Peter Fenton & Victor Lazarte - Purpose and Partnership - [Invest Like the Best, EP.354]

Transcript from https://podmenti.com/t/69b8cbdd01f17fed

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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best.
This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money.
Invest Like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at joincolosis.com.
Patrick O'Shaughnessy is the CEO and founding partner of Positive Sum and the CEO of O'Shaughnessy Asset Management.
All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Sum or O'Shaughnessy Asset Management.
This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of Positive Sum or O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.
My guests this week are Peter Fenton and Victor Lazarte.
Peter and Victor are both general partners at Benchmark Capital.
Of the six equal partners at the Storied Venture firm, Peter is the longest serving and Victor is the newest, having spent the past decade founding and building Wildlife Studios into one of the biggest independent mobile gaming companies in the world.
Peter has been a board member at Wild Life for the past four years and has a remarkable track record of tech investing over his two decades at Benchmark.
In our discussion, we talk about the core motivators behind great entrepreneurs.
Benchmark's unique operating philosophy, and what it's like to transition from builder to investor.
Please enjoy this conversation with Peter Fen and Victor Lazarte.
Gentlemen, this is gonna be so much fun. I don't think I've done a group one like this in a while, and it's one of my favorite things to do. And Victor, I think it's the first time that you're doing one of these, which is my honor for sure.
Since you're new to benchmark, I thought of fun, interesting opening
Topic.
Would be what is most surprising to you.
About
the partnership, the style of investing.
Really anything about
The team or the firm.
relative to your expectations coming in so far. I know it's just been a few months, but
I'm still interested.
I've been curious about
Benchmark for a long time.
I'm emerging from Brazil and I started my company there.
Eventually
many years after starting the company, I ended up
Raising my series A from benchmark.
Like initially made me curious. Growing up in Brazil, I was curious about
All great.
Venture capital firms.
And the thing that was interesting to me is
There's like a small number of firms
That
Are involved with like a lot of of the great outcomes.
I was always thinking like there there must be a formula, like there must be a playbook.
And when I joined Benchmark, I think the thing that surprised me the most is
The lack of structure.
A lot of what we do is around conversation. We don't do memos.
We don't have a pro like a sourcing process or or anything like that.
In the beginning, I actually thought oh that's probably like a weakness.
And slowly like I started to understand is we're in the business of finding the exception.
Finding a fantastic founder, finding someone that
Defy gravity.
And a lot of times frameworks
Prevent you from doing that. So
By not having this frameworks
When you meet a founder, you're able to sit across this person
And just be present.
And see what's in front of you.
Do you think that
that sharp contrast from the operating life, which I want to ask you a lot about, since I see you were very good at that too.
What are the trade offs?
What, if anything, do you miss about the operating life that you don't get when it's such a slimmed down, focused
Almost like art.
А донсі майсел аз на інвестор.
Because I've been a founder for thirteen years.
And I've been an investor for three months.
So I think slowly over time
my identity will change and hopefully like in thirteen years I'll think of myself as an investor.
For the time being like I think about
Myself as
As a founder.
At some point I wanted to make this change, and and to me
The thing that I was missing by being an operator for thirteen years is g just go very, very deep in one industry.
And you know the ins and outs
And you have a team that you have been working
with for over a decade and form these very very strong relationships
And you move over
So a benchmark, like we spend Mondays together, but the rest of the time
You're a lot of time on your own. You're doing your own thing, like you're meeting with founders.
And so I think what you get is this breath.
You get to learn.
About so many different industries.
And you get to meet so many incredible people.
Вот I miss, I think what you lose.
As
This connection with your team.
This feeling that
We're together on a mission.
Peter, can you reflect on
What to me is the single most fascinating thing about
this firm structure, which is
This unbelievably elegant
model.
And incentive.
Structure.
paired with this like incredible fragility that because there is no infrastructure
There's just the people, it's a very small number of people.
Benchmark's fairly unique in the sense that it's had a number of
successful
succession moments.
where new blood has come in and done really well. That's the exception in the investing world for sure.
And it just seems to me that it's both
the only place that you could get someone great to come in, but also that if you don't get someone great to come in that the model is incredibly fragile.
And I just love to hear you riff on
You've been there a long time.
On that.
Delicate balance to make it work.
Ephemeral.
I can't imagine a world where there's a benchmark and
Thirty to fifty years.
Accepting the finitude of
The project.
I think
protects you from investing ego and identity in
aspects of the firm that don't connect with the core work, which is working partnering with an entrepreneur like Victor and being
there shoulder to shoulder with them and
Having
The
overwhelming energies that you
summon up every day.
connected to the partnership with an entrepreneur.
versus the building of the franchise and managing the franchise.
changes the nature of the relationship.
I think so that you can
Have depth.
Yeah.
If our product was benchmark and that that was the company we were building
then the atomic unit of the quote unquote deal would be the company's but that's not how we conceive of it.
I encouraged my partners last night to
Watch Chimp Empire.
None of them will watch it, so I'll give you the shorthand. But in Chimpan Part, which is a great little Netflix series, we both have a love of primatology and
Sulski, which hopefully we can talk about. But
There are two tribes. The largest tribe they've ever recorded of chimpense, the central tribe.
They have over a hundred chimpanzees, which is
remarkably large. And there's an alpha male.
Yes, they're at least to the lens of the TV show, they're alpha male dominated societies. And so Jackson the Alpha Male.
controls.
the central tribe.
And there's retribution, there's all sorts of intern.
political moves from other chimpanzees who want to take them out. I won't give you the spoiler.
And next to them there's a much smaller tribe.
You know, maybe thirty or forty.
Chimpanzees.
But they hold their own against the central tribe.
By being
Equal.
And flat.
And women's
And man.
carry relatively equal loads in protecting the territories of the tribe. They share food equally.
Yeah.
To me captured the essence of
As strange as it may sound looking at primatology.
The benchmark model
Requires to have a standard that gets maintained over many years.
A
Prevention against the egoic rise of an alpha.
meaning the one partner that seems like that feels like they're better, that's in charge, that's the chief
If we were large, we'd need that.
And the energies of that person would be largely consumed as they are in the central tribe with protecting the position the person has, because there's lots of people who want that position.
And there's no competition for that inside of benchmark, like the Western tribe, and this is in Uganda.
And
What happens is that you have
A freedom of movement, an absence of the glucocorticoids that come from displacement of your bad feelings towards the person who's below you in the hierarchy because there's no hierarchy.
It's vulnerability, of course, is that
You
could establish a norm of complacency
Hey, it's all good. We're all happy here. And so if you don't internalize
A sense of
Excellent, the sense of doing the best work.
That you can do.
And have that be the dominant force in your life, the firm could very quickly become irrelevant and complacent and comfortable.
When I joined the firm we I was the seventh partner.
mentioned Matt the came after me and
Some of the founders raised their hand and got off the playing field.
Well our average age when I joined was
Forty three, forty four.
Um
relatively tall white men.
Today the average age I think is
Thirty eight thirty nine.
The median vacation home.
For the partners is zero.
And
So you have a group
That I think is
Deeply committed to being not just there, but in the Bay Area.
principally, but we've backed a lot of entrepreneurs who come to the Barry and some who are outside of the region.
And
Don't
have the corruption that can occur that leads to complacency
Yet.
And the question I say yep, because I think we're all vulnerable.
All of us as humans to the wandering attention. I think the
Firm structure has to come back to these principal truths.
This is your central life's work.
And
The
Other central tenant is
Just
But this idea that
We're partners to entrepreneurs who always be bigger than us, who always have more.
We want all the limelight on them, all the attention, which makes talking about the firm very awkward because it's sort of not who we are. It's why we don't have a website. It's why we don't have
P R
agency embedded inside of our firm.
These are things that run against our culture. So
The long term question you're asking, which is how do you sustain this? And how does an LP make the next commitment and not know that we're just going to revert to the mean of the industry returns? I don't know.
But I can say that the structure
Because
It has one more important constraint that we discovered when we
Bore witness to the firm it.
Seven partners.
Eight partners.
go to a dinner conversation and there's eight people, you're gonna have two conversations typically. Sometimes three.
Something broke.
And
I can only say the phenomenon of it breaking was
Hard for me
None of us really would stood by and said, Okay, we're gonna let this be the firm because you could feel the atomization of the effort. So by coming back to a core number, and we got down to as low as four partners.
Five actually'cause Bruce was in that fund, but it was Mitch, Bill, and myself.
Matt and Bruce and then
We had our best.
Period of time. It was Uber, Instagram, Twitter, Snapchat. Snapchat.
Discord.
Discord.
Yeah, okay. So you discover these things through lived experience, but the fragility of okay, you can have six partners is a constraint.
People need to be equal. And I remember I thought a lot about this when I joined the firm.
What's the end look like?
So that
partners who were there could feel like
We're approaching the end, there was a way to stay
Connected.
In my experience of the end of other firms, I was at Excel and it was not binary.
But it wasn't just like boom, they're out.
And when people would leave there would be narratives about them leaving that were not kind.
Oh, they became this or they became that and
Bob Cagle did it. Just raised his hand, said
Such a cool act.
And we're like but but but
And it's like
This is it. It's yours. I've done my part. It's yours. There was no negotiation about the residual economics. There was nothing. And we tried to give him and he's like, No, no, no, no. You don't understand. This is an ephemeral thing.
My struggle in general with firms is that I think it's the ego.
That wants to
Attached to something.
That will outlive them.
To me, it's all form of not accepting the total finitude and ephemerality of our existence.
And I think benchmark embodies that, which is why I don't think that
Yuri.
said this to me when I get over dinner and he's like, Do you have any reason to believe Benchwon'll be around in fifty years and
As he has pictures of the cosmos behind him. In the grand scheme of things, no. But then you know, our planet's not gonna be around probably in any life bearing form in a billion years, so
There's some point in time where it all goes away. You said a phrase there which means a lot to me. You said life's work and
I'm
probably spent more time thinking about those two words than any other in my career.
I've come to believe very deeply in the concept.
And
I'm curious to hear you riff a little bit on it from a couple perspectives. Maybe Victor, starting with you. You spent 13 years doing one thing, you're embarking on a new.
Mission.
Just like what that term means to you. Doesn't mean anything to you when I get to Peter. I'd love to hear how you suss that out in founders because
It seems like with life's work you get
Duration and persistence.
cheaply or for free, even, but it's really hard to tell up front. But since you did something for a very long time and I'm sure poured your heart and soul into it.
What is the phrase?
spark in your mind.
Up until now, I think
What's my life work? And I think we all we all derive
so much happiness from creating something that people use.
My life work up to this point, I feel like
I started this mobile gaming company
Just my Bron and I and we created games that
Over a billion people played.
And have been downloaded four billion times and
When I think about the hours that people
had fun with it. That's something that makes me
Really happy.
It's much more than we thought when we started it.
As I think about okay, what is it that I want to do now?
I think so much of
Things going way beyond what you think they could go
partnering with really special people.
After spending a lot of time.
With games, my curiosity
led me to different places and
Meeting interesting people.
And one of these interesting people that I met is
Back in Brazil, I met this two kids.
That had this interesting idea.
ended up spending a lot of time with them. Eventually they started a company that I'm on the board of that's called Brex.
And I think I think one of them like came here to your podcast.
Like a couple months ago, like Enrique came to me and he told me
U the closest thing that I have to a ko founder.
outside of the team.
That landed. Yeah, I was like wow. Did you ask for your shareground?
It's not about that.
And then to me as I was considering a new chapter of my life, I was okay, what is it that I wanna do?
How will I measure my success?
And I think that's how I'm gonna measure my success. How many times it's like I can find someone that just has an idea.
And be a partner to that person.
And help the person
Achieve something and create something that a lot of people use.
What was attractive about benchmark it's not like hey, like we want to be involved with the most impactful companies
Every investment firm wants to do that.
But there's a second part.
Which is
We wanna be the best partners.
To this company.
If you think about that, I think it explains a lot of decisions
Inside a benchmark.
If you want to be the best partner.
The reality is like there's a lot of really smart people out there. So you're not gonna be the best partner because you're smarter.
I don't think that's gonna happen.
But if you're more dedicated.
And I think I was more dedicated to the scholars that I met and and that explained it. And
I got conviction that that would be the case inside of Benchmark.
partially because of the experience that I had with Peter. So Peter came in and we had do a lot of things in the company.
As with every company, if there's periods where everything's amazing and there are periods where the things are not so great.
And the thing that was interesting about the way we work together is
During the times the company was doing worse
Were the times that he spent
More time with us.
So I think on average the him and I would have a weekly call
on average would speak to one other executive inside the company.
And then like if we're recruiting someone, I could get very involved.
I was making the math and it's like
Okay, so
Benchmarking that's at wildlife at like a one point four billion dollar valuation.
And they put around forty million dollars.
So they own three percent of the company.
When you think about the carrying.
Benchmark owns one percent.
And it's an equal partnership. So he owns
Fifteen basis points. And it makes me want more of an archer. And the average fund that has been involved with 10 X.
So it was done well but by himself. How does that make sense?
The guy that owns so little.
When he invested, we had a lot of other investors.
And
people weren't nearly as involved like people that had
Larger states were were nearly as involved.
But I think that was very myopic.
For me because that thinking
Fundamentally missed.
What I understand the benchmark model to be
And the benchmark model is like, hey.
We're gonna do everything we can to be the best partners.
And if you do that
Over time.
Everything else
Works out fine.
You asked the question in a way that triggered a whole bunch of thoughts on what we have found in the character.
traits of really successful entrepreneurs life's work.
There's this insatiable energy and drive and doesn't get captured in a liquidity event.
In working with Victor
I witnessed him go from being in Sao Paulo.
Yeah, with his brother.
And deciding that he wanted to build a different kind of business than one that was optimizing on just being its own internal studio.
And so when he came to the Silicon Valley
I stayed in touch. We didn't spend a whole lot of time in person. It was during covet and it's crazy, but then
The artifact of maybe a year later is that
Victor had built relationships with these people that we adore.
How are you? I'm on the board of Airtable.
You mentioned the team at Brex, but that's just the beginning. Dylan and Figma.
And
Alex at scale. And people who are the epicent of our industry. And here he is this kid from Brazil who's not a kid, but
To me that is the
precondition to be able to be an effective partner
І на way ви практично бізнес Діп Траст.
And we talked about Matt Kohler before and how you call Matt, he doesn't show up trying to cram his agenda down your throat. It's like he's humble in a way that isn't fake. And I saw that with you, which is there's sort of a disarming nature of I'm not here to judge.
You've got some issues and problems and I saw you
Do this.
With people and
situations that an average person that's more self interested doesn't
have the consideration of really thinking about and perceiving what is that other person going through right now. And I've so I gotta watch Victor do that time and time again. So we're always recruiting a new partner and we're recruiting and we this weird place where we said, gosh, the person whom we most want to work with
is the CO of one of the companies. Yeah.
It was
Acts of love.
They don't
Resolve to rationality.
If they're really
Pure.
then they form their own logic.
And I think the feelings we have towards Victor and
And some of these founders I'm trying to remember all these different interactions, but we saw a large surface area of how Victor interacted with other entrepreneurs and we say
There's a right answer here, which is that if he's the person that we have this resonance with as a partner, and that resonance comes from his capacity to build deep trust based relationships with great founders. When I and Bill and I and others at Benchmark recruited Matt Kohler out of Facebook.
That's what stood out.
He done that with Reed Hoffman, he did that with Mark Zuckerberg, to a degree with Peter Thiel, and I said the rest of it we can figure out.
Who's the first phone call on a bad day?
And my guess is that Victor's the person the team at Bruxell call first, and Color was the person that
Read or talk, and so
To me that is a
Exceedingly rare
Talent, gift, whatever you want to call it.
Is it a
Epicenter of benchmarks relationships with founders. If we don't have that, we're useless. This question, I'm gonna go back to life's work.
We had dinner with the founder last night of a company that's public and
Very successful. Things I'm about to say probably prevent me from saying his name.
But
Oftentimes when we're working with founders
That life's work gets occluded.
Yeah.
clouds over and or gets oxidized and
We can see this person who was
Nothing when we met them in terms of
Extrinsic.
Wars, accolades, fame, wealth, none of it.
And then as they move through these seasons, they can become loaded up with the bureaucracy of a company, with the trappings of wealth, with the distractions that come with success.
And I say a lot of what we end up doing on the life's works category is
Deoxydizing.
Polishing, bringing to the surface the most creative, generative capacities they have.
And
No.
Journey you're on, if you're a founder for a decade, you have
Every next milestone of success, the devil's temptations to degrade into somebody who became
Too interested in
The vanity, too interested in just winning or whatever it might be. That's the probability set.
'Cause the numbers can get through to that.
pick your measure of radical success.
What always struck me about Mark Zuckerberg is that
He kept it fresh. And I think you still with Mark today, you see the same dynamic energy.
Matures.
That we saw it when we were at Excel in two thousand
Five.
Some people.
Either don't grow and evolve and that's one of the traps for founders. They just say rigid in their place.
Others mature out of the generative place led to the company start.
Victor, just because many people won't be
Intimately familiar with the wildlife story. I'd love you to
Tell it in whatever format you want.
with
For me, like the angle on it being so incredibly interesting is that it's very much a business that you would expect.
To have been VC funded and backed.
It's a software business. It's a gaming business. There's tons of funds that do this sort of stuff.
Everything I understand is it's quite expensive to build games
Certainly the big marquee ones are expensive, but even the small free to play mobile games seem like they cost quite a bit of money to build.
And you built these things in a way I want to hear how you did it because it was cash generative from the start. It was bootstrapped. It was you and your brother. You didn't raise money. Like you did this totally different.
In a very different place.
And it got you to a very different outcome that I think
would be the envy of anybody listening.
So tell us what it is, how you did it, and and a little bit about that unique path that you've taken.
The reality is
We bootstrapped it not by choice. We actually tried to raise money, but we got turned down by everyone.
So I started it with my brother and we're both from Brazil.
Shortly after college.
We're talking about
How much we loved games and
This was uh end of two thousand ten, beginning of two thousand eleven.
And the app stores were first
Getting
Traction.
So that thing that was a passion of ours
Started to feel like
A good business opportunity as well.
So
When we decided to do it.
We set out to raise a
Seed round.
But unfortunately the best term sheet that we got is someone offered us
Roughly fifty thousand dollars for half the company.
Good deal if you can get it. Yeah. That speaks to
The importance of like a good venture capital community and when I look at Brazil
There aren't a ton of like super interesting technology companies being made out there. And and I think part of it is does venture capital seem that it's not well developed and leads to like a lot of bad behavior, like
trying to get a company for that cheap.
But in the end things worked out for us'cause you're right when you say that
Games are expensive and even mobile games are expensive to make
But it wasn't true back then.
Console games and P C games
They're expensive to make, but the best mobile games
The software development part is actually not
That expensive?
But marketing is quite expensive.
But this wasn't true back then. In twenty eleven.
This was a time where
People were making paid games.
And if you made like a compelling experience
That was free.
You just get a ton of downloads.
you wouldn't have to worry about marketing. So like that's what we did.
We found a bunch of mechanics that worked well in other platforms or worked well as paid games.
And we just made
Compelling products.
They were free.
And the first game didn't work, but the second one did.
So we use that to build a better team and build better games.
So over a nine year period we scaled the business.
I wanna hear a little bit more about this notion of borrowing
A mechanic that worked somewhere else.
And I'm putting it in a new format.
and the power of that move in business, not just in games, not just in free to play games, but just in general.
So maybe describe literally what you did. Like what was the mechanic, where did you find it? How did you incorporate it in that first game?
The thing that interests me about
Games it's that
It's a part
Creativity
part game design and part just like studying businesses.
So
I started studying what were the
most successful games of all time and
There's this pattern that emerges which is
Typically
A game that
becomes very successful is an evolution of a
Previously good mechanics.
Daddy just found a better way
of getting it in the hands of of people.
And that is true for the largest games in the world, like
For example, League of Legends, it's an evolution of
Dota. So Dota was around. It was just very hard to play because you had to buy a disc.
And then League of Legends came around and it was like hey, it's a slightly improved experience, but it's free.
And
Even nowadays, largest mobile game in the world right now is this game called Monopoly Go.
And when you look at it is just like a an evolution of this game called Climaster.
Which was very successful, but it was not very approachable. So Scope did this fantastic work of
Finding a great AP, making it more accessible, but the core mechanic is the same because the the reality is
humans like the same game mechanics.
for a very long time. Like think about chess or poker or things like that.
And then for us.
The first successful title
was this game called Racing Penguin, and there was

There was just paid games on the app store.
They use the same mechanic, deliver it for free and people will like it.
I would love to hear you reflect, especially
Because wildlife
Obviously had the benefit.
Uh
being at the early part of an incredible tidal wave that
In the app store and the phone and everything else.
that if you were early to it, there was just so much white space.
And you've invested in so many companies that have benefited from all these platform shifts from cloud, from probably AI now, from mobile, from internet, from all these things.
The degree to which my romantic notion of life's work, like the person meant to do the thing.
How that stands up.
to the power of a great tailwind.
In my view of this we see
Openings and distribution.
End up creating a
Explosion of
Momentum.
In areas that you have high consumer demand. This is what I'm most interested in at the moment, at least in AI, which is where's the distribution dislocation, and I don't see it
In the way that I think I did, say, for example, we did a mobile
Or the early internet or social.
Inside of that you have people. And so they're enjoying these forces that are out of their control by definition. And uh you get
Types of entrepreneurs.
In
Tailwinds.
The hyper competitive entrepreneurs that care about winning at all costs.
And
That can serve you really well in a high disruption
Of distribution because you gain share and sometimes that is the game on the field.
I would say that was a defining attribute of Travis.
More than any human I'd ever met.
possibly the few others running large companies at the moment are in the same
But there are another
Type of
entrepreneurs that come in these cycles that are more
their primary drive is more generative. There was a really interesting podcast with
Andrew Huberman and Paul Conti, and I've been studying Paul Conti's work for a while, but he disambiguates these three different drives. I heard it, I said this maps.
completely and directly onto the entrepreneurial framework.
And I think as an investor, it's actually really well served for you to think about that, which is
There's
A
Primal
aggressive drive that we all have and I'm sure it's set up in our
me's Olympic reward pathway to win. I'll compete.
And
That aggressive assertive drive is innate and I don't think it's not healthy to try and suppress it to the point where it doesn't come out.
There's a pleasure drive, which is this notion of think about
food, sex, all the things that people do to experience that rush.
It has the problem, of course, of being you habituate. Unfortunately, we always want more. And then there's a generative drive.
And the generative drive is this thing that you would describe as being able to
Uh um create
Uh serve, contribute, build.
And
In an entrepreneurial journey, and I think this is true in any tailwind sector, there's entrepreneurs that and I I think of are
Iconic names Brian Chesky comes to mind as having a super high generative drive.
Also very aggressive and competitive'cause you had to be to compete and win. You're going into really difficult regulatory dynamics and
obviously competing for capital for team members and all that.
But
In these cycles where you have a disruption of distribution, I think there are a few entrepreneurs that come out that have had
Protected their generative drive, protected their curiosity, their creativity.
As they manifest their aggressive
drive and they didn't let their pleasures
And their enjoyment of success corrupt them in a way that took their eye off the ball. But I think those three different drives end up explaining a lot of what we see in the primary data of what's going on with this entrepreneur. And I've worked with some amazing people who took advantage of the tailwind of the shift to cloud.
And then they arrived.
At this continent of wealth.
Who am I to judge? The pleasure drive took over. Right. So there's a lot of things people
Prefer I think
Understandably, I think for some people that
Don't want to make the sacrifice that's require.
To really
Keep your generative drive at peak levels and
One of the most important things we do as partners to founders.
is to
Nurture that.
Protect it. How? What are the protection of that drive or the nurturing of that drive seems like just again, you're hitting on what interests me. These are some of the things that Victor and I talked about.
We
As an industry.
Have systematized and scale transactional relationships.
And I think one of the core values is to
let go of the transactional relationship model and replace it with a deep concern.
And you talk about the importance of people deep concern for relational well being and mental well being.
Which is not transactional. So the mental challenges that you were going through and I bore witness to as you transition your business model, Victor and I would always talk is how you doing?
Oh I'm doing good. I'm busy. Yeah. No, he'd say, I'm not doing great.
As a partner, you have to create a lot of space for that.
And say um.
Tell me more. What's most important is in those moments that my experience the entrepreneur
Who's gonna go through
These challenges doesn't feel alone.
It's the most lonely position at the top of a company carrying all the embedded stress of your employees, of your external constituencies, of your customers.
And
If you can be there.
And I don't mean that in some transactional way. It's weird that we're on the board. It's weird that we have power.
You put that to the side, and you start with
How is mental health and making it the number one priority of the relationship? And and I don't think I could stress that enough. And if you're not
Starting there and ending there.
You're putting yourself into a risk zone where somebody ends up going off
the mental health into the ditches on either side of them as they're building their company.
And
They may never come out.
In the form that
is recognizable to be the leader of that business. So if you're aware of that
My experience there didn't come from some
training as a psychotherapist. It was from the lived experience of seeing
These people whom I admire and adored.
get off of that vector of growth and generative drive. And then saying, okay, what might be behind that?
What could I have done differently?
In my own sense of being a pardon to them.
And I'd tell you, as a young venture capitalist
I
Was not good at it.
Because I just took this aggressive notion and
And sometimes my CEO say to me.
And I've had a few experiences, see us I'm I'm lucky to work with.
We just want to win.
I th Oh
Wind watch.
And then we open up a real conversation.
And so that is not a purpose that's going to satiate your team and make them feel connected to the purpose of your business.
Let's work backwards. What do you mean?

At the loss of someone else. There was a week about three years ago
Where Patrick Collison and
Toby.
Both indirectly actually.
Somewhat directly in the case of Toby said, You gotta go read this book, Infinite and Finite Games.
the company is a manifestation of what you want to contribute to the world and you're letting these talents work through you as opposed to grabbing them and only them beating, then there's never enough. It's the cliche, it's the happiness of pursuit versus the pursuit of happiness.
Victor, when you were
running the business. I'm curious how those three categories of motivation felt to you. So aggression.
Desire
And ultimately healthy generative drive.
Did you rotate between them? Did you feel all of them that one of them dominate?
between the three of us. You spent the longest time building an an operating business, so
How do they manifest for you?
I think I have many.
different sources of motivation.
You gotta tap into all of them at
Different times.
There's some fuels that burn cleaner than others.
And this generative drive is the one that
Burn cleanest, sir.
And if you can tap into that and if you can do
different things to keep that alive, I think that's the best source.
The aggression drive is very powerful, so sometimes
The business needs more of you and you tap into that. You have a competitor and
You have to tap into this instinct of okay, like this guy is a competitor, he wants to kill me, so I need to kill them.
It's good for the sprints.
But you can't sustain that for ears.
The hardest thing
Is the pleasure drive that is the
Most dangerous one.
Because it just feels so good.
Before we invest it.
Victor and his brother
Had built such a profitable business without this filthy venture money. Yeah. That they could afford dividends that allowed a novel. What a novel thing. Yes.
But a lifestyle that
Would for the average pleasure seeking human being.
Be more than enough.
to swallow you whole. And it wasn't to say you were going to parties and things like this, but it was uh wealth that would have very easily
And I imagine that this is a challenge with your teammates who have experienced this wealth, like
Why are we working so hard? Hey, man, we work.

It's a conflict.
How did you deal with the desire part?
We're lucky.
That we're in an industry that
If you were successful, you got dividends early on.
On the first year of the company we're paying out lots of dividends.
And read somewhere that's Tens of Millions to help you in the first year, yeah.
I read that money
changes you. If you're spending a lot of money, like it distracts you and changes you.
I decided that for the first year.
I would spend one percent of the money that hit my bank account.
And that was a weird thing.
But that was like great discipline.
I think that's one of the core advantages of Silicon Valley.
Why people build amazing cameras at Silicon Valley is
I see this amazing people, des fantastic entrepreneurs.
They're not spending their money.
Us humans we're just so influenced by the things that are around us.
So that
The culture of the place you're in.
becomes a huge
Advantage or disadvantage.
If you're in a place where spending money's school
You can't fight it. And like you are going to spend money.
Like in Silicon Valley, like spending money is not cool.
And what's cool is having great ideas.
I think this is such a deep insight.
This idea
the the background waters you're swimming in, which I think this is felt to me acutely in San Francisco, and the Silicon Valley, if you were
include the areas around Stanford and Berkeley and
Is it a
Yanks you back into the generative drive, if you try to pursue pleasure.
You get alienated.
Okay, you can hang out with different people and then quickly you find that
The system and the reinforcement loop around
generative drive. I don't think that's true in Sal Paul's. I didn't know that he did the one percent thing.
some point you relax that constraint I started spending too much time with you, so it was hard to relax. I am so fascinated by this notion that
Founders say they want to win. Win what?
Often it's money.
Is money. That is the game that we're playing. I challenge that. Oh, I have I have the appreciation. For sure. That's one scorecard.
We're talking about money here and
I don't want anyone to get the impression that we're not capitalists. I think at least me I think capitalism is the number one invention that humanity had.
And the number two was probably companies. He was careful not to project capitalism on me. So I'm from Brazil.
And I've traveled around as many people have.
And turns out that there's places
They're very good for human beings to live in.
And there are places that are not good.
I'm now living the Bay Air and I can tell you that
Living in the Bay Air is a lot better than living in in Sao Paulo where I grew up.
And the principal difference is
There are great companies in the Bay Area. That is the difference.
The externalities of companies are insane.
And then on this like hey, entrepreneurs want to make money. Yeah, like they wanna make money.
It's a funny thing when I became
Eventure capitalists
The most frequent comment that I got from my friends is
Oh wow.
You move to the dark side of the force.
To mi was so surprising.
That people would say that to me and part of me was hurt.
There's some sort of resentment.
Against the investor class. And so think about that as I go why? What's behind it?
I think that the primary motivation of the great entrepreneurs
It's a chiving the mission.
And for most investors the primary motivation is make money.
I thought a lot about this question and
I think those two things
In the very long term they're they're somewhat aligned.
But not in the short term.
We go to the greatest entrepreneurs of our generation.
And you ask them.
And go to you and say, Hey.
Would you give up half of your wealth?
To
Have a city on Mars.
You've created C D on Mars. I don't know him, but I'm pretty sure that he would take that.
But if you go to a hedge fund manager and say, Hey
We're gonna take half of her returns.
But your companies will all have accomplished their mission and I don't think hedge fund managers will take that.
When I talk to entrepreneurs
It matters a lot.
what they're trying to optimize for it. And the best entrepreneurs
They're actually like
Achieve the mission.
Turns out that if you achieve the mission, other stuff works out just fine.
Talk about the business model and why you were able to produce so much cash.
So quickly. I think
We're entering into this era where
the interest in cash producing businesses is going up quite rapidly with interest rates.
You did this and built one and built one that kept
Producing lots of cash as it grew.
Say a bit about that, especially
with your V C hat on where now you're funding businesses which often maybe won't have that same trajectory.
But how did that experience inform how you think about your business philosophy, the other sorts of businesses that you want to be able to back, and so on?
When we started the company, we only had a hundred dollars to start the company and so we moved back to our parents' place and we did everything ourselves.
But then like we scaled it.
to hundreds of millions of dollars in annual revenue.
I think that was only possible because
When a new market is created
It takes a while for people to understand.
that there are consumer need that is now possible to satisfy
that is not being well satisfied.
A lot of people think about, okay, what was the innovation there is
I think it wasn't as much as mobile. I think it was much more
The advent of E net purchases.
Because
When you create a free game and then people are able to
Download the game for free.
play it before they decide to invest their money in
That's what really like expanded the market.
But of course, the market matured.
And then you're not able like today, there's no opportunity for you to have a game that commands that profitability today.
Because of course to get downloads now, like you have to
Spend a lot in
User acquisition.
And the way this shaped my understanding is
If you have a business where you have to
pay a lot to acquire customers, it gets very, very hard.
To make it very lucrative.
What are the new things that are emerging? Like that's the importance of like, hey, how do you burn into a market?
Because if you do that, one of the first few people, especially in the consumer experience, like if you're one of the f very first few people offering
Experience
That's when you get organic downloads. That's where you get organic traffic.
And that is the key to
generating a business that produces cash flow. And I think
The problem that we have today is okay
In consumer
The big platforms, they're a gateway.
to accessing these consumer experiences and
A lot of this consumer
companies they have to acquire to use us
From Google or from Mata.
Makes it very, very hard.
To build a profitable business.
I think most great businesses they first consume cash before they generate something.
But you gotta understand okay, what is your path
To one day
generate this profits.
I see a lot of business being caught up on this like oh okay, like we're spending money today.
In gaming this happens a lot. It's like we're spending money today and we're always gonna have to quantum
Of users so you can grow and grow and grow.
But
There's no
Perhaps producing lots of profit.
One of the shocking stats about benchmark to me every time I like do the quick napkin math is if you just add up the dollars deployed by a given partner, even with a long run.
It is a shockingly small amount of money in the grand scheme of the big investing businesses. It's the size of one check that one guy writes one quarter at Capital Group or Fidelity or T Row or something like this.
And
You've certainly earned the right
to
manage and deploy far, far, far more capital than the five hundred million dollar funds that you raise.
So why that constraint? Why keep it small?
Why wouldn't more dollars allow you to do more support of the great generative
entrepreneurs out there.
Or maybe the loan partner who thought, Why don't we raise his phone that's half as big? Because it'll force more discipline on us.
To establish the basis of the relationship in a non monetary form.
Venture's a hack. It came from
Other investment models that tried to do this upside sharing, how do you deal with risks that are asymmetric?
Models from oil well development were applied and
It's this weird hack where it's like I'm gonna be your partner.
In the fullest sense.
But I'm also
Gonna
by the relationship.
So
And by the way, once we invest, there's a bunch of my friends you'll never meet are that are gonna move into your cab table and they run pension funds and they deal with large institutions that you'll never see and they'll never lift a finger to help you. And
And they're gonna own more than your VPS sales.
And you're like whoa.
Let me understand that. And
So I think by forcing the structural discipline
To
Not by our relationships, but to earn them.
That it keeps it clean. I don't know. It sounds maybe naive, but if
We're
Over the three to five rounds that are done prior to IPO.
Involved early.
What we found is that the founders experience significantly less dilution.
Because benchmark thanks to our
Former partners, some of the existing partners have a track record that allows the next round to have a lower risk to getting done at a higher price.
We did this analysis recently, thanks to Victor asked the question. The average founder who takes money from us is gonna have a six to seven X increase in value over five years post investment.
That's average.
So there's ones that are way above, of course there's failures.
In a way of establishing a relationship that puts the primacy of that on the partnership and not on the capital.
We preserve the ability to raise
Lots of money downstream.
We're not competing.
Very often we take much less than Prata. People, Miles came in and said, That's crazy.
We're not trying to maximize absolute cash returns. We're trying to in a way maximise
If the objective function financially
were to be made explicit it's cash and cash multiple.
And so when we're doing Pro Rata, we're lowering our multiple.
Now you can say well, you're putting a not company versus the company to lose you money, so it's like Yeah.
So the answer to the question of a larger and larger function.
undermines the purpose. It increases the pressure on the financial transaction side of the relationship.
We come back to the mission and I remember Jack had
Challenge the
discussion of mission and said it should be about purpose, not mission, because missions can be accomplished. And I think there's truth in that. When I joined the venture business,
Clear Perkins was saying we want missionary founders, not mercenary founders.
This is not a
Binary state. I think it's a interesting
concatenation of
motivational forces.
Many of the great entrepreneurs will say that the
financial rewards are fueling
the continued sustained generative drives of their business.
perhaps they're rationalizing it, but I do know that when they start to go down the path of consuming those gains personally, historically has really undermined their capabilities as great founders and as great leaders. One of the people whom I most admire in our entire ecosystem is Pavel at Telegram.
There's so much that can be learned from a company that has
close to a billion active users.
And thirty employees.
He's an S th the idea that he would indulge himself with the largesse of his wealth.
He contributed out of his own pocket to the bulk of the funding of Telegram and with no revenue model. And you feel from him
This is one of things you just get
Somewhat decent at identifying characters, people.
aspects where
It's infinite and not in some
False way.
But the purpose that the really great founders feel
has a sensational aspect and yet we're all humans. We have these meaningful vulnerabilities.
And for the vast majority of us, we get caught.
And if you have a good partner, they're gonna
Cappy on your shirt. And
If someone's doing that in a threatening relationship, you get defensive, you can't hear it. It doesn't work.
I think that ultimately if you
Ask the question of benchmark. Why don't we start a growth fund? Why don't we start
Yeah, really feels like it goes right against our core value.
What have you learned about the very hardest situations in this business when
a founder needs to go or a business is killing itself because of some strategic blunder.
You're a fiduciary investing pension fund capital.
I certainly share with you both this deep desire to work with generative life's work entrepreneurs building incredible things.
And then sometimes things go sideways.
And
dealing with those situations well is incredibly important.
What have you learned about that part of this discipline?
That it is profoundly difficult.
There are
No single sources of truth.
Everyone needs to lighten their grip on their certainty that they know the right outcome.
And to have a lot of humility.
And when unfortunately you do get to a place where it's really fallen apart, you need something to come back to to guide you.
And I think that historically for me has always been the purpose of the company.
Beneath every business there's a customer.
Or above every business that's a customer.
And
If there are competing points of view on the best way to serve that customer's need.
And uh
Fulfill your purpose.
Good.
But when an individual or collection of stakeholders has put their interests in front of that
purpose. It's a good way to come back to truth as you see it.
In the relativist sense. And so I think what I've found is invariably
It could be a founder who can't keep a management team.
Or has done something that undermines the ability to have trust and safety inside of the company and
And you come back to that guiding principle. And does it work every time? No. And it's really challenging and
We obviously've had some very public examples of this with Uber and we were
As a partner to the people going through that, I can just say how profoundly challenging that was from a human standpoint. There were no certainties beyond.
This faith that there's a
better company that could be built.
Whether that's true or not.
one never knows. There's not a parallel universe where you get to run an A B test. And so but what I have found is that
There's a decency
That's available to everyone I've worked through in the most difficult situations in the drama, the human emotional roller coaster, there's a decency beneath it all that comes back to this business exists.
I don't know that again, I don't want to say to make money, but to serve a customer. And the outcome of that is that we all get the ability to have capital to do it at a greater scale.
Going in, I think, you know, I always put a ton of weight on
Creating a condition of safety.
Which is that people feel comfortable.
being vulnerable.
And
the biggest pathology that emerges in a board dynamic is a
absence of vulnerability. It's happened and I'd say a third of the boards I worked on, which is gone.
And it starts with the CEO.
But then the VPs that come into the room, and there's just a big defensive shield.
That prevents a real discussion.
Because if they're not gonna be vulnerable, then they're not gonna listen.
There's not a dynamic of dialectic that can
push because they're defending a position. And if they did let themselves be vulnerable, my God, the cultures in these companies that go wrong that way eat you alive.
But the CO has to be the one modelling that behavior. It's one of the things you and I talked about in
When he was the CEO, I said, Listen, there were some communications to the team. I thought, ah doesn't seem as vulnerable as it might be. And then he overcrecked it and he was so vulnerable. He said, You know, you you don't have to put a wool shirt on whip yourself.
To strike the balance.
Victor. If you think about the
strange path the business took from a financing standpoint. I'd love to understand why
you decided to take your first outside investment, again in the business that was spewing cash for a long time.
I think at a multi billion dollar, certainly greater than billion dollar valuation. And the dollar amount I think was like relatively small. So there must be something kind of interesting going on there.
Why did you decide to take some outside capital when
It's my understanding that the business really didn't need it.
So after nine years
Of building the business.
But Bron and I we wanted to
have an act two for the company to go from like
A company where him and I were the designers to to creating this platform.
And
What we needed wasn't really the capital, but it was more the expertise. So I was living in Brazil, I decided to move to San Francisco.
Because we thought that if we were gonna make a company that would change the business model of games
It's like a platform for creators. Like we needed to be in the Bay Area.
So I moved there.
And
Very soon after moving
I understood that
It's not enough to be there. You gotta be plugged into the ecosystem.
And
I thought that so I started meeting investors and and to me it became apparent that
partnering with a great investor, it's a great way to get plugged into the ecosystem.
And it's a great way to access all the knowledge that is in the region. So that was the major
force behind me wanting to partner with someone.
What would you say is
Peter's superpower.
I think
The thing that contributed most
Вос
Amplifying the founders' ambition.
So Arthur and I like
We're building the company.
And I think founders they're all
quite ambitious in no your
Dreaming about a new future.
But then as you start executing, like you have a large team and
So about like okay, we have seven hundred people.
And there's just so many details.
They're getting the way of building your ambition.
And
going through all the friction of the day to day
It's easy for you to
Start a glowering your bar of what you want to build.
So
I think like a great board dynamic.
Is when your board comes in.
And asks you like
What would it take to be ten X bigger?
Asking that question
Puts you back in
dreamer mentality of okay, what's possible, what can go right.
So at benchmark there's this tradition that I love that
Every Monday we have a dinner
With
Someone that we really admire. Someone that
changed an industry.
So before I joined a few months ago, they had dinner with uh Jeff Bezos.
And then one of the partners asked him
What do you expect of a board member? Like what's a great board member?
And Jeff told this story.
Of
The day that he presented the plan to the board where
He said, Okay, like have a plan to reach a million
Subscribers on Prime.
And then the thing that he wished
Is to have a board member that is more ambitious than his.
That would come in as like
What would it take to have a hundred million
Subscribers to Prime.
To me that's basically like three things that a great V C or great board member should do is one is
Amplify the founder ambition.
The second is recruiting and the third one is helping measure the right things in the company.
I think this first one is by far the most important, which is
How do you amplify the founder ambition in
And you ask the question of what's possible and I think
That's what Peter did for us.
How do you
Plan to suss out
In founders.
the kind of people for whom that first thing could be powerful.
having your ambition amplified.
Sounds great.
But I imagine that
A certain kind of person
It would be far more powerful for than for others.
So how do you make sure that your
partnering with the right people, testing before you've worked with them.
How do you test for something like that ahead of time, do you think?
I think it comes down to three things.
You gotta
meet a person and you have to feel that this person has a big goal.
Almost
Mor so
Then what exactly it is.
You gotta feel okay, like this person is
There's this energy, does this
Boldness.
that the person's trying to build something big, when you're parting the early stage
So many time.
What you're trying to do changes.
It matters more that like you're trying to
Build something that matters.
I think you've got to see this thing.
And then the second part is
You gotta be really intense.
Building companies is just super, super hard.
And the third one is that you're able to just simplify. So you have these three things.
And you have the right ingredients.
But then for me to be able to partner with
the founder in a way that I'm able to amplify his ambition.
I think a lot of it comes down to
Building trust.
And having a relationship that allows for that.
And unfortunately
For this part
It just requires a ton of time.
requires spending a ton of time together.
When I decided that I wanted to take a next chapter in my
trajectory and come to benchmark.
One of the things about benchmark that attracted me is
A benchmark this is the idea that
We don't delegate
Spending time with founders.
We simplify a lot of other stuff.
So that we can spend a lot of time with founders.
And that resonates with my mental model hey, how can you be a successful partner to someone? It's like you spend a ton of time, you build a relationship.
And you have so much context on what that person wants to do, and you have
context on what that person cares about.
And
When the person is being
restricted by all the
constraints of reality, you're able to come in
And ask questions that are provocative.
It's like hey.
What would it take to be ten times bigger?
Another way that you're unusual is that
You became very wealthy building your own business.
To go
to a firm to write very small checks.
In the grand scheme of things.
And not to be too cras about it.
In many ways, you could just literally write the same checks yourself.
Which is often not the case for VCs.
Why do you want to do this?
In a different way than that.
I think a lot of it comes down to like what are you optimizing for?
And the thing that I optimized for is hey
I wanna work with the most amazing people and I wanna be a great partner to them.
And I think
The partnership. Like there's just so many
things they can learn from the different partners and
Being a group of six
We all complement each other.
So to me that was like
How to understand a business.
That to me was like invaluable and
The other part is
There's something special about
the benchmark model. The thing that always attracted me is like okay it's such a small firm.
We make ten investments a year.
They're typically series A.
And how come
Investing so few companies at such an early stage.
There's so many
Interesting companies that Benchmark was lucky enough to be a part of.
Like
Uber, Snap, or Instagram.
And to me it's like it's this motto of
You select very few things, you spend a lot of time building trust with the founder, you spend a lot of time trying to amplify their ambition.
And I don't think there's something that I could do on my own.
Because when you partner with the founder
If you're
Optimizing for the short term, what do you do is like you write a lot of checks.
Write a bunch of checks.
And then the real is like after you wrote the check.
You're incentivized to spend the least amount of
time possible with the founder.
But somehow like
There needs to be
A
Belief.
From the founder side as all.
This person's gonna invest in me and is gonna spend a meaningful amount of time trying to make me better.
And you can't put that into a contract.
It doesn't work.
So the only way it works is
If our reputation should do that.
Benchmark is like okay, we say that we don't make bets, like we make commitments to founders.
And I think that the average
Once we make a commitment, like I think the average length of the relationship is like ten years.
A benchmark we have this thing where we say, Hey
We have very
few rules and people can do
Different things.
But the one thing that you'd get in a lot of trouble
Is
If you're not
Dedicating time.
to the founders that you're partnering with.
If you do that, then you'd get into a lot of trouble.
inside of benchmark.
So I think there's just like a ton of things that
If I tried to go on my own, like I wouldn't be able to come close to it.
I'd love to go through the various people that you've now spent some time with and just hear you react with
one idea or one thing you've learned from them or about their style.
That you like, that you appreciate so far.
We'll start with Sarah.
She's so analytical, and she's about
Understanding everything that is happening
In a sector.
She's just so diligent.
She's knowledgeable. There's a few things that she cares about and
Sure.
puts in the work, she understands what's goes on.
And so I think
Out of all of us, just probably the more disciplined one.
How about Eric?
There's many ways you can measure success.
In your
career.
If you want to call it.
And the way I want to measure my success is like, okay, how many times I identify this
great person and I'm a meaningful part of their journey.
Ten years in.
I joined benchmark and very shortly after
Eric said, Hey
Do not come over. I'm having like
Three of my COs for a beer at my house.
Wanna meet up for an hour.
So I come over
And it's Jay from Conflict, Spencer from Amplitude.
And Saj from Unventioning. And Eric.
Had this like
relationship for many, many years, over five years followed them.
And what was supposed to be a one hour meeting
turns into like a seven hour hangout.
And we're there, like this three guys, like they're learning from each other.
You see the depth of the relationship.
And it's a Friday and
People wanna be there.
People wanna
Spend time with Eric.
And what shocks me is like
This people
Respect his opinion.
And want to spend time with him and
And
When I looked at this like
This is how I'm gonna measure success.
I hope that
five years from now, or like ten years from now.
I'm gonna invite
A few of the founders I work with and
They will all have relationships because
I would have
A few of these encounters
And they will trust me and they will see me as like okay, like this is a guide that is an important part of our journey.
And and when I was there, I was like
Okay, like I came to the right place.
That's an incredible one.
I'll do Chaithan next, and I always feel honor bound that anytime I bring up Chaythan's name, it's important that I say that he probably gave me the single most valuable piece of business advice that I've ever gotten, which is I think really a testament to
the quality of thinking in the partnership.
So I always feel like I need to say that when I bring up Chain's name to whom I'm always grateful. What have you learned from him so far?
Chaiton
Spends more time on things that are further away from my
areas of interest or where I spend a lot of my time, but
What he does that impresses me is
is knowledgeable about his space and
He has this commitment of when people come into pitch.
Lots of times we're gonna say no.
But how do you make it so that
The person living the meaning

He was there.
So to the extent that people want to hear it.
You tell
People coming in, like everything he knows about the space. Everything he learns about the space.
And the idea is that okay.
Even if people say no
They're getting free work from someone that is knowledgeable and has been in there for a long time.
It's a wonderful answer too.
As you view the landscape again, I know these are silly, ridiculous questions, you're three months into this, but
What excites you the most about the current setup in the world?
Especi vis-a vis enabling technologies or
Tailwinds. He's I've heard Peter use the term thermonuclear markets. I love that way of thinking about this.
What is it out there that is most drawing you in and getting your attention and wanting to meet the people
Investigating a certain space.
I think computers
speaking natural language.
Is a big deal.
Humans being able to
Talk.
with computers and the way they talk with each other.
I think that changes things.
So one of the things that as a CEO and running the company
I just got distracted as you know, there's all these things being invented.
There's so much that could be better. One thing that I'm particularly excited about is
I always loved messaging. I think messaging is great because it's at the core of
communication and connecting with humans.
And you think about like the messaging experience today.
It's so suboptimal.
You have a conversation with someone
When you're live, it's just way more fun and it's way more effective.
Then
If you're texting with someone
And as you think about wow, now we can talk with computers.
And computers can understand us.
And they're getting better and better and better understanding us.
What does that do to communication?
I think that's one small example of
A lot of different
experiences that are being created. And cool thing is
I think LMs are a piece of it.
But there's all these other things that need to be built around it.
I think LMs are there to do a bunch of really great things, but all these other pieces around
We have the smartest entrepreneurs in the world working on things like that. So
That is what gives me great pleasure today is
Meaning people that are
Building these types of experiences.
It sounds like you think our attention is maybe missing key spots around this session. Rightfully so, with these incredible foundational models. What else are you seeing that catches your attention in this exciting area?
I'm predicting that there's a
Sub thirty.
Probably sub twenty five year old founder.
That is imagining in a generative sense.
A experience
That is deeply missing
Today
Around human connection.
the the use of these technologies will fill that void.
And it's gonna happen. I understand we'll see it in a way that we experience it and feel it before we think about it.
So if I'm projecting it and all that, then what do I know? And to steal Matt Collar's claim, our job is to see the present most clearly.
And I think we're
At risk of missing
And not paying attention to the bubbling up.
The inevitable bubbling up of a technology in the hands of somebody who's
generations younger than many of the people using these technologies today.
And
I think that that's an inevitability. In the same way that I think we're gonna see
the use of large language models combined with core
Enterprise technology.
Build
A
new continent of software application companies whose business models will not be selling seats.
It'll be selling work.
If you're buying work.
Your operating expenses is what you're looking at. Where's the opex going?
What could I buy?
totally different framework than the history of software, which is like I'm gonna buy a tool and then make my current work more efficient.
Versus like getting rid of whole sloths of of your opex. And so to me those forces are
A debate we've had internally of is AI a
distribution disruption or technology disruption, I think many
smart people would say no, it's really a technology disruption, so therefore it advantages the incumbents.
Because it's the same distribution model.
I think that's wrong in two ways.
There's a demand disruption, meaning I think.
Every single company I'm involved with, but I imagine the large global companies have the same
top of mind question of how does this apply to our business.
And that is a disruption that's not just, well, we talked to company X, you know, that we're buying from today and they told us what it meant, or Microsoft told us it means this, Salesforce sells it. No.
There's a distribution.
disruption on people's ability to bring in new technologies and take risks. Okay, so weird things are gonna happen. There's gonna be some
Epic failures there already have been some.
The other distribution model.
Disruption, I think, is pricing.
And the way that people think about buying software will change.
To me that changes the distribution model because I'm no longer
licensing or renting, but I'm consuming a completely different experience on the side. And I think that's probably true from the way we experience applications, meaning
We train this whole ecosystem on look at a screen and go like this.
And
I think the primal acts for AI may be different.
We're not investors in any of these equipment companies, but yeah.
What are the downs for the mid is there's stuff in we ask this question in part because we like to
Fancy ourselves intelligent about
growth companies in the public market.
There's a lot of companies
got left behind post their covid.
So somewhere in there we're missing something and
If I was looking at the
systematically, where are we in recovery
I think it's inevitable look back. There's
more than a few 10 Xers sitting right now in the one to five billion dollar market cap in the public sector.
The statistical probability to pick one of those and getting 10 X is much greater than picking one of the late stage private companies that raised it a bloated valuation that's somewhere between one to five billion.
If I was a true investor, I'd say we're probably in a maybe it's six months, maybe it's three years.
chance to get the ten X in the public market in a not
Overly priced.
Software business.
How do you think about the notion of platforms?
And platform businesses.
In this new era.
It seems like platforms there's the
Disruption and distribution is one aspect of what's driven some of these explosions. Some new platform also is often
a key ingredient in some explosion of great ideas, applications, whatever
Sounds like basically you were building a platform in at wildlife.
I would love to hear you both riff on the role that this concept plays in your investing and the technology and what makes you excited and whether it will be different this time.
A lot of people are making the acknowledgement that it can make sense of okay, there were the app stores, like mobile was this great platform, and then there were the app stores.
Then I
App sort of you can think about a platform or a marketplace. Okay, you have
developers on one side and you have people consuming the applications on the other side.
And now
Maybe you have a different platform.
which is an L M platform when like people are creating these new applications which are
You can
Think about it as bots.
You have an LM at the core, but you start putting like a lot of modules around it.
And right now we're seeing these very thin wrappers around LMs.
And a lot of people are seeing oh this
Platforms like think about like character AI
Or
OpenAI's new platform or pool.
And then when you play with some of these bots, you're like wow, like this is so thin. This is like a very, very thin wrapper around an LLM.
And so this is never gonna go anywhere. But if you think about the early days of the iPhone App Store, what were the
First apps that got traction.
That was the fart app. And there was a beer app, which is just it was a glass of beer and when you tilt it. That was even thinner, maybe.
So I think one big question is are the new platforms bought app stores? I think it's one possibility that is intriguing.
We get pitched a lot of
Companies that
Use that word.
Well I was gonna say it becomes one of those
Tells you.
It's like when we get pitched.
Anything for anybody.
We're skeptical.
register gets activated and
Adam Bosworth, I don't know if you've met Adam in the past. He was at Microsoft for twenty plus years and
said something to me about startup companies. Like you guys, you only startups use the word platform. A platform is a company that has a million developers.
When you have a million developers, you can call yourself a platform. Before that, I don't really want you know that's the one. So I think this reality is going to be that there will be over a million developers that are writing to large language models, and you assume that is the foundational quote unquote platform. Does it become commoditized likely?
We're radical believers in open source.
And that that force will be unstoppable here. It has a number of interesting
not at all well understood ethical implications for these models and what the forces towards open might lead us to. And I don't think any of us have a
Again, this is a case where we have uh
loosely held beliefs that we're constantly trying to update and make sure we're not missing something.

miljan plus developers that are accessing
Transformer based models.
There will
Emerge from that mass empowerment of creativity.
The next
Three to five.
half a trillion dollar market cap companies.
Maybe it's one to three.
But it is the substrate.
in which I think those companies will be born.
Is it one of the existing
Companies, is it open AI? I don't know. We do not have an investment in a foundation model company at Benchmark, and I think our view is.
that first of all doesn't really fit with our model of
We like to back a small team investing in
Companies like Instagram and Snap when they had less than ten people.
And they didn't have a plan to go hire three hundred people.
They had a plan to do it.
Get to a billion.
Active users. Yeah.
But
We start there.
tends to be where we can
Take advantage of lack of a better term of this is a thermonuclear force. This
capital that's gone into buying equipment NVIDIA processors combined with putting that online, making it available. And so that last mile lighting up of a developer ecosystem that's happened I think it gives us such optimism that even in spite of all the sclerotic issues of the
Covid.
over capitalization of the industry.
Both the funds and the companies.
This is right now, broadly defined, a million plus developers.
That will launch.
the biggest returns probably of my venture career and been doing it for twenty five years. And is it possible that we've gotten it all wrong?
Yeah, I mean there's definitely a worldview that it's a possibility.
Is this crypto all over again? And
We don't need to know the answer to that.
It sounds weird, but it's not our job to decide if this is right or wrong.
It's too redundant to
partner with the best entrepreneurs in the segment that best is defined by like the ones with the maximum generative drive, hyper curiosity, hyper competitiveness, and
And if it's wrong.
The great ones reinvent themselves, then they become Discord. How do you think about the presence of let's call it the largest five to ten
technology companies in the world which are
Almost like possibly huge. It's hard to imagine how big they are, how
big their market caps are, how many divisions they have, how much power they have.
Generally they're amazing companies.
You look at it from like a fundamental investor's perspective, these things are modern business marvels.
But they're way bigger than when you started your venture career.
And therefore I assume they have way more gravity in how you think about
new companies entering this space.
What's changed? How do you think about the presence of these death stars lurking out there?
As the little X Wing tries to make a go of it.
It gets back to
Looking for disruptions.
in distribution.
Because one of the struggles that we've had in our industry is that
They're compounding network effect businesses.
And that network effect.
winner takes most.
Concentration of wealth, concentration of users, concentration of forward investment capital and resource allocation makes whole segments uninteresting. When I joined the venture business, Microsoft had its
space that you just stayed away from. And it was the Death Star. And you said if Microsoft's your competitor, now if IBM was your competitor, more fun. But now it's like yeah, you've got at least three, possibly four or five Death Stars.
Тер твои ті запзм. Они entrepreneur.
Steve Jobs, Mark Zuckerberg, Jeff Bezos wouldn't work for one of those companies. And I adore them as people. They've built great cultures and great companies, but
We still have our primary
Source material, which is a founder that is
Typically disagreeable.
Truth seeking.
And nonconformant.

cookie in someone else's system.
Those people exist.
In a
Almost fixed ratio of humanity.
And our
belief is they just need the right substrate in which they can work. And so you wait. And crypto was a place you could have gone. There was definitely a lack of incumbency there. In fact incumbents were structurally disadvantaged there. I think we'll probably see
As we look back
In the course of time in ten years that
We can't deny the fact that Bitcoin
Ethereum.
Solana collectively created over a trillion dollars of today's sustained market value. Okay.
That's where it happened.
Now, what are the companies? It's not so easy because you know the nature of crypto. I think if you look at
large language models and use of transform technologies, is it the incumbents game
This is where we all energies come back to. Where is there distribu

Disruption.
think you're gonna find that there's a consumer experience that those incumbents aren't well suited to go create that they don't have on some whiteboard today. Maybe there's someone there that's frustrated who quits and goes and does it, but for reasons that relate to their own
capture in their internal atmospheric of the bureaucracy, they'll suffocate it if it comes out.
Or they'll do something grandiose that just flops.
And on the other end of the spectrum, you think you have the enterprise where
I think this nature of people are buying work, not software.
Totally different. So
You know, that's the hope. We have to believe that. I know the entrepreneurs didn't stop being manifest in the
social emotional landscape of humanity. So they may be unhappy right now relative to say two thousand ten.
Victor, as you think about the role of gaming in the world, you've built something that as many people have used as probably anybody.
How is your thinking on that evolve? Is there a common thread that unites the great
Gains or the great gaming businesses.
All that you've learned.
as one of the privileged few that's built such a big thing in that space.
I think
We're entering
A golden era of game development.
And the reason I think about that is
Game is the creative endeavor.
And I think what this new wave of technologies allows for is
Game development tools.
That make the creation process so much better.
Back in the day
The really hard part
Of making a game.
Was the technical challenge.
Everyone knew okay, what game should you do? Everyone knew what you wanted to do. The hard part was that just getting it done, having low latency, uh having high resolution graphics.
And over time
Thanks to like great tools that were created, it got easier and easier and easier to create a game.
And
What this does is
It allows a smaller and smaller team
To
create something.
With a work of art.
most times it's the creation of a small
Group of people.
A lot of times it's one.
And it's a person
That has a vision.
And then it needs to create this vision.
With AI tools, the vision that one person will be able to create
Will just be much better.
I'm excited about tools like
Mid journey, for example, that creates two D art and ends great.
But as you think about it
What if you could create art for a game?
In the same way, like you prompt and you have the entire art for a game and someone will build that tool.
When we get there, like we're gonna have
games at all better.
You know, like the beginnings of like book industry.
And in the very beginning
The core advantage that
A book company had is it had a great printing press.
Print the books.
And you pay him a little bit of money and like he gives you manuscript and like you print the book.
When printing
got commoditized and was very easy to do. A lot more people were writing.
And then
Every great writer out there was able to express themselves and what it happens is they just
Have a a better choice of books.
Game is like it's still a huge passion of mine.
connects to the things that I really love, which is understanding human psychology and technology.
And a lot of times humans love to play and like to play on every
space that emerges and
So whenever there's a new technology that gets invented
Very quickly people create games for that. So that was true for computers, that was true for phones.
And now
With AI
There's so many new games that can be done.
And people are starting to experiment with it.
And we're not there yet because
It takes a while.
For humans to understand what can be created.
Takes a lot of experimentation.
As a observer of the gaming market.
It's got its own challenges of incumbency.
I think the industry s really suffered.
As a result of
The moves on
Do not follow.
See acquisition engines are sputtering the
Growth rates are
elusive and there's still giant businesses, but it doesn't feel like people always feel like, hey, you know, remember we were growing eighty percent at a hundred fifty percent a year and we're growing at seven to ten percent and that

It needs to be disrupted.
Because the mobile's become congested, there's this question of okay, well
And I'm curious, Guy's my partner get asked this question.
Do you think there'll be a company founded
In the next two, three years.
That will
pioneer new business model.
Or do you think it's gonna be a version of free to play and that that's a fixed constant now because that's the nature of distribution?
I believe a game needs to be free.
So I think free to play. Is that a practical or a philosophical view or both?
I think it's practical.
the idea that you can experiment before you make a commitment, like I think is just really great.
There's people that care a lot about the game and it becomes their hobby and and they attribute a lot to it and they subsidize for the rest of the population. I actually think it's good for everyone.
I still consider myself to be young.
At some point I'll be O
Because I'm married to things that revolutions free to play was a revolution in gaming. So many more people started playing because of that.
I think I l we're gonna see so much innovation.
But I don't think the innovation is gonna be on business model. I think games will continue to be free.
I think the first innovations the tools will get so good.
That
Getting your imagination to be executed will be the easy part.
And imagining great experiences will be the hard part.
And that's fantastic for everyone involved.
Picture said something maybe we really stuck, which is it's
Not hard to make a
Game that's
Really compelling.
It's really hard to make a game that's compelling in long duration.
One of Mitch's forever games. Yes. And so you have this sense of this explosion of content. If there's an explosion of games to be played, then there becomes this discovery problem.
And then certain aspects of games that are gonna carry through okay, free to play but business model dimensions that have a
Yeah.
And that seems like it's inevitable, but the form that it takes will recognize it after it happened.
I think the interesting thing is
New technologies allow for new patterns of gameplay.
So
The dominant games
were games that you used to sit down f and play for an hour.
And like the dominant games were games that
sixty hours of gameplay.
And the dominant games now.
Are games
A mobile.
That you play for three minutes.
But you continue to play the same game for many years, like play the same game for five years.
People still play chess and back human. So thousands of years. Talk about forever games, yeah.
I'm always interested where people feel like they have the most room to still grow.
And that's why I asked this question on where you feel the most incomplete. Especially interested in asking this to you two because you've been doing this a long time with a Hall of Fame career. You're three months in. But my guess is you both still have something that you feel incomplete on. So I would love to hear
What you both think.
Doing a job now for twenty five years in my case.
You
Burn off.
motivational systems that are
Easily satiated.
What does that mean? Well
From my standpoint, it was
First of all not failing. That was a motivational system and
Maybe I still can pull that off. I still have some time left on this earth.
as a venture capitalist, then there's a motivational system of being decent in my peer group and
The motivational system that now is at the center, it comes back to this
earlier conversation about
generative purpose. And I think what I feel like I'm still learning and where I have
Humility is
I would say that I have
Infrequently had
full potential relationships with founders.
I look back on my twenty five year career, I know what it looks like and what it feels like, and I know it's possible.
And to say I can activate that now.
Every day when I get up.
It will be measured in
The
depth of impact.
And the meaning that
Joy that comes out of
Those relationships for me
And for their counterparts and we're blessed because not just the founder, it's the company, it's their customers that they serve. So it scales in a way, but it didn't need to for me because it it ultimately resolves down to the relationship I have with Victor.
Knowing that in relational life
There's always
A higher level of flourishing possible.
I would score myself
If I were being brutal on a scale of one to ten, is having gotten above a five in full potential. Occasionally I get to an eight or a nine.
But boy, nothing feels better.
when it's really working and that requires me to continually grow as a human being
Nothing's made me better in the job in the last decade than being a parent to five kids.
It's not that different. You start with connection. If you don't have connection with your children before you try and correct them, good luck.
Really internalizing
our role not as in a power structure, but as a relational partner. And then maybe that's one component. The second is yeah, you always tilt towards
Can I
recognize it more clearly when I see it, which is the next great company and entrepreneur and founder. And so much of this is outside of our control. And so you sit there and
You quote wait for the perfect pitch. Buffet said this, we don't have to swing.
And
part of not having uh three billion dollars of assets under management. We stay really patient, but
We also care about working and being relevant in a way that
We don't accept that.
This year.
guarantee there's a company that's gonna get founded that's going to break through ten billion in market value.
The probabilities as you start
In any calendar, you're really low that you're going to be the partner to that entrepreneur. And that provides a source of endless healthy anxiety.
Yeah.
That's an easy question.
Been an entrepreneur and but now I've just started this new journey.
There's more that I need to learn than the stuff that I know, which is
scary and exciting and there's this energy of being at the very beginning
And as I think about
The things that make a successful investor
I think there's
You source.
You select companies and then I help them build the companies. On this third bucket, I think I'm I feel very confident because
I built a company. I built games that generated
a couple of billion dollars in revenue and did that without using any investor capital.
So I'm confident that like I can help people build companies.
But everything else is a big question mark.
What matters most to you both that we haven't talked about?
It's such an interesting question.
My sense is that one of the major
future not yet founded companies is going to
And uh
Addressing
the pathologies that experience anyone who's on TikTok or Instagram twenty, thirty, forty minutes later.
They don't feel so good.
At the end of that.
Relatedly.
Gonna be more aware
Uh
the sources of human flourishing in the ethic of the companies that we're building and how we

we fund them and how they get built. This is not to say they should all become nonprofits. I actually think the recursive success of a profitable company is you get more resources and it's the system works. I agree with you. I'm a capitalist, but
Whenever you go into this train, you can come across as being sanctimonious. And so I'm very humble to not get there. But I do think the thing we haven't talked enough about in the industry is
broadly in the category of mental health.
We brushed on it today, but it is behind the greatest forms of suffering.
And
the internal lives of entrepreneurs, but also in the external lives of the companies that are getting built.
I had an argument or a discussion, I should say, with my friend Jeremy
Me taking the Hans Rossling side of
These incredible improvement curves in human history. And him taking the side of well, yeah, but
If you take some other measures such as
Suicides under a certain age. It's the worst it's ever been. Mental health measures are very bad. And there's not a factfulness book about that.
quite yet. And so I am sympathetic.
Very much so to that idea.
Oftentimes founders are on a journey.
That
Can go to some very
unexpected and
traumatic places.
It's unfortunate because those are moments when they feel most alone.
And I think a lot of people have gone through that post Covid because there've been major headcount reductions and
It feels laid bare, defeated, beleaguered.
And one of the
Really alarming things to me when I bring it up is I said, Oh one of the greatest entrepreneurs of our life, Mark Benyoff, went through a few seasons of those things where there were
discussions about does he stay an independent company or not. And people are like he did?
So this relatability, that feeling of being defeated and dispirited.
It'll be
Part of
The adventure. And yet on the other side of it.
As you go through more experiences, you can put it into context. And I think that a lot of times decisions that you're making in those troths become fatal for the company because you're just at that point where you got nothing left.
I'm sad to be forced to wind this down and ask my traditional closing question. What is the kindest thing that anyone's ever done for you?
To me the first thing that comes to mind is my daughter.
Natalie.
After a really tough day of parenting.
Where you feel completely unseen and unappreciated.
This was Easter three years ago.
Sits down with me.
And I'm
Doing my best to hide it.
And she put her arm on me and she said
I know it was really hard for you today.
But we love you completely.
And
It was really a great day and then
Yeah.
And sometimes kids
They should never be parents to us'cause we have to have a certain degree of but I'm come back to that moment and the grace of that human being at that point in time. And I think most parents can relate to having a moment like that in their life. How old was she?
Wow.
My grandmother?
And she taught me
Me and my entire family
The value of
Hard work.
This is
Not compatible with the idea that we don't have free will, but

Hard work does transform your life.
So she comes from a poor region in Brazil and
She had ten kids.
And when my mom was three, my grandfather
Was murdered.
And
She had no education.
And somehow
She works really hard and
My mom
Not always had
Enough to eat.
But
Through her work.
She
created a radically better experience for me.
And that made me ask the question like every day is
What could I achieve if I worked a little harder?
I think that
Asking myself that question
Radically changed.
My outcome when I think where I was born
And the things that happen in my life
I'm pretty happy.
And a lot of times if you're living like every day, if I work a little harder, what can I do?
No question has helped him more, and she taught me that, and for that I'm super great for.
What an incredible, awesome pair of closing answers. Thank you so much for your time. Oh, thank you. Thank you.
Mm.
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