📈62x+ on Pair Eyewear, the Behind the Scenes Story from Seed to Series C

**Please note that due to the sensitivity of the company still being private, we cannot share all numbers associated with the business

This week I (Alex Pattis) am doing a deep dive on one of my biggest markups and favorite portfolio companies, Pair Eyewear. We were one of the early investors in the business, which has gone on to raise at a 62x+ valuation markup well respected investors including NEA, Javelin Venture Partners, and Prysm. I share intimate details on how we sourced the deal at the seed stage to how we put together our SPV for Pair and some updates on how the Company’s gone on to become one of the biggest names in eyewear.

While this is a live company situation, companies like Pair are the ones we strive to back before they are obvious winners (a non-consensus bet at the time). I also want to highlight the upside potential in a relatable scenario here rather than what someone sees in a deal memo on “how X can be a unicorn in Y years”.

Pair is uniquely interesting in the context of the down consumer product market in venture as they are also one of a handful of companies that showcase 1) venture like upside is still alive and well for the best consumer product companies 2) non-consensus bets can be your best investments and 3) business model and unit economics can make or break the outcome of a consumer business, and few private consumer product companies showcase that better than Pair Eyewear.

Introduction to Pair founders via Jeffrey @ Bolt VC

In mid-2019, I initiated a deal-sharing dialogue with Jeffrey Akiki, then an investor at Bolt. My understanding was that Bolt was actively co-leading their seed round, and Jeffrey had shared materials about the company for a co-investment. While most of the round's funding had been secured, there was a small portion was earmarked for angels and strategics. Given the opportunity at hand, I recognized the need for swift action if I intended to participate in this round.

I was currently running Business Development for a healthcare startup and putting together SPVs as a side hustle. I was eager to build a great portfolio and more broadly break into venture capital, but at the time, wanted to get more reps under my belt putting together SPVs before jumping into VC full time.

I requested an intro from Jeffrey who quickly connected me to the Pair founders. This was pre-covid, and Nate & Sophia were based in NYC, so we made plans to connect in-person at Honeybrains in Flatiron on a Saturday. Yes, a Saturday. This was my side hustle, so weekends were easier, and thankfully Nate & Sophia agreed.

First 2-3 Meetings to Learn & Diligence

Our initial meeting took place at Honeybrains. As I left the meeting, I couldn't help but believe that this had all the makings of a deal worth pursuing, with founders I wholeheartedly wanted to support.

For context, here are some of the things that stood out at the time:

Product

The product concept of having a kids eyewear brand that would transform glasses from one-off purchases into a customizable product with recurring spend through different tops that could be purchased resonated with me. At the time it was a patent-pending interchangeable frame in a DTC model and it felt differentiated and a superior model to purchase glasses.

Shark Tank

They had already filmed Shark Tank which was going to air in 2020 which I knew would boost their brand awareness.

Founders

Nate & Sophia were young but very sharp. They were thoughtful, passionate about the company, and super smart in my opinion. They had become friends at Stanford but did not have actual work experience having started this business right out of college (or maybe in college).

Traction

The traction was still super early. They had pretty insignificant monthly revenue, but had 70% margins and 33% repeat customers which also felt differentiated versus other eyewear companies.

There was limited data and I don’t think the revenue was all that important in comparison to the signs of strong early product fit and to the larger opportunity ahead. However, the 1) margins and 2) repeat customer rate were two metrics that stuck out.

The margins and acquisition strategy showed strong unit economics and the foundation to scale a profitable business over time and the repeat customer rate was uniquely important to validate both product fit and scalability in the overall model. The company focused on selling glasses frames, but what set them apart was their unique approach. They encouraged customers to explore a variety of frames to complement their glasses, which was a unique concept compared to other eyewear companies. This innovation implied that customers would not only return more frequently but also at a much higher rate compared to any other eyewear company during that period.

Partnership Pipeline

They did have a nice pipeline of partnerships across Marvel and the NBA. I felt this pipeline had the potential to grow quickly.

Co-Investors

The round had a strong syndicate of co-investors who had committed to invest including Bolt, Precursor Ventures, Corigin (now Alpaca VC), Canaan Partners, and the Estee Lauder Family Office, among others, providing certainty that Pair had sufficient capital to execute with a meaningful set of advisors to accelerate growth.

Over the next week, I did further diligence and spoke to a few DTC founders in my network to get more feedback/insights. From what I recall, there was mixed feedback including things like:

1. “this is a unique idea”

2. “how are they different from warby parker”

3. “they don’t have much experience as founders”.

The very next Saturday, I met with Nate & Sophia again, this time at 1pm at the Edition Hotel next to Madison Square Park. It was an opportunity to dive deeper into the business and explore:

• How does the company intend to leverage its recent capital infusion to scale its operations effectively?

• Insights into potential partnerships the company is currently exploring or planning to form?

• The company's hiring goals and strategies for team growth in the near future?

• What key performance indicators and/or metrics and/or validation are they aiming to achieve before pursuing a Series A funding round?

• How does the company plan to maximize the opportunities presented by its upcoming appearance on Shark Tank to boost its business and brand visibility?

• And and opportunity to get to know both Sophia & Nate better

And the meeting definitely ended on a high:

1. The excitement felt mutual. Not only was I excited to participate in the round, but at least to me, it felt like Nate and Sophia liked my enthusiasm and were truly excited for me to join the cap table.

2. The bartender at the Edition Hotel gave us free mimosas for no reason at the end of the meeting. Maybe that was a sign or something, but I won’t forget that.

We didn’t commit on the spot, but I knew we wanted to take the final $150k available in this seed round closing shortly.

In Person Pitch

Once I committed to the deal and explained to Nate & Sophia the SPV process, I put together a deal memo and sent it to our LPs and also decided to host a live pitch/Q&A session in my building rec room.

I ended up hosting about 12-15 interested LPs/angels to get more color on the story of Pair directly from Nate & Sophia, and also give LPs the ability to ask relevant questions.

The Q&A went well overall. There were tons of questions from the investors in the room and lasted ~90 minutes.

I still remember the very last question from one of the angels (who was impressed) which was along the lines of:

“It seems like you guys are going to crush it, what do you need us for?”

Nate & Sophia’s response was “we like Alex and want to work with him”. This was music to my ears, as it was great to hear (particularly at that stage for me) but also a confidence booster on my ability to get into deals and build founder relationships quickly.

In the room, there were varying responses to the pitch – some chose to invest, while others did not. I also overheard a comment about the founders' youth and inexperience, although this opinion wasn't universally shared but stuck with me.

The SPV

In the coming week or two we completed our SPV and invested $145,000 and were officially on the cap table. We also were able to bring in some cool LPs such as Matthew Dellavedova who was in the NBA and had just won a championship a few years before with Lebron and the Cavs. He was strategic as he ended up playing a role in helping Pair secure their NBA partnership which was in motion at the time.

I recall this whole process being pretty standard moving along well.

Shark Tank

On Friday, March 6th, 2020, the Pair team threw a watch party to watch them live on Shark Tank at some venue in Soho. It was really fun to attend and meet their team, investors, and customers who all came to support and cheer on the already taped episode.

I also remember that was the first time in public someone would not shake my hand due to covid concerns (the very next week, everything in the world changed).

From Seed to Series A

In a little over a year, it became evident that the business was thriving. They achieved a remarkable 20-fold increase in revenue and further enhanced already strong profit margins, while also forging numerous valuable partnerships.

Javelin Ventures had come in to lead an $12m priced series A taking place. Pretty much everyone was following on from Seed. We were able to take part of our pro-rata and filled it quickly. I think we had 2x the LP demand versus allocation. This is one I wish we could have gotten more allocation, but it was clearly a competitive round and we were happy to have the opportunity to re-invest.

From Series A to Series B

Just about 8 months or so after the Series A took place, Pair got another term sheet from NEA to lead a $60m Series B. There was definitely a competitive process that took place behind the scenes as I recall Nate & Sophia sharing the many names of VCs they were talking to about this round.

So, how did this happen so quickly after the Series A?

The growth was accelerating and Pair had grown approx. 9x year over year. From my perspective, as an investor, it felt like the business was just flat out working and everything the team was doing was contributing to high margin, high revenue growth.

This Series B provided a very strong markup, about 45x in valuation from where we got in at Seed. This valuation bump was primarily attributed to the company’s strong execution and the market conditions of late 2021. We seized the opportunity to participate in this round and made our largest investment in the company during the series B.

From Series B to Series C

Despite continued growth from the company, the YoY growth moderated from the previous year's growth, which is normal given the speed at which they were growing, and the change in the market. Luckily, Pair was not planning nor needed to raise anytime soon, so the focus for the next 1.5 years was to continue to grow, but in a fashion that aligns with the new way in which companies are being valued. Again, this was a big change from 2021 to present with the inflow of VC having drastically slowed down at the growth stage.

The Pair founders were increasingly interested in global expansion and their investors supported the idea to raise more capital to fuel this despite not necessarily needing more capital to grow the business.

Eventually they decided to go out for their series C round. They ended up landing a great term sheet with Prysm Capital leading the $75m series C. Given the rapid change in market, this term sheet took longer, but in reality the timing was a return to normalcy.

The series C did indeed provide another nice markup from the series B done about a year and a half ago. From seed to series B, the valuation has now rose over 62x.

We’d love to share more on the progress, but as the company is still operating privately we must keep some exciting developments confidential.

Looking Forward

We remain fully committed to this investment and have not made any capital distributions at this point. I am exceptionally optimistic about the company's potential, given their impressive track record of execution. It's gratifying to witness substantial returns for our Limited Partners (LPs) who joined our Special Purpose Vehicles (SPVs) during the seed and Series A stages, as well as benefiting from the buoyant Series B market.

While it remains to be seen whether Pair will become our initial major success story for distribution, I am genuinely enthusiastic about the current status and the promising future that lies ahead for Pair and the LPs involved in this venture.

So why are we sharing this?

As early-stage investors we strive to find those 100x+ liquidation events. That has not yet happened, but directionally, Pair Eyewear is growing at a rapid pace and could fall into the “Fund Returner” category. The takeaway for LPs, among others:

• There’s no one size fits all for putting together a syndicate – we got creative and put together a live Q&A to generate interest from LP base; it’s something we don’t do often today, but it helped to build a consortium of interested LPs.

• Pair was a non-consensus bet at the time – there was a lot of fear as to whether d2c consumer businesses could create traditional venture scale.

• Business models can make the difference in a consumer goods company. Notably a big brand like Casper failed to maintain prominence in the markets partially because of the unit economics, business model and margins (people buy mattresses only so often…); Pair is a clear contrast to that (sticky recurring revenue with high retention and high margins). CPG can = venture upside for the best companies and at the right price.

• Relationships matter - Being helpful investors who are easy to work with at seed has provided an avenue to reinvest at series A and series B. Both of these rounds were extremely competitive, so while I am grateful we had the opportunity to re-invest in those rounds, it’s important to position yourself for an easy yes from the founders.

Clearly not every company executes and grows the way Pair has to date. But…the ones that do have the opportunity to return a fund and/or drive 100x like returns. We encourage LPs with every investment to think independently as that’s where you can find the best winners.

Stay tuned for a future story upon IPO/exit 🙏👓

***BONUS CONTENT***

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✍️ Written by Zachary and Alex