Mar Hershenson remembers when her partner Pejman Nozad burst into the office in September 2013. A former rug dealer turned investor, Nozad had only convinced Hershenson, a startup veteran teaching at Stanford, to team up on a new venture capital firm months before. He’d spent hours scouting and meeting the new class of companies at accelerator Y Combinator and found a favorite.
“He’s like, ‘Mar, I found the company we have to invest in!’” Hershenson says. “And I’m like, okay, which one? ‘This guy Tony!’ And I’m like, what does he do? And he says, ‘Oh, they’re delivering food.’ And I was like, oh my god, no way. This is crazy, Pejman. This is not tech.”
Worn down by Nozad’s enthusiasm, Hershenson agreed to test out the fledgling service, DoorDash. Many of its restaurant customers were within walking distance of their office, on Palo Alto’s University Avenue. Managers gushed to the investors about Tony Xu, the startup’s CEO. “This is like FedEx for me,” one said. The duo visited Xu and his three cofounders in their home, where Xu pulled out a whiteboard. “‘This is going to be a $100 billion company,’” she remembers him saying. “‘Let me tell you how.’”
With CRV and Khosla Ventures set to lead DoorDash’s highly-competitive seed round, Nozad and Hershenson scrambled to earn their piece. When Xu mentioned DoorDash needed design help, they sent over a designer friend from Google. The two played to their strengths: Nozad’s network, which included founders like Drew Houston and Arash Ferdowsi at Dropbox, whom he’d connected to his friends at Sequoia; and Hershenson’s operating experience, which she kept mixing it up with Stanford graduate students. “I said, I can open a lot of doors, but you can work with my partner who has started three companies,” Nozad says now.
The pitch worked. Hershenson and Nozad invested $250,000 into the seed round of DoorDash, then continued to back the company in its Series A and B rounds for an overall investment of about $1.9 million. When DoorDash went public on Wednesday, their firm Pear VC owned 2,518,360 shares, according to two sources with knowledge of the firm’s finances. Pear declined to comment on its stake. But at DoorDash’s share price of $176 as of market open on Friday, Hershenson’s and Nozad’s initial investment is up about 1,000x, and the blended position up 233x their committed capital – meaning the duo have, for now, turned $1.9 million into more than $440 million.
Pear VC is far from the only firm to have won big in DoorDash’s IPO, which made Xu and two of his cofounders billionaires. In addition to CRV and Khosla Ventures, Kleiner Perkins’ stake is valued at more than $1 billion, while Sequoia, SoftBank Vision Fund and Singapore’s all stand to reap plural billions in profits should DoorDash’s stock price hold up. Even among them, Pear stands out: a firm launched by two immigrants that stands to return its entire $51 million first fund a few times over from one of its very first bets.
Four years before their investment in DoorDash, Nozad first reached out to Hershenson about investing together. Originally from Spain, she had studied at Stanford in the 1990s before working at several startup ventures, including Sabio Labs, a company providing software for designing analog circuits that was acquired in 2008. Now teaching at Stanford, she knew of Nozad’s “rugs to riches” story; growing up in Tehran before fleeing with his family to Germany in the 1980s, then nabbing a visa to the United States, where his first job was at a Bay Area car wash, then a coffee and yogurt shop before scoring a job at a local Palo Alto rug dealer. Before long, Nozad’s customers were his investment collaborators; by 1999, Nozad served as chief hustler for the rug stores’ owners, who launched a venture fund. When Hershenson first heard from Nozad, he was looking to strike out on his own.
The pitch was simple: having found companies like music discovery app SoundHound among Stanford’s student population, Nozad wanted Hershenson’s help spotting startup opportunities within the university’s dorms. By joining forces, they could spot opportunities when still little more than an idea, then help them meet early investors and technologists to guide them to product-market fit, when their services would have a clear demand with customers.
Hershenson wasn’t initially very interested. But by early 2013, she was tempted. Fine, she told Nozad, she’d meet with founders one day a week as a part-time gig. Within months, she was fully consumed with the venture capital role. “Pejman and I are a little bit yin and yang. Pejman is so optimistic, always,” Hershenson says. “And I’m just impressed at how right he was.”
Initially working under the name Pejman Mar Ventures, the two scored early backing from New York Life Insurance and the University of Chicago for their $51 million initial fund. They rebranded as Pear VC as they hired more staff and launched a $75 million second fund in 2016; their third fund, for $160 million, was announced in December 2019.
All the while, Nozad and Hershenson expanded the scope of their student entrepreneur scouting. Nozad remembers learning the power of bubble tea, the sweet tea-based drink, when the firm ran a promotion in front of Stanford’s computer science building. Give Pear your resume, get one bubble tea free. “I walked by that day and saw the line, and I said to myself, Pear has such an amazing brand,” Nozad says. “But it wasn’t that, it was the bubble tea.”’
With the pandemic pushing events remote, Pear has expanded its programs to a handful of other universities. One program, Pear Garage, identifies and supports 25 top engineering students to come up with an idea; another, Pear Builders, works closely with 10 staffers from bigger tech companies with entrepreneurial ambitions. Recent participants have hailed from companies including Coinbase, Lyft, Uber and Slack. All told, the firm says 49% of its portfolio were founded by students.
At Branch, a company that helps businesses reach mobile app users that is valued at about $1 billion, per data from tracker PitchBook, CEO Alex Austin says he got to know the investors form their constant presence at Stanford Graduate School of Business entrepreneur-oriented events. Backed by firms including NEA and Founders Fund, Austin says Nozad and Hershenson were uniquely proactive in their connections to advisers and potential hires. “They just have this constant flow of really interesting people that are passing through,” Austin says.
The pressure on Pear now is to find more breakout winners like DoorDash, in which Nozad admits he would’ve loved to put more dollars if they’d been available. Just to continue backing their first fund winners, which also include Guardant Health, which went public in 2018, and Gusto, valued at nearly $4 billion, Nozad and Hershenson had to raise a sidecar fund and several special purpose vehicles that effectively doubled the size of the fund to $100 million.
By that standard, Pear’s latest fund isn’t so much of a departure in size. But the firm is undoubtedly growing. With that comes natural risk of upsetting the apple cart. “They do so many different things now. How do they make sure they don’t miss the next DoorDash?” asks one limited partner, who remains a supporter but asked to remain anonymous as they were not authorized to speak to the press. “And as they build their brand and fund size, how do they continue to have other investors want to partner with them?”
For Hershenson and Nozad, the answer is simple: keep finding ways to identify entrepreneurs before they’re obvious, and when they are in high demand – like DoorDash – take what you can. “As the size of funds are increasing, and everybody’s after the same founders, we think there’s a group of entrepreneurs that are kind of a rock, but they can be turned into diamond,” says Hershenson.
Ever the salesman, Nozad insists the two are well on their way to building a firm that will outlast them, with winners in each fund, not just DoorDash. Still, DoorDash’s IPO serves as vindication that perhaps he wasn’t so crazy after all.
“I always thought Silicon Valley takes risks on people, but not on a venture capital firm. I remember some people sitting next to us, and I knew deep down in their hearts they were saying, the rug salesman starting a venture capital firm? That’s pretty end of the world. That’s a sign of a bubble,” Nozad says. “But we kept going, waking up every morning and asking why entrepreneurs should be partnered with us. And we still ask that question.”