#AIS: Pear VC’s Mar Hershenson on making successful founders

next up is mara herschensen uh who's going to talk about entrepreneurship come on out more mara's going to talk about creating successful founders please thank you [Music] in general uh my name is mar i'm one of the founders of pair vc and i am very fortunate i actually work with many startups i've worked for the last decade with 100 plus startups uh they're worth over 100 billion dollars and they all have one thing in common when i invest there's actually nothing i'm the first check there is no product there's no customers there's just the founders so it is no surprise that i often wonder are these founders

born are my cards dealt as soon as i invest in one of these founders or is there anything i can do to change them that's a big question and i think many of you would say founders are born take for example palmer lucky he's talking tomorrow he was a prodigy he created the first prototype of the oculus rift at 17 and he sold the company to facebook at 22. clearly there's something special about him or melanie perkins she started her first business at 14 then at 19 went on to build the largest yearbook business in australia and now she runs one of the most successful startups

and then elon musk i don't think i need to say anything he's definitely someone special something in his dna right so you wouldn't be surprised many people ask me what makes a good founder and there's a bunch of characteristics you can google it people come up with a bunch of things like risk taking resilience ambition etc and in fact there's some research by academia that shows that people have some innate properties so uh researchers at northeastern surveyed 100 hundreds of entrepreneurs and they counted that 42 of them had started a business as a kid so actually that's a good hint for

anybody making angel investments maybe it's a question you can ask now there's also data that shows that founders can be made and while there are 37 percent of founders the repeat founders and companies today 59 repeat founders are in the top unicorns so that means at least you learned something from your first experience so it would be reasonable to believe that there is some relationship about you know what's your chances of being successful to how you're born however i do believe there's some form something you can do right there's some energy or some modification that would put you up in that chart and i think the

wider arrow shows that the early parts of that chart you need a lot of effort and in fact this is what i've learned from being an investor roughly and these are all rough numbers out of the 10 companies we back two will fail no matter what we do that's just almost their destiny and jason wrote a blog post in 2015 so that's a long time ago that's titled you don't have what it takes i recommend you reading it and basically the summary is some people just don't have what it takes it would take so much effort to change them that you might as well give up right okay so out of 10 companies we back two will succeed no matter what you know

us people in venture like to take credit um but truly the founders there's a percentage of founders that work independently of us um we back doordash early on there's a picture of their founders and i can tell you that tony hsu the ceo would have made it with or without any of his investors and then there are six companies that i think we can influence okay there's something we can do um and the question is perhaps what can you do with that sixty percent how can you make them more successful or maybe better if you're at the top ten percent can you accelerate their success that's a big question and that's what i'm really passionate

about can you create more successful entrepreneurs and why is it important why should you care a king i think this is the right audience you don't have to say there are many numbers to show that having more entrepreneurs is good for the economy you can read them but just more entrepreneurs means a better world so the question is how can you build this entrepreneurs is there a magic machine where you can actually take a regular founder or a regular person that outcomes a successful founder okay so at the risk of being elitist i am going to say that one of the closest machines of

entrepreneurship stanford university and the numbers actually show it 10 of unicorns have founders that attend at stanford and what's even more in the all-in summit i actually went through all the linkedins 40 of the speakers at stanford and i think all of us have started something whether it's 538 like made or a venture firm or a company or multiple companies so there's some special gene right and the question is what does stanford have that other people don't have right it's a higher ed institution so for sure you're going to go and take some classes gain some skill sets they put you around people that are

like you and they have a brand so you have access to capital network etc having been there though i will tell you that the skill set doesn't quite matter as much you can go online and learn some of that but your peers around you and the next degree around you actually really really matter and in a way what these people are doing is transforming your character and i i can tell you that firsthand just imagine yourself you may be a founder or an investor i don't know you are dropped in a world where you're basically are surrounded by people that are constantly thinking about starting new companies

this is smart people the ambition is very very high there's innovation almost breathing everywhere and nerding out is very okay right so by doing this throughout years you actually become one of them and your peers are really fundamentally changing your character you become somebody that starts to believe in themselves you can do it uh you learn basically to expand your own ambition right you may think 100 million exit is good but if you go to stanford you know that's not good enough right so you're setting your own bar um it's a really interesting process and the question is are there other machines like this

or is stamford just the only way to do it well the good news is there are other places that do this or the other forms of doing this i would say and one of them perhaps is the paypal mafia i think a lot of them running around here in the next couple of days you all know that they started many successful companies tesla linkedin palantir firm youtube yelp yammer et cetera et cetera et cetera right there's something magic about having been there at that point in time i haven't researched them and i don't have that much direct contact but according to sarah lacy who's a journalist and she spent a lot of time researching them

she concluded there was the confidence that they gained when they were there now i'm not sure but maybe in the q a they will reveal the secret there's other mafias this one i'm more familiar with this is rapi rapi is a company that was founded in 2015 so not not that long ago in colombia and it really transformed the latinum startup environment there's been a hundred plus companies created by rappy employees it's crazy even almost 50 in colombia it almost it literally changed the country which is a big deal i have uh the privilege of working with a few of these founders and there's something common in them they all have this sense of ambition that you know super

fast growth it's it's really interesting how they're almost cut from the same cloth so there are other places and i think we had the mayor here earlier um i guess he would claim that miami is on its way to doing some of that so there are places so i want to tell you about a couple of experiments that are personal to me that i've been running and hopefully will inspire you to do something on your own okay the first one is i teach a class at stanford it's a startup simulation class uh you have to for one sec forget is at

stanford i'm actually taking it to other colleges as well it's not your usual class okay so it's actually not your usual class in the sense that i never lecture there's no lectures for me there's almost no communication from me so i've been teaching this class for six years we will take eight teams these teams have four to five people and you cannot have a startup when you come to this class in fact you must be way earlier you only have an idea or you may have a couple of ideas but if you have something that you've been working on for a while you're automatically disqualified okay so everybody that comes in knows very very little

um and then what the class is designed to do is to just maximize your peers interaction because i believe that that's the way that you can create founders so how do we do that first we're very lucky that i can actually craft the class so even within stanford you have to get admitted to this class there's only 20 percent acceptance so i'm able to figure out who do we want to get get in and then the trick is to force each of the teams to present to each other every week and i know it sounds really simple but just by doing that you're actually motivating and teaching by example and the results are pretty incredible we

actually have one to three companies per year that get started i think we have two unicorns there's 600 million capital raised and i think what's really really interesting is that every year i'll get some pretty nerdy phd student that goes off to be a successful founder so it's it's very impressive and this one which is really interesting uh when i first started 20 of the kids were females and i said well we need we i bet we can shape the class so throughout the years we've been increasing female enrollment and i can tell you that the results have not changed we actually now

have more female-founded companies and this is actually something i care about so i went thank you okay so this takes me to my second experiment which is actually even more successful and has nothing to do with stanford okay so there's no stanford involved okay so um about a year ago a year and a half ago i decided let's get a group of women together artificially and again the same idea these women cannot be founders okay these are women that are just high potential okay and we actually have 30 to 40 women per cohort we've done it twice um and the goal is like hey can we teach

them about being a founder increase their confidence their ambition their risk-taking etc etc so how do we do it same thing first thing is we inspire them with great leaders so we would bring women that are successful in their own right to tell them that it is possible to be like them right i think in many occasions we just lack that role model and the next is we force them to connect with each other so sometimes it's talks sometimes it's fun events or dinners we even had a manicure pedicure session the point is like can you get them to talk to each other and the results are literally insane so we had 78 women

through the process i think they've incorporated 45 plus companies 35 of them have raised more than a million dollars and they're backed by people like sequoia and recent paradigm dragonfly of course pear so i mean it's incredible numbers these are not regular numbers that you would see in a random group of people and i think again it's important because i think we have something to say about what thank you about what the next generation looks right i mean it's for all of us in the audience two percent of all companies have an all-female founder team that is very crazy if you can

imagine if you can do the numbers so um you know i think perhaps richard branson said it better everyone is born an entrepreneur and everyone has the potential to learn to be an entrepreneur it's just that not everyone gets the opportunity right so i think my quest is about making those opportunities and i will say that you as an individual have your first responsibility about doing that right you have to create opportunities for yourself and i would say the most important is to surround yourself by the best people so you have to play up and challenge yourself and sometimes uh you know people don't go to places

that have the best people because they have a um the worst job at the company and that's the wrong attitude you should go to wherever the best people are so you can learn you know transform yourself i have two very practical pieces of advice that i give my founders first this is very simple but you can actually read you can read a lot um one of my founders asked drew who's the founder of dropbox how he became a great ceo and he said i read a lot but then i have actually gone and looked at our top ten percent of our portfolio and there's one thing those ceos have in

common they are reading machines so i don't know if reading will make you a great ceo but i know it won't hurt you so and the second one is get a coach i say even steve jobs had a coach if you don't have money to get a coach get a peer group because again it's about character building i think what investors can do so if you're an investor in the room um i know it's a very ego-high business but it is not about us you know we are not the ones who make the companies i think our role is to have create opportunities for our founders to grow and that actually will help the portfolio

and i think for society perhaps we should have an early intervention program much like a gifted program in schools if you detect that there are kids that have that gene in them why not pull them aside and create an early intervention program and i'll give you an analogy which you'll understand i'm from barcelona spain my fellow country woman is monserrat caballer she was a great opera singer and of course today probably i'm too old to become a great opera singer but perhaps i wouldn't i would have had some chance right maybe to just sing opera in the bathroom at some point if i had been taught early

on so that's the thought and you know just imagine a world where you can actually increase the total founder potential by just 10 or even shape who becomes to be a founder so with that i guess i'll go to the q a wow [Applause] awesome in the middle you're in the middle yeah that's amazing what a great talk that's amazing this is very intimidating i know but somehow the four of us are gonna get through it it was an incredible talk somehow god you're good i have to say you know we're watching the talk backstage and the nodding that we were each having and you know collectively we've invested in

you know i would say closer to a thousand companies now and we're nodding and thank you for putting my blog post up there from from years ago you don't have what it takes and i just realized you know wow one of the fundamental problems we have and i think having david here from the paypal mafia speaks volumes one of the fundamental problems in entrepreneurship is that you pointed out is people have to see it in order to be it and you know when you look at what happened at paypal and i'm really interested in hearing david's perspective on this they got to see each other at stanford and 40 of the speakers have been to

stanford here at this event i didn't even know that thank you for doing that statistic but it seems like the fundamental problem we have in society you can expand this and we were talking about how the mayor being are you getting into a question yeah but this is the fundamental problem we need people to understand that entrepreneurship and opportunity in this country is available to 100 of the people here they have that opportunity but because they don't see someone like themselves a woman a person of color a person of a woman who is a person of color et cetera et cetera et cetera they

need to see it to be it that's the problem isn't it well you summarized it really well it allows you to do the talk next time yes when you when you started this program what was your goal what did you think was going to happen honestly i didn't think it was going to be i didn't think that conclusion was soon as bs as big right i mean if you get 20 of women to start a business that would have been amazing but we're getting almost i would say 60 of them or 70 of them are going off and starting a business it's crazy i mean when you take both of those two programs together the the results are pretty

crazy they're pretty crazy yes um so okay take it out of the stanford context for a second um how do people i'll pick a city you know you're you're in cincinnati what does it mean to have a peer group and a network that can create or catalyze like a paypal like mafia there or even if it's in miami or in la or wherever you are that seems like a really hard it's a really hard problem so luckily i'm young enough that i'll i'll be able to read but zoom may make that a little bit easier too right i think you need that you know it's not just enough to get a

bunch of people together right you have to seat it the right way so that's why i said you know even for the female program we'll get hundreds of applications and we have to go and interview everybody and see who can have high potential right so again there's a little bit on the choosing of who goes into that program and then you can shape them so again it's that curve if you are too far to the left then your job is really really high i used to probably once a week read business insider or insider and then i stopped about seven months ago or no maybe like in the last few months and i'll tell you why i stopped

it was for two reasons there was this article that they kept running basically bashing the founder of glossier and to me it just didn't make any sense because it's like there are lots of people who you know go through trials and tribulations at startups and when you read about her journey it didn't seem particularly different than anybody else you try products some of them work some of them fail you learn and you move on but they would run it and they were just hammering hammering hammering they did it with the away founder too and you know there's a toy luggage thing which

was the craziest story unbelievable stewart so i read that story i was like what did she do wrong i never really understood everybody work harder yeah she was like work harder let's make this company successful yeah well i mean i think can i give you more equity yeah well i think honestly that happens even to me i mean on board meetings i look you know i'm not an [ __ ] i'm a [ __ ] right that's the yeah that's the summary of the situation welcome to the club we're [ __ ] well i'm not i'm a [ __ ] but anyway so that's why i stopped reading it because i was like this is really ridiculous because what is it telling people and then separately they

kept running this ad promoting this company called cerebral which last week got a doj subpoena for selling adderall illegally to people and so it's like this is the imbalance that you see when things are presented that don't really make a lot of sense there's a term for in the industry um and i didn't come up with the term chicks for clicks and so they will look for a female founder and no chicks four clicks ticks for click chicks as in a worm for a word for females chicks four clicks they're they're all trying to get clicks if you go after a female founder you're going to get 10 times as many clicks oh really it's just more exciting of course um the

therapist story i think like was such a great example of that it was like a failed biotech company i'm not saying that there wasn't fraud and stuff that happened there but man i mean the way that that that escalated the storyline yeah it was as well i mean it's a founder plus a female founder you know a founder of misbehaving quote-unquote plus a female founder just equals a little more the wife of the founder of wework is more famous in some circles she seemed more talented yeah i'm curious what your questions are for david about the magical moment of the paypal mafia yeah what was the what was the secret

sauce like being the 17th most important guy paypal hey hey he's now the ninth don't try and resuscitate it now you had your chance on the pod okay that was brutal yeah i know look i'll tell you something every guy on the stage no one will ever tell them what i said because everyone works for him or wants money from him so we can only do it to each other we can only do it to each other all right all right so so the and the the answer is that at paypal we recruited our friends to work at the company because literally nobody else like was willing to come work at this crazy startup peter recruited his

friends who he had gone to college with at stanford max recruited his friends from u of i that's how the initial team was recruited is through friendship networks but it wasn't like this was some exclusive club it's just that nobody else wanted to be a member and well sorry can i just say at facebook early days it was exactly like that as well it's like we had like really qualified people from great schools but it would not be the people that you would have thought it's like the folks that like spun out at microsoft you know couldn't succeed and all of a sudden we were like oh or like boss used to teach zuck cs and it's like yeah why don't you

just come in as like the ta of the class it was not it was a very rag tag did the trust make everyone because they all knew each other from before did the trust give everyone like a stronger sense of like being vulnerable and then developing themselves better because i do see like a lot of horrible well i mean i see a lot of these companies and everyone it's all like it's like you see early stage companies and it's very political who's going to last who's not because you don't really trust each other you never work together well each other yeah what i'd say is that you you would think that the the friendships

would would make it like this sort of um calm friendly environment uh paypal was actually a very um frictional contentious environment and but i do think that there is a trust element to it which is we were constantly debating what the truth was right and what we needed to do and what the big risks to the big business were and so we were yelling in fact peter when he hired me he told some of the other people on the team look i want to hire dave because i need someone here who i can yell at meaning like he didn't have to worry about hurting my feelings he could just say what he really thought and we could

have an open conversation about what we needed to do as a company even if it meant yelling so was it a culture of brutal honesty yes absolutely that's what the node talks about a lot right yeah yeah can i ask you guys a question mark david you use rappy so the last time i was here in miami was to meet the rappy founders and i spent a couple of days with them and i came away stunned kind of like what you said i didn't realize it was that extensive but there's a really special culture there yes paypal obviously had that as well but do you guys and don't don't take this wrong way but do you have to have somewhat more of a bounded outcome

for them these networks to really explode meaning if you look at a google or a facebook or even a microsoft when companies become almost too successful it almost just locks these folks in and the incentive to go off with that toolkit the pure network goes to zero because you're just too incentivized it's an interesting evolutionary trait right or people make so much money that they just retire you're totally right the companies that they come from have to be a little hard i don't think paypal was easy right no it's super hard yeah um and when it's hard you learn to be you know to overcome hard things and the

whole company learns if there's brutal honesty right if it's hidden at the top and you think it's all right nobody learns but if you do you do and actually i think the the rate of success of people that came out a founder of google relatively speaking it's not that high it's not that high it's not that high because everything works and everything no offense everything is easy but no freeburg you run well he's like oh [ __ ] yeah you're right i'm sorry okay but you're saying to google people mar to be clear it got very soft because it was too easy to learn they never learned anything

right there are more this is actually interesting there are more unicorns founded by paypal people than ex google people even though at the sort of the paypal mafia if you defined it as the pre-ipo uh group of people who worked at paypal there were only a couple of hundred in the bay area whereas google had like 10 000. so my theory on this having observed it at the early days of google the the organization grew the success of the company was exponential out of the [ __ ] gate i mean like more than most companies we talk about nowadays um and as a result all of the success was baked in the the monopoly machine

started rolling right away so then the hires started being safer hires people that could be more analytical people that could be more execution oriented not risk takers and so a lot of people were hired and i forgive i went to cal but forgive me for saying but all the stanford people who um basically had always done really well on their sats got great grades they'd always been successful they'd always you know kind of been given that thumbs up you're awesome you're smart come here and do this job they weren't the risk takers they weren't the people who were willing to take risk to fail and so the orientation was built a culture of people that just took didn't take a lot

of risk executed and then those people they had this false sense of entrepreneurial success by working at google because they were already on a rocket ship then a bunch of them left and tried to start companies and they're like oh yeah you just build an app and a hundred million people use it it's like dude failure failure failure failure failure failure failure and by the way if you make it to 87 failures then you'll have your moment of success and none of it make it past 0.30 right and so i think like my observation with so many google people i knew that left and started companies they either weren't risk takers or they didn't have the the

grit and persistence needed to go through the failure to get there and it was because that culture was defined by early success and then everyone that joined was just execution operations 100 yeah you mentioned something maybe you can just speak a little bit more about it but we used to do these things which you talked about where every week you would force people basically to present and what you're almost doing and i think what we learned was you're desensitizing people to failure itself and it just becomes a nothing burger because you're just seeing this litany of just randomly bad ideas almost but that's what becomes so powerful

because then these random little things just become enormous they shape you they shape you and you get very very lucky i remember like when you know at facebook we created i created this thing called growth circle we used to run thousands of experiments a week and we used to have folks present every week and it was just three hours of monotonous failure right it was just one after another after another but i think what it really did was allow people to feel okay trying the crazy idea yeah because they would see the 15 people in front of them wouldn't do it totally is that was that

the key is that that is the key that is actually the key and actually it makes a huge difference right if you yeah hear every and and you they also inspire you whoever is actually doing great you're like i don't want to be the last person you know the next week when i have to present i want to be better than the person that presented last week in the great but how do you motivate you but how do you get people that are those high sat over achiever types to be okay yeah you have to put them in a position so i'll tell you like one for example in the class one exercise you can tell people towards the end it's like you know they're all having

some startup or have some users or whatever they don't have a startup they have a project um i'll say okay your homework for next week is to 10x your sales you have one week to do it and people get really really creative when you actually tell them that and maybe they don't get to ten but they'll get to two or three in a week and i think that inspiration is enough for people to make the best out of themselves i think great leaders do that right they ask for more than you think escape you're capable people are capable what about learning failure right we were talking about this on the the yesterday we were having a conversation about

you know how do we make sure that our kids grow up and learn failure like we all learned and failure ultimately i think and persistent failure i think really taught me a lot about you know putting up with failure knowing that there's as long as you're doing the right thing you'll get their probabilistically how do you teach that because you know folks especially in an environment where they've always been successful and how do you keep them from saying you know what i don't want to fail i want to succeed because my orientation is to succeed so when they start to fail they run and they go do something easy which

they can be actually at stanford specifically right yeah exactly if you made it to stanford stanford but yeah no yeah i'm just i'm just i want to tell you um but you are very i mean you've you've been an incredible student i mean you probably cured cancer or something if you had to if you got into stanford today right so you're any they've they've never really failed at life this is an 18 year old has never suffered failure uh at least um as we understand it you have to put them you have to learn each of the students what is their weak point and make them actually do that right so one of the things i will do

yeah you provoke failure as quickly as you can so you know if you're a typical uh you know computer science student you probably can create an app well these days within an hour you'll have something great right try to get a thousand users yeah without spending a single dollar let them fail can you do it yeah it's hard yeah and then do it again and some of them you know the mental health problem is very very high right i think a lot of this people the first time they fail they can't take it let me ask you one more because my i'm sorry jacob but my my big three predictors of entrepreneurial success

are grit persisting through failure bias to action like you don't have an orientation being analytical you have an orientation to taking action um and uh a narrative because i think that the greatest entrepreneur is that we all know elon's obviously the penultimate example someone told me i use that word wrong so i want you penultimate means second ultimate ultimate is what you're going for i feel like you're wrong on that but i'll accept it um it may be the quinoa getting to your brain yeah go ahead yeah you may want some protein yeah the ultimate definition you had the penalty more like make stakes so um how does narrative get learned because

we've seen that the best entrepreneurs are incredible storytellers yeah they tell the story and they tell the vision before it's built as a way of attracting the best talent and then as a way of attracting the capital and then as a way of attracting customers and that ability is key to success and how do you actually is there a way to develop the importance um you know and i'm gonna even elevate it one more sales you have to be a great sales person your narrative you're selling the story of your company but you may be selling to a fat to an employee to an investor or whatever you need to be a good salesperson unfortunately teaching sales at a higher educational

institution is considered like dirty work so we don't even teach it right but it's the most important thing so you know i run a little accelerator and we it's like jason and we spend the last few weeks just teaching people how to talk you know how do you explain what you do and you know i tell people there's nothing like practice you have to practice practice get coach et cetera some people are born with that some people you actually have to learn you think you think it is learning though it is it is well you can definitely get better yeah right if not the world would be a better a sad place mars we were up here yes uh we

have ten daughters between the four of us i love that girl that yeah three two two three three whatever you can remind david of the names of his daughters um they're on your watch i'll look them up um look he's got a little card in here i'd like to my wife's name is he's got a picture mark um what have you learned uh about uh women in terms of entrepreneurship what what do we need to know about encouraging them to become entrepreneurs and to create companies um you know i think the most important is for women to believe in themselves i think a lot of us don't i think you google imposter syndrome and we all have

it even myself coming here today i was probably the person that practiced the most because i have that in poster syndrome that is the most important you have to overcome that because for most men it comes naturally right and us we have to work a little harder to do that but with confidence we make amazing founders i would say and you know i am fortunate to work with many of them this year our accelerator this session would present on wednesday we'll have two thirds of the founders are women that's very impressive um and they're amazing i'm not you know they're not there's no cutting corners that we're the best people but we as a society have

to do a better job of uh stop clicking on those clicks you know chicks for click exactly stop clicking well and i think maybe uh you know them seeing more role models like you and i think very specifically you know we as all girl dads appreciate the work you're doing oh thank you let's give it up for mark let your winners ride rain man david sacks and it said we open source it to the fans and they've just gone crazy with it [Music] besties [Music] we should all just get a room and just have one big huge orgy because they're all just useless it's like this like sexual tension that they just need to release

[Music] we need to get back [Music] i'm going on [Music]