Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Michael Smerklo was recorded in April 2019.
Michael Smerklo, Co-Founder and Managing Director at Next Coast Ventures, talks about some of the ventures his firm has invested in and the philosophy in general.
Sramana Mitra: Let’s start by getting to know you and introducing you to our audience. Tell us a bit about yourself as well as about Next Coast.
Michael Smerklo: I grew up in the middle part of United States. I’m the first person in my family to go to college. I started my career in jobs that I endured but hated – public accounting and investment banking.
I moved out to Silicon Valley in the late 90’s. I worked there for Morgan Stanley two bubbles ago. My first operating job was to go help a guy called Marc Andreessen and Ben Horowitz build a company called LoudCloud. For all the listeners that have read Ben’s amazing book, The Hard Thing About The Hard Thing, I lived chapters one through seven.
Then I left because I wanted to be an entrepreneur myself and run a company. I used some vehicle called a search fund and bought a small business in downtown San Francisco. I ran that business as CEO for about 12 years. From about 30 employees when I bought it, I took it to almost 3,000 employees when I retired.
I took it public in 2011 and I ran it as a public company for about three years. By the time I retired, it had 3,000 employees and had offices around the world. It’s a really great tech-enabled services business. I found myself at a point where I was both underqualified and exhausted.
So I decided to retire and move into venture. I co-founded Next Coast Ventures about four years ago in Austin, Texas with a gentleman named Tom Ball. Our whole approach was to start a firm off the coast of United States.
Our tagline is, “Built by entrepreneurs for entrepreneurs.” I’ve been running that firm with Tom for the last four years.
Sramana Mitra: Tell us a bit about the fund. How big is it? What do you like to invest in?
Michael Smerklo: Fund one was just under $90 million. I know you’re definitely in tune with the changing venture landscape. We set out to raise a $50 million fund. We put a lot of our money into it. Initially, we were looking to write check sizes in the $2 million to $5 million range Series A and Series B.
As we were pulling together that strategy, the venture landscape was shifting dramatically. We’ve stuck to focusing on Series A and Series B investments in United States. Austin is our headquarters, but we’re not entirely focused on Austin.
Our check sizes have moved more towards the $5 million to $10 million range. Because we’re a relatively small fund, we focus on three primary sectors – B2B SaaS, consumer, and emerging platforms. The best example of emerging platforms would be an Airbnb or Uber where software is driving the business model, but it’s not being sold in a traditional way.
Then we combine that with a thematic approach. We look at major trends that we see in the marketplace. These are things like digital natives becoming digital consumers or the changing face of retail. When those two things come together, combined with an amazing entrepreneur, which is the most important part, that’s where we get really excited.