Sajith: Fun, fascinating episode giving a glimpse of one of the most unusual and inspiring GP (General Partner) journeys, immigrating near penniless from Iran to Germany to USA, and then moving from a rug salesman to starting a leading preseed / seed fund in Pear Ventures. The anecdote where he pitches to Doug Leone, his ability to connect Sequoia to the Iranian PhDs in the Bay Area was my favourite passage in the podcast. More than the mechanics and dynamics of how Pear works (and it is an interesting firm with some cleverly-designed programs like PearX and Female Founders Circle etc.,) it is Pejman’s journey and perspectives that are fascinating. A key superpower of his is figuring out what value / help he can deliver better than others and then going all out to build depth and momentum around it. In his case it was initially connecting the Iranian emigrant network to VCs, and later the Stanford student network. I like the way he puts it towards the end – “there’s not one strategy that works, but pick the one that you can win it”.
Some passages from the podcast, I found particularly interesting and relevant.
Early days in USA
Pejman: “So, I found an Iranian car dealer and I bought a 1973 Chevy for five payments of 150 bucks and I found a job at the carwash in San Jose. So, I was driving every day for an hour, washing cars for 10 hours and come back. So, it was just my life was just washing cars. I think emotionally was the hardest part because I could have left the next day and go back and have that radio talk show or go back to Germany, but something was telling me, just keep going. By the way, I was the best car washer in the world has ever seen. I washed cars like nobody else. My English improved.”
Persuading Doug Leone
Pejman: “This is late nineties. There was no tech crunch, no YC, none of these things, but I had access to so much knowledge and these were not my clients, they were my friends also.
I was hanging out with them selling rugs. Sunday, having a barbecue and asked lot of question, how do you give term sheet? And credit to Silicon Valley, nobody judged me that Iranian guy coming, sending rugs to my home, asking him about startups, I remember. Anyway, I don’t want to have a question, I pause here, but I can tell you how we started to, well, one of the stories I want to tell you, one of the days a guy came in very well dressed, well-spoken he said, I’m looking for rugs and we look at rugs together and I said, I’m Doug Leone, bring the rugs to my home. So, I knew who Doug Leone was at that time. So, I went to his home and hard negotiator, but at the end I said, Doug, I can help Sequoia Capital. He said how?
I said, I have access to so many Iranian PhDs. And he said, okay, I come Monday morning to our office, tell me how more, and we ended up putting an event together with the senior partner of Sequoia Capital. The reason I bring it up was Doug didn’t doubt me and that relation and trust led us to both of us invest in Dropbox early on six, seven years after. But I think this is a DNA of Silicon Valley, which is, I mean tech is a community that there they give before they get and then judge people. And for me it was just astonishing. Imagine if you’re selling rugs in Los Angeles and you go to Steven Spielberg’s at the end of selling rugs to Steven Spielberg’s said, by the way, Mr. Spielberg, I can make movies with you and it’s just kind of odd, but I did it and then myself and the ownership of Medallion Rug, we started investing, we pulled capital.”
Founding and building Pear Ventures
Pejman: “Mar and I, we are Ying and Yang, I’m a college dropout and she’s a Stanford PhD. She started three companies and successfully sold all three of them. I never worked for a tech company. I think she has 14 patents, I have zero patents, but I have a lot of scars on my body and the respect we have for each other, opinions and complementary skills was the foundation of Pear.”
Pejman: “And three and a half years ago we did a survey among our founders and we asked them, what is the number one thing you need after you raising the initial capital? And everybody was hiring. Obviously, multi-stage firms for long have had their own talent services. I looked around most of the pre-seed seed funds don’t have a person to help with the hiring or they hire one person and that person mostly access a consultant, which is great.
They’re teaching, but nobody hires for them. Mar and I, we decided to build a recruiting agency in in-house. I spent 16 months, we hired a search firm. That search firm fired me because after 29 interviews they said, okay, we don’t have anybody else but there is a guy who built the entire recruiting platform at Instacart and he took Instacart from 300 to 3000 people. His name is Matt Birnbaum. He doesn’t want to go a venture capital firm. I said, okay, this is the guy I should talk to. I met him and it was just very clear, this is the person we need. So, I made it my life mission to recruit him. We did. So, Matt joined us 16 months ago and he spent around three to four months what does it look like to build a recruiting agency inside the seed firm.
And he hired three exceptional senior recruiters. So, we have four recruiters in-house on our payroll that if you come to Pear, we hire your people. In the last 12 months, we hired 70 people for our companies. We did over 1000 founder candidate conversations with an 80% hit rate. It’s just incredible. I think even if that’s what Pear can offer, we have a line of entrepreneurs coming to our firm to do it. And then you’re building the same thing for go-to-market and fundraising software. So, anything you need from zero to one, we’re building this.”
Pejman: “…my recommendation to anybody start a firm or they’re building about that is thinking about in a very hard way. And this is beyond hanging out with other VCs and angel investor going to demo days or going to conferences. That’s given everybody has that. Where do you have an access that nobody else has? You have to come up with one thing. It doesn’t need to be many things, but one thing that you see quality of entrepreneurs before anybody else is a key to build the firm.
Samir: Yeah, that’s right. And recently I had somebody on the pod, I think it was Mamoon at Kleiner where we talked a little bit about sourcing and one of the things he said is they don’t need to see every single deal, but they certainly want to see the deals that fit their thesis and are the most interesting companies and entrepreneurs and they track it. So, when a company gets funded and it’s funded by one of their competitors and they have not seen it, they look at it and say, well, why didn’t we see it? And how do we further refine our sourcing engine to ensure that doesn’t happen again?”
Pejman: “But when you look at people who have come to Pear, we have never hired someone who has been an investor before and that doesn’t mean they’re not good just the way we do it is by building companies from the ground up. We need operators and founders who have been at the early stages. Either you started your own or you have been so early with the product that you have that knowledge that allows us to win because that’s the founders’ needs.”
Pejman: “At the core of Pear is partnering with incredible entrepreneurs who are building long-lasting companies, but we innovate around that product always. And if this product works, we put gas in the fire, if it doesn’t work, we drop. We just launched two years ago a program called Female Founder Circle. So, we called top female engineers who are starting companies and we build a community. My partner Vivian, is leading it. We did the first one, we got 230 application, we picked 30, I think 10 or 12 companies came out of it. It’s the community of the best female engineers who leave their companies and start it. It’s speakers, workshops, mentorship and social events. And it was so successful that it is the fifth cohort, this cohort, we got almost a thousand applications.”
Pejman: “Our strategy hasn’t changed since day one. So, we are a pre-seed and seed specialist no matter what size fund we have. So, all of the investment cheques we write, it’s either a pre-seed or seed stage. Obviously, we continue to invest. Every fund we reserve over 55, close to 60% for follow ons. So, this fund, which is a lot bigger than the previous fund, which was $160 million, doesn’t mean we’ve got to write checks at series A and series B. If we don’t know it, we’re not good at it. I think we’re very good at finding talents to get into product market fit. The reason we raised a bigger fund, I believe we reached our product market fit after 10 years, which means we have our own brand and philosophy and value in the whole community. We built a sourcing machine that I believe nobody else has it at preseed and seed stage. We built the right team in term of the investment and services we provide. So, we decided that we can do more investments certainly and writing bigger cheque at seed, which we were not able to consistently write. For example, we had this sourcing machine that we saw companies at seed that were raising $4-6-7 million and we were not able to consistently lead those rounds. But now we can do it and we have the team in back. It’s all about what we have done, but doing more and writing bigger cheques at the seed stage.
And we build other products that fulfil that. One of them is Pear X, which is our boot camp for pre-seed companies. We invest around 20 to 30 pre-seed companies a year, which is $250,000 to $2 million. But rather than investing in 30 companies across the year, we batch them together now and they have to go through this program which is you go in it as a soldier, you come out of it as a Navy Seal, it’s an intense four and a half months program. We meet you 2-3 times a week. You work with a senior partner, you have our go-to-market and talent team behind you, and we have a demo day. So, that allows us to scale the help we can do. One of the questions we always ask and our LPs ask that we have so many companies, how do you help them? So, we figure out we can build this product that can help companies attract them. And many people like it because a very small cohort is 10 to 15 companies per cohort. More than 85% of them raise at demo day, which is pretty incredible. And then at our demo day we have over a thousand investors come pay attention only to 10 to 15 teams. So, that’s again an innovation around this investment that you can always do it. I mean even this product took cost long to figure out what is the offering, how much money we should invest, what is the duration? Do we do it once a year, twice a year? So, you always learn from entrepreneurs what they need.”
His advice to other fund managers
Pejman: “Pick one thing that you can become the best in the role of what you do and then build momentum around it. I started my career in the Rug gallery, the network I had. I never claimed that I can provide product feedback in how do you build your cloud technology. So, I started there, but I learned, I think I’m a lifetime learner. I still learn. I still pay a lot of attention what’s going on, but I think you have to become the best in what you do and pick that strength that you have. You might be an amazing salesperson and you can build the best go-to-market strategy for early-stage teams and then go around and do it. But the role of being a generalist and not having deep expertise, it just is very hard. And survival for any fund would be very hard. And whatever strategy you have, make sure that you have the ingredients and the stamina to become the best at what you offer to the founders. And you can be in any good companies. And as you mentioned, and I agree that there’s not one strategy that works, but pick the one that you can win it.”
Great founders prioritise
Pejman: “But there are a few traits that beyond that I see in some incredible entrepreneurs. I had the privilege to work with them and seeing them in the garage all the way to IPO. One is typically you don’t see these entrepreneurs during happy hour, you don’t see them in conferences unless it’s very necessary. They spend time with their team and their customers, users, nothing else. So, that focus is really important. And then make things priority. Obviously that customer matters the most and your team and product. If I text Drew that Drew, let’s hang out for coffee and tea, I might get an answer in a week or two. If I tell him, well, I was with Samir and he was having trouble with Dropbox paper, like maybe five minutes, three minutes he gets back. That prioritisation comes with an immense amount of focus that they have. the best entrepreneurs I have ever worked with they’re lifetime learners. As the company grows, they grow.”