Now on his second startup venture, Adam Pritzker sold his first for hundreds of millions of dollars and is now on a mission to finance the next generation of brands.
Born and raised in San Francisco, and having entrepreneurial aunts, uncles and cousins swapping their stories around the dinner table gave this founder an early desire to build things himself.
Still, realizing that the West Coast can be a bit of a comfortable bubble, he wanted to get out and experience more of the world. He achieved that by heading to New York for college and studying anthropology and economics at Columbia.
In his exclusive interview on the DealMakers Podcast, Adam Pritzker streamed us his scoop on how to build customer loyalty, the art of raising capital, how to create powerful distribution channels, and many more topics.
General Assembly & The Bank Shot
Adam’s first startup, General Assembly started as a co-working space. Yet, due to the demand for information, they built their first classroom. Classes turned into courses. Courses turned into workshops. Then Fortune 2000 companies began approaching them to develop their enterprise education product.
As with many great startups, it was an incredible bank shot, that started out as one thing and curved to somewhere else. Today, Adam still feels starting an enterprise business through a consumer business is a really interesting way to build a company.
Adam enjoyed a lot of great help in launching and building General Assembly. He had as cofounders Brad Hargreaves, Jake Schwartz, and Matt Brimer. Matt was really good at bringing all kinds of people through by doing all kinds of events, happy hours and dinners. They also found the benefits of engaging the community and getting the community to promote itself.
They also received great advice from Aileen Lee to use OKRs to manage a team (the topic of John Doerr’s most recent book). She was at the time at Kleiner Perkins and coined the term ‘Unicorn’. She then went on to start Cowboy Ventures and landed on the Times 100.
Mimi Chun who had actually interviewed Adam to hire him at IDEO actually ended up becoming the first employee at General Assembly. She brought her expertise in human-centered design.
General Assembly scaled to around 500 employees and raised about $100 million in venture capital, before being acquired. Their investors included Bezos Expeditions, GSV, Maveron, and IVP. The startup was reportedly acquired by the Adecco Group for more than $400 million.
Moving The Ball Down Field
Following up from his last victory, Adam decided to just get the ball in play, start developing a number of brands, and let the path make itself clearer. Adam says that he saw social media driving a proliferation of consumer products thanks to being more easily discoverable.
At the same time, consumers began to become more interested in understanding the contents of those products, the supply chain of those products, and where those products came from.
Factories around the world were beginning to allow developing brands to do smaller runs of goods to micro-target people, essentially using social media. While local brands gained the ability to be global because of e-commerce.
Adam believed the enterprise infrastructure layer would have to undergo a massive transformation in order to power all of these new brands.
As a result of this thought process, Assembled Brands was born becoming a new way to finance companies and a new approach to building brands. It does this through financing in the form of credit, rather than just equity. Because if you use all equity as an entrepreneur you’re probably going to get diluted out.
Secondly Assembled Brands has collected data on 3,500 brands over the past 18 months. That enables them to help these brands benchmark themselves, gain business insights about where to improve, and creates models for underwriting credit.
Thirdly, they provide a network of vendors who can help brands improve their metrics.
Important Startup Lessons Learned Along the way
1. Look for upside potential, with limited downside.
Adam found a big believer in Oaktree Capital Management, who wrote them a $100 million check to keep growing. Oaktree is a large global private credit company with a family of funds with about $100 billion in capital under management.
In March 2019, Brookfield took a 62% stake in Oaktree.
2. Loyalty is incredibly important
Loyalty can be measured by a customer buying your product over and over and over again. If they’re doing that, your business actually looks like a subscription business.
If you’ve launched a subscription-looking business in a capital efficient way, that’s a very powerful combination for value creation. You’re going to grow organically, and you’re not going to spend that much money on customer acquisitions relative to the return on that ad spend. Plus, investors like it a lot.
3. The next Microsoft didn’t look like Microsoft
A lot of people want to be the next of what was big last time. Yet, the next evolution often looks quite different. The next Microsoft was Google. The next Google was Facebook. The next Facebook probably won’t look anything like the social networks you are used to. The next $100 billion LVMH might look like Assembled Brands.
4. Focus less on the outcome
Adam’s advice for new startup founders is to really enjoy the process, and building deep and meaningful relationships, and be a little less focused on whatever the ultimate outcome is.
Life is too short to be miserable on the way, and how your startup ends up evolving could just be even better than the original goals you had.
The Evolution of Consciousness
Adam believes that every product in every category is being reinvented. People now care about what’s inside of whatever they’re consuming; what the contents are, where that comes from.
They care about the community around that product and the drive of people. People are interested in consuming local brands from all over the world that are best in the breed for whatever it is being sold. If he’s right about this evolution of consciousness, powered by the transparency of the internet, big incumbent conglomerates have a lot of work to do.
Listen in to the full podcast episode to find out more, including:
- The three biggest challenges that new consumer brands have to deal with
- Ways to finance your startup
- The danger of popups
- The best use of offline distribution channels
- Why starting with wholesale has great profit margin advantages