15 Sep September 15, 2020 – Next Coast Ventures Mike Smerklo and Creator Mindset Nir Bashan
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Mike Smerklo – Co-Founder and Managing Director at Next Coast Ventures – Read interview highlights here
For every business or venture, someone has done it before you.
Go find someone who can give real advice and feedback.
Mike Smerklo is the co-founder and managing director of Next Coast Ventures, a venture capital firm that invests in entrepreneurs building disruptive technology companies and has backed more than 40 companies across two funds. Mike is an entrepreneur, investor, and business leader driven by the desire to turn ideas into reality. Prior to Next Coast Ventures, Mike bought a small technology services company, ServiceSource, and ran it for 12 years, scaling it from a small startup to public company with over 3,000 employees around the world. Mike Smerklo went through the many challenges in building ServiceSource into a successful public company, not the least of which is actually learning how to control the ever-present doubting voice inside himself. In his new forthcoming book, Mr. Monkey and Me: A Real Survival Guide for Entrepreneurs, Mike Smerklo ditches the usual platitudes of business memoirs to offer an honest look at the mental toughness and grit it takes to start, grow and operate a successful business. Through an actionable methodology called the SHAPE formula, he helps readers step up and pursue their dreams with confidence by developing a mindset that supports success in any scenario.
Nir Bashan – Founder and CEO of The Creator Mindset Consulting
When you are able to change your mindset into something
creative, you will then come up with and you will learn
how to make ideas.
Nir Bashan, the Founder and CEO of The Creator Mindset LLC, is a world-renowned creativity expert. Nir has spent the last two decades working on a formula to codify creativity. Through his workshops and consulting, he teaches business leaders how to harness the power of creativity to improve profitability, increase sales, and make work more meaningful. His clients include AT&T, Microsoft, Ace Hardware, NFL Network, EA Sports, JetBlue, and many others. He has also worked on numerous albums, movies, and advertisements, winning a Clio Award and receiving an Emmy nomination for his creativity, and was one of the youngest professors ever selected to teach graduate courses at the Art Center College of Design in Pasadena. Nir is the author of the latest marketing book, The Creator Mindset: 92 Tools to Unlock the Secrets to Innovation, Growth, and Sustainability, in which he draws from years of experience in advertising, entertainment, consulting, keynote speaking, and teaching to show you how to use creativity as a decision-making tool, and do so every bit as confidently as you use spreadsheets and data analysis.
Highlights from Mike’s Interview
I wrote the book, Mr. Monkey, largely because I thought it was a topic that was not being addressed around entrepreneurship, and that’s the mental aspect and just how doggone hard the job is. So Mr. Monkey is the caricature that has been my inner dialogue, a voice inside my head that has told me that I’m not good enough or I wouldn’t be successful. The book really dives in and Mr. Monkey becomes the main character, helping entrepreneurs think about this voice and learn to deal with Mr. Monkey, because I think everyone has a version of this monkey in his or her head.
That inner voice is very mean, and mine’s not only mean but sneaky too. I say in the book that I don’t want to gender stereotypes, so whatever it is, it could be his/her or it. I used to think maybe I could suppress it, and that’s what the whole book is about. I thought if I achieved enough, I took a company public, if I made enough money, that someday the voice would go away. But the real learning is the voice doesn’t, and not only does he not go away, but he actually gets smarter, bigger, faster, stronger, and sneakier. So I think that’s the whole version, the whole point is that he’s not going to go away. So how can you begin to bring him into the tent, make him somewhat of your frienemy, and perhaps benefit from the voice?
There are positive and negative inner voices, obviously, there’s motivation and all those things. But what I tried to bring to life is the negative aspects. I wouldn’t certainly put it as the conscience or anything like that, it’s more the voice that is going to get in your way. Entrepreneurship I think is the greatest job in the world, I think it’s desperately needed in the world now more than ever, I think we need more folks from diverse backgrounds. But the hardest part is getting up the courage to move forward with your idea. Then when you do that, you’re going to hit a bunch of roadblocks: you’re going to be told no, you’re going to make mistakes, all these things are going to happen. So rather than go into the broad sphere of the inner voice, focusing on entrepreneurship, to me, it represents the voice that’s going to tell you, you’re not going to make it. It’s a negative voice that is telling you that, for whatever reason. It could limit your creativity, it could tell you you’re not smart enough, not strong enough, not from the right economic background or social background. All of those things are what I tried to bring forward in the book, and then how to hopefully address it.
Some would argue that it’s inertia more than courage, and inertia certainly is one of the negative voices. I think it’s different for everybody, and that’s what I’m trying to get across. So inertia is a really hard thing to overcome for anybody. It could be a lack of confidence, it could be that I just don’t think I’m good enough. I started to hear it when I finally got to college. So a lot of my inner voice early on was, I talk about in this book, I started to get a little success and it’s like, wait a minute, you don’t deserve this. I grew up raised by a single mom, a lot of negative attributes. But I’m a white male that grew up in the right time, so I had a lot of privileges that others don’t. But my inner voice kept saying, you’re not good enough, you don’t deserve this. That’s my voice. It could be very different for anybody else, and that’s the whole point. It may show up as inertia, it may show up as I don’t deserve it, it may show up as I’m not smart enough. It’s all different, I think the key point is understanding your own inner voice and then starting to address it.
I talk about how to overcome this strong voice in the book and I lay out a very straightforward formula. Because what I didn’t want to do is come out with all platitudes and look how great I am, I wanted to give entrepreneurs wherever they are in their journey a very specific framework. So the first thing is acknowledging the voice, acknowledging it’s never going to go away, and bringing the voice in. That’s why I made this a monkey; sit down with a monkey, grab a glass of wine or a cup of coffee, and talk to him/her and really start to hear what the origins of the voice are and what it’s telling you. Then from there, I lay out an acronym formula called SHAPE that really helps you begin to address, and each chapter has what’s called Monkey Minders. Again, this is from my experience as an entrepreneur. I got to work with two legendary entrepreneurs in Silicon Valley before I started my own journey, and now I work with some of the best and brightest. So this is not the Mike Smerklo version of it, this is what I’ve seen across a pretty wide spectrum of entrepreneurs. I tried to provide very practical advice about how you actually get to know the voice and then how do you begin to live with and hopefully benefit from it.
For a large percentage of entrepreneurs, this little voice could also be called a chip on the shoulder. This is the benefit. I’m not saying this voice is not helpful, this doggone voice has told me I’m not good enough and it created a chip on my shoulder. If you look at the design of the book’s cover, in the lower right-hand corner, you see a shadow of an entrepreneur who is looking at him, cowering. So the monkey is basically the chip on your shoulder telling you you’re not going to do it. I get up early in the morning, still in this day and age, to prove the monkey wrong. So that’s part of the point, that’s part of the benefit. I would tell you, most great entrepreneurs, at least, from my own experience, have some chip on their shoulder, they’re trying to prove something. It’s not just financial, it’s to make an impact on the world or to prove someone wrong or both. So that’s the real powerful part of it.
So moving on to SHAPE, the formula is pretty simple. It does have some sort of build on it, the first aspect for the S is self-awareness. It’s about understanding yourself, what you’re good at, what you’re not good at, and where you can improve, or maybe you have to hire someone to help you. That leads to the H, which is help. The biggest thing I learned early on was Tiger Woods has a coach, Steve Jobs, the legendary founder of Apple had a coach, the founders of Google had coaches. So these great entrepreneurs, I think there’s a general belief that they’re superheroes, which is completely and patently false and wrong. You got to get help. So find help, either to help you mentally or with your professional attributes.
Keep in mind now, you do not need a high-paid coach. I think another mistake that entrepreneurs make is often they’ll get a mentor who’s ill-equipped. There’s this idea, I’m going to go find a guy or a gal that worked at Dell 20 years ago because they’ve got a big name. I’m not targeting Dell, it’s a great company. But whatever executive from whatever old company, that really has no idea that you’re a one-person and you’re in your garage starting your Amazon business. The point isn’t to go get a high paid coach, the point is to get a basket of helpers. That’s all that that chapter is really hitting upon is just don’t believe that you need to do this yourself. I also like to think that every business or venture, someone has done it before you. There are examples in just about everything, you can look back in history. So go find someone who has helped, who wants to spend the time and is willing to give you real practical advice and feedback.
So then, getting help and getting feedback, that leads to the next part of the formula which is authenticity. I was an imposter, I’ve suffered from imposter syndrome my whole life. I talk about how I had two different great leaders that I tried to copy, and then finally, one day I got exhausted and I realized I was not being authentic. There are a gazillion books on Amazon, they’ll talk about authentic leadership. So I’m not trying to replicate that. But the key point here is to find your voice, to find your true north if you will, and let that show up in your leadership.
There’s also this idea of fake it till you make it, and I just hate that term. Being competent and being aspirational, that’s a different concept. But fake it till you make it, I think it’s a really dangerous thing for entrepreneurs. I think being authentic and being real with where you are on your journey and what you’re trying to improve on is very different than fake it till you make it. I think fake it till you make it’s very dangerous, that’s one person’s point of view. The key is, I think when you start to have people work for you, or you’re going out to raise money, or whatever the point is, I found it exhausting to not be myself. So when I found my true voice, that allowed me to be much more mentally healthy as I went on the journey.
That’s where the persistence comes in next in the formula. I think this one’s pretty well known as well, but I think there’s just a real danger to not understanding that this is going to be a long and painful journey. I hate Shark Tank because I hate the idea that they show the people that go on a TV show, Mark Cuban gives them a thumbs up, and off they go, they exit the stage as if the day is done. That’s one small step on a very long journey. I think it’s a real danger being an entrepreneur to not understand that this is going to be a long journey, it’s going to be filled with ups and downs, and the more comfortable you get with that, which leads to E for expectations, the more successful I think you’ll be.
So the expectations leads from that, which is it’s going to be hard, it’s going to be a long journey, it has amazing ups and downs. I tell the story in the book, I used to wait for a day, I had this magical day in my head that said, when I get to X in revenue or X in value, and I had these numbers in my head, it’s going to get easier. But it gets harder the more money there is. There’s this old sad story. On day one, it’s you and a small little rowboat and the waves are really big. The boat gets bigger, more people get on it, the waves don’t go away. So the someday never comes is really what I’m trying to get upon. The more you can start to embody that and think about it and have the right expectations, I think that leads to a much stronger mental aspect, and it helps you deal with the monkey.
Switching the topic here, Next Coast Ventures is headquartered in Austin, Texas. We invest usually in typical Series A and Series B company, technology-focused. We’re typically looking for companies that have reached some level of what we call product-market fit, meaning that they’re actually generating revenue and they’ve got some established customer base, and then we’re trying to come in and give them capital and expertise. Everyone around the firm has been an entrepreneur, so we’ve sat in the seat, and we try and bring that practical knowledge to the companies and entrepreneurs that we back. That doesn’t mean we take over from the founder, we fully respect the founder. We take a board seat, we are board members, but we do not actually take over the operations. We’re there to try and coach and help and do anything we can to make him/her more successful. I was an entrepreneur, raised capital from some great venture investors, so we understand that the job is not ours to do. I think any venture capitalist who thinks that he can do the founder’s job is really mistaken. So we try and provide advice and help, but know that we’re not running the show.
I also bought and scaled a small business and eventually grew it to the point where we were able to IPO and publicly trade. The company is still in business today, it’s called Service Source. It’s still publicly traded. So basically, I wanted to be an entrepreneur, I didn’t know how to become one. I didn’t have a brilliant idea. So this is a great way, another alternative. I raised a small amount of capital from a vehicle called a search fund, 15 people gave me a little bit of money to go find a company to buy. I quit my job, I holed up in a small office and started dialing for dollars, literally calling up founders and owners of companies asking them to sell me their company. I got hung up a bunch of times, yelled at and screamed at, all that good stuff.
Then luckily, I came across a business that did outsource sales for technology companies, Service Source. I bought it when it was 30 employees and a couple million in revenue. For the next 12 years, grew it from that to almost $300 million in revenue, 3,000 employees around the world, and a publicly-traded company. So it was quite a run. I think the one thing we did incredibly well was, and I give this advice to entrepreneurs, we focused maniacally on our customers. So every development we did from a company, from a product, from a solution was all customer-led. That’s easy to say but hard to do. The real secret was just that focus, and then getting some phenomenal people to come join me on the mission. So it was a really incredible run.
A search fund is an interesting investment alternative. It’s pretty well skewed towards the investors, they get a right of first refusal on whatever company. Even if they choose not, they get a step up in their equity value. So it’s in a bit obscure asset class. The biggest thing I used to do is I would look at investors and I would say, with no laughter, I’m either going to make this work or I’m going to die trying. Some of my early investors used to say, we didn’t know if Mike was joking or not. Candidly, I wasn’t really joking. So in terms of fundraising, I just had an unwavering ability to look at people and say, I’m going to work until I’m damn near dead. I almost did, and that’s the reason I wrote the book. Listen, I’m not recommending anybody risk their health as I did, that’s why I wrote the book. But to be successful, it is a lot of hard work. There’s always this joke of you get to be your own boss. No, you’re going to have more bosses than you ever thought and you’re going to work tirelessly.
The book is available on Amazon. I’ve also got an entrepreneurs’ quiz on MikeSmerklo.com. You can go there, I’ve got a really cool quiz that helps you get a quick assessment of where you are on the mental aspect of entrepreneurship. Then, the book is available everywhere starting in early October.