Next Coast Ventures, an Austin, Texas venture capital firm focused on backing high-growth, early-stage startups based away from the United States’ coasts, closed a second $130 million fund.
Although the sophomore fund is a sizable increase from the firm’s $85 million debut fund, which closed a little over two years ago, the final close is below the initial $150 million target, according to a regulatory filing. But this fund is still a sizable increase for the emerging manager.
Next Coast Ventures, which invests in Series A and Series B rounds, exited four portfolio companies from its first fund, including Clarity Money, which was bought by Goldman Sachs last year.
Additionally, the firm had several of its bets receive substantial follow on investments. As an example, AlertMedia, a company whose $8 million Series B was led by Next Coast Venture, raised a $25 million Series C growth round earlier this year.
Michael Smerklo, Next Coast Ventures co-founder and managing director, said that the strategy for the second fund will not change from its first. The firm will continue to back companies in what they call “Next Coast” markets, including Chicago, Salt Lake City and Minneapolis, but with a slight preference towards budding tech companies in Austin, he said.
Austin is one of the fastest-growing startup markets in the country and Next Coast Ventures expects that about 60 percent of its investments will be from there, Smerklo said.
The firm intends on deploying capital from its second fund over a three-year period, writing checks from $5 million to $10 million for each investment, Smerklo said.
In addition to Smerklo, who was previously a Chairman and CEO of Service Source, a Saas company he took public in 2011, Next Coast Ventures was co-founded by Thomas Ball, who was formerly with now-dismantled Austin Ventures for a decade.
“Companies on the coasts are raising extraordinary amounts of capital,” Smerklo said. “But we feel like we are playing a different game because our typical portfolio company doesn’t consume as much capital.”
This is what resonates with the firm’s LP base. “What we provide them is venture like returns, but at a slightly lower risk profile,” Smerklo said.
Nearly all of Next Coast Ventures’ limited partners from fund one re-uped for the firm’s second fund, he said.