Mar 24, 2023 · 55m · news
Mike Maples: Lessons from SVB; Crisis Management Tips; USD's Status as the Reserve Currency | E993 · 20VC with Harry Stebbings
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In this episode of 20VC, host Harry Stebbings interviews seasoned seed investor Mike Maples Jr. to dissect actionable crisis management playbooks for startup founders post-Silicon Valley Bank collapse, while exploring macroeconomic risks, venture capital structures, and the absolute primacy of product-market fit.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 21.4% of the talking time here. How this is scored →
Harry as informed peer 4.2 Guest teaching 3.4 Guest disagreement 1.9 Harry pushing back 4.1
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 53:25 Rejecting Clubhouse's Product-Market Fit
When Harry brings up Clubhouse to challenge the idea that true product-market fit guarantees long-term success, Mike bluntly rejects the premise, reframing Clubhouse's growth as mere 'COVID market fit' driven by housebound boredom.
Hardest push from Harry ▶ 45:12 Challenging VC Reserve Allocations as IrresponsibleHarry forcefully rejects standard venture capital logic by stating that reserving capital for follow-on rounds is irresponsible, arguing from eight years of investing experience that early winners and losers are far too unpredictable.
Biggest teaching moment ▶ 18:39 Teaching Boyd's OODA Loop and Fighter Jet AgilityMike educates Harry on military strategist John Boyd, explaining how the F-16 was engineered for hyper-agility to disorient enemies by completing decision loops faster than opponents can react.
Harry holds his own ▶ 39:58 Breaking Down the Capital Intensity of Modern AI StartupsHarry pushes back on Mike's view of software risk evolution by articulating the exact cost structures of AI startups—highlighting massive compute requirements, expensive data, and inflated engineer salaries to demonstrate a return to heavy upfront capital intensity.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Crisis Lesson 1: Scenario Planning and the Uncertainty Matrix | 2 | 3 | 1 | 1 | Harry sets up the discussion on practical founder lessons post-SVB and listens as Mike details scenario planning matrices. Mike explains how top founders map options against uncertain outcomes like COVID lockdowns without resorting to panic or blame. | |
| Executing Scenario Plans: The SmarterDX Case Study and 'Thinking in Bets' | 3 | 2 | 1 | 3 | Harry prompts for granular execution details and offers a reality check, noting that respectfully only one or two of his own portfolio founders did scenario planning. Mike illustrates the process using SmarterDX and Annie Duke's 'Thinking in Bets' framework. | |
| Multi-Stage Funds at Seed: Strategic Retreats and the Signaling Myth | 6 | 2 | 2 | 6 | Harry pushes back on Mike's claim that multi-stage funds are retreating from seed, citing Dave Tisch's 'five on twenty-five' product as counter-evidence. Harry also brings up partner churn dynamics while Mike argues that large fund sizes dictate focusing on major checks rather than small seed positions. | |
| Crisis Lesson 2: Financial Agility and the Three-Account Setup | 3 | 4 | 1 | 2 | Harry asks technical questions regarding money market and sweep accounts, admitting his own initial ignorance of these instruments. Mike reframes the issue away from optimizing basis points, educating Harry on building a three-account setup to maintain operational agility. | |
| Startup FinTechs vs. Big Four Banks: Prioritizing Resiliency Over Optimization | 4 | 3 | 2 | 3 | Harry brings up Twitter discourse around FinTech banks vs Big Four banks and asks about broader wealth migration. Mike redirects the focus, emphasizing that macroeconomics and central banking concerns are distractions from a founder's primary job of reaching product-market fit. | |
| John Boyd's OODA Loop: Agile Decision-Making and Shapers vs. Reactors | 2 | 5 | 0 | 1 | Harry asks for clarification on 'shapers vs reactors', leading Mike to deliver an detailed breakdown of Colonel John Boyd's OODA loop and F-16 design principles. Harry agrees warmly, drawing a personal parallel to David Goggins' mental preparation techniques. | |
| Crisis Communications Part 1: Over-Communicating and Radical Transparency | 4 | 3 | 2 | 5 | Harry playfully teases Mike for attributing wisdom to Christopher Lockhead before challenging the idea that investors respond productively when founders admit uncertainty. Mike argues that radical transparency with factual updates builds far more trust than spin or silence. | |
| Crisis Communications Part 2: Radical Humanity and Resisting Panic | 4 | 2 | 2 | 5 | Harry forcefully asserts that highly compensated VC leaders cannot afford to 'turn to mush' during crisis moments and recounts a glib founder email regarding SVB exposure. Mike stresses empathetic human communication while maintaining disciplined, panic-free execution. | |
| Sullenberger's Momentum, Finger-Pointing, and Fiduciary Duty to LPs | 5 | 2 | 2 | 5 | Harry argues against public finger-pointing at VCs regarding bank runs and asserts that encouraging companies to keep capital in at-risk banks violated fiduciary duty to LPs. Mike agrees with the LP fiduciary standard as his North Star while politely declining to pass judgment on peer firms. | |
| Quick Fire Round: Unforced Economic Errors and USD's Status | 3 | 4 | 3 | 2 | In a quick-fire round, Harry asks macro economic questions regarding federal deposit guarantees and inflation. Mike delivers a passionate critique of Washington's unforced economic errors and excessive money printing, warning that irresponsible stewardship threatens the US Dollar's reserve currency status. | |
| AI's Impact on Startups: The Intersection of Technical and Market Risk | 6 | 4 | 2 | 6 | Harry challenges Mike's historical tech-risk framework by arguing that modern AI startups require millions in hardware compute, data, and expensive talent, effectively returning to high capital intensity. Mike reframes this dynamic into a matrix of 'Big T' technical risk versus 'Big M' market risk. | |
| Fund Deployment Pacing, Reserves Management, and Follow-on Governance | 7 | 5 | 3 | 8 | Harry takes a strong, contrarian stance by calling fund reserves an irresponsible way to deploy capital because early winners are unpredictable. Mike counters with Dave Swenson's asset allocation principles and explains Floodgate's governance structure, where a separate partner manages follow-on allocations. | |
| Reflections on Board Seats, Investment Mistakes, and the Supremacy of PMF | 6 | 5 | 3 | 6 | Harry shares personal investment mistakes and questions whether seed startups need boards, before challenging Mike's premise on product-market fit by citing Clubhouse. Mike rejects Clubhouse as a counterexample, reclassifying its initial explosion as 'COVID-market fit' rather than true product-market fit. |
Statements from this episode (32)
Maples: US Dollar Will Lose Reserve Status Without Fiscal Responsibility
“It's inevitable that the dollar will not be the reserve currency that If we are not more responsible with the stewardship of our money.”
Maples: Best founders map choices against uncertain outcomes using scenario planning
“And so the best founders, what we saw, they were doing scenario planning. They, and with the scenario planning, what you try to do is you try to map the choices that you have, you know, the different options against the different uncertain outcomes.”
Maples: Founders in crisis cannot afford to assign blame or hope
“You want to be very sober, very matter of fact, very clear about what the options are. None of this, oh, woe is me. How did this happen? This isn't fair because you don't have the luxury to think those thoughts. You don't have the luxury to worry about who's t…”
Stebbings: Only 1-2 of 100 Portfolio Founders Did SVB Scenario Planning
“Respectfully, I, Probably had one or two out of maybe a hundred.”
Maples: Fund size dictates VC strategy during market crises
“The multi-stage firms, like any firm, your fund size is your strategy. So if there's a crisis, you're going to tend to worry about the companies that move the needle in your large fund. Less so than, oh, I wrote a million dollar check to this company 18 months…”
Maples: Venture capital signaling risk is overrated
“I think signaling is overrated. I think that companies that perform well always raise money. And companies that perform so-so Can sometimes benefit from a positive signal, but usually, usually not being able to raise is a function of not getting product market…”
Stebbings: Partner churn at multi-stage funds hinders Series A fundraising
“The one thing I think does make a difference is when you have partner churn at multi-stage funds, so if you can be orphaned at multi-stage funds, even if you do well, if there's no real owner, it can be a lot more difficult to have your internal champion to le…”
Maples: Startups start dead and must focus solely on product-market fit
“Startups start out dead and have to prove they're alive. And they have one job to do, which is get product market fit, And that means answering one very specific question, which is, what can we uniquely do that people are desperate for? And anything that you d…”
Maples: Founder time spent managing corporate treasury subtracts from product-market fit
“Your time is the only thing that's zero sum. And so a decision to become a part-time hedge fund bond expert, it subtracts from your efforts to get product market fit.”
Maples: Startups should split cash across three non-correlated accounts with transfer rails
“Have money in an account that's not correlated to Brex and Mercury in two other places, and have the rails set up between those pools of capital, those deposit accounts, so that you can immediately move from one to the other very quickly. It's the discipline o…”
Maples: Deciding twice as fast lets leaders correct mistakes before competitors act
“Even if my first move is wrong, if I'm moving at twice the rate that you're moving, I can adjust and make my next move before you make your first move. And so, even though I was wrong, I end up being right because I'm getting feedback from your decisions, and …”
Maples: Founders must be shapers who take initiative during crises
“Whenever you're in a crisis, you have to take the initiative, right? You, you're a shaper and not a reactor, and that's what I mean by that.”
Maples: Hiding during a crisis is the worst mistake a leader can make
“The worst thing a leader can do in a crisis is hide. And not having information is not an excuse to hide. So you got to lead from the front and be visible.”
Maples commits to daily LP updates during future financial crises
“If this ever happens again, what I will do is I'll say, we're gonna have a designated time each day where we say everything we know at the time.”
Maples: Effective crisis communications require zero spin and explicitly stating unknowns
“I think you gotta tell people what you know, you tell people what you don't know, and you tell people what you're doing to figure out what you don't know, specifically, and you wanna focus on facts and not happy talk, Zero spin, right?”
Stebbings: Founder Casually Downplayed $111M SVB Exposure During Bank Run
“I had one brilliant email, and it said we have a hundred and twelve million in cash a 111 of which was in SVB. Uh-huh. Not to worry. I'm sure we'll get it resolved soon.”
Maples: 85% of Floodgate founders stayed focused during SVB collapse
“85% of the founders that we worked with, and I feel really lucky, we made good choices of who we decided to go into business with, but 85% of the founders were just like on it, and we were just like taking care of business, right, and not wasting time on the s…”
Stebbings: VCs did not cause the Silicon Valley Bank run
“Can I be honest, it really pissed me off when I saw a lot of people say, oh, VCs are to blame for the bank runs. I was like, are you kidding me? Have you studied the mechanics of how banks work in SVB's balance sheet? It was not VCs that caused the bank runs.”
Maples: Protecting SVB depositors does not resemble a bailout
“Yeah, it's incredible to me that you could put your money in a bank, that there's not transparent reporting that the federal government said was okay, and now it's like somehow an entrepreneur's fault because The bank's assets weren't what they said they were,…”
Maples: VCs must prioritize LP fiduciary duty over bank loyalty
“Yeah, and I mean, like that's not the decision I would have made, right? I'm not gonna judge who made what decision, but my view is that it's not my money. And you know, if I was the Stanford Endowment, if I was you know, Sloan Kettering, what would I want Flo…”
Maples: US money printing during the COVID crisis was scandalous
“The amount of money that we printed during the COVID crisis is just a scandal.”
Maples: Kevin Rose launched Digg for $1,500 over a weekend
“Kevin Rose had started Digg for 1500 dollars over a weekend, and so there's no technical risk there.”
Maples: Hard technical startup problems require unambiguous market demand
“It's dumb to solve a hard technical problem that nobody wants if you solve it, right? That's just dumb. You want to solve a technical problem where people will unambiguously, desperately want it if you solve it, but it's hard to solve.”
Maples: AI reduces startup creation effort below Lean Startup levels
“I think if anything, it takes even less to develop an idea using AI than it did with lean startup techniques.”
Maples: Early-stage venture funds benefit from longer capital deployment horizons
“The riskier you are in terms of the stage that you invest, the better it is for you to have a longer time horizon.”
Stebbings: Allocating venture fund reserves is an irresponsible capital deployment strategy
“I think reserves are an irresponsible way to deploy capital”
Maples: Floodgate maintains a 70/30 split between upfront checks and reserves
“What we do at Floodgate is seventy-thirty”
Maples: Floodgate initial check writers cannot allocate follow-on reserves
“We have a partner dedicated just to follow on investing, and so the person that writes the first check Doesn't get to decide who writes the follow on check.”
Stebbings: Startup founders cannot overcome adverse political regimes
“No, they can't. They cannot overcome political regimes. It does not work.”
Maples: Overboarding limits an investor's ability to learn and stay present
“When you're on too many boards, sometimes you don't learn fast enough. You're not present and mentally awake enough, and you're not incorporating lessons quick enough.”