20VC The Biggest Indicators Of Success In Founding Teams, How To Balance Both Vision and Operations & Taking Money From The Man At The Rug Store with Mar Hershenson, Founding Managing Partner @ Pear.vc

In this episode of the 20 minutes VC, host Harry Debbings interviews Ma Hershensen, a founding managing partner at Pear VC, who transitioned from a Stanford professor to a VC. Hershensen, who holds a PhD in electrical engineering and has co-founded three startups, is recognized as a top innovator and champion of innovation. She and her business partner, Pejman Nozad, focus on early-stage startups, providing hands-on support through programs like Launchpad. Hershensen emphasizes the importance of assessing founders' potential and the balance between vision and operational excellence in startups. The conversation also touches on the role of board seats, the significance of clear communication from CEOs, and the necessity of defining key benchmarks for startups to reach the next funding round. Pear VC's approach to investment is based on a shared vision of making a meaningful impact and helping founders from the ground up.

• Harry Debbings is the host of the 20 Minute VC podcast and is active on Snapchat.
• The episode features Mar Hershenson, a founding managing partner at Pear VC.
• Mar Hershenson is recognized for her achievements in technology and venture capital.
• A thank you is extended to Pejman Nozad for introducing Mar Hershenson to the show.

You are listening to the 20 minutes VC with me, your host Harry Debbings and you can find me on Snapchat at H. Debbings with two B's.

This quote introduces Harry Debbings as the host of the 20 Minute VC podcast and provides his Snapchat handle for listeners to connect with him.

So enough on the suspense. Joining us in the hot seat today, I'm thrilled to welcome Ma Hershensen.

Harry expresses excitement about welcoming Mar Hershenson to the show, highlighting the anticipation for the interview.

I also want to say a huge thank you to Pesman at Pear for the intro to Mar today, without which this show would not have been possible.

Harry thanks Pejman Nozad for facilitating the introduction to Mar Hershenson, acknowledging the importance of this connection for the episode.

• Mar Hershenson has a PhD in electrical engineering from Stanford University.
• She developed a technique for optimizing the design of analog semiconductors.
• Mar co-founded three startups in different industries and registered 14 patents.
• She has been recognized by MIT Technology Review and Fast Company for her innovation.

After earning a phd in electrical engineering from Stanford in 1999, Ma developed a groundbreaking technique for optimizing the design of analog semiconductors.

This quote summarizes Mar Hershenson's academic background and her contribution to semiconductor design.

Subsequently, Ma spent the next 13 years cofounding three startups in the mobile ecommerce space, enterprise software realm and semiconductor industry, work that led eventually to her registering 14 separate patents.

The quote details Mar Hershenson's entrepreneurial ventures across various tech sectors and her success in patenting her innovations.

Ma has also been recognized by MIT Technology Review as a top innovator under 35 and named a champion of innovation by Fast Company.

Mar Hershenson's recognition by prestigious organizations for her innovative work is highlighted in this quote.

• Mar Hershenson was approached by Pejman Nozad to help founders start companies.
• Initially hesitant, she became increasingly involved in meetings with founders.
• Mar and Pejman angel invested together before deciding to raise a fund for Pear VC.

He approached me, I think, in 2010 with an idea to start some sort of house where we would work with founders and help them start companies.

Mar Hershenson explains how Pejman Nozad initially pitched the idea of working with founders, which eventually led to the creation of Pear VC.

We basically angel invested together for six to nine months, and at the end of nine months, it was clear that we should go and do a fund together.

This quote describes the period of angel investing Mar and Pejman undertook before deciding to establish a venture fund together.

• The Launchpad program is a 10-week summer initiative for founders.
• It originated from the Garage program, where Stanford students are mentored.
• The program has been successful, with many participants raising seed rounds from top investors.

It came out a little naturally, just like the fun. We have another program called Garage, where we work with Stanford computer science students for nine months during the year.

Mar Hershenson describes the organic development of the Launchpad program, which evolved from the Garage program that mentors Stanford students.

So last year we had about 13 companies. Eleven of them ended up raising a seed round from great people, Excel, first round index, just really, really top name people.

This quote highlights the success of the Launchpad program, with a significant number of participating companies securing seed funding from notable investors.

• Mar Hershenson and Pejman Nozad evaluate founders at the earliest stages of company building.
• The criteria are based on the founders' abilities and potential, rather than existing traction or products.

So there's no traction, there's no curves, there's nothing. There's just the person and the will and the idea. That's the people that we bring into Launchpad.

Mar Hershenson emphasizes that the Launchpad program focuses on the founders' qualities and ideas, rather than any established metrics or products, when considering investment.## Judging Founders

• The primary criterion for evaluation is the founder's obsession and hunger for achievement.
• Determining the potential of founders is based on their personal qualities rather than their initial business metrics.

And the only thing we're judging is the human being and the founder and whether we think they are obsessed, hungry to achieve something.

This quote emphasizes the importance of the founder's personal drive and passion as the key factor for judgment, rather than traditional business metrics.

• The venture capital (VC) industry is experiencing a shift towards a platform approach, offering more than just capital.
• Andreessen Horowitz initiated the platform movement, and others are following with various models and stages of investment.
• The focus is on helping startups from the very beginning (ground zero) to reach their first significant milestones.

Well, that's certainly a way, certainly our way and certainly a way many people are know, I think we obviously, Andreessen started this platform movement and they're investing in stages that are different from what we do.

Mar Hershenson acknowledges the trend in VC towards a platform approach, crediting Andreessen Horowitz for starting it, and notes that different firms might operate at various stages of investment.

• The platform aims to accelerate startup success by replicating successful strategies and providing intensive support.
• A supportive platform involves surrounding startups with experienced people and established processes.
• The platform is service-intensive and relies on human interaction to address founders' unique problems.

And all what we've been doing over the last four years is surrounding us by people putting processes in place, trying to replicate some of the successful things that we've seen in our companies so that the new companies coming in can get there faster and more efficiently.

Mar Hershenson describes the focus on creating an environment that helps new companies succeed by leveraging the experience and processes that have worked in the past.

• Successful CEOs recognize the importance of both vision and operational excellence.
• A founder's vision is crucial, but they must also be operationally focused from the outset to realize that vision.
• Founders must measure success and plan from day one, even if the company is at an early stage.

I think great ceos have both, right. And it may not necessarily be that they're good at both, but they know that they need both in the company.

The quote highlights that successful CEOs understand the need for both a clear vision and strong operational capabilities within their company.

• Founders must identify what they need to prove to progress to the next step and focus on addressing their most significant risks.
• It is crucial to tackle the hardest tasks first, as they are the most important for startup success.
• Measurements and goals may differ based on the startup's stage and objectives, such as proving technology or acquiring customers.

I think one of the key things that we have to do and founders have to do is to figure out what do I have to prove to move to my next step, right? What are my risks that I have and what do I have to show that I can do?

Mar Hershenson stresses the need for founders to identify and address the key challenges that will allow them to move to the next phase of their business.

• The way a CEO or founding team communicates is a strong indicator of potential success.
• Effective communicators are concise and clear about their current status, challenges, and needs.
• Lack of communication or ineffective communication can be a concern and may indicate potential issues.

Gosh, every company, I feel like it's a whole world in itself, especially when it's the first hundred days. But again, I think it's almost the way the CEO or the founding team communicates. It's a great predictor of success.

The quote implies that the quality of communication from the CEO or founding team can be a reliable predictor of the company's future success.

• Recognizing the risks that prevent reaching the next stage is crucial for startup progression.
• Successful investors are aware of the benchmarks required for startups to secure the next round of funding.
• Benchmarks can vary, especially for revolutionary companies that may not fit traditional metrics.

Another element you said there about kind of is the risks that stop you from getting to the next stage. And the next stage, obviously, kind of being the presentation to vcs and the ultimate funding.

This quote reflects the conversation about understanding what risks need to be mitigated to successfully progress to a stage where the company can present to VCs and secure funding.## Importance of Benchmarks for Startups

• Benchmarks are essential for startups to understand the minimum levels of achievement required for next-stage investment.
• Next-stage investors evaluate traction against benchmarks.
• It is crucial for startups to stay updated on benchmarks to progress to the next level.

"And that's the way the next stage investors think about it. Of course they'll think about product and people, but when they're measuring your traction, they have some sort of understanding of the minimum levels you have to be."

This quote emphasizes the role of benchmarks in the assessment process by next-stage investors, highlighting that while product and people are important, measurable traction against established benchmarks is critical for startups seeking further investment.

• Danger was a company started before the smartphone era, co-founded by Andy Rubin, Joe Britt, Matt Hershenson, and Mar Hershenson's husband in late 1999.
• Despite the .com boom, Danger struggled to secure funding due to its focus on creating a smartphone.
• Pejman Nozad recognized the potential in Danger and invested when others did not, showcasing his ability to see the future potential of companies.

"But Hejman was able to look at these guys and see that they were onto something. Andy is the sort of person that lives in the future and sometimes he visits us."

Mar Hershenson recounts how Pejman Nozad was one of the few who saw the potential in Danger, a company making a smartphone when the focus was on .com businesses, highlighting Nozad's foresight and belief in the founding team's vision.

• Mar Hershenson and Pejman Nozad started as angel investors before founding Pear VC.
• Their shared goal was to have an impact and help founders, leading to the creation of programs that support entrepreneurs without taking equity.
• The partnership has maintained consistent strategic goals and has not experienced major shifts in direction.

"We just wanted to make a difference. And with that in mind, I think when we make decisions for anything, for an investment or for a hire, for a new program we're going to launch, I think when you have those high-level goals clear, they become easier."

Mar Hershenson explains that the clear, shared high-level goals between her and Pejman Nozad have simplified decision-making processes in their partnership, emphasizing the importance of alignment in a business partnership.

• The investment decision-making process involves meeting numerous companies and being selective.
• The excitement about a team is often a clear indicator for Mar Hershenson and Pejman Nozad to make an investment.
• Agreement on people and the ability to convince each other are key factors in their investment decisions.

"And I think it's really, most of the companies we do are in this one category where both Pejwin and I get so excited about the team."

Mar Hershenson describes the mutual excitement she and Pejman Nozad feel about a startup team as a significant factor in their decision to invest, indicating that team quality is a critical consideration in their investment strategy.

• In a two-person partnership, roles are less segmented, and both partners wear multiple hats.
• Both Mar Hershenson and Pejman Nozad are involved with every company they invest in, making them interchangeable in their roles.

"It's very unlike a big partnership where you're kind of on your own and you have your companies and so on, even though every company that we have, I think the both of us are involved at one point or another."

This quote highlights the collaborative nature of a small partnership where both individuals are deeply involved in every aspect of the business, contrasting with larger partnerships where roles and responsibilities may be more distinct and isolated.

• Mar Hershenson believes in the importance of board seats, even for small companies.
• Regular meetings with company founders are crucial for assessing progress and determining necessary actions for success.
• Data suggests that companies with a lead seed fund and clear venture support have a better chance of progressing to Series A.

"I think getting together with your companies very early in a monthly basis, checking where we are, what we need to do, who do we need to ask for help? It's critical."

The quote emphasizes the importance of early and regular engagement with startup companies through board seats or similar oversight roles, suggesting that such involvement is critical for the success and progression of these companies.## Scaling Time in Venture Capital

• Venture capital is a services business that requires scaling the team as the number of companies increases.
• VC firms need to manage board seats and partnerships effectively as their portfolio grows.
• The nature of seed investments is such that the involvement of the VC is typically around 18 to 24 months before passing the company to the next stage investors.
• Time management is crucial due to the intensive demands of the job and the need to balance work with personal life.

"Number one is, it's a services business, so you have more companies, you need to have more people."

This quote emphasizes the necessity of expanding the team in a VC firm as the portfolio of companies grows to maintain the level of service.

"Our model will get companies and they stay with us as a seed investment for, I don't know, 18 to 24 months, and then they go in the hands of the next people."

Mar Hershenson clarifies the typical duration of their involvement with seed-stage companies before they transition to the next level of investors.

"I think managing my time is the hardest thing."

Mar Hershenson acknowledges that time management is one of the most challenging aspects of working in venture capital due to the constant demands on a VC's time.

• "Four Steps to the Epiphany" by Steve Blank is recommended for its practical tools for measuring early-stage company success.
• Elad Gil's blog is valued for its dense knowledge and insights into the tech industry.
• Other resources like the Bam Primax newsletter and various podcasts are part of Mar Hershenson's regular reading and listening routine for staying informed.

"My favorite book is, and I recommend it to a bunch of our founders, is 'Four Steps to the Epiphany' by Steve Blank."

Mar Hershenson recommends this book to founders for its valuable framework on achieving success in the early stages of a company.

"Every piece that he writes is so dense with knowledge and truth."

Mar Hershenson praises Elad Gil's blog for its rich content and valuable insights.

• Pear aims to be the best place to start a company, focusing on supporting founders in the early stages of their ventures.
• Pear's recent public investment in Nova Credit was driven by the founders' compelling vision and the product's potential to address a significant problem for immigrants.

"The vision for pear. I think we want to be, I said at the beginning, the best place to start your company."

Mar Hershenson articulates Pear's vision to be a premier starting point for new companies.

"Nova credit is almost like a FICO score for immigrants."

Mar Hershenson describes Nova Credit's product and its relevance to immigrants, highlighting why Pear chose to invest in this company.

• Kindness and helpfulness are guiding principles in both personal life and business interactions.
• The belief is that a positive attitude and treating people well can have a significant impact on business relationships.

"A smile is worth more than 1000 actions."

Mar Hershenson shares a personal philosophy taught by her mother, which emphasizes the value of kindness over numerous actions.

• Zoom is highlighted as a key tool for video and web conferencing, with a simple user experience and scalability for businesses.
• Vidyard is recommended for engaging leads through video content and converting them into customers, underscoring the importance of video in modern marketing and sales strategies.

"Zoom, the number one video and web conferencing service providing one consistent enterprise experience."

The speaker endorses Zoom as an essential service for businesses, noting its ease of use and the recent significant funding round as indicators of its value.

"Vidyard, the video management platform that powers the video enabled business."

Vidyard is recommended as a platform for creating and managing video content, which is crucial for engaging and converting leads in today's market.