Why We Say No

Why We Say No

Chances are, some of you have pitched to Pangaea in the past. We probably said "no". Although we invest at a good pace, saying "yes" to the most compelling opportunities, we don't like to waste our time, or yours. So, if we're going to say "no", we'll try to do so as quickly as possible.

I'd like to summarize some of the reasons we say no, grouping them in 4 basic areas: Fit, Management, Momentum and Exit.


Pangaea is an advanced materials venture capital firm. If your idea doesn't have novel chemistry at its heart, you'll get a "no" immediately. In fact, we don't even count such deals; they are simply rejected (politely) and deleted. The same goes for pharma – yes, it's chemistry, but it's not a market where we have a lot of experience.

Pangaea is an early stage investor. We look for companies where we can add value. If your company is about to IPO, there is limited opportunity for Pangaea to add value. If you're only in silico or haven't filed your patents, same thing. If you're looking to commercialize some great IP and have data proving your technology works, we can add a lot of value to that.


The judgment call on the strength of the management team will be made by our partners, and usually by the first partner who reviews the deal. Pangaea always meets with, or at least does a phone interview with, the management of every start-up company that fits our mandate. We don't even count a deal as part of our dealflow until we've done that.

Everyone is on their best behavior while they're courting. If you're difficult to work with during due diligence, I'll bet you'll get worse after we invest. We watch for rudeness, arrogance, willful ignorance, disrespect, disinterest, and passive-aggressive tendencies always. Any sign of these problematic traits is likely just the tip of the iceberg.

If we're impressed enough to move into later due diligence, we'll assess the whole management team for their abilities and behavior, as well as the fit of the whole team. It's unfortunate, but great ideas and outstanding people sometimes don't gel into successful companies. We use our past experiences and the input of others to guide our judgment here.


Sometimes, a deal is a fit, with a good management team, and even addresses the all-important question of exit, yet we still won't do it. Entrepreneurs have to realize they are competing with each other for a VC's limited resources. When you first approach me (or any of us), you should know that there's another deal or three that I'm very excited about. You're not only going to have to get me excited about your company; you're going to have to get me more excited than I am about any of the others.

So let's say you manage to do that. Now, I have to pitch my partners. Each of them is already very excited about their own two or three top deals. I have to get them more excited about my deal (your deal) than they are about their own. The partners regularly meet to compare the "hot deals" and make sure we are in agreement that each is a potential portfolio company. If my partners don't agree, it doesn't matter how excited I am about a deal, I'm going to say “no”.


From the first read of an executive summary, we are thinking about the exit. There are lots of elements here, but as a rule of thumb, we are always looking for a plausible path to a 10x return on our investment.

The first thing we look at is the addressable market. Can your product solve big problems in big markets? Are there obvious partners who would integrate it into their business? Pangaea has a real advantage here, as our Strategic Limited Partners include several of the world's most successful chemical and materials companies. We'll frequently consult with our SLPs to ask for information about markets or technologies.

Who might acquire your business? We look for recent acquisitions of comparable companies, paying close attention to the valuation and the amount capital that was required to achieve that exit. Those two things often don't have a lot to do with each other. As a result, we prefer capital efficient businesses that look likely to attract a feeding frenzy of multiple acquirers. In this situation, you may be able to achieve an exit valuation based on the impact the technology would have on the acquirer's business, and not just some multiple of sales.

Of course, fundamental to the achievement of that 10x is the initial valuation of the company at the time of our investment. Here, we have to balance the need for potential returns with the need to attract and incent a truly world-class management team. If the valuation is too low, there's nothing in it for you, the entrepreneur; too high and there's not enough upside for the investor.

Why we say yes

Pangaea does due diligence on hundreds of advanced materials opportunities every year. Investing in about 0.5% of relevant dealflow in any given year is pretty normal across all of venture capital, which means 99.5% of you who pitch to us are going to get a “no”, even when your technology and business are a fit for our mandate. That shouldn't discourage you, but it should set your expectations.

The good news is that we do say “yes”! We are excited about materials technologies and understand the urgency for adoption of innovation. We can, and do, help start-ups with great management teams and exceptional IP to commercialize and grow their companies. If you have chemistry that solves a big problem in a big market, you might be our next "yes"!

General Partner, Pangaea Ventures Ltd. Keith has been making cleantech and advanced material venture investments since 2001, having managed Mitsubishi Corporation's Canadian VC activities and BASF Venture Capital America out of Silicon Valley.View Keith Gillard's profile on LinkedIn


  • Guest
    Michael Simon Friday, 05 April 2013

    As a former VC and a technology banker today, I have a lot of deal flow. Keith sums it up nicely: we are living in a world filled with opportunity. You have to have it together and be able to sell your ideas.

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  • Keith Gillard
    Keith Gillard Friday, 05 April 2013

    Thanks Michael - yes, there really is an "embarrassment of riches" in the dealflow department. One of the few benefits of managing a VC fund lucky enough to close after the financial crisis is that we really do have the luxury of picking and choosing. Thorough due diligence is the order of the day. The great entrepreneurs stand out in stark contrast to most. As you put it, they "have it together" and are very good at selling their ideas. It's so stimulating to meet those people!

  • Guest
    Samuel M. Shafner Wednesday, 22 May 2013

    Great post, Keith. This needed saying.

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  • Keith Gillard
    Keith Gillard Wednesday, 22 May 2013

    Thanks Sam. There was certainly a big and emotional response over on LinkedIn.

  • Guest
    Alejandro Ochoa Sunday, 02 February 2014

    Excellent column. It's always painful to deal with undesirable people. Honesty, integrity and the given word's value seem to still count in many spaces, including yours.

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