At Paloma, our mission is to identify groundbreaking ideas, nurture them from inception, and guide them to market success.
We’re in the weeds with our ventures for at least 18 months; in the same slack channels, in the same daily stand-ups, experiencing the highs (and the lows 🥲), together.
In short, we are your team.
Working so intensively with ventures means we have to be very selective during the application process. For every~500 pitch decks we see we typically only work with 5. This model means we can’t play the volume game by betting on 100s of ventures a year and hoping one or two will have outsized returns. Instead we have to believe that every startup we choose to partner with has the potential to become a venture scale business.
But what exactly are we looking for? Our Venture Partnerships Director, Poppy Trewhella, walks us through our top three criteria.
1. You know your industry like the back of your hand
Paloma can build world-class products. We also have ample experience launching ventures and guiding them to product market fit. Our venture portfolio is currently valued at over a quarter of a billion dollars (AUD) we’ve helped companies like Afterpay scale their products to billion dollar acquisitions.
What we don’t have is deep domain expertise in every industry. We love founders who know their industry inside out, understand the nuanced market dynamics and can identify trends or problems that someone from outside the industry would be blind to.
A founder’s industry nous combined with our venture building expertise makes for a pretty powerful team.
Portfolio example: We love working with Stu and Lisa Kagan from Buddy because they live and breath the recycled scrap metal industry
2. Your idea has the potential to get BIG
It’s hard when we have to say no to businesses that are clearly going to be successful... but just not successful enough. This typically comes down to a few things:
Your vision: Are you happy to build a business that will make a few million in ARR and support a pretty nice lifestyle? Or are you looking to build a unicorn? We think lifestyle businesses are awesome but ultimately we’re looking to create businesses that can reach at least a $100m valuation in order to deliver returns for our fund.
Your market: Who are your customers? How many of them are there? How many competitors are also selling to them? Ultimately we’re looking for big markets. If you have the best idea in the world but a very niche or small market, it’s likely that there will be a ceiling on your growth.
Your model: While we’re agnostic to industry, the ideas we often get excited about are in underserved industries with big contract values, and high margin reccurring revenue.
Your right to win: If someone entered the market tomorrow with exactly the same idea, what makes you the winner?
Further reading: How we use ‘The 7 Powers’ to assess early stage ventures at Paloma
3. You haven’t built much (or anything!) yet
Ideally we like to come in on day 0. If you’re pre-product and pre-revenue, that’s the best time to speak to us.
Building technology is expensive and it’s better to get it right the first time. Our approach is to work with founders to deeply understand their customer, what needs to be built and why. Often we’ll start with a ‘first slice’ to test hypotheses and market demand before building out a bigger product with more features.
Though if you have already got an MVP or product in market it’s not a dealbreaker. You’re likely to have some pretty strong learnings from your time operating and we can work together to figure out what to do next.
Further Reading: Read about our portfolio company ChemCloud’s journey from day 0
More art than science
Whilst we lean on these criteria to help us select ventures, we’ll never be able to perfectly predict which startup ideas will blow up and which will fail. We like founders who will challenge us, educate us and persuade us that we should work together.
We’d love to chat. Contact us at hello@palomagroup.com.
Read next: What to expect from the Paloma application process
