo Srugo (00:07:32):
Yeah. I've like, you know, thinking about all this MVP stuff. The way I've summarized it is almost like before startup mode, there's research mode. And in research mode, what I've seen is a lot of founders spending a lot of time. Some structured, some unstructured, but understanding core customers and understanding real problems. And then from there, you can start kind of going and iterating. Which is similar to this kind of insights idea that you speak a lot about. And maybe that's tied to inflection. So, maybe let's start there. What? Because I think, as I understand it. Insights are related to inflections, right? So like, what is maybe first of all, an example of an inflection. Maybe a not so obvious one, you know, the Uber Lyft one is pretty obvious. You got GPS on iPhones, you know, you can do it before. It's a one, zero to one, very, very simple. What are some maybe that are not as obvious as that?

Mike Maples (00:08:19):
Yeah, so, and Pablo, I would say that I have a slight twist on how you would talk about this research phase. And this might get to your question. I like to ask when I see a startup idea. Is this from the future? And so, for example, last week I got pitched by a mental health startup. And the person says, mental health is a crisis. We need to solve mental health. And I'm like, I agree. I also agree we need to solve it. So I have an app to solve mental health. And I'm like, why is this idea from the future? And they say, well, because I believe in the future. Mental health needs to be solved, and I'm the person to solve it. I said, I'm not interested in your ideas about the future. I want to know why you're living in the future now. A different future than the rest of us are living in. So, for example, Mark Andreessen. When he did the Mosaic Browser, was a student at the University of Illinois. Everybody thought that what was called the digital superhighway was going to be designed by AT&T or, the government or, Time Warner or, somebody like that, Microsoft Network, AOL. Everybody thought it was going to be a tops down thing. And here you got this kid making minimum wage in a supercomputer lab. And he designs the browser to make the internet useful. So, what were the inflections? The inflections were, the government had just made the internet legal for business in the first place. You had Tim Berners-Lee and the standards of the World Wide Web. But what Mark was trying to do was not trying to design a product for some digital superhighway market. Mark didn't even know that there was such a thing. He was a student. He was just a kid. What he was doing was he was living in the future, and he was building what was missing in the future. And he was tinkering with inflections that defined what that different future would be. So, when I talk to founders about coming up with great startup ideas. I often say to them, and it's a little bit Zen-like. But I say, don't try to think of a startup. Because if you do. You'll orient your footing in the present. And I agree with William Gibson that the future is already here, it's just not evenly distributed. And it goes back to pattern breaking. When you're living in the future and you're tinkering with inflections. You see firsthand the way that this new technology will change how people think, feel, and act. And it's in the course of seeing the empowering new capabilities and how it transforms human capacities and behaviors. It's that direct experience that causes the founder to see what's possible and what can be built. So, most startup ideas I find come from not having a formal assessment process, but rather by living in the correct future. And tinkering with what's happening in the future. And by tinkering with the future. You learn what's new about it, but you also learn what's limited about it. And so what I like to say is you want to build what's missing in the future. You know, live in the future, build what's missing in the future. And then if you do, your intuition about what to build is far more likely to be right. You know, Andreessen knew what to build in a browser. Because he knew what was not useful about the internet that he wanted to make useful. And so by solving a problem that he had himself, you know, he was able to solve a problem that tapped into a universal need.

Pablo Srugo (00:11:51):
But this is different than, for example. You know, just serving a hundred customers in a space. Figuring out what the biggest problem is, and this is obviously super simplifying and just solving that.

Mike Maples (00:12:00):
Yeah. And that's, to me, that's the conventional view. The conventional view is, too many founders. They ship a product without building something people want. They go after markets that aren't big enough. So what you should do instead is find the right market. And, you know, find unmet needs in that market. They'd build a product that meets those unmet needs. But the problem with that is it buys into a context. Which is that the definition of the market is the definition. And so, my view is that the entrepreneur wants a product that defines the market. And so if I buy into the rules of the market as it exists today. Even if I'm right. I'm going to compete for what the leftovers of what the incumbents don't already have. And so I wanna show up with something radically different. I wanna avoid the comparison game altogether. And so, I like to say a great startup forces a choice and not a comparison, right? Like, a great startup. If a customer says after seeing your startup idea. How does that compare to X? You either explained it wrong or you don't have a big enough idea by definition. And so we want ideas where nobody after they did a ride share said, well, how was that any different from a taxi? And nobody, you know, the Tesla Cybertruck.

Pablo Srugo (00:13:20):
Yeah, that's a good one.

Mike Maples (00:13:21):
A lot of people I know don't want one. You may not like it. You may think it's ridiculous. You know, when I first saw it, I thought he was maybe he was joking. I thought, is he really going to ship a truck?

Pablo Srugo (00:13:30):
Now I see it on the street. I'm like, I know black. That's not bad. That's kind of nice. But I get your point.

Mike Maples (00:13:34):
But here's one thing I bet nobody says. How does that compare to a Ford F-150? Right. And so Elon basically says, look, live in my future or don't. But you can't reconcile a Cybertruck with a Ford F-150. And so great startups have that quality. Where, they can't be reconciled with anything that's happened before. And, you know, it's actually a good thing if most people don't like the idea. Because, you know, if it if everybody likes it. It's too similar to what they already know. Which means it's too consensus. And so the best startup ideas tend to be the polarizing ideas, you know, ideas that probably most people don't like. Because they're not ready to live in the future. But a tiny subset of people say, Oh my gosh, where have you been all my life? I can't unsee this. I've seen a bigger truth now. Let's go, that's the place you want to be.

Pablo Srugo (00:14:24):
And this is if you want to create. What you call a breakthrough company. Which maybe we should define that a little bit. Because, is that tied to the size of the opportunity? Does this mean if you want to create a billion dollar company. You need to do this, or you know, what I mean, or only at 10 billion. Obviously, if you want to build a small. Let's say, $10, $50 million company. You don't need to do this, right? So, at what level does this become something you truly need?

Mike Maples (00:14:48):
Yeah. So, I would say. That it's tricky, right? People will say to me, what's a breakthrough, and is a billion-dollar exit a breakthrough? It's hard to. The way I think of a breakthrough is it breaks free from what's known. So to be a breakthrough, you have to represent something radically different that was thought to be impossible or thought to be not a way that things would happen. And you can have some big valuation exits that aren't a breakthrough. But I say to founders, look, if you're pursuing the right opportunities. You only have to be right once as an entrepreneur. And so the question is, what types of opportunities are worthy of your time and talent? What opportunities create odds more in your favor than others? And I would assert to you that breakthrough opportunities create the best odds for the founder to win. Because, it allows them to define the rules of competition rather than to be defined by someone else's definition. When you let somebody else define the rules and they have more resources than you. They just have a lot of tools to co-opt you. When you're a startup, the only advantage you have is your ability to change the subject. And so you want to have something that disorients the incumbents, that turns, you know, Airbnb. They didn't try to have a better hotel. They turned the strengths of hotels into their biggest weaknesses. They said, hey, you know, Four Seasons in Austin, Texas is the same as Four Seasons in Paris. Wouldn't you, when you're in Paris, rather live like a local? Yes, I'll grant you that a room in the Four Seasons in Paris would be just like one in Austin. That's great. But wouldn't you rather live in a neighborhood in Paris? And wouldn't you rather be in a 17th century house for the same price and all these other things? And so, you know, you think about Four Seasons. They spent decades creating a value proposition that was consistent across their hotels, right? Their whole existence was predicated on that. And so that's the place that you kind of want to be. Now, having said that, you know, I was on a podcast about six months ago and it was a guy that. The people who listen to his podcast aren't techies. They're like people who own a bakery or, you know, a lumber yard or something like that. And I gave as an example, the cronut. So, you know, there's this bakery that created this cronut in Boston. And, you know, I think that there is one of the lessons from Pattern Breakers that I think is durable outside of tech. Is this idea that most people don't try to show up in the world differently enough. You know, most people try to be better according to the current standards. And that's because we get raised that way. We get raised to get good grades. Get good test scores. Go to the right school. The way we succeed is to succeed conventionally by somebody's arbitrary rules and standards. But I think that when you're an entrepreneur, the way to succeed is to create new rules and new standards. And I think that that's even true outside of tech, right? I think that. You know, the cronut nobody had ever thought of before, but somebody came up with it. Next thing you know, there's lines outside of, you know, in the supermarket. There's this thing called the four-hour energy drink. Which blows my mind because it's basically the same ingredients as Coca-Cola. They put it in a smaller vial, they put it on a different shelf, and they charge more money for it. And I'm like, I'd much rather be the five-hour energy drink. Than, you know, the next knockoff brand of cola. And I'd rather be that than an organic, you know, DTC branded cola, right? Or some, you know, nouveau sounding take on it. So, you know, I tend to like ideas that seem radically different. And I tend to think that more people could come up with radically different expressions of their business, even if they're in businesses that aren't technology fuelled.

Pablo Srugo (00:18:57):
And maybe in that. We're going on a little tangent here. Because we're going down the cronut aisle. But, do you need an inflection for an insight? Because there, it's like, yeah, it's true. This idea of a cronut is pretty insightful. It's new in terms of how much money could you make on it. Because people can copy it. There's a whole other discussion. But it's kind of a stale industry, and so do you need one for the other?

Mike Maples (00:19:19):
Yeah, and I would say that in that example. The cronut is not a breakthrough in the sense I define a breakthrough. To me, a breakthrough changes human capacities and behaviors, right? And that's why the inflections are important. Because the inflections give the founder the weapons to change the future. We're not interested in having a fair fight with the present, We want to have an unfair fight. Business is never a fair fight. The only question is who gets to fight unfair. And so the inflection lets the entrepreneur wage asymmetric warfare on the present. You know, the Lyft example and the Uber example is kind of obvious. But it illustrates it really well. If the smartphone all of a sudden has a GPS chip in it. Now you can locate riders and drivers with an algorithm. That was never possible before. So now all of a sudden, the inventory of human capacities and behaviors has been increased. And an entrepreneur with an insight can realize the premise of that. The upside of that, and then say, oh, that means you could do Airbnb for cars. That's where you're going to get the real breakthroughs because you're getting radical enhancements of capabilities. Whereas to me, the cronut is more or a five hour energy drink or things like that. It's more of like niching down and being, you know, competing for a given market real estate by being different rather than being better. But I don't think it's fundamentally expanding human capacities and behaviors. It's just taking advantage of changing preferences, if you will.

Pablo Srugo (00:20:53):
I guess in another way. Like, the way I think of it as you're talking is kind of the Steve Jobs. You know, do you want to make a dent in the universe kind of idea. And if you want to do that. Then if you just like if your goal is make a million dollars or make $10 million, there may be I mean. Maybe go to finance, you know, you might not even need to do a startup, right? If your exits are just dollars. Then there's certain paths that might lead to that. Maybe with I mean, a certain level, maybe not. But if your goal is truly to make a difference and make a dent in the universe. Create something truly new. Then it's clear, at least in my mind, how this breakthrough concept applies.

Mike Maples (00:21:23):
Yeah, and this is where I have a slight bias. Like, a lot of people say, oh, well, all you think that matters is technology. And I'm like, there is a "ish." I believe that, right? So, there's a. I look at it like there was a time we were all cavemen sitting around in the dirt in caves. And somebody discovered fire and that changed things.

Pablo Srugo (00:21:43):
That's pretty good.

Mike Maples (00:21:45):
Somebody discovered how to like make steel, you know, melt metal and make spears. And somebody figured out how to launch projectiles off of a cliff at bears, and tigers, and stuff. And somebody figured out how to float barges on rivers. And somebody figured out how to make canals and aqueducts. Somebody figured out how to, you know, create catapults. And somebody figured out how to create computers, and printing presses, and all that stuff. And I tend to believe that the arc of humanity really is an arc of technology. And it really is an arc of going from one breakthrough to the next. And, you know, in so doing. You amplify human capabilities.

Pablo Srugo (00:22:26):
And can you. Because when I think about some of these examples, like take here, you know, Shopify is like the biggest company right in Canada. And in a sense, you could say Tobi was living in the future. But then you have to wonder, did Tobi really know he was living in the future? At some point, he realized he was and he realized e-commerce could be huge and he could power it. But in the early days, you know, the story is he's selling snowboards. It creates a website to sell snowboards. People are like, hey, that's a great website. And so then he starts kind of building his website and it takes off. I guess the question is, how much is it? Is this about stumbling upon the future? And how much can you really, as a founder. Make this something you're going after explicitly and saying like, okay, I need to figure out the future is.

Mike Maples (00:23:05):
So, first of all. I love this question because like Tobi illustrates this idea perfectly. Tobi's idea, is not a great idea because of his ideation process, right? His idea was great because he was living in a better future. Now, you could say, well, was that premeditated or not? To me, that's not as much the point. To me, most people think that ideation is some process where you come up with the best idea. What I argue to people is, before you get out of the building. You want to get out of the present. And that some futures are better futures to pursue than other futures. And that the degree to which you pursue a valid future. It has a much bigger determining factor on whether you're going to have a big idea or not, right? I'm much more interested in. Is this founder time traveling to a valid future, regardless of how they got there? And so, in Tobi's case, he was there. It wasn't premeditated, but he was tinkering. You know, he was playing with web 2.0 audio technologies. He knew a bunch of the guys who did Ruby on Rails. You know, he was a technology tinkering guy and he's building this. What was it? Snow devil website to sell snowboards. And he's like, Hey, wait a second. I can't, none of the tooling exists. I got to build all this on my own. I wonder if other people would want this too. That is how most startup ideas that are great actually happen. And, you know, there's no way you could have known that if you were just studying the e-commerce market. You had to have a visceral feel for what was missing. You had to be experiencing it as part of your lived experience. I like to say you want to get out of the present, and if you're not already traversing a powerful, valid future. You want to find a way to catapult yourself to a future, right? That could be working at a company that's future-led, that has a perch on the future like PayPal in the early days, or Silicon Graphics in the early 90s. It could be. What Maddie Hall did when she started Living Carbon. She says, I'm just going to go be Sam Altman's chief of staff for a couple of years. And so she just followed him around every year. And if you're following Sam Altman, you're going to see lots of glimpses of the future. And there's going to be chances for you to try on different futures. But, you know, get out of the present you must. Like a lot of people say to me, hey, well, I don't have a natural way to get out of the present. And I'm like, OK, then maybe you shouldn't be thinking of starting a startup.

Pablo Srugo (00:25:37):
Well, it's going to be my question. What do you say to a founder who's either in those early stages. Whether they're like, I want to start a startup or maybe they're already playing with stuff. They're figuring stuff out. Now they're listening to this. They're like, I don't know if I'm really like in the future. Because, one of the issues with the future is. It's really easy to craft just about. Especially if you're like IQ, like any narrative you want of like things are going to go this way and in five years is going to be like that. And so therefore, I'm going to build this thing out. Which I don't think is what you're talking about. But I could see founders misconstruing this as that and kind of saying, well, the future is going to be this. Therefore, I'm going to build that today. You're almost talking about something more visceral, like somehow living there. So how besides maybe working at, you know, a board like an edge company. What are some other things you've seen or that founders could do to truly like be. Building in that future versus just hypothesizing about what it could be.

Mike Maples (00:26:28):
So one metaphor that didn't make the book. Because it was going to take too long to explain in the book, was this idea of an oasis. And so imagine that you and I and everybody that we know lives on a sand dune, and we've always lived there on this desert. And then somebody goes out and wanders off, and they find an oasis. Well, when you're in the oasis. There's no ambiguity as to what's different about it than the sand dune. You're sitting there, there's palm trees, there's water. You're like, this is awesome. I'm in an oasis. And living in the future is a lot like that. You know, it's like, it's kind of binary. If you don't know for sure you're living in the future, you're probably not. If there's any ambiguity. Then the inflections that you're tinkering with aren't powerful and profound enough. If the inflections that you're tinkering with are powerful and profound. You'll be like, whoa, I can't believe that nobody else is seeing what I see. I remember like when I first started seed investing. Josh Kopelman would come out from Philadelphia. And at the time, this is like the mid 2000s. We were among the only people really doing it. And we'd sit there at Il Fornaio and we'd look at each other. And we'd say, how is it not patently obvious to everybody. That seed investing is going to be giant, right? We saw what was happening with the lamp stack and lean startups. And, you know, we didn't have words to describe it that way yet. But it was like, Josh and I were living in the future. Not because we were smarter than all the other VCs. It's just that we happened to be at that place at that time. And when we looked around, we were like, it is just completely obvious that this is huge. And that this is going to be giant, and it's going to be a whole new category. There are just founder after founder wanting to raise just a million dollars. At the precise time when it doesn't take much to start a startup. We're like, once you see it. You can't unsee it, you know? And so that's what it feels like. So, like, the way startups usually happen is somebody finds a valid oasis. And then they come back to the sand dune and they say, hey, guess what? There's an oasis over there. And most people in the Sand Dunes say, oh no, I don't believe you, you're wrong, you're crazy. The last guy who left and said there was an oasis. We never saw him again. Never heard back from him, I think it's a mirage. And one or two people in the Sand Dunes say, yeah, you know, I'll bite. I'll go with you. So they go to the oasis and they're like, oh my gosh, he's right. There's an oasis here. And then they come back and they. To their other people. The sand dune, they're like, dude, you've got to check this out. This is amazing. And so more and more people trickle over to the oasis. And before you know it, you feel like a schmuck for staying on the sand dune, right? The social pressure flips. The social proof. Now, you know, it's like. You feel stupid, not moving. Startups are a lot like that, startup markets. They're these movements that gather force. But it's like when you're in a valid oasis. Your reaction is not, am I in a valid oasis? It's, I hope nobody sees what I see before I capitalize on it. Because how is this not obvious? It's like, if you saw what I saw, you just can't unsee it. So, that's kind of what you're looking for. And what too many founders do is they say, I want to start a startup now. Help me come up with valid futures. And so I'll know that it's, a big enough future or not. And I'm like, dude, you're going about it wrong. Like, that's not. That's not where great ideas come from. You know, they come from back to the Tobi example. Tobi didn't do the snow devil website because he wanted to start an e-commerce company. He just followed his obsession, right? He just kind of like kept going and pushing the envelope and fixing what was broken and then moving to the next thing and the next thing, next thing. That's where the great startup ideas come from. People are pursuing. Ideas in the future that they can't unsee, that they're obsessed by. And it's in so doing that they open new fractals of knowledge and insight because they're doing things that most people think is a waste of time. Most people thought what Tobi was doing was a waste of time, it's like some side hustle hobby. But because you're doing that thing that nobody else is doing. You're discovering the undiscovered. And if you're in a valid future, if you're in an oasis. You're discovering undiscovered things that matter. That are going to matter to a whole bunch of people pretty soon. And so that's the place you want to be.

Pablo Srugo (00:31:01):
You love this show. You don't want to miss the next episode. Why would you? So hit that follow button. Trust me, it's in your own best interest. So you almost, flipping from this idea of finding unsolved problems. To just going almost way further to places nobody's even thinking or building of. Almost , like. The thing that comes to mind is, like, back in the day when people, you know, went out west for goals. Sort of thing while everybody else was optimizing whatever was like close to them, near them.

Mike Maples (00:31:32):
Yeah, people tend to want a recipe or a playbook for things. But there can't be one for breakthroughs. Because by definition, breakthroughs are undiscovered. And so you can only have a recipe for a cake if somebody's cooked that cake, right? You can only have a playbook for a process if somebody's completed that process. So, you know, what you need to discover a breakthrough is not a process or playbook. You need a mindset. You know, it's hard for some people to grasp. But the best way to come up with breakthroughs is to be the type of person likely to discover them. And the way you become that type of person is you live in the future and you get curious about the inflections that define that future. And you tinker with them and you identify. So it's like people live in a bell curve of time. Most of us live in the present. Even if we're interested in the future. We're still living in the present. Some of us live in the past. Some of us, a small sector of us, maybe 5% live in the future. And these inflections come over like an event horizon. And the people who are living in the future see them first. But equally important, they're hanging out in the future with other like-minded people in the future. And so they're having conversations with each other rather than people living in the present. And so they're getting wisdom from the unconventional minded. And so they're getting an information advantage because they're seeing things before other people see it. But they're getting a collaboration advantage because they're collaborating with co-conspirators who are observing and noticing the things that they notice. And it's by doing that that they discover the breakthrough opportunities. But you have to be a little bit willing to have faith that the dots will forward connect. If you pursue the things that you're obsessively interested at the edge.

Pablo Srugo (00:33:22):
I guess if I'm if I'm pulling out, you know, some practical things for founders. I get two things out. One is, the kind of I think Paul Graham also talked about this. If you want to start a startup, don't start a startup, just go build things with people you like and just go down like rabbit holes. Right? And that that is an idea. And the other one, is almost this living in the future, at least the way I'm construing it. is it's a bit of a fail safe, a bit like, you know, you used to get directions back in the days. I never was that, but people tell me. And it would be like, you know, go. And if you if you hit the, you know, the trail track, you've gone too far. You got you got to go backwards. Right? And so it's kind of this idea. If you're building and you stop and you ask yourself, am I building in the future like and you honestly introspectively think. Am I living in the future right now with what I'm doing and the answers not a clear yes. Then you might wanna rethink whether this is the thing you wanna spend you know ten years of your life trying to try to grow.

Mike Maples (00:34:13):
Yeah I think that the other thing is. I think there are ways to pursue the future. Where you don't have to be attached to success or failure. So like, for example. I'm working on some AI projects on the weekend that I think could have an impact on investing in startups. But I'm not sitting here thinking. What happens if nobody wants this? Or what happens if I don't succeed? Or what happens if it doesn't give me an advantage? I'm like, well, I just can't not do it. It's too interesting. And if anything, the problem I've got is, my wife and kids want me to spend less time on it on the weekends. It's not that I'm worried about whether it's going to succeed or not. And, so, but if you. If you just work on things that are interesting for their own sake. Where you're like, wow, this new thing is just so interesting. I can't, I can't let go of it. It may lead to something and may not lead to something, but you're not, you're not raising $5 million. And now all of a sudden you've got employees and, you've named your conference rooms and, you've got board members and, expectations. And so most of the stuff I've seen, this is another example where Tobi really fits in. Tobi wasn't attached to success or failure. He was just building something interesting that turned into something. And most of the great startup ideas are like that. You escalate your commitments as you increase your certainty, and you just double down on what works. Because you just tried something and the next natural logical thing was to turn it into a company. And there's nothing that says everything that you work on on the weekends has to become a company. In fact, why not make it small enough so that you don't even have to think about it that way? You work on it because it's worth working on.

Pablo Srugo (00:35:57):
There's two things you mentioned there that are relevant today. One's AI and the other one is this thing about fundraising. One thing that's changed a lot. Since when, let's say you started investing in today, even when I was raising funds 10 years ago in today's. The amount of money that's being raised and how early it's being raised, right? So like the median. I mean, the median seed now is like $3.5 million. The 75th percentile is like $5.5 million, and then you've got pre-seeds. I think the median is like, $1 million to $2 million. Is there, I mean. On the one hand, I think. I would say the balance of power has shifted a lot towards founders. Founders have a lot of choices today. Is there a downside to raising bigger rounds earlier on, in your opinion?

Mike Maples (00:36:38):
Oh, for sure. You know, the stuff I've been interested in lately, and if any founders are listening to this. You know, Wade Foster has a term for it, I think. He calls it seed strapping. Wade was the founder of Zapier.

Pablo Srugo (00:36:56):
Zapier, yeah.

Mike Maples (00:36:58):
They went from Missouri to California, and have built this giant company raising only $1.5 million. And I've seen some entrepreneurs asking the opposite question. Why do I need venture capitalists at all? And that's who I'm looking for, to be honest. Like, I'm looking for a founder who says, you know, I'm not raising money just so I can raise more money. I'm not on this, you know, treadmill, VC, BALCO, steroids-injected treadmill. Instead, I want to raise a one and done round. I want to raise a round so that I can. A, hire my investor so they can bring me some perspective that increases my chance of winning, and B, lets me take a little bit more risk without being crazy. You know, maybe there's something I want to try. That is a little bit too risky to try, but makes sense to try, and if I had a little bit of a cushion, I can experiment some. And if it doesn't work, I can retreat back to where I was, or I can. If it works, I can double down. But that's really what I'm interested in. A lot of people have forgotten what the purpose of a seed round is. In my view, the only way to really fail as a founder is to lose your time. And it's to be three years in on an idea that you now realize wasn't good enough. Wasn't worthy of your time, and that happens a lot. A lot of times the founder will find themselves three years in. And they're now pursuing the idea out of obligation rather than passion. Knowing what they know now, they wouldn't have done it. But they have employees now. They have investors now. They raise a bridge round, you know, to keep going and keep going. And, you know, you'll never get your time back. So like I like to say to people. There's the seed strapping route. Which I like, and then there's the zero to one don't have product market fit route. Which to me is you've got an insight. It's non-consensus. You hope it's right, but you can't know it's right. You can only really know that it's non-consensus. So let's figure out what the biggest risk is, and let's raise the minimum amount of money we can raise to take out that risk as soon as possible. If we can't take out that risk. We're not going to succeed, but at least we get our time back. If we take out that risk. We've done the single most important thing we could do to add value to this business. We have a first mover advantage into the future. We've taken a risk that other people haven't taken. That's the way to think of a seed round. And so to me, it's the minimum viable raise to take out the risk or not to take out the risk. But you don't look at it like I need to increase my odds of not going out of business. Because it's not worth staying in business if it's not going to ever amount to anything. And so that's kind of what I'm trying to do. Is figure out very quickly. Whether to pursue the upside of a breakthrough or whether to falsify the insight and then try the next one. Right? And because, you know, that person gets their time back. Hopefully we get to work together again. And so that's how I see it.

Pablo Srugo (00:40:14):
Well, this is a bit out there. Because I would tend to, I mean, I agree and I generally like have a bias towards that. And obviously like minimizing dilution early rounds. I mean, as a seed stage investor, you know, we get affected just like founders on future rounds. And then I see data. I saw data a couple of weeks ago and it was like a perfect straight line correlation between the size of your seed round and your odds of becoming a unicorn. The bigger your seed round. The higher odds of becoming a unicorn. And I don't know, I don't know if you have any thoughts about that.

Mike Maples (00:40:40):
I don't believe that.

Pablo Srugo (00:40:41):
It was crazy.

Mike Maples (00:40:42):
Well, the other thing is. Odds of becoming a paper unicorn or

Pablo Srugo (00:40:46):
Well that's probably. Well, that was part of my thinking was like, okay, if you raise more now, you probably raise more later, so you probably have a higher chance of becoming a paper unicorn.

Mike Maples (00:40:54):
Yeah, and I just think people are thinking about it wrong. So I think that there's this. The conventional wisdom right now is all things being equal, wouldn't I be better off if I raised more money than less money? Well, what really ends up happening is, you hire some people, you name your conference rooms, you start working on your minimum viable product, and only later do you realize that you're hosed. You realize that you had an opinion about what the world was going to be that wasn't true. But now you've got investors, you've got employees, and if you raise three to five. You're going to have those things. Whereas I'd much rather raise a small pre-seed. Come up with implementation prototypes and say, look, I'm only going to cross the Rubicon if I can find somebody desperate for me to build this thing. But like by the time I hire a bunch of people, there's not going to be any debate about. You know, it's like in the early days of Chegg. We put up this fake site called textbook flicks. We didn't have any textbooks to rent. We didn't have enough money to buy textbooks, but we had a fake site and people would try to rent them and they'd get a 404 error. But we knew that people wanted to rent textbooks. We could see that they were going through the shopping cart. We could see the price they were willing to pay. Now it's like, Okay. We know that there's demand for this thing. Let's build the thing. Nobody knew that Chegg was textbook flicks, right? And so we constructed a fake experience. But we wanted to know for sure that there was something that people wanted here. But what's happening now is people are raising seed rounds. That allow them to postpone the question, of knowing whether there's desperate people for their idea. And so they pursue losing strategies for too long, and they hire people to go work on features that nobody wants. And before you know it. The organization has its own momentum and inertia. Now there's people who have opinions about what the company should be doing that exert their own influence on what happens. And what we should be doing is asking, what is it about what we could do that people are desperate for? That comes from the future. We don't need many people or time or money to do that. Tobi didn't need much time or money to make that app at Shopify. Most people don't in the companies that they're at. So, I think for the most part. Raising a lot of money early. Is, it makes the company worse rather than better for the most part.

Pablo Srugo (00:43:24):
There's very few founders who are able to raise a lot of money and not spend it and manage all of the implications that come with that. With the investors who they raise it from. Who typically want you to spend it, not in all cases. And I think, certainly if your goal is finding product. Like, there's scaling and then there's finding product market fit and everything that comes before that. And I would say in that part, being smaller is an edge. There's that Jeff Bezos idea, you want teams that you can feed with two pizzas. This kind of an idea makes total sense because it's all about communication, like, insight sharing, being able to move fast. The time you spend on managing, and alignment, and all the other stuff is just overhead that is completely. It's actually a weight pulling you back in that early phase.

Mike Maples (00:44:07):
Yeah, what I find is that most people are too impatient for the first million dollars ARR. Their plan suggests that they're gonna get it sooner than they should even try to be getting it.

Pablo Srugo (00:44:20):
Yes.

Mike Maples (00:44:21):
And then they're too patient to go from one to $10 million ARR. So I like to say that, you know, the purpose of the first million is not the first million per se. It's to get validated learning about customers. And validated learning about customers, if it's truly valid, should allow you to go from one to $10 million in two years or less. And so, the purpose of that million dollars is to kind of play the game with enough live ammunition. That you're able to instrument the business. And then you move to that phase where you do raise more money potentially, and you do invest more in management, and OKRs. And all that other stuff. But by raising too much too soon. A lot of times you start running the company as if you've, figured things out you haven't figured out. And you know, it shouldn't take very many people at all to get product market fit in a company. You know, it takes a lot more people to grow. But it takes fewer people and usually more time to get product market fit than most people are forecasting, I think.

Pablo Srugo (00:45:26):
Yeah, I think if you're if you're pushing too hard to get to that million. You're gonna. You might get there faster, but you're going to bear the brunt of it later. And I've seen many examples of companies. I don't know that there's a correlation between how fast you get to a million. And how fast, how far you can grow later. I mean, the biggest example I know of this is like Nike, right? Nike took like, I think it was seven years to get to a million. I mean, we're talking inflation adjusted. But in any case, you know, in a sense you see this breakthrough thing. There were so many pieces that needed to come together. Market being one of them and technology being the other for that Nike shoe to really get to a place where it could truly explode.

Mike Maples (00:45:59):
Yeah. And by the way, I'm not saying all things being equal. Would it be better to get to a million bucks revenue sooner? Of course. But what people don't realize is, the place you want to be is, one million going to 10 million in less than two years. That's the foundational elements that you want to set up.

Pablo Srugo (00:46:20):
Is there a one to three, three to nine kind of thing?

Mike Maples (00:46:23):
Yeah, you want to have the foundational elements in place for longer term success. And so getting to a million dollars really fast. Because you trick a few people into paying you money. But you haven't proven anything valid about going from 1 to 10, not good. Taking forever to go to $1 million. You know, the problem is somebody will get there faster and beat you.

Pablo Srugo (00:46:42):
Well, sometimes, by the way. The getting to $1 million really fast might be because you're actually specifically not going after something that's so different. That all it takes is you slightly tweaking something else. Gaining a few customers, as a result, you get to a million. But, you know, more competition will come in later, et cetera, et cetera. It's going to be hard.

Mike Maples (00:46:57):
Yeah, it's like I like to say it's not first mover advantage. It's first to product market fit that wins. Regardless how much they raise. And if you can get to product market fit without much money. You're going to win even if the other guy raises more. Zapier shows that. If the other person, by raising more money, gets to product market fit sooner than you do, they'll win. But the reason to raise a lot should not be it buys me a longer runway, it decreases my odds of failure. It should explicitly tie to, I need to raise this much to be the first to get to product market fit. If you're Snowflake and you're building complex enterprise software with innovative leading customers, you can't deliver half a loaf. You got to have enough energy and momentum and product footprint to deliver. I could see why you'd raise more. But it all comes back to working backwards from what does it mean to be first to product market fit in my sector?

Pablo Srugo (00:47:57):
And then just to, you know, we have a few minutes left here. Just to tie to some stuff that's happening right now. The biggest inflection obviously around AI and LLMs. And then this idea of being non-consensus and right. Which to me makes a lot of sense, certainly in the world of like, let's say buying stocks. You certainly need to be that because there's a whole market, et cetera, et cetera. But when you look at this. A lot of the ideas, are not necessarily non-consensus. Just because so much has opened up. You kind of could go now and say, let's apply LMS to a bunch of different things. Let's switch out humans with voice AI in so many different places. And it's not, it almost becomes like, yeah, of course, like that's gonna happen. So then the question is, does that make, it's consensus, but it might be right. What about those ideas that are happening right now?

Mike Maples (00:48:41):
Yeah, for that reason, I haven't made a lot of AI investments. And so I've seen a lot of AI ideas where I'm like, I totally see the inflection. I can totally see why people are going to love this product. I just don't know why there won't be 10 just like it, or I don't know why Sam Altman's not going to do a demo and put you guys out of business. And in my simple mind, I can't do those. So I haven't done very many AI investments for that reason. And I wish everybody well. But I just think mindless competition is usually a trap. And there'll be some that'll compete with a bunch of other people, and they'll be in a drag race. And they'll just try to raise more money, put more fuel in the tank than the next guy, and they might win. But for the most part, I think that the profits get competed away in those things more than most people realize. And so I haven't done as many of those. The ones I've had success with would be vertical AI. Where the founders know, a lot of very specific domain knowledge about the category they're in. You know, UDEA is doing some stuff with chief legal officers. They've gotten off to a good start. Applied intuition and vehicle simulation software. So those have both done really well. And then there's another one that I'm working with Trip Adler. Who is the founder of Scribd. He's got a company called Created by Humans, and it helps content owners license their content rights to the LLM providers. A very risky idea, but it's one of those things that could be powerful if it works. Because it has marketplace, winner-take-all dynamics to it. So those are the kinds of things that I like and, you know, some of them will work, Some of them won't. But I tend to stay away from stuff where, you know, a whole bunch of people are going to run into the territory and whoever runs fastest wins. I tend to not like those as much.

Pablo Srugo (00:50:40):
So let's stop it there. I mean, normally one of the questions I ask is, when was the moment that you found product market fit? So let me ask you a different question. Which is, having seen as many companies you have and thought of so much about startups and zero to one. What is your best definition, explanation of product market fit?

Mike Maples (00:50:58):
I have three main heuristics. And by the way, it's very easy to lie to yourself. The first is an objective measure of customer delight. It might be a net promoter score, but it's some way to know that customers love your product in the wild. You know, Doug Leone at Sequoia Capital used to say, If you pull a pilot from a customer hasn't paid you yet, if the customer doesn't scream. Then you don't have product market fit. If the customer's like, oh, well, whatever, you know, okay. So that's number one, they just can't live without your product. Number two is progress down the sales learning curve, especially for B2B. So, if you have product market fit. A salesperson should be able to pay for their entire burden to cost across the entire company. Because if you have that, then you can hire new salespeople at will. Because every incremental salesperson will be a breakeven new asset to the company. So in theory, you could just hire salespeople until that's no longer true. But as long as.

Pablo Srugo (00:52:02):
What does that mean? Does that mean if they cost 100K. They bring 100K ARR, or is it higher than that?

Mike Maples (00:52:07):
It's higher than that. So let's say that the company is spending. Has a $10 million expense, and you have three salespeople. Well, every salesperson has to contribute $3.3 million of revenue. Because that would be their burden to cost across the company, right? So, and now if I believe that every new sales rep I hire can contribute $3.3 million of revenue. Well, I can hire that person. Because the resources required to support that person will be, you know, I'll have more than enough to do that.

Pablo Srugo (00:52:47):
You're talking expenses across engineering, R&D, marketing, everything?

Mike Maples (00:52:50):
Across the whole company.

Pablo Srugo (00:52:51):
Oh, wow.

Mike Maples (00:52:51):
So the burden cost is all costs.

Pablo Srugo (00:52:53):
Okay.

Mike Maples (00:52:54):
Right? And so what you do is that sales yield. Can be, the way to think about sales yield is the dollars that an individual sales rep generates. Divided by their burdened cost. Which is basically the overall cost divided by the overall number of reps. And so as you can see, if a sales rep can generate more revenue than their, not just their cost. But their burdened cost. Well, then I can hire sales reps at will. Because every sales rep pays not just their own way, but the entire company's way completely. And so now I can scale at will. And by the way, a company with $10 million revenue usually has more than three sales reps, right? It might have 10 sales reps.

Pablo Srugo (00:53:36):
Yeah, I was going to say. That's a hard one.

Mike Maples (00:53:41):
But the logic is still the same. If it has 10 sales reps. If every sales rep is generating a million dollars and the costs are 10 across the company. You can hire more sales reps as long as they can generate a million dollars of revenue. And then the third is exponential organic word of mouth. And so if you can, those are all measurable things. Those are all knowable, measurable things that could be seen and observed. And what I like to say to founders is that be careful because, you're going to get deceived. You're going to want to believe yourself that you have product market fit. Your seed investors are going to want to believe you have product market fit. Because they want to help you raise money. Everybody around you is going to conspire to convincing you have it before you do. And I'm like, you know, there are ways to assess in the real world, in the wild, whether you have it or don't.

Pablo Srugo (00:54:30):
How do you measure that last one? What's your best measure for word of mouth?

Mike Maples (00:54:33):
You would, understand that the mechanism when a customer. When they, use your product. How does it spread within their organization or across organizations? Facebook did a really good job of this on the consumer side. You know, where they, but you know, part of why it's important is you'd say, Hmm, can I engineer exponential organic word mouth? Maybe I can create lighthouse customer programs. Maybe I can be at certain events or birds of feather kinds of things or discord chats or whatever the case may be. But you have to have some mechanism to get customers to syndicate the awesomeness of your value because otherwise you got to make up for it by spending money on marketing programs.

Pablo Srugo (00:55:17):
Is this fundamentally referrals? Like should you see X percent of your revenue coming from referrals?

Mike Maples (00:55:21):
I think ultimately. Yeah, or to me. The valid definition of a niche segment is a set of cross-referenceable customers with common desperation. And so you want to have a way for those people to come together and share their ideas about how you're solving their desperation. And there's multiple ways to do that. Sometimes it's network effects. Sometimes it's referrals. Sometimes it's different types of programs. It could be events. It could be customer councils. It could be, but the important thing is to realize that it's an important thing. But I think that most people would say, if I can prove that customers, whenever they experience my product, they love it. If I can prove that sales, every time I add a resource, can pay for its entire burden cost across the company. And if I can prove that I've created a mechanism for exponential organic word of mouth within my niche sector. I think most people would say that's a pretty strong set of cases that you have product market fit.

Pablo Srugo (00:56:19):
They can scale, yeah.

Mike Maples (00:56:20):
Yeah, that is a fairly robust first principle set of reasoning, right? That you have product market fit. So that's what I normally look for. And then I ask, okay, chances are we don't have it yet. And so then there's a book I like a lot called The Goal. Where you ask, what is the number one bottleneck? And so I'm like, okay, if we don't have product market fit, there's a reason. What is the most important reason? What do we have to do to crush that reason? And so another way to look at product market fit is it's the systematic elimination of bottlenecks. Between us and product market fit until there are no more bottlenecks. At which case we can scale at will. But it always comes down to the North Star. Which is, what can we do unique that people are desperate for? And then how can I eliminate all friction so that anybody who's rational. Who knows what my value proposition is? Who would be desperate for the empowerment that I offer, would instantly want this. That's the place I want to be.

Pablo Srugo (00:57:23):
Perfect. We'll stop it there, Mike. It was great chatting with you.

Mike Maples (00:57:27):
Yeah. Thanks, Pablo.

Pablo Srugo (00:57:29):
You remember the first person who told you about Bitcoin? The first person who told you about Uber? You want to be that person because being first is cool. So be a cool person and tell your founder friends. Send it to them on WhatsApp. Put it in a WhatsApp group. Put it on a Slack channel. Let people know about the show. Let people know about this episode. Don't let somebody else beat you to the punch and share it with your founder friends first. Remember what Ricky Bobby said, if you ain't first, you're last.