by Mar Hershenson

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Pear
Clinching the
Series A
Mar Hershenson, Managing Partner
Pear

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You’ve just raised your Seed Round

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Raising an A round is much harder

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Completely Different Landscape
Seed Series A
4
100s angels, seed funds ~20 target A funds
Quick, simple
Hope
Slow, not as simple
Data

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More Funds in Seed
Number of Ac,ve Seed Funds
2010 2011 2012 2013 2014 2015
236
150
112
65
42
33
Source: CB Insights https://www.cbinsights.com/blog/past-present-future-micro-vc/

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Investors Registered on Angel List
50
2,500
18,000
30,057
More Angels
Source: Techcrunch, Harvard Business Review, Angel List
2/2010 12/2011 6/2013 11/2016

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Seed Rounds with Follow-on As
0%
10%
20%
30%
40%
0
750
1,500
2,250
3,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*
Total Seed Deals Series A Follow-on % of Follow-on
Source: Pitchbook, Q2 2016 VC Report

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.. but people do climb Everest
1- Figure out where
you are going
2- Make a plan,
execute, iterate

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Figure out where
you are going

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What company will I be at Series A?
Revenue AudienceTechnology Founder
Our Focus

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Word 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

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Little Single Metric Correlation
SaaS MRR-Valuation
0
45
90
135
180
20 35 50 65 80
MRR($M)
Post Money Valuation ($M)
Source: Thomas Tungunz, Redpoint

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Growth is not Enough
13

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VCs question future success
How do I know if
revenue will reach
$10M? $100M?
Are sales scalable,
profitable?
How do I know if
that enterprise
deal going to
expand?
Repeatable?
How do I know if
it will reach 10M
active users?
100M? Will the
CAC scale?

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VCs look for predictors of future
success
Engagement
Daily Active Users
Product Quality
Activities per User
Retention
New, churned and resurrected
users/accounts
User Quick Ratio
Unit economics/Margin
Life Time Value
Customer Acquisition Cost
Cost of sales
Growth/Scale
Organic/Inorganic growth
Recurring Revenue
Cash burn

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Growth Quality
(Quick Ratio – Added MRR/lost MRR)
Source: Diligence at Social Capital Part 1. Medium

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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

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Super-Fans
(Completed Key Actions/Week/Active User)
0
13
25
38
50
1 2 3 4 >5
Completed Key Actions
%ActiveUsers
Super Fans
Source: Josh Elman, Greylock Partners

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Good Metrics Not Enough
MARKET SIZE MARKET DYNAMICS
CHEMISTRYTEAM

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19
Plan
Execute
&
Iterate

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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

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“What gets measured, gets done”
Georg Rheticus, Astronomer 1514-1574

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Display Dashboards to Team
100
Leads
50
Demos
20
Conversations
10
Closed
MRR TIME TO CLOSE

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Keep Iterating
Plan
Execute
On
track? YESNO

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1/3 Seeds do a Second Seed
2007 2009 2012 2014 2016
13%
15%
17%
19%
18%
21%
25%
29%
32%
34%
Source: Pitchbook, Q2 2016 VC Report

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25
Climb down
Mount Everest

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The actual raise
Build First
Rational ask
Time it right
Target list
Practice the
pitch
Run the
process
Speak data
Diligence
investors

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Climbing Everest is Hard!

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… but Possible
Get help from
a sherpa
Plan &
work
Re-plan
(if needed)

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Questions?
mar@pear.vc