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Episode Summary
You had a vision when you started this thing. Then somewhere between hiring the wrong VP of sales, missing payroll the first time, or watching your competitor raise a round you’ll never raise, a voice showed up in your head telling you that you don’t actually belong in the chair you built. Mike Smerklo calls that voice Mr. Monkey. He’s heard it every step of the way: as a kid in the rough part of Toledo, as a CPA, as an investment banker, working for Andreessen and Horowitz at Loudcloud, raising a search fund in 2003 (the worst capital market in a decade), buying Service Source for $12M, growing it 40% year-over-year to $300M in revenue, ringing the bell at the IPO, flying home on a private jet over Toledo, and getting beat up by public shareholders by Monday morning. Mike and I dug into the SHAPE framework he wrote the book around (self-awareness and help are the two that hit hardest), why “fake it till you make it” is a dangerous phrase that quietly produces WeWorks, how he tied his own equity to investor performance from day one, the three growth levers that turned a sleepy services business into a public company, and why the first 50 hires set every culture you’ll ever have. He also drew a clean line between venture capital and private equity that most owners I talk to are still getting wrong.
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## Top 10 Takeaways- Your business problem and your mental problem are the same problem. The monkey doesn’t go away when you hit a revenue number.
- “Fake it till you make it” is dangerous. Vision and energy aren’t faking. Misstating where your product is, is.
- Self-awareness is the most underrated owner skill. What are you actually good at? What are you not? Stop bullshitting on both.
- Asking for help isn’t weakness. Tiger Woods has a coach. Steve Jobs had a coach. Why don’t you?
- Mentors have to be relevant and timely. A 75-year-old Fortune 500 CEO is dated advice for your startup.
- Tie your equity to your investors’ returns from day one. Alignment beats every negotiated cap table clause.
- Grow a services business 30%+ with stable EBITDA and you create real value every year without the multiple moving.
- Custom-house your business and nobody else can move in. Optimize the K-1 and you build a place only you can live.
- Whenever you take money, understand what the giver expects in return. Uncle Fred, venture, and the IPO buyer want very different things.
- The first 50 employees set your culture. After that, culture leaves your hands and lives in theirs.
Sound Bites
“100% of the companies on the planet that I’ve ever met are underpriced. There is not one attribute with this one thing. I do think self-awareness might be the most important attribute in success.” (@TBD) — Mike Smerklo
“Tiger Woods has a coach and Steve Jobs has a coach. Why wouldn’t Mike Smerklo not have a coach?” (@TBD) — Mike Smerklo
“If you had a $100 million business generating $20 million of EBITDA, you can grow that to 130 and EBITDA grows in line with it, the multiple doesn’t have to move, you’ve just created substantial value.” (@TBD) — Mike Smerklo
“The first 50 employees are all that matters. They’re going to set the culture of the business. After that, they’re going to go hire employees, and culture will leave my hands and go to theirs.” (@TBD) — Mike Smerklo
“We’re flying home on a private jet over Toledo, Ohio, and I’ll tell you that ecstasy was a Saturday. By Monday morning, when I started getting beat up by public shareholders, that all went away.” (@TBD) — Mike Smerklo
About This Episode
Mike Smerklo is the co-founder of Next Coast Ventures, an early-stage venture firm based in Austin investing in entrepreneurs across the “next coast” of the U.S. Before Next Coast, Mike ran a search fund acquisition of Service Source, growing it from a few million in revenue to nearly $300M and taking it public, serving as CEO for over a decade. Earlier in his career, he worked directly for Marc Andreessen and Ben Horowitz at Loudcloud during its early days. He’s the author of Mr. Monkey and Me: A Real Survivor’s Guide for Entrepreneurs, with all proceeds going to a scholarship he set up for underrepresented students pursuing entrepreneurship. This episode is a mix of mindset, deal mechanics, and capital structure (which is why I wanted him on).
Resources Mentioned
- Mr. Monkey and Me: A Real Survivor’s Guide for Entrepreneurs by Mike Smerklo — All proceeds go to a scholarship for underrepresented students in entrepreneurship. Available on Amazon.
- Mike Smerklo’s website and blog — mikesmerklo.com
- Next Coast Ventures — Mike’s venture firm in Austin.
- The Hard Thing About Hard Things by Ben Horowitz — Mike’s pick for the best book on startups.
- Shoe Dog by Phil Knight — Referenced as one of Mike’s favorite founder stories.
- Bill Campbell — The legendary Silicon Valley coach who told Mike to get a coach.
- Todd Herman / The Alter Ego Effect — Referenced for the conversation on imposter syndrome.
- Ep. with Jason Dorsey — The mutual friend who introduced Ryan and Mike.
Connections
Phase + Module:
- Module 5 — Predictable Revenue — The three growth levers (sales/marketing, analytics, international) that scaled Service Source
- Module 7 — Leadership Team — Mike’s “first 50 hires set the culture” thesis
Milestones:
- Milestone 13 — Strategic Plan — Picking the growth levers that compound value over a decade
- Milestone 21 — Leadership Development — Coaches, mentors, and asking for help as the operator’s discipline
Concepts referenced:
- Normalized EBITDA — The multiple-of-EBITDA math Mike used to underwrite value creation
- The Multiple & WACC — Why venture, private equity, and public buyers price the same business differently
- Sustainable Financials — Consistent growth + consistent gross margins + consistent profitability as the formula
- Case Study Reference — Service Source: search-fund acquisition at $12M to IPO at $1B+