Emanuele Levi (360 Capital Partners): Our history of finding successful companies that we have been able to support since their very early days and have worked with for many years speaks for itself
08 Oct, 2021
Sonia Nagar is Partner and VP at Pritzker Group Venture Capital. She founded a mobile shopping app called Pickie. After much success, the app was acquired by Retail Me Not, where she became the vice president of product and head of mobile apps for the coupon shopping site — and earned a Webby Award for Best Shopping App! Upon relocating to Chicago she was preemptively meeting with VCs about future potential investments when one thing led to another and she was offered a position that was too good to refuse. Today, she is the Vice President at Pritzker Group Venture Capital and is responsible for sourcing the firm’s investments in consumer enterprise and emerging technology.
I took a very meandering path to get in VC, it was non-linear. I started off as an engineer – I worked for General Motors in their advanced engineering group. It was my first job as an undergraduate. I’ve pretty quickly decided that I didn’t want to be an engineer. When I looked at the people who were running General Motors, they all had MBA, so I thought to myself if I want to be a CEO someday, I need to go get my MBA. I applied and was fortunate to get accepted into Harvard Business School. When I was there, I got exposed to all sorts of things: I spent a summer in investment banking at Goldman Sachs, because I was good at math and it seemed like a logical place to go. I didn’t like investment banking, but I work in the GS tech media telkom group and I got to work on the IPO team for a company called Bill Me Later that was in the financial space. While I did not like investment banking I love working with the founders and I felt like I was on the wrong side of the table. I went back to my second business school year, I’ve tinkered with a few startup ideas but I didn’t have anything that I was really excited about. During the summer of 2007 Bill Me Later decided not to go public, but take a big investment from Amazon, so I’ve got to know a lot about Amazon. I was excited about their ambition to launch a whole bunch of new categories, they were growing really fast. I decided that I have no idea about a startup and wasn’t ready to be a founder, so I went to work for Amazon back in 2008. I was part of the team that launched the clothing category there and was there for 2 years. Then I got engaged – my husband was in New York, and I moved there. I wanted to start my own company, but I promised my husband that we wouldn’t both be without income, and he was starting his MBA program. I did consult for 1.5 years and as soon as he finished his MBA program, I started a company called Pickie – it was in the mobile shopping space back in 2011. That company was ultimately acquired by RetailMeNot, and I spent a few years running RetailMeNot mobile team, more on the product side. My husband and I decided that we wanted to move, to be closer to our family to the Midwest. We moved to Chicago and I was thinking about building a new company. From my experience with the previous startup, I knew that it is very hard to raise venture capital funding unless you build a relationship over time. I was trying to do that, and one of those conversations happen to be with the Pritzker Group – a large VC fund here, in Chicago. They liked the way I thought about the world and asked me about have I ever thought about being an investor. This is my long story about a very non-linear path to venture capital.
I’d been a founder and an operator before, and as the founder and operator, when you’re building tech products you have a fast feedback cycle. You know if you’re good right away. What surprised me about venture capital is the feedback cycle so long: you meet a hundred companies, invest in 2, and you won’t know for 10 years whether you made the right decision or not. That was a surprise.
One of the more unusual startups I invested in, as an angel investor, and it’s not really unusual because falls into a very large category, that is underserved and still a little bit taboo. It’s a company called Dame and it is a Women Sexual Wellness space. Their first products were vibrators and now they’ve expanded, they have a huge product catalog, they grow incredibly well, a very large business now. But if you said me 10 years ago that I – a technology investor, consumer startup investor – would be investing in vibrators, I would buy that. It is an amazing business with an incredible founder.
I tried to be very open but I would say that the place where I get referrals most often is founders that I’ve already invested in and investors that I’ve co-invested with. I do read my cold emails, but I don’t respond to all those. If I get a cold email or a message via Twitter that is thoughtful and relevant, showing that a founder has done the research to understand where I focus, the stage I invest in, and the types of teams I’m interested in, I will respond to that message. It is best to go through a referral call, but if you do send a cold email, it should be very customized with a pitch that is very relevant to investors.
I appreciate founders that put data in their 30-second or 1-minute long email to me, so you have incredible growth like you’ve grown 200% or more in a year, that’s a great way to get my attention, especially at the early stages. If you can tie it to something that I’ve said or written about in a blog (I try to share the themes I’m excited about in various channels so that people know when I’m interested in), that would be the second thing that makes me super excited.
Hundreds. We definitely will look at hundreds of pitch decks, we go into more detailed diligence with, maybe, a hundred, and there are 20 to 30 we go really deep on diligence on.
As an Angel, I probably do 7 or 8 deals a year. I do 5 deals in the year at The Community Fund VC. And I do 4-5 deals a year for Pritzker Group.
I am most excited about Consumer – either products or services or technologies. But I also get excited about marketplaces more generally – B2B or B2C.
Healthcare. I really like Healthcare, I really appreciate the impact and the opportunity, but it’s not my area of expertise and so it’s just not a category that I invest in.
It varies whether I’m personally investing, investing for Pritzker Group, or with the Fund. Personally, I enter at pre-seed or seed. Pritzker Group makes later-stage investments, and Series A is the sweet spot there, although there is a pretty active seed program for Pritzker Group: we’re writing $500K-1M checks, so it is the later seed-stage program.
Yes, US companies.
I think, eventually, I will – personally, get more diversity in my portfolio, but at the moment I am US-focused.
I am an engineer by training. I feel like the boring numbers are effective for me, but ultimately it does matter that the founder is a good storyteller. Because all CEOs and founders have to be pretty good at sales whether it’s fundraising or recruiting or
negotiating partnerships. So I need a little bit of both but I definitely appreciate good numbers.
When we’re writing a small check, it can be as fast as a week or two. A larger check when you’re doing a Series A investment is probably closer to 3 to 4 weeks. There are always anomalies: some deals get done even faster and some others take much longer. We try to be pretty efficient though.
If you google “venture capital diligence questions,” you come up with a good list. The best and more seasoned founders have a data room and come prepared before they come into a pitch. At the first pitch, you’re not giving everybody access to the data room, but after they do that first pitch and an investor is interested they are putting all the investors into a data room at the same time and they should have there all of the financials, also some historical financials and monthly forward projections, some customer cohort information that makes it clear how they’re calculating their unit economics, some information on the margin, some information on suppliers and supply chain, on marketing, on acquisition metrics for both paid and unpaid strategies, some legal details, like their certificate of incorporation, as well as their cap table. Having all that prepared means that you are more likely to be able to quickly respond to questions you get from your venture capital investors and then put the answers into your data room so that you can be efficient with how you using your time.
As an angel, it’s $25K. For Pritzker, it is $500K-1M at the seed stage and $4-6M at Series A.
It starts with the founder and the founder’s story to make sure that this founder, I believe, is the best founder to build the solution for the area that they are tackling. That’s important because often we get charged with the same startup ideas, where 5-6 founders attack the same area at once. I look for some measurable product-market fit or some unique insight that other people don’t know that gives a founder an advantage in a category. For consumer companies and especially at the later stages you expect to see a certain level of growth. For the venture capital network companies you need to be growing really fast and that justifies valuation. For a consumer company that’s usually 200% of yearly growth, maybe less at the early stages sometimes. But approaching that number, care about unit economics, and make sure that a business has a good scalable path to grow usually starts with having a good LTV:CAC number. More recently I feel like I’ve been excited about companies that have a good level of capital efficiency as well, which usually means that they are being very responsible and smart about how they burn money or that they figured out capital-efficient ways to grow and they can grow faster with the same amount of money as somebody else or get more runway.
I love complementary teams that have a long history of working together. In this case, you have confidence that they know how to work together and they can work together well. I like to see all the things you would expect for a company to be successfully covered: if it’s technology startup, you want to see a rockstar CTO or something with a developer background as part of finding team; if it’s a consumer company, you want to see somebody that has either an advantage on the product side oron the marketing sid; and it it’s B2B company and it needs to be sold, you want to see somebody who is good at sales. You can think about all the things a company needs in order to scale and be successful and you want to see those roles covered.
Steve Wozniak. He’s had a technology genius behind. Steve Jobs was a marketing genius, but I’ve heard that he was a jerk, and I have and our fund actually has “no assholes rule”: life is too short to work with people who are jerks.
Pritzker tends to invest later. If there’s a solo founder, they generally have a pretty well-thought-out team – something we’re looking for. And as an angel – absolutely: I have invested before and right now I’m working on a deal – and I’m committed to – a solo founder. What I’m looking for is if it’s a solo, but a serial founder, that person knows how to build a team and scale and knows what he or she is getting into. If this is a first time founder, you’re just looking for more traction to demonstrate that this solo founder has been able to build something, is willing and able to hire great people because no startup can scale without great people around them.
If somebody is a jerk, that’s a red flag. Especially to those inferior, like our executive assistant who helps us book meetings or one of our associates – that’s huge red flag. Founders who say they have no competition – that’s a red flag, because there is always some competition. Intellectual honesty is also really important to me. I like when founders are a little bit open and thoughtful about what they know and don’t know. To me that just shows a higher level of understanding and intelligence, because the smartest people I know are very aware of what they know and what they don’t know and I always seeking to learn new things. If you think that you know everything, it’s a red flag.
I tend to be very involved – both as an angel investor and as a part of the Pritzker team. Both times I want to have a text message basis with the founders that I work with. When I was a founder, I remember that there were some investors that I would have to always be selling, always pitching, and others where I could be really open when things weren’t going right. I value that second group so much more. As an investor, I wowed to be that type of investor for my founders. My founders can text message or call me all-time any questions and, if I don’t know the answer, I can connect them to someone who does. In Pritzker Group we write bigger checks and usually take board seats and become very involved and informed about what’s going on.
The biggest mistake I see is founders having their investment meetings ad-hoc and all spread out instead of trying to run a tight process. I’ve noticed that serial founders who know what they’re doing or even founders that are more experienced are really smart about building a relationship with investors over time, so they have meetings to get know investors and when it comes time for them to ask for money, they are able to schedule a bunch of first meeting so that they can have other second meetings at the same time and, hopefully, get competitive term sheets at the same time, which could drive a better valuation or mean that you have to make a decision on a term sheet or give your favorite investor or fund enough time to come up with a term sheet.
We definitely strive for 10x as a fund. We’re really playing for the multi-billion dollar outcomes.
Most funds will have minimum ownership of 10%, but you expect the whole round to take 20-30%, it’s pretty standard.
So many! I do think that it is hard to look back and have regrets, because for every 5 startups that you said “no” to that were successful there are 50 startups that you said “no” to that weren’t. I don’t have regrets, but I definitely have companies that I said “no” to that have gone on to be very successful. We were talking to Allbirds, but we didn’t move fast enough. We could do Series B for Honey. They were sold and had a great exit. We had an opportunity to do a deeper dive there and didn’t do that. Honey I remember especially well, because I came from RetailMeNot and they were both in coupon and discount space. I had too much knowledge at that space and wish I had pursued that one or seen that one coming.
COVID has been an incredible opportunity for many consumer companies because it has created changes in consumer behavior, where people will prefer to do certain things online that they may have done in a store or in person previously. Any time consumer behavior changes there is an opportunity for technology companies and startups to have a lot of success.
I think the workplace has forever changed. There’s a bunch of B2B companies in the Future of Work that are emerging in response to the fact that a lot of companies tried work from home and now their workers not want to come back or the companies have realised that they can work effectively with distributed and remote teams. There is a lot of opportunity in the Future of Work category. The way people live has changed and homeownership trends have changed: people moving all over, from big cities to suburbs or even farer, and there will be interesting changes in Real Estate and homeownership. All E-Commerce categories as well, like delivery of anything. When you have people working from home and some little bit of germophobia and people who prefer not to be in a large gathering, Delivery is here to stay. Virtual Entertainment – there is a lot of opportunity there, because there are people who will prefer to view everything from home instead of going to big gatherings like concerts or sports venues.
I’ve seen interesting companies that could partner and have a business together. I usually will introduce the founders and let them run with it. In general, it’s hard to combine companies inorganically and have it working. You usually suggest doing a partnership or something lightweight first then figure out if there is a compliment there and then see what happens.
I read the news at The Wall Street Journal, Techcrunch. And Twitter: there’s a lot of content I follow – lot of VCs, tech leaders, entrepreneurs. I usually find at least 30 minutes of educational reading through people sharing links on Twitter.
SpaceX is doing incredible things, like space travel. It is still to be seen how consumers will interact with that, but it is a very revolutionary breakthrough. Love it or hate it, Facebook is a behemoth, it changed the way we interact and the fact that they have that broad reach is pretty revolutionary. What else? Who invented vaccines. For the last 100 years for sure vaccine technology has done so much to improve the quality of our life.
There were many startups, like Quibi, that had raised tones of capital and didn’t work out, but I have to admire the fact that they tried and been that ambitious.
I am very happy with where I am now. Having once been a founder, I can’t say that I would never do it again. I can’t imagine that I won’t ever be a founder again, but right now I love VC, I love working with startups and being an investor, I love the diversity of getting to meet with a lot of really interesting people and learning new things every day. I’m very happy with what I’m doing now.
Intellectual curiosity is probably the number one thing because if you are intellectually curious and willing to learn new things and like meeting people to learn new things, you’re going to love venture capital. That love will mean the work won’t be like doing work and you’re going to be good at it. You do have to be a little bit analytical as well so that’s number two: be able to think critically about the market or a solution. Then I think venture capital is a people game, so you have to be good at working with people, you have to be good at networking with people to generate deal flow. This is number 3 that is critical for a good VC.
It is chess where you have to be thinking about the long game.
The first is – start building relationships with investors as soon as they possibly can and build those relationships over the long term. The second would be to always be hiring because the second you raise a round of funding, you, usually, have to go and hire a bunch of people and that takes a lot of time. One of the mistakes I made as a first time founder was when I raised a round, it took me months to get people I need hired. And then the third thing would be not to believe everything you read in the press. This is one of the things that surprised me when I switched to the venture capital. Often, when you’re a founder or even an executive in a tech company, you’re reading about all these companies that are so awesome and crashing it, but in reality, their numbers are not that good. Don’t believe everything you’re reading in the press, just focus on how you deliver value to your customers and building your business. “Swim in your lane,” – it’s something my parents would say to me, and this is applicable to you and building your business and your team.
Austin. After my company was acquired I lived in Austin for 2 years and loved it. I love New York and all its hustle and bustle but the weather is a downer. Austin has a great combination of booming technology scene that growing really fast and really great weather!
Old school camcorders, like the VHS tape camcorders that used to have. It was almost like the scarcity of taking video made it more special, so you only pull that for special occasions, and watching those videos was more an event vs now when everything is digital and much less special. I miss that.