Silicon Valley venture firm Floodgate has closed on a new $131 million fund, and that could be good news for Austin startup founders.
The fund is the sixth raised by Floodgate, which is based in Palo Alto, Calif., and led by former Austin software veteran Mike Maples.
Maples --- who built his career in Austin as head of product marketing for Tivoli Systems in the mid 1990s and then as a co-founder and executive of Motive Inc. from 1997 to 2004 -- moved to Silicon Valley to pursue venture capital more than a decade ago.
But he has remained an active investor in Austin startups, backing companies including Aceable, which offers drivers education in a mobile app, BigCommerce, an e-commerce software maker, data.world, a data analytics and collaboration platform maker, and The Zebra, a car insurance comparison website.
Floodgate’s Silicon Valley deals include ride-hailing company Lyft, freelance labor force app TaskRabbit and social media platform Twitter.
Floodgate, which raised its first fund in 2006, provides seed funding to very early stage companies. With its new fund, Floodgate expects to make a dozen investments of $500,000 to $1.5 million a year over the next three years.
Maples said when he raised his first fund, he was interested in the concept of “lean startups,” which favors getting your product into the marketplace as quickly as possible while spending as little as necessary.
“You can use lean startup techniques to dramatically improve success in the marketplace with less money,” he said. “I started a fund that was designed to do that.”
Twitter, he said, is an example of how it can work. “They weren’t even sure if it was going to be a company until it blew up at South by Southwest.” (Twitter was a break-out star at the festival in 2007).
But today seed money is easier to come by, Maples said.
“Now there over 300 seed funds have raised capital, and 300 more are trying to raise a fund. Ten years ago, you couldn’t raise a million dollars to start company. You had to raise $250,000 from friends and family, or raise $5 million from a traditional venture fund. Now it’s dramatically over-supplied. It’s so easy to raise a seed round that a lot of founders get self-confident about how easy it will be. People are throwing seed money all over the place.”
So over the past few years, Maples said, the Floodgate team has created a framework targeted at what they call “prime movers who are on big missions” to build multi-billion dollar companies that transform industries.
“In a world of too many new startups, founders need to up their game if they want to win,” Maples said. “The tech industry is no longer just about technology. Lyft has changed transportation. Twitter has done the same for communication. Founders of companies in the next decade need to create movements.”
Austin, Maples said, is capable of breakout companies, and it’s what he would like to see.
“I don’t think Seattle did anything to cause (Microsoft founder) Bill Gates,” he said. “What I’m hoping is that there’s an Austin startup that will one day be worth more than $100 billion. It all comes down to the founder.”
Floodgate was among the first investors in The Zebra, which was founded in Pittsburgh, Pa., and moved to Austin in 2012 after getting funding.
Since then, Zebra has raised a total of $21 million and added Dallas billionaire Mark Cuban to its list of investors.
“The way Floodgate thinks about growing companies is incredibly valuable for anybody,” said Adam Lyons, co-founder of The Zebra. “It’s about ‘Here’s what the future’s like, here’s how to disrupt it, here’s what you should be thinking about, here’s what could impact you in the next 10 years.’ To have that support and that kind of feedback and perspective, for us has been amazing.”
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