Founders Should Be Skeptical Of Their Own Products Early On: Pear VC’s Ajay Kamat.
Being a traditional bio-researcher, the kind in a lab with a white coat, can be boring work. As anybody who took chemistry in college knows, operating a pipette can be tedious. Doing it for a good portion of the day, five days a week, takes a special kind of patience and dedication. Getting to a demonstrative outcome can take 20 years.
Somebody best suited for the world of tech and software might find this kind of environment, limited by the constraints of nature and the petri dish, to be short on the stimuli their personality requires.
Ajay Kamat, a partner at Pear VC, is one of those people.
Kamat grew up in the Bay Area, but instead of following the well-trod path into software, Kamat opted to study bioengineering at UC Davis. His first job out of school was a quick lesson that being in a lab, working a pipette, wasn’t where he wanted.
Looking toward software, Kamat found a job in sales/BD, but that ultimately wasn’t the part of the company he wanted to be in.
(Note: We mention this exact phenomenon, applicants for startup sales jobs who really just want to be at the startup, not in sales, in a recent piece on how to spot sales talent. It’s real and something of which founders should be aware.)
Not being close enough to the creation of the software, to the product, was frustrating for Kamat, so he came to the conclusion that, as soon as he had enough money saved, he would start his own company, which he did.
He shut his first venture, MicroMobs, a group messaging service, down after 20 months, when he didn’t see a real path to growth. This is where he Kamat feels being more skeptical of his own product, being more introspective about what his startup was doing, would have been greatly helpful. He says the data indicated that the company was stuck 8 months before he pulled the plug.
“I wish we had pivoted and shut that product down a little bit earlier, but the one thing that I'll say is just be highly skeptical of what you're producing.”
Kamat took that lesson to heart in creating his next business, WeddingParty, which helped couples plan and buy services for their wedding. The startup would go on to be involved in 8% of the weddings in the United States, and it was eventually acquired by FC-portfolio company Instacart.
Kamat later joined up with Pear VC, one of the early investors at WeddingParty, Pear VC focuses on seed and pre-seed investing, an area in which Kamat feels particularly comfortable, having been a two-time founder, bootstrapping both companies early-on.
Here are some of the other key takeaways from Kamat’s talk:
- Founders should tirelessly question their own product-market fit. Don’t be heads-down about this. Many people’s natural inclination is to build and build and build—to put together a product that looks great, that passes QA and is ready to be heavily used. That’s a mistake. Get something out to users, even if it’s buggy and ugly, early. Don’t waste time building a product that nobody wants.
- Data should play a central role in figuring whether your product has legs. It’s rather simple these days to use off-the-shelf software and SaaS to track how well users are sticking with your product 30-days, 60-days and 90-days after signing up. These things should be tracked, as they can be indicative of a problem very early.
- Building something from the ground up is one of the best experiences a person can hope to have—whether it leads to an exit or not. It’s a big learning process that people, if they’re at all inclined, should set out on at some point.
- Time is far more valuable than some founders believe. Don’t waste it pitching potential investors if your product isn’t ready. Go back and work on the product, get it to a point where your investment pitch will be more effective, where you will work less hard to bring in the investment you require. That’s simply a better use of time and resources.
- Founders should find people who can help them step back from their product and do honest assessments of where the company is at and where it’s going. Product road-mapping is something that many founders don’t do on a formal basis, but they should. It can be an illuminative process.
- The right formula for a small, new startup: a tight team consisting of one or two great engineers, a designer, and a product person—who might be the CEO, all the better if they’re technical. From there, focus like crazy on finding product-market fit.
Below, readers will find a version of the conversation between Kamat and Mittal. While this conversation has been edited for clarity and, in some cases, brevity, it should be noted that this was a live exchange with questions from an international audience arriving in real-time. Many of the questions come directly from viewers. Mittal’s words in bold:
I noticed that you actually had your start in biology, is that right?
Biology and engineering at UC Davis?
Yeah, I started in bioengineering. I loved the science and taking the classes, and learning about iy was a ton of fun. When I went into the industry, however, I started doing some internships, and I realized that it was just so slow.
Discovering drugs and cures for things was just like 10, 20, 30 years. It just wasn't for me. It was really solitary too. I literally wore a lab coat and was doing experiments all day.
Pipetting nonstop, and after doing that for a couple of years, I decided I have to go into technology.
How did that transition happen? I'm sure there's some sort of a story there in terms of going from pipetting in a lab coat to a startup.
Yes. I was working in biotech when I was in college. After graduating college, I was determined to get into software. It wasn't easy because my background was in bioengineering. I wasn't a software engineer.
I got a job right out of school at a technology company, but it was in more in a sales and BD type of role, but I told myself as soon as I saved up enough money to quit that I would start a company, because I kind of came to the conclusion that the only way that I was going to be able to get into the industry that I wanted was to dive in head first.
So it was sort of a simultaneous realization or decision to not just go into software or technology but also to start a company?
Yeah, I mean, it was an interesting time. I was really fortunate. I grew up in the Bay Area, just across the street from Apple. Software and technology companies were all around me. I thought that I wanted to go into biotech, but once I crossed that off the list is something that I didn't want to do, I was very confident that what I wanted to do is to get into software. It's not easy to get a job. One of the things that I realized that I had to do was just learn, and the way to learn was to just start experimenting and doing it on my own.
Sure. What was an early lesson? I want to talk about the wedding company that you started later, but I think you started like a messaging company initially.
Maybe briefly describe the company, and then also, what was one or two lessons that you learned from that experience? It sounds like whatever came out of that, you were like ready to just jump right in and do it again, so I'm curious.
We started a company called MicroMobs. MicroMobs was a group messaging product. If you can think of what Facebook groups is now, at that time Facebook group didn't exist, WhatsApp, all these messaging products didn't exist, and we launched it. We got on TechCrunch. We got a lot of press, and we ended up getting something like 50,000 users. It wasn't really growing and so we decided to shut it down.
The big lesson there for us was, one, we just weren't really the right of people to build that product. We didn't know how to develop on mobile. It was our first time doing something on the web. We built this clunky product. It was a little slow. We couldn't get a lot of people. It didn't resonate with a lot of people, and at the same time, all these awesome mobile messaging apps are coming out. Those were becoming really popular. We were just off. We weren't building the right thing.
I don't want to drill too much on this, but I think this is something that perhaps some of the entrepreneurs in the audience might take learning and lessons from. That obviously takes a lot of self-awareness and introspection to make that call.
It sounds like you were looking at the data and just decided based on what you were seeing. There's always this trade-off between never giving up, just always going at it versus like actually being real and being like, "Wait a second, maybe we should just pull the plug here because of a variety of reasons."
Any advice for founders who might be in a similar spot, at a fork in their paths?
I didn't do it very well. I went too long. I wish we had pivoted and shut that product down a little bit earlier, but the one thing that I'll say is just be highly skeptical of what you're producing. You should have some intuition about the users who are using your product. You need to put the data together to understand if people are using it or not.
It's actually not super difficult now to get the data infrastructure in place to say like, "If someone signs up on day one, are they using it on day 30, day 90? Are they really getting value out of the product or not?" That's actually super difficult to figure out within a six-month period.
We went like, 20 months when we should have probably been like 12 months.
I like that learning – that you should at least somewhat be somewhat skeptical of your own marketing and your products.
Especially if it's in consumer products. Consumer is so competitive and so challenging, you should be really thoughtful about do people really like it or not.
Now what about your next company—maybe you can explain the it and the gist of what it did, what problem you were addressing.
In 2012, my co-founders and I started a company called the Wedding Party. Wedding Party was a group photo-sharing product for weddings. It was a photo sharing product and messaging product, and ultimately, we were trying to build a marketplace around weddings.
The reason that we were thinking about this market at all is because my first friends started getting engaged and started getting married. There was this domino effect where one friend got engaged and then another and another and another. One thing that I realized is that 100% of them, every single one of them, complained about their wedding. They loved it, but the planning of it was just this really difficult thing, and so because we were in this period where we were investigating what we wanted to do next, we just started taking a look at the wedding market. We noticed that a couple of really interesting things.
In the U.S., the number of people getting married was consistent every year. It's like 2.2 to 2.5 million couples. Roughly $100 billion is spent on weddings every year. It was highly fragmented. It was fragmented across hundreds of thousands of different wedding vendors of which $50 billion is spent. $30 billion is spent on wedding gifts and $11 billion on photography and on and on and on. We just looked at it and we said, "Why are there no products to help people with this difficult time when they're doing all these planning, and why isn't there a product that helps connect people to all of the hundreds of thousands of potential vendors that they can be working with?" We set out to go and try to solve that problem.
Got it. Cool. I'm taking you through the chronology of your last six years, but just to accelerate that a little bit, it turns out that the Instacart acquired this business.
It acquired Ajay's last company. As some people might be aware, Instacart is a FundersClub company, so kind of a small world. That's super cool.
You sort of got the transition from pipetting in the lab to startups, and from a startup then maybe eventually running into a wall and maybe figured out how to move beyond that to another opportunity. What about getting into venture capital because that's a very different activity and endeavor from being a builder to being an investor, so I'm curious?
I didn't set out at all to go into venture capital. It wasn't really my plan. In fact, one of the things I identified most strongly with and still identify with is being an entrepreneur. I think starting something and building something from the ground up is one of the best things that someone can do. I was fortunate with Wedding Party in that we raised a bunch of money. One of the firms that we were working with was Pear Ventures, at that point called Pejman Mar Ventures. Pejman, one of the founders of the firm, was actually our first angel investor.
After they started Pear, after he got together with Mar Hershenson, they started Pear. They invested in our company as well and joined our board. I've been working with them for four or five years. After we sold the company, Pear was growing and they were raising a second fund. We got to talking and I decided to make the leap and do it. I will say it was controversial. I mean, I talked to as many people as I could. It was like a very clear 50-50 split.
Yeah, people said, like, "Stay in product, continue building," and other people said, like, "No, you should really go into venture capital and see what you can do there."
Right. So you’ve worn the VC hat, I guess, for about a year and a half now or so.
Yeah, close to two years.
What have you been able to borrow from being an entrepreneur, like starting two companies, right, selling one, that you think makes you a better VC?
I'm very open with founders and telling people that I would be a pretty bad Series B growth stage investor. There is something about this stage that Pear operates that, which is like pre-seed and seed-stage, that I think I understand really well. In the five years that I was working on startups, two of those years I was bootstrapping. I was just paying everything out of pocket. Two of those years, we raised money. We built a team. Wedding Party actually got a ton of traction. We ended up getting 8% of all weddings annually in the U.S. on our platform, and so built a team, got a lot of traction, and took it through the whole process.
Having been through that, I'm very cognizant of what founders are going through when they walk in our door, and so we try to be super respectful. On top of that, the one thing that I've learned is it actually took me eight months straight of trying to fundraise to get my first round of funding together. What I try to do with founders is just be as open and frank and honest as I can be about where we think their business is in order to save people time, because that's the number one thing that I wish that I could get back is a little bit more time. I wish it took me three months instead of eight months. I feel like I could have gotten more done if that was the case.
The time spent fundraising, you mean, yeah.
Has anything worked against you a little bit in the sense of things that you got used to as an entrepreneur, or habits or things that helped as a founder, that’s aren’t as useful as an investor?
One of the things that really enticed me about Pear is that Pear itself is a startup. If it wasn't, if it was really well-established, I don't think that it would be a good fit for me.
Being a founder, I think, was a prerequisite because of the work we do working with founders, but also, I think because of building the firm itself as a startup.
That's cool. One of the co-founders of the firm, Pejman, is actually a backer of mine as well, and so it's sort of a small world again, but so many examples where he was like the first investor or really help somebody through a tough spot, something like that. It's cool to have him and Mar trying to build something different. That's why I totally get that.
Can I add one more point on your question about being a founder and getting in to venture?
I do think it's also important that, like our firm, we obsess over the next first 24 months of a company's lifecycle. Who are the first five key critical hires? What is the operating strategy? What type of funding does a company actually need to like get to the milestones? We spent so much time thinking about that. That is one thing, having done it now for several product launches, personally, it's so beneficial to be able to go and help our founders think about those problems.
For example, I spend like three-hour sessions with some of our portfolio companies just doing product road-mapping. Sometimes, you just haven't done that formally as a team. You get three or more people together and do it. That's the type of thing that we can really help companies with to get from like step zero and step one.
Sure, yeah totally. I've been there as a founder. Sometimes, these various focused but specific things that are just so much help if you've never navigated that before.
Can you talk about Pear VC and how you're building networks of young founders and potential founders in preparing them to build businesses or if you're doing that?
Yes. That is a lot of the work that we do. As a pre-seed and seed stage firm, we're meeting people frequently when they're just at the idea stage of getting their companies off the ground. In fact, sometimes, we invest in teams that are just two or three people and an idea. The way that we get to know people is just that we're actually quite liberal with our time. We're willing to meet aspiring entrepreneurs. We're a small team as a firm, but we rely on a lot of the community-related activities that we do.
Last year, we did something like a hundred events, which is a lot for a very small firm. I mean, I think just last week we had two or three different events that we did. These events are open to the public, so our portfolio companies come join, people that are friends with the firm join, people who are interested in meeting us and learning more. We do things like putting together a speakers series where we bring top CEOs or top other type of founders who have built companies before. They come in and they talk. We do workshops. We do things like an annual food truck party where all of the friends of our community come together. On top of that, we do a lot of work with lots of different universities. The whole goal is to get people into our network, and part of our community.
For any founder out there, like you mentioned these things are open, how would a founder learn about this? Is it just found on Pear's website?
Yes, so go to our site, pear.vc. You can sign up for our mailing list there and get into our list of events that we'll send out to everyone. I think it's a really excellent way of getting to know us. Some of the companies that we invest in, we later learn that they have been coming to our events for like six or nine months before we actually started learning more about their business and ultimately made an investment.
I think we're very open as a firm.
For a company focused in VR, virtual reality, what are the problems that you think need to be solved in this space? Is there one area that you see us having more opportunity than others for a startup?
Well, the first thing that I'll say is our firm is not thematic. We don't have like a deep expertise in any one category. We’ve looked at a lot of VR companies. I think the challenge is figuring out the application. These days, in fact, I've been much more excited about AR companies, because it appears that there are more opportunities to build software that lots of people can use in that space. I think Facebook's recent announcement is an indication of that.
When it comes to VR, I think, the first thing that comes to mind for me is when is the big killer, like the first killer game, when is that going to come out and give the platform a lot of exposure to lots of people? From there, ideally, we'll see there's a place where people start building different types of applications that are valuable to different groups of people, but I don't think we've had that first inflection point yet. That's at least what I'm personally waiting for.
Sound like you personally think that maybe VR is a little too early, whereas AR is maybe closer.
Yes, I mean, I'm not one to sit here and predict the future. That's just what I see in the companies that are coming to pitch us and what the technologies that people are building.
Yeah, but you'd love to meet a VR founder that's working on something interesting.
How do you see subscription box business models? Typically, these are e-commerce companies, right? I'm actually more explaining for the audience where you sign up and every month you get a box of something. It could be like socks or it could be clothing. It could be food or whatever, so that kind of thing.
Yeah, I think that with ecommerce, one of the most important things for a brand is to be able to get people to be repeat purchasers and keep coming back, and so subscription boxes are an interesting strategy to get people to kind of be sticky and stick with your brand for a long time.
It's an enforced stickiness.
Yes. That's exactly the problem, right? The issue I think that is worth thinking about is how many pairs of socks, for example, does someone actually need, like are they buying a sock a month on average, and does what you're trying to sell them in the subscription box, actually fit in to normal purchasing behavior that people would be comfortable with, or are they more likely to test it out as an experiment and then churn off?
That's, I think, the issue. It's really about what you are selling. Do customers really want that over a long period of time? If those two things are true, then it comes down to the economics. How much does it cost you to acquire the products that you're putting in the boxes? Can you get any efficiencies of scale because of the model? Then it could potentially work.
What are the most important goals for a team, a startup team, in their first 12 months?
It really depends on the type of company that you're building. Speaking from kind of a consumer or enterprise focus, you're really looking for product-market fit, right? I mean, what you're looking to do is build and launch a product and get some indication that people want to, A, use your product, or B, customers want to pay for the product. I think the first 12 months, if I were to start another company, that's exactly what I would focus on.
I'd get a small, smart team together. Focus on our core concept. Launch a minimum viable product, like the least amount that of engineering that we had to do and see if we can get people to pay for it, or if it's a consumer product, pay for it or stick with the product to have really high retention. It could take a lot of iteration to get product market-fit right, and so I would launch as soon as possible and then iterate as quickly as possible until you could find out if people are willing to pay for your product or use your product. I think that's all that the first phase of a company is about.
It sounds simple but it's less about necessarily what your idea of what the perfect thing should be and more about reading the market and customer or user, right?
Iterating with them.
Yeah, I think there's a natural tendency to want to build something that's done, and then you launch it to people, and you want them to start using it, but I think when it comes to building products, and even if you talk to people at larger companies, when they're launching new products, frequently they launch the minimum viable product feature set to the audience to see if people will start using. I think that's the most important thing to figure out.
If you have to start again from scratch with everything you know now, what would you do differently or the same?
One of the issues that we ultimately had with Wedding Party was actually the market. Earlier on, I said that a $100 billion is spent on weddings very year, but the problem is that the customers are typically getting married once in their lifetime, but you only have them for that very short period of time. As a result, if you get the users, if you're so fortunate to be able to get users organically like we did, if they use your product and purchase through your product, within a year they're going to be gone. If we had thought through that problem earlier, before starting the company, I think we would have ended up in a different place with a potentially a bigger company.
The two things that I think matter most when you're starting your company is to make sure I have a killer team around me. It could be two or three people, but enough so that we could deal with everything, like one product person, one or two strong engineers, one designer, and get a really solid team together that can move very quickly. Then really think about the market and really think about how the market that you're going after actually functions today. Who are the existing players? How are the customers interacting with those existing players? Is there an opportunity to kind of get in to any aspect of that market, and then grow your business? Ultimately, can you have users that stick with your product for a long period of time? I think is very important.
I can tell a quick story about how I met my first investor, which will be instructive for a lot of founders.
You mean Pejman?
Yes. It was a rainy day in Palo Alto, and there was a block party. It was supposed to be outdoors. It was supposed to be sunny, but it was raining. I didn't want to go to the event. My co-founder said, "Look, just go." I put on my Wedding Party T-shirt and I went out. I just kind of talked to a bunch of people. We were like huddling in this garage because it was raining. Pejman walked up to me and he said, "Hey, what's that?" He pointed at my T-shirt. I told him what Wedding Party was. He said, "That's kind of interesting. Let's meet next week."
Then I actually went and met him in The Rug Gallery which is an interesting story, but that's how we ultimately met. I think our VC firm is accessible. You can find us at events. You can email us directly. If you know people who know us, getting an intro is always a great way of getting in front of an investor. I think being persistent really works.
Walking around with the shirt that says your company name on it in Palo Alto at least.
Walking around with the shirt, yes!
Hey, this was a lot of fun. Thank you again, Ajay, for joining us. It's awesome to hearing about your entrepreneurial journey and your venture capital role now and little insights on how Pear is building a VC firm that takes things a little bit differently.