20VC The 4 Required Powers For A Startup To Be A $500m Business with The Most Powerful Woman in Startups, Ann Miura Ko, CoFounder @ Floodgate

In this episode of 20 minutes VC, host Harry Stebbings interviews Anne Muirco, co-founder of Floodgate, a prominent early-stage venture fund with investments in Lyft, Taskrabbit, and Refinery29. Anne shares her unconventional journey into venture capital, beginning as a technically inclined electrical engineer with a passion for business, leading to venture capital after a friend's suggestion and a pivotal meeting with a VC in Silicon Valley. She recounts her start at Charles River Ventures on the eve of 9/11, her experience teaching entrepreneurship at Stanford, and her eventual partnership with Mike Maples to co-found Floodgate. Anne emphasizes the importance of proprietary power, product power, company power, and category power for startups, highlighting the need for a strong market fit and the potential of category creation, as seen with companies like Netflix and Lyft. She also discusses the challenges of time management, her recent investment in health and wellness platform The Greatest, and the necessity of unit economics in startup growth.

• Anne Miura-Ko is the co-founder of Floodgate, a leading early-stage venture fund.
• Floodgate's portfolio includes notable companies such as Twitter, Twitch, and Weebly.
• Anne's personal investments include Lyft, Taskrabbit, and Refinery29.
• Forbes has described Anne as the most powerful woman in startups.
• The interview was facilitated thanks to Beezer at Sapphire Ventures.

"So joining me today is Anne Muirco, co founder at Floodgate, one of the valley's leading early stage venture funds, with Twitter, Twitch, weebly and many more all in their immense portfolio."

This quote introduces Anne Miura-Ko as a prominent figure in the venture capital world, highlighting her association with successful companies and her status as recognized by Forbes.

• Anne's journey to venture capital was not direct; she had a winding path with various interests.
• Growing up in Palo Alto, she was exposed to venture capital and entrepreneurship from a young age.
• Originally an electrical engineer with a focus on robotics, Anne developed an interest in business.
• She was advised to gain more experience before pursuing a career in venture capital.
• Anne worked at Charles River Ventures, where she began her venture capital career during a challenging time (starting on 9/11).
• She intended to return to graduate school, originally considering law school, but ultimately pursued a PhD in math modeling and computer security at Stanford.
• While at Stanford, she taught entrepreneurship classes and met Mike Maples, who introduced her to a new model of venture investing.
• Anne was planning to start a company but was persuaded by Mike Maples to join him as a co-founder of Floodgate.

"I actually have a very winding path to venture capital. A lot of people will say that they had this target of being a venture capitalist and worked towards it. For me, it was very random."

This quote explains that Anne did not have a straightforward or intentional journey to becoming a venture capitalist, which contrasts with the more typical narratives of individuals in the industry.

"My second day of work at Charles River Ventures was 9/11. And so the real great start, it was awesome in the sense that I actually got to see the hardest period of venture capital."

Anne's career in venture capital began during a challenging period, providing her with unique learning opportunities and shaping her understanding of the industry.

"I just accidentally raised a venture capital firm. It's $35 million. And my great idea is that you should drop out of your PhD program and be my co founder."

This quote recounts the pivotal moment when Anne was offered the opportunity to co-found Floodgate, highlighting the unconventional and serendipitous nature of her entry into venture capital.

• The venture capital landscape has evolved, with smaller investments becoming more common.
• Mike Maples' investment philosophy was that "$500,000 was the new $5 million," indicating a shift in how venture capital was approached.
• This philosophy was considered unusual at the time but has since become more mainstream.
• Anne's decision to join Floodgate was influenced by the potential to define the culture and build something innovative in the venture capital space.

"Mike Maples had really started to talk about this new model of investing that really only a handful of other firms were doing at that time."

The quote highlights the innovative approach to venture capital investment that Mike Maples and, by extension, Anne were advocating for, which was not widely accepted at the time.

"This is not a venture backed startup like you're trying to do, but this is now a backed venture startup."

This quote encapsulates the unique proposition made to Anne, framing the opportunity to co-found Floodgate as a startup in itself, albeit in the venture capital industry.

• Anne began her venture capital career during the aftermath of 9/11, a difficult time for the industry.
• The interview references another challenging period, the 2008 financial crisis, as a point of discussion regarding timing and its effects on venture capital.

"Then you said about the second day of Charles River Ventures being 9/11 and terrible timing, obviously, and talking of kind of terrible timings and interesting timings, 2008 was also a terrible time, financially crisis wise."

This quote draws a parallel between the start of Anne's career in venture capital and the broader economic context, suggesting that timing can have significant implications for the industry.## Early Stage Investments

• Anne Miura-Ko made early-stage investments in Taskrabbit, Modcloth, and Zimride (which turned into Lyft) between 2008 and 2010.
• This time period was seen as a great opportunity due to the economic downturn, allowing for more thoughtful investments and less competition.
• Anne capitalized on the situation by building relationships with entrepreneurs who were in need of funding.

"So between 2008 and 2010, I invested in Taskrabbit, Modcloth, and then Zimride, which turned into Lyft." "It was a great period because I just had the luxury of time, and I had this opportunity to sit down and think and not just to react."

The quotes highlight Anne's strategic investment choices during the economic downturn and the benefit of having time to make thoughtful decisions.

• Anne views the 2008-2010 economic downturn romantically due to the unique opportunities it presented.
• She was a PhD candidate and a budding investor, which made the period advantageous for forming mutual relationships with entrepreneurs.
• Investors at this time were innovating and ensuring they were entering into the right relationships.

"It was a great opportunity to allow me to take a bet on an entrepreneur and have them also equally take a bet on me."

This quote emphasizes the reciprocal nature of the investor-entrepreneur relationship during economic downturns.

• Anne leveraged every talent and connection she had to build her portfolio, despite having little brand recognition.
• She used endorsements from influential figures like Steve Blank, Eric Ries, and Tim Ferriss to establish credibility with entrepreneurs.
• Anne dedicated significant time and effort to the first few companies she invested in, such as Taskrabbit, which helped build her portfolio's foundation.

"So every single person who I knew who might be able to vouch for me, I got them to vouch for me."

Anne explains how she used her network to gain trust and credibility with entrepreneurs.

• The competition for investment rounds was not as intense during the economic downturn, allowing Anne to secure investments with less popular companies.
• Today, VC brand importance has increased, changing the dynamic of how investment opportunities are pursued.
• Anne's approach to building her portfolio involved focusing on companies with less competition, like Modcloth and Zimride, which were not in hot sectors at the time.

"And then similarly with Zimride, it didn't really have a lot of competition either."

This quote indicates how Anne targeted companies in sectors with less investor interest, which benefited her investment strategy.

• Anne discusses the concept of "thunder lizards," a phrase from Mike Maples at Floodgate, referring to startups with exceptional growth and impact.
• She emphasizes the importance of startups having levels of power for venture investing, as not all are suitable for this type of investment.
• Anne and her team analyzed startup exits over $50 million to understand which companies significantly impact venture capital funds.

"So the reason why we think about the different levels of power and why a startup needs to have these levels of power, is that we believe that not all startups are meant for venture investing."

Anne explains the rationale behind focusing on startups with certain levels of power, as they are more likely to provide significant venture capital returns.

• Proprietary power is one of the four powers of defensibility and is associated with what makes a company defensible.
• It can include intellectual property (IP), such as unique technology or expertise within the team.
• Anne provides examples of proprietary power, such as a company with extensive research from Stanford and a team with specialized knowledge in microsatellites.

"Yeah, so proprietary power, for the most part, is what most people would talk about when they say, we have something that is defensible."

Anne defines proprietary power and its importance to a startup's defensibility and potential for venture investment success.## Expertise and Team Authenticity

• Expertise in a specific domain can lead to the creation of successful and innovative products.
• Ev Williams' transition from blogging to founding Twitter (microblogging) exemplifies the value of domain expertise.
• Understanding customer behavior is critical and can contribute to a team's authenticity.

"Also say people like Ev Williams, who was an expert in blogging, then went on to found Twitter, which was microblogging."

This quote highlights Ev Williams' domain expertise in blogging, which he leveraged to create Twitter, a platform that transformed and specialized the concept into microblogging.

• Proprietary power can stem from unique assets or advantages a company has.
• Brand strength can be considered a form of proprietary power, though it's challenging to assess in early-stage investments.
• Proprietary access to resources, such as Apple's acquisition of strong glass for the iPhone, can also constitute proprietary power.

"Brand can be proprietary, but I think it's very hard to assess whether or not you have brand at the very, very early stages where we invest."

This quote conveys the difficulty of determining the proprietary power of a brand in the nascent stages of a company, emphasizing the complexity of early-stage investment evaluations.

• Product power is closely related to product-market fit.
• Market size and a strong need for the product are essential for true product-market fit.
• Product-market fit should be a "visceral experience" where the market demands the product.

"It's not product, it's not team, it's ultimately market that has all of the power."

The quote summarizes the concept that the market holds the ultimate power in determining the success of a product, emphasizing the importance of market demand over the product or team alone.

• Category power involves defining or creating a market in a way that resonates with customers.
• Successful category creation can redefine how consumers engage with a product or service.
• Netflix and Lyft are examples of companies that have created new categories within their respective markets.

"Netflix was very successful in creating a new category, not by attacking the existing market blockbusters had already defined, but rather by creating this new category."

This quote illustrates how Netflix created a new category by changing the narrative around media consumption, moving away from the traditional rental model to delivering media directly to homes.

• Company power encompasses the ability to scale a business model, minimize technical debt, and minimize organizational debt.
• Companies need to be prepared to scale their operations in response to product demand.
• Early conversations about company culture, hiring, compensation, and decision-making are crucial for scalability.

"Company power is a bunch of different things. First off, it is the ability to find a scalable business model. Secondly is to minimize your technical debt. And the third is to minimize your organizational debt."

This quote defines company power as a multifaceted concept that includes finding a scalable business model and managing both technical and organizational aspects effectively to support growth.## Unit Economics and Startups

• Unit economics have been a priority from the beginning for many companies.
• Zimride, before becoming Lyft, was notably capital efficient.
• Lyft maintained capital efficiency until faced with a well-funded competitor, necessitating a shift in strategy for survival.

I think we've taken a pretty hard look at unit economics from day one with almost all of our companies. And in fact, if you look at Zimride, it was an extraordinarily capital efficient business.

This quote emphasizes the importance of unit economics and capital efficiency in the early stages of a startup, using Zimride as an example.

• The challenge of competing against a "800 pound gorilla" in the market can threaten a startup's unit economics.
• Lyft's strategy involved building a strong sense of community and brand differentiation.

How do you play with someone like that when you have such a huge 800 pound gorilla fighting you that's so well funded? How do you do that without ruining your unit economics?

This quote raises the concern of maintaining unit economics while competing with heavily funded competitors.

• Lyft differentiated itself from competitors by fostering a sense of community and an irreverent brand image.
• The founders' belief in the shared ride experience was integral to Lyft's brand and community-building efforts.

And what we found was one of the first things that Lyft did that was really important was actually build a sense of community and brand and purpose.

This quote highlights the significance of community and brand building in differentiating Lyft from its competitors.

• The quick fire round is a segment where short statements prompt immediate responses.

So I say a short statement, and then you give me your immediate thoughts. How does that sound?

This quote introduces the quick fire round format, which involves rapid responses to short prompts.

• "The Poisonwood Bible" is cited as a favorite book due to its impactful writing and historical fiction genre.

I love the poison wood Bible. And it was just one of these books that I read probably about five years ago, and it just had such an impact in terms of the way it was written.

This quote explains the personal impact "The Poisonwood Bible" had on the speaker and why it is a favorite.

• Authentic founders are those who create startups with personal meaning, often stemming from personal experiences rather than just brainstorming ideas.

It's the person who is not just doing a startup, but is building a startup because it has personal meaning to them.

This quote defines what an authentic founder is and highlights the importance of personal connection to the startup's mission.

• Benedict Evans' newsletter and Hacker News are cited as go-to sources for information.

I love looking at Benedict Evans newsletter. I also look at Hacker News quite a bit.

This quote shares personal preferences for staying informed and highlights specific resources valued by the speaker.

• Time management is identified as an ongoing challenge.
• Bullet journaling and checklists are among the productivity hacks employed to manage time effectively.

Time management.

This succinct quote identifies time management as a key challenge for the speaker.

• Bullet journaling involves handwritten notes and organized task lists to aid memory and productivity.
• The speaker has shifted from electronic records to handwriting for better recall.

I've gone from trying to record everything electronically to trying to write down everything.

This quote explains the transition from digital to handwritten note-taking as a method to improve memory and organization.

• Delegating non-core tasks to family, friends, and colleagues is a strategy used to manage workload and focus on core responsibilities.

And so I just try to offload all the things that are not core to me, to people, my family and people who are my friends and people who work with me.

This quote reveals the speaker's approach to productivity through delegation and leveraging their community for support.

• The Greatest is a health and wellness media site catering to a younger demographic, offering content beyond just fitness.
• The site's engagement and growth potential reminded the speaker of a previous successful investment in Refinery29.

My most recent investment is a company called the greatest, and it is a company that I've been involved with for a few months now.

This quote introduces the speaker's most recent investment, highlighting its focus on health and wellness and the reasons for the investment decision.