 Oh my god, I feel like I'm at a Maroon 5 concert. This is great. It's great. So we are going to start today with a little bit of introductions. So why don't we start with you, Mar. Okay. And Pa. How did you come to co-found Pa with Pageman and just give us a one minute intro on that story? Okay, it's a good story. So I'm glad you asked. We started Pa in 2013. I actually had moved to the US from Spain in 1995. I went to school there. I started three companies. I had done one angel investment at the time by 2013. And my partner, Pageman, had come from Iran. He had been in no companies, but he had done a lot of angel investing for 15 years. He was actually an angel investor in one of my companies. And in 2009, he said, let's start a fund. I really want to help founders, and we're going to rent a house, and we're going to fill it up with Stanford students, and we're going to back the best of them. And I want you to do it with me. And I said, oh, my God, this man is insane. What year was this? This was 2009. 2009. I said, you're insane. I'm not renting a house with you. And he tried for four years to convince me. Ultimately, he decided to change strategy. And he said, oh, forget the house. Let's just go do some angel investing. We started meeting at Kupa Cafe, which is this cafe in Palo Alto. At first, like an hour a week, then an hour a day, and then eight hours a day. And I said, fine, you win. Let's go build a fund. So we raised the fund. We rented a home, and we still have a home where, you know, it's like a communal space where founders work. There's no charge. There's a lot of food and activities. So it's, you know, anyways. So the Un-Peshman got it. And you've been to that place. I have. Un-Peshman that. Yeah. Pate, give me one minute intro and you? Yeah. My story, I'm also from Barcelona, actually moved to the States in 2008, just fascinated by Silicon Valley and its entrepreneurial culture. And I wanted to learn from others and eventually start my company. And so I did. In 2011, we started Charboost. And that's a company that I've led for 10 years, backed by Sequoia Capital and successfully sold to Zinga last year. And so I took some time off after selling it. And I knew, socially, actually, Mar as a fellow Spaniard in Silicon Valley. And she seduced me together with the rest of the team to come over to this site. So I joined as a venture partner first, part-time. And you know, three days a week that I committed for became seven days a week quickly. So I want today to be as like tactical and granular as possible, especially for founders. I think that's what Slush specializes in. And we're going to focus specifically on the fundraising market. It's changing every day. I want to start at seed first. And so when we look at the seed market today, all valuations fundamentally different now versus 2021. Yes. So, yes, they're lower. Valuations are lower than 2021. But I want to put things on perspective because 2021 is not the benchmark. And if we backtrack to the last 10 years, we saw one of our early investments, Stordash, did a seed round at an 8 million valuation in 2013. Last year, we saw a company actually out of Columbia, founded by fellow Spaniards, doing a 14 million round at a north of 60 million valuation. So again, that is not the benchmark. And what we're seeing now is valuations going back to 15 to 20 million for seed. And I think that's reasonable. That's reasonable. We are expecting valuations to maybe drop a little bit, but not too much. And the reason is that there's so many investors. There's liquidity in this market. Yesterday, I think at the investor event, there were 1700 investors. So there are opportunities for early-stage companies. So we think we're at reasonable levels now. We said we'd go off schedule, so we are, but I'm just too interested. You said that like, okay, 15 to 20. So that's like four or five on a 15, 20, 25 post, whatever we go for. The thing I don't see anymore really is actually the friends and family or the pre-seed. It seems like for pedigreed founders, we've skipped this one on five stage, and we've just gone straight to the three or four on 15 to 20. Do you see what I see? Definitely. I think there is, if you are what I call them elite founders, everybody has a different definition of an elite founder. You could be a second-time founder or somebody who's been at a high-growth company for a long time, so you have an exact out of Clark and I go and start a company. They get just a premium evaluation, and they skip that pre-seed round. But for most companies, there is this pre-seed round where you need that initial cash to prove something. So, you know. I mean, speaking of needing cash, I think the really interesting thing is also like, how much cash to raise and how much Runway to raise for. I actually always take the view that you should always raise much more than you need, because things always take longer. When you think about fundraising stay and advising founders in the audience, how much Runway is the right amount of fun Runway to raise for? Specifically today, do you think? And how do you advise them? So, for seed, we don't typically ask necessarily for a runway of 18 months. I know we've heard this word quite a lot. But we do want our founders to be nimble, to be able to be very agile and iterate. Companies need iterations, right? So, you need to have that enough space to iterate, to get closer to product market fit and to build sustainably for the long term. I think in our portfolio, 40% of our companies have gone through iterations and pivots. One of our stars, Branch, for instance, they've done three pivots. They've gone from a consumer app to now being a deep link SDK, right? Totally agree. You need that time and that space to be able to iterate. And I would even go farther and say that the measure of success really, really early on, your KPI is how well are you iterating? So, how many iterations can you fit in a cycle of pre-seed, right? And it has to be a good iteration, meaning that you can't quit too early. So, you have to try it all the way and you have to learn something from that iteration. So, you have to be measuring. So, you can do the next one with some more knowledge, right? So, the random walk doesn't work. You have to be thoughtful as to how you do it. I do want to dig in on that. Speaking of like measuring in each iteration, can you give us an example of one, just so we can actually kind of go granular and understand what that means? And so, people can build that velocity into their iterations. What do you mean when you think about it? Maybe I can talk to you about Brandt. This is an older company of ours. And, you know, originally, when we invested, this is iteration two. They had a consumer app where you could choose photos and you would get a photo album. And we said, okay, you know, I gave him some money, initially a pre-seed money. And I said, let's try growth. Let's try paid advertising to see if it works, right? So, the founders went out at Christmas when everybody prints photos. And we, you know, tried to change the knobs to get to a reasonable cap. We couldn't get there. I think we tried every possible note, but we were tracking and we couldn't get there. And, you know, the founder was ultimately convinced this is never going to work, right? And then he iterated. And the iteration said, well, if I want to print, I'm not just going to print from my app. I want to print from every possible app in the world. So I'll build a printing SDK. So I would call that a pivot, but it's somewhat of an informed pivot, right? In that sense. Totally get you. Again, I'm so sorry, because we did have this schedule. But when we think, I had a founder the other day, and they had six on the table, but they only set out to raise three. Okay. And I said, listen. It's okay. I love this question. I'm interested to, we might have different views on this. I was like, five or six, take it. Put aside three, like pretend like you have three, save it in the bank and operate with the mentality that you only raised three, but you need the cash. And actually it's better to have that for the rainy day, because iterations can always last longer. What do you think? Well, that is an approach. I think having been on the founder side, it definitely gives you a safety net. It allows you to maybe think bigger, which is necessary, just having that cushion. I think I would, on the other side of the spectrum, there's those founders who just want to raise as little as possible, whatever you need, and again, stay nimble. I have to say this, because when you say, put it away, and people don't act the same way. If you don't have money, you're going to work, you're going to go figure out the truth before anybody else, right? When you have money, you hide the truth. If you look at numbers, raising a higher seed is not a sign of you making it to a series A. It's not. It gives you amazing leverage for fundraisers as well, and it gives you more time. I tell you that the DNA of a suffering company is irreplaceable. It's irreplaceable. And by the way, if you are a founder, and I want to look at you, you only have so much equity in a company, right? It's a bad sign when a founder is like, I want to raise more money to be sure. It's like, okay, you don't believe you can do it, right? Just saying you, you should keep all the equity for yourself, not for me or anybody else. Right. We've seen that. Execution is so important, and in terms of scarcity, we're way more productive. Just think of you getting ready for an exam. When do you study more? The day, you're getting ready for an exam. When do you study more? The day before or a month before? I think that's on the assumption that I did study for these exams. Yeah. But I see it all the time, the curve of productivity of a company, the less they have the more they do. I think the really interesting thing, they're like taking this company, for example, there was a lot of interest in this company, but then for a lot of other companies, there's not interest. And a lot of times it's because of the space that they're in, and investor kind of attraction is often led by segments. When you think about segments enjoying investor tailwinds and segments sort of maybe colder, how do you think about which are kind of colder and hotter, and how do you advise founders in... Well, I can tell you today, in this environment, anything that needs a lot of money, it's a hard sector to invest in, right? Because money is more expensive, so you couldn't do something like a last mile delivery company. I mean, I think you've seen all the last mile people, I think cutting costs, right? I think Gorillaz, Pepe was telling me they were burning $90 million a month, so you've got to cut, you've got to cut. Autonomous vehicles, they need a lot of cash, right? I mean, you've seen Argo AI just shut down, they've raised $3.6 billion, right? There's not enough cash to build that. There are some bright spots. If anybody in the audience is doing generative AI, there is a premium going on for those companies. You know, Pepe and I were actually using generative AI to answer your questions. Oh, really? Oh, great. I'm gross. I hope it's good. I hope it's good. I wonder what, I think a lot of founders have raised the seed or raised some money, and they're thinking, okay, well, funding markets have changed. How have expectations of where my business is changed as well? When you think about what companies need to do in graduating from seed to A, what has changed in the last year? Well, we've seen good companies always raise, and I don't think that's changed. I think the best companies, and by good companies, what we mean at Peer, and we like building towards four things. First, unit economics. They need to be profitable and get as close as possible to contribution margin profitable. We like businesses that have higher LTV than CAC, and ideally 3X, at least, LTV from CAC. We like low payback times, and then we want growth, growth, and being able to fuel that growth. That is the goal. Obviously, at seed, you're not getting there. It sounds like a great company. Exactly. You got it? Hello. Hello. You did. There we go. Am I back? Yes. All right. Anyways, I don't think these basic fundamentals have changed, but obviously when money is expensive and we're clearly in that period of time, the bar is just higher. Anyone building a company right now focus on being as much as possible to show signs of building a good company? I think at seed, you're trying to figure out, can I build a machine that can scale and grow? When you get a Series A money, it's all about scaling that machine, right? So a good Series A investor is looking at not necessarily how much revenue or any absolute value they're looking at, can you scale? So it's more about the expectation than the actual level. But to give you some numbers, which maybe the audience is interested in thing in 2021, a Series A, you didn't need much revenue. I would say a few hundred thousand dollars. You would get nobody cared about metrics in terms of LTB to pay back. It's like you're going to figure it out. Don't worry about it. The multiples were 100 to 300X. So you could be a company that was doing, I don't know, 300K in ARR, and you would be a hundred million. You could even be zero revenue on a hundred million valuation, right? Clubhouse. I'm interested to tell you your thoughts. Often it's easier to raise money like pre-launch or on zero revenue. Absolutely. A Series A in 2021 was a seed today. Now in 2022, so this is today, if you go and raise a Series A, what happens with everything is the pendulum swings, right? So if this was 2017, we went this way and now we're this way. So people are much more demanding, right? So you're going to need enough revenue. And I want to say that there's no absolute but people want you to do. I'm seeing people actually want one and a half to two million, especially if you've raised a big seed, right? If you've raised six million, if you've spent it, then they want more revenue. They're going to want those unit economics that Pepe said, et cetera. So you might be a company doing one and a half or two million ARR and your 2022 valuation may be 50. And you're like, you have valuation nostalgia from a year ago. So you have to let go because the rules have changed. And one of the things founders should not do is trade crappy terms for high valuations at the end of the day. Can we play out like a hypothetical scenario? Let's do it. There's a startup and they've got 12 months of runway, OK? So they don't need to raise now, but leverage is always great. But they're also thinking, I don't know, 2023 could be even worse. How do you advise founders in the 10 to 12 months of runway where we don't know what 23 is going to look like? Some say it's worse. Some say it's much worse. How do you advise them on when to raise and how to time their fund raise? It takes time to raise, right? And we're seeing now at least six months ahead, I would say. So again, it depends on where you are in that iteration process and those sign of becoming a good company. So I would say start raising at least nine months ahead because you're going to need good six months. I don't know, Mar, what do you think? Yeah. You know, I would look at a company and say, OK, let's look at all those questions, those four things that Pepe was saying. And let's see what grade do we give ourselves. Do we have proven unit economics? Do we have growth? Do we have retention? Do we have payback times that are under control? Whatever it is, it's slightly different if you're a consumer or a B2B company. If the metrics are good, then I'm not worried, OK, because I know we will be able to raise. If the metrics are not good, depending on how far we are, today, you're supposed to be really far. I'm going to say 10 months is not enough. We need a longer time because it takes time for a company to figure things out, right? If you're close, I may say, OK, let's do minor iterations. We'll probably be able to get there. So it really is on a case-by-case basis, right? And it depends on really the fundamentals of that engine. Are they working or are they not working? Can I ask, what happens to all the companies that raise preemptive series A's with very little revenue, very little product market fit, but in a popular space? What happens to all of them in this new market? They're at a higher risk, right? Because let's assume you were that $100 million company at zero revenue. So now you are literally at the iteration stage where you're trying to figure out your go-to-market and your product. You're at the same risk level as a seed company. It might take one iteration, two, 10, or infinite iterations, which means you never get there, right? You may go out on fundraise with a $2 million in revenue, and then your valuation is only 60. And then it's a trouble because what do you do? You're going to do a down round. Down round are horrible for founders. They're just terrible because you get completely diluted and so on. So those companies have to work really, really hard to grow into that $100 million valuation. Can I just jump on that? Albert Vanga from USV tweeted recently that in his career, there's a lot of talk about down rounds, but in his career he's only ever seen or executed on two. And actually, they're not as common as people think, and it's so challenging with the damage to morale and what happens to internals within the company. Have you had a down round process go through, and what advice would you give to founders who are contemplating going through it or going through it? Well, you know, there are many ways to do down rounds, right? And I think when a company, I mean, when we invest, and I think a lot of ventures, people feel this way, we are part of that team. If the founder, I mean, listen, the founders got raised money at $100 million, let's say this hypothetical company, somebody paid that, they're responsible as well, right? We're both responsible for those prices. So if we need to do a down round, and you wanna keep the company successful, you need to take care of your team, of the team, because ultimately those are the people that do the work, right? So if you do a down round in a way where the founders and the team are still significant owners of that company, so you take some of the blame, you're okay. If you take a down round where you are like, I don't care, my legal documents say this, I'm gonna do whatever it takes, then there's a lower chance of ultimate success, right? So it really depends on how you do it. You can't be that greedy. This is not just the founder's fault, this is everybody's fault. One point that I would like to make, because we're taking the fundraising perspective here, but one thing that we tend to forget is also our responsibility as founders to build teams. And I think to date, the talent is extremely informed. So those companies that last year did these crazy rounds with very little revenue, as you said, talent knows that. And I've been in good times and hard times, and it's very hard to get the best talent as a founder when people know that your valuation was inflated, that revenue is not there. So I think because we're talking about finding fantastic unicorns, I think we also need to think about the impact of having these crazy rounds, not only from a financing perspective, but also on building teams that are gonna help you succeed in the future. So to you, do you kind of just say how it is then? If you're one of the founders of one of these very inflated but priced companies, do you say to the team, hey, we're all aware that this price is something that we're gonna have to grow into, but let's grow into it together. How do you communicate that to the team when they're going, this is crazy. I think as my perspective, again, having been in hard times is transparently and vulnerable, you need to be open to the reality in what the company is. And my experience has always been that even if you don't know how to get out of this, but if you communicate it as soon as possible early on to everyone, especially the top talent in the company, they're gonna feel involved and they're gonna be part of the solution. I mean, a lot of people are repricing options, right? So that's an important part. To keep your employees, you have to reprice those options. Yeah. Okay, so I'm gonna ask a really unfair one now. We have product, we have market, and we have team. How do we weigh these three kind of core pillars of the company when making an investment decision today? You should take it. Yeah, well, I think it depends on where you are. From my seed, where we do seed, and seed means typically there's nothing, there's no product, there's no customers, or there may be some MVP, but it's very, very early. It's all team, I mean, our majority's team, it's all we have, right? But there's a caveat on that team. I mean, we're looking us to how they present the company and the company at seed is just an initial hypothesis of some product you're building and a market you're going to. So I look at how the founder is describing that market, how ambitious they are, how knowledgeable they are about the product of where they're going after. So all those details matter, right? It's not just the founder, it's kind of their awareness of the rest as well, right? I think Mike Maple says it very well. He says, like, what's your insight development? Yeah. Like how do you see the world in a way that they don't see it yet? Exactly. That's part of it, right? And some founders have spent 10 years working on something so they bring something to the table, for sure. We've mentioned iterations many times, we've mentioned pivots many times. I think the hardest thing when you're going through it is when's too early, when's too late, and what's the right time? You've both been through pivots. Yeah, I don't think it's never too early or too late. We try to work together with our companies very early on to put together operating plans. When you have milestones, goals that you leave and breathe for and you look at the hard data, it's not, you don't get emotional about pivots, right? So I think the sooner you put together a plan, you set up goals across the organization. It's not only product adoption, it can be team, it can be, but with clear metrics, it's you're going to easily see that things are not working out, right? And you can work with your board if you have a board or with mentors or advisors, right? But we encourage our companies to put together these operating plans very early on so that they can be the touch of the emotion and go through these pivots a little bit more rationally. Now I want to do one final question, then we're going to do a quick fire round. I want to ask you about biggest miss. I think often we learn a lot from our biggest miss and how it changes our investing mindset. So when we think about our biggest miss today, what's the biggest miss and how did it impact your investment decision making? Mara loved this question. It's a very painful question. We'll say it fast. Because I think we all have our anti-portfolio, which is the companies that we could have invested and we did not invest. In the life of Pear, we're nine years old, we've done 14 big misses, so there's not just one. So I think it's one and a half per year. Which one sticks with you the most? You know, I think probably Rapi is the one that pains me the most. Why Rapi in particular? They were from Spain, which is where I'm from. We actually worked really hard. We introduced them to their first investors. And ultimately we didn't do it because the valuation at the time, this was 2016, it was 26 million. And Peshma and I thought, oh my God, that is crazy. Who would do a seed at 26 million, right? And at the end, you know, our business is very simple. You have to back the best people, big markets. When you start thinking about valuation and analyzing proof points, et cetera, you know, you make mistakes. Yeah, I don't know, that was our biggest, but I have 14, you know, so. That's a cool episode. So lots of scars. 14 scars, yes. Okay, we're gonna do a quick fire round. Ready? All right. But I'm gonna direct the questions here, so don't worry. So we're gonna go with Pepe. What is the most common investment mistake you see now? Not building your own criteria and being dragged by FOMO. I heard a brilliant one, which is, you know, venture is traditionally FOMO, but in 2022 we have Jomo, which is joy of missing out. Tell me, Mark, what's the best investment advice you've received? We're not in the business of not investing, which means that when you look at a company, it's not about why it won't work, but what could happen that it would work, you know, that's the way to look at it. Pepe, why Europe, why now? You're obviously in Barcelona. Why Europe, why now for Pear? Well, we're in Europe, isn't that fantastic? I think talent is more fluid than ever, and great talent comes from or wants to live in Europe now. Mark, biggest fundraising mistake you see founders make today? Go see Sequoia for your first meeting. So please practice first like a hundred times before you see anybody you want. Do you say they should, sorry, do you say they should stage it in terms of like angels first, test out? No, I mean like you're ready to go find it, you know, when you practice a pit, you're getting ready. It's like a little bit of acting, right? If you want to see your highest target, I want to work with this investor. Don't go pitch him first, practice with other people before you go see your, you know, your best target. Practice with the other investors. Yeah, exactly. Pepe, what have you recently changed your mind on? That's a good one. I thought we would become kind of Zoom animals, and I am valuing more and more the in-person meetings. Yep, got you. Mark, what would you most like to change about the world of venture? Well, one of the things I care a lot about is diversity. You know, we still have, it's a, you know, and I think it's less in Europe, but in the US we still have only 2% of companies that are female founders only, and 15% have one female. So you know, that's something we can do better as a... Okay, so final one for both of you, and I want like separate ones from each of you. So what was your most recent publicly announced investment, and why did you say yes and get so excited? Dude, I'll start. So there's a company that I'm very excited about. They're actually from Barcelona. It's called Spatios. It's a platform to book venues for corporate events, and I met the founder through, actually a common contact, a common founder, and I've been in the business of organizing events. I know how painful it is to book a venue, to book everything that needs to happen, and we love the greed of the founder. So we decided to invest in their pre-seed, and they've been part of Pear X, which is our pre-seed bootcamp, and we're very excited, very excited. They're going to be doing a seed soon. Ma, most recent investment? You know, now people announce their seeds like a year later, so you have to rewind. But maybe Fair Street, which is a company that sells software to Medicare agents. It sounds really boring, but it's a massive market. The founders, Tori and Sarah, took my class at Stanford, and they came in with the idea of building a healthcare company. I said no for two years, and they kept working on it and iterating. So finally, I'm like, oh my God, people are never going to give up. So we ended up backing them, and we helped them through the pre-seed, and they just, a few months ago, they closed the seed round with several times over subscribed, so they're really happy about it. I mean, that's one more really unfair one. Ma, in 10 years' time, where is Pear? In 10 years' time, you know, our vision is very clear for Pear. We want to be the best seed fund that ever existed, so, you know, it's, I think when you look at a series, you know, the great firms, the Series A firms, you know which are the top five, but you know how about seed, and that's where Pear wants to be. So, you know, we had a lot of work to do. Ma, perfect, thank you so much for doing this. It's been a joy to do. Thank you. Thank you. Thanks.