Benchmark Part II: The Dinner

0:00 I've spent a lot of time in in in in Europe and The dinners are about three hours, maybe three and a half hours long. That's unlike it. Yeah. And that's the whole point. Is that social connection is not something that's transaction. It's fluid. It it's fun. It's playful. And and so w the idea is people are coming out beaming, smiling after dinner.

0:21 As opposed to um You know, this sort of rigid structure of a typical dinner with an agenda. There is no agenda. Yeah, I don't have the agenda is to come together. Who got truth? Is it you, is it you, is it you Who got the truth now? Is it you, is it you, is it you? Me down!

0:42 Another story on the way Welcome to Season 11, Episode 5 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures. And I'm David Rosenthal, and I'm an angel investor based in San Francisco. Where We were.

1:09 For this very episode. Indeed. And we are your hosts. Last episode, we told the four-hour story of Benchmark, the legendary venture capital firm that stayed small while all their competitors ballooned in size. At the end of the episode we mentioned that there

1:25 Partner meeting. had this dinner at the end of it, where the five equal partners of benchmark sit down for an open-ended discussion. Sometimes with a special guest. Well, we were talking with the benchmark partners about that last episode. And they invited us to be their guest for one of these dinners. And for the first time ever.

1:44 Record it. Even on video. So we are so pumped to share this with all of you. We got to ask them about a lot of the open questions we had. about the future of balancing those out there consumer investments with their B2B portfolio.

1:58 How they think about making sure that they see that next world changing company. the pressure of inheriting a top venture firm and trying desperately not to mess it up. And of course, there's some good war stories from the portfolio companies in there too, David. Indeed, indeed. Yeah, this was such a special episode on so many fronts. This is by far is a record on an acquired episode for a number of guests.

2:22 That we have concurrently. Oh, we had seven microphones running. We had to buy like five thousand dollars worth of gear just for this episode. I think it was worth it though. Next time I need to account for the fact that there will be uh violent laughter when I'm setting the audio levels,'cause We've had a blast and you'll definitely hear it when you listen. All right listeners.

2:41 Now is a great time to talk about a new partner of ours here on Acquired, Lagora. The agentic operating system that is redefining how the world's best legal teams work. Yep. It's sort of obvious that AI is gonna completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chat bot out there. Lagora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do. operate with obsessive customer focus.

3:15 They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review where you Drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legor's bet here is interesting, since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time. And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

4:06 And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Lagora numbers essentially speak for themselves. When they have a head to head pilot with their top competitor, they win seventy percent of the time. Lagora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries. And crazily, they went from one million To a hundred million in AR.

4:34 In about. Eighteen months. truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client.

4:50 If your legal team wants to check it out, whether you're a law firm or you're in house at a company. You can learn more at Lagora.com slash acquired And just tell'em that Ben and David sent you. Well, we have an update to the merch store. We got many requests about this. Gosh, why isn't there a dad hat? Well

5:08 We called up the good folks at Cotton Bureau and we did some horse trading because I wanted a really good one. You know, I wanted one that was embroidered, that felt nice. So for the next couple of weeks There'll be a limited edition dad hat embroidered. with ACQ right there on the front. So get them before they're gone. at acquired.fm slash store. All right, join the Slack, acquire.fm slash Slack. The LP show has been on fire recently. For those of you who are paying LPs out there, we just dropped an interview on the profitable growth playbook for B2B companies with Jale Rezai, the CEO and co-founder of Mutiny.

5:43 That is live just for LPs right now for another week or so, and then it will hit the public feed. So you can become a LP at acquire.fm slash LP or get those episodes after they're made public by searching for the LP show in your favorite podcast player. Now without further ado, on to the dinner. And listeners, as always, this show is not investment advice. David and I may have investments in the company we discuss. And uh this show is for informational and entertainment purposes only. Okay, so our first question is what are we doing here? Like what are we at? And Peter, it feels like you would be the best person to explain this dinner tradition.

6:19 Why do we have a dining room in the office? When I joined Benchmark. There was great optimism between Bill and me about you know, injecting new practices, new habits, new ideas into the firm.

6:33 And Bill had just read the Ben Franklin uh biography. And it Ben had four dinners, if I recall, a week But they were like going deep on finance, then on you know, chemistry, and then on life sciences and Uh and he took the catalyst to say, like why aren't we doing dinners? And anyway, we had this like playful, you know, experiment where we said, Well, let's try a few of them, and then we did a a big dinner towards the end of the year and I think it was like two thousand seven. Maybe two thousand six. Two thousand six that was actually my first year.

7:03 And uh It was amazing. Like time stood still. And and we realized like just the partners or No, we had four outside guests. Uh Katerina Fake. Uh Mike McHugh. Yeah. Um Gideon U.

7:17 And Martin Nikos, if I'm not mistaken. And It was Electric. And we came out of that

7:25 Bill had this habit, he'd always call me in the car after like What did you think of the dinner? I'm like, Ah, I think it was fun, but I want to go to bed. He's like Alcohol had been served, people were in the city. Like it was his baby. He wanted to like keep working on the concept. We danced with this idea. And so the concept that that I came to is that Firms are full of strategies. The Aren't coupled to reality. And if you look at a venture firm, eventually it's just a collection of habits. And this is stealing from William James, who I think was the greatest American thinker.

7:55 um that you know we are nothing but an amalgamation of our habits and habits so character they so everything. So The idea that we should be nurturing curiosity, which is the essential life blood of the firm. needed a habit. And and and Mondays, as much as they're an attempt at that, you sit around the office and you joke around, you try and d dive into topics. They're they're limited. And so the dynamic range of a dinner with um

8:18 You know uh an open ended no agenda. While explorations of the most bizarre things your partners might be curious about. And I've definitely gotten a few, you know, rat holes that with this group and they pulled me out. Uh you know, we it just became one of those things that honored the purpose of the firm, which is the sense of like constantly learning and and activating our curiosity. But um

8:41 Yeah, collective effervescence of a group that we could never get in a one on one dinner. Um, one of the challenges which is being manifest right now is that In a table. You know, where there's a head of the table. you can get a dominant participant in the dinner conversation. But the problem with the table is that you either have a rectangular

8:59 uh structure which carries power structure embedded in it. Um or you have a circular table which atomizes the group. And so I'd seen this table, uh, The Seven by Jean Marie M Masude, who's a French designer. And um Rame with the idea.

9:14 Something would be organic that could expand and collapse, but most essentially Destruct or deconstruct power centers and and create a non hierarchical Construct with intimacy. But this table ends up being

9:28 Um, Ole Lundberg designed it. We gave him I gave him the hand sketch and and he ran with it and uh it's Um Allowed Ole's lifestyle to meaningfully upgrade because the number of people with means that sat at this table that decided they need a table just like this. Uh Well and the people you have at this table, just for listeners who don't understand the gravity of this dinner, it tends not to just be the five partners. You have Pretty esteemed guests come to these. It's the spotlight of attention, which is the biggest gift you can give to another human being on an individual.

9:58 And more often than not, it's somebody that we haven't w worked with or invested in. And uh I think you guys might have mentioned this in the podcast that uh We've had dinners with people like um Still in field. And Oh, you come away, you're swept off your feet. You're like, why this is why we exist to serve people like that. Uh Toby from Shopify. Um

10:17 You know, Jeff Bezos has been um We travel to Jeff. Do you bring the table? Unfortunately it's not portable. The dinosaur Seattle side where LA we've been in L we've been in LA, we've been in Seattle. You can see the ethos of the firm In the structure of the table too, which is that You can't have a sidebar conversation at this table because everybody else can hear it.

10:43 And so it's all one conversation. And that Um You know, sort of coming from Mm.

10:51 From the outside and then being part of Benchmark. Like the one conversation element of everything that we do. on Monday is so powerful. Because We're all tuned in. On whatever's being discussed, and sometimes it's not

11:06 Great news, sometimes it's good news, sometimes it's tough news, whatever it is. Getting the whole group. Tuned in. I think it's like the is The essential power

11:16 of the structure. And I really like the table for that. I mean I remember I'll I'll never forget early in my venture career when I was a venture capitalist. Uh I remember

11:28 an older partner taking me aside and saying, like, if you want to bring something up at the partner meeting You need to have had a side conversation with everybody else before you bring it up at the table. Which is so funny because Bruce When we were talking to Bruce Dunlevy, he was like our one rule was no pre selling a deal. Like you can't walk around the hallway and say like hey I'm super excited about this one later. Like if you you know I think you'll be excited too. Like vote for it. That's uh one of the great perks, especially for somebody who's come from another venture firm, to benchmark.

11:58 So you don't write a memo. And it's because the memo, you know, when you're A memo really is a vehicle. S To you know, obviously give

12:07 Background. on the company, all the work you've done, but it is also a little bit a Pre cell. before the company comes in to present. It's it's persuasion. Yeah. And so you know, a lot of hours get consumed by the writing of it and the reading of others. And not to to have like a founder come in then and there's none of that.

12:26 It's a blank sheet and you just get to have the experience of the founder. It's um It's a nice thing. Which I think is a really good one, which is it's like Yeah. Does it Does the di

12:41 Is the company incredible and does that company have a chance to be One of these few extraordinary companies every decade.

12:52 And like that's That's actually all that matters. Like that's all that matters for all of us. And if you find that Um Then

13:02 You really don't need to sell it. Yeah. You don't need to sell it. Do you have any sort of format of codifying your thinking?'Cause like memos serve the purpose of forcing you into clarity of thought in addition to creating an art a sales artifact. And so how

13:19 What things do you do in your partnership to gain clarity of thought? I would say the memo Is a crutch often. Because Yes, it can force you into clarity of thought, but it also allows you to fill in blanks that the entrepreneur themselves are not saying.

13:35 And it pushes a sort of bias and perspective that maybe the firm has, or maybe you have a sector thesis, and it's like there's a lot of manifestation of ego when you put a memo together. Not having a memo does not replace work. And does not replace the calls and does not replace the conversations. And What I find so amazing about our

13:57 Monday discussions When you're relaying the calls you have Relaying the notes you took on those calls. You're actually telling Exactly what you've discovered.

14:09 Without the overarching bias, without your ego pushing into it. You're not pushing anything into the firm. You're just saying like this is what I've discovered. We all just heard from the entrepreneur. it either confirms their views and sort of like how they want to rove through this market Or we found some challenges. And so it's it's that sort of like

14:27 And I think you all mentioned it on your podcast, which is that when you talk to benchmark partners, it feels like We don't have some hard stop. We can just keep going. Yeah. And that is the beauty of that Monday meeting, which is that we don't have a next topic to jump to. It's not like we're working through a list. And so we allow ourselves to have that open discussion. Agenda. You gotta go through the CRM and update the CRM. If you haven't updated your CRM, you're gonna get Negative points. Negative points. Yeah. Like I don't see all these all these calls logged in the CRM. I also think the like the the artifacts like they live in the memories and the live stories of the

15:07 Partners. And so like sort of if there's a curiosity in that direction Call up Mac, call up each other. Call up Mac, call up Bill. Um

15:17 And so the those learns, those stories, that wisdom sort of still still walks. Um successful. And one of my first experiences this Unbounded agenda on a Monday was I brought up a new part of it's like actually it could just be for like You you know that that's gonna be what Monday is like coming when your first Monday is.

15:40 We're GPs of other firms. Yes. Yes. Before this. Yeah, yeah. Yes. So we've all ready, boys, and like you talk to Bruce or whoever this like just Monday has no agenda. Like, I get that. If you can intellectually guess what. Yeah, I you get it and then I remember my first Monday, and sorry I interrupted your on your first Monday, but you sit there and you keep on waiting for like, well when are we gonna talk about Pipeline. You know, and it like doesn't happen and instead it's like these random roving conversations, but then

16:12 But then the you know the topic of substance will come out in a natural way. You have to really enjoy uh being around each other in order for that to work. One of the things we didn't talk about for our dinners is like We really you know, you just By getting to engage on these topics that aren't Just the business of our day you know what we do every day.

16:33 You just get to enjoy being together and then G and you get to know each other in different dimensions, some of the stories that get told. Um last week was a deep dive in psychedelics. For a deal or for a deal. Expansive Monday. But it is it is it is critical to then what happens on the Mondays and and everything in between. Sarah you and Tatum both mentioned. Lack of structure, lack of memo is not a replacement for doing the work that I assume happens

17:09 During the week. I'm curious, what does it mean? And in the meeting itself. There's no reason why we can't call somebody that we want to talk to when we're together. Yeah. Did you put them on speakerphone? Yeah. It's like, hey, you're on speaker with all of us. We have a couple questions for you. What is the how do entrepreneurs react when they get a call from The partnership. Hey, it's benchmark. Yes. No, I think it's

17:31 It's surprising to everybody, whether it's entrepreneurs or whether it's like people that we call in the industry, where it's just like, hey, we're all together. This question came up and we want to talk to you about it. It's like Oh wow. Like that's actual teamwork.

17:45 Like you're working together as a team. Mm-hmm. And I think you You both have investigated the venture industry so much that Sort of like all the stories that are told

17:56 A benchmark are all about the group. Going and accomplishing something and there's a lot of Like We did this, we did that, and then this happened and then we did this. And then I think

18:06 Broadly the stories are natural in the industry naturally tend to be one person. Like it there's like The venture capitalist is the hero. And the truth is That's hardly the truth.

18:18 And part of that is All five of us. Deep eng engaged on that and working as a team for that. And so When you call somebody together You're exercising that motion, you're exercising that muscle.

18:30 So One of the things we Spent a bunch of time Talking about on The first episode was

18:36 What the psychology must be like, Ben and I speculating of Being a around this table here as a partner with you guys. And Our thesis was that for a

18:49 ordinary group of people, it would trend towards mediocrity. But if you have a cultural norm of We are all bringing it all the time. then it trends towards greatness. And and why would it trend towardio mediocrity? Well because it's the line that uh

19:07 a bunch of other GPs said about benchmark when it was getting started was that's communist capitalism and it's gonna trend it's gonna end up like communism. Right. Um, but obviously that is not the case here. I'm curious what that like feels like for you guys on a day to day, week to week basis, knowing We've got this partnership, this relationship, we spend all this time together. But obviously we each need to like really bring it. So

19:32 Right before Sarah was joining. Do you remember this? Yeah, of course. This is what six five and a half, six years ago. Yeah. Something like that. So she texts me on a Saturday. She's doing So

19:45 been announced. We hadn't we hadn't decided anything. Like it was like we're but we were close. And she's like Do have time tomorrow. Okay. Um

19:58 And so anyways, we got brunch. At the pub. And She's like Eric, okay. What

20:09 What's our job at Benford? Like this is this is V three or whatever, benchmark, like what What is it? And I was like, Sarah? Job number one.

20:21 Don't fuck it up. No pressure. Don't work it up. Because I I think there is a real risk that you you could imagine a risk where you feel like you're born on third base or whatever the analogy you want to use is.

20:36 Uh and I think one of the things that you have to hope for is that every single person who you you add Feels like hey. I'm in service of the entrepreneur and it's my job to find

20:49 And work with and help. The next eBay, the next great the next great entrepreneur. And And believe me. I wake up

21:01 Every fucking morning. Like Hungry. That I don't want to be the beginning of the end. Yeah.

21:13 You want to contribute. And Wh where does that come from for you personally? Why why are you Because you don't have to because I'm a failed entrepreneur. I think that's I I th I think that really is is it

21:25 For me, which is I know what I know how hard it is. Because I did it and failed. Did not live up to expectations. Did not live up to expectations in I saw a company It was really hard and it didn't work.

21:40 And um And so I think you just like realize like how how difficult it is. There's a w They're so the privilege of the job is There are people out there who are super smart. to

21:57 Have an idea. That's often against the grain. That wanna change the world. In some way. And

22:06 You know the It's It's doing what you can to help them. And um And so

22:13 I I I think about that all the time. And and I think that is a That's a chip on your shoulder or whatever to to go prove. Uh the the um They're different motivational systems, right? Yeah, fair enough. Fair enough. I think some part of them

22:29 All of us. Some of those motivational systems are fear based. Don't fuck it up. Some are joy based. And I remember saying to Bruce, we had a long conversation about well, you know

22:41 You guys are moving on. I really don't wanna You know, I'm gonna leave the firm in a better place than I joined. And and it doesn't get to the core of your question, which is how do you maintain standards of excellence? Well Peer pressure's a really powerful mechanism in in lot of directions. So why t why does it bend towards excellence? And

23:01 I think we had this sort of insight that Um The joy you feel, the total Complete joy of working with a great entrepreneur. Isn't is contagious.

23:11 It's energizing. It's the life blood of it's the currency of our of our firm. And If we

23:19 Look up towards that. We can all recognize that benchmark probably isn't gonna be around in thirty years. I and Bruce said to me You don't need to keep me like benchmarks. Like we didn't try and start this so it would outlive us. I mean it was uh sort of they did name the firm benchmark, though. So like they didn't attach Rego to its name, which I thought was a uh um Telling um and

23:43 You know, but the idea that this is ephemeral. And and you said like everything's ephemeral. Like this structure, we don't have any pri we're institution, franchise, all those words make us nauseous. Because it it's really The nature of the business we're in is that we want to destroy the incumbents.

24:01 And I think we're collectively aligned around being anti authoritarian destroy the incumbent. So the last thing you want to do. Absolutely was the DNA of the founding of benchmark. Absolutely as we talked about in great so we want no part of this firm to become the incumbent. And so how do you do that? Um violent rejuvenation. With a common culture of collective joy in serving entrepreneurs.

24:22 And if you stay true to that. And ruthlessly true to it. Then you fire yourself. Because there's a day where you realize I will not give To the firm.

24:32 More than I take. In in in the case of everyone who's left this firm. And I've never seen this in the history of investing. You study all these firms. Every single partner fired themselves. And and it was that ethic that was recursive and you feel it and it's it's intrinsic in

24:49 I think it's also partly because the minute you're in a position to be the incumbent I'm the last man standing. Um Where the I'm I want my partners to destroy me. That's joy, which means they I've succeeded. Now we're big limited partners, so that's that's also joy. One thing I'm curious uh

25:08 What is the relationship of Past benchmark partners. to this group. Uh we talked about um. One of the things I remember, you know, from the research and hearing Eric, you and Bill

25:19 Both talk about is With Cerebrus. We gotta call Bruce. We gotta call the old guys. Yeah, like what what is that relationship like for you five? Um I mean the

25:30 official relationship is there are L Ps. Like that's the official relationship. Like there are L Ps With us like other LPs. Um the I think the more the feeling relationship is Like.

25:44 There you call them. and they want to see you succeed for all the reasons Peter's talking about. And And so they'd pick up the call and Um And help.

25:55 And put their network at work. Uh To help you. And they have a lot of insights and have seen a lot of stuff. Um I would say one way one shorthand.

26:05 They feel more like uncles and aunts. Than they do like parents or great. Yeah. Uh that's Perfect. And for listeners who don't know, because I didn't know until Chaith had just showed us uh the benchmark partners, none of you have offices.

26:18 Like you all sit at this crazy um round table. It looks like you're going to war and you're like you know trying to put the strategy up on the board and um and like You guys need a hollow deck in the middle. We had a poop emoji sofa. But but you have like uh there are aunts and uncles with computers over there. Like it there were not five computers, there were seven, eight, nine. Not fast enough, but they'll be gone soon enough. So yeah. It's fine if they visit. But not stay too long. They can watch the kids every now and then, but as soon as there's a real problem, it's funny, because aunts and uncle say, Here's your baby that's what happens. This is gonna be hard work. Oh no, no, no, no. You're the parents. I gotta go home. It's great being an aunt or an uncle. You know, I have five children and I can tell you I should have learned that lesson. I love my children dearly, but

27:20 Um my brother's in a good position. What um Oh okay, so picking up on that theme. One of the things that I always have appreciated about you all uh having done some co investments in past lives and just Your reputation in the industry. Um

27:38 The hard work. What are examples of The hard work. Like real examples. And we're gonna dish this to Chain. Yeah, I know you have a story here. Uh a very recent one. Um, not gonna do anymore. Well this the just to to Chain and part of the reason he's discompobulated. And has a cold brew in front of him. For those of you who are watching the video at five PM.

28:08 Is she got off an international flight. Three hours ago, four hours ago. But was with us on Monday. And today's Wednesday. So Here we are. Forty eight hours away can do math. I'm not as coming. Yeah, I'm not I'm doing great. Um So so what are the circumstances that lead to you suddenly deciding that you need to be in the I think this is a great story of

28:38 You know, how the firm And we as a group operate, which is Yeah, there was Um A portfolio company that was going through an important decision and

28:50 Um Yeah, there was There was a decision that was made. Friday morning it felt like There was a finality to that decision. It was like okay, this is what we're gonna do.

28:59 And then You know, people go to the weekend Emotions rise up, they have conversations with their friends. And you know, stuff starts to get off track. And I get a call.

29:10 You know, Sunday night. It's just like You know, things are getting off track. What do we do? And You know

29:18 We're all on a group chat. And so I put it immediately in the group chat that says Here's what's going on. I'm looking for advice. It was late at night and Eric called me At eleven or eleven thirty PM and we talk.

29:31 Sure. Thirty, forty minutes. Or we're just walking through everything. And what was so incredible about that moment is When you're in it.

29:40 It's really hard not to get wrapped up in the emotion. And sort of. Stop thinking logically. And what was great about that conversation is Eric was able to zoom out.

29:52 And say Look, we're in the service of entrepreneurs. We only recommend And guide entrepreneurs. It's ultimately their company.

30:02 It's their decision. And so But Eric said on the call is what what I would do As And what I know you would do

30:11 I know you take them would do that, right, right? Which is, you know, if you were if you weren't in the moment You would you would make the phone call and say, Hey This is your decision. I'm here and a hundred percent supportive

30:30 No matter what. So we got off the phone I made that phone call. But also here's what I think. Yeah, well. No, I think because you've gone through all the part had already yeah, it had already been done which there is no more thinking. It's your fault all we're a sounding board You make the call. All the facts, all the reasoning, all of that had been laid out. There was no more logic and there was no more explanation required. It was at this point.

30:52 It was emotional. And You know, after that conversation with Eric, I made a call just said It's your company. This is Sunday night. Then Monday partner meeting.

31:04 This is like midnight I made the call. So you're all in the circle. Yeah. And so we come in Monday morning, we're talking. Um

31:13 And then at some point during the conversation Peter said, This is not a conversation that should happen on the phone or on the on Zoom. It needs to happen in person. It's like okay. Let's do it. Okay. Yeah. Um

31:27 It's like okay. I should get on a plane right now. And so here we go, like time to go to San Francisco Airport. And then as I was leaving, Eric goes, Are you gonna come back for the acquirement? It's like, oh yeah, okay, don't worry, I'll find a way to do it. Am I getting on a last minute flight to Europe? Yeah. And you have to come back by a certain hour on Wednesday. Um

31:50 And what transpired Was As I was getting on the plane That meant so much and set such a positive signal. That by the time I landed

32:03 Everything had just like gotten in place. Like I didn't say anything. I didn't do anything, just showing that level of support and commitment. Change sort of like All the dynamics. Which is like

32:17 Hey, this is Oh, you actually meant what you said that you're here to just support me and support us and support the team. And you're right, it is our decision. And And that was it. It changed the tenor of the conversation completely.

32:33 Um I would say it's like also broadly a manifestation of like the orientation to investing, right? Like there's a lot of people who would say of investing Oh like we made this bet. Like you might hear that word a bunch of times. Oh like Well, it's a good bet, or it's a good risk adjusted bet, or hopefully it'll be a good bet. And there's a there's a very passive I'd like to own that asset. It's a metaverse play. But it sort of like pervades a very passive view of almost like trying to super forecast.

33:02 a set of odds and you did the diligence to super forecast those odds. And like we'll never we never talk in in that way. It's like w when we think about partner with the founder, it's not oh we want to make a good bet. It's like we want to make a commitment. And that commitment Manifest like as a group.

33:18 to be vulnerable and honest here and and and collectively get that feedback. And then with the with the founders to be on the field Denting those odds. Right, each year. Big years and a and and even a couple of times at every year. There's a there's important moments where you you can you can tell you can't transform necessarily when I'm saying we've got some silver bullet.

33:38 But that commitment Can really change the odds. No, each of us make one or two of these commitments a year. Not that's right, they're not bats. They're and they're There's a level of

33:50 relationship that then happens with the founders. Because there's only one or two. A year. And it's and what you end up feeling is that you really just care about every company that you work with. And the founders and the teams and everything and so

34:05 When these moments happen, it's not a transactional thing of one of, you know, a lot of companies with which you work. It's you know A founder that you really work closely with that you know so much about and that, you know, that level of support doesn't feel

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36:14 And just tell them. That Ben and David sent you. Can I ask and and this may be you know, drifting into a an area that's that's harder to talk about. And so uh we can abstract it a little bit away. We talked about Uber on our episode, but I wanna abstract it to, you know

36:29 how you think about this generally. The role of a general partner in a venture capital firm traditionally is that you have a fiduciary responsibility to your LPs to maximize their returns. And you have a a second fiduciary responsibility when you join the board of a company to the company. And it's hairy enough trying to balance the trade off. that'cause sometimes those things are at odds. You're representing all shareholders on the company's side. And with your LPs, you're representing, you know, their interests. And so

36:57 You then introduce this third thing, which is the thing you care the most about, which is support of the founder and empowering the founder. when do those things get hard? How do you balance those things? I assume most of the time you're indexing strictly to we're partnering with this founder and we trust them, but when when do you have to Juggle those things.

37:19 Yeah, I mean it's um People go to therapy often they only talk about the shit that's going wrong. And I think it's useful to think about what's going right. And if there's not a DSM for flourishing. There's there's there's a DSM for dysfunctions. We can open that book up and we can have all sorts of flavors of dysfunctional family.

37:38 And I I I think we could do that and that would be illustrative and informative about how it can go wrong. I would flip it and say when it works well. What are the preconditions of where you have alignment? And then and then you look at degradations from that. I think one of the words that sort of

37:54 vital to any durable founder Benchmark partner relationship is vulnerability. Yeah. If if there's everyone, it's a little bit more Caution or pause of I can't share this information with my

38:07 Then we've Um degradated the relationship. And we have to fix that. And you fix trust is fixed intimately one on one. You have conversations that allow you to zoom up to say, okay, what's the collective purpose? And I think that We could talk about Uber. We could I I have every reason to believe Travis is purpose was um

38:27 The biggest Most Ekstraordinary uber imaginable in Іно виракти газер. And and and in many situations

38:38 This was one of them. Pathologies creep in. And You learn this through a course of firm experience, which is when you start to see that happening. You need to

38:47 Act immediately. Because the minute we get othered, and it's not about us and this pr joint purpose, but it's you and me, it's my agenda and my LP's agenda and all that. And I sadly see that with a lot of the other firms in the industry because It's not necessarily the partner in the room. That's got the issue.

39:03 It's their partners that have told them that they need to do this or they need to that. And I see it, I'm like, oh man, I adore you. But your partners I have different feelings about. And you're here trying to rattle because they've said, Why aren't we meeting our plan? And so the entrepreneur immediately vulnerability snaps like that and it closes. And then you have no trust And now they come to us typically and they say, We got a problem with one of our directors. I'm like, Okay. So we'll you know, off sidebar with them and say, What's going on here? How can I help you with your partners? and

39:31 Um As much as you know you look at at situations where it falls apart, let me give you an inverse story, which is where it really only could work, I think, in this firm model. I was on the board of a company that wrecked somewhere between two to three hundred million dollars of capital. And I'm pretty accountable. Now I should be fired if this job actually had a standard and governance and practices and that company's called Docker. And I was just in Miami yesterday at their all hands meeting.

39:54 I remember the last time you invested it was called Dot Cloud, right? So the last time I did an all hands meeting with Docker was three years ago and there were sixty employees that that we'd spun out. Of the um the prior company. And the valuation was zero.

40:08 So we gone from over a billion, four, billion five to zero. And I was working with some of the great venture capitalists in the industry on that company. And Aside from inside partners.

40:20 Cricket's gone. All left bail. And I this is okay, um What was different with benchmark? Insight's another story.

40:29 Um Very fun. Um quote that we don't often talk about on the show. I don't think we ever talked about this on the show, but a very prominent firm has a uh One of their mantra quotes is focus on your winners. And I think that's what you're talking about here. Yeah. It was a pretty big loser. And um but the vulnerability that I was able to have with the team that remained.

40:52 To say we made mistakes, we're accountable to it, here's how we work through this. Because you know what, if you look up in the purpose of Docker, we're literally uh this is cliche. It's the beginning. you know, we have thirty million developers that use this product every day. Um yeah, that's the craziest thing. Unbelievable product success that completely changed the industry, but like business model business model and strategic failure such that there wasn't effective value capture. There was the value destruction, hundreds of millions of dollars of value destruction. My two partners, I came in and I said, I may be drinking my own bath water, I I like I don't know what to do here.

41:24 I was really vulnerable. And I said if I've gone off the deep end. No part of that truth seeking exercise would allow me to spin position blame be a victim. Um I was being accountable, and I said, like, what have I done? And they said, Not only do we believe in this company. Can we put it in the new phone too?

41:41 I thought, well, that's crazy. You have to have that founder level Luis joke, you know, employees can quit. Found unfound a company. Yeah. And I think we feel that way in our commitments. We can't uncommit. That founder permanence and and Oftentimes it outlives.

41:59 Every executive that gets recruited Um Not every, but like a hyper majority of executives. And so this case of flourishing and and then that was a case of Um Yeah, trust, all these things that come to stress. The LP's agenda, the founders' agenda, the com

42:14 It's not that hard. You just look up and say, What's the purpose of the company? Let's resolve around that and that'll sort the rest of the stuff out. That's the you know basic thing, the long term there really is no conflict, but cre can creating, you know, a delighting in a wowing and Uh impressing the customer and creating shareholder value. Our customer isn't it's it's not the founder. We say it is, but it's really the purpose of the founder. Yeah. And it turns out that purpose if that's the customer. Yeah. One of us may be deviating from that and we can keep each other accountable. And that happens internally. Like my partner said, No, the purpose of Docker is just the beginning. My God, is they're gonna get developers to program the global computer.

42:52 Okay, so then you could dust off three hundred million dollars of lost capital. So I wanna do um A big topic. we really wanted to cover with you guys in this session is Staying focused on early stage.

43:08 Not having a growth fund, especially when your entire peer set has become life cycle capital providers. And I actually think this is a good Entry into it. So Peter, the story you just told of like When things are not going right.

43:21 The benchmark approach. I'm actually really curious. When things are going right. Yeah. Your competitive set has said when things are going right We should go long.

43:32 We are going to interpret that. I think in large part as a competitive response to you guys during the fast Fab Four era. We are going to become life cycle capital providers. We're gonna put a ton of money

43:44 Round after round after round into our best. That was in response to there's a crap ton of fees to make on and the founders would be taking our money and we have the brand telling that was not like um benchmarks stayed so true to their thing that okay I think there are three classes of firms. There's a class firm that fit that There's Benchmark. And then there's a class of firm that actually We're making a strategic decision. We care about Carrie. We're playing for Carrie. We think we care. And and those were valid decisions on on that third class. But you guys have not done that.

44:20 Mm-hmm. Despite, I assume, every opportunity in the world to do so. Why? Can we ask Miles, you were the newest to to join. Well actually you have to do it. This is a great point.

44:37 To announce. We've got an even bigger diagram upstairs. How far can we stretch this triangle? I look, I think there is there is certainly um All of those all of those opportunities to do that. Um I think Sarah says it nicely in in part like our job w we're really focused on how do we scale the company those companies, right? And how as part of that having I

45:06 relationship that doesn't get sort of adulted by this question of the us making another commitment decision. It's like we're we're we're in and we're not evaluating anymore. We're not deciding what a fair price is anymore. We're not trying to decide um how to maybe make a make a strategic call with a company that optimizes for a moment for us to get more capital in. Like there should be we want to remove any chance Uh

45:31 doubts or alternative incentives or questions in in that relationship, right? So it can be fully, fully vulnerable. And If we do that well and we and we've Partnered with ideas with great purpose and and and uh

45:45 A long, endless runway to work on. We'll scale uh our success will scale through their success. And we don't need to scale ourselves. you know, in in independently of those companies scaling. And so I think we'll all

45:59 The beauty of being small is like we'll all do Perfectly well. But they're literally like million dollar bills on the ground for you to pick up if you were to just put more money in your own company. I I totally agree with Melson and I would just Add one thing is like

46:15 It doesn't feel like work if you love doing it. What do you love? Doing. And and I think that's the biggest thing which is if you love

46:27 Working with founders. then you want to spend your time Working with thou. And that means you don't want to spend your time Managing a staff that's scaling.

46:41 You don't want to spend your time Doing marketing. To LPs or others. Like You don't want to spend your time

46:49 Um Meeting. investments that are outside of your purview. Like it's just like that's like you want to spend your time with those founders. And I think that's a that's the What do you love doing? And and I think that's the biggest thing. I don't think there's any question

47:06 That over the last few years. The growth investors have done extraordinarily well. um extraordinarily well. And there was millions of dollars to be picked up doing that.

47:18 Um but But I think the question of like what do you love doing really Resonates. And one thing that's super nice is you know the cycle's turn. And the strategy persists through cycles. And so

47:31 I also don't worry about $100 million holes. Right. We were joking before we started, like. I would have met if we were here eating dinner. You you guys must be licking your chops right now. Like this is your time to shine.

47:43 Here in late twenty twenty two. So well, yeah. Um With the caveat that I think we sort of Because we're early stage, what does that mean? It's moved it's uh in terms of its definition.

47:56 Um we have faith that every year Some number above zero. a companies will be founded that are gonna be worth more than ten billion dollars. And then about every two or three years a company is gonna be found out that's gonna be worth more than a hundred billion. And it seems to be independent of the cycle. So Yeah, things get a little crazier when things are and they get a little depressed, but

48:16 The growth fund thing, I'll come back to answer it a little differently, which is that I Would like This group. I guess I'm part of this group.

48:25 To set a high water mark for a f multiple on a fund. And I think it's kinda fun to think about, okay, it's great you can scale capital, but you know If we had a twenty X phone. Can we get a fixed at fifty X fund? I'm not sure we can do that.

48:38 If we start All we're doing we're investing more money in late stages, we're lowering our returns. Mm-hmm. That's all we're doing. 'Cause our commitment is fixed. It's not like we're gonna be more committed.

48:47 So We're you could say we're getting more cash on cash for t yeah, but we're lowering our returns. And the hack of the venture business, which is coupling, you know, capital from other people and ourselves with uh the partnership that it comes with. I think it's a little more inflamed when you

49:03 stuffing large sums of money into a company as he gets, you know, as opposed to keeping it pure. And I will say, like what would make me proud is if this team maybe after I'm gone, you know, sets a new high water mark. They won't do that with a growth fund. And the rest of it, you know, it's it's like should we care that's cash in around yeah, but I also want to know with our limited partners say. Um There's nothing like a benchmark fund.

49:25 And when it works. It sets the pace in the industry. And so you know. It's sort of like there's the there's the What's the quote Sarah and I used for the team the other day, the Johnny Ive quote. Yeah. I was gonna say this. Focus is when

49:40 In some ways Every bone in your body thinks an idea is a really good idea. But you don't do it. And say no. And and it's it's a fine idea. We would I think I it's not to say we don't have opinions on later stage. Later stage. You would for sure have good return. It would be one of the best growth funds in the industry. And

50:04 We like to think so. But that's not if we're gonna if we're gonna do it. But I think to to be able to have that focus That you know, uh a conversation on Monday and our time together on Monday. Is an hour of roving curiosity of like fertile ideas the right at the edges that seem weird and bizarre. You gotta be weird. Instead of instead of instead of okay, what's the growth pipeline and you know, is that a good valuation? Is now a good moment to sort of get in.

50:31 And and I think it's the the focus is And we have to have a CRM if we did a girl. Sorry, like that it's you know, for us it is at the end like the we're all here because we want to partner with founders as early as possible. in that kind of relationship on the board. And Anything, you know, to this Johnny I've you know, just the focus, like like anything that distracts from that and we We have five people. Like there's not.

50:59 This is it. And like The capacity to take on the principal program, but we'll come back to the capacity to take on more things would Take away from are you know getting the room with that founder who is gonna build that next iconic company. And supporting the ones that we have. And so we just

51:17 We're forced in a way by the constraint of How many people, you know, the SEAL team of six people never being more than that. To be ruthlessly focused. And that's that's what That's what we're here for. That's super real. I mean the The just to validate it, like

51:33 There's lots of opportunities that you can always pursue and that seem like good ideas. And like we have this struggle at acquired. We're two people. Oh my god. And and and there's a thing that we know is uniquely differentiating, which is these like ridiculous Deep dive podcasts that are just us and sometimes we have guests like Wonderful to be here. Thank you for doing this with us. But we know that the most differentiating thing that we do is this like unique format that just we can do. Every time we start taking on more stuff, I'm like, Oh man, the golden goose is getting worse. I can feel the golden goose getting worse because we're doing other stuff. You're really good about it.

52:09 Keeping us both honest on that too. That's uh It's funny that you use that phrase. I it In two thousand eight.

52:17 I was This is the first time somebody said to me You should consider venture capital. I didn't join benchmark until twenty fourteen, so two thousand eight. And um

52:29 A very famous nameless Venture capitalist said. Our early stage program is our golden goose. How much AUM is that famous venture capital map? That early stage for that's everything that we do. Text. That golden views. Longtime listeners will probably know exactly what you're talking about, but

52:54 So Peter, I just want to clarify something that you said. It's interesting. You define the scoreboard as fund multiple. And it's not total cash return to LPs. I think that's an interesting like that's a clarifying mindset about the way that you guys look at this. Like I can tell you this I think of it as an LP. And The benchmark fund.

53:14 Of course again the purpose is not We don't come show up and say let's drive returns. It's it's it it would be alienating. Yeah, to everything we stand for to think of it that way. It's the outcome, right? Not the input. Um But I think the cash and cash multiple

53:29 Both as an L P and it's a real problem for L Ps, I will say,'cause we have large L Ps who look at us and like, Why do we waste our time with benchmarks? We're a toy. And I I say oh, can you say the number of your largest LP, like what what their dollar per fund. They're like twenty five, thirty million. I could get it wrong. I'd probably piss one of them off if listen to this. But just in the sense for listening in the context of a Harvard and Stanford. That's barely worth their time. Right. It Um of our retired partners are.

54:04 Indeed. Yeah. And uh Painful fees. There's some discussion among some people in the firm that that over time is the way the model sort of endures is that the LPs It's it's anyway, it's not. Um It's hard it's hard to say that the LP construction

54:23 has much to do with anything of our day to day performance. I do think this idea though of the principle of the firm being Um standards of of Asymmetry. And

54:33 or exposure to the volatile material to start up. Asymmetry is a twenty X, fifty X, hundred X fun. Yeah, and if we degrade that sort of misses the point, you know. Yeah and I want I want this to be and I'm already we're many of us are this place where

54:47 Oh We pay. Crazy. A as a GP. I paid carried interest.

54:54 And management fee. to my fellow GPs as an LP. And that's well, that's crazy. And this this this Oh you don't get like a GP allocation that doesn't I get a tiny in my view tiny little But for the for the supermajority of my investment in benchmark, I'm paying

55:14 Limited partner rates. And management. It's not tax efficient. But this is the point. We have aunts uncles, we don't have uh uh overlords that are there getting a lot of the other. But to the point of equality, right? Like at equal partnership. Like That it that is you know, taking it to taking it to every extreme. Yeah, yeah along the way. Peter.

55:37 In this case. Am I r understanding this right, that the longer tenure you have as a benchmark GP the worse your economic deal gets. It's it's the same. Well, that's a horrible way to characterize it. As your LP commitment goes up and you're paying fees and carry on. You know what? I think the counter argument The Bruce counterargument uh which I think is

56:03 is a hundred percent. Right. Is it isn't the worst economic it it's not a worst economic arrangement because the returns will be higher. So you'd be happy to pay the fees. But it's the Mike Merit's thesis of every successive generation of technology should be bigger outcomes because you're addressing bigger markets. You cannot get allocation to the benchmark funds. And so getting any allocation is gonna be better. So the alternative.

56:30 You're happy to pay the fees. You're happy to pay the fees and carry. Because It works and it's still the best I see. Your marginal economic deal goes down, but your aggregate economic deal goes back. Your cash on cash, even though your multiple goes down. Your cash on cash. A lot of times I think. We all learned from that. Uh okay, we one one more thing I want to say, because I think I kinda think only we can say this. You can't really say this. Um

57:01 On on the strategy before we move on. Um I think One of the most persuasive things that we heard in our research for part one. about maintaining the model is we definitely talk to entrepreneurs.

57:14 in the current benchmark portfolio. Who believe That aggregate in the long run, they took less dilution. by having benchmark invest and you guys not having a growth fund.

57:27 And having to put more money into them. Uh then they would have Had you or whatever early stage firm they had taken money from been wanting to put more money in in subsequent rounds.

57:39 Because just to connect the dots. If that had been the case. Then you would be Have a conflict. as that investor when things are going well, to put more money in at a

57:50 better advantaged valuation for yourself. And you don't have that complex. Versus the and and what you actually have is quite the opposite. It's not even because this happens all the time where someone is an investor and they're like, Oh, this company's doing well. I'm gonna preempt their around and I'm gonna see if I can get a slightly lower basis than if they went to market. And So that's firm A. Firm B is a not benchmark firm who also doesn't have a growth fund.

58:12 They go out and they raise at market rates, but then there is a benchmark brand. So like option C is take benchmark's money. And I think. And and you guys probably are are sure of this. Your companies tend to go raise better series Bs at higher valuations, at with more certainty than your average series A funded startup.

58:33 Is that the dot is that the picture that you're sort of Yeah, I'm just speaking purely in the realm of when things are going right. A company is super hot. the fact that there's not a conflict in a future around allows the entrepreneur to optimize valuation for future rounds better. than if you were to try and put more money in.

58:51 Yeah, I totally do that. Is this a question are we just selling for benchmarks? I I didn't think they would say it, but I think it's important that we literally heard that from multiple. the the founders own more of their companies Exit. Uh S one time, whatever it is. In this case.

59:08 For those reasons. And one other really important reason. Which is A founder is gonna raise a series B or Series C or Series D or an IPO one time in their career, maybe two times in their career. Yeah. If we're doing our jobs.

59:26 And the people around this table of all All done this. Multiple times. And you will help them. Raise better rounds from better investors.

59:37 Have a better Process. Um And get to a better outcome. You'd have to talk to the entrepreneurs that I've invested in, but I suspect if you were to talk to them.

59:47 Uh the Value uh that I can provide to them since I stopped being a professional venture capitalist as part of a firm. Exponentially higher than when I was within a firm. Totally. Like ex no conflict. Because there's no conflict.

1:00:03 And you can Do that. You can do that. You can help them through that that part. And that outcome results in

1:00:13 De-risked. Like the subsequent rounds are degressed, sure. There's I think there are a bunch of brands, firms that can say that same thing. Um

1:00:24 There's no conflict. I think there's very few firms that can say that. part and the multiplicative Plus the help. I think

1:00:33 should yield. better outcomes. Better outcomes. S strategy is just all about making trade offs and aligning all of your trade-offs so that they're a force multiplier rather than in conflict with each other. And if I had to sort of summarize why benchmark works, it seems like Every all the trade offs are actually just thought through very clearly and tried to align them all. So they sort of like Um

1:00:56 uh the play well amplify each other rather than conflicting with each other. There is one big trade off. With our model though. Um, that I think about all the time just because I'm a paranoid person, which is At the end of the day, like Our job starts like the thing that

1:01:13 How do we make sure we have that first meeting with the founder that's gonna build that next iconic company? Right. And so much of what we do is about maximizing that probability that we do get to meet that founder and then end up partnering with them. A lot of firms, I mean all the other firms outside of us.

1:01:33 Have Built. Machines around that. You know, you have legions of people at these firms. I grew up doing this. I was, you know, an analyst at Bessemer. Right at the whole college startups. Yeah. And so you have all these firms who have built these big teams to do that.

1:01:49 They Uh nurture relationships with seed funds, invest in the seed funds. Relationships with angel investors, incubators, like they have this machinery. That's smart. 'Cause it's all about making sure that every

1:02:03 Deal every round that happens. They're gonna be in the mix. Yeah. We There's five of us.

1:02:10 You know? And There's always the risk that like a found that one of those founders who, you know kind of mistake basically our our lack of outreach. For a lack of interest, when it's really just a constraint.

1:02:25 And we do everything we can, of course. Like it's not like we're just resting on our laurels and Waiting for calls. We're doing everything we can to make sure that we are in the mix. But at the same time, we are Limited. Even if you work twenty four seven, you still have a lot less hours. And so that is That's the that is the big constraint that I know keeps

1:02:44 Keeps I think all of us up. Mm. You know, just making sure how do we the founder that is gonna raise that round You know, many are intentional about like how do I make sure that I'm gonna find the right partner for me for the arc of this, you know, the journey that we're all gonna be on together, but

1:03:03 You know, you guys at this point have such a For better or worse, Mystique. Yeah. I think for a lot of Especially first time founders. That are younger that are earlier stage. They're probably like, Oh, I'm not gonna call I've got these other firms calling me. That's great, I'm gonna go with but like

1:03:18 Am I gonna call benchmark? Like that seems co like wow, that's a lot of pressure. Like and that's that's um That's a potentially lethal risk for us, right? Because if you think about us being the incumbent and come back to the fact that like, you know A number of the people at this table have a lot of capacity. in the sense that they could dive in, they can give their all and and and it's they're very available and so One of the things you think about is the shift in the last fifteen years since I've been here.

1:03:43 Um Yeah, the the Investments that are occurring before we get engaged have gone up by about a h I don't know, a hundred X, at least thirty X. And so I mean seed was not an asset class. Seed wasn't an asset. I thought I didn't know I was a seed investor, but I guess I was a seed investor. But a third of what I've done was like formation of a company investments, right? And so when

1:04:04 So weird when people say to us, so I didn't think you're at this early stage, because then some people say new relic was incubated. Yeah. And it's like you know. Okay. Um I think our our um challenge, and I think you say it well, is that um I would love to know.

1:04:20 Which is why if someone sends us something and and anybody who listens to your podcast, but I start with the premise emphatic yes let's meet. Because I have always will create time. As much as it may impact we when I don't have enough time to take that next marginal meeting, I shouldn't be practicing.

1:04:36 And What I would love to know is the people who send it to us say This is the biggest favor I can do to this entrepreneur is to open this door because the gold plated, whatever terms you want to use, high quality experience they're gonna get, it's gonna stretch their thinking. And there's so many times when someone comes back, even when we don't say yes and say, I'm so glad we met because I learned something that really helped shape the course of the company. And So the the point of this is

1:04:59 Our our competitors, if we call them that, they're our peers most of the time, have tried to build vertical systems, which is to say integrate into the very inception of the company all the way through to the last strip of capital going in as they go, you know, off of the whatever. From seed to IPO and beyond. And sounds uh familiar. Seed to grave. Yeah. And And one of the one of the strategic Um vulnerabilities we have. Is that uh That people

1:05:25 Tell stories. that we're this way or they're that way. No, we're just like everybody else, but we're highly available to meet and and we're quite responsive and The last two or three investments I've made were an example of the following, which is that there's there's an angel in the ecosystem who saw a deal going down. And they said, You know, you probably should talk to Benchmark. And when they did.

1:05:45 We committed in in the last two instances in less than a day. Oh. If the if we knew it was only a day, we would have talked about Then you would have taken a week if you had money. But this is illustrative because the system we built is to do just that. And so our biggest risk is that people tell stories. And I think sometimes the stories are propagating their agendas. We're widely available and open or we're we're most times an emphatic yes for someone who would introduce something to us.

1:06:12 And and and what we'd love to know is the person who makes the introduction and we honor this says, Wow, I just did a huge favor for the founder. Now we have to earn that every single time we meet the founder. Every meeting. And we don't always get it right. We s we've screwed up in the past. We've been less than fully present. Okay, we know we take that r seriously. But um That that's the that's the vulnerability of the model, which is that right capital always carries its agenda. Oh, let me tell you about the way we're this, we're that and it's like and it's always threatening and it's attacking other layers and like We're we're hoping that we play a different game, which is like, you know, serving the founder's purpose and like show up and and be decisive less than a day. That's pretty common. All right listeners.

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1:08:37 Do you do besides The five of your twenty four seven being on. What things do you do to keep your radar operating to to try and address that. Yeah, how do you solve that problem? Yeah.

1:08:49 We all have different ways. I mean it's you know, there is no single way for us, I would say. I mean I like I always talk about having an air game and a ground game, you know, and For me like I You know, it helps me learn to to write.

1:09:05 And then you know, you write about things like areas that you're interested in and it tends to be it's kind of virtuous loop also of than the founders who are thinking about, you know, building a marketplace or A next, you know, social product, social network will See something that I wrote or or Bill wrote or whoever wrote and then kind of come into the fold that way. Um

1:09:26 And then there's I mean, I think like you you have the The consumer, you know, the consumer lens that you have it you have a little bit of a wider funnel that you have to kind of keep. You never know where these things are going to come from. There's so many different domains where the next consumer company might come. I think like the engine the B to B stuff, the developer oriented companies are Closer to the ground. Yeah. I think

1:09:49 We all have our own strategies. And I would say The one thing that's always interesting is to compare sort of our different strategies of sourcing and how Investment, how we source investment. Um I was sharing this note internally.

1:10:04 Which was that I found that A hundred percent of the investments that I've made as a benchmark partner were all sent to us By An entrepreneur.

1:10:14 And not necessarily an entrepreneur that we had backed. It was oftentimes an entrepreneur who had met with us once or twice or we engaged in their process and we didn't get to the finish line with them. But they enjoyed the process so much. Going back to what Peter said. is they went to the next entrepreneur and said

1:10:31 You should go to the process, like Just talk to you. That's the most meaningful introduction we can get. Yeah. That's that that carries so much weight. You have'em to one of these dinners. I think it's in part because like There isn't

1:10:47 really like a process. Like you know, like if there's if there's diligence, people are like oftentimes founders will ask, Well what's your process? It's the funniest question. I I don't know. Like we're just we're gonna explore this together. Um I think to what Sarah said. So what you're saying, it's like the Elon Musk's tweets. Yes. It's exactly like that. Let's just text back and forth a bit. What did you do today? You do as much diligence as you need to do to get conviction. Yeah, and I I would say um I think of it uh the the experience hopefully is great for for the founders in part because we're not trying to sell internally, we're trying to truth seek. Mm-hmm.

1:11:36 the coming in meeting with all of us or meeting in small groups of us is not us like trying to get some information again to like tr super forecast some odds. It's to It we're putting ourselves in the shoes'cause we made the commitment to start working on this and work together to say Okay, how how will we think about navigating that? Like where could sort of um

1:11:57 you know, full starts or you know, local maximum as B and how could we realise the full purpose? And That comes with dynamic sharing of stories and history and learnings from the past. And I think you find um

1:12:11 hopefully that's sort of leads to a lot of the introductions and and and come out of that is in part because it was it was sort of this reverberation of discussion around the potential that they had And and how to navigate that correctly. And they got an interesting view on their own business together. Um And and that's I think the best founders

1:12:30 Ask. questions on these things. And so like one of the things that That I've noticed is Like the the great founders will often use their fundraising process to get Right.

1:12:42 connections and introductions and you know, sometimes it's customer introductions, sometimes sometimes it's just like luminary like people connections to people who've been there before you We just went through this process on a recent investment. And we introduced the the the founder to Other CEOs were further along.

1:13:01 And She extracted knowledge basically from them and in not in a r in a reference context, but in a literally like, How do you build the company? How did you make this decision? How did you know when you had product market fit? How did you raise the next round? And in and hold and build connections that way. And I think I I think that's a sign of

1:13:24 That's what it's like whenever you meet with someone who's worked at Amazon for a long time. It's like scary. You sit there and they're silent and they manage to just extract all this information from you. But you know, you said like our processes as long as it is for us to get conviction, but actually I think it's really important that it's a process of getting conviction on each other. And and that should be part of it. This is, you know, I I like one of the things that makes me sad about kind of some of the conversation in the industry is this like

1:13:56 Come like just the idea that a board member is just somebody who shows up. It's kind of like it feels like that's what Everybody's been reduced to and We hold a higher bar for ourselves, like we We we you know Try to have that level of commitment.

1:14:13 That ends up manifesting in all different ways for the company, whether it's helping clothes like an I C engineer or, you know, whatever. No, having those like late night conversations or whatever it is, like That is In the best form can be

1:14:28 a really meaningful relationship for the founder from the and from the company from the very beginning. And a founder should realize that that is like, you know, of course you get into the The Anxiety and the stress of am I gonna get funded? What are the terms gonna be? All those things, I wanna get back to building my business, all that. But at the end of the day it is this relationship that you're beginning.

1:14:53 And it's really important for the founder to recognize also that They are getting conviction through the process on what it's gonna be like to partner with that person. There's this uh trope in the industry, right? Which is You wanna be the founder's first call. And it's like I've never really liked it in so far as it's like very reactionary. It's like, oh they'll call me, I'll pick up the phone and and respond.

1:15:14 Just a little more. I think it's a that's that's a low bot. I think the hopefully founders would say of us Like we're we're the Best call up. Like they've they've been proactive and had the space and thoughtness and context and trust to be able to do that.

1:15:28 Um I remember when uh when Peter and I worked on air table. Um No.

1:15:34 Pretty recently, pretty um uh close to the the initial investment, um right after it happened, Peter, uh you could imagine it was a decently high price in some ways, like a high multiple. Yeah, okay, let's press sales, whatever. And Peter Peter came in and and was proactively sort of shattering the frame. And saying let's give away more for free. Like why why constrain this? and squeeze juice from what we have where let's unfur this even further. It's a database at the end of the day. Why would you constrain People putting stuff in a database. There's so much that happens on top of that.

1:16:06 As you're evaluating mutual fit on an investment. Uh between the entrepreneur and benchmark. You know, in E Boys there's some famous line about Venture capital is more a balls business than a brains business. And like let's stop using that phrase immediately. But it's so evoic phrase. It's the most e-boys thing ever. It seems to me benchmark has shifted to become much more analytical over time. Do you think about that? Do you think about what the right balance of you know, gut feel and courage versus having done analytical things, yeah, I would disagree with that completely.

1:16:41 I would say that we're not particularly analytical and So it still occurs. More than a brain space. No, I think it's it's it's very like gut driven and it's like it's um I would characterize it as like It's a set of discussions that you have.

1:16:58 That resonate or don't resonate. And it's like I really want to commit to this. in this puzzle for the next ten years. And let's go do it. And there's gonna be a lot of like fulfillment here. And if everything works and we serve that great purpose that we're all aiming for, then the financial returns are gonna be excellent. But

1:17:15 There's no sort of like outcome scenario analysis here that says like Here's the ten percent upside. Bullcase, bear case. These are all things that you know. Those of us that came from other places had it all done.

1:17:27 And one of the interesting things is You know Watching the firm Externally? And seeing how this works inside of boardrooms, like Miles just talked about an example, you know, I was on a board

1:17:39 Um with Peter for a long time before I joined here. And one of those elastic. Yeah. That's right. And One of the things that 'Cause I was on a number of boards and I would see all sorts of board members. And one of the things that stood out to me

1:17:54 That I aspire to and I modelled a lot of my behavior. after was every board meeting the amount of preparation that Peter would do ahead of the meeting I mean he was by far the best prepared board member I had ever worked with. Ever. And the number of discussions he would have, the number of calls he would make

1:18:12 And just how present he was. In the board meeting itself. Um Was just so Farnab.

1:18:20 like any other board member that I'd worked with, I was like, I need to model my behavior That because that is the model board member. And I don't think that work. That dedication, that commitment comes from any sort of analytical work you do on the macro. Because if you do, then you start getting tied to your own biases.

1:18:39 You never let The company, the founder The team breathed. Because There may be a thesis, but you rapidly pivot to something else because it's working, or you're getting different signal. And so

1:18:51 I think that there's so much of this that is just Instinct gut feeling. emotion, commitment, et cetera, et cetera. But it's Not analytical. I think most of the investments we make

1:19:04 Yeah. differs, consumer, enterprise, marketplace, like all of them are different in different ways. There's just very little data to analyze, period. But when you're looking at something that's like a consumer social app that seems to be catching fire, like there are things you can know, like viral coefficient or like uh how you know we go we grow the thing that's the thing that's a little bit more than a lot of those things can lead you the wrong way. The uh the truth is in this market oftentimes you're making a commitment before

1:19:32 There's enough Endureing data to really know. No it is, but Which is different than ten years ago. Ten years ago Benchmark was making commitments when there was like like Uber, like Instagram like it was early, but there was data proving that like I think I think of it More as like um

1:19:48 I always think, you know, in a way of the to make great investments you have to be Okay, looking crazy, maybe even stupid in the short term. On the outside. Like and then but it comes from a place of deep conviction when you're

1:20:04 when you're in front of the entrepreneur and they have they see something that other people don't see You feel it too. And nobody else who hasn't had that conversation sees it. And and so from the outside and you see all the time like it could be People always critique other people's, you know, investments like oh I can't believe

1:20:22 That person did this. I can't, you know, exactly. But I remember when we invest in in in chain analysis. Yes, but it was when all the ICOs were going crazy. Everybody was thinking about tokens and Two people I remember calling me after we announced it was like You invest it in a Like a SaaS company? Like shouldn't you be putting the money in tokens or like

1:20:49 Not wrong, but also not right. Like it looked Like s you know, a stupid investment in the beginning before it can have the the room. And so I think part of the relationship that we then have with each other is That comfort that something you know seeing something that can be contrarian.

1:21:06 Or misunderstood from the outside and You have to nurture that. Well benchmark. Uh n no pun intended, I guess. Oh

1:21:17 Good our failures are. Web Van was a really good failure. Awesome. And I you should make that bet a thousand times. Shame that most venture capitalists felt towards maybe contempt towards the venture firm just before I was here. And and it's laughable. It's stupid. And If we start to look like we're

1:21:38 Um Which is why we get worried about the long term degradation of eventually we go away, so it all doesn't matter. But I would love for us to be a personal. I think we pulled it off in the last fund or two. Like we have a Is that include Fun Seven? A real stinkers. Honor the fact that we are still just as gullible. Just as naive and fallible as the prior generations.

1:22:02 Not yet more so, but we're working at it. I I think some of those are really like that's a good webinar is a good venture investment. Great. Um and and I think There are set of them. I think of them in in my head in recent funds were like Yeah. Yeah.

1:22:19 Definitely a good venture investment. It was a good use of venture capital dollars. It was a worthwhile endeavor. An entrepreneur pursuing that. should get funded. And they should get funded by the best. And they should have

1:22:33 We should do everything we can to give them the best odds of success. And have another partner be on the board. What? And I think that if you just look at

1:22:48 You know. The last yeah, I joined right before Our ninth fund. And so I've been here through fund nine and we're now deploying fun ten. Um

1:22:58 There's a lot in there that that wasn't I mean most of it is not analytical. And I would say like if you just look into it You know, there are gonna be some bad investments that come out of it. But doesn't mean that had we gone through the process and we look back at how we made those decisions. It's exactly what Eric was talking about. It's

1:23:17 That was worth the shot. It was like That was worth the effort. Well and the p the pivots validate. why you can't be super analytical. It's like did you think that the game was getting a little bit more than the best pivot. Like multiple X Discord next door. Documents and business model. It's like Uber I mean like learning from Lyft's discovery of the the Uber X model. Like that's the business. Yeah Okay, so it's like you have some starting theories and you get you get in the mud.

1:23:44 Yeah, and it was always funny reading my old investment memos, and I've only been doing this four or five years, but like Yeah. the amount of wrong like I don't think I could have predicted how wrong I was about what the businesses would ultimately go on to do when you're doing this like ridiculously early stage stuff. That's why we talk about memos. Yeah. Yeah, right. There's no no artifact in this. We don't we don't do portfolio reviews. At least they they try and do portfolio reviews and I and I don't show up. So um I do remember one attempt at a portfolio review a while back.

1:24:14 And it was like The apex of failure at benchmark and Yeah, I think I have one of those in my portfolio now. You guys can guess. And and Kevin Harvey said This one has the dual benefit.

1:24:28 Poorly executed. It turns out that a bad idea well executed is a problem because then you give it more money. Or a good idea. Probably executable. That hurts because you think, oh I mean, we can think of companies like Friendstar and think, oh But the bad idea, bro, actually. Those are the second best investments in Venture, like that clearly that was wrong. Yeah. It's the middle ones that are kill companies. I love I love Mar McDonald's joke, where he was like trying to explain the fact when you get in front of you doing a stand up, that bus has already died, of course, is um And nobody laughs. He says, then I start laughing to myself. These people have paid money, it's a whole thing, and I just did this thing just to make them laugh and nobody laughed. And and we have a few of those. If we're not doing that. That was the early days of a claim.

1:25:19 Can I ask, I had a really dumb question prepared that we sent over, and I want to try and ask a smarter question. The dumb question was Well To maximize your chances of getting that You know, great. decade making company in the portfolio, double the partnership, keep the same number of board seats, raise twice as much money, double the partnership. That way everyone's managing the same amount of capital that they are now on an average basis. But I would ask the opposite question.

1:25:42 If the thing that makes this all work is the fact that all of you can be ridiculously focused and say no to most distractions on your time. Could you raise less money and have a more concentrated portfolio? I've thought about this and I think it's an interesting Uh provocation.

1:25:59 There's the Extreme, of course, which is to raise no money. And just go on the boards and say we're tired of the hack. It's a hack to take. I'm gonna I mean tell this is a funny story because you say, Okay, but oh it's nice to meet you. It's imagine dating and then you have a relationship and it's like by the way

1:26:16 A a bunch of people that you don't you and I I don't really know them very well. You definitely don't know them. They're gonna be moving in. And they're gonna take up about twenty percent of your cab table. And and they they're pension funds. They're very decent people and they're Uh noble causes. Why are they on my cap table? It's like because you gotta work with me. Like, but I didn't choose them. Well, you kinda did because I bring them along wherever I go. And I they aren't packing their stuff right now in your basement and they're gonna have more equity in this company than your VP of sales or your VP of engineering. Well that doesn't seem right.

1:26:49 And so We you play with this idea and um As an LPM benchmark, I don't like you know there's a limit to the take this idea. GP, I think. As a GP, yeah, yeah, so so so but I think this interesting construct is that what's the residual value? The that is separable from the capital.

1:27:09 Brees used to joke. We can pay a higher price'cause we add more value. So Isn't there a better discount? But we can afford to pay a higher price and get better terms if we add more value. It's a joke. But it the point is the same, which is that we've we've confused these two things. Capital, which seems to have been free. Now it's not free.

1:27:30 Okay. So now they're maybe are fused again in capital and partnership. And I think that You gotta done some deals, right, where you put no capital in. There have been examples. Uh and where we don't There's some awkwardness to talking about it publicly. One of the ones that's probably a good example is Tinder. Yeah. And You know, Barry Diller said, What do you want?

1:27:50 It's like well we want equity in Tender. He was like, Shut up. What do you want? We want equity and tender. And like, but I don't need cash. It's like So just imagine being a fly on the wall of Benchmark. negotiating with Barry Diller. That must have just like I would I would pay a lot of money to watch that. It's it's it's more

1:28:11 bizarre than your imagination can allow. So go there and then go past that. And you'll get close. Um. So Th this this question of like can we decouple is something that I kind of look at as like the residual value of the the firm is are we are we generating multiple equity points and for our contribution. And I think that's what I would love to know is our best reference, which is a founder is able to say, I look at my cap table and I look at where the equity went. And and this is what burns me, which is there's a lot of people on that cap table they'll say,

1:28:43 They bought a ticket. You know, they were in the they got a ticket. Versus They Made. a huge impact on our total success. And and that's equity. That was the best return on my allocation of that equity. And every time you're taking on on on dilution, you're asking that question of like what's the return on that on that allocation? I think a lot of times the return is like

1:29:04 It's a hundred percent towards the person who got on the cap table, not the other way around. And and that's our ethic, and it maybe there'll be a model where we're not gonna be CIA where we take ten percent and all that, but you know, the capital light, you couldn't raise less. Why not? I bet if you raised four hundred million in your next fund and you have five fewer companies, your scoreboard, that multiple, could go up. I'm the person that the last discussion of like we were gonna do it the same size phone, I'm like, Why don't we cut it in half and people thought well then people uh others will say we're becoming irrelevant. I'm like uh no but it's just so different than they say now. Anyway, we might one day. Yeah. It's a four twenty five, go down it.

1:29:40 Two hundred. Yeah. Okay, so forty. Was it forty per partner per year or the old benchmark website. That was such a good line. Other firms are overfunded with over twenty million per partner of capital. The machine. It's such a gift to humanity. The um okay, so

1:30:01 Last big topic. I think a lot of folks we asked a lot of folks in the ecosystem. What do they want us to ask you? We're the we're the vehicle for that. Universally. Everybody.

1:30:14 Responded. They wanna know. What is the process? What's involved? How do you think about Who's taking a the next seats at this table.

1:30:25 So how does that work here? Thank you. Two hundred and fifty hours of board meetings together. It's a ten year long process. You have to serve on the board with one of us. We have to watch you grow. And then we say, you know that person would be. You think Mitch was an exception, Bill. Uh Mitch had, you know Two hundred hours of board meetings together, maybe you know? Did Eric, you didn't have any You're the only one who didn't have it. No, no, no, no. I know, but but but literally that seems to be the model of like serve on a board with a benchmark partner. And that's how you get to know people and build really deep relationships is you need to go through shit together.

1:31:01 Like I mean, I think it's a good thing It can the shit can be the company is going really well and we have to react to a super dynamic environment. But like Getting coffee every once in a while is not a great way to get to know should I take someone on as my Spouse effectively. I I think that's right.

1:31:17 And I actually think it's it's actually I was just thinking about it'cause The It's been different for everybody, I think. Um Yeah, I think the story with Peter is

1:31:29 Like he was repeatedly showing up competing for investments that benchmark Before he was here. Was working off. You were walking out the door as they were walking in. Yeah. And and so like that's a that's that's telling, you know, the story with Miles. is Miles was there before. Like he he invested in Benchling before us and Super Great before us

1:31:52 Um and was was early on air table at the same time. And so like that's a really important Like signal. Like, okay. You know, Chain had worked with Peter on the board. Sarah. Just I just squirt by

1:32:09 Yeah, actually S Sarah, how Sarah and I, I think both had no Like professional overlap. Yeah, yeah. Um I in that context. Um And who made the first phone called The Issue? I've lost track.

1:32:26 I don't think Peter loses track anymore. I think the way in is um Something that's Uh common what we've heard for the people we've recruited and and maybe Eric's an example of this. Um

1:32:47 But it's that they don't want to join a venture firm that the like the only firm they could imagine being at Would be benchmark. It's the last job you're gonna take. So there's this underlying Love of the craft. And it sounds again a little um romantic, but it's intended that way. I I left Stanford Business School, embarrassed that I went there, maybe at some level.

1:33:07 Um And I and I dreamed about getting a job at Benchmark. And Bruce canceled his meeting with me. And then I waited and then you know, at another time he was late and he sent me a handwritten note saying, Oh, I have bigger things to deal with basically is what the note set and uh And then and then like you know I think he gave me like a T shirt. I not and then seven years pass. And I think I sent like typically I sent him a note say, Hey, I'm working at Excel just to see if I could catch his interest and he said, Good luck

1:33:36 Did that motivate you? Like when you think it in the back of your mind. Do you know Peter Finn? I mean I feel like I do. And then Kevin and I went on a board together. um at a company that was not particularly successful, and I was wondering why is Kevin doing this investment? And you know I said, What does that say about benchmarking? He later confessed that he felt the same way. But uh You know, and then and then you get you get to work with the firm and there's something that I would say underneath it, which is that um

1:34:12 The the totality of like I would do the job, even if I didn't get paid, that sense of all in, this is a craft and I so am oriented towards that. When I first met Matt in two thousand five when he he around the time he presented Facebook to us at um At Excel. You knew immediately that he was going to be in the venture business. It wasn't like, Well, one day maybe no, Matt was going to be a great venture capitalist because the single most important thing we have to do in our job is to

1:34:40 partner to God. In his case to both Reed Hoffman and to Mark Zuckerberg. So you think, Okay He's overqualified at some level because he's these are giants of our industry. And

1:34:52 Um, if you're doing that. If you're really close to one of the great and you were doing with Ben at Pinterest and I of course knew about Sarah because, you know, we both try to invest in GitHub and um That's a funny story for another maybe for drinks later. Uh yeah, I so I think uh if I remember right, another firm did that at a very high valuation. Yeah for the time. Seven fifty, I think was the post. But like at the time for a series like that was the first institution. There might have been some secondary selling. One of the things I found is when the secondary selling it does tend to clarify.

1:35:28 People's interest and price. It's one thing if you're just selling equity on the cab table, but when you're selling your own shares, you start to get really focused on the But you know, we're not running an auction, but it is the highest price. All of a sudden, you know, that seems to be the right answer. Um anyway, so so the point is that You know, we orient towards Uh extraordinary.

1:35:49 So to get close to benchmark, get close to extraordinary. Who are the best entrepreneurs? you know, f build that rapport and relationships. And the single best thing that we can see is that you've earned that trust and respect in and to to be a confidant, to be a partner to The great ones. You know, or serve on a board with us with one of those entrepreneurs. Um I guess there's some self-serving interest we could say, send us your best investment. That will help. But our responsibility is to be, you know.

1:36:17 The um the best introduction that you make if you're looking at a great company. And if we if we don't if we fall short of that We deserve to be told and and and punched in the stomach. Can I maybe I can ask a a related question, which gets to Eric's this is what we love to do and wake up and focus on every single day. And that's

1:36:37 If each of you have a sort of bias on things you're obsessed with. Like Chaithan, you wake up in the morning and you look at net retention rates. Like it's just your I don't know, what I'm trying to come up with some boring enterprise software thing. But like Chain just like eats sleeps and breathes sales kickoffs. This is getting better for me. Chain is so far underground right now that he well, he showed up, which I'm really grateful for. He did, he's here.

1:37:13 There are there are probably d a dozen people on a short list that you're like, gosh, we would kill the work with that person. And ultimately a factor in that probably needs to be there's a thing that they're obsessed with that we need on our team at this moment in the technology industry. Is that part of the calculus? Like do you look for where do we need additional strength? Loosely.

1:37:37 I I I mean I I think about it and it happened. It didn't It didn't it wasn't intentional. Um at least for the part. When I joined benchmark in twenty fourteen.

1:37:48 at the end of the Fab Four era or at the whatever Um as as you called it. Um You know, the partnership, the four were Predominantly

1:37:59 Consumer investors. Like Peter was working on Twitter at the time. Obviously Bill with Uber. You know, Mitch with Snapchat.

1:38:09 um and and Discord. And not having just come off Instagram. Um among others. And And like Which that's just re all that just that you just list it is ridiculous. It's ridiculous. And and so you join

1:38:25 That group and in a way it was just like the perfect time. As someone who had some enterprise exposure. And and then the You know, lucky enough, the first investment that walked in the door was confluent and Um for me and and so But now if you look at the group, it it's almost so like

1:38:44 it's almost turned, right? In in the sense that there's a lot, lot more enterprise heaviness. That wasn't intentional, I don't think. Um I don't like it didn't come up, but It happened over time naturally. And I think this is just a a big element of benchmark overall, which is the entrepreneurs lead the way. And the markets lead the way.

1:39:04 And and we're we're following that. Um in in some sense, and hopefully seeing it In conjunction with the market evolving. Um, but it's less intentional, so when when Chain joins and And does modern treasury

1:39:20 Um as an example Um Like or Sarah joins and does chain analysis. Like you're Y th that wasn't intentional like oh, there's like this big crypto thing and Sarah's an expert in crypto. I don't think she knew anything about crypto at the time, or maybe she knew a little bit. I don't know. But that wasn't a that wasn't part of it.

1:39:36 Um, and so I think the the the firm evolves. And if you go back even further, obviously the firm had semiconductor expertise. Like we have no semiconductor expertise anymore. I guess you do. Than having expertise in it. And so I think that I think it's just the the market takes us and entrepreneurs take us. There's a we make a mistake. Repeatedly, probably once a week in the portfolio of confusing

1:40:06 Phenotype and genotype. Meaning we hire people because of the phenotype that's been you know expressed because they have experience in areas X, Y, or Z. And the underlying genotype doesn't actually get our um attention. So you would tend to lower your your selectivity when someone has some background of relevance. The issue that you're seeing at benchmark today

1:40:28 is sort of a question of like where's the equity value been created? Where we're the ten to hundred billion dollar outcomes of the last seven to ten years. Well consumer has been A little m more ephemeral. in that regard are a little harder to to capture because of the incumbency effects. So what's going on in the phenotype of the firms, it may look more tilted enterprise, but I can tell you the genotype is we are

1:40:49 Total generalists. So I can say Very explicitly. I think that somewhere between AI Crypto And

1:40:59 But I think those areas. Don't have the incumbency. of some of the traditional, you know, network effect giant trillion dollar market cap companies. And so Our genotype is such that we will then go populate those arenas and and you'll see us become What looks like experts in those areas, but that's not who we are. So is our next partner likely to have uh

1:41:22 Some background and experience in an area with high disruption. Absolutely. Yeah. And it'd be great. We got Kohler to join the firm at the still the beginning court quarter of the social in the social over. Who knows? I mean you could say I the issue with like a social over is like we have a big problem with incumbency. Yeah and distribution. being constrained.

1:41:42 Uh on top of that, y yeah, I mean it's um you know, capitals was, at least for a long time, limitless. So You you're looking at things at a little increments at the end. It's sort of like, you know Uh, Feynman complained about this in physics, which is like if you came thirty years after the theory of relativity, you were sort of cleaning up the the message. Yeah. Whereas the people are there the first three years look like geniuses, even they were third rate physicists. They're working on first rate problems. We're we can be first rate, you know, whatever working on third rate problems if we're not um in areas of high disruption. So what are the areas of high disruption right now is something that we obsess over. And and you know, but you don't think about it as like we need

1:42:19 Uh expertise in that area. I think the genotype is we want somebody that is a roving Curious There's no great venture capitalist, in my view, that isn't Aspiring to

1:42:31 wide dynamic range. This is why Eric is gonna become one of the great consumer internet investors of the next decade. He doesn't know this no faster. But you know. John Door, Mike Muritz, we so my my former partner, Jim Gatz. Those are the people who shown it you can do both.

1:42:48 Because the underlying connection with the entrepreneurs, they're not so different. The the they're they're similar gestalt and if Chain's next to the he'll probably be there to the uh uh internal. They're already crossed the line with SaaS. Yeah, like again, I think even if you look at the greatest companies, right? Amazon, Microsoft, Shopify, Square. Like they're all crossover, right? Like and even if we took something of high disruption like AI, right? What's happening in generative media and large language it's it's um unbelievable. Right. Are L M's just gonna be a consumer thing? Absolutely not. Exactly, right? Like the the first version of it might be something like Jasper, right, which is actually a B to B product. But there's really interesting opportunity of what what is a um what's the version of a Twitch relationship that that starts to form and sort of a parasocial relationship, but it's with a bot, potentially, right? An artificial character that has a relationship with you. And

1:43:45 Is that a consumer thing or is that an AI thing? We just did an LP episode with Mutiny, and they're using GPT three to like generate landing page content. I think the technical ex like We're not it's not our The founders and entrepreneurs know the product. They know the technology. Like that's what they bring. That is the thing they bring. That's their invention.

1:44:05 And they've discovered the inside. And they've discovered the inside. Here we go. But there's a whole bunch of things that come to turn that technology into a product and that product into a company that's really valuable. And Like that's the part that we can partner on.

1:44:24 How many success stories are there in Venture and even in through Benchmark's history of That market was Dead. That market is done. Or That market doesn't exist. That market isn't real. That's the best time to invest. Yeah. And it's like the founder figuring something out.

1:44:40 And having that insight. You're sitting in the meeting. You're sitting in the meeting. And you're like three minutes in. And the founder says something.

1:44:52 That you've never heard anywhere else. Nobody's also has said, nobody's put a blog post out on it. Nobody it's an insight. And that insight Is It that's the magic.

1:45:04 Yes, that's obviously how it should work. And that's why I think I would say like to say there's a specific specific sort of um set of experience one needed, like would imply we'd be maybe thesis driven. It's like I don't think anyone here is terribly thesis driven, but like we're very change aware. And

1:45:23 There's the question of that pulling The curiosity and sort of roving into it. Not like with physicists with a set of rules we've got to check or a net dollar attention that's gotta be a set but like net dollar attention. How do you guys deal with so In my you know, prior life is trying to do that for, you know, a living. Poorly. Um One of the hardest parts I've found about early stage event, I totally agree with everything you're saying.

1:45:50 I You guys and you vote with your feet. You only have one of those moments in the first three minutes of a pitch. Once, maybe twice a year. Maybe zero times a year.

1:45:59 The rest of the day is can get kinda depressing. Like you can learn something every learn something in every that's the m that's the amazing thing about the job is Every day people come in and talk to you about something they're experts in. Or you can help someone who is great. Maybe you don't see it entirely, but like someone who's fantastic and help them. And they and they They'll teach you something. And you'll learn something.

1:46:23 And you'll just ask Questions And you know, they'll tell you and you've like learn. There's a firm. That shall remain nameless.

1:46:33 Why don't you have a clock on your wall, Mike? I don't know. 'Cause then maybe we're in a meeting with all a B and then we look at it and it's not so good. And this person said No, no, no, no. We move all our clocks six minutes forward. So if it's a bad meeting, we can get out. So that's a good way to deal with it. We we didn't do that. Like people suggested this and they did that. So I would just anytime you go to a venture firm Check the clock on the wall and look at your and then and then you know, are they playing this. This clock doesn't work, by the way. Yeah. I was looking at it earlier and David and I made a comment to each other like that is a really subtle

1:47:06 Way to put a clock in the room. But if it doesn't work, then it doesn't work. Oh look. It's two thirty, it's time for dinner. Um We can't l another thing we can't let go. Um What's the purpose of the principal program? To honor the statement that force consistency is the hobgoblin of little minds.

1:47:31 Okay, you gotta unpack that. God, Peter's just on another level. You are Are deeply committed to the equal partnership model, clearly. We don't have principles, so we have principles.

1:47:57 Amongst us all who pushes us and challenges us as well. Yeah, uh maybe I'll loosen up the the response. We don't know what we're doing. I mean, like and and Blake is amazing. And you meet Blake, you want to work with Blake. Do you find a way? Find a way. And and I think that Is it a program? No. But I you know, uh Miles seems to like uh Miles's got a British accent a little hierarchical, so He should hire an associate. I don't want to work with that associate, bless his heart. But uh maybe you call him a junior partner, baby partner. But but you won't become too um scare you. Blake is amazing. You find a way.

1:48:40 And Um It's been a pretty good launch pad, it turns out, for people who come in for our non principal principal program. I think it's programming that you don't talk about that you're talking about. Is it false consistency or force consistent? It was Thoreau who said that, or is it Emerson? It's exactly right, though, which is that when you have a little inner fundamentalist. You need to have a conversation with that person and tell them to calm down.

1:49:05 Because you know, no, that doesn't mean we're gonna have eight partners and a growth fund and uh then there's some hard lines. We just say But this is you know, getting closer to people who are um embody our values, but uh at a different stage in their career, that's okay with us. You gotta break your rules when you you find an excellent circumstance. You do I definitely can too. Like I I don't maybe this is like an institutional version of this, like The times in my life when I've held too tightly to something is when like that's like your is this a way to like Hold tightly to the thing that's like a core value of the firm, but not too tightly. Like

1:49:40 I I think we should call it a fellow. But we constantly constantly orient it to special people. Yeah. And sometimes there's a sp there's a special person like Blake. I'd I'd wanted to work with Blake for quite some time and Sarah had too. And we said Blake You wanna come work together. Yeah. Like let's do it. I would say that we don't have associates. But

1:50:03 Hire an associate. We don't have principles, we have a principle. We have EIRs, we have venture partners. We it's just You're trying to figure stuff out. We have Venture Partners. It's just you come to the table

1:50:19 And you say I want I wanna do this. I wanna go explore this area. I wanna go work with this person and you just kinda figure it out. And like it's not always straightforward, right?'Cause there's

1:50:30 People have their own constraints. And so you're trying to fit Their own model of how they can engage with you. And so we should just figure it out. And so None of that should violate the authenticity

1:50:43 Right. Of what we do. And how we interact with people, and I think that's the biggest thing that we have to be protective of, and that is what we're protective of. And the relationship we all have and how we work together as a team. And I think if we preserve that then anything else The fees are to be used.

1:51:00 for exactly those kinds of experiments. Um And And and those types of trials. And and you can do Anything you want with that. I think this is the longest discussion we've had on the idea of a principal program.

1:51:21 How we think about EIR, so You know Um, Eric had worked with Josh eventually. And um Josh was gonna leave eventually and just explore ideas. And I was like, Okay, well why doesn't he just come hang out with us and explore some ideas? And we call it an EIR.

1:51:36 I knew Ruby from heap. And he had left heap and he wanted to explore ideas, so I brought him in. Those two knew each other from prior lives and then they were like, Oh, we're both And benchmark exploring ideas. Why don't we like share ideas that we're exploring and then they decide to start a company together.

1:51:52 It was like If you're an airplane. Which is airplane which Eric is on board of. And You know, that wasn't sort of like this. We have a hyper like thesis. Yeah, yeah, yeah. Thesis and we need to go attack this thesis. So let's go recruit some EIRs and let's go set them up and let's give them my none of that. There's so much

1:52:13 Um, beauty and amazing things that can come out of just like Organic development and opening yourself up. To organically finding cool things. is I think ultimately the goal. Yep.

1:52:24 All right, what did we get wrong on the episode? Or what could we have? I think there's I'll start. I think one of the things that um You all talked about it on the episode was swim lanes. Oh yeah.

1:52:38 And areas of focus. Mm-hmm. And I think what we had just a little bit. I gotta say it felt extremely weird to be naming each of you in that episode. Like w when we did our Sequoia and Andreason episodes, like these things were about firm strategy and like institution building and programmatic, thoughtful And then we got to the end of the episode and I was talking about each of you as individuals and articulating things that like you care about and invest in. And on the one hand, I'm like, I feel gross. Like this feels really reductive and strange and pointed. And then the other hand It's kind of the point of benchmark that like it actually is just about you as humans and not about This like institution and strategy and so I think like if you look at

1:53:19 Even when it was um Bill, Peter, Mitch Matt. You know, it's it's If you just look at the kind of work that they did. They were all generalists then. I mean Peter was doing consumer and deep developer tech and You know, Matt was

1:53:34 working with consumer companies and he was on the board of Duo, which was a a security, right? And So An AI company. Right. And I think if you as you just look You're all in the pool with no kind of

1:53:50 Companies and ideas that we're bringing to the table on Mondays. That's the thing that you see. And there's a lot of encouragement around the table, which is like if you're interested in something, something's like really hitting you at the moment, just go for it. Go meet all the relevant people, bring'em in. Let's all learn together. Let's figure this out. And it's it's never the conversation that I've seen in other places, which is like whoa, whoa, whoa, whoa, whoa. Stay in your sector. Like I went on a drone kick and definitely Peter was like Stop. Stop droning up. The only way to kill the conversation about drones is we brought in D drone.

1:54:35 We didn't do that first. Probably done pretty well. All right, other stuff we missed? You know, you when you when you look at anything from the outside. And you were there, you can't help but say Mm-hmm.

1:54:51 particularly like books are written, because journalists tend to write the story from the perspective of a loner. Who's projecting this sort of Shakespearean plot. If I if I was there, what was the intention? I've read these books about us at Uber or Twitter or we work I'm like it was so much more interesting. You guys did a remarkably good job of capturing the essential primitives of the firm. I don't know if it's interesting to the people, but it is right that this Um You know

1:55:19 deep commitment to equality that Bob feels. permeates to this day through everything we do. And from the way we treat our um people that are in the investment team and to to the Notion that

1:55:33 You know, we book most of our own meetings. Like I I you know, we we do so ourselves'cause we're not below anything or above anything in I think that that that's the through line that you captured so So well, and I think it was, as you say, asymmetric. And was it in reaction to the the era's leading venture capitalists? I don't know. But I can tell you that there was a humanity to it that always felt

1:55:53 To me at least something you you really You wanna honor. Like if benchmark's anything, it's that we're available, we're flat, there's no arrogance and It's uh you guys got to the central core of that. And that comes really from Bob's history and it's you know, it's just say it's about our companies, right? The founding Two or three employees set the culture. And it doesn't change unless there's some catastrophic event where it has to get reborn, but

1:56:16 Good luck with the on it Twitter. You know, that culture. was set in motion. And the its root system goes so deep. We'll see what happens. I'm very interested. It's a good lesson and if it does transform. Yeah.

1:56:29 then that's a that's an example of one form of transformation. If it doesn't, then You'd say okay. This believe me, people have been trying. I thought Twitter. I was like, yeah, we had Twitter. We have a actually there's been a lot of discussion in acquire Slack about like why have you guys not covered Elon on Twitter? And just like

1:56:51 That no, that's not what we do here. Yeah, that's we're not the T M Z of Silicon Valley. I'll have eight years of experience there. Oh boy. All right. Well we should end it on that now. Yeah. Thank you all. Thank you. Appreciate it. A lot of fun. All right listeners. Now is a great time to talk about one of our favorite companies, StatSig. Yes, there is a reason why the best product teams rely on StatSig, whether they are iterating on their core product features or shipping AI powered experiences at scale.

1:57:25 Yeah. In the crazy speed of today's AI world. Shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next. This is where StatsIG comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed.

1:57:56 to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. Ah, so fun, David. Man. What a special experience.

1:58:14 Thank you to the Benchmark partnership too for inviting us doing this. Having a pretty candid conversation with us. That's not what I was expecting going in. No, no. They're very gracious hosts. Yes. Well we love your feedback too. Uh please

1:58:28 chime in at acquire.fm slash slack, come hang out with us. Get your sweet t shirts from the merch store. at acquire.fm slash store. We also have A dad hat that is limited edition. um in part because that is the only way we could embroider it. And so I wanted them to be great hats. And so uh you can go and and get that just for the next couple of weeks.

1:58:49 So make sure you get your order in if you want one. See, this is how we know that you are not a dad. Because you're like Actually like caring about the details of your hats. Once you become a dad Uh

1:59:03 No, you show up like wearing appropriate hats whenever we go visit various people around San Francisco. I I often see you in their merch. Like it's a premeditated decision. It is it it is, it is. But that that's without the kit. That's true. That's true. Uh, all right, well uh LP show if you want to listen, the episode with Jale was awesome on the B2B profitable growth playbook. Uh her story's super impressive, so check that out. becoming an LP at acquire.fm slash LP or searching LP show. in the podcast player. Of your choice.

1:59:34 Without listeners, thank you or thanks to the very good people at Benchmark and uh We'll see you next time. We'll see you next time. Who got the truth? Is it you, is it you, is it you Who got the truth now

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