J.B. Pritzker returned for a fireside chat at 1871 last week, a venue his Venture fund helped establish back in 2012 which has now gone on to be one of the most prominent tech incubators in the world. He discussed with Howard Tullman issues around gaining Venture Capital financing, some of the key take away points are as follows:
Introductions a must - With the Pritzker Group receiving at one point over 1,000 submissions a year asking for Venture Capital funding, the first filtering action for those submitted is whether the entrepreneur has an existing or historical relationship with the group, or have been recommended by a trusted source.
Show confidence not arrogance - There is a clear difference here, avoid being bullish in submission and negotiation, not every business is "The new AirBnB" or a billion dollar idea.
Must consider competitors - Any entrepreneur must consider competitors in any submission and be able to discuss them. It is not good to have a blinkered view on the market.
Must have sizable addressable market - As a rule of thumb does the company have access to a $5 Billion market. It may not do initially but does the product have the ability to reach and dip into other large markets to get there?
Whole company assessed - When reviewing a company it is expected that the company e-suite of engineers are equally as impressive as the c-suite who are presenting as they are driving the business.
Not short-termist - Pritzker Group look for 3 x Investment returns and a 5 year exit traditionally. They are not as IRR focused as other firms out there who will be looking to sell earlier in order to reinvest in new projects.
These items must be considered when submitting as it is incredibly competitive and funds although risk taking in nature have to preserve their reputation and ensure returns. If in doubt, use a finance specialist to ensure the project is correctly positioned for submission to ensure it meets the standard of the VC firms.
