Pejman Nozad of Pear on building a $800MM+ AUM firm as an immigrant who sold Persian rugs before going into VC

0:00Welcome back to another episode of Venture Unlocked, the podcast that takes you behind the scenes of venture capital. I'm your host, Samir Kaji, and on this week's episode, we're thrilled to be joined by Pejman Ozad, co-founder of Peer VC, a really unique pre-seed and seed firm based out of Palo Alto. Today, Peer has scaled to over 800 million in AUM and has built such a powerful engine to help early stage companies. As many regular listeners of the show know, we often like to highlight managers that have different backgrounds and stories leading to their careers in venture capital. I think of all our guests, Pejman best epitomizes how someone can overcome so many obstacles to be successful in the industry, as he not only immigrated from Iran with little to his name, but the catalyst that got him into venture was working at a rug store.

0:43During his time at the rug store, he was able to meet some of Silicon Valley's best VCs and entrepreneurs and use his curiosity and ambition to learn about the industry and ultimately become a startup investor. His story is one of the most remarkable ones in the Valley, and I really think you'll enjoy hearing him tell it. During our chat, we went through his backstory as well as all the learnings he's had as an investor over the last couple decades, and what has gone into building pair to what it is today. I really think you'll enjoy the conversation with Pejman, so let's get right into it. Samir Kaji is the CEO and co-founder of Allocate.

1:17Allocate and Venture Unlocked are independent of each other. Any statements or references made by Samir or his guests regarding third parties, investments, or securities are solely their views and opinions and are not intended as investment advice or an endorsement of such parties or securities by Samir, his guests, or Allocate. Allocate or its clients may maintain relationships with or investment positions in guests, third parties, or securities mentioned in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Benjamin, it's so great to see you and thanks for joining us today.

1:51Good morning, Samir. Thanks for having me. I really appreciate it. It's exciting. I was I was looking at my calendar from last week. I was just utterly excited to see you here. And I think before we started, I just want to say congratulations for building Allocate. And it's pretty amazing what you have done and your team in a short period of time, building the brand and the team and the access you're providing. It's just pretty incredible. I appreciate that. And it's actually a great segue because I would say the same to you in terms of the platform you've built. And this is never an overnight success.

2:23It takes a long time. And I do think a great origin point for this conversation is to talk about your story itself, leading into tech and venture. And I was having a talk with a few LPs the other day. And one of the things we mentioned is just emerging managers and some of the folks that have started firms over the last 10 years coming from such different and varying backgrounds. And you epitomize that. So for those that haven't heard the story, I'd love to hear how you got into technology and maybe a little bit of the background that drove you into what you're doing today. I started in 1992 when I arrived here.

2:59So I was actually homeless in 1992 in this town. If you look at the profile picture of my Twitter, it's me sleeping in an attic above a yogurt shop because I was sleeping in my car, I was sleeping outside, and I begged the owner of the yogurt shop to let me sleep in an attic. and I slept there. But something magical happened in that attic that changed my life forever. I pause here and I go back before we continue the story from that attic. I was born and grew up in Iran when I was 10 years old, the revolution happened. And then two years after, the Iran and Iraq war happened for eight years. So I experienced as a teenager the darkest side of humanity.

3:45And for long, my life and everybody in my country was survival, especially if you're a teenager. I remember Iraqi jets were bombing us, just go to school, come home, do homework and wait for them to come. But now I look back, I think it made me stronger to really survive that attic. Survival was the meaning of my teenager life and many people like me. I was a very good soccer player. I played for big clubs in Iran and I went to the German school in Iran so I spoke German the owner of the club asked me to come and translate he started a magazine so I started to translate German to Farsi but I became really good at it I started to write my own articles and you know everybody loved the way I analyzed soccer and all of a sudden they gave me Iran's most popular sports radio talk show and you know at the age of 18 i used to bring the lebron james of my country to my show was just amazing i think i was having imagined at 17 18 you can do these things i um got accepted to the college after two years i decided i have to leave iran my parents left iran before me they went to germany i stayed in iran i served in the army in iran like every male should go and serve in the army but i was very lucky because i was a good soccer player i played for the army soccer team.

5:11I left Iran. I went to Germany. They gave me a scholarship to continue education and play soccer. A few weeks into it, my brother who left Iran before me when he was 15 years old, that's American dream. He was denied visa multiple times. And this was early 90s. It was so hard for Iran to come to the US. Even engineers and doctors and businessmen cannot get to America. He took me one day. I said, why? I don't want to go to America. I don't speak the language. I've got an opportunity here. But he said, just go get a visa, don't go. And I went over there and the woman who was a counselor of the embassy interviewed me for 45 minutes.

5:51And at the end, she said, I remember exactly the words. I don't know why, but I want you to see my country. Give me your passport. So in a very, I don't know, dramatic way, I decided to come to America with no plans. Normally you have some plans to come. So I just arrived in this town in San Carlos because my uncle used to live here. And it was difficult. I left a really kind of a great career in Iran. I left university and Germany. I didn't speak the language. I only had$700. But the biggest problem was I was in love with the girl in Iran. And I thought, okay, I'm going to lose her. So I better call her every day.

6:30So this is 1992. to view there's no whatsapp no internet phone no skype nothing so i had bag of quarters i'm here every day going to this payphone in downtown san carlos and calling here every day i don't know it was like three four dollars per minute which is so expensive so 700 was gone and i didn't know what to do so i found an iranian car dealer and i bought a 1973 chevy for five payments of 150 bucks and I found a job at a car wash in San Jose. So I was driving every day for an hour, washing cars for 10 hours and come back. So again, it was just my life was just washing cars. I think emotionally was the hardest part because I could have left the next day and go back and have a radio talk show or go back to Germany.

7:20But something was telling me just keep going. By the way, I was the best car washer the world has ever seen. I wash cars like nobody else. my English improved I I get I got the job at the yogurt shop which the photo is there and that was a time that I didn't have money I didn't have a home so I I asked him if I stick in an attic this is a real attic the yogurt shop still is there in Redwood City it's above a yogurt shop it was a storage for cops and you know napkins and so on so my life was again survival waking up run the shop till 6 p.m go to college take a shower at the college come back study.

7:58The magical moments was one of the nights I was studying Iceland advertising for the Rutt Gallery in downtown Palo Alto and being Iranian we all grew up in Iran although we don't have much knowledge but we think we know something about Persian carpet so I called the owner who actually was an amazing businessman in Iran and he built an empire one of the biggest industrial family around Amiti family interviewed me actually the government post-revolution did nationalize his asset. So he came, started from scratch in America. Rug Gallery is one of the businesses they had in addition to real estate and some global business.

8:34He interviewed me and then he rejected me right on the spot because he asked me, have you sold rugs, furniture, cars? I said, no. I said, well, you're not the right fit. So I insisted that how can you deny somebody you haven't met? It was a pause and he just, he said, come the next day. And I went over there, he hired me on the spot. Later, he told me that I really liked that you didn't give up and he wanted to meet me. I remember the day he hired me, he took me outside. As you know, you still can walk by the Daniel Ruggs' beautiful, amazing gallery. It's on University Avenue. And he said, you know, listen, at the end of the street is Stanford University.

9:13You can go get PhD in business, but your real PhD in business with me here. So whatever I tell you, do it. So next day I put a suit and tie. I went there to sell rugs. No, no, no, you're not selling rugs. You just bring tea and flip carpets. So for a while, I was flipping carpets until I proved myself. And I ended up selling rugs. And again, I became, I think I'm the best rug salesman. Again, I sold a couple of million dollars worth of rug, which, you know, most of our companies won't achieve that even in their lifetime before they die. But Persian rugs, you know, you come, Seth Pagemon. I bought a home in Menlo Park with my wife.

9:52I'm looking for the dining room rug. And you and I, with your wife, we start to look at rugs. And then ultimately, we bring the rugs to your home. 95 % of transaction happens at people's home. So by going to people's home for a few years, I realized every single customer is either founder of a big tech company, top venture capitalists, even if they are bankers and lawyers that just serve tech community. And I was in awe. Not because they were wealthy. Mostly for me, businesses are you build this and sell it. I never knew that you can build massive companies, create jobs, create wealth based on knowledge.

10:29And I felt that I'm just so lucky to be part of this community. Maybe this is a chance in my lifetime. And I decided I want to be one of them. And I started to ask a lot of questions. This is late 90s. There was no TechCrunch, no YC, none of these things. but I had access to so much knowledge. And these were not my clients, they were my friends also. I was hanging out with them, selling rugs Sunday, having barbecue and asked a lot of questions. How do you give term sheet? What is, I mean, just like, and it was, and I think credit to Silicon Valley, nobody judged me that Iranian guy coming, sending rugs to my home, asking about startups.

11:07I remember, anyway, I don't know if you want to have a question. I pause here, but I can tell you how we started to, But one of the stories I want to tell you, one of the days, a guy came in, very well-dressed, well-spoken. He said, I'm looking for rugs. And we look at rugs together. And I said, Doug Leone, bring the rugs to my home. So I knew who Doug Leone was at that time. So I went to his home and a hard negotiator. But at the end, I said, Doug, I can help Sequoia Capital. He said, how? I have access to so many Iranian PhDs. He said, okay, I come Monday morning to her office, tell me how more.

11:47We ended up putting an event together, senior part of Sequoia Capital. The reason I bring it up was Doug didn't doubt me. That relation and trust led us to both of us invest in Dropbox early on, six, seven years after. but I think that's I actually think this is a DNA of Silicon Valley which is which is I mean tech is a community that there are there they give before they get and then judge people and for me was just astonishing imagine if you're selling rugs in Los Angeles and you go to Steven Spielberg's at the end of selling rugs to Steven Spielberg's by the way Mr. Spielberg I can make movies with you and I think it's just kind of really odd but I did it and then you know I myself and the ownership of medallion rug we started um investing we pulled capital i told him we have this this access so we started to invest in this was at a time that angel investing was really fashionable we started to invest in startups and my god we had such a terrible track record i mean just like so embarrassing how we did it but you know i i learned the world around me one this is If you remember, if you were going late, early 90s, or I mean, late 90s, early 2000, if you want to raise money, Sand Hill Road was your only access.

13:05I mean, you had to go over there. There was not much happening, and you had to know somebody to get you there. I think venture capitalists were not leaving their office. They were not wearing jeans, no T-shirt. It was like Wall Street in the 80s and 70s. I somehow broke that. I brought the entire Sequoia to the rug gallery with founders, Persian music, and people really loved it. And, you know, I think there was, I created a marketplace that at one side was my access to amazing top tier VCs and the other one entrepreneurs who were looking for advice and capital. And in addition to knowing venture capitalists, I knew founders, top VP of engineering of massive big companies and I were bringing them as an advisor.

13:48So the word got out that I have a really good deal flow. And, you know, fast forward, we ended up being the first investor in Dropbox, Lending Club. And I continued to invest in Gusto, Applovin, SoundCloud, some amazing companies, but a lot of scars on my body. And then it came, I made money. I started to invest my own capital, but I realized there's an opportunity to build an institution. And I pause here before I get to a pair. It's a great, fascinating story. And there's so many nuggets to extract from there. But some of the challenges that you had growing up, which really kind of drive, I feel like you enter the world of always finding something challenging to do.

14:32And I was going to ask you, going from an angel, starting a fund, but I want to maybe reverse a little bit and think about all those learnings. You're with Doug in his office at Sequoia, and you're pitching this idea of being this marketplace in a very different way with your community and having the foresight to understand that you had this unique world that you lived in where you were seeing so many people and building these networks. What did you learn, I guess, from folks like Doug and maybe your angel investing that guided you in how you wanted to build Pair when you started in 2012? Doug and a few other people really believed me very early on.

15:11They didn't judge me. And And it taught me that I can believe in future entrepreneurs with similar background and take the risk and believe that everything is possible. And that's kind of genesis and DNA of there today. We partner with founders that are even students and they've gone and built massive big companies like DoorDash. So that was learning from that. But the other one was I learned that if you have a very focused and very well-defined value, you can participate in an industry like venture capital, which is well-guarded. And definition of venture capital is I've always been from Ivy School or computer science background.

15:57But I came up with my own strategy and I felt I can play in this community. For me, I knew this is like playing in NBA, but I won't be Steph Curry, but I can be the best agent. That's how I started it. And I dabbled down on the value of the network I built. Obviously, after 23 years, I learned the business and I built a great team that I learned from them. Whenever I talk to people that are starting new firms, one of the questions is, why are you doing this? Venture capital is building a company, right? So you're starting a firm, which is building a company. And we'll get into how the company has evolved, and I will call it a company over the many years, because I think it has become a true platform, which is launching these new products and services.

16:46But maybe talk about why did you feel like this is what you wanted to do? And how clear was the vision of what pair was going to be at that time? Around 2009 and 10, I was doing professional engineering. I realized founders raised a million dollar i'm an engine investor with a few others there are a couple of firms involved but founders are left alone right after that although many people claiming they do see the investments it was not much help and either they didn't have time or didn't have expertise and i felt there's an opportunity to build an institution to serve founders day zero the question was can i walk to a room full of founders and claim I'm your best partner?

17:34And the answer was no. Although I had a great track record, everybody knew me. I had a really good deal flow. But I knew in order to be a top firm, I need a partner who has built product, shipped product, and built the company. So I reached out to my current partner, Mark Hershenson, and I didn't talk to anybody else. I changed her for four years. I told myself I either built this with Mara or I continued doing angel investing. And Mara and I, we know each other for 23 years. I funded her husband's company, Danger, in the year 2000. And then I was very lucky to invest in Mara's second company in 2003.

18:12I actually syndicated the$2 million round then. And I remember I had to take Mara to people's home in Palo Alto and in offices. It wasn't like today that you go on AngelList and you click and you wire the money. And we had to get checks by hand. But by doing that, I got to know Mar. But she's brilliant, smart, driven, with principles. She's a very good human being. And we became really good friends. So for four years, she said no. And I said, don't start your fourth company. Come and join me until I changed strategy. In 2012, 13, I said, it's okay. Don't need to partner with me. But why don't you come and meet founders with me at Coupa Cafe in downtown Palo Alto?

18:51And she said, okay. I said, you're an entrepreneur. Share some knowledge. So she was coming like 30 minutes a day and then 45 minutes. I think two months down the road, she was full-time meeting entrepreneurs. So I won. So we started to build the firm in 2013 together. We want to build the best seed farm ever existed. And we want to build the firm that outlasts two of us. And we want to help entrepreneurs build massive, long-lasting, profitable companies. Mara and I, we are Bing and Yank. I'm a college dropout. She's a Stanford PhD. She started three companies, successfully sold all three of them.

19:28I actually never worked for a tech company. I think she has 14 patents. I have zero patents, but I have a lot of scars on my body. And I think the respect we have for each other's opinion and the complementary skills really was the foundation of Pair. And then we started 2013 with the$50 million fund, and I can tell you more. But the vision hasn't changed since then. And Stanford Business School teaches a case about us, which we are really honored. Normally, they teach a case about Sequoia and Boeing. There's an email in 2009, I sent Marr, and I said, okay, why don't we get a home and an office looks like a home next to Stanford and bring incredible entrepreneurs, something magical happens.

20:11That hasn't changed. We've expanded the product offering, but that core is the same philosophy. You mentioned something that I want to unpack a little bit further. You said the mission was to become the very best seed fund in the world or seed firm in the world. And I'm curious in what that actually means if you deconstruct that. You can build the best team, best services, but if you don't have the performance, it doesn't mean anything. So for me, the best seed fund is consistently return 5 to 10, 20x every fund. If you can do that, then you belong to history. But, you know, I can build all these services if I cannot fund seed the next category defining companies.

20:53I just don't think you can belong to the best of people. You can play basketball if you're not champion of NBA or you're not Leo Messi, you're not world champion. Yeah. And as you think about that, then from, you know, the standpoint of getting performance, that ties into certain things that are fundamental within a venture firm. It's sourcing opportunities, like being in the right room, having the acumen to be able to pick the right opportunities, given the sample set of companies you're looking at. And then, of course, it is things like you have to win and you have to have a founder choose you and then ultimately, in some way, help the trajectory of the company.

21:30and overtime that creates this flywheel where the probability of returning these great performance outsized returns becomes more highly probable and a function that gets stronger and stronger over time. When you thought about that, because as an angel investor, I feel like when people go from angel investing to starting a firm, being institutional, they realize the bar is much higher. They have to think about all these different things. And to serve the founder and taking a bigger piece of the cap table requires so much more. Maybe you can talk about the key ingredients necessary to driving the performance and maybe look at sourcing and winning as how you built around those two things?

22:09Well, very good question. This is the question. I wake up every morning and think about it the whole day because I think you need to keep thinking about it and improve. It has evolved. Even our name has changed. When we started the firm, Mara said, oh, Pajmon, everybody knows you. So why don't you call it Pajmon, obviously her name. So it was Pejamaar, but we both hated it to have our name at the door. We thought if you want to build a long lasting firm, you want people to feel that this is their firm. So we ended up with Per. That's a different story. I can talk about why we did it. But yes, in order to become a best performing fund, you need one to pick your own strategy.

22:44And I really believe there is not one only strategy that works in venture. You can be Y Combinator. You could be Sequoia. You could be Benchmark. You can take three exceptional firms, but three very different philosophy and strategy, fund sizes, team, and composition. So I think you need to figure out where do you fit the whole ecosystem and can you win as the best firm in whatever you're offering. If you look at the knife of the company from day zero to, let's say, an exit that's an IPO, I believe there are really good firms that they can help entrepreneurs post product market fit. I do believe for zero to product market fit, nobody has become the best firm.

23:31And if I ask you, who is the best pre-seed and seed firm in the world? Maybe there is no answer or maybe there are multiple answers. We are aspired to be that firm. We are not there yet. That's the goal and mission of Pair to become the best pre-seed and seed firm in the world. to fulfill that promise that we can help in early stage get to product market. In order to achieve that mission, we have done a few things. One, we build the investment team. Our investment team have started and sold 10 companies to Cisco, Instacart, Zynga, Yahoo. It's a huge knowledge of starting from scratch, and founders really trust our investment team.

24:08Plus, operators who are coming from Uber and Facebook and Google with over decades. That's one thing. The other one, as you mentioned, we started to think about this zero-to-one journey. You have investment know-how, operations, but what else do you need? Three and a half years ago, we did a survey among our founders, and we asked them, what is the number one thing you need after you're raising the initial capital? And everybody was hiring. Obviously, multi-stage firms, for long, they have their own talent services. I looked around. Most of the pre-seed seed funds don't have a person to help with the hiring or they hire one person and that person mostly access a consultant, which is great.

24:51They're teaching, but nobody hires for them. And Mara and I, we decided to build actually a recruiting agency in-house. I spent 16 months. We hired a search firm. Actually, that search firm fired me because after 29 interviews, they said, okay, we don't have anybody else. But there is a guy who built the entire recruiting platform at Instacart. And he took Instacart from 300 to 3 ,000 people. His name is Matt Pimbom. He doesn't want to go a venture capital firm. I said, okay, this is the guy I should talk to. I met him and it was just very clear, this is the person we need. So I've made it my life mission to recruit him and we did.

25:33So Matt joined us 16 months ago and he spent around three to four months. What does it look like to build a recruiting agency inside the seed firm? And he hired three exceptional senior recruiters. So we have four recruiters in-house on our payroll. that if you come to pair, we hire your people. Since the last 12 months, we hired 70 people for our companies. We did over 1 ,000 founder candidate conversation with 80 % hit rate. It's just incredible. I actually think even if that's what it can offer, we have a line of entrepreneurs coming to our firm to do it. And then we're building the same thing for go-to-market and fundraising software.

26:16So anything you need from zero to one, we're building. So this is in terms of what the team looks like. And one of the evolution happened with the firm, started with Mara and I, now we have a big team. So the firm is generalist, but with the specialist investors. You talked about winning deals. Obviously, brand, background, reputation, how much you help. But founders really want to work with somebody who deeply understands your markets, and that's what we built. So we have Eddie who runs our biotech, Vivian runs Climate, and healthcare. Our pun runs our fintech and our Ash runs our AI and deep tech.

26:56And we have more people and we're adding more people. So in addition to the know-how of building companies, the services we provide, and we have market experts who can help the companies. Then it comes to the sourcing, which I actually think most of the managers who start, they think about it less than anything else, which for me is the most important thing in venture capital. And the reason is if you see the best entrepreneurs and you have the ability to win them, this is a very good job. Otherwise, it's just like very, very hard job. So we spend a lot of time thinking about sourcing and how do you build a differentiated playbook.

27:35And my recommendation to anybody who started a firm or they're building about that is thinking about it in a very, very hard way. And this is beyond hanging out with other VCs and angel investors, going to demo days or going to conferences. That's given. Everybody has that. Where do you have an access that nobody else has? You have to come up with one thing. It doesn't need to be many things, but one thing that you see quality of entrepreneurs before anybody else is really key to build the firm. Yeah, I think that's right. And recently I had somebody on the pod, I think it was Mamoun at Kleiner, where we talked a little bit about sourcing.