mike maples ventureshift 7 17-13

Mike Maples, Jr (@m2jr)

July 8, 2013

Thunder Lizards

Why aren’t more people trying to build Thunderlizards?

Why aren’t more seed funds focused on finding them?

Exponential Entrepreneurship

Part 1: Two Basic Laws…

Law #1: Moore’s Law

Computing Performance doubles at the same price every 18 months

Moore’s Law: What It Means

• Animates the “magic” of the tech industry

• Asymmetric weapon of the startup

Moore’s Law and Exponential Companies

PC

Client/Server

Internet

Social Networking

Law #2: The Power Law

The biggest outcome is bigger than all of the others combined, and so on…

The Power Law in Practice

• 10,000-20,000 companies will be funded by Angels

• 1,000-2,000 will get VC funding• 50-100 “won’t suck” (exit > $50M)• 10 +/- 5 will be special (exit > $500M)• The best company in a given year will usually

be more valuable than all other 9,999 companies combined

The Power Law: What It Means

Outcomes do not follow a “normal” distribution

…they are governed by exceptionalism

•Maples Angel•Maples Fund I•Y Combinator•Exits in a given year

Merging the laws

Can I use the asymmetric power of Moore’s Law to create one one of the ten best

companies of the year?

Part 2: Exponential reasoning vs linear reasoning

We are hardwired to think linearly

• Linear thinking is intuitive

• Exponential thinking is not

Exponential Reasoning

E=mc2

Intuitive Reasoning

F=ma

Intuitive, tangible Counterintuitive, abstract

Observable Experiment Thought Experiment

Exponential Entrepreneurs and First Principles

• Reasoning by analogy– Copy what others do, but with slight variations– Characteristic of linear thinking– Gets us through the day– Start with a tangible idea

• Reasoning by first principles– Boil things down to their fundamental truths and reason up from there– Used to figure out things that are counter-intuitive, like quantum

mechanics– Start with a thought experiment– Key is to solicit negative feedback relative to the first principles

Reasoning by Analogy: Example 1

“Case method” of analysis (aka “pattern matching”)

Reasoning by Analogy: Example 2

Lean Startup / Customer Development “Religion”

Reasoning by Analogy: Example 3

Companies by analogy(ex “we are Instagram for Google Glass.”)

First Principles Reasoning: Bill Gates

Computers have always been expensive

…but someday they will be cheap

…which means software will become the valuable resource

Diagnostic Test #1

“Most people believe in X. But the truth is NOT X.”

First Principles Reasoning: Evan Williams

Millions of people write blogs

Micro-blogging is super easy

What if tens of millions create micro-blogs?

Diagnostic Test #2

What is valuable?

What is nobody else doing?

What can I do?

What valuable company is nobody building?

First Principles Reasoning: Elon Musk

Cost of rocket is huge

Cost of fuel is small (.3% of rocket)

100x improvement in cost of space travel if you could reuse the rocket

Diagnostic Test #3

What is your big “secret?”

Recommended Viewing

http://www.ted.com/talks/elon_musk_the_mind_behind_tesla_spacex_solarcity.html

Part 3: Exponential outcomes require a fundamental advantage

The Traditional View of Capitalism

• Capitalism is a system of perfect competition

The Broader View of Capitalism

• “True” capitalism and competition are opposities

“Gerry’s Law” of Capitalism

“Gerry’s Law” of Capitalism

“Don’t be the best. Be the only.”

Fundamental Advantages

• Perfect competition is not perfect• Can it transcend competition if it works?• At least 10x better in some area• Distribution strategy often flows directly

from the advantage

www.marchforinnovation.com#iMarch

THANKS!