Jun 3, 2016 · 5 minutes

Yesterday I wrote some 4,000 words about an underrated female VC Floodgate’s Ann Miura-Ko.

But there was a bit of the discussion that I cut for length that’s nagged at me all day. I felt it was interesting enough it was worth a follow up.

It involves the tricky thing about Miura-Ko’s consumer track record: She’s backed beloved, iconic, and category defining companies, but Lyft is her only unicorn. We discussed at length whether that was a good thing or a bad thing. In 2016, it’s not at all clear. Whether we ever enter an actual venture capital crash may dictate the answer more than anything.

We’ve written a few times recently about companies like Thumbtack that have almost no brand, but insane revenues and runway, and companies like Postmates who are unquestionably leading their market, despite not being anointed the Silicon Valley darling.

As 2016 goes on, expect more companies like these to stand out. Read Bill Gurley’s manifesto to understand why spending less cash, raising less money and having a sane valuation is underrated. That is hardly a self-interested position. That’s a guy that Snapchat, WeWork, and Uber are making rich.

Floodgate’s partners granted my point, but argued that it likes to back movements not companies. It has made-- and will continue to make-- money off those movements in part because it invests so early. Her partner, Mike Maples said that Miura-Ko in particular has at least one deal in each fund that could easily return the whole thing.

But do movements always spawn the largest companies?

One of Floodgate’s bragging right early on was being an investor in Digg-- unquestionably a movement that flamed out. Both Maples and LinkedIn and Greylock’s Reid Hoffman have said it was one of the biggest and most surprising disappointments of their investing careers. Twitter is easily Maples’ biggest hit, again an early deal. I’d argue Twitter is more of a movement than Facebook or Instagram or Snapchat. But today, Twitter is also more of a movement than a company.

ModCloth has been a pioneer in promoting healthy body issues among women, and it should get credit for surviving in fashion ecommerce. But will it become a $1 billion win? Similarly, quirky Lyft is a far more of a movement than Uber. It’s the ridesharing company that gives a fuck. But it’s a distant number two in the US to Uber.

Still, as a watcher of this industry, I’m not complaining about the approach. It’s far better than firms who just shrug and accept they’ll just have to fund assholes.

Below are excerpts from the interview I did with the partners on the topic. (Including an obligatory dig at Y-Combinator….Mike “honey badger” Maples is one of the few VCs who isn’t afraid to do so. )

Ann Miura-Ko: When we did TaskRabbit there was no framework, there was no sharing economy. That was the challenge for us. We were not only not riding a wave, we had to discover and help them create that wave. We call it category creation. A lot of these companies talk a lot about building a product and some will even get into company building. But even that feels like not enough. The last leg is category creation, especially in the world of lean startups where it’s all about iteration. That third leg of the stool has been lost.

I was trying to describe it to a student the other day. In lean startups you could think you are at the foothills of the Sierra, when in reality you are looking for basecamp at Everest. How do you figure that out?

Mike Maples: If you look at some of the companies that have gone through Y-Combinator, you see this. If you do product design but not company design you get Zenefits. If you do company design but not category design you get Dropbox, and so you get people who are unaware they are playing a game with multiple dimensions to it. Traction is not a company. When it comes time to scale super fast, you don’t want  to have to tell the last duck to get into a V-formation.

Miura-Ko: At the end of the day, I’m proud of them for not getting caught up in the billion dollar valaution hunt, because both [Modcloth and TaskRabbit] could think about being capital efficient and how to get to profitability. TaskRabbit in particular is going to get to profitability by the end of the year.

They were super scrappy. So was Lyft. In 2009 or so, [Manu Kumar] and I literally had to sit John [Zimmer] and Logan [Green] down and give them a pay raise. I think they were paying themselves something like $50,000 a year. Logan said he was going to eat from this one can of beans for two weeks, and I think it lasted like a day. That’s how scrappy they were.

[That ethos] was mutually reinforced. We really didn’t have an office space, so I remember Floodgate was homeless for a little while. We were trying to have our first board meetings with Lyft and John and Logan were working out of a one room place. We couldn’t do it there. We had to use the common room area of a dorm at Stanford, because none of us had offices.

I remember when Andreessen Horowitz first invested and we were having this conversation on how do we use this huge amount of capital. You could tell around the room, minds were being blown.

That mindset still sticks with them.

Maples: We’ve always believed in investing in movements, not companies. TaskRabbit and ModCloth and Lyft are all movements. They have a point of view and fans. Floodgate itself was a movement to democratize innovation [by pioneering the “super angel” trend which invested smaller amounts than most VCs, but bigger amounts than most angels.]

Part of that is also our gender and ethnicity balance and the people we back. We’ve had the most success when we’ve invested in movements. They are so powerful they happen to make money.