The Benchmark Partnership: Peter Fenton, Eric Vishria, Chetan Puttagunta, Ev Randle | Ep. 41

[00:00] I know that I'm a moment away from any of these people firing me and I want them to. But the minute I become predictable, it's over. [00:07] Many things. Predictable is not one of them. [00:11] Benchmark team, it is an honor to be here with you all. I'm not going to make you all reply in unison to me, but I'm really excited to be doing this with you. I want to start with an observation, which is that of the sort of top VC firms, whatever you'll call that. But like, you know, I'm thinking of Founders Funds, Koya. [00:27] Thrive, Andreessen, most have scaled in a big way. For whatever set of reasons, that has been sort of like the dominant strategy. Benchmark has been a stalwart in some ways to hold out with small firm, small team, smallish capital base. And I'm just curious, like, why? And I'm sure you all have sort of like different opinions on this. So just to pick somebody random, like Chathan, I'm curious, like, what is your take on this whole topic? [00:57] founders early and we really like to partner with them really early. Like I think the favorite [01:03] amongst all of us is partnering with a founder pre-launch or at idea phase or when it's like two or three people in a room and [01:10] You know, just growing with our firm, I think just like in terms of measuring happiness, [01:14] for each of us. That's where we derive the most out of professional satisfaction. And if you just think about what that does in terms of alignment of benchmark with the founders and that company, it's pretty amazing if you're there from step zero. I would argue that you can't do that as you scale.

[01:33] The interests, and we see it all in our board meetings, every round becomes its own thing, and its own game, and its own whatever. And one of Benchmark's things, we've talked about this, that you're like, we don't do the future rounds, so there's no conflict in the middle of those. And we're fully aligned on dilution, we're fully aligned on trying to make this the biggest outcome we can do. And... [01:56] I think capital constrains you in that way. Time constrains you in that way. [02:01] And each time you go partner with a founder, you're doing it with extremely high conviction. [02:06] and you're going all in. That, to me personally, is an extraordinary experience. And, you know, different models, [02:14] different ways of practicing the business. But for me, [02:18] This is the way I love practicing the business. It's becoming rarer by the day. [02:24] And then therefore it becomes more differentiated. Peter, you've been here the longest. And so you've obviously seen Benchmark in its context through a bunch of sort of changes around you. Have you felt... [02:35] Tempted at any points have you felt strengthened and sort of your clarity on what it should be like, you know You have your behavioral [02:43] experience on a monday which is where we aggregate today is a monday we're here with you feels great and and there are [02:50] eras in the business that I've participated in where the Mondays sort of sucked. [02:55] And some of those were just cyclical. You know, you have a downturn in the economy. Your partners are bringing in their struggles, their pains, the channeling, the entrepreneurial problems.

[03:06] landscape at that moment in time. [03:09] What I was struck by is [03:10] The... [03:11] period of time that I've spent, I've had time at Excel and I've had time at Benchmark when that felt more self-inflicted. [03:17] not market driven. [03:18] And so the [03:21] lived experience the behavioral experience is the joy of the business is centered on serving entrepreneurs and as chaitan related you know getting close to an entrepreneur [03:30] being a partner, deep partner to them, social emotional partner, strategic partner, all of that. On a Monday, if we're talking about that, it feels really good. It feels aligned and it feels purposeful. And when the Mondays we're talking about our [03:44] friction with their European effort. And I'm sure the European partners at the time, now called Balderton, were talking about the problems with us. It felt draining. [03:53] I joined benchmark and they just raised over a billion dollar fund in benchmark four and the overhang of the misfit between [04:02] How do we practice our business of partnering early [04:06] going shoulder to shoulder with an entrepreneur and deploying that volume of capital. And so [04:10] there are a number of things that happen when strategies are misaligned with [04:13] Purpose and values and the main thing that happens is just less fun. And so I looked at the simple question of like how many hours a day? I [04:21] our Monday meetings go, you know, somewhere between six to eight hours and how much of it is just joyful and aligned and how much of it is dealing with stuff that's not sort of what brings purpose and meaning and value in the business. And and what I feel like we got right as we select people.

[04:37] who care mostly about [04:39] the proximity to the entrepreneur, being able to deliver a meaningfully differentiated experience for them. So they come away and they give a reference to us that says Benchmark shows up on all the recruiting calls. Benchmark is at the epicenter of our tough decisions. They're always available. They being us individually and then as a group. And [04:57] scaling, just asking the question of like more capital equals a whole bunch of activities that I think degrade. Interestingly enough, they eat at the [05:07] Essence of why we practice the business. So the outcome of maximum cash on cash multiple, I think is degraded with scaling Yeah, definitely that the quality of the relationship the entrepreneur is degraded by scaling the [05:21] You know, I think the [05:23] Ultimately the joy [05:25] because there's some other thing that's growing which is an incentive system that fuels more is more um you know [05:32] Isn't wrong for other people to do it. I just know what their Mondays feel like and like we leave Monday and [05:39] and carry that energy and that effervescence and the sense of purpose into every day that follows from that and when we didn't do that we had more activities more extracurricular activities man it felt the opposite yeah it's like you want a monday to end and then you're a little less of yourself the rest of the week [05:54] What about you, Eric? I think this strategy is not... [05:59] finance, financially maximal. [06:02] It's not financially maximal for us. No one's crying for us. We're doing fine. But like, it's, so it's, it's a perfectly fine financial outcome for us or financial strategy for us, but it's not financially maximizing. It's happiness maximizing and it's happiness maximizing for the kind of person who wants to do,

[06:19] the, [06:20] the work. Can I put a third variable there if there's happiness, financial? Yeah. If you had to put a third variable of like impact, [06:28] Do you think that you can have the most impact this way or do you think you could increase your impact if you worked with more companies, even if you suffered a little bit for it? I don't know that the way we do it, it just doesn't scale, unfortunately, like it doesn't scale. Is that because of the board seats? Yeah, it's the engagement. I just say it's like the engagement with the entrepreneur that I think is the. [06:50] is the time limiter and the constraint. Yeah. [06:53] And that's it. That's the time. Ev, you obviously came from like bigger firms, Founders Fund and KP. I guess you're rolling what? Are you two months in now? Three months. Three months. So like your experience on this has to be at least notable because it must operate so differently. I mean, I think today, especially one of the beautiful parts about the asset class is that the menu is so large in terms of how do you want to spend your day to day and what do you want your life to look like as an aggregation of that day to day. [07:23] KP is very different from Founders Fund, which is very, very different from Sequoia, which is very different from Andreessen, which is different from Lightspeed and GC. Like everything, some firms are more similar than others, but every firm is actually quite distinct. But I do think the thing that really stands out [07:37] about benchmark. And I think to Chaitan's point around being even more relatively differentiated than it was in the past is as the prevailing trend has been towards scaling and getting to mega scale, [07:48] I talked to some of my friends and peers at some of these larger firms and the way that they talk about their day-to-day and their job and how they're getting fulfillment out of their job. It'll be, let's say it's over the summer. And they're like, yeah, I've already done four deals this year. So I'm having a pretty good year. Yeah. And I'm like, that is the North Star and KPI of what's giving you fulfillment. I'm like, do you like the founders? Do you like the companies?

[08:18] the four investments and four companies that's giving you. This is one actually that gets at one of the things that was a noteworthy difference for me going from running a company to now doing investing is as a company, money's involved, but the primary work is about a product and customers. And then in venture, there is at least one way to practice it where it's primarily about dollars, which I just don't think that's a path to happiness. I mean, and it can be for some people, but I think this is a group that's very much [08:48] maybe the Charlie Munger punch guard approach where it's like over your lifetime, you might only have 10 meaningful partnerships. So every single one of those partnerships should be unbelievably meaningful for you, for the founder that you're working with. And I think that fundamentally... [09:01] comes into conflict with the idea of, you know, each of us going out and doing [09:05] eight investments a year or scaling up massively or something like that. What are like the principles or like foundational tenants of benchmarking? [09:13] if you had to describe the... [09:16] three to five things that like define what benchmarks about like, [09:19] How would you name those? We want to be the first call. [09:23] We're an entrepreneur. [09:24] We want to be their most important. [09:26] and most impactful partner. [09:28] And I think it's like pretty easy to quantify. You could ask any of the companies we all work with. Who do you call first when you hit a patch of bad news? Like, who do you share that with? [09:37] We want to be that person that can only come from being there for the founder and [09:43] having full trust between you and the entrepreneur, and the entrepreneur knowing that when they speak to one of us, they're getting an authentic experience. Like it's not

[09:53] I noticed with these like [09:55] large groups that we've all been part of and boards and stuff. Like whenever bad news gets presented in a board meeting, you can see panic in some people in the room, because they have to go tell their boss. [10:07] with the board meeting notes afterwards, things are off track. Also, by the way, it's a reflection of something in the relationship if they're learning bad news live in a board meeting. Sure. Yeah, 100%. And we're working with such unformed companies and people. [10:24] that like there's gonna be bad news and if you like [10:27] aren't expecting that then you're doing this job all wrong and so like things go well things go badly things go sideways things go up things go down stuff happens and as long as the entrepreneur knows that they can call you [10:39] And you're going to be there and there's trust there. And you're that first call. I mean, that's what we aspire to in every single one of our relationships. So there's that that part of it, which we talked about a bunch. And then the other part of it is the equal partnership. [10:51] And I think that's a very special thing. [10:55] Like it's a very special thing. You know, I've been here for a quarter. Peter's been here for... [11:00] 20 years, I think I'm on 11, you're on like eight. That equal partnership is really special, I think, and just something that also doesn't scale, frankly. But [11:11] has a very kind of special dynamic. And I remember when I joined and you're just like this new person, it's my first investing job. [11:19] Peter and Bill and Mitch and Matt, who were the four that

[11:23] that I joined. [11:25] they're asking me [11:27] about doing things. And you're like, well... [11:31] I have no idea. Like, I have no idea. I have no idea how to do this job or anything else. But I think it's just it relates to this. [11:38] Deep belief in the equal partnership. And I think it's very empowering for a new person, I think. I found it very empowering. I've told me he was disempowered. He was disempowered right now. I think it's just like it's very empowering for the new person. And it's also it has it also like creates I think for the right kind of person creates a lot of internal drive and expectation because you're like, oh, I better not fuck this up. [12:02] And so I think that's a magical piece of. Why is it so hard for most people to do this? Because like I think a lot of other firms, you know, want it, but. [12:11] effectively rounds to zero the number that can do it. I have this belief that the biggest leap wasn't at the founding of Benchmark. The founding of Benchmark, the founders came together, it's like, how do we cut things up? Okay, we cut them up. Okay, it's equal. What else do we do? But then... [12:26] They had an amazing first fund benchmark. One was like a legendary, um, you know, whatever 70 X return or something like that. Then, so they built all this brand value, [12:38] Like they gave away and then they gave it away. And I think that was the lead. Nobody can do that. And that, that I think is the hard part, right? It's like, well, I, I, [12:46] I built the firm. I built the brand. I should get some economics from that. I should do whatever it is. No residual economics is the craziest. It's the craziest thing.

[12:56] It's the craziest thing. There's no incentive really to do it unless you really care about legacy and something other than... [13:03] I mean, the incentives are very thin to do it. It's also just... [13:07] I think rooted in the culture of benchmark and you go back to Bob and [13:12] i mean bob bruce andy all these the founders have played their part but it was uh [13:17] rooted in this idea [13:19] of respect and affection. Is that you should have a partnership where you really respect and admire, you give all my money to any of my partners, but then you admire them. You say, okay, [13:30] There's an old saying, like a virtuoso is somebody who surprises even themselves. And I believe that about all my partners practicing the business. They're virtuosos in the aspects of the business that motivate us to do the work. So when Bob raised his hand and I was there, he just said, [13:46] It's time. I'm out. And, [13:49] Others had left before, you know, Andy and others. But there was never a conversation. It was actually just the opposite. We gave him economics and a fund that weren't. [13:58] giant economics, but it was just [14:02] Yeah, we're saying thank you. And I think the culture, you know, as soon as you get into the parts of everyone's identity that that are. [14:08] ego driven. They [14:11] They lay claim to things psychically that make sense to them and it never it would never make sense to ask for something to this firm that was going to entail taking. [14:21] more than you're giving. And I think that's a weird thing to say, but it's a pressure that I feel as the last of the

[14:28] prior generations knowing that I want to be raising my hand first before I realize I'm not contributing more than I've taken out. Not because, you know, it's some explicit trade, but just it's a cultural ethic. And the cultures we know, as you found in your company, like they're so durable, like the inertial forces of culture that get founded. There's one of the things you said, what is benchmarking? If I read one book that captures benchmark, it's this book. Now, I've read. [14:52] um partners different here but it's the carl rogers on becoming a person um and that the premise of the book which is very simplistic in a sense it was like the the apex of client-centered therapy it's about psychotherapy sorry this is where you wanted to go in this conversation but but the premise of the book is that to be useful in a relationship you have to first permit yourself to understand the other person fully [15:17] And I think if benchmark is doing its best work, an entrepreneur comes in here and says, [15:22] They see me. I bet if you ask Andrew at Cerebris, [15:27] you know, who understands him most fully and the founding team, the purpose and the vision of the company. It wasn't, well, he found this hire for me or he gave me this advice about negotiating the contract with the company X, Y, Z. It's a [15:39] like, [15:40] benchmark understands what i want to do and then we do something else which i think is equally important unconditional positive regard [15:48] And there are examples in the past of benchmark where that's been broken. [15:51] And I think an immune system builds around those failures and says, how do we not do that again? As opposed to say we're defined by that one act.

[15:59] And so I think what you see in the current lineup at Benchmark is a really emboldened immune system. We've had some vaccinations from past experiences to basically say like we never want to be in a position where [16:10] The relationship is [16:11] degrades where there isn't that faith that [16:14] we've delivered unconditional positive regard, because we believe in our founders oftentimes more than they believe themselves. And so if you understand the founder fully, [16:24] and you have unconditional positive regard, then you really can empathize with what they're going through. And I think that that nurtures the sorts of success possible with founder entrepreneurs that we all hold out as the great examples of why we do this job. I remember when we spoke last, you talked about the fact that the benchmark seat was kind of given to you. Like that from the beginning is like, I'm going to give this to the next person. And I can see why, like you're saying, like the seminal moment was actually the handoff. Because that creates the instigation for all the future handoffs. [16:54] And you feel responsibility with that. I think all of us feel responsibility. That was one of the big things we talked to Ev about as Ev was joining. Well, just like you feel it. Not everyone feels that, which is fine. Also, I think if you're talking about [17:11] because it's equal when you walk in. It's like if a bunch is given to you right at the beginning, you're like, I got to pay this off to somebody. And the people who kind of set me up from the beginning, I can't really pay them back anymore. So I can see why you'd be like, I got to make sure I give enough before I go, even though it's sort of you're in a weird way, paying back prior generations. But rooted in that as well, Eric says responsibility,

[17:35] And I think he feels it and I respect that. [17:37] i think the founders gave us permission to basically not take it too seriously yeah there's a listen come on like there's a group of you no one's gonna be around in you know a million years everything's ephemeral yes so what you want is is is a tight-knit group of people that are at maximum potential manifestation like the energy the joy that and the heaviness of like oh we're gonna [18:01] you know have to maintain this relic and wheel it out and like they've built tablets in the back about what the founders said none of that man like this is like a day-to-day thing by the way forgive me we're in an entrepreneurial environment where like when somebody has a legacy we want to destroy it we're we're in the business of creative destruction not not permanence and then during and forgive me yeah like our startups bubble up from nothing and we stay true to that and i think the [18:31] legacy or claim to it, benchmark, it's like the immediacy and present moment that we deliver. [18:36] Everything else is secondary. One of the things that you just said, which I hope is OK for me to press on, is and I've wanted you guys to talk about this, which is I know each of you individually and I know you all are founder friendly. And there's like it's very easy for people in a competitive venture landscape to like poke at one historical example that everybody else has done. If you're just loud, you can just like you could just poke at people.

[19:06] But I've wanted you guys to sort of like speak because I know you're very founder friendly and I've talked to founders you work with and all of that. So I'm actually curious to hear, you know, your sort of thoughts is, you know, you've seen some of the stuff like, is it important for you to sort of just like talk about like what you just said? Like there's like a thing and then we have like an immune reaction to it and the firm updates or like, yeah. How do you process all that? [19:36] what the motivations are of the counterparty. [19:38] you accentuate certain parts of a firm's history. [19:42] you know, the, [19:44] Thank you. [19:44] Ethic of the firm. I think this is sort of borne out and I [19:48] even in our worst moments, is [19:51] The company must come first. And so we're not more important than the company. Nobody's more important than the company. It's the initiative. It's the collective premise of an entity, which is bigger than any one individual. And there are moments in the past... [20:05] I've been around through the generations where [20:09] It used to be the standard model that, you know, when are you going to get a real management team? [20:13] And that sort of faded to... [20:16] Well, [20:17] Perhaps we can go the distance and you have the Steve Jobs narrative, which is like what crimes were committed against this notion of general management versus the founder mode reality that we all support. The part that's sort of most relevant, I think this is this is what happens every day here is. [20:31] we we view our job i do personally and this has been borne out in the references is making the founders the best version of themselves and and like any relationship if it's simply sycophantic and enablement and codependency we make them worse

[20:45] If it's harsh and it's judgmental or absent, [20:49] We make them worse. So so [20:51] One of the things I think you need to figure out in references is what questions should you ask? And of course, if you're going to engage with any great firm, you want to go and do references. The one that's the first phone call, but I actually think it's even you go a level deeper and say, how does this person make you a better entrepreneur? [21:06] and how they unlocked your potential. And what we care about more than happiness is flourishing. And our companies, and I think what's borne out in the work that we've done is that, if I work with that group, [21:16] Like, I'm going to be a better version, and I'm not going to be living in fear, because then you're not a better version of us, nor am I going to be getting, forgive me, what happens in our job right now, I'm struck by the number of boards where I see this, is a relationship that's sycophantic. [21:30] that that where people aren't afraid people are afraid i should say to pursue the truth because they don't hurt anyone's feelings or worse i think the greatest crime that occurs in many of the boards that we all serve on is that somebody says something behind the entrepreneur's back they won't say to their face that's one of the things i think is a deep ethic at benchmark is that we are transparent like if we're going to say it to your face we we may not say behind your back but we're not going to be a situation where here's what i really thought about the board meeting and and

[22:00] you really want to know that you can trust your partner because they're not putting a face, a mask on because they want you to feel a certain way. But they're being real. By the way, this also goes to your point about if you're not going to if you don't need to put more dollars into the company, if you structurally almost can't put more dollars into the company, then you just want to tell them the truth. If you're hoping to get to win the next round, you don't want to piss them off because next month you might be writing a term sheet. And I think there's a lot of there's the references piece. There's the I want to put more money into this company thing. There's just like I don't want to fight type of stuff. [22:30] that, which I think there's the best version of being founder-friendly is... [22:37] is not comfort all the time, obviously. Yeah, absolutely. That's definitely not the best. And there was, I mean, there was a recent example of this. I recently led an investment that's still unannounced, but we actually had the founders over for dinner in the dining room where we'll have lunch here in about an hour. And after, you know, we, during the dinner, they showed a demo, we were going through their commercial strategy and we gave them a lot of very direct feedback. And a lot of it was constructive. It was like a really productive, constructive conversation, but not every founder, you know, responds super well to that. [23:07] And I was like, well, how is that for you? You know, how would you respond to that? And in that call, he said, you as a team are going to make us better founders. And I can tell that right away. And because of that, he really wanted to work together because it wasn't just going to be, you know, slaps on the back and congratulations. But it was going to be a relationship where we really pushed both the founders and the whole team to be a better version. Does it feel like structurally different to you than KP and Founders Fund in any way?

[23:37] differences with Founders Fund, because I do think Founders Fund obviously... [23:41] really, really leans on this, the kind of like Hippocratic oath of VC, which is do no harm. And in doing so, it's like, hey, we're going to be completely hands off is kind of the pitch. And then if you need something, call us. I think, again, that sells really easy. I actually do think that it's one of these things that in practice actually materializes sometimes is I don't want to say like laziness, but it is just more passive. It is just like we should back founders that are [24:11] and that they don't need help and they don't need any VC assistance. And sometimes that works out. And, you know, sometimes maybe there are founders that are like that. But I think the vast majority of the time, almost every single founder could use feedback, a sparring partner, [24:24] Yeah. Any of these things like even Tiger Woods has a coach. It's like 100 percent. And so I think like having that position is something that I think is a great soundbite and like, you know, goes really well on Twitter. But I think when it comes down to it, there's very, very few practitioners, even the Tiger Woods of the world that don't don't benefit from something like that. This is ultimately the highest accolade of a firm. [24:48] that they seek. [24:49] is a manifestation of a value system. [24:52] And everyone in this room, I've heard this, and I know I'm going to hear this on your newest investment, is that if we've really done our job, and you'll hear this in our references, they feel like a co-founder benchmark. It feels like they were a co-founder. And what does that mean? Well, it wasn't a conditional transaction. It wasn't a one-night stand if they gave us money and then we sort of could brag about the brand. But it was a...

[25:12] They were... [25:13] proximate with me when what a founder and co-founder does is [25:18] it's a bit like [25:19] Being in a partnership where you have a child where you just say like there's something existentially deep that's permanent in that relationship and [25:27] I, I, [25:28] believe most companies that have single founders end up finding proxy co-founders because they they need support systems you need a relational you know balance and as the ups and downs of being an entrepreneur and so if we've achieved that you could say well it's not for everybody some firms might want more of like just just the money thank you and the brand um or they want services that are delivered by people who work at the firm [25:51] yeah those are different facets but the depth that can occur when you have that kind of um [25:56] proximate relationship and and and um [26:00] ends up [26:01] You know, taking you through troughs that would advise the companies to be sold early or to have a destitute, you know, founder who's just tired and doesn't. There's also a through line to it. Like I felt this as a founder, we're like even like a like a long time exact might be four or five, six years. But then you have a board member who's there through the first round, the second round of exacts and the third. [26:21] exec team and all of that. So you're working many more hours per day with people on your team. But then when you look back over a decade, you're like, there's somebody who's with you the whole time. And it's hopefully your co-founder and your board members. So there's something about the long arc of it too, that is special. I have moved away from talking about it as like guidance or advice or whatever. And I loved your sparring partner thing, because I think that's what it is. And that's what the co-founder thing is too. Because

[26:47] But startups are hard. [26:49] They're really hard. And the most successful startups are... [26:53] doing things that are new, innovative, and haven't been done before. Therefore, [26:58] you're figuring things out for the first time like you're figuring things out for the first time that are like challenging hard and no one knows. And so like a huge part of the co-founder thing or. [27:11] which we should be careful about using it. But that aspiration or that idea is... [27:19] "Hey, we're asking each other questions "that like sharpen our thinking." [27:24] We are like trying to figure things out together. And I think that's a, that's a very specific way of working where I feel like a lot of times what we're doing is you're, I'm, I'm talking to somebody and I'm thinking of a very specific example from last week was just like, where it's like, [27:40] The entrepreneur knows, like she knows what she wants to do. And it's like in there and you're asking questions to help them realize that. [27:48] realize it and for it to come surface or get clarity on it. [27:52] And like, that's very, it's different than getting like, [27:55] advice right that isn't advice that is that's a sparring partner yeah and um and and a sounding board and i think that's where you get it's part of what i feel like is [28:05] forgive me, this is where I got to be the older person in the room, the degradation of our [28:09] industry. [28:10] And it really has been a degradation as I think it's shifted. The system has shifted to winning. [28:15] our goal is to win right because there's there's capital supply now and so so you have this large sums of capital that need to be deployed and so the system is built to i think create in the mind of the entrepreneur a selection criteria they'll say if you're doing pocs you want to design the criteria of the poc so you win it so what's happening is the industry's programming entrepreneurs in a way to select for things that i think

[28:39] are off target. [28:40] And they're aligned with the target of the firms and the capital basis they're deploying, but they're off target relative to the quality of the relationship the entrepreneur seeks. So what are the big ones? The biggest thing I'm not going to pick on the off target things, the on target things are when I want a co-founder, what questions do I ask? [28:55] And do they make me a better version of myself? Do they provide the kind of expansion of my horizons that make me every day feel more joy for doing this work? Do they keep me honest? Are they available? [29:08] Do they put me first? And so a lot of winning as opposed to serving, winning is a moment in time. We average in our boards 10 plus years. If you could blacken with the history of my boards, 10 plus years. And so [29:23] maybe three or four executive teams, as you say, might go through those years. And the sense of continuity of my partner is there. [29:31] And this is the case of, I mean, I love my relationship with Howie, not to pick one, but with Howie Liu at Airtable. And, you know, Howie's going through a genesis right now and a creativity that I think occurred at the beginning of Airtable. And it is so fun to watch. But I understand the human and I know what he's gone through. I know how to help him at part sort of say, like, this is an area you want to be asking some questions about. And I think that that's different than winning. Winning is a transaction of like, take my capital and I got to get on to the next one.

[30:01] We say yes once or twice a year, serve for a decade long, and [30:05] The differentiation of that, because our incentives aren't the same as deploying capital. So I think that creates, in the entrepreneur's mind, they have to ask the right questions. What do you want in that co-founder? Because you can't fire your board member. Right. I'll take a shot at one of the things I think is like off target, which is the like, you know, it's become like a thing to sell no board seat. And you're like, one of the advantages of working with our firm is we'll give you all this, you know, capital with no board seat. [30:35] than boards as like signing up to work on the company, which I think is like how it should be understood in like 99.9% of cases. Yeah. But I think it has been very effectively. [30:44] And somewhat disingenuously sold the founders because it like sounds good and you just keep control of your company and there's no risk. And that means that we don't have to help. And so we can it aligns with deploying a lot more capital. Deploy more capital. Yes. And probably says something about the experience of the average founder with the average board member. It's like, can you. [31:00] Blame a founder for thinking that's a good pitch based on the experience that they probably have with the average firm. Yeah, and also you hear about a terrible situation once and it makes a big impact without nuance and it's hard. It's going on right now. [31:13] seed rounds at over 100 million with no board [31:17] And it just... [31:18] I know how it ends. It's just between now and then, the amount of entrepreneurs that will miss the opportunity to really seek out a close partner is such a shame. - It is. One of the things I wanted to ask you all about was, I'm guessing,

[31:32] I'll take it as a premise that we probably all agree that like a great entrepreneur is like, [31:37] unique or odd or strange or just beats to their own drum in some important way. [31:43] Maybe there's examples where it's not like that. [31:45] We could talk about that, too. But one of my questions is, do you think to be a great investor, you have to be the same way? Do you have to be unusual? [31:52] as a person to be a great investor? Or is that not the case? And can you just sort of [31:57] be like a regular person who can spot unusualness. You know, one of the things about benchmark [32:04] Thank you. [32:05] As we were talking to Ev. I'm asking selfishly because I don't think I've got the oddities that sometimes I wish I had. You know, in our conversations with Ev, I think Peter framed it. [32:14] perfectly, which is like when you know very clearly and then given our structure of equal partnership, you're essentially refounding the firm every time somebody new comes on. Because the whole dynamic of the partnership changes. The conversations change, sort of feel changes, everything sort of changes. And so it feels like a refounding moment. There's some alignment that happens. I think it goes back to the core of like, [32:37] what values do you prescribe to as a person and part of it [32:41] is like you are competitive i think that is important like there is a competition aspect to this this asset class at the end of the day we are investment managers and you enter a company [32:54] And then there's competition to enter the company. [32:57] and then you invest and then the company itself faces competition at some point like you can run competition free for maybe 12 months and the big guys show up like each of us has faced immense industrial like competitive threats from external bodies and you have to have some kind of competitive

[33:18] persevering spirit about you that can be that stabilizing force for the founders. Because you also have to have that empathy that the founders feel it 10 to 100x more than you. Because at the end of the day, you as an investor are diversified. You get to work on lots of projects. The founder is simply not diversified at all. This is the only thing that they get to work on. This like value system, [33:45] Hyper competitive energy. [33:47] in empathy, that is actually not present. [33:51] in a lot of people. I mean, you and I talked about this a little bit with Max at LaGora, an interesting example. You did the seed. We're not here to pump LaGora, but while we're here. Let's pump. But it was like NYC, it's a legal tech company. There was already Harvey. And the question I think I asked you right before we sat down was like, "Do you want [34:09] Why'd you meet? Like, you know, I think like once you meet Max, you can see it's good. But like, I'm like, you know, to the extent that like that's like a case study in spotting somebody who I think is unusual in a very positive, strong way. Like, what was that for you? Well, Peter and I actually met Max in this exact room. [34:27] Together, that was the first reading we had. I think within 15 to 30 minutes, we both came away. [34:35] sort of like that unspoken language between us that we want to be in business with this person. Yes, it was legal tech, but there was some core purpose with him as he was expressing it and the founding story of like how he picked that problem. And, you know, they're sitting in Stockholm, watching Harvey at the time of our seed round in March 24. I think Harvey had already raised it a billion and a half dollar valuation or two billion. And then by the time the product had

[35:05] competitors had already raised a three or $4 billion valuation. And so, but what we were backing was him, his co-founders, because when we invested, it was a team of five people that had a very core insight on how to attack the legal market and why LLMs were like the perfect fit for lawyers. And when he expressed it, Eric likes to say this a lot, there's a magic of founders when they explain something very complex and they explain their unique insight into it. And it becomes very [35:35] world should work and with your fire and your energy that will probably be how the world works and in max you saw that right away we saw it right away and [35:45] And so we needed to be in business with them. [35:47] That was it. And the conversation immediately went to [35:51] Well, great. What are you doing the rest of the day? We just want to spend time with you because clearly you're spectacular. Clearly there's something here. Yeah, it's been amazing. We didn't see it. The product didn't launch until six months after our money went in. [36:07] And then I think like it's you don't start to see the amazing stuff that a person can do for a while. But if you look back at other great investments that you've had, do you think it's always clear that the person's unique to you or was something in the Lagora situation? Did something there jump out faster or like are there other situations where you don't see it for a while? Do you always see it quickly? No, I think you see it quickly, but each person spikes differently.

[36:37] Is there one way to succeed as an investor? God, no. In fact, in this firm, [36:42] Thank you. [36:43] We joke. Imagine two circles. Entrepreneurs that I respond to, entrepreneurs Eric respond to. There's this tiny little gray area in between with like six people in the universe. For two people who do like a lot of software infrastructure or enterprise or open source or whatever, for our Venn diagrams of entrepreneurs to be so separate is kind of remarkable. So you guys will meet a founder together and one of you will be like, this person's amazing and the other one's like, I don't see it at all. And flipped. [37:13] I could never work with that person. That's a different statement than... [37:19] whether they're good or not. I would like to invest. I think we often- Good for you and not for me. Yes, I think we do have that. By the way, Bill Gurley and I had that where it's like, there's again, almost no intersection. What's interesting, I think this actually relates to any entrepreneur that's thinking about working at a venture firm. A friend of mine was raising money, [37:40] family friend, so that it wasn't appropriate for benchmark. And I said, you know, he said, "How do I choose?" And I said, "The question I would be asking if I was an entrepreneur is, which of these esteemed venture capitalists is most personally resonant with you and committed to you?" And they're gonna say they're committed because they want to win, [37:58] codified. [37:59] Like make them be explicit about the kind of commitment they're going to make and make it uncomfortably. [38:04] Concrete. [38:05] So with most of the entrepreneurs I work with, we speak

[38:08] every friday and and so but you you make it real and if you don't want to put the time in if you don't feel that response for you with running your fund and for us individually um i knew max lagora like the chateson would be 24 70 fly to stockholm on the moms and he has and he is today yeah yeah [38:28] okay so there you go and so so so as you went respecting your commitments does it clear that [38:38] is a reliable path to about investment and about relationship. And so I think you're going to find [38:45] chasing what is it that you see [38:47] And then allowing that to get washed with experience because sometimes you're going to get it wrong. And when you get it wrong, you learn, okay, don't make that mistake again because you've seen me make that mistake and vice versa. So it's interesting that you guys have like these Venn diagrams that let's just say they don't touch just to make it simple. But they're both good. Like I know you both make very good investments. Is that basically like, you know, you can kind of cultivate any set of tastes as long as it includes the good stuff. Like is that basically what you shake out to or is it like? There is a lot of overlap on the people though. [39:17] people in these Venn diagrams the four of us have. There is overlap in the quality. In the qualities of the people. Yeah. Something Keith and Vinod said that was interesting when I talked to them together is they're like, they're really different people, which is very apparent when you talk to them. And they said one thing that we basically always agree on is, did we walk out of the meeting with the founder and was that person special or not? Which I thought was an interesting thing, because I wouldn't have expected that out of the two of them, because they are

[39:44] quite different. So I would have thought that there would be these very different tastes. [39:47] in there. That doesn't mean they always want to make the same advice. It's very rare that [39:50] One of us thinks a person is special and the other person is like, absolutely not. Yeah. Yeah. I mean, another question I always have here is like, are really special people? [40:01] is it like can you miss it like are like yes is it a special ability to tell special people and like i like let's take max at lagora like do you think that [40:10] a hundred reasonably... [40:12] at least okay VCs who are, you know, been doing it for a while, do you not think most of them would have come out and been like, this guy is great? Is it unique to be able to see greatness earlier? Or is it more about getting into the right room with Howie and Jack Dorsey at the right time? That's a good question. I think most of the time people react [40:30] Similarly, like people who are good at this will identify or see that specialness like we and we miss it like everybody misses it sometimes, but do it. But I think there's a bigger thing that happens, which is I think people talk themselves out of stuff. Mm hmm. [40:44] for other reasons. Yes. Like they'll, the competitive situation, you know, this company or like, can the outcome for what they're working on be big enough and like, you know, like those kinds of things. Like I have that in like, I'll take Alex at scale. Like, [41:00] You met Alex and you were like, something's going on. This guy is a winner. Like when we saw it very, very early, like we saw it together. And and, you know, and those are particularly painful because it's like we absolutely recognized that he was amazing and a super special person. We absolutely recognized that the autonomous vehicle labeling revenue was bullshit and going to go away and like not that long. So the facts and the read was correct and the conclusion was incorrect.

[41:30] And it's like, "God damn it!" And so that's a particularly painful one and it's a good lesson for me, which is just like- But you thought he was special and you thought he was special and passed anyway? Yes. Have you ever done that? And have you ever passed on a special person because you didn't like something else about the setup and been like, "I'm still glad I did that?" Or is the lesson- [41:48] just always back if you feel that way no matter what else. I mean, at this particular moment in time, I would say like, yes, I did. You know, with the hindsight benefit, it's like if you [41:58] feel that way. And I think you have chemistry with person like that's part of it, which is like, who do we respond to? We're focusing on the positive case, the negative case, which is useful also to think about. And it's actually true, I think, if you're an entrepreneur is this word inauthentic. [42:14] And I think it's, [42:16] easy over time over many decades to see the masks [42:21] The fakeness, the posing. And if there was one trigger for all of us in general, I think this is true in entrepreneurship. It's true for the employees you're recruiting is that they think you're faking it. Yeah. And if there's there's a little fake it till you make it thing. Put that aside. I think that's broadly bad advice. If someone's not willing to be vulnerable with us in the meeting and expose what they don't know and be real, then we have a relationship. So there have been people come in here who've done well, who've raised money. And particularly now in the cycle, I think you get people who are [42:51] playing a promotional game, [42:53] because there's something that's attractive in the external metrics. It could be research background, pick your favorite. And they, okay, we got to sex that up a bit, and then we'll flip these people.

[43:04] Um, [43:05] One of if there was a common thread in the benchmark investments is that very low representation. There are exceptions of the promoter and [43:13] You know, the case where you find someone who's like really talented, but they're in the wrong market and we don't back them because we love them. That happens. But, you know, [43:21] When we get in trouble as an industry, I think, is when we start to become quite accepting of the this. This is forgive me, the distinguishing traits between founders and entrepreneurs. When you find it in a market like we're in, the number of founders increases geometrically. [43:39] I think the number of entrepreneurs stays as a fixed constant. So what happens, we have a lot of founders, because I could be a founder, you could be a founder, but you were a founder. But you're also an entrepreneur. Entrepreneurs have this... [43:50] Guile, there's a sense of, of, [43:53] leverage like Brendan and Mercore to me is a an entrepreneur in any cycle in any market he happens to also be a founder right now [44:05] I think that's not the case for a number of people who found companies who would otherwise, if the market was shitty, they would be employees at big company X, Y or Z. [44:13] As a founder, you have to, I think, introspect. You have the entrepreneurial qualities. And to study entrepreneurship, the vast majority of entrepreneurs drop out. The phenotype of the personalities, they don't want to be validated by a system they didn't create. They're not looking for, you know, fancy brand names. They're not attracted to big, you know, fancy whatever. They look for things that are substantive. The other dropouts are not straight-A students. Yeah, and there are exceptions. You know, Brett got great grades.

[44:43] - Six people in the universe on a stage. - But I think this market right now, because it's so attractive to be a founder, has brought in a degree of promotion and the sorts of stuff that get people into trouble over the mid to long term. And our whole system is identifying and [45:01] getting proximate to the entrepreneurial energies, which are, you know, kind of, as we know, these forces beyond all measure. There was a period of time between Q4 of 2022, we call it like end of 2023, [45:14] there was a broader macro tech correction, where a whole bunch of public tech stocks corrected. There was a tightening of the late stage market, and interest rates were going up, and all the tourist capital had fled the scene for a little bit of time. [45:30] and capital just got a little bit harder to raise. And at that time, what was really interesting is, if you look at all the C and A deals that we did, [45:39] and where those companies are now, it will look like our hit rate went way up. But I actually think what happened is that if you were willing to start a company, at that point in time, in AI, you were a true believer. There was some natural inspiration for what you were doing. So it's like, Leonard Fireworks, Red Sierra, Harrison and Langchain. [45:58] It's companies where the entrepreneur had some fire that was like, "I need to do this." God, we're all those done in that one year? I think you're right. I think a lot of people read it as what happened here is they just got to the blue ocean thing first. Maybe there's a degree of that, but a lot of it is if you want to do this at a time when it looks really painful, that's just a different…

[46:17] subset than people who are going to do it at a time when it looks incredibly attractive. That's right. Yes. Yeah. 2008, 2011, when we did series A at Uber, Instagram, Twitter. Snapchat. Snapchat. Like, yeah. And it was, but then by the like 13, 14, it became very. Yeah. And it's funny because all the like think pieces and essays about this stuff are always like there was a, there was a new technology. And on top of that new technology came X, you know, you get cloud, you get blah, blah, blah. You get mobile, you get blah, blah, blah. You get AI, you get blah, blah, blah. [46:47] don't really see people talking about in the moments where the psychology requires a different kind of hardness. It's just... 100%. And I think in that moment in time... And it's probably a bigger explainer. [46:56] like 2022, 2023, early 2024, if you wanted to be an AI applications, an AI application enablement, it actually took a special kind of person that truly believed, regardless of what [47:10] anybody else thought, because at that time, [47:13] It was quite unpopular and weird to decide you wanted to build an AI application. Yeah. Because the natural assumption was that fundamentally the foundation models were so powerful. And as they reached more and more intelligence, like they would just start to gobble up the applications themselves. Even if you look at the people who worked at the labs in the like late 20 teens. Yeah. And now you compare those people to the people who are working at the lab. I mean, not that obviously people are brilliant now.

[47:43] It's like they were doing it when it was really not cool. Yes. And those are still, I think, the most brilliant people. Yes. That's right. [47:49] There's something there. The last topic I want to get to is basically... [47:53] how you all are thinking about [47:55] AI, which I realize is sort of like something that we've probably all talked about a lot, but I do think it's like the most interesting thing going. And I don't think any of us want to talk about politics right now, going through sort of a lot of your. [48:05] recent investments. [48:07] It's actually clear that you guys caught the AI wave in like a pretty substantial way. A lot of them were not obvious companies. You know, even Legora, which is sort of like a middle of the fairway venture type of company, was not an obvious thing to do from Sweden. And, you know, there was already Harvey. I think Manus was a very unusual investment as well. I think Cerebris is extremely interesting. Obviously, like Sierra was like before it was happening. I think when it happened, it's like, wait, Brett Taylor is doing customer support. [48:37] You look back and you caught a lot of it. So I guess what I'm curious about is as you're thinking now and you're looking at companies today, what are you excited about? Like what are, you know, to the point of you guys are having these conversations as a partnership and you're being really curious. Like what is at the top of your curiosity list in AI right now? I think you just have to roll. [48:57] Back to, you know, call it [48:59] end of 2022, when we happen to get involved with these spectacular entrepreneurs. I think the thing that [49:04] It became clear to us sitting around the table was that AI was the thing. [49:08] And even if it wasn't the thing, it didn't matter. That was where we were drawn to. It was the thing that had this gravity pull for us. So all we wanted to do was spend all of our time talking about it, thinking about it, meeting all the people, working on it, all that kind of stuff. And then you have to overlay your value system on the thing that you're excited by. And the thing that we laid on top of that was, what kind of relationships do we want to get into with companies?

[49:35] In that moment in time. [49:37] And we decided we wanted to be in business and, [49:40] with companies where that ethic of being the primary partner, board partner, [49:47] lead investor, [49:48] first investor, principal investor, principal believer in the mission, is how we wanted to practice investing in AI at that time. [49:57] And so that meant that we were looking for just really spectacular entrepreneurs with unique approaches to the market. And if you want to do that in a place where you want to be the first investor, you want to back teams with two people, three people, four people, five people, whatever, you're often meeting people. [50:14] that are probably a little bit early on whatever the next curve was. And so if you remember what was happening in 2022 and early 2023, everybody wanted to start [50:25] a foundational lab and everybody wanted to aggregate GPUs. And so there was like a big drive to aggregate capital to basically buy [50:35] GPUs, which then would be utilized for training runs and stuff like that. And it wasn't that we had some [50:41] hypothesis or some macro view of why we don't want to do that or do want to do that. We were looking for companies and entrepreneurs to [50:51] That resonated with us that wanted to partner with us and in that moment I [50:57] We met a lot of people that were working on really aggressive ideas that we thought were just spectacular people with spectacular approaches. And as a result, you saw this list of companies

[51:09] that we compiled at that time. So that was when we did Sierra, when we did Fireworks, we did Langchain, we did Markhor, we did Levelpath, we did Legora. [51:20] Manus. [51:21] Etc, etc. All of that came together. And when Eric did Cerebris, the Series A, like it's all of that same stuff, which is [51:29] partnering super early with founders working on something that they're deeply passionate about [51:35] And frankly, it's cliche to say it, but all of those investments at the time were a little bit non-consensus. Yeah. I think you have to be. It's interesting because from the outside in, before I joined Benchmark, I think if you look at the investments that were made in that kind of 22, 23 time period, you had like an inference cloud with fireworks. You had a data infrastructure platform with Mercore. You had a horizontal AI play with Sierra. You had a vertical AI play with Lagora. [52:05] done in that era, it was easy to ascribe kind of like a thematic nature. Then you got here and were like, "Oh my God, these guys!" They had no idea what they were doing. That is correct. That is correct. No, but I think you come in, you're like, "Oh wow, they had like a vertical, they had horizontal, they did data." It was like, "Oh, they can fill out each thing." They must have done a market map. Then you come in, [52:25] And you start asking about each of the investments and the story behind each of the investments. And like 90% of the story on every single one of the investments is the person, is the founder and the entrepreneur and the relationship that they built and why the entrepreneur was so special. And that was so revealing to me coming into this organization and this partnership was like, wow, like the founder centricity.

[52:47] just bled off the page in terms of the stories of all those investments. And so I think that's the way that we're approaching it today is obviously we love to talk about [52:55] all of the newest and greatest things that are going on in AI every single week. But in terms of the actual investments, it's always and I think [53:02] It lends itself, especially to this era where I think... [53:06] Because the sands are shifting beneath the founders feet so quickly in AI and things are changing so rapidly, like founder centricity as an investment strategy matters more now than any time in the last decade. I think the underlying like technology substrates changing very quickly with AI in a way like anything, any software that you could have built in like 2022, you could have built in 2010. [53:29] Plus or minus. Like once we have the cloud, you know, we got little APIs here and there. But for the most part, for 12 years, like it was pretty stable. If you compare that to today, you're getting more change like every quarter than... [53:40] you know, we did in a decade in terms of the substrate. And so a founder's ability to navigate that and actually like understand where their edge is and where their edge is going to come from and how quickly the moats are deteriorating because they're deteriorating really quickly and how do you build an excellent, like it's just, it's critical. And so I think it becomes even more important. And so if I look forward, I'm like, you know, we see all the same things. Like it sure feels like the infrastructure cycle is going to continue. It sure feels like, you know, [54:07] five years from now or maybe even sooner, we're going to have really interesting things in robotics. It sure seems like agents are getting really good and the applications are going to get better. And like all these things like seem like really clear, but I don't know that that isn't enough. I don't think to make an investment. It's impressive to me that it would be, it would have been so tempting to answer my question with some high minded thesis about like, and you all just said

[54:37] Amen. [54:38] forces, not like specifically AI or [54:42] social or mobile. [54:45] There are windows where the disruption is so high that that entrepreneurs come in and they see something with such clarity that they can't not do it. And then there's this lag effect years of like all the other people that come in afterwards. And in a sense, that happened already with AI. [55:02] It happened with the first generation. It happened with the people doing, okay, now we got to do our model company. But when your brother and the team of people were at OpenAI, and that was before it was obvious, then lightning struck. [55:13] My belief is that that [55:15] is likely to happen again at least one or two times in the AI cycle. [55:19] where there's something so disruptive that no one can fully understand it and then there's a completely new kind of entrepreneur that emerges what we've been watching for the last three months [55:28] Post opus 4.5 is the force of that disruption has awakened [55:34] a whole group of entrepreneurs that were otherwise not seeing things they were seeing that now they weren't seeing them three months ago i'm a big believer in what you're doing with sunday and robotics because that's a world where we all know that in a decade we're going to have these things in our house [55:47] But the path from here to there is that an incumbents game where the big companies are going to push down complex products or will there be entrepreneurs? It seems likely that it will bring so so much of this is like, okay, where is there a disruption that but then the lag effect of industry is that, you know, 90% of the capital flows in afterwards after the entrepreneurs have figured out by the time it's sort of figured out and there's the next thing like it's not for us and and.

[56:12] That's. [56:12] our faith that the Silicon Valley is an adaptive landscape that will continually have these disruptions that, that make a, as soon as there's a winner, like we're kind of uninterested, we move on. So it's a great place to end. Thank you guys. This was really fun. Thank you. Thank you.