This week’s Misfit Entrepreneur is Mike Smerklo. Mike is a serial entrepreneur, investor, and founder of Next Coast Ventures, a unique venture capital firm that focuses on emerging companies heling them in the critical stage to hyper growth. After working in investment banking at Morgan Stanley, Mike was then recruited by Marc Andreessen and Ben Horowitz to one of their new startups. In 2003, Mike purchased ServiceSource, a 30-person tech services startup and over the next 12 years grew it to a 3000 person publicly traded company with over $300 million in revenue and a market value of $1 billion.

After exiting the company, he founded Next Coast, investing in over 40 startups to date and recently wrote the best-seller, Mr. Monkey and Me.

Needless to say, Mike has a wealth of experience as an owner/operator and investor, and I am excited for him to share it with you.

www.MikeSmerklo.com

Mike grew in a rough part of Toledo, Ohio. He was raised by a single mom and had a simple goal which was to just get out. His mom focused him on education as no one had to gone to college in the family. He listened and ended up going to Miami of Ohio. After college, he went to E&Y as an auditor and found quickly he hated it. He then went to Lehman Brothers in investment banking. It sucked the life out of him, but he learned a lot before going to business school and then eventually out to Silicon Valley. He worked for Andreessen Horowitz, bought and ran ServiceSource until he sold it and the “retired” to Austin, Texas. Retirement didn’t last long before he started Next Coast.

What makes a great business?

• The short answer is “Do you do something for your customer that is a differentiating approach?”
• Do you bring a different and unique experience to the customer that they are willing to pay for once or multiple times?
• We overcomplicate things in our lives, especially business.

You wrote Mr. Monkey and Me as a story of your journey with ServiceSource and lessons learned. Take us through the different lessons you learned.

• The goal was to write a book that got to the mental aspect of entrepreneurship.
• He not only drew on his experience, but also interviewed top entrepreneurs.
• The “monkey” is the voice in entrepreneur’s heads that holds them back,
• The core of the book is the SHAPE formula.
  • Self-Awareness
  • Help
  • Authenticity
  • Persistence
  • Expectations

Take us through each element of the shape formula and define them.

• Self-Awareness: The ability to understand strengths and weaknesses and what the entrepreneur should focus energy on to improve.
• Help: Seeking mentors and coaching to help improve, but also finding those that are better in areas to help in the business.
• Authenticity: Finding your inner voice. How do you show up as the leader that you want to be and is natural?
• Persistence: Playing the long game and having the will to continue.
• Expectations: Thinking about the beginning, middle, and end of the journey and the different expectations needed at each stage.

At the 14 min mark, we talk more about SHAPE and persistence more in depth.

Lessons from working with Andreessen Horowitz that have really helped in your success?

• Each of them taught him different things. It was also early in their days in 1999.
• It felt a little like chaos.
• From Mark, Mike learned the power of thinking big and not taking half-measures.
• Ben taught Mike a lot about management.
• The best “how to be a manager book” is Management by Objectives by Andy Grove.
• Ben also shared that the first 25 employees hired in a company is all that matters. If you get those right, the culture, ethos, etc. will be set by those first 25.

40+ investments at Next Coast. Talk to us about your model and what you look for when investing a company.

• Market size is a factor.
• Does the solution differentiate and are customers willing to pay for it? Will they see real value?
• What do the economics look like and do they make sense?
• But 90% of it comes down to the entrepreneur.
• They use a term called “glass-eater.” Which is asking “Is the entrepreneur willing to do anything and everything, legally and ethically, to make the business a success building a real business – and do they know what it takes to do it?”
• Next Coast looks at over 1000 companies a year to find just a few.
• Things that get overlooked are that entrepreneurs have to be able to sell and have to be good at telling the story.
• “Great entrepreneurs can’t imagine the world without their solution.”
• At the same time, entrepreneurs have to be willing to take feedback and advice.
• Entrepreneurs also overlook substitutes and inertia as competition.Things that are not direct competitors but are taking customers attention.

What are market trends and things that are upcoming that entrepreneurs should be focused on?

• Each year, Next Coast does a lot of work to understand where the world is going.
• Future of work is still a strong theme. Work continues to be redefined.
• There is a still a lot of opportunity in the changing game of retail.
• Software is another good place.
• Healthcare hacking is big. Consumers taking more control over their health.
• Education is another place that is at the start of a big shift.

Where do you see the future of work and the changes that will happen?

• Figuring out what a physical presence looks like.
• Great talent is everywhere and not having to have a complete physical presence makes it easier to get it.
• Challenges are managing in a hybrid work environment.
• Creating a cohesive culture in this new environment.
• Things are being reshaped.

Another big trend is monetizing data.

What is software 3.0 and how it is changing growth models… 

• It is still very early for software.
• It has gotten much easier to write software.
• Software 3.0 is no code, APIs, businesses that have software becoming a much bigger part of it.
• Enterprise is more saturated but using software in all aspects of life is just beginning.
• Next Coast invested in Everlywell which is healthcare hacking software which allows you to take a test a home on over 30 different things and then get results through software online.

What do you think is most important for entrepreneurs to focus on in their business?

• The customer – they are everything.
• The entrepreneur must focus on their health – mental and physical.

Best advice for entrepreneurs just starting out?

• Self-awareness is the cornerstone. Understand what you are good and not good at.
• It is better to play to your strengths than correct your weaknesses.

Best Quote: Great entrepreneurs can’t imagine the world without their solution.

Mike's Misfit 3:

1. Be nice. The world needs it now more than ever.
2. Comparison is the thief of joy. Envy wastes emotion and drains you.
3. It is easy to live a hard life. It is hard to live an easy life.

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This week’s Misfit Entrepreneur is David Garofalo. David has 30 years of experience in the creation and growth of over 15 multi-billion-dollar sustainable mining businesses across multiple continents and has led the largest merger in gold mining history valued at $32 billion dollars. That’s a heck of a track record. If that is not enough, David is still at it. He now serves as CEO and Chairman of Gold Royalty Corp, a precious metals-focused royalty and streaming company. The Company acquires royalties, streams and similar interests at varying stages of the mine life cycle to build a balanced portfolio offering near, medium and longer-term attractive returns for our investors.

David has won just about every award in the mining industry possible as well as awards such as Canada’s CFO of the year. While we have had guests come on to discuss the gold and precious metals markets before, the thing that interested me most about David was the way he put his new company together and the wealth of experience he has gained in building not one, but over 15 billion-dollar companies, and I can’t wait for him to share all he’s learned on his journey!

www.GoldRoyalty.com

Ticker Symbol: GROY

David started out as a CPA in the 80’s with Deloitte and cut his teeth there. He was in the mining sector and learned the business from the ground up. Over the course of his career, he has been involved in the construction of 15 mines across the world with the majority of his time in the C-Suite.

What is your secret for continued success?

• It’s going back to the same people over and over again.
• David has assembled a great team that he brings with him into each endeavor.
• David brings the strategic vision, and they help execute.
• It is about people at the end of the day.

Is there a formula or set of principles that you’ve used consistently to build your companies?

• For mining, it starts with geology. You must have a sound geological model, sound exploration principles and sound mine development principles are foundational to success.
• It comes down to having the right foundations and principles.

At the 8 min mark, David talks more about the mining business and minimizing risk and lessons on how to manage it.

Thoughts on dealing with the stress and risk of running a business. How do you handle that?

• Having a great team makes a big difference.
• Recognize you are not a master of everything and that you have to delegate or find others to fill the gap.
• It cannot be all on your shoulders.

Talk to us about your latest company.

• It is different than what he’s done in traditional mining in that it helps to provide capital for explorers and developers.
• In return, they get a royalty on the mines and projects.
• The get a percentage of revenue off the top.
• Everything David has done to this point has prepared him to build the company.
• The company is publicly traded under the ticker GROY.

State of the state in the mining industry? What are some of the keys to successfully investing in it?

• It’s never been a better time for gold as an asset class because of being in the inflationary cycle we are in now. The highest since the 70’s.
• There are a lot of parallels.
• Inflation adjusted; gold could go to $3000/oz if things play out like the 70’s.

At the 24 min mark, David and I have a great conversation on rates and the FED and the differences between now and the past. Especially with the debt the US has now compared the past. It’s great to just listen.

Thoughts on how businesses can thrive in an environment of prolonged inflation and higher costs?

• If you are in an industry that has pricing power, you can take advantage.
• In David’s case, cost inflation plays into the royalty business and avoids inflation risk.

One thing to note is that in a bull market for precious metals, silver performs better than gold. So, it has potential for a lot of upside.

Prediction for when precious metals go parabolic?

Later in 2022.

• When capital gets reallocated, it doesn’t go in a steady methodical way.
• There is typically a catalyst and then a stampede. It happens quickly.
• All the ingredients are there.

Best advice on M&A and selling/acquiring business?

David tells the story of his $32 Billion merger with Newmont.

• Recognizing the timing is very important.
• If there are great synergies and economies of scale, then it makes sense to bring companies together.
• You have to do a lot of work on making sure the fit is there and that the cultures can align when brought together.
• You have to make sacrifices in the best interest of the company and shareholders. In David’s case, he had to give up his job.
• Most deals don’t have because of social issues – ego, who get’s what job, etc.

You talked about you built your core team. How have you created a culture for the team to want to come together again and again?

• We’ve made it fun and enjoyable.
• Surround yourself with people you like and respect.
• Make sure they have the right skillset and values that align with the team.
• If you do it right, it is like catching lightening in a bottle.

Any specific traits you feel are most important to succeed in today’s world?

• You must have resilience. 
• You must have respect for those around you and show it.
• Treating people extremely well is very important.

Any other important leadership lessons people should know?

• Don’t give up.
• It’s ok to be a bit stubborn in realizing your vision. ​

Best advice for an entrepreneur just starting out?

• Choose your friends well.
• Surround yourself with people that have integrity, the right attitude, and right skillsets needed to help you build your business.

Best Quote: Surround yourself with people that have integrity, the right attitude, and right skillsets needed to help you build your business.

David's Misfit 3:

1. Show up.
2. Be loyal.
3. Stay healthy.

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Hello Misfit Nation! Welcome to another edition of "Lessons for Hannah!"

Many years ago, I introduced a new format that alongside our regular episodes called “Lessons for Hannah.” Hannah is my daughter and one of the main inspirations for the Misfit Entrepreneur. I wanted to have a place where she could go and learn from her daddy and his Misfit friends throughout her life….even after I am gone. If you haven’t listened to the first episode of "Lessons for Hannah," I urge you to as it gives some more background and tells the amazing story of how Hannah came to be in our lives.

Lessons for Hannah are short, very useful, and sometimes comical lessons, that I want to share with you and give to Hannah to help in your lives. Because I want Hannah to have these for her life, I’m going to speak as though I am talking directly to her. These episodes are a lot of fun and if you think there is a lesson that we should include in these episodes, please don’t hesitate to send it over to us at support@misfitentrepreneur.com. We’d love to share it.

This Week's Lesson for Hannah

Hannah, ​

Sometimes I come across things that are just too good not to share. As you know I spend a lot of time on these lessons thinking them through to give you the best advice I can. Every now and then I find a resource where it’s been done for me. I recently saw a post on Twitter from handle named LegacyBuilder_. The post was titled, “Every father should teach his daughter these 20 lessons.”

After reading the title, I could not help but check it out. As I read through them, I felt they were spot on, so I want to share them with you.

Here they are.

1. The world will try to steal your joy. The world doesn’t like when a person is walking around with joy and happiness. Be ready for trial, drama, and full attacks in your way of life. Meet them with grace and an attitude that you will persevere. You create your own joy.
2. Your children will learn a lot from you, act accordingly. They learn how to love from you and pick up the worst parts of you as well. Don’t be fake and try to act like a perfect person. Instead, be real with your kids and show them what life is like when you laugh and love.
3. People can change. People will show you their best and worst sides as you grow up. Don’t fall into the trap of thinking that the world is all good or all bad. Have the wisdom to know that no matter what people are going through there is always the power for them to change.
4. Your mother loves you. You will argue. You will laugh. You will cry. Remember that no matter how mad she makes you, she loves you. Your mom sees endless possibilities when looking at you and wants you to succeed.
5. If it feels wrong, it is. Nothing should be forced in this life. If you ever find yourself in a situation that feels off, remove yourself. Trust your gut always and stand up for what you believe in.
6. Don’t worry about the future. Take it from your dad. Worrying about tomorrow only steals joy from the day. All the deadlines, boys, and arguments will work themselves out. Focus on being in the moment and the future will take care of itself.
7. Your last name matters. Our last name is special because it comes with a lot of history. Not all of it is glamorous, but you are living proof that generational curses can be broken. Take pride in where you come from and keep working to make our last name grow in legacy.
8. The world is bigger than your hometown. You will think that your hometown is the entire world until the day you leave those city limits. Travel, experience, and learn about different cultures around the world. Open your eyes to all that life has to offer. It’s a big world.
9. You don’t have to go to college. Maybe you will, maybe you won’t. A college degree doesn’t promise you anything (except maybe debt). The real way to win is by being a lifelong learner and pursuing your dreams with drive and determination. Never stop learning.
10. Start investing at 20. Learn what compound interest is and put 25% of your earnings into a mutual fund monthly and never touch it. You can live off the other 75% despite what anyone else tells you. As you start to earn more keep the percentages the same.
11. Sports can teach you a lifetime of values. Sports taught me and your mother what it feels like to give it out all and still lose. It taught us that everything great in life has an ending and it taught us to be competitive in our life but with grace. Play a sport. Grit is learned through experience.
12. Grit is defined as strength of character in moments of uncertainty. You can read books or watch as many movies as you want but you can’t learn grit until you go through tough times yourself. Don’t shy away from difficult, you will grow.
13. You aren’t defined by your losses. I’ve seen so many people that have never overcome losses in their life. They are constantly defeated and eventually stop trying. Losses are learning opportunities that will develop true character. It’s okay to lose, but not to be a loser.
14. Winning isn’t the goal, growing is. Winning is amazing. There is no better feeling than winning after putting in the hard work it takes to win. Remember that if you become addicted to winning you will never be satisfied. Winning is part of growing not the only goal.
15. If you feel like you aren’t enough, remember you are. You don’t see it but sometimes I don’t feel like I’m being the best dad. Then I’m reminded that every day I get to love you and our family. Never think you are not enough. A day where you move an inch is still progress.
16. Choose your husband wisely. This is the man that will be with you on your greatest and worst days. Choose a man that will see you for who you are, love your children, and loves the Lord with all his heart. Your marriage will rise and fall with your dependence on God.
17. Don’t tell everyone what you’re doing. People will use information against you to push their own agenda. Working in silence is a superpower. Let them see what you have been doing when you are standing on the mountaintop.
18. Take care of your body. You will be unstoppable if you develop healthy habits early and keep them for the rest of your life. Love the gym and maintaining a body that is happy and healthy. You don’t have to be the fittest person in the world, but don’t ever stop.
19. Your strength comes from above. There is only so far you can go on your own. God has a plan for your life. There will be times where you search for meaning of life. Remember this: Your purpose is to show others the love of the Lord and honor him in all you do. And I might add, one of my favorite passages from Philippians: “I can do all things through Christ who strengthens me.”
20. Dad will always love you. No matter what you do or where you go. No matter how you act or what you say. I promise to be the person that gives you the tough love you need and provides a place where you always feel safe. Always and forever. That’s a promise.

Hannah, I really could not have said those any better and hope you use them in your life.

I love you,

Dad

Best Quote: Dad will always love you. No matter what you do or where you go. No matter how you act or what you say. I promise to be the person that gives you the tough love you need and provides a place where you always feel safe. Always and forever. That’s a promise.

Misfit 3:

1. Read the list of 20 lessons and commit them to memory.
2. Remember, above all else, your strength comes from above. God has a plan for your life.
3. Never stop learning and growing.

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This week’s Misfit Entrepreneur is Jason White. Jason knows how to create a niche. He is the founder of The Federal Code, a business that teaches the secrets of winning federal government contracts with no certification, no business history, using minimal startup cost, and using subcontractors to support new contracts — the same way he does it. Jason currently manages over 40 Federal Government Contracts worth over $37 million. And the students he’s taught have successfully won over $30 million in contracts. J

ason is a great example of how to find a unique need, create a niche, maximize it, and then teach others to do it and help them find their financial freedom. I’ve asked him on today to share how he does it and what he’s learned along the way.

www.TheFederalCode.com

@IamJasonWhite_ on Instagram

Jason never set out to do what he does. In fact, he was not a good path to success at the time. The opportunity literally fell into his lap. He was working at a gas station in 2008 and his friend came in to get something and told him that he was about to get a federal contract in trucking. Instead, the guy was arrested that night and went to prison. But, the idea stuck in Jason’s head. He decided to see if he could get a contract and started going down the rabbit hole. It took him 3 years before he got his first contract.

Talk to us about Federal contracts. How does your business work?

• Federal Government contracting is simpler than you think.
• In its simplest form, it is the Federal Government look to procure a product or service from the private sector.
• Jason didn’t have any money, a network, resources, or credit – he figured out that he could outsource the work and be the middleman between the Govt and the product/service provider.
• The Federal Govt is the largest purchaser in the world and provides a steady stream of opportunities for contracting.

How do you find a contract? How do you get started?

• he main requirement you must have at least an LLC. It is also good to have a DUN’S number.
• You then register that with SAM.Gov. Y
• ou will look for opportunities in SAM.Gov.
• There are 96,000 contract opportunities on average every day in SAM.
• Jason looks for service-based solicitations that continue for more than 1 year. This created residual income.

Are there some types of contracts that are better than others? How do you distinguish?

• As newbie, you will consider things easier to understand than others. For example, a lawn care contract is easier to understand than say an IT contract.
• But, the mindset needs to be not so much, can you understand or manage the contract, but more of can you manage the company you outsource to that is fulfilling the work.
• The expectations will come from the contract – your job is to manage the expectations.
• Jason stays away from construction contracts.

How do you win a contract?

• The Federal Govt is an endless supply of opportunity.
• You are bidding, so your quotes must be competitive.
• The only way to do that is to compare and get quotes from multiple companies to find the best price and then your fee goes on top of it.
• It’s a numbers game. Don’t worry so much about winning as much as consistently creating competitive bids.

How many bids/submissions do you typically do before winning?

• Jason has found that he wins about 30% of the time for him at this point.
• For someone starting out, this ratio will be lower.
• Jason strives to submit at least 10 bids every month.

What is the typical profit margin on a contract?

• It is all over the place.
• This happens because the bids are all different and for different types of services, so they have different margins.
• Jason has created a formula he uses for this process.
• He price compares with 3-4 companies for every bid.
• He looks for a middle ground and then adds his fee.
• He knows based on the companies’ prices where to be to not be the cheapest nor the most expensive.

How you find the companies/resources to fulfill your contracts?

• Google! He Googles service providers in the area for the contract and interviews them.
• Remember, you are not looking at opportunities just where you live, you are looking at contracts for the entire nation. It comes down to your ability to manage and hold service providers accountable that matters most.

What causes people to fail in Federal contracting?

• When you are essentially subcontracting, you are hinging your company’s name on their work. They are working on your behalf, but you are ultimately responsible.
• One of the biggest pitfalls is not setting expectations appropriately. It is very important that you understand and communicate the expectations of the contract and have a way to measure that they are being followed.
• You may have companies that find out the job is more expensive or don’t appropriate the right amount of resources.
• The Federal Govt wants to help small businesses out and understand that mistakes get made and challenges come up, but you must make sure to not make the same mistakes over and over again.

How do you handle working with these subcontractors?

• You will need to have a service agreement that is legally binding.
• You can do this through an attorney or through LegalZoom or LawDepot, etc.
• Try to keep it simple and make it easy for both parties.

At the 27 min mark, Jason walks through an example of a recent contract and how he got it and managed it.

Anything else we should know about Federal contracting?

• One of the biggest secrets is that you must be consistent.
• Jason recommends bidding on a minimum of 10 contracts per month.
• Most people quit because they don’t maintain a high level of activity.
• Learning to communicate well is critical.

Talk to us about your entrepreneur journey – what made you go from gas station attendant to committing to this and figuring it out?

• Jason barely graduated high school, but he learned common sense on the streets.
• Jason kept asking how.
• When his buddy told him what he was doing, he was surprised the guy was trying to go straight. He was just too late for himself.
• It was the vessel, the messenger that made the difference.

Talk to us about playing to long game. You didn’t get your first contract for 3 years.

• Success leaves clues.
• Someone has to be the pioneer to leave the clues.
• Jason just kept telling himself he wanted to see it through.
• He wanted to prove that a guy like him could finish and succeed.
• He learned a lot about himself and what he was capable of in his journey.
• He stopped being motivated and started being driven because when you are driven, motivation can care less. When you are driven, you don’t care what gets in the way, if you get sick, whatever, you push through. ​

At the 38 min mark, we have a great conversation on being driven.

Best Quote: Stop being motivated and started being driven. When you are driven, you don’t care what gets in the way, if you get sick, whatever, you push through.

Jason's Misfit 3:

1. Be patient. It’s rare to know how long it will take. Keep going.
2. Have a high level of communication. Build this skill set.
3. Do not look to your left or to your right. Focus on you.

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