How many Gen Xers and Millennials does it take to assess a product targeted at digital natives?
Earlier this year, I organized a SXSW panel about how Millennials and Gen Z – what we call digital natives – are completely overhauling time-honored industries, which are often dominated by brick and mortar. The panel featured some of Austin’s top founders and was moderated by Next Coast co-founder Michael Smerklo, who has a long track record as a successful entrepreneur and investor. I caught myself chuckling a little bit during Michael’s introduction to the panel, under my breath of course, as he started running through statistics about the behavior of digital natives and how none of them applied to him – you can hear the clip below. He asked everybody in the room to raise their hand if they considered themselves to be a digital native. Almost everybody did, which isn’t that surprising at SXSW. But Michael, whose job it is to write smart checks for entrepreneurs targeting that demographic, didn’t.
While Michael admittedly has youthful enthusiasm and is extremely tech-savvy, he is actually Gen X. As is our other co-founder Tom Ball, who is even tech savvier. They grew up in an era before smartphones were the norm and Mark Zuckerberg had no effect on their college experience. I, however, am a Millennial, and while I grew up during the days of dial-up, I was still tagging friends in Facebook photos in real-time during my college years. So there’s a generational gap that exists, and yet we all work for the same VC firm that’s committed to helping the best entrepreneurs with innovative technology disrupt huge markets. Which brings me to the question: How many Gen Xers and Millennials does it take to assess a product targeted at digital natives?
Dagney Pruner, Director of Marketing at Next Coast Ventures
Let me preface this generational quandary by saying it’s a crucial one for a venture capital firm to solve. One of the biggest trends we believe in at our firm is the rise of digital natives and how that is going to change business models, industries and the needs of consumers. It’s a trend that’s not going away anytime soon. They will have more purchasing power than any other generation in the upcoming years, and we’ll be investing in companies relying on that fact. So as investors, we have to find a strategy to identify great products and business ideas that target this demographic. We even brought on a Venture Partner that focuses solely on studying generational behavior, that’s how big of a trend we think this is.
So how many Gen Xers and Millennials does it take? The answer is all of them – all of them at your firm, at least. Next Coast is not a large shop personnel-wise. Michael and Tom have carefully curated a team that come from different backgrounds, both personally and professionally, because they understand that no two perspectives are the same – and no two are ever ‘right.’ In my year at the firm, I have come to learn that they don’t let people into the fold whose opinions they don’t value. They don’t believe in inviting you to the party but not asking you to dance. Collaboration is key – and it’s especially important when you’re doing diligence on an idea that bridges generational gaps.
When an impressive entrepreneur comes in with an idea targeted at digital natives that piques our founders’ interest and the diligence process gets underway, it’s not just about looking through balance sheets and making customer calls. It’s about making sure this idea works in practice, not just on paper. Our founders ask us to help them try out the products or test the platform, and by ‘us’ I mean our whole team, whether it’s our MBA fellow or our office manager. We’ll compare notes and user experiences, and a common refrain we hear is: “Interesting, I never would have thought of that.”
Dagney Pruner, Director of Marketing at Next Coast Ventures
That’s because we all bring different pain points, expertise and perspectives to the table, and that diversity of thought is especially crucial when it comes to vetting an idea where the founders of a venture capital firm ARE NOT the target demographic. They may have decades more experience in investing under their belts, but they didn’t grow up in an era where shopping online WAS shopping, and they’re humble enough and smart enough to do something about it.
For example, when we were initially looking at EverlyWell, a company that focuses on online health testing, everybody in the office got together and tried out one of their tests. We know you cannot glean the complete user experience simply from reading a company deck. We compared our experiences – illuminating as it crossed over the digital and non-digital divide – and Michael and Tom realized that the idea behind EverlyWell was bigger than they originally thought. Not only did it resonate well with us digital natives in the firm, but we thought it was likely valuated as much by all Millennials and Gen Z who had experienced these pain points. When our firm sees something like this our founders get super, super excited because they know that most groundswells in consumer behavior start from the younger generations and have the potential to expand to broader audiences. Now, we are proud to count EverlyWell as a proud part of our expanding portfolio.
Next Coast portfolio CEO Julia Cheek discussing EverlyWell and our SXSW Panel.
I genuinely believe our firm would not have known the full extent of EverlyWell’s potential without the Millennial perspective. Our founders’ commitment to collaboration and willingness to learn from perspectives younger than theirs is what makes them different. I believe that with a continued commitment to this modus operandi, Next Coast will always be equipped to assess businesses targeting this crucial piece of the market and will attract entrepreneurs that understand the value of that approach. Venture capital firms will throw around the words “partnership” and “collaboration” when they talk about their investment ethos, but if you want ensure they are truly grasping a company’s full potential, make sure they are practicing what they preach.
About Dagney
Dagney is the Director of Marketing at Next Coast Ventures. Prior to Next Coast, she received her Master’s in Journalism from the University of Texas at Austin with a focus in business. She previously worked as an algorithmic salestrader at Credit Suisse in New York City after graduating from The University of Virginia as a Jefferson Scholar.
