J.B. Pritzker: Chicago’s busiest venture capitalist

Like countless others seeking greater fame and fortune, J.B. Pritzker is looking to Hollywood.

Already Chicago’s most active venture investor, Mr. Pritzker’s New World Ventures is stepping up its game in Los Angeles, hunting for deals in media and technology to boost the fund’s profile and profits. Run by Mr. Pritzker and his brother, Tony, New World has an audacious goal to be known as one of the top funds outside Silicon Valley and, eventually, one of the best anywhere in the U.S.

“We’re not there yet,” says J.B. Pritzker, 47. “Great success doesn’t come in short periods of time.”

Mr. Pritzker’s aim isn’t ego gratification; it’s all about making money, he insists. (Of course, in business the two go hand in hand.) But to move up to the top tier, New World will have to make more, larger investments on the West Coast. At the same time, Mr. Pritzker needs to build the tech cred of Chicago, his adopted hometown, and notch a headline-grabbing cash-out—one that has at least 10 figures—which so far has eluded New World.

“They don’t have the visibility out here yet,” says Mark Landay, a high-tech recruiter and angel investor based in Santa Monica, Calif., who has met with New World representatives. “They’re still dipping their toe in the water. If they want to increase their visibility, they’ll start leading $5 million to $10 million (investment) rounds.”

Tony Pritzker, 52, long has been based in Los Angeles, where he and J.B. were born while their father, Donald, was building what became the Hyatt hotel chain. It was only last summer that New World, the venture arm of Pritzker Group, dispatched a full-time associate to L.A.

While Los Angeles is underserved by venture funds, it’s not unserved. There are incumbents such as GRP Partners and plenty of investors day-tripping from Silicon Valley. Chicago-based MK Capital also has a Los Angeles office.

“We haven’t gone all-in in L.A.,” J.B. Pritzker says in an interview in his West Loop office, where a wall display of 20 iPads showcases his latest deals. “It takes time.”

Brave New World

Though it’s dwarfed by the private-equity business of Pritzker Group, New World is the dominant venture player in Chicago, with two dozen investments here since 2007, the most of any venture firm, according to Dow Jones Venture Source. If all goes well in California, New World intends to enter New York, Managing Partner Chris Girgenti says.

While he’s a scion of one the most famous families in Chicago business, Mr. Pritzker grew up in Atherton, Calif., near Palo Alto, and went to high school and college on the East Coast. (Formally, he’s named Jay Robert, for his uncles.) He’s tech-savvy but not a technologist. In fact, he got into tech investing almost by accident. After graduating from Northwestern University Law School in 1993, he joined investment-banking firm Chicago Corp. and was assigned to its tech group. He launched his own firm in 1996 with Mr. Girgenti, a fellow Chicago Corp. banker.

“I invested in his first pitch, $25,000. It was everything we had,” says Adam Hoeflich, a partner at boutique law firm Bartlit Beck Herman Palenchar & Scott LLP in Chicago, who met Mr. Pritzker nearly 20 years ago. He says it’s not unusual to find his friend awake at 4 a.m., working on deals in his home office or kitchen.

Mr. Pritzker credits his work ethic to his parents, both of whom died before he was 18. “The message was you didn’t earn any of this.”

New World’s first fund turned a $3 million investment into $20 million, he says. “There’s nothing as intoxicating as investing with entrepreneurs and getting those kinds of returns.”

New World has invested $300 million in 104 companies. Mr. Pritzker also has proved himself behind the scenes, launching initiatives credited with making it easier to start tech companies in Chicago. They include the I2A Fund, which makes early-stage investments; the Chicagoland Entrepreneurial Center, a nonprofit that advises startups, and Built in Chicago, an online social network for the tech community. His signature achievement was 1871, a 50,000-square-foot tech incubator that opened in the Merchandise Mart in May.

His work extends to civic organizations and philanthropy, too. He is chairman of the Illinois Holocaust Museum and Education Center in Skokie.

“J.B. isn’t just an investor—he’s tried to help create organizations,” says Len Batterson, a longtime Chicago venture capitalist. “That’s pretty unusual for venture capitalists.”

Though New World is a big fish in Chicago, the city is still a relatively small pond. The nation’s third-largest city by population ranks ninth in the number of tech venture deals and amount of money raised, according to Dow Jones Venture Source.

Follow New World’s evolution over the years

New World also needs a huge hit, like Silicon Valley legend Kleiner Perkins Caufield & Byers scored with Netscape, Amazon.com Inc. and Google Inc. “Part of being a top 20 firm is mind-share,” Mr. Pritzker says. “We’re not known to every entrepreneur.”

But he notes that New World has put together a string of smaller deals while avoiding big flameouts. (The firm passed on a late-stage investment in Groupon Inc. but got in on Facebook Inc.)

Hits include TicketsNow Inc., a Rolling Meadows-based online ticket seller that was sold to IAC for $300 million in 2008; Playdom Inc., a Palo Alto, Calif.-based game maker acquired by Walt Disney Co. for $763 million in 2010; and logistics software outfit Fleetmatics Group PLC of Dublin, Ireland, which completed a $133 million IPO in October.

Timing hasn’t always been on Mr. Pritzker’s side. New World launched a $100 million tech fund with Chicago-based William Blair & Co. at the peak of the dot-com boom in 2000 but gave back about half the capital after the tech bubble popped. “It was absolutely the right thing to do,” says Ellen Carnahan, who oversaw the fund for William Blair.

All in the Family

New World doesn’t have to worry about outside investors anymore. It’s funded solely by the Pritzker brothers, who are worth a combined $5 billion, according to Forbes.

“It’s a unique platform to have a 20-year time horizon, not ‘where’s our next fund?’ “ says partner Matt McCall, who joined New World in 2009 from venture firm Draper Fisher Jurvetson Portage.

Chicago-based SimpleRelevance, an online marketing company, raised $410,000 last year from I2A Fund and New World. “It’s patient capital, the best money in the Midwest,” says founder and CEO Erik Severinghaus.

New World is not a hobby or charity. The brothers added up their results recently to compare them with other venture funds. “We have choices,” Mr. Pritzker says. “We always ask ourselves whether we’re better at it than if we found three money managers and just gave it to them. It turns out we are better.”

He declines to provide specifics but says that over the past decade, New World’s results were more than double the average annual return of 8.59 percent achieved by the top one-quarter of U.S. venture funds launched in 2002, as tracked by Boston researcher Cambridge Associates LLC.

Mr. Pritzker has an easy, quick wit, but he doesn’t joke about business. “We’re trying to make money, trying to add a zero onto our net worth.”

(Editor’s note: The story had been updated to reflect the fact that the Chicagoland Entrepreneurial Center is no longer an affiliate of the Chicagoland Chamber of Commerce.)

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