TECH MONEY

Austin’s Next Coast Ventures launches an $85 million fund to invest in startups

The new venture firm plans to invest much of its money in Central Texas.

Posted March 2nd, 2017

Good news for Austin entrepreneurs: Next Coast Ventures has closed on an $85 million fund to invest in startups.

The new firm, founded by two technology industry veterans, plans to do 20 to 30 deals, with up to three-quarters of them in Central Texas.

“We are thrilled with the activity we’re seeing in Austin,” said Mike Smerklo, co-founder and managing director of Next Coast Ventures. “We want to be part of the ecosystem that helps drive the next generation of technology companies.”

Mike Smerklo, co-founder and managing director of Next Coast Ventures.

The fund is one of the largest raised in Austin in recent years. Last year, S3 Ventures announced a new $75 million fund to invest in tech startups. Meanwhile, Austin-based Silverton Partners is in the process of raising a new $100 million fund, according to securities filings.

Next Coast Ventures’ fund comes as the venture landscape in Austin is shifting. While seed-stage funding -- typically less than $1 million raised by very early-stage companies to get off the ground -- is still available, it has become more difficult for expansion-stage companies that are trying to raise larger rounds of funding.

RELATED: Are Austin startups falling behind in the venture capital race?

Next Coast will focus on early stage companies, writing initial checks of between $2 million to $5 million, said Tom Ball, co-founder and managing director of Next Coast Ventures. 

Ball said the firm will act as a bridge to help Austin startups connect with Silicon Valley investors, who can provide larger rounds of funding down the road.

“Our relationships in Silicon Valley mean we can syndicate deals with venture firms in the Valley, and bring that DNA here,” Ball said. “We both have strong ties there, and we think that will benefit companies in Austin and other markets that are under served.”

Tom Ball, co-founder and managing director of Next Coast Ventures.

Prior to founding Next Coast, Ball was a general partner with Austin Ventures, where he spent 10 years focusing on early stage investments. Prior to Austin Ventures he founded several companies including Openfield Technologies and eCoupons.

Smerklo was formerly CEO of ServiceSource, a San Francisco-based technology services firm. Before that, he founded software company Nucleus Growth.

Ball and Smerklo raised the fund from institutional investors, funds of funds and wealthy families.

“We expect that between 50 and 75 percent of our fund will come from opportunities in the Austin marketplace,” Smerklo said. “We also want the latitude to look at markets that are similar to Austin -- strong entrepreneurial endeavors but perhaps not as much institutional capital as you would see on the coast.”

Next Coast will invest in business models designed for digital natives, as well as startups in education, retail, business-to-business and business-to-consumer sectors.

The firm has already invested in six startups, with four of those based in  Austin, one in San Francisco and one in New York. The Austin deals are Umuse, Dropoff, OnRamp and Phlur. 

“There is more promising activity going on in Austin right now than any time in the 11 years I’ve lived here,”  Ball said. “That’s driven by the great companies that have been created here, and by the great talent pool and great universities. People see the successes here, and they want to move here to build a company.”

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