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Pear
LAUNCH Scale 2018
Navigating
The New Seed Landscape
Mar Hershenson, Managing Partner Pear VC
Pear
Pear
LAUNCH 20192
Partner @
We help build companies from 0 to 1
State of Early
Venture
3
Year 2003 2010 2019
# Funds 0 33 ~800
Number of Seed Funds
Not only 24x funds…
Pear
LAUNCH 20196
Source:	SEC	Form	-D	filings
… but also 4-20x bigger funds
	I	(y.	2004) 	II	(y.	2007) III	(y.	2011) IV	(y.	2013) V		(y.	2016) VI	(y.	2019)
$200M
$100M
$85M
$35M
$7.4M
“Example	Fund”	size	increase	over	Hme
Pear
LAUNCH 2019
Rounds have shifted
7
Source:Wing	VC.	Techcrunch.	A	quick	look	at	how	Series	A	and	seed	rounds	have	ballooned	in	recent	years,	fueled	by	top	investors	
2010 2019
Age	of	first	institutional	Seed 1y 2.5y
Total	Seed	raised	before	Series	A $1.3M $5.6M
Series	A	size $5.1M $15.7M
%	Companies	with	revenue	at	A 15% 82%
Pear
LAUNCH 2019
Getting to a Series A is a ~3.5 year Journey
8
$5.6M	Raised		
Before	Series	A	
$250k-$750k	
Pre-seed	
$1-4M		
[Seed	Plus]
Pre-seed	2019		=		Seed	2010 Seed	2019		=		Series	A	2010
Metrics	in	Seed	round	matter
$2-4M	
Seed
Where do I have to
be to raise Seed and
A money?
Pear
LAUNCH 201910
Product Market Fit Stage : “0
“0 “0.5 “1
Valuable
product I can
sell
Idea stage.
No product
No
customers
Valuable
product my
team can
predictably sell
Source : Nikhyl Singhal, CPO at Credit Karma
Start-up journey has not changed
Pear
LAUNCH 2019
The round names have changed
11
Product Market Fit Stage : “0 to 1”
“0” “0.5” “1”
Series A
Seed
Series ASeedPre-Seed
2005
2010
2019
Series A
What are valuations at
each stage?
It depends
Pear
LAUNCH 201914
Source : Jason Calacanis Blog. The Valuation vs Traction Matrix
Pear
LAUNCH 2019
“Elite Status” Start-ups
15
Founder
Background
Hot Market Hype Location
Attended top university
Worked at high-growth
company
Second time founder
RPA
Crypto
AI ….
Big investor leading
YC
Famous founder
Silicon Valley!
Pear
LAUNCH 201916
“0” “0.5”
$3-6M
$10-20M
“1”
$30-50M
Typical	Startup
Series ASeed/Seed +Pre-SeedTypical	Startup
Elite	Startup
$10-15M
$20-30M
$40-80M
Series ASeed/Seed +Elite	Startup
Expected Round Valuation
Pear
LAUNCH 2019
Assumptions Forward
17
Average Start-up
No Bio/Deep Tech
Location: Silicon Valley
Pear
LAUNCH 2019
What matters most when*
18
	Pre-seed Seed Series	A Public
Team Traction Market Traction
Traction Team Traction Market
Market Market Team Team
1
2
3
* Caveat: Typical investors at each stage. A Series A investor will think market first at seed too (eg).
“0” stage, Pre-seed
19
Pear
LAUNCH 2019
!20
~$100k ~$750k
Friends, Family & Fools
Angels
Pre-seed Fund
Angels
Friends, Family & Fools
“Typical” Pre-seed Rounds
Pear
LAUNCH 2019
How to raise pre-seed from a fund
21
	Pre-seed
Team*
- Emphasize	“singular”	achievements		
- Show	you	can	execute	
-		Attract	complementary	co-founders
Traction
- Demonstrate	“MVP”		(does	not	mean	you	need	to	code)	
- Keep	investors	updated	as	you	make	progress	(even	if	small)
Market Founder/CEO	has	ambition	to	build	something	big
1
2
3
* Assumes non-elite status start-up
“0.5” stage, Seed
22
Pear
LAUNCH 2019
!23
~$2M ~$4M
Seed Fund
Pre-seed Fund
Angels
Series A Fund
“Typical” Seed Rounds
Pear
LAUNCH 2019
Where do I have to be to raise seed
24
Seed
Traction
Proof	of	customer	“love”	
A	few	customers	that	cannot	live	without	your	product
Team
Core	team	is	ready	(Minimum	Viable	Team)	
(especially	engineering/product)
Market Founder/CEO	has	ambition	to	build	something	big
1
2
3
* Caveat: “On average”. Some investors ma
Pear
LAUNCH 201925
Test - when you reach “0.5”
When you are not changing your to acquire and retain a new customer
website
sales ppt
app
Pear
LAUNCH 201926
Specifics on traction at seed
Revenue
	$	0-200k	ARR	
(~10k	MRR)
Product	Stickiness Fanatic	Customers
Growth Organic/Viral
Plan
Clear	Plan	to	reach		
$1.5-2M	ARR	in	18	months
Most	Critical
Pear
LAUNCH 2019
Actual data and trends matter at seed
27
Engagement
DAUs/WAUs/MAUs
Frequency of use
30d/90d/120d Retention
Lengths of sessions
Customer Love
Organic growth
Reference accounts 

Super-fans/addicted users
Sings of love (posts/emails…)
Pear
LAUNCH 2019
Product Market Fit Measurements
28
58%
0
15
30
45
60
Ini^al Q12017 Q2	2017 Q3	2017 Q4	2017
33%
22%
47%
56%
40%	benchmark
Source : How Superhuman Built an Engine to find Product/Market Fit by Rahul Vohra
Pear
LAUNCH 201929
Why Retention Matters
LAUNCH Scale 2018
Pear
30
Cohort Analysis - Retention
Cohort
Size
0 1 2 3 4 5 6 7 8 9
110 Jan 100% 33% 21% 16% 14% 13% 12% 12% 10% 12%
186 Feb 100% 31% 21% 14% 13% 12% 11% 11% 9%
184 Mar 100% 29% 18% 16% 14% 12% 10% 9%
225 Apr 100% 35% 29% 22% 20% 17% 15%
231 May 100% 42% 37% 34% 24% 21%
209 June 100% 44% 37% 33% 25%
240 Jul 100% 42% 38% 31%
271 Aug 100% 45% 40%
248 Sep 100% 51%
243 Oct 100%
2,147 Total 100% 39% 30% 24% 18% 15% 12% 11% 10% 12%
Source:	Diligence	at	Social	Capital	Part	2.	Medium
Pear
LAUNCH 201931
Advice for “0” to “0.5”
“Experiment”	Mentality
• hyp	—>	test	—>		measure	—>	new	hyp
“Scrappy	and	Fast”	Operations
• Build	fast.	Kill	Features.	Simplest	MVP
Ignore	“Fake”	Signals
• Number	Employees.	Money	Raised.	Speaking	engagements.
Pear
LAUNCH 2019
The “0” to “0.5” journey in steps
32
Vision/Idea Build
First
founder
driven sale
1 2 3
Repeat
founder
driven sale
4
Consumer Companies: 3) Launch to network 4) Organic growth/word of mouth expansion
Pear
LAUNCH 201933
Branch - “0” to “0.5” journey
Data driven PMF driven “
Photo App (CAC was high!) —>
Print SDK (no takers) —>
Deeplinking (customers inbound)
Duration:
15 months
Team:
4 co-founders
Cash spent:
$50k
“1” stage, Series A
34
Pear
LAUNCH 2019
!35
~$8M ~$20M
Series A Fund
Seed Fund
Series B Fund
Corporate Fund
“Typical” Series A rounds
Pear
LAUNCH 2019
From finding product fit to finding market fit
36
Iterate on formula until
finding customer love
Iterate on growth engine
until economics work
Focus	on	the	revenue	engine	
Not	the	absolute	revenue
LAUNCH Scale 2018
Pear
37
Myths on the Street
E-commerce
$500k-1M MRR
20% m-o-m growth
SaaS
$100k-200k MRR
100% y-o-y growth
Consumer
50k DAUs
25% m-o-m growth
Source:	Equityzen	blog
Marketplace
$500k-1M GMV
25% m-o-m growth
LAUNCH Scale 2018
Pear
Growth is not Enough
38
LAUNCH Scale 2018
Pear
39
SaaS Series A MRR-Valuation Correlation
0
45
90
135
180
20 35 50 65 80
MRR($M)
Post Money Valuation ($M)
Source: Thomas Tungunz, Redpoint
Revenue is not Enough
Pear
LAUNCH 201940
Test - when you reach “1”
If I hire 1 AE, I will close this $400k ARR new business in 6 months
If I spend $10k in ads, I will get 10k new users (or maybe no ad-spend is needed)
Pear
LAUNCH 2019
Where do I have to be to raise A?
41
Series	A
Market Need	to	convince	series	A	investors	this	is	a	$10B+	company
Traction Can	demonstrate	that	is	a	scalable	business	with	efficient	growth
Team Core	product	team	built.	Initial	growth	hacking/sales	team
1
2
3
Pear
LAUNCH 201942
Specifics on traction at Series A
Most	Critical
Series	A	Round
Revenue
$0.5-4M	ARR	
(~$200k	MRR)
Product	Stickiness Net	retention	80-150%
Growth
Efficient	Growth	Engine	
(SE>1,	LTV/CAC>3,	default	alive)
Plan Plan	to	3-5x	in	12/18	months
LAUNCH Scale 2018
Pear
43
Growth Quality

(Quick Ratio – Added MRR/lost MRR)
Source:	Diligence	at	Social	Capital	Part	1.	Medium
Pear
LAUNCH 201944
Sample Metrics for Series A SaaS Companies
Source:	Bessemer.	Consumer	Series	A	Metrics	
Cash	Flow	Efficiency	-	Net	new	ARR/Net	Churn	
CARR	-	Committed	Annual	Recurring	Revenue
METRIC GOOD BETTER BEST
CARR		
%	Growth
50-100% 100-200% 200%+
CAC	PAYBACK	
Months
24 12-24 <12
CHURN	
Monthly
1-3% <1% Net	negative
CASH	FLOW	
EFFICIENCY
<1 ~1 >1
Pear
LAUNCH 201945
Advice for “0.5” to “1”
Focus	on	“Growth	Engine”	rather	than	“Abolute	Growth”
• Replicatable	and	efficient	growth	are	better	than	just	growth	
Measure	“Growth	Engine”	Efficiency
• Use	data	to	measure	performance.	Build	sales	&	marketing	ops	teams.
Avoid	“Fake”	Growth
• Sales	&	marketing	cost	higher	than	net	revenue.	GMV	vs.	actual	revenue.
Pear
LAUNCH 201946
Doordash - “0.5” to “1” journey
Duration:
10 months
Business model iterations:
First region to “1”
Second region to “0.5”
Extreme attention to metrics (LTV, CAC, Payback, Margin)
Team - Key hires:
Engineering. Operations Heads.
Cash spent:
< $2M
Summary
47
Pear
LAUNCH 201948
In Summary
Seed	Round Series	A	Round
Revenue
	$	0-200k	ARR	
(~$10k	MRR)
$0.5-4M	ARR	
(~$200k	MRR)
Product	Stickiness Fanatic	Customers Net	retention	80-150%
Growth Organic/Viral
Efficient	Growth	Engine	
(SE>1,	LTV/CAC>3,	default	alive)
Plan
Clear	Plan	to	reach		
$1.5-2M	ARR	in	18	months
Plan	to	3-5x	in	12/18	months
LAUNCH Scale 2018
Pear
49
“What gets measured, gets done”
Georg Rheticus, Astronomer 1514-1574
LAUNCH Scale 2018
Pear
50
Make an Ops Plan
Q1 Q2 Q3 Q4
Revenue $1M	ARR
New Hires
Product
Cash @ end
$100k	ARR	
100	leads
1	Demand	Gen 1	Sales
Rev	2.0
1	Customer	Success
3	Engineers
MVP	
1	Sales
1	QA	Engineer
18	months 15	months 10	months 4	months6	months
Pear
LAUNCH 201951
Know	your	Northstar	
Focus	on	building	a	large	business	that	makes	money
Pear
LAUNCH 2019
Contact: mar@pear.vc
52

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Seed Financing Landscape - Launch 2019

  • 1. Pear LAUNCH Scale 2018 Navigating The New Seed Landscape Mar Hershenson, Managing Partner Pear VC Pear
  • 2. Pear LAUNCH 20192 Partner @ We help build companies from 0 to 1
  • 4. Year 2003 2010 2019 # Funds 0 33 ~800 Number of Seed Funds
  • 5. Not only 24x funds…
  • 6. Pear LAUNCH 20196 Source: SEC Form -D filings … but also 4-20x bigger funds I (y. 2004) II (y. 2007) III (y. 2011) IV (y. 2013) V (y. 2016) VI (y. 2019) $200M $100M $85M $35M $7.4M “Example Fund” size increase over Hme
  • 7. Pear LAUNCH 2019 Rounds have shifted 7 Source:Wing VC. Techcrunch. A quick look at how Series A and seed rounds have ballooned in recent years, fueled by top investors 2010 2019 Age of first institutional Seed 1y 2.5y Total Seed raised before Series A $1.3M $5.6M Series A size $5.1M $15.7M % Companies with revenue at A 15% 82%
  • 8. Pear LAUNCH 2019 Getting to a Series A is a ~3.5 year Journey 8 $5.6M Raised Before Series A $250k-$750k Pre-seed $1-4M [Seed Plus] Pre-seed 2019 = Seed 2010 Seed 2019 = Series A 2010 Metrics in Seed round matter $2-4M Seed
  • 9. Where do I have to be to raise Seed and A money?
  • 10. Pear LAUNCH 201910 Product Market Fit Stage : “0 “0 “0.5 “1 Valuable product I can sell Idea stage. No product No customers Valuable product my team can predictably sell Source : Nikhyl Singhal, CPO at Credit Karma Start-up journey has not changed
  • 11. Pear LAUNCH 2019 The round names have changed 11 Product Market Fit Stage : “0 to 1” “0” “0.5” “1” Series A Seed Series ASeedPre-Seed 2005 2010 2019 Series A
  • 12. What are valuations at each stage?
  • 14. Pear LAUNCH 201914 Source : Jason Calacanis Blog. The Valuation vs Traction Matrix
  • 15. Pear LAUNCH 2019 “Elite Status” Start-ups 15 Founder Background Hot Market Hype Location Attended top university Worked at high-growth company Second time founder RPA Crypto AI …. Big investor leading YC Famous founder Silicon Valley!
  • 16. Pear LAUNCH 201916 “0” “0.5” $3-6M $10-20M “1” $30-50M Typical Startup Series ASeed/Seed +Pre-SeedTypical Startup Elite Startup $10-15M $20-30M $40-80M Series ASeed/Seed +Elite Startup Expected Round Valuation
  • 17. Pear LAUNCH 2019 Assumptions Forward 17 Average Start-up No Bio/Deep Tech Location: Silicon Valley
  • 18. Pear LAUNCH 2019 What matters most when* 18 Pre-seed Seed Series A Public Team Traction Market Traction Traction Team Traction Market Market Market Team Team 1 2 3 * Caveat: Typical investors at each stage. A Series A investor will think market first at seed too (eg).
  • 20. Pear LAUNCH 2019 !20 ~$100k ~$750k Friends, Family & Fools Angels Pre-seed Fund Angels Friends, Family & Fools “Typical” Pre-seed Rounds
  • 21. Pear LAUNCH 2019 How to raise pre-seed from a fund 21 Pre-seed Team* - Emphasize “singular” achievements - Show you can execute - Attract complementary co-founders Traction - Demonstrate “MVP” (does not mean you need to code) - Keep investors updated as you make progress (even if small) Market Founder/CEO has ambition to build something big 1 2 3 * Assumes non-elite status start-up
  • 23. Pear LAUNCH 2019 !23 ~$2M ~$4M Seed Fund Pre-seed Fund Angels Series A Fund “Typical” Seed Rounds
  • 24. Pear LAUNCH 2019 Where do I have to be to raise seed 24 Seed Traction Proof of customer “love” A few customers that cannot live without your product Team Core team is ready (Minimum Viable Team) (especially engineering/product) Market Founder/CEO has ambition to build something big 1 2 3 * Caveat: “On average”. Some investors ma
  • 25. Pear LAUNCH 201925 Test - when you reach “0.5” When you are not changing your to acquire and retain a new customer website sales ppt app
  • 26. Pear LAUNCH 201926 Specifics on traction at seed Revenue $ 0-200k ARR (~10k MRR) Product Stickiness Fanatic Customers Growth Organic/Viral Plan Clear Plan to reach $1.5-2M ARR in 18 months Most Critical
  • 27. Pear LAUNCH 2019 Actual data and trends matter at seed 27 Engagement DAUs/WAUs/MAUs Frequency of use 30d/90d/120d Retention Lengths of sessions Customer Love Organic growth Reference accounts 
 Super-fans/addicted users Sings of love (posts/emails…)
  • 28. Pear LAUNCH 2019 Product Market Fit Measurements 28 58% 0 15 30 45 60 Ini^al Q12017 Q2 2017 Q3 2017 Q4 2017 33% 22% 47% 56% 40% benchmark Source : How Superhuman Built an Engine to find Product/Market Fit by Rahul Vohra
  • 30. LAUNCH Scale 2018 Pear 30 Cohort Analysis - Retention Cohort Size 0 1 2 3 4 5 6 7 8 9 110 Jan 100% 33% 21% 16% 14% 13% 12% 12% 10% 12% 186 Feb 100% 31% 21% 14% 13% 12% 11% 11% 9% 184 Mar 100% 29% 18% 16% 14% 12% 10% 9% 225 Apr 100% 35% 29% 22% 20% 17% 15% 231 May 100% 42% 37% 34% 24% 21% 209 June 100% 44% 37% 33% 25% 240 Jul 100% 42% 38% 31% 271 Aug 100% 45% 40% 248 Sep 100% 51% 243 Oct 100% 2,147 Total 100% 39% 30% 24% 18% 15% 12% 11% 10% 12% Source: Diligence at Social Capital Part 2. Medium
  • 31. Pear LAUNCH 201931 Advice for “0” to “0.5” “Experiment” Mentality • hyp —> test —> measure —> new hyp “Scrappy and Fast” Operations • Build fast. Kill Features. Simplest MVP Ignore “Fake” Signals • Number Employees. Money Raised. Speaking engagements.
  • 32. Pear LAUNCH 2019 The “0” to “0.5” journey in steps 32 Vision/Idea Build First founder driven sale 1 2 3 Repeat founder driven sale 4 Consumer Companies: 3) Launch to network 4) Organic growth/word of mouth expansion
  • 33. Pear LAUNCH 201933 Branch - “0” to “0.5” journey Data driven PMF driven “ Photo App (CAC was high!) —> Print SDK (no takers) —> Deeplinking (customers inbound) Duration: 15 months Team: 4 co-founders Cash spent: $50k
  • 35. Pear LAUNCH 2019 !35 ~$8M ~$20M Series A Fund Seed Fund Series B Fund Corporate Fund “Typical” Series A rounds
  • 36. Pear LAUNCH 2019 From finding product fit to finding market fit 36 Iterate on formula until finding customer love Iterate on growth engine until economics work Focus on the revenue engine Not the absolute revenue
  • 37. LAUNCH Scale 2018 Pear 37 Myths on the Street E-commerce $500k-1M MRR 20% m-o-m growth SaaS $100k-200k MRR 100% y-o-y growth Consumer 50k DAUs 25% m-o-m growth Source: Equityzen blog Marketplace $500k-1M GMV 25% m-o-m growth
  • 38. LAUNCH Scale 2018 Pear Growth is not Enough 38
  • 39. LAUNCH Scale 2018 Pear 39 SaaS Series A MRR-Valuation Correlation 0 45 90 135 180 20 35 50 65 80 MRR($M) Post Money Valuation ($M) Source: Thomas Tungunz, Redpoint Revenue is not Enough
  • 40. Pear LAUNCH 201940 Test - when you reach “1” If I hire 1 AE, I will close this $400k ARR new business in 6 months If I spend $10k in ads, I will get 10k new users (or maybe no ad-spend is needed)
  • 41. Pear LAUNCH 2019 Where do I have to be to raise A? 41 Series A Market Need to convince series A investors this is a $10B+ company Traction Can demonstrate that is a scalable business with efficient growth Team Core product team built. Initial growth hacking/sales team 1 2 3
  • 42. Pear LAUNCH 201942 Specifics on traction at Series A Most Critical Series A Round Revenue $0.5-4M ARR (~$200k MRR) Product Stickiness Net retention 80-150% Growth Efficient Growth Engine (SE>1, LTV/CAC>3, default alive) Plan Plan to 3-5x in 12/18 months
  • 43. LAUNCH Scale 2018 Pear 43 Growth Quality
 (Quick Ratio – Added MRR/lost MRR) Source: Diligence at Social Capital Part 1. Medium
  • 44. Pear LAUNCH 201944 Sample Metrics for Series A SaaS Companies Source: Bessemer. Consumer Series A Metrics Cash Flow Efficiency - Net new ARR/Net Churn CARR - Committed Annual Recurring Revenue METRIC GOOD BETTER BEST CARR % Growth 50-100% 100-200% 200%+ CAC PAYBACK Months 24 12-24 <12 CHURN Monthly 1-3% <1% Net negative CASH FLOW EFFICIENCY <1 ~1 >1
  • 45. Pear LAUNCH 201945 Advice for “0.5” to “1” Focus on “Growth Engine” rather than “Abolute Growth” • Replicatable and efficient growth are better than just growth Measure “Growth Engine” Efficiency • Use data to measure performance. Build sales & marketing ops teams. Avoid “Fake” Growth • Sales & marketing cost higher than net revenue. GMV vs. actual revenue.
  • 46. Pear LAUNCH 201946 Doordash - “0.5” to “1” journey Duration: 10 months Business model iterations: First region to “1” Second region to “0.5” Extreme attention to metrics (LTV, CAC, Payback, Margin) Team - Key hires: Engineering. Operations Heads. Cash spent: < $2M
  • 48. Pear LAUNCH 201948 In Summary Seed Round Series A Round Revenue $ 0-200k ARR (~$10k MRR) $0.5-4M ARR (~$200k MRR) Product Stickiness Fanatic Customers Net retention 80-150% Growth Organic/Viral Efficient Growth Engine (SE>1, LTV/CAC>3, default alive) Plan Clear Plan to reach $1.5-2M ARR in 18 months Plan to 3-5x in 12/18 months
  • 49. LAUNCH Scale 2018 Pear 49 “What gets measured, gets done” Georg Rheticus, Astronomer 1514-1574
  • 50. LAUNCH Scale 2018 Pear 50 Make an Ops Plan Q1 Q2 Q3 Q4 Revenue $1M ARR New Hires Product Cash @ end $100k ARR 100 leads 1 Demand Gen 1 Sales Rev 2.0 1 Customer Success 3 Engineers MVP 1 Sales 1 QA Engineer 18 months 15 months 10 months 4 months6 months