Mike Maples on SVB, Crisis Planning and Investing Through Uncertainty

In a March 2023 conversation after Silicon Valley Bank’s failure, Floodgate co-founder Mike Maples discusses how startups can respond to crises. He has invested at seed stage since 2005 and draws on experiences from the 2008 financial crisis and the pandemic.

Maples says the quality of founders’ responses varied during the SVB run. Rather than relying on hopes about a single outcome, he recommends mapping uncertain scenarios against available choices, including how long funds could remain inaccessible and what spending or financing decisions would follow.

He compares this with planning for pandemic lockdowns of different lengths. The goal is a matrix of possible conditions and actions, not a prediction that any one outcome will happen. Founders can then discuss payroll, essential expenses and the possibility of additional funding soberly with their investors.

Maples cites SmarterDx founder Michael Gao as an example. He says Gao presented options to investors including what to do if only insured deposits were accessible, if some funds returned after a delay, or if the problem resolved quickly. Maples says he and his partner would have been enthusiastic about investing more on fair terms, revealing their investment interest in the company.

He considers scenario planning useful in ordinary uncertainty as well as crisis. A startup cannot know every outcome in advance, but it can prepare a more precise response as information arrives. He says a fair number of Floodgate founders had already encountered the exercise through a pandemic-era runway session.

Stebbings asks whether founders will favor multistage funds because they can provide emergency capital. Maples initially suggests some are retreating from seed, then qualifies that wording: he expects large funds to focus time and capital on investments material to their own returns. This is his assessment, not a measured industry-wide finding.

On the signaling risk of a multistage investor declining to lead the next round, Maples largely agrees with Dave Tisch that the risk is overrated. He believes product-market fit matters more to fundraising. Stebbings adds that partner turnover can leave a company without an internal champion, which Maples accepts as a fair concern.

Maples disputes the idea that every startup CEO should become a bank-risk expert. In his view, a young company’s central job is finding product-market fit, and time spent mastering bonds or bank balance sheets competes with that work. His alternative is to establish financial agility before an emergency.

As an example, he suggests setting up at least three places to hold money, ideally with different exposures, and keeping enough cash for operations in each where resources allow. He suggests around three months of runway per account, with remaining cash in what the company considers its least risky account. This is his illustrative 2023 approach, not a guarantee of safety or a universal prescription.

He says companies should also arrange transfer instructions and authorize the people who can move money before they need to act. Opening accounts in the middle of a crisis can take time when many others are doing the same. The objective is to be able to respond quickly, rather than optimize a few basis points of return.

Asked about money-market and sweep accounts, Maples says the appropriate instruments can change over time and others may disagree with his emphasis. He prioritizes a resilient, workable setup that allows the founder to return attention to building the product.

Stebbings asks whether startup-focused banking providers are safe alternatives. Maples declines to endorse a particular bank, saying the variables change and he does not want unintended effects from a public recommendation. His general principle remains to use multiple, differently exposed accounts with transfer pathways ready.

Stebbings worries that deposits will concentrate at the largest banks. Maples shares broader concerns about banking but argues that an individual founder cannot solve them while running a startup. His advice is to create room to act in different conditions and keep attention on the company’s mission.

He explains agility through military strategist John Boyd’s account of a fast decision loop. A pilot who can act, observe and adjust faster can recover from an initial mistake and retain the initiative. Maples applies the analogy to founders: prepare accounts, authority and choices so that the team can act instead of improvising under pressure.

For crisis communication, Maples credits Christopher Lochhead, co-author of Play Bigger, for four principles: communicate frequently, be radically transparent, be human and keep moving. He says he consulted Lochhead because of his experience communicating through corporate crises.

First, do not hide because the information is incomplete. Maples says he would improve Floodgate’s own communication with limited partners by setting a regular daily time to report what is known. Employees, customers, investors and partners need timely information even when leaders cannot answer every question.

Second, explain what is known, what is unknown and the specific steps being taken to learn more. Maples recommends facts over reassuring spin. In his experience, silence can lead stakeholders to assume that the leader is hiding something, whereas clear acknowledgment of uncertainty builds confidence.

Third, recognize that people are scared about jobs, money and the survival of a company. Leaders should acknowledge those feelings while remaining steady and acting on them. Maples says individuals may react very differently under stress, and leaders should respond with empathy rather than anger.

Finally, keep making progress. Maples uses the example of an aircraft gliding after losing its engines to illustrate the value of momentum. He advises teams to focus on the next useful action rather than spend scarce energy on blame or scapegoating.

Maples says roughly 85% of the founders he and his partner worked with focused on practical responses rather than blame. This is his impression of their own portfolio, not a survey of all startups. He contrasts that experience with the arguments he observed on social media.

Stebbings rejects claims that venture capitalists caused the SVB run. Maples says the criticism revealed distrust of investors and technology, while disputing the characterization of deposit protection as a bailout. These are the speakers’ positions in a contested debate, not a complete determination of the causes or policy consequences.

Stebbings also questions urging portfolio companies to keep money at the bank despite the risks. Maples says he would not have made that decision, but avoids judging individual managers. His own guiding question is what the investors whose money Floodgate manages would reasonably expect it to do.

Asked about the end of 2023, Maples predicts a more difficult economic environment. He argues that Western governments have relied too heavily on monetary expansion and says, conditionally, that the dollar could lose reserve-currency status if US stewardship does not improve. He does not claim a specific date, and these are his views and forecasts at the time.

He declines to prescribe a universal deposit guarantee. Instead, he criticizes the scale of pandemic-era monetary expansion and argues that it contributed to persistent inflation and subsequent rate increases. He acknowledges that he is not a macro forecaster; the causal account is his interpretation rather than a settled conclusion of the interview.

Turning to AI, Maples distinguishes technical risk from market risk. Older startups often raised money to prove a hard technical milestone in a market where demand was assumed; lean startups could build cheaply and instead needed to prove that customers wanted the product.

Stebbings asks whether AI is making company formation expensive again. Maples says some ambitious AI ideas require substantial compute and funding to resolve technical uncertainty. For those projects, he argues, it is important to tackle a problem with clear demand if solved rather than a difficult problem nobody wants.

At the other end, AI may lower the cost of writing code and testing ideas, creating many similar products competing for adoption. Customers can benefit, but a startup must capture value as well as create it. Maples sees both technical and market-risk opportunities, while saying their solutions are not obvious.

On fund pacing, Maples says time diversification is especially useful at risky seed and pre-seed stages. Deploying over a longer period avoids having every investment exposed to the same market prices and lets a manager observe different conditions without predicting the cycle.

He says Floodgate’s sixth fund invested from 2017 to early 2022, roughly five years. By a market correction, some earlier companies had already reached product-market fit while later investments remained less mature. This is his rationale for pacing, not proof that the fund achieved a particular return.

Stebbings questions reserves because early winners are not always obvious. Maples says Floodgate uses a 70/30 allocation between initial investments and reserves and treats pro rata rights as opportunities to deploy capital offensively, rather than automatically supporting every struggling company.

Floodgate assigns partner Iris to follow-on decisions separately from the partner who made the initial investment. Maples wants the original partner highly committed to helping the founder, while a second person assesses where follow-on capital can earn returns. Partners still share knowledge within the firm.

He says the team compares reserve allocation with the most valuable companies in a fund, measured by valuations rather than opinion. High allocation to those companies can indicate discipline, but valuations are not realized cash returns. He cautions against assuming a manager knows better than the entire market when a company cannot raise.

Stebbings describes his own mistake of evaluating a business too academically and overlooking geography, political conditions and other external factors. Maples says his recurring mistake is falling in love with an idea that fits his view of the future without sufficiently testing whether the founder can execute it.

Asked whether seed companies need boards, Maples says the answer varies. His guiding principle is that the investor’s role is to help the founder find product-market fit, whether or not joining a board serves that purpose. He says excessive board commitments earlier in his career reduced his ability to learn and be present.

Maples recalls asking Michael Seibel whether a startup with genuine product-market fit had failed or not become very successful. Maples could not name one from his own experience; he says Seibel could name only one among the companies he had seen at Y Combinator. This is an anecdotal recollection, dependent on their definition and sample, not a measured failure rate.

Stebbings asks whether product-market fit can be transient, citing Clubhouse. Maples considers its pandemic-era popularity ‘COVID-market fit’ rather than durable product-market fit, while saying he is still rooting for the company. His classification is a subjective assessment of that example.

Asked about his biggest cash-returning investment, Maples says Lyft is probably among the largest. He recalls Ann investing $750,000 at a $5.5 million post-money seed valuation and says the fund sold at favorable times. He does not give an exact realized multiple in this conversation.

On limited partners, Maples agrees that managers who missed opportunities to distribute cash may face fundraising criticism. Ultimately, he says, investors want their capital returned with a gain; whether or not a manager delivered that outcome shapes how they assess the decisions made along the way.