Pear Soil (Pre-Seed)
We started Pear four years ago with the simple mission of backing very early exceptional founders and offering them enough help and support to make them successful.
Since then, we have invested in marquee companies like Doordash, Gusto, Branch, One Concern, Guardant Health, and many others in their initial rounds of financing. In most cases, we invested before clear product market fit was established, before customers were attained, and even before a fully functional MVP was built. The reason was simple: back exceptional founders who have the ambition to build something impactful.
Sometimes, investing this early is challenging. One can easily find many reasons not to invest (e.g., unproven acquisition costs, no data on churn, market non-existent, etc...). At Pear, we often suspend disbelief and try to imagine how an exceptional founding team can eventually turn an idea into a category-defining company. We have been constantly surprised by the supernatural powers of founders - founders who can trump any sort of rational analysis and continue to amaze us with what they can achieve.
Once we back these remarkable founders, we roll up our sleeves and actively help them build the foundation of their companies. This means different things for different founders at different times, but it encompasses a large variety of things such as: being actively involved in hiring a key employee at the company, calling customers on their behalf, whiteboarding different product strategies, running experiments on acquisition strategies, preparing for the next round of financing, and many other operational activities. We strive everyday at becoming better at helping our companies and making a difference. For that reason, we have grown our firm from the two original partners to five full-time team members who know that our first priority is to be there for our founders, twenty-five Pear Fellows and an extended network of mentors and advisors.
For all of us at Pear, meeting these exceptional founders and partnering with them are the moments we live for.
The moving landscape of early stage investing
Since we started Pear, we have seen a lot of changes in early stage investing. New rounds have appeared in the day-to-day terminology like pre-seed, second seeds, seed prime, mini-As. There are a lot of market-dynamics behind all of these changes but perhaps two of the most important ones are the rapid increase in the number of early stage investors (the number of sub-100 million funds has grown from 100 in 2013 to over 500 in 2017) and the shift up market for initial seed funds (many of the original seed funds of 2007 have increased their fund sizes and well-known incubators invest in companies that are further up market.
It is no surprise that we often confuse terminology like pre-seed/seed/A and we assign a label to a company based on the money they raise, not the stage they have reached.
All companies start at “0”. At some point, they have nothing but a great founding team (or solo founder), the ambition of going after a large market, and the intuition that they can build something to make a difference. There is no product to evaluate if users love the product and there are no customers. They are a far ways from reaching any signs of product market fit.
In order to make it to a point at which a company can be massively scaled (make it to “1”), two things have to happen. One, companies have to build a product that will make at least one customer/user (or small number of customers/users) very happy: so happy that they cannot live without their product. Two, they need to build a growth engine that allows them to 10x the number of customers/users in an en efficient manner.
At Pear, we are laser focused at getting companies from “0” to “1”. Where you are as a company is not defined by the amount of money you have raised or by how long the company has been around but by where you are on those two key milestones: a loved product and an efficient growth engine.
The Soil Stage ("0 to 1")
Before you seed a tree, you need to prepare fertile soil. At Pear, we are focused on what we call the Soil stage, or “0 to 1” stage - that is going from nothing (or almost nothing) to something that can be scaled. This company stage is probably the most amorphous and less standard of company “stages” but it is an absolutely necessary phase; all companies go through some form of the Soil stage.
Some companies go through the Soil stage before any financing ever takes place. It happens in an almost accidental way, where founders find they have something of extreme value by either solving their own problems, working on what they love, or as regular course of business. There are many examples of this class of companies. For example, in 1996, long before Google raised a cent, Larry Page’s and Sergey Brin’s BackRub crawler project was so popular at the Stanford Campus and within academic circles that it would bring down Stanford’s Internet connection. They had built a better search product before Google even existed as a company and as such reached Stage 1, way before any investor got involved.
Other companies raise a small amount of money to get to Stage 1. Perhaps, they may have built something prior to raising money but lack the resources to pull it all the way through to “1”. For example, if Larry Page and Sergey Brin had not been able to deploy BackRun crawler in the Stanford network, they would have had to figure out some way to pay for those servers and raising some money to get that going would have been the right choice.
Finally, some companies raise way more money than necessary to get to product-market fit. Typically, we have found that this is not a good recipe for success. Founders that raise too much money initially tend to behave like a company that has already proven itself e.g., they hire to keep an 18 month run rate rather than to achieve a goal, or overspend in sales/acquisition without truly grasping where their product really is.
Traits of a Great Soil Company
Our mission at Pear is to support companies at the “0 to 1” stage. We use some general guidelines to qualify what would make a great Pear Soil portfolio company:
- Teams are small. Typically, teams are 2-4 people - very small and self-sufficient without the need to recruit a key member outside their area of expertise. Everybody in the team has a clear non-overlapping role and trust amongst the team is high.
- Founders are scrappy. At this early stage, everything is scrappy. Companies don’t have a fancy office, the team is heavily compensated in stock versus cash, founders are begging favors from friends, founders are not outsourcing sales but doing the selling themselves, etc...
- The timeline is unclear. It is unclear if the soil stage lasts 1 month or several years. As a result, founders watch burn like a hawk independently of how much money they have raised because they know that it may need to last not 12 months but 2 years+.
- Team is customer/user focused. Teams are laser focused on proving in as short of a timeframe as possible that they are building something of value for at least one customer or one group of customers. This typically correlates with building a great product people love, but it cannot be confused with building a beautiful product the founders love. It is important to bring the customer/user into the picture as quickly as possible.
- Team has a hacker mentality. This means that they are typically optimizing for fast execution vs. perfection. They are nimble and fast. The product gets shipped with minimally viable features. Sales is done in a non-scalable way, begging friends of friends to try your product.
- Decisions are data driven. Founders act like mathematicians. They have clear hypotheses they want to prove and they run concrete experiments where success is measurable and quantifiable and not based solely on anecdotes or gut. Sometimes these quantifiable goals are high level targets set before the experiment begins; for example: “We will have 5 transactions done by end of the month to know it is working.” Sometimes these goals are concrete and tactical: “We don’t have enough sign-ups. I think onboarding is broken. We will focus all our energy on optimizing the onboarding flow to get 2x the number of sign-ups.” In any case, the founders have measurable goals that they are constantly evaluating.
- Founders have an incredible amount of grit. It is really hard to go from “0 to 1”. You are underpaid. You feel like you are failing often. It is hard to convince anybody of value to join you. We look for these founders that won’t give up.
There are also common pitfalls we see at the Soil stage.
Sometimes companies get started, make some progress but never make it to “1”. Smart founders go back to “0” and restart the process with the knowledge they have gained along the way. The company then remains at Stage 0.
Companies that are still at ”0” raise a healthy seed round ($1.5M+) and they start acting like they are already at “1”. They plan for an 18-month runway, hire a great but expensive team, and operate as if things will surely work out.
Companies have a great product but no acquisition engine and start overspending with unproven acquisition/sales strategies.
Sample Pear Soil Companies
Once we commit to backing a Soil company, we are all in. This means different things for different founders at different times, but it encompasses a large variety of value-added activities such as: being actively involved in hiring a key employee at the company, connecting companies to relevant customers, white-boarding product strategies, running acquisition experiments, preparing for the next round of financing, and many other things. We strive everyday at becoming better at helping our companies and making a difference.
Here are some case studies around how we've worked with Pear Soil portfolio companies in the past:
Select Pear Soil Mentors
We match our Pear Soil portfolio companies with expert mentors from our network to advise them on the company building process.
Here are a few of the talented mentors in our network: