Why I invested In Pearachute
I recently made my second angel investment. It’s in a company called Pearachute started by my former co-founder at GiveForward, Desiree Vargas Wrigley. It’s a subscription based service for children’s activities — think Class pass for kiddos.
Though I am new to the investing world and haven’t yet developed a full framework for evaluating investments, in general I am looking for four things: great CEO; great team; big market; real need. Pearachute hits all of these criteria for me.
Here’s why I invested.
1. Great CEO
First and foremost I’m looking for a great CEO, and Desiree checks this box.
As Mark Suster has famously stated, investors invest in lines not dots — meaning when you are opening your wallet, more data points > than fewer data points. As a rule of thumb, investors want to invest in people whom they trust and already have an existing relationship (a line) rather than people they have only met once or twice (dots).
In the startup world, I have no longer line than my connection to Desiree.
We had the opportunity to work together over the last eight years on GiveForward and I have an enormous amount of admiration and respect for her. She’s smart, hungry, passionate, empathic and her mind is always thinking about the future. I’ve seen her help pioneer an entire industry (crowdfunding). I have no doubt she can help pioneer another.
2. Great Team
Great companies are built by teams, not by individuals. The best CEOs are the ones who build the best teams around them.
With Pearachute, Desiree has done just that.
When she first told me about Pearachute my immediate response was, “this sounds amazing. You need to hire Erica” (our first employee at GiveForward).
With a smile, Desiree responded, “I already did.”
My heart lit up.
Recruiting is probably the most highly leveraged activity a CEO can spend time on. This is even more true when you’re recruiting your first five to ten hires, as these early team members will shape the DNA of the company for years to come. Hire great people early on and your life becomes exponentially easier over the next three to five years. Your chances of success also skyrocket.
But a startup team isn’t just employees and co-founders. It consists of investors and board members too.
Great CEOs recruit up just as well as they recruit down.
So when Desiree told me that some of our early investors in GiveForward, David Cohen (CEO of Techstars) and Sam Yagen (co-founder of OkCupid/former CEO of Match Group) were thinking of investing in Pearachute, my decision to invest became even more of a no-brainer. The reason wasn’t just because these guys are so called “brand name” investors, but more importantly because they are both incredibly smart and supportive and have a relationship with Desiree that goes back almost six years. Both sides of the table are going in with eyes wide open and that’s a wonderful thing. Again, it’s about lines not dots.
The final piece of any startup team is your board. As a CEO your relationship with your board is probably the most important relationship outside of the relationship you have with your co-founders. It is one of the few relationships that can either make or break a company. When Desiree told me that two people she’s known collectively for over a decade, Sam Yagan and Paul Lee (Managing Partner at Roniin) were going to sit on her board, it was icing on the cake.
Great CEOs recruit great teams and with Pearachute I think Desiree has brought on some of the best in the industry.
3. Big Market
I won’t spend too much time on this one because it’s pretty straightforward.
If you are optimizing for upside, big markets provide the greatest opportunity for outsized returns. As an investor, ideally you want to invest in the company that is going to execute the best in the biggest market possible.
The market for kids activities is estimated at $32B. For me, this checks the box.
4. Real Need
The last part of my investing checklist is about impact. I only want to invest in companies that solve real problems. Pearachute does just this.
When I was at the Pearachute office last week, I sat in on a phone call from a inbound investor (and father of a toddler) who was hoping to invest in Pearachute’s next round after reading about Pearachute in Techcrunch.
He pretty much started the conversation by telling Desiree how he viewed the problem in the current market:
“I have a three year old and when you have a three year old, you have no idea what they are going to be interested in. Plus kids at that age lose interest so quickly. The problem with the way things work now is you spend $250 to sign your kid up for soccer and get locked into a twelve week program only to find out on week two that he hates soccer and doesn’t want to go.”
When Desiree first told me about Pearachute she pretty much explained it like this.
“I have a three year old and when you have a three year old, you have no idea what they are going to be interested in. Plus kids at that age lose interest so quickly. The problem with the way things work now is you spend $250 to sign your kid up for soccer and get locked into a twelve week program only to find out on week two that he hates soccer and doesn’t want to go.”
It was uncanny how the investor and Desiree were saying the exact same thing. It was like Deja Vu.
Pearachute is solving is real pain point for parents. Instead of paying $250 and getting locked into soccer for the next three months, a $99 monthly membership on Pearachute allows your kiddo to take unlimited classes and discover all sorts of interests from art to sports to music, and language.
Pearachute gives children the opportunity to discover what they truly enjoy and reduces the pressure and financial burden on parents stressed out over trying to pick out the perfect activities for their kids.
It’s a win-win both for mom and dad and for the nino.
Conclusion
As one of my first angel investments, I don’t think I could have picked a company and team that I’m more excited about. And though I went through my entire investment checklist, truth be told, I probably would have invested no matter what. There are certain people who you’d invest in blind. It doesn’t matter what their idea is. Whatever they are doing next, you want to be part of it and get in on the ground floor. Desiree is one of those people. I’m pumped to see where this goes.
