How to Build a Moat Around Your Business

On this episode of Lochhead on Marketing, we have a dialogue with Mike Maples Jr. on how artificial intelligence is changing startups and venture capital. Mike Maples Jr. is the co-founder of Floodgate, one of the highest profile early stage venture capitalists. He also has a podcast called Starting Greatness, and it is one of my absolute favorites. By the end of it, we hope that you'll gain a new way to think about both technical risk for startups and market risk. And why in an AI world, you must either be radically different or radically disintermediate something. Welcome to Lochhead on Marketing. The number one charting marketing podcast for marketers, category designers, and entrepreneurs with a different mind. Mike Maples Jr. on AI We begin the discussion on the topic of challenges of making sense of the rapidly evolving field of AI. Mike also talks about the traditional funding model of startups, where the primary focus was taking out technical risk, and how the LAMP stack, which commoditized what was once expensive, made it easier to start a startup. Mike notes that the nature of the LAMP stack changed what startups were funded for. “What I like to say is that the LAMP stack was deflationary in terms of the cost of starting startup. And so what does that mean? It meant that what you were funding was different, because if Kevin Rose can start dig for $1,500, over a weekend, there's no technical risks there. I mean, he hired a contractor to do it that he didn't even know at the time.” – Mike Maples Jr. Who gets Product Market Fit first The conversation then moves on to the changing dynamics of venture capital investment. The discussion continues with the notion that technical risk and market risk are inversely related. Solving a technically difficult problem that is valuable to society will create a market; if the problem is easy to solve technically, it will all come down to who achieves product-market fit first. To add value to the business, Floodgate and YC have taken the approach of funding market risk takedown. As technology becomes more commoditized and innovations become more accessible, the person who creates something people want the quickest wins. This is why YC was so successful: it offered young people $100,000 to either take market risks or leave. He also mentions that the traditional venture capital model may not be appropriate for all businesses and that deflationary factors such as content, code, and data may change the way businesses are built. Mike Maples Jr. on AI and the future of Venture Capital Mike Maples Jr. then returns to the topic of artificial intelligence and its implications for the future of venture capital. Here, Mike emphasizes two ends of the risk spectrum: high technical risk and high market risk. On the one hand, some projects require large amounts of funding for mass computation in order to build massive models that have the potential to change humanity. On the other hand, AI is being used in a variety of fields, including content generation for marketing, customer service chatbots, and lead generation, resulting in a deflationary effect on content, code, and data. According to Mike, some businesses may not require traditional venture capital funding and should instead focus on achieving $50 million in revenue with a small team and minimal funding. There is also speculation that the current billion-dollar funds may be providing the wrong incentives to these companies. To hear more from Mike Maples Jr. and how AI can affect the future of startups and venture capital, download and listen to this episode. Bio Mike Maples Jr. is an entrepreneur turned venture capitalist. He’s co-founder of Silicon Valley based, early-stage VC Floodgate. And the host of the popular “Starting Greatness” podcast. Investments include Twitter, Lyft, Bazaarvoice, Sparefoot, Ayasdi, Xamarin, Doubledutch, Twitch.tv, Playdom, Chegg, Demandforce, Rappi, Smule, and Outreach. Link