In a world where we flit from one shiny new thing to another, there is something to be said for those of us who stick to one thing and do it really well. Mar Hershenson and Pejman Nozad are two of those people. They co-founded Pear VC 10 years ago and have built it into a seed-investing powerhouse.
The duo began their effort as Pejman Mar Ventures in August 2013, but renamed it Pear three years later because, they said, “Pear trees are long-lasting and strong and they need support and the right conditions to succeed.”
Despite a challenging fundraising market, Pear managed to close on $432 million for its fourth fund last week. It is the firm’s largest to date, more than twice the size of its third vehicle and more than eight times the size of its debut fund.
Hershenson chalks up the big vote of confidence from her investors to Pear’s decision to not stray from its original focus of investing in start-ups at the very earliest stages.
“I don’t think there are many long-lasting seed funds,” she told me. “For Pear, we wanted to build something that outlasts Pejman and I. We’ve spent a lot of time and money on building a team and platform, so I think the institutional investors appreciate the fact that we are here for the long run.”
The strategy has produced some stellar results, including Pear’s very first investment in 2013 in a then-unknown start-up that graduated from accelerator Y Combinator – DoorDash. Nozad was impressed by CEO Tony Xu and was convinced his food delivery service would be a hit, so Pear’s first fund invested a combined $1.9 million in its seed, A and B rounds. DoorDash went public in December 2020 at $102 per share and by the end of the day its stock price had shot up to $190, valuing Pear’s reported stake of about 2.5 million shares at more than $475 million, or 250x its investment.
No one-hit wonder, Pear has gone on to seed two other companies that went public (Guardant Health and Senti Bio) and several unicorns, including software developer Aurora Solar (valued at $4 billion), mobile software maker Branch ($4 billion), HR software maker Gusto ($9.5 billion) and security compliance company Vanta ($1.6 billion), according to press reports.
The University of Chicago’s endowment has been a Pear LP from the very start and is an investor in all four of its flagship funds. Joanna Rupp, managing director of the endowment’s $2.8 billion private equity portfolio, counts herself lucky to have been introduced to Pear not long after taking responsibility for the PE portfolio in late 2012. “I was trying to build out the portfolio and looking at new managers,” she told me. “We were looking at smaller funds where we could be meaningful partner.”
Judging by the success of the DoorDash deal, investing in Pear’s debut fund turned out to be fortuitous. And the firm has continued to impress the University of Chicago endowment and its other LPs, including the Inasmuch Foundation, Los Angeles Fire & Police Pension System, the Richard King Mellon Foundation and the Passport Foundation.
“Pear’s mature funds are among the very top performing in our portfolio and in the benchmarking universe for VC funds of the same vintage,” Rupp said. “The less mature funds are difficult to compare to other funds.”
How has Pear continued to find success from one fund to another? “One of the reasons they’ve been successful is that that they’ve been hyper-focused on seed and understanding how to serve that entrepreneur and understand that ecosystem in different geographies and different verticals,” Rupp notes.
If she had to distill Pear’s strategy into a simple sentence, Rupp would say it is to, “Identify great founders and win the right to invest at the very earliest stage.”
Of course, delivering on that strategy requires a lot of heavy lifting. “They are some of the hardest working VCs I’ve ever met,” Rupp said. “Their domain expertise and broad network are unique.”
Most VCs become experts in certain market segments and then look for the best start-ups they can find in those spaces. Pear takes a different approach, looking for the best founders it can find regardless of the market or technology they are focused on, as it did with Xu of DoorDash.
Because Pear backs companies so early in their development, it is typically investing before they have product/market fit. It helps each of its portfolio companies in three ways – with hiring (typically at least their first three employees), making customer introductions and with fundraising for their next stage of growth.
“Every resource that we have at Pear is really thought out to increase a company’s chance of success,” Hershenson told me. “If you help them with those three things, you are increasing the chances that they make it.”
As a seed investor, Pear has had to get really good at managing a large portfolio. Its check sizes range from $500,000 to $2 million at the pre-seed level and $2 million to $5 million at the seed level. For Fund IV, it expects to back 80 start-ups.
To support such a large number of companies, Pear has built a team of 26 people, including 12 who are on its investment team. Each investment team member is in charge of roughly 10 companies, working with each of them from one to three years.
While it isn’t unusual for firms to stray from their original strategy and raise large funds with lucrative management fees, Pear has no desire to expand beyond seed. “We want to be the best firm at helping companies find product/market fit,” Hershenson said. “Our position is, if we’re very good at that, we’re going to do great. There’s a lot of brand names that are multi-stage, and I think they’re amazing firms, but we want to be the best at seed.”