Acquired｜Benchmark Part I

All right, let's try and do it as one and we're gonna hustle okay, let's try and do it It's just one but I don't think we should hustle because especially those early days.

That's what people don't know Alright, no trade -offs.

And we'll let the chips fall where they do So very anti benchmark approach we're taking to this episode trade -off nothing go full -depth into Gen 1 and Gen 2.

Fine. Yeah All right We'll see on this guess Welcome to season 11 episode 4 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 am an angel investor based in San Francisco and we are your hosts The hardest thing to do in venture capital is create those massive Outsized returns that only come from investing in one of the five or so truly important companies each decade Then once you've done that the next

hardest thing is to keep doing it with an entirely different generation of partners Today we are gonna talk about a firm who built one of the top Franchises in venture capital benchmark that has incredibly managed to do both our Sequoia and Andres an episode were about the empires that those firms chose

to build and This episode is about the Empire.

They chose not to or maybe well There was a flirtation with an empire in there as we'll get into there was Benchmark famously believes that venture capital doesn't scale.

They have zigged when others have zagged They have not grown their fun size.

They haven't tried junior partners.

They don't have a platform team they are not multi -stage and I've heard they don't even have a CRM and Yet they are the big early backer of so many of the world's most important companies There were early e -commerce companies in the 90s like eBay e -shop 1 -800 flowers or ariba Semiconductor and networking

companies like synopsis and juniper networks And of course in the next generation open table zillow twitter instagram uber we work snap riot games asana discord new relic and our friends of the show at modern Treasury We are at the moment of the changing of the guard Bill girly is not a general partner

in the next benchmark fund and the majority of the current partners joined in the last five years They clearly transition from the eBay generation to the uber generation and the question is can they do it again?

Will this third generation of benchmark continue to set the benchmark for all time?

greatest venture capital funds in history I like what you did there you do what you did there?

Ben teered this up before we started recording of like I really like my intro on this one if you don't like it stop me But I like that.

That was good. Well done.

Thank you. Well listeners.

We did a very different thing in preparing for this episode We're trying to embrace raising the bar in different ways as the show grows So for this episode we talked to several current partners at the firm several former partners some of the original founders of the firm portfolio CEOs and even public

company CEOs who used to be Portfolio CEOs to get a whole bunch of different perspectives on benchmark Okay, listeners now is a great time to tell you about longtime friend of the show service now Yes As you know service now is the AI platform for business transformation and they have some new news

to share Service now is introducing AI agents So only the service now platform puts AI agents to work across every corner of your business Yep And as you know from listening to us all year service now is pretty remarkable about Embracing the latest AI developments and building them into products for their

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matters Ultimately service now and a genteck AI is the way to deploy AI across every corner of your enterprise They boost productivity for employees enrich customer experiences and make work better for everyone Yep, so learn how you can put AI agents to work for your people by clicking the link in the show

notes We're going to service now comm slash AI agents All right listeners as you know after this episode you should come join the slack to talk about it with the 13 ,000 other passionate smart kind members of the acquired community We also have a merch store that we launched at acquired dot fm slash

store If you've already gotten your sweet sweet gear You should tweet it at us at acquired FM and we will reshare some of our favorites And if you are dying for more acquired go check out the acquired LP show by searching for that in any podcast player I feel like every episode now I'm constantly thinking

like are there gonna be any quotes from this episode that should make it into the merch store I know on the Sequoia when I was thinking about Doug talking about burning cigarettes in his arms and he wouldn't flinch Market -sized unconstrained from pesos Absolutely Alright David take us in and listeners

Please know this show is not investment advice David and I may hold investments in the companies discussed and the show is for informational And entertainment purposes only.

Ah man. I'm so excited for this one.

There's so much Silicon Valley history And I feel like we covered Sequoia we covered andreas and and there's this missing gap in between the two of them and this is benchmark We're gonna talk about it today.

Well, I hope we can do it justice I'm so pumped.

Okay to understand benchmark We start in the 1990s in Silicon Valley But I don't think you can actually start with benchmark.

You have to start with another firm I'm sure you know what that firm is.

Are you going TVI? Are you going Meryl Pickard or you going somewhere completely different somewhere completely different, but I bet you can guess it The 800 pound gorilla Kleiner Perkins indeed in deed and not just Kleiner Perkins, but specifically John Doers Kleiner Perkins after a very successful

generational transfer of their own from Kleiner and Perkins to John Doar Here in the 1990s.

I mean John Doar we've talked about him this season on the Amazon episode.

I mean he was alone the 800 pound gorilla in the VC ecosystem in the early 1990s and specifically Leading up to and during the internet era, you know You think today of the top VCs the top VC firms you think Sequoia you think benchmark you think Andreessen founders fund He was all of that a haul in one.

He was just Absolutely at the top of his game He had joined Kleiner.

He did not start his own firm.

He started his career at Intel working for Andy Grove and from that sort of just like Don Valentine when he got into the business and done in his very Don way said He had an advantage.

He knew the future John also knew the future.

He saw the PC wave coming.

He did compact He did into it He did Sun which wasn't the PC wave But it was in that air and that of course led to Finode Kostla then joining Kleiner and like this dominant franchise And then when the internet started man, he did Netscape He did Amazon as we talked about he did Google if you were an ambitious

Young venture capitalist in the 1990s in Silicon Valley and that was a big if you could do very well as a venture Capitalist in that era without being ambitious, but if you were ambitious Boy, you needed a damn good answer about how you were gonna beat John Doar Oh, yeah to set a little context for how

you could do well Even if you weren't ambitious there are 100 times as many venture capitalists now as there were then those businesses didn't have the economics either in terms of gross margin or Addressable market size or zero distribution costs all the things that make big tech big tech now didn't

exist then so for a while The capital base and the number of venture capitalists actually made sense with the much smaller technology ecosystem but there were always those few years of basically arbitrage where Innovations happened that made these much more interesting investible categories But there

were still only a few venture capitalists looking around at each other like oh my god and valuations were so low I mean it was crazy when John and Mike Moritz did Google at a hundred million dollar valuation in the series I you know that was earth -changing So to understand John you know we've painted

the picture of how dominant he and Kleiner were There were two very specific aspects to his style incliner style one was he was Unquestionably the guy the guy is a good way to put it.

He was the CEO of the firm He was the leader.

He was also the best player on the field.

It's like if he was Michael Jordan and Phil Jackson and the front office he did everything so that led to plenty of situations like we talked about on the Amazon .com episode of he called Tom Alberg's wife he Aggressively came in to try and court the deal win the deal and then he would try and pass off

the board seat to a junior Partner and Jeff of course didn't let that happen but many entrepreneurs did yep the other very particular aspect to the Kleiner Perkins model at this time was they had adopted this idea of a modern kuretsu Within a venture capital firm and this is sort of funny to think back

on now But it made sense at the time you have to put yourself in the context of the 1990s a proto -internet ecosystem really this was the AOL days leading into the Netscape days His dev deals and distribution Was a lot more important and different than it is now It wasn't like you could just have an idea for a company

Spin something up on AWS put it on the internet get distribution for free on social It didn't work that way you needed deals in place product market fit was a lot less organic and quite frankly a lot less real because you didn't get this immediate signal of users finding your product and paying for it

in this sort of high -fidelity organic way You had few products available to you and they were whatever products got done in these deals and so True product market fit ended up being like an equal peer to your biz dev prowess unlike today a core part of this kuretsu model a Kleiner was we helped facilitate

and some would argue they would do more than help facilitate they would force these partnerships biz dev relationships upon their portfolio companies and when your portfolio companies include Netscape and Amazon and excite these would be quite valuable deals both for excite and for the young startups

Which of course sounds great if you are funded by Kleiner You're sort of joining this cabal where Kleiner will sort of pull some strings behind the scenes and orchestrate what deals makes sense for them as a shareholder across all of these companies and Theoretically everyone will benefit from it by being

a part of the cabal so of course KP was unquestioned the best venture firm at the time But they weren't the only top tier firm in the sort of bulge bracket quote -unquote of proto VC firms at that point in time There was of course sequoia and Don had done Cisco.

They were about to do Yahoo It was up and coming but they weren't yet the dominant Sequoia that we think of today.

It's amazing. They were almost a 20 year old firm But they weren't Sequoia as we know them.

There was Greylock based out of Boston There was Venrock, of course and IVP one of the early institutional firms David We have to quick history on Venrock because listeners are gonna care about this.

What is the rock in Venrock?

It would be Rockefeller yes, it's pretty loose connection at this point But was at one point the sort of venture arm of the Rockefeller family office Or one of the Rockefeller family offices spinning off to do a venture fund Indeed so there were all those folks there were the summits and the TAs kind

of at the growth stage And then there were a couple other Venture firms that you've probably never heard of probably never heard of them because they don't exist anymore And among those were two One called technology venture investors or TVI Which had one very notable investment one very very notable

investment that we'll talk about one sec and another one Merrill Pickard Anderson and air and the two of those firms Just so happened to share the same office building on Sandhill Road amazing they shared 2480 Sand Hill Road part of the quadrice office park complex right there in Menlo Park and there

was a reason or at least I'm assuming that there's a reason why They were in this building Because that office park was the original office of a little company called For thought which we talked about many many years ago on acquired.

No Really? Yes. Oh, I had no idea and for thought were the makers of a little Mac application that then became a Windows application called PowerPoint.

Yes For thought of course got acquired by Microsoft absorbed into the office juggernaut and that their campus there in the quadrice office complex became Microsoft's original Silicon Valley campus on Sandhill Road renamed the graphical business unit Amazing now Why am I saying that it was appropriate

that these two venture firms were based there at this point in that building?

At least for one of them appropriate well, it's appropriate that TVI.

Anyway is based there Yes, who wouldn't want to be right in the thick of?

Microsoft Silicon Valley business unit outpost but TVI Technology venture investors they had the unique honor and what made them single -handedly really part of the then top tier of venture capital firms is they were the only Venture capital investor in Microsoft yep one million dollars to own five percent

of the company I don't believe they raised another dollar until the IPO Imagine owning five percent of Microsoft at IPO I don't know how long they held or I imagine there was a pretty rapid distribution to limited partners there But that is a rare honor Really nothing else mattered at that point, you

know You could hang up your shoes after that one and declare victory, which is some foreshadowing Because that is exactly what would happen now.

So these two firms they shared this office building there at 24 80 Sandhill Merrill Pickard had done pretty well for itself as well.

They had done Palm Pilot remember Palm Pilot.

Yep Oh, yeah, one of the few successful companies out of the pen computing era.

They've done a bunch of semiconductor companies They did rhombus.

That was a big winner for them And so both of these firms the founders and the senior partners of these firms TVI had made all this money on Microsoft Merrill Pickard had done really well and TVI it was Dave Marquardt right who made that investment in Microsoft and was sort of the leader of TVI Yes,

but not one of the founders.

I don't think he was part of the sort of second generation But they start to be a whole bunch of conversations within these two firms about Hey, you know, what does the structure look like going forward?

The firms are getting a little longer in the tooth these older GPs maybe aren't working as hard anymore.

You know, they've made their money We've got some junior investors here that are out doing all the deals Maybe we need to rethink some of the ownership structure of these firms and it's worth a quick digression here About how does a venture firm actually work economically?

Even today, I think most people and a lot of entrepreneurs don't really know this There are multiple parts to the economics of a venture firm You think about a fund and the carry within a fund and that's pretty straightforward, you know Which partner gets what percentage of the carry, but there's also the management

company Yes Typically the way that this works is the founding partners of a firm own the management company that management company is an LLC that has basically the employment relationship with all of the founders and then it is the sort of umbrella parent over each of the funds So each fund has its

own carry that gets cut up in different ways among all the different partners for that particular fund But over the umbrella of the whole thing is a management company, which you would sort of think of Typically an LLC but you can think about it like Kleiner Perkins incorporated And of course that's

sort of the governance of do we raise more funds?

And how big are those funds?

But there's also economics.

Of course, there's the economics on a fund by fund level Which is how is the carry from this fund getting distributed and a percentage basis across everyone with carry?

Yeah, the performance gains from the fund.

Yes But then of course there's the fees and the fees flow into the management company It's a fee paid to the manager for managing the LPs money and the owners of the management company Decide how those fees get paid out to think of this as the salary the fixed part of compensation and venture capital

Now here's the important factor The split of the carry in any individual fund while it tends to reflect ownership in the management company These are two wholly different entities And so what you often had and what you had with all these firms these old firms back at this point in time Was the management

companies were owned and controlled by the people who founded the firm and nobody else And so you might let some of your junior partners in for pieces of the carry and future funds But you wouldn't let them into the management company.

So that meant they had no governance.

They had no control They had no right over anything and they didn't have Contractual right to any of the fees they were just employees.

They were kind of at the largess whatever the Managers of the management company decided that they should get in terms of salary and allocations in carry and typically this would be high numbers I mean ideally as a venture capitalist You're getting paid more on the carry than the fees a lot more but it

has always been a well compensated profession So it's not like the owners of the management company were back there saying we're not gonna pay any cash out and no They would pay a high salary But then they would get to keep everything Remaining in the management company at the end of the year and sweep

it into their own bank accounts There's this amazing New York Times article from 1995 why the New York Times was covering politics of Silicon Valley venture firms I don't really know but this is deep and like full -on real housewives this article So in this article New York Times quotes an anonymous

source If Merrill Pickard had divided the rewards more equitably They wouldn't have split up and then there's another quote in the article from one Robert Cagle partner at Technology Venture Investors as we're talking about and he says Today the power is much more distributed Says the young Robert Cagle.

Nobody can claim that they are making all the money for the firm The resentment is in the air among the younger partners of venerated Silicon Valley Venture firms at this time and when they say today it is much more split up You know, you could imagine Bob Cagle is sort of saying this a little wistfully

I envision a future where this is the case, but it seems like at TVI and Merrill Pickard This wasn't the case at the moment.

Well now just who is this Bob Cagle character?

Well, his story is actually pretty freaking unbelievable and kind of explains why he might harbor some resentment for this Privilege that you might say of the older generation.

He grew up in Flint, Michigan Yes listeners that Flint, Michigan his mother was a single mom So family worked on the production lines for General Motors the era falling on hard times It was rough you think about Flint Michigan even today.

That is a hard Scrabble background so Bob was a great student in high school, but there was not a lot of opportunity there In fact, the only opportunity he had to go to college of which he was the first member of his family to go to college Was to go to an institution called General Motors University,

it's fascinating that this existed which was a training school for members of General Motors employees families And the idea was it was kind of like a quasi vocational school to get them ready to work in the industry Yeah, so I believe he works in the company for a little while and then he ends up getting

a chance to go to the prestigious Stanford Business School and while he's at GSB He gets a chance to meet and intersect with someone a few years his senior who had graduated a few years before Dave Marquardt who he had talked about earlier from TV.

I This is right as the Microsoft deal is going down quite fortuitous after GSB Bob goes into consulting Boston consulting group and then Dave invites him to come back and join TV I and he does really well there he does synopsis the big EDA company It's still around today Avant via soft bunch other companies

that do well the firm makes good money on and so after 10 years He's kind of like all right.

I've done well here.

I've risen up from nothing But you guys are still holding on to the keys to the farm and all the economics Speaking about Bob and their impression of him at the time he had an almost religious fervor That anything other than an equal partnership was just morally wrong for a venture capital firm And

I totally understand where he's coming from here.

I don't think Bob had any idea of the incredible amount of knock -on effects that would come from that Absolute steadfastness of an equal partnership and we're gonna spend The next however many hours of the story really diving into What are all the trickle -out effects and different emotional states that that puts

a person in at various points in a company's lifetime?

This is the beginning we didn't talk to Bob But I don't think he first saw just how powerful this was gonna be I think it was motivated first and foremost especially given his background by like a sense of fairness and like morally like what is the right thing to do and fair and Proper rewards for proper

work and then almost certainly to Economics was a core motivation here, too.

He was like, hey related to the fairness.

I'm doing the work You guys are making the money, you know, you're taking my money here for sure And we did unearth something that I've always been a little bit curious about because people always say benchmark is an equal partnership It both means that each of the partners in a given fund have equal

carry But also all of the current GPs own the management company without paying for it The management company is always just given to whoever the equal current GPs are if we do a deep dive on it someday I would be very curious to know how the Kleiner Management company transitioned from Kleiner and Perkins

and Caulfield and buyers to John Doar But it is not common that it is just given yep So here's Bob.

This is the milieu.

We're in and Bob in particular, you know, he's quoted in the New York Times talking about this He feels more strongly than anybody About this idea of an equal partnership going forward and as you can imagine these discussions within TVI They're not able to get to a resolution.

Shall we say within the firm?

And so They decide you know, everybody's made a lot of money, especially the senior guys.

They decide to quote unquote This is the term they use declare victory and say you know what?

We won we won they won.

They did they did Microsoft they won like what more did they need to prove?

What a spin hey the firm's kind of blowing up the people we've trained don't really believe the economics are fair They don't think there's a way to fix it within the current culture.

And so therefore victory Victory we're declaring victory and calling it a day So that's the end of TVI.

They manage out the current funds.

Everybody remains on their board seats, you know, it doesn't just disappear This is a thing with venture capital firms.

There's a long Tail because all these existing firms and board seats existed.

Everybody's got to manage them out I think Microsoft had gone public so at least they were able to distribute that at this point Yes, of course, it's worth noting that Dave does after TVI go on to found August Capital Yes, so Bob and future benchmark aren't the only ones that come out of this also August

capital also in 24 80 Sand Hill Road like it's in one building, you know Man, it's so funny even in the 90s You know We joke about the original Silicon Valley history of there were like 10 people and everybody knew each other This is all going down in one office building Yeah for how concentrated tech

was venture was much more concentrated much more concentrated Before we actually get into the formation of benchmark here It is worth lingering on Dave and TVI and the Microsoft investment for one more moment When I was looking up what the terms of the deal were for the Microsoft investment there's

some interesting color shared by Dave about his style of investing and you can see that the seeds of Benchmark really were present in TVI's demeanor toward what they believed about venture investing So here's an excerpt from Dave Mark word The venture business is an intensely personal relationship business

and it's not an industry that scales well He says he would never consider adding a value -added service companies should do that themselves Bill Gates wouldn't let me bring in outside PR people and marketing talent That's what founders do.

My view is that the CEO ultimately is responsible and accountable for everything They are the ones who make the decisions the VCs are there to support and be steady?

Oh, I love that I love that you found that that could have been a benchmark partners quote, but it was Dave Mark court when he was at TVI Totally.

You could copy paste those exact words Yep, so back to Bob here I think he really would have preferred to keep going at TVI and like convert it to an equal partnership Like this is what he was agitating for But obviously that wasn't gonna happen.

So He's got to go figure out something else.

Yep. He believed this so deeply in his soul that it is worth Not continuing at this firm or perhaps even not continuing this firm period in order to realize this dream So what does he do?

We're now in probably like early 1994 ish He calls up his good buddy Bruce Dunleavy.

He trots up the stairwell Maybe takes the back stairs to go see his buddy Bruce up at Merrill Pickard now Bruce had gone to GSB a few years after Bob and when Bob was at BCG after GSB Bruce had Interinformed there now Bruce Comes from quite a different background than Bob shall we say Bruce grew up

in Texas and Was a high school football quarterback in Texas, which you know is big deal He goes to Rice University where he's very erudite.

He studies English literature I don't know any other young VCs who studied European literature in college and somehow Managed to weasel their way into the industry.

I don't know how you did it David I don't know how I did it either definitely would not work today You were destined to become a podcaster.

Yeah, right It all works out in the end so Bruce had gone on to work in the PC industry and then importantly at Goldman Sachs and then joined Merrill Pickard and in his Venture career he was the one who did palm pilot.

He was on the rise He was one of the young Turks within Merrill Pickard, but remember He's a few years younger than Bob and so Bob goes up to see him and he's like TV eyes breaking up.

I really believe in this equal partnership thing the Internet I think is coming like Netsky if you there was happening here We're positioned to do this and this is like early 94 early 94 you and me This is the same time Bezos is driving across the country and starting Amazon.

What do you think about?

Bustin loose out of this place and you and me start a firm together And Bruce is like Well, Bob, I'm honored, but I don't have the Microsoft money here Younger than you.

I don't have the same kind of safety net so it doesn't happen at that point in time a few months go by and Merrill Pickard Starts to have internal discussions about what their next fund is gonna look like and lo and behold surprise surprise the bug of equal partnership seems to have made its way around

the building a little bit and infected the waters of discussion elsewhere It's like a virus.

That's like a very specific building in Silicon Valley So Bruce and his fellow sort of young partner at Merrill Pickard Andy Radcliffe the two of them I like Hey guys, there's this equal economics idea.

What do you think and it turns out that that conversation?

I think probably goes about the same that it went at TV.

I they probably a little pats on the head.

Yeah by the way, can we just recognize Bruce was Bob's intern and think about the Incredible vote of confidence and how counter to human nature it is for Bob to approach Bruce and say would you like to be my equal partner?

Humans have this it's kind of a flaw we remember people the way they were when we met them and so as they grow we tend to underestimate them and it shows an incredible amount of Maturity and it really illustrates this obsessive sense of fairness that Bob had that the very first person he asked Used

to be a subordinate of his and he asked will you be my equal?

Totally it reflects two things certainly in Bob and and I think in all the early folks at benchmark and benchmark as a firm this religious devotion to Equality fairness it also reflects just like an absurd amount of self -confidence Yes, Bob's like hey you and me let's together go take on this whole

industry Just the two of us which you know, you kind of need both to go do something crazy So Bruce is a little bit more the voice reason, you know, he and Andy within Merrill Pickard have had these conversations He's amenable to the idea of leaving and starting a new firm, but he's like Bob Just the two

of us for what we do.

We're not gonna have enough Capacity to be able to create like an actual portfolio that makes sense if it's just the two of us doing deals We need to have some more investment capacity here We need enough diversification and they were thinking sort of about round sizes at the time They might invest

a million they might invest two million, but they're just not gonna have enough companies in the portfolio With them doing venture the way that they believe they need to do venture, you know eight to ten board seats a person No investments without board seats that sort of thing the TVI style if they're

on 16 to 20 boards And that's all the companies in a portfolio.

That's not enough Right and there's also just like a credibility aspect talking to LPs about this too.

Like they're gonna start poking holes right away Yep, so Bruce says, all right, I'm down But we got to recruit some more partners here.

So they start going around the valley they go outside of the office building trying to recruit folks and The prevailing reaction, you know, I think maybe they thought that the religious meme of The equal partnership and fairness and there's a new generation dawning in Silicon Valley Maybe being within 24

80 Sand Hill. They thought it was more pervasive than it was Because the pretty universal reception they get around the valley as they approach other young GPs is you guys are freaking nuts, right?

We're in an amazing club here.

Don't screw up a good thing that you got going Didn't they try to recruit like a well -known GP from Greylock who was like, um, no, I met Greylock What are you thinking?

And that was right?

That was the smart thing to do was not to go do something crazy it was to do the John door path like if people had Ambition if young folks had ambition, it was like hey, I'll put my time in and like look at John it worked for him He was still quite young at this point in time and he had the keys to

Kleiner Perkins You know There was no real reason to believe for a lot of these folks that they had to go leave their firms and do it on their Own so we got a chance to talk to Bruce and we sort of asked him about this time this sort of interregnum period And we're like, you know, were you how are you

feeling during this time?

Like were you a true believer?

Did you think it was all gonna work out or and he's like no, I started thinking maybe we were a little nuts, too Yes But you made a good point which is Their back was against the wall.

They burned the boats.

They were gone at this point in time.

They had no other option they had to Go make this work or they were out of the industry.

This is like Michael Ovets when his Application for credit to start CAA had been discovered by the upper -level management of his old firm.

He was out He was done.

There was no way to go back and undo.

So you had to build the business.

Yes There is no other path forward So They need some more folks now.

There's an obvious Recruit to bring in to join them who also is in the same position And of course who they do bring in which is Bruce's partner Andy from Merrill Pickard Yeah, he's in the same building so easy to get him.

So now you got three now you got three You got three pretty good folks and Bruce.

I believe it was Bruce says You know, hey look, we're having a tough time Convincing other venture guys to come join us other GPs but we might actually want to look somewhere else and it might actually be a good thing for us if we bring in some Entrepreneurial DNA into the firm You know, we've got all

these problems with the way traditional venture works and all these other folks out there are reluctant to join us Maybe would be good for us to actually bring in some different Perspectives and he says I think I know just the guy a former entrepreneur Who I worked with sat on his board.

We actually went to rice together Kevin Harvey So Kevin after rice he had started two companies The first one Apple had acquired and then the second company approached software Bruce had invested at Merrill Pickard was on the board They just sold it to Lotus had a decent outcome Bruce thought hey Kevin might make

a pretty good VC. So they approach him and he's like great This sounds way easier than starting another company.

So there you go. You've got Bob you've got Bruce you've got Andy you've got Kevin the for well known founders of benchmark But for wasn't actually the number they were going for they thought they needed at least five people To have a viable firm and so they go out and they do actually recruit a fifth

founding member the fifth co -founder of benchmark a guy named Val Vaden Val had also gone to GSB and worked in venture, but he had moved on From true kind of early stage venture.

He was doing buyouts like software company by outs I'm thinking of like Toma Bravo and Vista like the precursor to that, you know at a much smaller scale And so they bring Val on as the fifth partner.

So here we are now at the end of 1994 We got the five members of the band the drummer the guitarist the bassist the lead singer and rhythm guitarist Bob Bruce Andy Kevin and Val they Put together a prospectus to go out and raise their first fun And the first thing they need to put on the prospectus

is a name It's quite an audacious name that they come up with of course benchmark capital Yeah, they went all in on signaling something to the market And I think what you're about to get into is how they signal that in the form of the economics that they were asking for But they certainly signaled it

in the name. It was you haven't heard of us, but we're already important.

Yes, our aspiration is to set a new benchmark for Performance in this industry and how venture capital is done This is featured prominently supposedly in the benchmark fund one prospectus.

It says quote there is always room at the top.

Oh Boy so then what you're talking about been typical Economic terms of venture funds, especially in those days was a standard Management fee and carry management fee of 2 % Standard carry performance element of the fund of 20 % of the net Profits of the fund and for those who don't know just a quick

crash course 2 % that's an annual fee So if you raise a hundred million dollar fund that's two million dollars every year that goes to the management company that gets used to pay the budget and the salaries and all that sort Of thing and then the 20 % it's not just 20 % of all the profits It's typically

20 % of the profits after 1x.

So you give everybody the money back 100 million goes back to the LPs and then you get 20 % participation and all of the profits after that Yep, so that's standard in the industry.

Now. I think at this point Some firms maybe just Kleiner had charged more than 20 % carry I believe Kleiner did at this point because they were such a marquee.

They were so proven, you know If you wanted to invest with Kleiner you had to pay a premium to get him.

Yeah, they felt they had pricing power Yeah, they're pricing power Benchmark comes out the new benchmark capital swinging right out of the gate with 30 % carry premium carry We're gonna price and position this like the premium product that it is Which of course from one perspective and the perspective

of several prominent LPs is quite laughable There's nothing here and LPs at the time are looking at this like hey We think that fees in this industry are going down not up Yes, a good allegory is actually the thing that Andy Radcliffe went on to do after benchmark, which was found wealth front He's

like, oh investment management fees.

Those are way too high and these strategies are only available to a small group of people What if we democratize it and we bring down not a 1 % management fee for private asset management But like a quarter percent or whatever wealth front is it's like kind of amazing that when he was going out to raise

for benchmark He was saying 20 % profit will take 30 % of the profits.

Yes. Yes So great now this as you could imagine One reaction that this does not engender from the LP community is indifference So this was a brilliant strategy now some LPs absolutely love this and very notably and famously Horsley Bridge the big investment advisor makes a huge bet on this motley crew

of benchmark capital founders in fund one and I think they've been in every single fund ever that benchmark has raised and were in before any other institutions.

Yes, and I think they are still one of the very largest benchmark LPs to this day and so there a big Investor in that fund one which ends up being an 85 million dollar fund Which fast forward a little bit but becomes one of if not the best Performing venture fund in history returning billions of dollars

to LPs I think it's the best cash on cash of a large venture fund in history period.

Yes still to this day I think there have been some small funds I think lowercase fund one Chris Sacas fund but nothing of this size 85 which With inflation today is probably like 150 160 but with venture inflation of how much these funds have grown Think about it like the way you would think about how

newsworthy a 500 million dollar fund is in today's environment Yeah, this is probably like the equivalent of you know, three four five hundred million dollar.

Yeah It is the best returning fund of that caliber of venture fund in history So Horst Lee loves it a bunch of other LPs.

Love it some LPs Absolutely hate what is happening here?

They hate it on every dimension.

They try to go viral with their hate Yes And they hate a few things obviously they hate the premium carry for the reason of what you said Ben They're like, there's more capital coming into this space.

It's getting more competitive.

We want fees to go down not up You gotta remember we've painted the picture a little bit here but This was a different world in venture where you could do pretty well by being pretty lazy In the LP world.

It was even more extreme there was nowhere near the same level of competition for institutional dollars going into private partnership alternative asset funds So if you were one of the large university endowments a you had a pretty easy But your team was pretty small and so you felt like you had privileged

access to this small set of money managers and now you've got people coming in within these established firms and relationships who you like you feel like you can deploy capital with them and get great returns either year after year decade after decade and Those firms are blowing up and now there's

new firms entering the industry that you have to evaluate and these new firms want premium carry Right there pissed and it's hard to underwrite because any LP that you talked to will tell you It's not just the track records that we're looking at and it's not just the meetings we're having and it's not just

the relationship We have with these individuals.

It's our belief that those individuals will create magic together Will they be?

The Chicago Bulls or will they be the LeBron Miami Heat?

You don't know that they're gonna have that trust and that process and that demeanor and The number one fear is everything looks great on paper So we wrote a big check but it turns out these guys can't work with each other and when you have a new firm with a new brand and a New set of people that's

the key risk and hate you know The Heat brought home a championship and I think actually the analogy holds here of like a fund might bring home a championship But if you're a large endowment, you don't care about one fund, right?

You want to back an enduring franchise you want ten funds?

Yes so Stanford your alma mater your esteemed alma mater the alma mater of like almost all of these folks Literally almost all of these folks who are starting benchmark They get so angry that not only do they not invest in the fund They start organizing Against this young benchmark capital they call

up all of their peers the other university endowments across the country Including ones who have already committed including ones who have already committed to the fund and say We don't think this is a good idea.

We want you out literally Stanford black balls benchmark insane Totally insane now.

It's easy for us to pick on them now because famously they have a complete a hundred percent turnover in the Management team of the Stanford endowment a few years later a decade plus later They end up being a large benchmark LP and they do end up coming back to benchmark and the new team Very happily

for them for Stanford for my alma mater gets back into benchmark Or gets into benchmark for the first time and atones for that sin But man, this was a rocky birth of benchmark fund one.

Shall we say? these guys were Going way against the grain and actually this is a funny story.

So Bob. I think you probably would have had the religious fervor about the equal partnership anyway But right around this time is when Jim Collins first big book built to last comes out Bob reads it Loves it as he's thinking about what's going on a TVI and what he wants his future fund and what benchmark

would become to be Totally aligns with Jim's principles in the book They actually hand a copy of the book to every LP as they're pitching them going around for it fund one Which is really funny because a I think they did believe in the values espoused there in but it's also brilliant marketing if Lps

care about backing firms and funds that are gonna have multiple funds in the last four decades And you're literally handing them a bestseller called built to last and the number one risk with you is that you're new and unproven It's just it all lines so well, so they do actually I think slightly over

subscribe it So I think they had 87 million of commitments.

They cut someone back so they're off to the races.

It's 85 million It's these five partners and they start investing they overcome the blackballing of Stanford of the LP and VC establishment.

So they just survived coming through the fire here And what happens next is interesting.

So, you know, it's towards the end of you just sort of second half on 1995 They've raised the fund.

They've just been through this journey Frankly, there's kind of a letdown.

I think you know, maybe that's too strong But a few things happen here.

They didn't expect that this was gonna Instantly be an obvious success right out at the gate.

It wasn't all a hundred percent sunshine and roses, you know within Benchmark itself as a partnership either right?

It's not just that hey We're starting to make some investments but like nothing's really popping in this sort of 95 96 era to your point it was we're not gelling as a team the way that I was sort of hoping we were and It's not all of us it's one of us Yeah, and there were deals to be done during 95

and 96 That would have put the firm on a very different trajectory during those early years Those were the years when Amazon as we talked about got done.

That was the time when Yahoo got done and Like would benchmark have beaten John Doar to do Amazon?

Probably not, you know, maybe but they weren't even really in the picture, you know, and certainly Yahoo I mean Mike Moritz is great like he's wonderful But a big part of what started to make Mike Moritz Mike Moritz was Yahoo He wasn't Mike Moritz before he did Yahoo and benchmark wasn't in the picture

then and so there were some notable Misses during those years.

Yeah, and then the team Val came from this very different perspective.

He was coming from the buyout industry the proto software buyout industry And benchmark was all about doing formation stage investments in technology and internet companies There just kind of wasn't a fit in investment styles Yeah, I think that is probably the right thing to chalk it up to David and I

stumbled upon this and we were like Valvaden How have we never heard this guy's name?

Like I remember thinking like wait there was a fifth founder of benchmark They had people coming from a venture capital background.

They had someone coming from an operational background They would have someone who we haven't talked about yet coming from an executive recruiting background who would be a slam dunk fit But this person coming from more of a buyout background turned out not to have the same fit with the rest of the firm

So at the end of 1996 Val ends up leaving the firm, you know leaving the equal partnership, which certainly was I'm sure not what any of them planned Or were hoping for they've invested about 16 million in companies by the end of 96 You know, which is like fine deployment, but maybe a little slow They're

having a partnership transition.

The firm is not winning.

I'm sure it must not have felt great I mean like but I've been there I've had friends who've been there like it can get depressing like if you're a new firm if you don't come out the gates strong You kind of end up fading away a lot of folks, right?

Lots of fun ones don't raise fun twos and Certainly don't raise fun threes because then you have fun ones performance to look back on that should have sort of been popping already Yeah, so I imagine there's a lot of concern at this point in time and maybe some of the sort of swashbuckling this of the founding

This may be been replaced by a little bit of depression They had to call all the LPs and tell them hey we came to you with talking this big talk and one of us is out I will say after talking to a lot of different people around the firm The number one characteristic that just kept coming up over and over

and over again They do what they say.

They're gonna do they carry themselves with incredible decorum they have tremendous discretion when speaking publicly and this just comes through any time you hear any of them talk and From what we can tell there was a very generous separation with Val from the firm So much so that when you go to the Wayback

machine, which is just an incredible resource that this exists Oh, you found some great stuff You were tweeting the last couple weeks like just screenshots from old benchmark websites.

They're It's been so fun.

Val is still on the website in 1997 January 97 so there's the five general partners and it says complementing benchmarks early stage focus Val Evaden Concentrates on technology special situations.

And when you click on his bio, he's there.

He's got a picture It says Val will be establishing a new fund to focus on technology special situations investing The new funds focus builds on Val's experience investing in technology companies undergoing significant transitions Which can benefit from the capital and investing skills of a venture

capitalist these include Fallen Angel public companies companies contemplating major acquisitions or divestiture programs corporate spinouts management buyouts and in rare instances turnarounds and financial Restructurings, so they're basically saying yep We're gonna keep using our brand to help you

raise this thing. That is the thing you're good at which becomes vector capital He goes on to found and then he's part of a few other venture firms over the years.

So anyway, all this to say heading into 1997 It was dark if you were handicapping The future if Vegas were betting on the odds of the young benchmark capital heading into 1997 The line would be long on outsized success here Certainly nobody would think that this current fund that they are investing

out of and this current basket of companies Inclusive of the ones they would do over the next 12 months would be a 92 X in just a few years on the fund On the fund on the fund Wow so 1997 the Annis Mirabelis For benchmark.

Can you explain that for those of us to instead literature?

I Thought that was a prerequisite for you know getting into this industry.

Sorry. I did computer programming out enough.

That's relevant It's Latin for a miracle here I think And literally it is a year of miracles but they put themselves in a position to win, you know, I think we're gonna talk about this more in a minute, but a key key element to benchmark and to them getting it off the ground was Both doing something

different but also having this swagger to them and Obviously they had the swagger and I think they kind of might have lost it in those early years And so I don't know how intentional this was.

I am imagining it was pretty intentional that the four of them remaining sort of gut check and say like Okay, where we had a deal.

Like how do we get the swagger back?

How do we get back to winning?

How do we get back to being aggressive?

So they go out they decide they need to replace Val.

It's the best way to do it bring in a new fifth partner and they Go recruit the most aggressive the most hyper competitive the most swagger full person That they know the tallest we're not yet talking about Bill Gurley although that will be a story coming up very very soon here they recruit the number

one Executive recruiter in all of Silicon Valley and technology David burn from Ramsay burn and associates It's a lot of let's but I go and recruit someone away from the firm that has their name on it Yes, and to go recruit somebody whose job it is to recruit You can say many many many things about Dave

But you could never say that he doesn't have swagger and that he's not a hustler So kind of like Bob Dave also grew up pretty hard Scrabble his family was also a General Motors family He grows up pretty working -class.

I believe in New York he ends up getting into the recruiting business and Essentially by like pure force of nature and force of will just wills his way to the top It's kind of like a Jerry Maguire type story.

He ends up starting his recruiting firm Ramsay burn they're based in Westchester County, New York, and they're not working in technology to start they start cold calling prospective clients in tech and in Silicon Valley from Westchester, New York Dave starts cold calling them and saying Were Ramsay

burn the leading executive search firm in high technology?

They hadn't done a single retained executive search in high technology when he starts doing this But they're not claiming anything literal or specific so leading sure It's like how the new iPhone it's like a 2x better camera But they don't tell you any sort of units or what vector that is better on yeah

2x better than what but they're leading and It becomes a self -fulfilling prophecy when in the I think it's probably late 80s early 90s Dave gets his big break and he gets through to John Doran John Makes him his preferred Executive recruiter for CEO searches for his portfolio companies and remember

back in these days That's part of the standard VC playbook you come in you back the company you start a search for a professional CEO Yeah, congratulations on finding product market fit Surely you don't know how to do the job after this so and we spent a lot of time talking about that in part one of our

entries in Horowitz episode involving none other than benchmark capital so David ends up doing the CEO searches for Netscape he brings in Jim Barksdale, which of course is a Kleiner company into John door company He does the same for excite.

He's working all over the Valley.

It becomes a genuine self -fulfilling prophecy.

He becomes the number one Retained executive search CEO recruiter in Silicon Valley from his outpost in Westchester County, New York he projects an aura of success and eventually it becomes success so Benchmark comes out.

I think Bruce flies out to Westchester and convinces Dave to leave all this behind He's making millions of dollars a year in cash Running his search firm.

Yeah, none of this speculative startup equity.

He's literally getting paid.

Yes, and The benchmark partners convince him to come out and try his hand Being an actual VC and to join benchmark and I'm sure they're thinking and this is what plays out they need a shot in the arm here for this firm and Boy is Dave that So I couldn't 100 % prove this but I believe Dave's first deal

is web van. Oh is it?

I don't know if he did others before it If weapon wasn't his first it was certainly among the first like right after he arrived so I'm just gonna open up e -boys here and for those who don't know who have not heard of the book e boys it is the Authorized history of benchmark up until 2000 where the author actually

sat with the partners for the better part of two years Fully sanctioned to observe conversations in partner meetings and when it comes out it's not the book that they thought it was is a little bit more gossipy and interpersonal and Definitely Characterizes each person to be a little bit more tropey

than they would be in real life So it is both looked on as a lot of the facts are right but also There's a lot of drama.

It's a period piece and we're gonna talk more about you boys in a second here But I'm just reading here from page 30 so David Byrne arrived at benchmark with ambitions to contribute to the partnership fast in any way he could and he had some ideas for new businesses for Which he hoped he could find

entrepreneurs One of the concepts that kept nagging him was an e -commerce business that he called my store Which would sell online everything for everyday needs start with groceries and move toward an online Walmart We've got some less family friendly language here, but I'm quoting from the book.

So fast -forward if you have little ones listening Well shit Bruce Dunleavy said when Dave told him his idea as the two sat in Dunleavy's office Have I got the plan for you?

Dunleavy reached into a stack of papers and pulled out a business plan called oasis He tossed it to burn explaining that he and the other partners lacked the balls to do it would burn be willing to be the guy and Oasis, of course is web van Which I remember web van as a creator a cautionary tale of what could go

wrong in the comm Excesses but going back and doing the research here and looking at it.

This is actually a great Bet to make oh, this is exactly the type of bet you should be making in venture capital totally, this is the exact kind of swagger bet With the right aligned Asymmetric upside and downside that if you want to be taking the right kind of risk to establish yourself As one of the premier

early stage venture capital firms you should be doing All right.

So what was webin? What was the company or what was the deal?

What was the company and why was it so swagger filled to do it?

Yeah, we talked about webin on every season episode so far in season 11, I think Yeah, I feel like everybody knows the theme of season 11 is webvan there we go there we go That's so true.

We probably hit it on Walmart and Amazon So of course as we've talked about it was Louie borders the founder of borders books Which had then gotten absorbed by Kmart and then spun out and he had left his part of all that and he felt like borders Didn't realize his vision.

He wanted another big swing bite at the Apple.

He knew Kmart Walmart.

He wanted to build Amazon what Amazon is today he wanted to build Amazon calm and the modern Amazon calm He was just a couple decades too early.

And so that's what web van was it was Anything you want starting with groceries?

That was their wedge, but it was Anything you want from the web on a van delivered to your doorstep and importantly now Webvan did have the sort of last mile component as the initial founding Wedge whereas Amazon they're like, yeah We'll get it to you and it might take two weeks and of course and they

get to Prime and they get to prime now and now they're trying to do one day prime and all sorts of things can happen the same day if you're spoiled like me and live in Seattle and web van had that from the start and It was equally ambitious.

Louie borders did want to Do food and everything it was the everything store at the edge Sort of close to your house whenever you want it and It was so ambitious that even the benchmark partners after they invested kept trying to talk him into Could we just do food?

Do we have to compete with everything Amazon is doing right away?

and the benchmark partnership as a whole but I think especially the Original for benchmark partners were the ones really pushing David to push Louie.

Hey, can we just do food?

Can we scale down? David totally falls in love with Louie Like this is what he's there to do from his perspective and it did feel like this was the sell to Dave Hey leave your lucrative successful executive search firm because if you come here you can make big bets And so I think that was the thing

that was like always on his mind is Well, if there's a bet that everyone else at the firm is too scared to make maybe I'll make it Yep, he was that guy which benchmark totally needed.

Yes, they needed to re -inject that DNA into the firm Yep, and this deal is a great deal to make as I alluded to so Here's how the deal goes down and this is great cuz this is not how people remember it Everyone goes web van ball of flames terrible venture investment.

Let's more money on fire than I can ever remember emblematic of calm insanity and incorrectness of everybody lost their mind This is a a great risk -adjusted bet to make by benchmark But be not actually that big of a smoking crater relative to today So it's a 7 million dollar round benchmark splits the deal

with Mike Moritz at Sequoia Sequoia does three and a half million benchmark does three and a half million Moritz and burn join the board I think they each get 10 % of the company and Then web van does do a late stage one or two I can't remember if it was one or two at least one quote -unquote later stage

But mezzanine rounds from completely other investors Sequoia and benchmark don't put more money into the company before they go public And then web van goes public, you know during the go -go areas it trades up to an eight billion dollar market cap so you know at the high point for this web van bet that benchmark

and Sequoia each put three and a half million into That's what like lift is today.

They go from let's assume it was 10 % that they each got Maybe there's a little dilution in there But like let's keep it easy three and a half million to eight hundred million dollars in public stock You know within like two three years so like man Fantastic.

I don't think they got liquid on a lot of it I think they were still locked up before the dot -com crash happened and it cratered So like whether they got any money out or not, you know, I don't know but like man What a great bet to make I stand up and applaud for web van And the thing that I really

want to underscore here is for the asset class of actual venture capital early stage high risk high return stuff you want to back someone who's got a missionary focused dream like Louie borders was ready for his next act and he wanted it to be really really big and It was probably the right bet.

Maybe at the wrong time.

It's probably a decade maybe two decades early But the vision was right.

And so you're betting on someone that kind of has to be bigger than their previous win so they have an incentive to make it really really big and As a venture investor you want to be buying all that risk You don't really want to be making these sort of risk -mitigated bets and have a port No, that is why

you have a portfolio of 30 companies go get all the risk you can and especially for three and a half Million dollars, so that's less than five percent of the fund like for sure.

Of course do that all day long So that starts to bring some swagger back to benchmark and then you alluded to e boys it takes a couple years for you boys to get written and come out but What a ballsy move these guys are like yeah, let's bring in an established author So Randall Strauss had written at that point

Steve Jobs and the next big thing about next and you know The tagline on the book, which I think was part of you know The actual book ended up being different than I think what everybody thought but was the first inside account of venture capitalists at work And it's like the benchmark guys.

They got nothing to lose again at this point.

So like why not? Let's be the first inside account of venture capitalists at work and Randall gets access to Everything like he sits in partner meetings.

He's the author in residence.

He's there at 24 80 Sand Hill He's in the portfolio companies.

I think he even visited the web van facility Yep, which was off -limits to all press, you know all outsiders super private Yep, even at their launch They didn't let any press inside to see it because they were afraid of giving up trade secrets He embeds with eBay It was crazy to do this and at the beginning

of e boys Randall writes in the introduction here There was no precedent within the venture business for providing an outsider such access I suspect that the benchmark partners thought that something ballsy like this which was sure to make the gray beards of the guild squirm must ipso facto be a good

thing You know, which is funny and of course, it's more complicated than that But I think it's emblematic of they got the swagger back.

They're like, you know, what you got to play like there's nothing to lose here Yep, so that leads us to The big one the one that actually changes everything You know certainly then and still right up among their best venture investments of all time And this one required all the pieces of the puzzle

it required the executive recruiter it required the knowledge of Consumer which at the time consumer investing was not a thing that overlapped with technology But it was not a thing that if you were betting on technology companies, you're usually investing in semiconductors, you're investing in networking

equipment, you're investing in enterprise software and so you needed this marriage of We need to find a killer executive for a consumer company that's building a consumer brand that has unbelievably disruptive brand new cutting edge always falling over technology it required a Focus on and core belief

in the future of the internet and it required teamwork of the whole partnership working together so June of 1997 actually well before June Pierre Omidyar who we talked about on the amazon .com episode had been working a few years prior at a little pen computing company called Inc and they were a pen

computing company and Bruce Dunleavy from Merrill Pickard Anderson and Ayer was an investor in the company and Inc had an interesting journey pretty much the whole pen computing space except arguably pom pilot Didn't really pan out.

This is like the go corporation of which Jerry Kaplan wrote the great book startup about and Inc certainly fell into that category, but the vcs and the management team Refused to kind of give up on the company and they pivot into very very early e -commerce sort of software enablement Enterprise software for early

e -commerce and the company ends up getting sold to microsoft in a good outcome So everybody's happy.

They kind of all went through the trenches together And Pierre had been working there as an engineer during the time.

He has fond memories.

He got to know Bruce through that And after Inc.

Do you know where Pierre goes after Inc?

Right before he starts ebay or auction web.

Ooh, I do not Oh, you know, I thought for sure you would know this he goes to the epicenter of Pretty much all innovation that has ever come out of silicon valley general magic Oh, that's right.

That's right. That's right.

I remember. Yes, I'm watching the documentary a few years ago Yeah, uh, we should do an episode on general magic and maybe find some of the original people Uh, that'll be we should do that at um the computer history museum in silicon valley.

That would be super awesome I assume they have the device there They invented the concept of cloud they invented the concept of mobile In retrospect, it actually makes sense that Pierre would go to general magic given his background in pen computing Totally.

It all makes sense So while he's working at general magic famously in his free time Pierre starts tinkering around on the early internet and starts a collection of internet services that he calls ebay for electronic bay area, although there would be lots of Retrospective Justifications of that name

and there was like a lot of crap on this website It's like a courier font website that has like a bunch of stuff on it all under this like umbrella of ebay but it's just like a bunch of different content and like some programmatic stuff and To your point there was one link One of the five or so main things

you could do on the site Was do this thing called auction web which surprise surprise became the thing that became ebay So we're telling all this history because it's awesome to tell ebay history, especially having done amazon earlier this season but kind of painting the picture here of like Pierre's

this like engineer.

This is a side project, you know, it's really unclear what's going on here.

That's right He was full -time.

He was still a full -time employee at general magic when creating ebay, you know, he's been at companies, right?

But on the engineering side he's not like a what any vc at the time would consider like, you know CEO material as stupid as that was But it's very different than jeff bezo's coming from d shaw with a full -fledged business plan and building everything out and then you know John doer from kleiner perkins

cold calling him like that's not what happened at ebay by any stretch of the imagination But what does happen is it starts?

Working and at first Pierre is like just hosting these auctions for free There's no business model He gets so much traffic that like his server costs kind of go through the roof and so he reluctantly had in hand shamefully asked his users To pay a small listing fee just to keep the lights on and famously

it's like The way he does it is they send checks to his apartment He gets deluged with checks.

He can't open the mail fast enough.

This is product market fit That our friends is product market fit He brings on jeff skoll who is a newly minted MBA from stanford business school to come in and be the quote unquote business guy meaning literally like Open the checks and cash them It is funny that like if Pierre hadn't needed To pay

for the server costs There's a really good chance this could have gone the way of the litix foundation or craigslist I know craigslist is a real business now, but like it could have been wikipedia It could have been this like unbelievable resource for humanity that generated no profit But instead that became

the it company for a generation think about the way we think about fangs today In the early 2000s and late 90s.

That's how people thought about ebay Totally and we chronicled somewhat to this on the amazon .com episode But for our purposes here, you know again painting the picture this deal had some hair on it so Pierre After he brings on jeff's like actually, you know Okay, i'm open to building this as a business

and like obviously we've got good revenue like we have cash flow I don't need the money but having experience from Inc and then also from general magic he knows that vcs and a professional board can Really help the company and he remembers bruce from the ink days But p and jeff they go around san hill

they pitch this to everybody And just about everybody else actually literally Everybody else turns them down Benchmark though is interested and bruce is interested and he's like, you know as you were saying ben My partner bob is actually really interested in Consumer stuff and consumer marketing and consumer

psychology. You should meet My partner bob bring bobbin Then they bring david in and david's like i can Bring in the management team.

I can find the right person for this, you know, kevin and andy love it It's really the whole team working together They give pier and jeff a term sheet To invest six point seven million dollars total in the company in a series a financing had a 20 million dollar pre -money valuation Pierre and jeff have one

other term sheet A competing term sheet shall we say But the terms they offer are a little different.

The other term sheet is From knight ritter The large newspaper conglomerate.

It was basically an acquisition, right?

It was an acquisition at which jeff's goal had worked very briefly after graduating from stanford gsb for a few months before pier Recruited him to come help open the mail at ebay, which kind of makes sense, right?

This is a classified thing on the internet.

We do the classified things for newspapers.

We can do this too Ah how the world would have been different if one of the nation's leading newspaper companies had acquired the leading online classified business And an interesting thing to note is at this point ebay is growing 10 a month So check fast growth company.

It's profitable All these checks that are getting mailed in like it is generating cash and growing so Why would you get acquired?

Why would you not keep running this thing?

Well, it was actually a pretty compelling offer.

The reason you would get acquired is they offer pier and jeff 50 million dollars five zero million dollars and that's a thing you would think about taking That is a thing you think about especially at this moment in time I mean that's like a lot of money, right?

You know exits quote unquote didn't often happen for that size Let alone exits of like a two -person company that like was barely a company, right?

So there's some debate about what happens here and there's debate among people who were there.

This is a truly unknown Truth, but we will give you everything we know.

Yeah, it's like the aws episode and the like multiple origins of aws There is a version of the story where None of the money That benchmark invested in ebay was actually used by the company.

That actually is probably true They probably didn't actually burn any of the money because they were profitable.

They were always profitable.

They were never not profitable I think of the portion of the six point seven million dollar Benchmark investment that went to the company's balance sheet.

I don't think any of it ever left the balance sheet Yes, I think that is correct Perhaps not all of the six point seven million dollars went to the company's balance sheet perhaps What we do know is that benchmark got?

20 percent or more of the equity in ebay for their equity investment in ebay What was reported was that they owned 22 .1 percent at ipo It was also reported by the washington post after the ipo of ebay that Benchmark had also structured equity backed loans to pyr and jeff in the amount of 750 000 each

as a way to like Prevent them essentially give them an incentive not to take The acquisition offer from night ritter because they're sitting there.

They're like, oh my god.

This is life -changing money, right?

So it's effectively a secondary.

It's structured as this equity -backed loan But basically what you could sort of take away from If this washington post article is true is a total of 1 .5 million dollars was paid to pyr and jeff To say hey make yourselves comfortable You know, this is a secondary effectively I have also heard from a podcast

where another benchmark partner at the time said that three of the six Was used as a secondary 50 percent of the investment round And of course, we have also heard that there was no secondary and that doesn't exist at all I think there was at least something and there's enough sort of smoke here around

the equity backed loans that was reported Not only by the washington post but then was an scc filings that in addition to The equity investment that benchmark made there was also some kind of equity backed loans to give them the ability to uh Whatever they made on the appreciation of the shares that they

got as a part of the direct investment They also had a nice nice nice return from The founders deciding to take some money off the table So all of this is highly untraditional highly non -consensus.

They're the only term she They're willing to probably do at least some sort of this What would come to be known as secondary transaction that then later everybody would wake up and realize like oh This is a great use case for this, right?

Allow the entrepreneurs to take some money off the table So they don't sell the company for 50 million dollars and instead let everybody make 50 billion dollars But nobody else was willing to do it at this time They were the only vc term sheet and the only ones willing to structure a deal like this I

also love how everyone was making hay during the clubhouse deal that this was some kind of like new phenomenon like Oh my gosh 10 million to the company's balance sheet and 2 million to the clubhouse founders when it's only a few months old What is andres and harlow?

It's thinking this is crazy town.

It's like the benchmark ebay deal That may have been 50 of the round or at least 25 so the deal gets done in the summer of 1997 and You don't have to wait long for the fruits of that deal to ripen unbelievable in september 1998 just a little over a year later by which point in time The company and with benchmark

and david burn highly involved has recruited meg whitman Superstar meg whitman from hasborough and previously of disney strap planning fame and that's right She was part of the strap planning group.

Yep, and I think previously did that bane I believe it was bane one of the big three consulting firms to come in Take over a ceo and lead this business and god does wall street love this story at the ipo in september 1998 benchmark stake Of the 6 .7 million they invested is worth 400 million Fortunately

for them though, they're still locked up for another six months.

They can't distribute By the time the lockup expires the next spring in 1989 that stake is worth over four billion dollars on an 85 million dollar fund A 6 .7 million dollar investment turned into four billion dollars in a little over 18 months Less than two years the irr on that is unreal this alone

47 x's their fund. Yes now If something did or didn't happen with a secondary in these loans And if those were incremental to the actual equity investment, which we don't know for sure if they were or weren't But if they were if what is recorded in the washington post in that old article, which is linked

to in our sources is true That's another One billion dollar kicker on top of the four billion dollars Which is an additional 12 x on a fund that would have already whatever 47 x'd Unreal so whether you're talking about four billion five billion, whatever And benchmark distributes that they lock that in that is real

returns To the funds limited partners to the gps and we do know for sure that they distributed four billion dollars.

Yes I just want to pause real quick and say fund one Did go through the dot -com run -up and burst and so in 2000 after that a lot of the investments actually not ebay But a lot of the investments looked much worse very quickly ebay had obviously a drop but not like a drop to zero or anything So depending

on when they got out of certain things at the point that e -boys was published The mark on this fund was 92 x but even if it went down We know it was at least like a 50 x because we know for a fact that four billion was actually distributed to lps So now remember back to the premium carry Oh boy 30 percent

Remember how I was like painstakingly explaining that like the first one x goes back to the lps So then only after that the gps participate that's a rounding error at this point Even if they didn't give the first one x back if you 50 x a fund So even by the most conservative analysis, you know assuming

no secondary kicker Everything just what we like are pretty sure we actually know That's one and a half billion dollars of carry dollars to be distributed amongst the equal partnership After the ebay investment and they had you know slices of carry I'm sure val retained some carry after he left and uh

famously I think bob pushed for this they gave pieces of carry to their assistants It is that you know the stories about like benchmark assistants becoming multimillionaires like that was it This is how this was how and so I think before the ipo but after ebay is clearly working and Meg Whitman is there

benchmark Had been doing for a while and would really embrace Bringing in entrepreneurs in residence and doing the eir strategy of company formation Bring somebody who wants to start a company in house them at the firm Help them get started, you know, bring the whole partnership together to help them

incubate the company They did this with an eir named danny shader and Danny comes up with the idea For our company he calls accept com He notices ebay is becoming so big.

It's now this viable platform on its own but actually doing payments For auctions that are completed is pretty hard.

And so he says, you know, I think there's actually an opportunity to build A separate independent company to do payments on the internet and specifically to start with accepting payments for sellers on ebay Benchmark partnership gets super excited about this.

They bring in ebay.

They bring in meg Meg's talking about like we like this we need this maybe ebay will invest in the deal itself, too So they put the deal together they fund the company bench mark does The ipo roadshow starts, you know, make gets distracted ebay ends up not investing Then after the ipo is done ebay gets

cold feet. They don't do the deal They're thinking about oh, should we build this ourselves?

Should we look at other companies of acquiring paypal doesn't exist at this point, right?

Why are we partnering at all?

Shouldn't we own just like a hundred percent of this thing if we're bringing all the customers to it?

so This company is kind of stillborn at this point in time.

You know, what are they going to do?

The whole business plan was payments on ebay auctions listings You'd think this would be a zero They call up amazon And we talked about this on the amazon .com episode but uh fortuitously for them and for benchmark amazon was Starting to think about competing directly with ebay and launching amazon auctions

they swoop in and they buy Except .com For 175 million dollars of amazon stock so benchmark gets some amazon stock Hand would become close with jeff bezos.

There's a sort of long standing relationship between jeff and benchmark You know ebay then they do buy another company, but one that does not have good technology.

It doesn't work out And that's what leaves the window open for paypal a couple of years later There were so many points in time where like the window should have closed For paypal to be started.

There's no reason that that company should have been successful or existed Yet, but unforced errors just kept happening in front of them and they just kept having that open window Ah, so fun such a fun sidebar And fun to tell it now from the ebay and benchmark side of things as we you know We told it

from the amazon side a little bit ago So why is it that in less than two years benchmarks stake grew 100 Thousand percent why did ebay appreciate so quickly?

And to put a finer point on that they invested at a 20 million dollar pre -money valuation And by the next spring the company was worth 21 billion dollars I think there are a few things the simple answer to that question of is The world and the financial markets woke up to the power of the internet and What heretofore

was a secret hiding in plain sight right in front of everybody's faces that like hey The internet is this incredible enabling technology and you can build real businesses that make real money On the internet was not something that most people believed until then now Other people in silicon valley did

of course believe that clina perkins being chief among them But there was another Non -consensus from a silicon valley perspective aspect to the ebay deal That benchmark was willing to see and exploit That nobody else did Which was that the external facing?

Aspects of this company did not look anything like the kind of companies that silicon valley backed But if you just looked at the numbers It was working.

This was already working.

The outward factors made it look like there was a ton of risk Investing in this business But it was already de -risked.

It was already working Yeah from the outside.

It looked like this ui sucks No one will ever use this and also it's not a real business of people selling beanie babies Like they were getting laughed at so it was super non -consensus from that perspective Sidebar the first business Enterprise that I ever did in my entire life was selling beanie babies

on ebay. No way You were a merchant.

Yeah, totally I sold three beanie babies two of them for $100 each and one of them a jerry garcia bear for $350 as weird that I remember all this.

Oh, I remember that jerry garcia bear That was like the real hot commodity, right?

Yep So it's interesting like to answer the question of like the growth there was intrinsic value growth Certainly of this company growing 10 per cent per month And then it had some fits and starts and there were times where it was growing even faster than that And then there were times where it wasn't

growing at all because the servers were down and they had to work directly with I feel like it was like I don't know if it was deck or sun but someone to like come help us fix whatever we're breaking on your hardware by Scaling so fast and using this for purposes that you know, you never intended it

to be used for because this was pre Good web servers existing but also the multiple growth was just nuts people were willing to project way farther in the future because They thought okay Retail is a big market If the internet's actually a thing and people are willing to transact on the internet, then

my god, this business is going to enable online peer -to -peer commerce with no Holding of inventory like this is an asset light high growth Pure technology business in a gigantic consumer market.

Let's go and so of course, you know bubbles happen Of course that would never happen again.

No, of course not. It's funny.

I looked up eBay's market cap today and if you look at eBay's market cap when they went public it was A couple billion dollars then of course ran up real fast as we talked about to 25 billion dollars Stayed there through the dot -com crash the bottom of the trough.

I think was something around seven billion and then it would have another run -up in 2004 Up to 77 billion, but after going up and down and buying paypal and divesting paypal after all this Do you know where it is today?

David? I believe it's about 25 billion, right?

23 billion dollars right about the market cap However many years later this is 22 years later right around the market cap where benchmark got liquid.

Wow Wow, that's so Crazy, isn't that wild and right about what is that like one?

50th of amazon's market cap something like that It's still astonishing to me that in the long run amazon ended up beating ebay.

It makes sense It's that bezos quote about in the long run.

There is zero misalignment between customer experience and shareholder value and customers get a much better experience from Amazon holding inventory and amazon doing all this really hard low margin Thread the needle stuff in order to create this great user experience, but that stuff compounds Well,

that is the perfect transition to come back to I want to talk about the benchmark architecture itself and analyze why The equal partnership and the teamwork and everything worked here All right listeners.

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Thanks to huntress All right, so We've told now The story of benchmark fund one from pre -founding up through fund one raising it the marketing the founding religious fervor around equal partnership the rocky start And then the hiring of david burn the getting the swagger back It all working I think

maybe before we continue on the rest of the very much more to come of benchmark history I think we should take a step back and talk about like Okay, this equal partnership thing itself that they Marketed so much around the beginning of the firm that really was like the founding ethos.

How did this actually play out in practice?

Yes so part of it obviously was economics part of it was What they thought was right part of it was lp marketing part of it was counter positioning against john doar Obviously for sure.

How do we be different?

Do something that they will never ever do which would have been giving up an enormous amount of their personal economics Right john wasn't going to make the other partners at cliner perkins equal partners to him like just it was not gonna happen And there's downstream impacts of that to portfolio companies

to winning deals But also to then working with portfolio companies, you know John and cliner almost lost the amazon deal when he tried to hand off the board seat Not only did that not happen at benchmark because there were no junior partners to hand the board seat off to It was like in the case of ebay

It was the opposite of that like hey, we'll all come help you.

You know, we're gonna bring the whole Talents of the whole firm and all of our varied skill sets to help you Yep and then there's the other counter positioning aspect versus john and cliner of like You know, there's no koretsu here There's no being forced to work with other companies There's no you

are a part of a larger hole.

You're not a cog in the machine like this is boutique by design this cannot get bigger than what it is and Everyone is special everyone gets attention Every partner within the firm has full context on who you are and what you're doing designed not to scale Yes So now let's talk about some of the second

order benefits or effects everything is about trade -offs So it's the benefit that comes with the problem It creates a culture of unbelievable trust I think this was some of the surprise upside of the model when Nobody has any incentive To claim credit for anything because everyone already has the best

job at the best firm Then it forces even the most competitive people of which they all were unbelievably competitive people To have a sense of teamwork That just wouldn't have happened otherwise because as we know from buffett and everyone else who has said it over the years Incentives drive behavior and if you

truly create the incentive for this group of people to be this team oriented Then all you're left with is this culture of teamwork and this culture of trust Where you you're all in bed with each other.

I mean you have signed up To be for better or for worse a part of this person's success or failure And let's unpack those incentives because I think there are several layers to this There's the obvious economic incentive David burn made as much money on ebay as bob giggle made on ebay as bruce dunley

He has kevin harvey as you know, andy rackliff made on ebay.

They all made the same so If one of them could help give a boost that would add, you know an incremental couple billion to that market cap It was well worth it to all of them.

Yep. That's the most baseline obvious one But I actually think that's the less Salient one on a day -to -day basis Having you know lived myself as part of firms, you know, we all have to it like obviously The money is the scoreboard and your job is to provide Outsized returns for your limited partners

and like it matters to you But like on a day -to -day basis, like that is not part of your mind every day.

What is much more salient I think to most People who are working as investors within a venture capital firm Is the impact of what they are doing on their own career trajectories?

and in any other structure That is either the foremost thing on your mind or the foremost thing at the back of your mind and you may profess otherwise But like it is there it is there every day in what you're doing and just as one small example That the you know, sort of the older Generation and some

of the current generation benchmark partners like to talk about, you know The older folks thinking back to their previous firms Say, you know another partner maybe say a senior partner Has a portfolio company that they're on the board of that they're responsible for that investment and There's an executive

hire that would really help and you know a candidate who could be like the perfect candidate for that firm Is it in your best interest to?

Send that candidate to that firm or to wait until one of your portfolio companies Has a spot open for that candidate like there's the economics but even more than that making that senior partners track record better Not only does you no good It does you like net negative good because it widens the gap

between them and you once you introduce a secondary incentive Which you have when there is anything junior senior and the incentive is become senior Then there's a misalignment and whether someone chooses to act on that They're not good for not doing it.

They're not evil for doing it.

It's just worth acknowledging that New incentive exists.

So it will change the behavior And this isn't to say every fund should all be equal The only way this works is if everyone truly brings the same amount of value to the partnership because otherwise over time You will have a situation where even if you're equal economically you become Unequal in everybody

realizing hey that person is not bringing it the way that we're bringing it and that creates just as big of a problem You've brought up.

I think the absolute crux of this that i've You know, we've now read and watched and listened to probably just about maybe not I won't say 100 percent But probably 95 percent of all the content out there about benchmark.

And I don't think this is talked about anywhere else and I think this is Hopefully the biggest piece of context we can bring to the understanding of benchmark and venture capital in our industry with this episode There is a very obvious question When you look at benchmark and you look at their success

and you look at their success over generations Which is if this obviously works so well Why doesn't everybody do it?

Why doesn't it work everywhere else and the benchmark firm Model is very very much in the minority There may not even really be any other firms that are structured the same way As them and I think what you just brought up to me Is the crux of the answer There's two ways that this Partnership model in the benchmark

style can play out depending on the personalities involved For most groups of people I think it actually trends towards mediocrity and this was some of the criticism of Lps and some of the other gps in the early days thinking they were crazy.

They called it communist capital This looks like communism, right?

Like if everybody's responsible, nobody's responsible And so you trend towards the squishy middle and I think for a lot of groups of people That's what the natural outcome of this would be Not to mention you have people that are over compensated and some that are under compensated If you're not all

sort of bringing the same amount of value and so the incentive there is messed up too because I think this is a different way of saying the same thing you already said but If you're the person that brings the most value, but you're not being compensated for it Well, then why are you giving 80 of your

economics to these other deadbeats you start showing up in a mediocre way?

Yep, you're gonna leave for this model to work you need every active general partner every owner of the firm Everybody who is in that equal slot to be bringing it at an equal level both in terms of effort and in terms of output To bringing it at an equal level and to literally the utmost of their capabilities

Because I think it does trend towards equilibrium and equal level of effort and bringing it that everybody brings But you need a cultural norm of we're all bringing it like 100 % every day and That's I think a big part about what that sort of uh, the initial Swagger that benchmark had and then that reset

Afterwards, I think really set that as the tone and that's what I think makes it very hard for other groups to replicate Yeah, and I also think that's why They have to retire Once they sort of age too far out of their 40s because it is an implicit thing among the group of You got to be bringing it all

day every day And at some point if you want to notch down to 90 % It's time for you to not be a gp in the fund and I think a lot of these things Especially after talking with folks who are and have been partners.

I think a lot of this is implicit I don't think this is codified in rules anywhere and I don't think a lot of is explicitly set in conversation because They have an awareness of how unbelievably delicate The trust is and how You need to create an unbelievable support system for your partners to be able

to Succeed you have to be super supportive of them to make the riskiest possible decision Because that is the business that we're in you have to find the outliers you have to go Find these weird marginal edge cases And if somebody feels like they don't have the trust and support and safety in their

partner group They're not going to do that And so a lot of conversations.

Well, I think it's a very sort of like familial group and like there's sort of lore about these 10 hour monday meetings where you know, it's meandering and it's jovial and it's friendly I think the hard conversations have to be Just so delicately handled in order to maintain this like very delicate

state It's constantly balanced on a knife point.

I think yes, and here's what's even harder about maintaining That sort of knife point equilibrium And the nature of our business and particularly the nature of early stage Even the very best investors and the most engaged the people who are bringing it on the effort And who have produced and are likely

to produce extraordinary outcomes going forward We all hit dry spots, right?

I mean, I was just recently the other week listening to uh rulof from sequoia did a great interview on uh, Tim ferris's show awesome conversation, you know, he's freaking rulof.

He's running sequoia now He took over for leony, right and one of his very first investments was youtube.

So right out the gate He's crushing it But then he hit a dry spell and it was really hard on him and it was hard on the partnership and he talks about it So like now imagine you're within the benchmark partnership and one of the partners or multiple of the partners Hit one of these dry spells.

How do you disambiguate?

As a member of that group Do I think that my partner this person Can pull themselves out can we as a partnership together pull them out of this dry spell will they give back to?

Performing at the top of their game or not, right?

You have to keep their head game strong You can't add to the pile of reasons to have self -doubt So I think this is the trade -off implicit architecting a firm like benchmark the way that they have If you're going to maintain world -class performance It will not scale but you do get this next level of trust

that you can't get any other way Which should lead to outcomes and which actually this is a good time I was debating if I was going to actually mention this on the episode or not But I want to so in preparing for this I was talking with rich barton rich famously started expedia by spinning that out

of microsoft and then started zillow where benchmark was an investor and rich for a long time was a venture partner with benchmark and I think it was only when he jumped back in the seat a ceo of zillow that he stopped being an active venture partner there And his point to me was it's way harder to

cooperate your way to success There are other ways to do this.

There are obviously there are other models of very successful venture firms We've told several of them on this podcast yeah, but this cooperating your way to success is the benchmark secret sauce and because of that and because the relationship with a benchmark board member who is almost like a co -founder and the entrepreneur

Is so tight and the communication is so frequent I mean we talked to founders who said i'd speak to my board member every week and we talked to other people who said We're texting or calling every single day.

I mean, this is really a tight -knit relationship in how they sort of think about the board role rich's point was this culture of cooperation and trust ends up being a model for entrepreneurs to bring into their company and it's amazing having that kind of example to follow and I don't think he meant

that it was like super direct or overt, but I think he meant that you sort of Naturally end up learning from that and following it and implementing it in your company Yes, this absolutely spills over into the portfolio company Relationship both between the kind of lead you know the board member within benchmark,

but you know even more so And I think this is what one of the things that makes benchmark Very different from other firms the whole firm of benchmark the whole partnership the firm is the partnership There is no difference between the firm and the partnership There's nothing else that relationship with the entrepreneur

and the portfolio company if i'm a founder and I am Choosing a board member.

It's crazy how most people don't think about this because you're You're mostly trying to figure out.

Can I get a deal done?

Can I get a deal done at good terms that sort of thing?

But really what you want is a board member who feels psychological safety in their partnership To do the things that they think are right without conflicting incentives It is crazy how rare that is for someone to actually have that psychological safety so bringing it back for a minute to the psychological

makeup of the individual partners within the partnership and why it's so critical and delicate You know a big theme of this first part of the benchmark story we just told was having to have the swagger if you don't have the swagger if you don't have the One of the folks we talked to called it swashbucklingness

If you don't have that the magic disappears, it's like, you know for anybody who's played sports The minute you start thinking When you're out there on the field, it's game over.

You're not gonna win.

You're not gonna perform you gotta be out there Feeling yourself believing i'm gonna hit that shot I'm gonna make that play give me the ball.

I want the ball. We're gonna win if you don't have that mindset you're gonna crumble and That's why I think these things are so Intricately tied together in a partnership structure like this Okay so now that we've laid this groundwork of how delicate it is and how essential it is and how at the core

of Benchmarks every fiber of their being it is now Let's talk about the first time that they recruited someone new into the partnership That's got to be pretty hard to be the first person coming in to kind of be the next generation of the firm after The big success right because david burn sort of was this but like

it was sort of part of almost a reset Yes, they hadn't had that success yet so We're now Post ebay late 98 early 99 the ipo has happened distributions are being planned underway And you've got a pretty interesting set of circumstances here The model worked you had the highest performing venture fund

of all time in terms of returns to lps of a meaningful size fund Yes It worked bigger and better and faster despite the false start Then I think any of them really imagined And you also have this element that we just talked about of like you gotta all be all in for this to continue to work But everybody

just made hundreds of millions of dollars Like What now why are we raising from lps again?

Why aren't we just turning this into a family office of all the times to declare victory like they could actually declare victory now Right.

Why are any of us going to work anymore at all even if it's to invest our own capital Right, and you know, even I think they all Do sort of recommit and e -boys talks about this a little bit It's hard to know what the actual psychology was of any of the folks at the time But as painted in e -boys and as

born out in practice, they all do Recommit, you know, nobody raises their hand and says, you know what?

I can't go 100 anymore I'm gonna do other things they do later, but they don't now Even despite all that the game just got way harder for them Because they went from the people painting the targets on the back of john doar and other people To now they're the ones with the targets on their backs and you

know, that's sort of the lesser problem the bigger problem is The target of people who want to work with them So they're now overwhelmed with opportunity the easy opportunities are the deals, you know The investments the entrepreneurs the new companies Even as the tech bubble starts to burst benchmark

is now one of the top tier firms.

They get all the calls they get to see Whatever they want to see basically Oh, and there's a bunch of things we didn't even talk about like all the fortune 500s that are calling them to say start a joint venture with me to create a dotcom You don't even have to put any money in but help me recruit the management

team and understand how to do a startup This is the big problem Nordstrom and toys are us.

This is the bigger problem the distractions So literally goldman sachs calls them up and is like we want to benchmark goldman sachs Joint venture and not like you become goldman sachs.

It's more like help us create the goldman sachs .com Yep, and you could imagine, you know that could lead to all sorts of things the car companies call them up gm General Motors, you know the original like the dna of two of the partners, you know They want to do the same thing, you know general electric

wants to do this There is so much and then we're going to talk about lps and international and all of that in a minute here There's an opportunity to raise a lot more money.

Should we do that? 85 million was kind of a small fund so for the five partners There's a lot of debate about what to do now like it's not clear what to do.

I mean a they don't have to do anything As we talked about but they're all committed.

They want to do something Some of them Say like hey Are we actually cutting off our nose to spite our face by not hiring associates and junior partners here and scaling up scaling our capacity?

You know, we started as associates.

We learned the trade and look at us now.

Why can't we do the same for other people?

Some of them say we should be doing all of these jvs like we should be moving towards a you know more next iteration modern version of this kleiner koretsu concept like if we have a relationship with goldman sachs if we have a relationship with general motors If we have a relationship with toys rs and norstrom

Isn't that helpful to all of our other entrepreneurs?

Oh, they started something if you look at their website from 2002 god i'm so glad the way back machine exists They have a page called our corporate network and they've got like 30 different companies on there that the tech says the benchmark corporate network Is made up of key industry executives who accelerate

the growth of our portfolio companies by facilitating strategic partnerships sitting on boards sitting on boards And offering advice where appropriate companies active in the benchmark corporate network include and it's like of course tech companies tsmc toshiba Intel but it's also companies that are sort

of bridging the old world in the news So you've got charles schwab and e -trade and of course, there's companies that were never in their portfolio But are other big successful tech companies like cisco so You got some partners saying we should do that and then you've got other partners saying like Guys,

don't mess with success The model ain't broken.

Don't fix it. We should stay focused and stay doing the exact same thing Right because you could paint a picture either way.

I mean there's definitely a picture to be painted of like The ebay thing really worked out and this Set of principles we had was a really good way to get started But it's the world's going to change and it's going to pass us by so we need to adapt and if the new wave Is the dot comification of america's

greatest companies?

We're in an amazing place to either seize that or let it pass us by and let it slip through our fingers And there was a very compelling argument to be like Let's be the future and you look at like an andres and harrowets what they decided with web3 They made that choice Let's at the risk of destroying

everything bet on this brand new big wave that we think could be the thing Well, and sequoia too, you know, sequoia expanded internationally sequoia added a growth fund sequoia raised bigger funds there are very clear examples of success in pursuing any of these paths And listener where you might expect

us to go here is but benchmark didn't do any of that They stuck to their guns.

They knew what made them special and they chose to ignore all the temptation But despite what they are today that is not at all what happened.

They tried everything They threw the kitchen sink at corporate partnerships.

They expanded to multiple continents at the same time They were like, oh bigger fun.

Let's raise a billion dollar fund And they tried it all Two thoughts one the one thing that they didn't do the one thing they stayed true don Was they didn't bring on junior partners?

That's a hard decision to undo once you do that you can undo all this other stuff hard But you can and they did The other thing I was going to say on that, you know The other firms we talked about that were successful with different strategies Were architected in a way that they could pursue those strategies

Sequoia was a ceo firm.

Don valentine was the ceo And then mike marets was ceo and leony was ceo.

Oh, yes stored. Whatever you want to call it, you know Ruloff is the ceo now.

There was someone who could make a call Yes There was someone who could make a call who could say i'm taking time as Doug talked about on our episode with him.

Mike and I are taking time We are going to travel to china and we are going to go find the right partners For us in china and you all here are going to keep doing what you do here making investments in menlo park tending to the chickens Yes What a great episode that was that was so fun You know in andresin they

are an organization.

They have hundreds of people So all the things that they're pursuing the corporate partnerships the web3, you know There's hundreds of people working there in all different roles and levels That's not benchmark So the one thing though as you teed it up here that they all pretty much right away are in agreement

on after ebay is let's bring in a sixth partner a new Equal general partner.

Let's continue the model and maybe we'll pursue some of these other things too But under minimum it's time to bring in a new general partner so When you do this and they've done this before of course with david bern, but it was different now It's benchmark back then it was benchmark capital haven't

heard you guys like now it's Benchmark it is.

I mean honestly listers i'll put the link in the show notes you go to the 97 website and the 2002 website is comical to see like the word benchmark In this like they're selling so hard And they don't sell it all now at least in a public facing way and it's almost like someone made a cartoon About benchmark

when you're looking at this you tweeted about this that they had directions from the airport There's a literal map from both san jose and san francisco and it's like here's san francisco here's san jose Here's stanford and here's benchmark.

It's amazing So now when you're bringing in a partner With the benchmark equal partnership model.

There's no try before you buy You can't bring them in as a junior partner and see what happens and be like, oh, you know You'll get a sliver of economics in this fund.

We'll see if the partnership gels, you know We'll see if you perform here, you know, and then no you can't do that.

You gotta go all in from the beginning and so When you accept that that's the set of constraints you operate in There's actually a sort of very narrow path that it makes sense and very very narrow cool to fish in for future benchmark partners Which is if you want to be reasonably confident that somebody's

going to be a good venture capitalist You probably want to find people who are already Good venture capitalists.

Yes, that's a great point.

You could develop the talent internally or well But you can't at benchmark, right?

It's like we can develop it internally.

But the way we're set up prohibits that and so We must look elsewhere.

And what should we do?

We should look for someone who has been in the industry long enough That they've burned through all the capital being a bad vc because there's a lot of tropes about it takes seven years or takes 50 million dollars to make a vc Which I think are all quite reasonable because your first several investments

you're like It's like you're getting the crap out you may hit some winners, but it's probably going to be luck not skill Exactly and you don't really have the right networks yet And you haven't sat on boards with other vcs even seen how people at other firms operate and there's just lots of reasons

why It takes a lot of money and a lot of time to form you into a great venture investor But you don't want someone who's been doing it so long such that they're already the most senior person at their firm Or they're toward the end of their career if you're going to recruit them in and make them equal

partner You want to have like 20 years of running room left in that person's career And so that scopes you in super narrowly to like you need someone who's probably like 30 and like the best 30 year old venture investor Yes currently on the field And back to the original founding impetus of benchmark

somebody who's Operating within a firm context where they are not An equal partner with full economics and it's going to be very attractive for them To transition to a place where they are And on a personality trait characteristic just to keep narrowing further and further.

It's like well, they need to be Fiercely competitive but also under the right set of conditions an unbelievable teammate Yes, the box gets small.

It gets very small and at this moment in time late 90 early 99 There is one very obvious very large person who fits in that very small box Oh, and you need him to be over 6 5 and a white man Yes, right They all did fit that characteristic early on but are fortunately more diverse now Yeah, which is funny

now. It's a peter's the only uh, white man left as he's fond of pointing out Which is you know, great that is progress.

Yep Bill girly, of course we're talking about yes.

He sees above the crowd I can't imagine that anybody listening now, you know, what are we two three hours into this podcast?

That's still listening does not already know a bill girly but you know, his history is basically perfect for this He's also from texas.

He's houston his His dad worked for nasa I think and then he goes to florida he plays basketball He started his career as an engineer at compact a john doar company Goes to wall street starts writing above the crowd There was um, I think this was on there's a great interview.

He did years ago with cara swisher I think this was where he tells the story when he started above the crowd he went to A tech conference that stored also up was putting on They were selling this new device, you know palm pilots at the tech conference.

You know, it's like uh, you know like New next wave of technology and obviously bruce was on the board.

He didn't you know wasn't focused on that at the time But these palm pilots at the conference Had the contact information for all the attendees of the conference including like bill gates and like, you know, steve jobs Wow So bill bought the palm pilot and then just started spamming everybody with their

fax numbers for With his above the crowd list I do know michael mobason shared this story with us that The way that bill originally started above the crowd was there was someone else who sent out a fax that was like a weekly sort of like equities analyst Effectively like blog posts like newsletter and they

would send it out by fax at a certain time and when that person retired Bill started above the crowd to start sending the faxes at the same time and sort of fill the slot that this other person had Which was of course genius and then he added to the contact list from the palm pilot with fax numbers So

genius and did you know david he eventually also started writing for fortune.

Oh, yeah I've forgotten about that.

He had a regular column in fortune He would always leave at the bottom.

Like if you have feedback email, I think it was like atc at venture .com I think it was like the above the crowd.

That's awesome. That's awesome.

He's a good growth hacker bill He's underrated on that very good at distribution very good at distribution and it turns out venture capital investing And it turns out venture capital.

Well, we'll get into that So, you know, we told the story elsewhere a bit on wall street Then to work for frank kotron in silicon valley did the amazon IPO with frank Frank promised to get him into venture if he came out he did bill joins hummer windblad spends about 18 months there Has venture capitalist,

but he's a well known commodity one of the rare female led venture firms.

That's right. Especially at that era They're very very very few You know bill's just great There's you know What can we say about bill that hasn't been said one of my favorite things when we were talking to folks?

That's so perfect. Bill has a calvinist work ethic and That is absolutely true Absolutely true having worked with him on some stuff I actually pulled all my quotes from research from things people said about partners into one place and I definitely have this one having Someone like bill girly on your

board is really like bringing in a new co -founder He is always working on behalf of your company intellectually and executionally Sounds like the bill I know So his buddy, no, so all of this is chronicled in e -boys the whole recruitment process all the internal discussions about bill Of course, it's

e -boys. So you got to take it with a great assault.

It's dramatized. But what's interesting, you know when I read it there's this discussion about bill that like just screamed off the page to me where The existing partners are concerned about whether bill's too intellectual and too analytical like he'll overthink the decisions There's this quote in there

from one of the partners saying I don't think it's attributed to whom You know, we all know that this is more a balls than brains business and When I read that I just wanted to like yell at the book.

I was like, this is a balls and brains business and Nobody personifies that more than bill and like I can't believe how wrong this is and like god.

This is so e -boys But talking to a bunch of folks and thinking about this.

I actually see what they're getting at at that era And all of what had gone into making benchmark benchmark at that point in time It was more a balls than brains business because you had to be willing to take risks that others weren't willing to take They were certainly open to doing that And you were with the exception of ebay

with the exception of the one that was the one You were backing companies at that era That hadn't yet put the products in market.

You had to raise venture capital for most companies.

Yes to Get the infrastructure to build the product.

There was no aws yet and You had to make that bet you had to make those people bets At the stage the benchmark was investing you weren't investing on product traction Which is really interesting because benchmark mostly markets themselves at this point as a series a firm That is not how they marketed

themselves then They said we do seed and startup investments seed being pre -business plan and startup being post -business plan Right, but not customer traction Exactly and when I was really trying to figure out like how did they shift from seed to series a and y I think there's shades of gray.

I think what they actually did was they shifted to series a for consumer And they're still willing to do seeds in b2b and in fact There's a great girly quote where he says backing a repeat entrepreneur in the enterprise sector is near risk free and so I think basically what happened is as more and more

Consumer startups started happening in the early and mid 2000s You basically had angel investors that were starting to like Come in and fill the randomness risk the pre -launch no traction who knows the product building risk, right?

Because it was consumer so hits driven that benchmark basically said, okay We'll let you guys take that risk and we'll invest at the point of traction or the point of product market fit Because these consumer products are such freaking crap shoots that we don't want to be playing in that seed stuff

anymore for consumer I have so much to say here So one and the most obvious thing to be here.

That's so funny is Ebay is like the exception that proves the rule but is the rule here Like ebay had traction when they invested and that's what made it non -consensus But actually that was like the smart thing to do because it had traction and that's where they made the lion's share of their returns

So bill joins from hummer wind plaid and uh, do you know what bill's first deal a benchmark was?

Ooh, uh No, I don't got some real fun silicon valley open table history trivia here.

Nope E -pinions E -pinions, do you know who the ceo was of opinions at the time?

navall Really? yep, that was his debut in silicon valley.

Wow And uh, that did not end well For devall he did venture hacks after that he went did venture hacks He ended up leaving the company was replaced as ceo Then I think that was probably a big part of why he went and then did venture hacks It was kind of anti vc silicon valley that that led to angel

list and now How funny how full circle it all comes bill also talks a lot about this on that cara swisher episode is so good so bill joins and We gotta tell this too from eboys.

There's this really funny vignette the partnership can't get comfortable With like the one thing they're having trouble with with bill is like is he gonna overthink things?

Is he too analytical?

Is he too intellectual?

Does he have enough balls and kevin harvey invites him on a hunting trip?

He has a sort of hunting property and on the hunting trip bill apparently greatly impresses kevin by jumping over a cliff to go chase down either a deer or a boar that they're hunting and go like In the rain yeah, and kevin's like whoa, I wouldn't do that like okay, this guy's got balls i'm not worried

about that anymore Oh So funny so just everything so eboys so Two things to talk about here first, we got to talk about the imperial era but first let's flash forward a little bit and I want to talk about bill and his investing And how it ends up transforming the firm over time.

He's a great investor in enterprise and consumer But he becomes known for marketplaces very analytical.

He does well. He does some of these early marketplaces He does open table.

He does zillow. He does grub hub He does what becomes odask, you know dog vacay the mergers with rover, you know, etc, etc hacker one Yep in the earlier era than that sort of the grub hub open table era and all that Those were great wins and bill worked Tirelessly, I think to you know, help make those

companies successes They weren't ebay sized wins They were far from ebay sized wins Well benchmark did not have an ebay sized win until bill's big marketplace Exactly exactly, but I think it's very retrospectively and there's so much randomness tied into all this But I do think that inside of the series

a style investing I think bill and benchmark in the sort of next generation Recognized that shift of like, oh there's a mispricing here Benchmark used to invest in seed and formation stage taking the product risk You can now invest at the series a post product risk where there's data And you can see

if something's working or not And you can make crazy seeming bets like uber at a 60 million dollar valuation that are actually like Deeply in the money cannot lose money and that was the era when benchmark really shined And that's the thing that bill really brought from being an analyst and from writing

regularly and from like writing You know We've referenced by 10 times on this show a rake too far you know bill's posts where he sort of compares all the different take rates and what goes into a take rate and There's so much tying that into moats and pricing power and he just understands all this stuff

at such a deep level And I think we shouldn't disparage the other founding partners.

It just wasn't their skill set.

It wasn't their strength They didn't look at financial statements and develop emotions around what this business was good at and bad at and what the future could look like they Sat in a room with entrepreneurs and thought does this guy have it?

And I think it's a very different skill set very very different skill set And to bring it back now to this moment in time when they're bringing bill on and also facing all of these other Decisions and opportunities now that benchmark is benchmark It's interesting that that decision the bringing bill

on the evolving the partnership That was the right decision All the rest of it were the wrong decisions So let's get into that and to dive in on your right decision.

I just want to add a little more color The series a was the place to run to for that period of time because of the mispricing you identified If they had said we want to stay a gut -based business and we want to stay at formation stage investing I mean the rise of seed firms and accelerators and angel

funds meant that that got so competitive so fast That they probably would have needed to go multi -stage and raise huge funds In order to compete rather than being lost in the baselines and lowercase and there's just no way I mean, let's take y -combinator, which is the big institutionalized winner out

of all that Benchway couldn't have built y -combinator.

They weren't architected to build y -combinator But now the interesting there is this interregnum period like it wasn't until after aws That all this became possible, which wasn't until the mid 2000s So from when bill joins and all these decisions are on the table in 99 2000 You've got another five six

years before the world shifts Okay, so what are all the other decisions they made?

Well, like we said, the only thing they don't do is bring in junior partners, but they do everything else They raise a billion dollar fourth fund and before that the first fund was 85 I think the second I want to say was 150 and the third I think was 175 I think those were the core funds and then there

were parallel entrepreneurs funds on top of those So you know top it up a little bit to allow Individuals and entrepreneurs to invest as well, but not that was the scale that they were investing at They raise a billion dollars for the fourth, you know, menlo park based sandhill based fund They expand internationally

first to europe and then to israel bruce essentially moves to london He's commuting back and forth but spending a lot of his time in london for the first year setting all that up which again For all these things the thesis makes sense.

They looked and thought ebay Well, that could have been started anywhere, right?

I mean, there's no reason that needed to be here in the bay area It actually at the beginning at least didn't require that many employees and it was matching people who were shipping stuff all around the world so We've got a brand and we have a unique ability to raise capital from lps We should be leveraging

that for the next ebay that starts anywhere Yep, they recruit seven partners new partners to come in and run The international funds both a separate europe fund and a separate israel fund both structured the same way but separate partnerships Right.

That's the interesting thing is that it wasn't like now we're all equal partners in one big pool It was you guys are a fund and you have your own equal partnership And we will come to an economic agreement where you get to rent the brand from us But the reality was especially in those early days There

was a lot of work involved from benchmark.

It was benchmark lps that were investing It was the benchmark brand and then they had to go recruit the partners and put everything together and then instill the benchmark way in them or try to Right deal with answering the questions.

Oh, how do you guys handle it when there's xyz in the partnership?

Like there's suddenly real administration In a group that's allergic to administration We didn't mention this earlier, but there was one last tidbit.

I wanted to say on The upside benefit of the trade -off of running a partnership like benchmark You get to spend all your time on the field when you're a small equal partnership You're not spending your time managing the firm or worrying about managing the firm or worrying about where your career is going

or worrying about this that or the other thing like Literally 90 95 percent of your time is spent playing the game on the field, which is making investment decisions Helping portfolio companies like there's nothing else right like imagine david you and I spend all of our acquired time on research recording

Final tweaks on the edit and then how do we want to message the release of an episode?

And imagine if I had a recurring meeting for three hours on your calendar on monday mornings About how should we hire the next 15 hosts to come up with and acquire all the listeners for all the new shows we're going to make You are the exact wrong person to do that job and that is sort of the allegory

I mean, that is a big reason why acquired is what it is today But we talked about that years ago.

Should we have more shows right?

Should this be a company and we were both like absolutely no That is not what we want to do So, yeah, you know, it's very similar here but benchmark to take the personal analogy They wanted to run acquired but they instead decided to go build the new york times Right, but you can't go halfway.

I mean, that's the thing you need to go all the way if you're going to cross that chasm You know pretty quickly the cracks start showing in this model.

Well, here's what they do They raise the billion dollar californ, you know us fund They raise a 750 million dollar europe fund.

They raise a 220 million dollar israel fund The europe fund they end up cutting back to 500 million after the bubble burst because they're like we just can't invest 750 million we can't deploy it all Yep But even still you're now talking about a firm that the previous fund structure was on the order

of 200 million Mostly in silicon valley but all in the us To now on the order of 2 billion Around the world It's a big task that they bite off The cracks start showing almost immediately the three examples all of which are sins of omission Which are the biggest sins in venture capital?

None of the sins of commission of deals you do Are what's really going to hurt you?

It's what you don't The first and this happens shortly after bill joins, but as all of this, you know Architecture all of this, uh infrastructure is starting to get spun up That's when google shows up does google pitch benchmark Well, it's unclear to me exactly what happened bill talks about it a lot.

I think this is One of his few biggest regrets.

He said that publicly he had just joined the firm and google appears and Some subset of the benchmark partnership including bill Heard about them Met with them, huh had an opportunity to pursue and bill always frames it as they failed to Google not that they you know passed or like that There was a full

party but they didn't pursue it with the typical benchmark and bill hyper competitiveness Drive to win that we all know They declined to pursue Would they have beaten john doar for google?

Maybe maybe not debatable Would they have beaten mike murritz for google?

Again, maybe maybe not mike hadan yahoo at that point Maybe slightly more believable that they could be Sequoia at that point in time, but could they have beaten one of those two firms to get one of the two primary vc slots in google Almost assuredly.

I mean at this point This was bench where they had just done ebay, you know, they were At the height of their powers.

They were the internet firm.

Google was the next internet company They had the relationship with bezos even though kleiner had the tighter relationship But remember bezos was a very influential and large seed investor in google.

Yep so Gosh That's a big miss.

Yeah Okay, google's a miss google's a miss.

Okay, that's one next A much smaller miss but still a big miss for a different reason they've got this europe fund now, right?

What happens with a really?

Promising european company that has aspirations to be a silicon valley company and go global Does the europe fund do it?

Do the core benchmark manlo park partners do it Well, wait, can I guess where this is going?

Yeah skype skype That emerges a couple years after all this gets set up out of talon astonia out of astonia and bill talks about this too He met skype like skype's got this right up his alley right up benchmarks alley ebay ends up buying skype But should bill do it should benchmark menlo park do it

should benchmark europe do it Are they trying to hand it off in the process?

They'll use the deal.

So that's another miss and then The third miss that is not directly related to the international expansion, but I think is more symptomatic perhaps of the sort of taking your eye off the ball, but a google size miss Is they miss facebook?

And what so we know sakoya is out for facebook because of sean parker the pajama pitch, you know, all that the bad blood Sakoya can't do facebook Who else could do it kleiner was still kleiner at that point, right?

The tumult hadn't started there Totally, you know excel ends up doing an excel is great firm and jim bryer does it, you know like not to take anything away from them, but like Absolutely benchmarks should have been and was in the conversation.

And this is 0405 Yep for the series a for the 100 million dollar valuation of facebook, you know, very similar to that google round What happened well specifically what happened was benchmark had invested in fredster and so was Conflicted out now.

You could argue that was an unavoidable mistake, you know other but like Boy, does that hurt and supposedly I think it was bob Kegel who was on the board of fredster and at that point there have been some ceo turnover at fredster jonathan abrams who then started Newsel and founders den was the original

founder of fredster.

I'd forgotten that oh my gosh with the original acquired meetup at founders den Indeed and now runs a pic capital They had brought in tim kugel as ceo of fredster at that point.

Tim had been ceo of yahoo Tim blocked benchmark from pursuing facebook.

Oh, is that really what it was?

Did they know about facebook they never got to look at it because of fredster?

That's the story and supposedly, you know, mark Zuckerberg loved bob loved the benchmark team who knows right?

But like my point is If you want to be a generational defining Venture firm by definition you have to invest in the generational defining companies They did that with ebay and then the international expansion happened and then for a whole variety of conflicts and reasons no google No skype, you know

skype's not generational defining, but like they should have been there to do it No facebook bummer and I think you can probably trace most if not all of that back to Probably making the wrong architecture decisions right so this sort of like 2001 to 2010 actually not a great decade for benchmark.

They had some good investments they'd open table well Not to 2010 I would say until 2006 2007 okay fair.

But like if we look at the biggest wins out of that period it's probably Open tables zillow Grubhub instagram wouldn't have been yet.

Nope So that's probably those three that we just mentioned Yep So finally after all this and I don't know if this was before or after Excel doing facebook but right around the same time Legend has it at one of the menlo park monday partners meetings I think it was kevin harvey who finally kind of just

said what probably everybody was thinking at that point in time of like Guys, why are we doing this?

We don't need to be wandering in the woods Can we go back to focusing on what we all actually want to do here, which is invest in california with the right size funds do early stage focus only on the game on the field and not do all this and Kind of, you know supposedly one by one.

Everybody's like, yeah, actually that sounds a lot better I mean, this is after that article came out In bloomberg that I think is pretty illustrative of the time.

It was in 2000 and the title is still the benchmark to bet on And it ends in a question mark.

I mean it's funny because like 2000 this is still Very early in their wandering in the woods years of everything you're talking about right now But it raises a lot of the right concerns Yeah, and there's a great quote in there that i'm sure everybody involved regrets But I think it was mark quamie from sequoia.

Yes. Yeah about uh Does benchmark have the technical prowess to you know relate to the next generation of founders?

That was a good dig like hey They're not technical and you know How are you supposed to work with technical founders?

It was a good thing The other script that they had is they really started changing strategy on their core stuff, too They did a late stage mezzanine investment in 1800 flowers.

That was not a good investment right before their ipo Why are they deploying capital into that?

They had a billion -dollar fund.

They'd put that money to work.

Yep To get on to the next one So, you know again the benchmark roller coaster Continues it was up it was down.

It was up, but now it's down again And this kind of thing is why you need to treat the partnership with such delicacy.

This is where The relationship stuff really matters where you need to have built that foundation of safety and trust so that You can call each other on hey We got to like Massively unwind a huge thing that we did here as a partnership and not take it personally And know that that person is thinking

with all of our best interests in mind and not thinking less of me as a human Because of it totally and that happens so Kind of that 2004 2005 era, you know post facebook they do that they spin off europe They spin off israel becomes balderton and then michael isenberg goes and starts all f in israel

Both of which have become great funds.

Yep. Yep, you know, we didn't talk to Either those teams, but I would imagine they're you know, hey like they exist They're great firms now because benchmark helps set them up So, you know, it's not like this was Not any value creative for the world.

It just came with some real trade -offs, right?

so around this time the first actual wave of Retirement of stepping back of some of the original partners Happens and this is the test right?

Are they actually going to take no further economics?

Are they going to live up to the founding?

principles they were on the other side of that table at this point 10 years ago And they've now been wildly successful.

They've had ups and downs at benchmark It's time to refocus the firm.

What are they going to do?

and They do it. They actually do it.

They resist the temptation David burn nadir acliff and they had brought on another gp during that period alex palkanski in the 2005 2006 fund they raised then they all step back and They don't take tail economics meaning They're out of the management company No longer formal decision making power in the firm

the current ownership structure the management company transfers to the current gps And they don't take Carry in the new fund they keep working keep having carry in the boards that they're on from the old funds They're lps.

They're big lps and they're big lps.

Yes in the future funds going forward With their own personal money, but they actually make a clean break.

They do the transition that they had asked for So many years ago.

So what's the gp group look like at this point?

So at this point heading into fund six or in the mid 2000s The lineup is bruce bob Kevin and bill so we're down to four and three of the original founders plus bill Still like a very good lineup, but you probably need some more firepower To really pursue what you want to do here Well and kind of like

what you were mentioning in the 1996 recruitment where they went and got dave burn The spree of recruiting that they go on here to inject a little giddy up back into benchmark They go and get hitter after hitter after hitter.

It is The most impressive lineup of venture capitalists to all suddenly join the same firm this Retrospectively feels like the heat but none of these people were these people yet no, and Peter fenton is the first of these new blood to come on board.

He hasn't quoted tech crunch disrupts 2020 many many years later Talking about this and he's asked about bill in his time in this period of benchmark And he says bill like me isn't a founder of benchmark But in a sense we have acted as though we were founders of benchmark and this is a refounding of the firm

with the blessing and direction of not direction of what to do but like the Prescription from the original founding group To go forth and do your thing and figure out what's going to work now Yep, and in many ways it's just back to basics It's back to basics But it's back to basics in a way that makes

sense For the moment.

So what do they do?

Peter fenton is the first person to come on board And peter joins from excel and peter joins from excel which had just done facebook And peter wasn't directly involved in the facebook investment, but it was part of that relationship The other thing about peter that we heard from folks talking to was At

that time the existing group of gps of benchmarking in particular bill They found that you know as they were going and meeting companies everything that they would get interested in As they were going around the valley, they'd show up and peter had already been there It's like, you know, they saw him

coming out the door.

He was one step after them In all of these companies peter has an interesting Background his dad is noel fenton who was an entrepreneur and then founded trinity ventures The venture capital firm trinity.

Oh, I didn't realize that yeah, so peter kind of grew up in the business Well first his dad like hated vcs and then yes, he became a vc Yes founded trinity, which is a common path.

I think it's like I want to do things differently Totally, but he fits the bill, you know, just like Bill when bill joined he was early 30s.

He had an established track record.

He was young. He was hungry He was up and coming.

He was a baby gp in excel, but he was not a full gp.

Is that a formal title?

Yeah, baby gp. That's the formal title Here's what I would love If acquired can have some influence on you know, our industry this is what I'd love I want transparent Titling on linkedin or whatever just like be clear about what you are.

So does every founder.

Yeah, right. Exactly like I'm a baby gp I'm a you know old crusty senior gp I've hung around too long.

I have a lot of economics, but i'm not currently doing deals.

Yeah, exactly exactly So peter's a baby gp.

He's had a bunch of early wins At excel and he's clearly out there hustling.

He's clearly smart They make the pitch to him to join and again, it's you know, on the one hand It's an intelligence test like it was an intelligence test for bill to join on the other hand There's some questions about bench mark right now.

Yep. Oh, it's the first generational transfer It's like oh, this is a firm that had one big win and some other wins in that fund.

I mean Look, if you 90x a funder, whatever and only 40x of it comes from one company clearly you had multiple winners but like one fund that was really great and it's been a tough several years and a bunch of Those people from the big successful fund are stepping away bill girly hasn't become bill girly

yet. And so What am I joining and how certain is it so those are the questions on the benchmark side There's a massive question for peter on the excel side even Let's take off the table whether excel made a counter offer for him to Be a grown -up gp or not Whether they did or didn't is irrelevant He

had gp economics even if they were baby gp economics in the facebook fund And he's walking away from that to join.

Wow. Yeah, that's not an intelligence test.

That's an emotional decision That's a gut check Do I really really believe?

in This sort of refounding of benchmark this refocusing on this model.

Do I think it can work do I think?

Bill and I and other people we recruit Can bet on the future here and it'll be worth me walking away from facebook fund economics.

Yep So he does so he takes it he takes it.

I think he's probably pretty glad he did It becomes a great decision for everybody involved In short order peter goes on to do Twitter, docker zora horton works new relic elastic he brings bret taylor Of google maps and then facebook fame into benchmark as an eir.

They do quip together.

Yeah, and Peter fenton had been an investor in friend feed when bret taylor started that before Brett sold that to facebook.

You're right. That is how he Made the journey from google and google maps to facebook Yes, and unbelievably bret has gone on with the quip acquisition by sales force to become the president co -ceo of Salesforce with mark benioff and also is the chairman of the board at twitter Who is the central spokesperson for this ongoing

lawsuit with elon musk wild the bret taylor universe?

Is unbelievable the bret taylor cinematic universe.

Yes I love that. I don't know which avenger he is, but he's one of them.

Yes Okay, so peter is new partner number one kind of coming in in the next slot after bill who's next next Is mitt tlasky who mitch?

I think is really like super under the radar and kind of a unsung part of What comes to be the fab four era and they truly are the analogy is the beetles here mitch Had been Founder and ceo he's been a games industry guy He worked in the games industry his whole life and then founded and was ceo He

started a game studio of a early mobile games company called jam dat that bill Had led the series c in and was on mitch's board And the super random that mitch, you know, he was later in his career He'd been a founder like he didn't like vcs either.

Like why would he do this?

Why would they recruit him?

so Jam, dad had gone public and then had gotten acquired by Ea in short order during this period where benchmark didn't have a lot of wins It's the plight of all good games companies.

You get acquired by ea eventually indeed Ah trip.

What a great episode we did with trip back in the day.

Yep, so mitch had actually sort of pervade over one of the Right spots for benchmark during that era and mitch criminally so few people aren't familiar with him He just went on patrick's show on invest like the best great episode You got to go listen to it Like if you want to understand mitch and why

he's so special go listen to that episode games investing, but also just broadly Why you would want him in your partnership?

And I got to work with mitch on the board of a company called play fab that was started by james gortsman who's now andres norowitz's gaming gp It all comes full circle small world But he joins next and mitch would have some Incredible wins in these coming funds not just in gaming, you know gaming he

would do that game company Which is under the radar, but he's doing incredibly incredibly.

Well, it's literally called that game company David's not like forgetting a word here.

That is the name of the company and several other gaming investments, but also snap and discord big big big time wins mitch joins next and then The final member of the fab four Gets rounded out they recruit From facebook and this is still when facebook is a private company leaves facebook as a private

company having been employee number five At facebook and before that employee number, I think less than five at linkedin Matt color Matt color is the single best person at understanding consumer social products and maybe all consumer products and maybe all consumer psychology in the entire world a he's

Super smart understood but like he was there like talk about knowing the future, you know don valentine knew the future because he had been a national semiconductor and You know worked with the traders saying all that and like he knew what was going to happen Matt Had been at linkedin and then had been

a face like he knew the future And just had this fundamental unfair advantage over everybody at that point in time And he also got all of these new folks and bill got what aws meant for the industry and Series a investing and the difference between formation stage and seed investing and investing in data and traction Yep,

matt is the person who we have referred to on previous episodes when uh, kevin sinstrom was Negotiating to sell to facebook and due to the court documents.

There was a uh conversation leaked about Kevin strategizing over aim with a very strategic advisor about how to position the sale to facebook and of course Who would know mark zuckerberg psychology and what facebook would and wouldn't do better than employee number five at facebook and matt color Of

course is that confi don't and he also has one of my Very favorite lines that I before doing this episode had assumed was a truism of venture all along, but I now realize What's a specific moment in time truism that something had changed?

Which is he says, you know, our job as venture capitalists is not to see the future but to see the present very clearly and That all of a sudden became true at that moment in time.

Thanks to aws Thanks to the facebook platform and where you could now do these series a's these still early stage quote unquote investments Where there was no product risk.

There was no adoption risk.

There was no market risk You were still looking at early data, but you could look at an instagram You could look at an uber you could look at a snap and you could look at the data and you could say my god This is working.

Yes It is awesome watching 10 and 15 year old videos of matt on stage at conferences talking and just Basically being 10 years writer than everyone else He has a quote.

I think he's on stage at a tech crunch disrupt with maybe mike errington In 2011 ish and he's like, I don't think anybody understands mobile advertising.

This is going to be so huge This is much more like tv advertising.

Everyone thinks it's going to be less valuable.

I think they're all wrong The primary thing you have to understand is this is basically a tv where we can take over the whole screen And then there's it's enriched with all this other data and all this other location and people So misunderstand the potential of mobile advertising and of course mobile

advertising would go on to become an enormous market And he was very right about that I've never met matt but in the countless hours of him speaking at various things that I sort of watch He just has the demeanor of a beetle Well, I think they all were at this point in time, you know in this era They

genuinely were I mean, let's talk about so fun six is sort of the Transition here.

Wait matt didn't have a background in venture.

Do you know if he was like a big angel investor?

I don't think so I believe he had always wanted to get into venture but you know, I mean mitch didn't have a background in venture either You know both of them actually were did we talked about The benchmarks back for hiring a gp the best way to be reasonably confident in someone's ability to be a good

venture capitalist Is someone who's already been a good venture capitalist, right?

They were making More riskier bets on both mitch and matt both of which paid off hugely for the partnership.

Yep. The other thing that matt Identified I think long before much of the rest of the investing world and world at large Was the dynamics behind uber even though bill ended up doing the investment but they worked as a partnership to source and we'll talk about it but matt Had this saying back then that it

was partly and you know informed by his experience with uber I think of the smartphone is going to become your remote control for the real world And that was an outlandish thing to say in 2010 2011 But like my god was he right?

Yep. Okay, so you have the slate now you have the fad for you have bill girly You have peter fenton you have mitch lasky and you have matt coleur and of course I think bruce dunleavy is still an active partner at this point too I think bruce and bob are still active at least in fund six and maybe a little

bit into fund seven but fund six is the transition and Fund six is you know Great.

I believe it'll probably end up being uh, you know, five x plus five to ten x fund Instagram's in that fund.

That's like matt's third or fourth investment which my god I mean they returned the fund on the investment But like with the sale to facebook because it sold like 12 months after they did the series a I mean imagine doing a series a investment I don't remember the valuation of instagram series a call

it 50 million. Maybe less right to 20 x in a year Yeah, it's crazy very hard to turn that down.

It's also funny that sokoya claims Instagram was one of their investments where it's sold 48 hours after they invested.

They were an investor for two days Yeah, you know.

Hey branding success in venture capital leads to success in venture capital del told me that once So uh instagram's in that fund Asana which was actually matt's first investment which was former folks from facebook You know that took a long time but they end up getting public on that new relic horton works

a bunch of peta fenton ipos are in that fund new relic Which was incubated in their office?

Yep, because peter had invested in lucerne's previous company when he was at excel To bill's point about repeat entrepreneurs and enterprise are as close to a sure thing as you can get by the end of fund six It's clear.

There's something special going on here And then that leads into fund seven, which I think was 2011 and they raised 550 million dollars for benchmark fund seven and it's the four of them benchmark fund seven Is about as close as you can get to Speed running in venture capital.

This is a group that had perfectly gelled from fund six The world was their oyster.

They raised the perfect size fund with the perfect gps Who have expertise in all the things that were going to flourish in the next decade And they could look and they could just execute And you could argue fund one was like this and certainly from a returns perspective fund one was actually better

than fund seven But they had to wander in the woods to find their way.

This was just like a perfectly set table Yes, a hundred percent on all that and two things I would add one I think they knew A secret that very few other people in the industry knew which was this series a is like a favorably mispriced asset Right, which it's not now right?

Like when someone thinks it could be the next facebook Like that's why clubhouse gets done at a hundred million Immediately and then shortly thereafter billion Most series a's are not done post -product market fit anymore now C and a and b are Often pre -product market fit when there's a thing that is the next

big consumer social app and it's showing signs of that Everyone knows exactly what to look for and price is it appropriately?

Yes, but that had not happened yet by any stretch So that's one thing I did and then two They had the swagger They knew they had a secret.

They knew they had the right team.

They knew they had jelled as a team And they were willing to just go Run and you know not overthink things and play the game on the field.

It was a perfect balance of gut and intellectualism So this fund is ridiculous uber snap discord That gaming company stitch fix duo security docker elastic next door And we work and we work.

I mean at the time that they got liquid I do think it was a very very very profitable investment for them.

Yep. They got money out of that in the softbank shenanigans A quote that we have from talking to folks part of the firm and you know Other entrepreneurs is like that.

It was quote unquote swashbuckling insanity But in an absolute in a good way in every dimension Wait, is riot games in fund seven?

That must be fund six.

I think riot might have been fun six.

Yeah, but that was another great mid investment Yeah benchmark fund one was one of if not the best Fund of its size and scale ever Benchmark fund seven is one of the best if not the best Fund of its size and scale ever so according to a 2018 wall street journal article they reported that before fees

the 2011 fund was sitting on a 25x On that 550 million that is a venture fund a full -sized venture capital fund that 25xed Of course, it may be lower than that now, but I think it's still north of 20 Depending on when they got liquid on on what because this is something we'll talk about in playbook

benchmark knows how and when to sell In addition to how to identify these phenomenal companies I think the benchmark philosophy is that they don't want to hamstring the next generation with any of their decisions It's funny.

All I have is these sort of like gut feelings from talking to people, but I think the way benchmark kind of works is When they hand it over to the next generation first of all, they don't do it all at once They sort of like do it in this blended way so they can carry a lot of the institutional memory

with them But it's you guys do what's right for you.

Here's what worked for us By the way, what worked for us probably will work for you But you need to make that decision on your own and again, I don't think it's said I think these things are kind of unsaid Yeah So listeners the fab four era just to like put a fine point on this You had by this point

the very best marketplace investor in history and bill girly You had matt coleer who literally helped create the dna of the modern social media company as an early facebook employee He's investing in consumer social And again, these are too narrow of swim lanes or doing other stuff You had one of the best

games investors to ever live investing in games with mitch lasky and these are super clear swim lanes And it was the best decade of all time to be investing in the categories of marketplaces consumer social and games with mobile having an undercurrent of all of it and on top of all of this You have peter

fenton as a utility player and like a total shark across all categories from doing the twitter investment to new relic Yeah Especially, you know open source software and enterprise and bottoms -up adoption, you know, he did great there But you know, they all blended too like mitch did snap, you know

but at the point is it doesn't matter like it was a re -founding of the firm back to those original principles of like It genuinely was they were functioning as a team Matt found uber but bill was the right board member and like, you know, well, we'll talk more about uber in a minute here Yeah, let's

do that because I think so far this has been the benchmark glory fest and I think the takeaway is Overwhelmingly positive here, but let's continue to paint some of the trade -offs and some of their tougher moments Two things just to put the cherry on top of the fun 7 fab 4 glory fest in march of 2015

Which really was like kind of the apex I think of this era Ironically after eric joined so there were five at this point But eric had just joined eric fishery who we'll talk about in a sec But forbs comes out with this article man.

I remember this article It's just like it'll always be seared in my memory, you know working in the industry being post gsp back in madrona at this point in time and like This article comes out in forbs called the benchmark way Five partners because it was five at this point eric had joined who make

other vc firms look outgunned and overstaffed And it was just this chronicling of the fab 4 era and all these companies we've talked about Like everything they touched turned to gold We listed all those companies that are all you know Other firms would kill to have one or maybe if they were in their

wildest dreams two Of those portfolio companies in their funds and they had like 12 And they own like 20 of each of them.

Yes It's not like they're like cutting little checks here and there on average each partner takes one board seat per year And when they take a board seat they invest at the series a and they own 15 20 plus percent in those days I mean, I think it was 20 plus 20 to 25 Yeah, pretty wild.

Yeah wild. All right.

So we're talking about uber.

Yes Yeah Well, that was a journey And ends up being the bulk of the returns in fund seven even amongst all those great companies In 2018 when that wall street journal piece came out their holding in uber was worth eight billion dollars So that alone would have 16x the fund and I think at that moment

They sold Some to softbank in a transaction at that point in time.

Yep. That's their thing.

They've gotten liquid on A lot of things sort of like along the way you got February 2018 benchmarks sold almost half of its stake in snap and realized a billion dollars in gains Somewhere, I don't remember the time frame exactly but benchmarks sold 900 million dollars worth of uber shares to softbank

And at that point still owned seven billion as of 2018 And to rewind to snap for a minute benchmark, I think was instrumental in encouraging pushing snap to Go public as soon as they did That member we did that whole episode way back in the early days of like, holy crap Snap is going public after like

four years of existence, you know, that's crazy Right, you know, there was a whole structure It's all in the scc filings of evan got a you like massive like 600 million dollar plus bonus for a successful completion of an ipo like Did it they're very good at this.

Yes Even this knowing when to sell thing we work They sold a lot of we work shares to softbank and I think is actually still part of some ongoing litigation where softbank didn't want to Complete that transaction but as an aside actually on we work I was watching a video with peter fenton and he said

We were involved with we work that guy was as pathological as you could possibly imagine and then go further The stories would blow your mind I almost feel like we're just not going to get into we work on this episode.

We did that whole thing with dan prime act Yeah, no, either way, that's not the point of this episode You can hear about that elsewhere.

We should definitely though talk about uber.

Yep. All right uber so famously Girly had been studying the space had been looking at do you look at taxi magic taxi magic We talked about it all on our uber episode Like he had literally been searching for this company.

He tried to get taxi magic to become uber.

It didn't happen So much great history go listen to that the original uber pitch is actually Garrett camp coming in and pitching the limo thing and travis isn't ceo yet And then finally travis gets in the seat.

There's some product market fit.

It seems to be happening Benchmark invests girly joins the board 2011 I think that happened 2011 a 10 million dollar series a at a 10 or 11 at a 60 million dollar post money valuation And one of the first investments out of fund seven.

Yep there's some such great fun stories of that era that I think This is fun to think back on like a happier time in silicon valley and show the sort of like swashbuckling insanity of Benchmark at the moment.

They knew they wanted to do the deal.

And so like before you know, the final sort of partner meeting travis was pitching at secoia right before and Uber was active in san francisco but wasn't that active on the peninsula down on san hill and so he had taken like an uber down from san francisco to All the firms on san hill road and told

the uber like hey just wait for me like you know Nobody else is going to call you here The bench right guys knew what was going on while travis is inside at secoia just up the street.

They call the uber away So that travis has to run Literally run down san hill which if you've been there, it's like a quasi highway like there's multi lane like anyway Then after they do the deal they send him a pair of nike's as like Fun stuff and then uh right after that Travis goes on j cals show on twist

one of the best twist episodes ever episode 180 and talks about The deal and um is that where he talks about the michael ovid's episode too.

He talks about ovid's And just watching this like man like God, travis was sharp was is he's just behind the scenes now You know, I mean great upside great down.

So but like man, he was good and uber was good and those days were something special anyway, so jason asks Travis in that moment the deal had just gotten done jason invented angel investor of course.

I was like jason angel investor in uber Oh Did he wait?

Was he the third or the fourth angel investor in uber?

We'll have to ask him about it like I didn't J kal.

We love you But jason asks travis on this episode why to go with benchmark why to go with bill And travis just like doesn't blink.

He's like they're the best I went with them because they're the best.

I didn't want to work with anybody else.

I knew it was bill.

I knew it was benchmark They are the right partners They are the best period that is what two other portfolio ceos said In the exact same way that I had talked to privately to prepare for this show and I shouldn't share who they are But they're like, oh well because they're the best there was no other

need for explanation Yeah And I actually got lots of other explanation like They're this unbelievable partner and like they actually can help you recruit executives and they're truly like like three people told me They feel like a co -founder.

Yeah, we can get into all that in analysis, but Oh, man, the over day it really was but I mean just like i'm so nostalgic and wistful now like god, those days remember those days 2010 like 2015.

Oh, yeah, the whole industry.

It was just a different time so much happier Feels like it right and i'm trying to figure out is that because there was like Was tech like intrinsically better than or did we just not think about the downsides?

No, we just didn't know You know, I don't think anything was actually different.

It was just It was still early Yeah And frankly, like there weren't enough hooks in most products yet to make you hopelessly addicted.

Yeah the sophistication of applying All the behavioral psychology and the machine learning that applies a lot of the models to like just The ruthless execution of capitalism.

I don't think we realized it yet and it was just much more nascent of witch uber You know, yes A prime example Yeah, I mean y 'all know what happens It's interesting, right?

Like so what's the right way for us to talk about this?

So there's a thing that we should definitely talk about on the benchmark episode, which is Benchmark with their board seat on uber ends up suing the founder along with a group of other people Give me like 60 seconds on like how we got to that point Uber had a lot of bad stuff that all sort of happened

Seemingly all at once delete uber but like how did we end up in a situation where shareholders were all looking at each other going?

We need to replace the ceo.

Otherwise the company will destroy all the value it's created So I think there are multiple threads to explore here one All the reasons I think were wistful for i'm wistful for 2011 2012 You know when things were just simpler and happier Uber I think was you know, it was at the forefront of all the stuff

that Made now a less wistful time, you know everything, you know You said and some of those were the company's fault and some of those were travis's fault and some worked You know, you look back at like delete uber that was just an absurd situation like uber was trying to do the right thing Yes, but that was an example

of a company that you know How luck is about maximizing the opportunity for good fortune to happen to you?

This was the opposite they had built up so much ill will that a pure misunderstanding About the way that they were trying to help launched a gigantic social media campaign where people assumed they were acting with malice.

Yep Then you had the susan valor Stuff in which case many people at uber were acting with malice.

Yes. Yes. No doubt about that You know, there was the attitude that I think needed that you couldn't have built uber without of the Hey, the existing laws and regulations are stupid and they don't serve consumers and we need to fight them.

Yep, and The company and travis never changed that stance whereas public opinion started on Their side and then as things just escalated and escalated and escalated moved first slowly and then quickly over to the other side and I don't think the company and travis moved along with them and You know,

that's a tough position for the board.

So I think that's another thread and then I think the last one I think this Obviously right like the uber situation and the we work situation too to a certain extent Obviously the uber situation is the end of the fab four era, you know There's like tailgirly stays for a while and like this new we'll

get into all that but that's the end of like The beetles, you know just like the beetles had a 10 -year run, you know, the fab four had a 10 -year run Yeah, it stopped being fun and I think part of that I suspect Was the pressure you get to a certain point With uber and you know a few years in like so we

start out with benchmark and bill and travis and the company are besties You know lock arms for life, right and you listen to that twist episode with jcal Right after the series a you listen all the interviews with bill that travis is like, you know The best most shining example of representing of an entrepreneur

i've ever worked with all this stuff And then it it doesn't go right from that to like suing the company.

No, there's a few years in the middle where bill starts Sounding the alarm in silicon valley about all sorts of things and not talking about uber But clearly he's talking about uber and not naming uber but saying things like hey, maybe valuations are out of control Hey Maybe it's not in the founder or any

of the company's best interests to be raising this much money at these valuations Or you know if you are going to to be in the private markets where like there's so much opacity for everybody involved It was unprecedented uber hit what a 70 billion dollar.

I think valuation 80 on the private markets Yep, or maybe 80 was the number that it was anticipated to go public.

Mm could be I know it was at least 60 I believe Valuation it whatever it was that had never happened in history before never by an order of magnitude Had that happened and all of a sudden The rules of the game have changed and things are very different and the amount of pressure on the company on benchmark

on the board on the lps of benchmark A point that I hadn't thought about till I started thinking about in this research Say you're an lp in benchmark Some university endowment you work at that pool of capital.

That is an lp in benchmark fund seven Uber is not getting marked to market but you are getting your quarterly marks From benchmark fund seven based on the valuations that uber has achieved which has comp tied to it Which has comp your personal comp as a you know, an employee of the organization is lp

and for the future planning of like the disbursements from the idyllic it reaches a point where like The amount of capital involved is so meaningful here To so many players all up the stack thousands and thousands of people in addition to all the employees and all the customers and the Drivers on the platform

like you actually have these Thousands if not tens of thousands of people impacted by these paper valuations at uber, right?

And so the amount of pressure just kind of land this plane so to speak reaches just like Crazy heights, uh, you know and look who is this anybody's fault is with like, uh, who do you blame?

I don't know but like I think this happened Yeah And so then it was like, okay we need to get public and we need to get public in a way where People don't fear that the company's gonna fall apart So we need to stay on the same order of magnitude of the current valuation so that the world doesn't fall

apart for Us and all the other investors and all the lps and all of the investors in this thing so far and so If you have a disagreement about that, there is sort of a greater good than any single relationship you have with a founder right at a certain point The level of scale that you're impacting

here becomes way more than just like, you know You and your board member or like, you know with the way silicon valley even even go back to the bubble We were talking about web ban, you know web ban gets liquid goes public trades on the public markets up to eight billion dollars crazy Right here.

We're talking about 80 billion dollars in order of magnitude more On the private markets.

Yes. Yeah pressure cooker So benchmark goes through with this They know that they have existential risk to their reputation based on suing one of the most iconic successful founders of all time who many other founders want to be like And many other founders don't want to be like right?

There's a lot of people who deliberately do not want to be travis but still This is a rubicon crossing move Right and it's interesting in some ways There's actually two ways where I don't think it's that big of a deal Let's start with the one that's more arguable so Getting sued by someone that you've

signed a very heavy contract with People talk about it like wow, no one will ever do business with them again That is a thing.

That's like sort of unique to startups and venture capital There are lots of other agreements and lots of people who do business together where like if you start Doing ill will by the other party there are lawsuits I don't know why everyone made it out to be this big deal of like because silicon valley

runs on trusts and love and Sunshine's if you raise a big debt pool and then you don't use the debt pool for the intended purpose Well, like the lps in the debt pool will sue you for that You don't have to look very far.

Look at venture capital's cousin private equity, right?

Nobody would bat an eye here Not that I would ever want to be in that situation and not that I would ever take any of the first 10 steps That gets you to that situation But like it always struck me as like people are getting really holier than now around like this rubicon of a lawsuit Then there's the second

thing of like, okay.

Did it actually impact them as much as Sort of people projected that it could was this really an existential risk?

I think the answer is no Yeah, I think the pretty clear answer is no at this point Yeah, I think it's definitely a tool that gets trotted out you know if you already have all these other things stacked against you like benchmark doesn't have a platform team and like Oh, we haven't even talked about that yet

And on top of that they sued travis remember It's like the cheapest shot you can take But it's a shot you can take and you can bet that people take that shot when they're competing for a deal That's really an important one.

I think pretty unambiguously at this point both in my opinion and just Looking at what's happened in the intervening god.

It's been five years since then The answer to that like does this meaningfully negatively impact benchmark is No directly.

No And probably hasn't but there's some question around is there some pajama pitch moment where they're not getting to see something because of this move It's probably not this move I don't think it's happened yet But you know startups take a long time to mature and we don't know what they didn't get

to see and why and so who knows Yeah So directly the answer in my mind is clear cut.

No Indirectly, yeah Very little doubt in my mind that this precipitates the end of the fab four era Yeah, that's probably the biggest value destruction.

This is the yoko Oh, no moment.

It causes people to retire earlier than the other was one of I don't mean to blame yoko, but like, you know, whatever your pet theory is for why the beetles broke up This is the end of the era.

Yeah, dude. I watch the documentary.

It's because paul is full of himself That's the reason Amazing.

I haven't watched yet.

I gotta go. We've been doing too much research.

It's so good So, you know all that comes to a head in 2017 into 2018 2018 they do fund nine Matt and mitch step back at that point bill sticks around for one more fun cycle And then of course, you know, probably everybody knows at this point Certainly if you're still listening at this point bill has stepped

back now at this point and peter is the only current active gp from the fab four era So what's benchmark?

today Well flashback to start the answer to that question.

We got to go back to 2014 when they bring on another non -spec Gp.

Yeah An operator a ceo We are of course talking about the one and only eric misteria Who you introduced me to in?

2013 2014 when he was visiting seattle.

We all got drinks together, right?

That's right. We went to uh, Oh, what was that great bar?

I don't remember somewhere in pioneer square in seattle.

Yeah, and uh, delicate us.

Yes and uh At the time I was like freaking out because I was like, oh my god This was the guy with ben horoitz who did loud cloud I had just read the hard thing about hard things and I was like, oh my god So fun.

It is incredible. The fact that he worked with ben on and mark Yeah, he was vp of marketing loud cloud and opsware and then ended up at benchmark and not injuries in hero.

It's so he joins and um Kind of quietly eric for anybody who knows him is sort of a understated guy But total class act like fits the benchmark Understated class.

He'd always go above and beyond be, you know, incredibly responsive courteous like that's like the Despite being i'm gonna say this in the most kind way possible a killer.

He has all those characteristics, too He's so sharp and so kind Yes all the above Sort of quietly in the midst of all this of the transition out of Through the setback half of the fab four era now into the new era Eric's just killed it There's no other way to put it.

His first deal was confluent series a 7 million at a 24 post Company's trading at a 7 .6 billion dollar market cap today Then he did amplitude he did benchling.

He did cerebrus one of our pet favorite semiconductor companies out there now Yeah, he fit right in so you've got eric.

So now in 2017 really kind of in the midst of all the uber stuff going down benchmark brings on Another general partner in some ways actually like the very perfect venn diagram Hybrid spec if there ever were a spec for a benchmark general partner And in other ways the most Different general partner

that they've ever had a benchmark They bring on sarah taval Good friend of the show Good friend of the show the first woman investor and ipso facto GP at benchmark ever she worked at greylock before She scouted the pinterest investment and then famously went and worked at pinterest and helped scale

the company Well, that was when she was at best rate and this is why you're right bessamer to pinterest to greylock sarah, it's so many ways it's like Literally, I think if you were to ask dolly to paint A picture of a benchmark gp it would come out looking exactly like sarah because she started her

career in venture as a junior analyst at bessamer At which she sourced pinterest Which was a very non -consensus deal at the time She then goes and joins pinterest as a very early employee Spends years there helping scale pinterest and working with ben ceo and building that company and then She goes

to greylock and joins greylock as a baby gp I love that you keep using the baby gp.

Hey, I didn't make that up.

We heard that in the research not about singing but about peter Uh, so I mean literally like I can't imagine a more Qualified partner to join benchmark and in some ways she's like the bill protege That sort of takes his place afterwards.

She does a lot of consumer.

She does marketplace investing.

She's very analytical She's a big frameworks thinker.

She writes a lot No one's a clone of each other But you can sort of see where sarah's swim lane sort of emerged from when they were thinking who do we need someone like?

Well, here's the other interesting thing about sarah And why I think she's a great, you know fit to everything we've talked about at benchmark here.

Yes, you're totally right She fits that swim lane.

But do you know what her first investment was?

at benchmark Ooh, I do not The very first investment that she made after she moved over from graylock and joined benchmark was chain analysis Which does not fit any of those categories and was a very Very non -consensus deal to do in the middle of ico crypto winter in 2017 early 2018 She did I believe

in the series a and benchmark I believe owns a meaningful part of that company Which is currently valued at 8 .6 billion dollars That's the most risk -adjusted way to do crypto Like by the enterprise security analysis tool Which but I think it's so funny, you know, it really like it's a great bet fits

the benchmark she fits benchmark and that investment of like hey knowing a secret right like Yeah that other people aren't willing to recommend making a correct non -consensus bet.

Yep You keep saying correct non -consensus and it's funny All of the benchmark partners or at least some benchmark partners from every generation Reference that howard marx axiom very often and this is awesome because like we just had howard and andrew on the show But andy raccliffe says it bill girly

says it all the time Of course in order to make money and investing you have to be both non -consensus and right And I have heard another addendum to this from a benchmark partner that I thought was pretty interesting Oh do tell do tell you want that to be true when you make the investment But you don't

want to be very non -consensus for long you want to quickly I know who told you that consensus and right You just don't want anybody to see it until you make that bet but like you don't want to make that bet and then be Sitting there for five years still non -consensus knowing the personalities involved.

I can tell you exactly who said that but we will Protect their identity to to protect the guilty here But it is a great point and it is the point that I wanted to make in regards to ebay That is the takeaway of like you seem like a whack job buying the company that facilitates selling beanie babies

Which seems like a non -market to you know within a year Having whatever it was a hundred thousand percent growth or something like that On that investment.

So that was 2017 so you got eric joining 2014 you got sarah joining 2017 and then the next year 2018 you have surprise surprise another spec hire Joins benchmark as the next gp.

Of course we are talking about jathan put a good time He is a spec hire and while he's been very very successful and blah blah blah We can say that one of his greatest successes is uh joining us for the only episode that we've ever done Not about anything related to acquired or tech or business where we

analyzed the last star wars movie together And you two liked it and I was like what?

Okay, wait, wait, we we can't get into a holy war here because that's no we're treading enough controversial territory here We don't need to go into star wars But that's on the lp show from like four years ago or something.

So chafing total spec hire for benchmark He was like 30 ish he came from nea.

He had already done elastic and mule soft and mongo db Knocked it out of the park on all three investments one got acquired by sales force.

The other two went public the exact thing that we were describing of like be in venture for Seven -ish years and then have 20 amazing years ahead of you chathan is exactly that So now you've got two great enterprise investors with eric there and jathan there not to mention it It's not like peter right

has left yet You still have peter fenton there Yep And that brings us to the most recent person to join as a general partner at benchmark, which is miles grimshaw Which was last year david Yeah maybe a little over a year ago, but uh Not long ago miles, of course was uh, the wonder kind at uh thrive

capital involved in helping Build that firm and uh as a baby gp all these baby gps into uh Yeah, an incredible Success there, but now part of benchmark.

What companies was he involved with there?

their table, uh, where he met peter and benchling, uh, where he and eric Overlapped on the board and I think miles was very early to benchling, uh, very very early definitely before benchmark and eric Yeah, if you want to be a gp at benchmark, just uh be on boards with them.

That seems to be the takeaway But even better Join boards before they join And then have those companies be incredibly break out successful companies.

I think that's the answer that's the playbook So that's the lineup right now.

You got the elder statesman with uh, peter fenton you have eric vishria Sarah tabble chathan puta gunta and miles grimshaw and that is the current benchmark partnership We want to thank our long -time friend of the show vanta the leading trust management platform Vanta of course automates your security

reviews and compliance efforts So frameworks like sock 2 iso 27, 001 gdpr and hipa compliance and monitoring Vanta takes care of these otherwise incredibly time and resource draining efforts for your organization and makes them fast and simple Yeah, vanta is the perfect example of the quote that we

talk about all the time here on acquired Jeff bezos his idea that a company should only focus on what actually makes your beer taste better i .e.

Spend your time and resources only on what's actually going to move the needle for your product and your customers and Outsource everything else that doesn't every company needs compliance and trust with their vendors and customers It plays a major role in enabling revenue because customers and partners

demand it But yet it adds zero flavor to your actual product Vanta takes care of all of it for you No more spreadsheets, no fragmented tools, no manual reviews to cobble together your security and compliance requirements It is one single software pane of glass that connects to all of your services via apis and eliminates

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time instead of static So you can monitor and share with your customers and partners to give them added confidence So whether you're a startup or a large enterprise and your company is ready to automate compliance and streamline security reviews like vanta's 7000 customers around the globe and go back to

making your beer taste better Head on over to vanta .com acquired and just tell him that ben and david sent you and thanks to friend of the show Christina vanta ceo all acquired listeners get a thousand dollars of free credit vanta .com acquired Okay, david analysis Of benchmark capital.

This is like a hell of an undertaking.

Is it benchmark capital or is it benchmark?

I know they used to say benchmark capital.

Well, the entity itself is benchmark capital At least their goofy website.

Oh, we didn't tell the story of the website.

Oh, we got a okay. We got to do it here We got to start the website.

Let's do it Yeah So yeah as ben has been talking about in the episode to do the wayback machine they used to have a truly goofy website Yeah, but I actually think I know something that you don't oh, okay.

Go for it. All right website so Many people know that benchmark has a website that just says benchmark.

I think it has some contact information Linked to their twitter feed.

Yes, which of course lists their announced portfolio companies in a twitter list and I assumed that was always the case.

I assumed they just never updated their website because they thought that would be a You know a way to keep the mystery a little better.

At least keep our operation simple They were actually the very first venture capital firm to have a website in the early 90s I guess in the mid 90s.

Yes, they were they were very early to adopt it and uh, We'll put links to this wayback machines.

It's just awesome. I mean it is like hilariously goofy And you can find directions on how to drive to pitch them and they evolved it a few times It sort of got more and more modern And uh, then matt color joins the firm and says hey, I think we really need to update our website you guys like This is embarrassing.

Oh, I actually heard the story was the opposite It was the the other existing partners when he joined were like you're the new guy your initiation ritual.

You're coming from facebook like You deal with the website.

Oh, I actually don't know which direction it was But anyway, I think he worked on it a little bit He sort of came up with some ideas that he you know needed to make it more web 2 .0.

E more interactive incorporate live things Ultimately one problem was it ended up putting benchmark too far Forward it was almost like taking credit for these entrepreneurs success And uh, that is antithetical to everything benchmark stands for they want to be in the background They want to be entrepreneur

show They want to be that sort of quiet confidant and partner and they think that the best founders will be attracted To the idea that they're not taking credit by featuring those companies on the website Which I think is sort of an interesting rationale for it.

I think what really happened or at least what also happened is Matt was showing it to the rest of the partnership in these early revisions and got a whole lot of feedback And a whole lot of opinions And it ultimately ended in just saying hey, actually, I think we shouldn't have a website at all because I

don't want to deal with this Which also ended up really because it totally added to the mystique, especially in that fab 4 era So great.

All right Let's land this plane.

Let's land this plane.

So Let's talk about power.

I think that's a good place to start it before we get into playbook.

Great I'm not sure there's a more perfect and pure illustration of counter positioning Than how benchmark started yep agreed And I think it goes deeper than just like oh if you are a very powerful very wealthy senior gp at a different firm You'd have to give up a lot of your economics and no one would do

that. And so therefore no one's going to do it Other firms were not set up to exclusively have partners That were truly equal to each other in value Price is what you pay value is what you get You know price is what you pay The carry that you have to pay someone out and the salary that you have to pay

someone And value is what you get in terms of them bringing great deals and contributing something to the partnership No other firm was set up to have equal value employees So you couldn't make everyone equal because it wouldn't solve the problem.

Yep. So every other firm Couldn't do this now.

It doesn't mean that this is better But it is for sure that no other firm was set up to actually do this a hundred percent and I don't know where this falls on this but there's also because of everything we talked about this whole episode because Of this all -star team dynamic of like for this model

to work Everybody has to be an all -star and has to bring it all the time and you have to be committed and capable of being the best On the field It's also a barrier to entry to other firms starting and copying the model Like sure you can try and do that But like you got to be the best and other firms

have lots of firms out there have equal partnerships and no no associates, but none of them Have 25 x to 500 million dollar fund and so it's almost like Every decision you make is very risky because once it falls apart, it's done for good Yeah, because no one you're not going to go attract the next

bill girly If you've been mediocre for a couple funds the next bill girly doesn't think that the other partners are exactly exactly so I think one funny thing is uh Realizing how much this sort of faded away when you're An upstart you need to be really loud and overt about this stuff and when you're

on top You can sort of let the community speak for you, which is what they do now But I love this from bench parks 1997 website This is just like says it in prose many venture firms recently raised mega funds.

They're actually laying out Here's why you should go with us not other firms, but the numbers in this are really funny Mega funds capitalized at more than 40 million dollars per partner This can lead to an overextension and a lack of accessibility and responsiveness to portfolio companies Some investors

have been known to hold as many as 20 board seats at one time That was before people learned the trick of just don't take freaking board seats I love that.

They just were like, oh, I don't know like let's just type this all out Well, you know back in that era that early like everything we talked about at the top of the show Like these guys were pirates, you know, it was great.

I love it. Totally There's another interesting quote in there where you can really hear dave burn's background Coming from executive search and being in a like very services forward business That was not the common belief among venture capitalists at that time The belief was we walk on water and people

would be happy to work for us And take our money and I think dave burn really brought this like we are service providers mentality to it And I think that's also very bob giggle that ethos.

I think they all shared that good point So it says benchmark is structured to provide a high level of service with maximum investment flexibility Our capitalization of 20 million dollars per partner allows for an average of six board seats and ensures the right level of partner Attention and support

regardless of investment size It's so funny that they felt the need to spell all this out.

I know today You would never write this to be like if you have to tell me this like right Right.

I love the 20 million a partner too.

It's like Well, uh, we could only raise 85 million and so therefore We started with five partners and so it was 15 and you know, yeah a lot of Exactly, but yes counter positioning you are so right.

This is one of the clearest examples we've ever had.

Yes The other one that is extremely obvious to me is branding and The definition of branding is if I hand you an identical commodity with a unbranded or brand b on it You are not willing to pay as much as you would pay for brand a or tiffany's This couldn't be more true benchmark and all vcs are in the business

of selling american green dollars and benchmarks american green dollars Cost a lot more Yes, and I really would want to do the analysis of like Again, price is what you pay value is what you get?

Lots of times entrepreneurs take a deal where benchmark Is asking for more of their company aka a lower valuation in exchange for the same amount of dollars And then the question is on values what you get How much should entrepreneurs be willing to i've talked to multiple entrepreneurs where it's not just

lower It's like the lowest Right and they still do it is benchmarks money worth twice as much as a competing term sheet That might be ridiculous.

Is there a 20 premium?

Definitely And it's like what are some easy ways to sort of like back into this because there's a squishier stuff of like All the feedback we got around it's so meaningful to have them on my board and we talk all the time And they're one of the smartest people in the world and they have these amazing

networks so they can help me recruit This fantastic executive team and they know the ceo of all these amazing people who could be customers So like that stuff's like a little squishier, but definitely valuable the thing that is not squishy at all is it has to be close to a hundred percent of benchmark

companies that raise a series b Yeah, and so you're completely de -risking your next round of capital by becoming a benchmark partner And it costs benchmark nothing to Have that asset but they now have that asset because the only people that revere benchmark more than founders Are vcs?

so like now that they have that asset it's like They just get better deals on everything because even when they deploy the same amount of dollars that joe schmoe vc does Their dollars are worth more because it comes with a great series b This is the perfect segue to jump to any other powers we want

to talk about and those are the two obvious ones to me Yeah, okay Now here's the question in the current environment.

Yes Totally agree with everything you said And other firms have had to you know Sequoia does their own thing and dreason has their way of doing things No, there are other great firms out there too, like blah blah, but like in aggregate The rest of the industry has had to figure out a way to respond

competitively to this Yes, and in aggregate the response has trended towards Responding to this being that if you take money from benchmark, you are almost guaranteed your next round at good terms Which is true at sequoia and maybe in dreason harlots too and probably founders fund Unfortunately, those

people also could lead the rounds they signal whereas benchmark can't Oh, so yes.

So here's where i'm going with the aggregate industry response to that has been Okay, we'll raise more money and then we can also provide you the same thing.

We'll just bring the money Yes, and benchmark has very explicitly not done that Yes, and part of it's operational.

I genuinely do think it's funny.

I came into this research wanting to believe like They create all this mysticism so intentionally and like I don't actually think I think they embrace it I think they embrace the sort of like opacity and like mystique of benchmark But I think most of it actually originally stems from work We want to

do and work And they like only bring partners in who want to do a very particular style and craft of venture capital investing and Those people end up sort of perpetuating the resistance to I don't want to be a growth stage investor I don't want to deal with the conflict of A founder looking to meet

for their series b or c Well, and that's when things are going sideways at the company It's also a conflict when things are going well, you know, I talked to a founder about this where things are going well And he had a great point.

It was like, you know All my other vcs have these, you know growth funds and you know They do lots of stayed like whenever I go to raise a new round all the conflicts come out It's like right Everybody's trying to ram money down the throat outside investors inside investors blah blah blah and benchmark

isn't a position I think this is a legitimate point to make Where they can help make around the best round come together without The conflict of having to force more of their own money down the company's throat And where this shows up for a founder is how nice is it to have your board member?

Be someone that you're not pitching board meetings aren't pitches because they are not your next round of capital That is the thing like with psl ventures having a hundred million dollar fund That is the awesome thing for me is like we're also not your next round of capital We aren't going to lead your

series a and so like you actually get to have a more real relationship I do think for benchmark I suspect they've done some bridge rounds here and there or their participation in a round signal something to the next round investors So it's not perfect.

You do need to keep your lead investor excited about your company But they definitely have a lot less of a conflict then yeah, it's a different motion than Just about everybody else in the industry.

Yes I think this is the right point here to say too Obviously, we know All of the current generation of benchmark partners and we've had a bunch of them on the show in the past and we know lots of folks in the ecosystem You know, there's always kind of this question with any vc and with benchmark too

of like, oh they say XYzvc says they're dedicated to the craft and they do all this but like really, you know, but how can we help you know like that kind of stuff We've talked to enough people we've lived we can genuinely say like that's not the case with benchmark.

They really do They do the grid like everybody we talked to like they grind we've seen it.

We've been there like they actually do it It's also the benefit of not having other responsibilities like none of them are managers None of them have any other career aspirations so they they literally can dedicate 100 of their time to their portfolio of companies that they currently work with and The

next set of companies they could work with I also will say it is surprising to me Whenever I meet with a benchmark partner how much time they have for me?

It feels like a buffet -esque schedule Rather than like a lot of times meet with people in our racket and they're back to back in 30 minute meetings all day It never feels like that Don't you guys have something more important to be doing?

But the architecture of the partnership is such that you can allow for a lot of breathing room in your calendar.

Yes Should they have a growth fund or not?

Like it's a good question.

It's an interesting question to discuss This is the moment where we should see the benchmark model really work Right last year was the moment where it should really not work, right?

And actually I think it continued to work pretty well through the previous cycle But if it really really works this market and this year Should be a good year.

All right, let's go into playbook The first thing that I just want to say after doing the research is they are just not a thesis driven firm period I think a lot of people want you to have a thesis and they've been so good historically especially the fab four Maybe a little less today, but definitely

the fab four of saying oh, no, I don't have themes.

I have like a thesis I don't have like an area I invest in We just follow the founders and i'm good at understanding if something is unbelievably compelling and I can sort of like These days model it out more and project and work on trends and in the old days understand someone's personality more in their

gut more But either way like the partners aren't coming in with I believe this market is going to be the huge thing And that's why i'm betting on these 10 companies yep, I think Part of the dna of the culture of the firm is they're all learning machines.

I think that is what they screen for, you know And uh that takes like so many forms But one obvious, you know fun form that I can't believe we haven't talked about yet is they do these dinners They started them during the fab four era just legendary legendary They have this custom build table in the office

on monday nights after the partner meeting they Do these dinners they invite somebody, you know, bezos comes every year like this is crazy public company ceos and yeah So michael lewis, you know, blah blah blah, you know part of that I'm sure it's just fun But one of the things they do in those dinners

and i'm sure one of the reasons they started them They bring the ceos of companies.

They missed it brian chesky's come to those dinners tony shoe from dordash has come to those dinners When they miss they want to know why and then they want to adjust Yeah, that's a great way to phrase it it's funny my uh Playbook theme that I had was they are experimental and I think it dovetails off

of what you were just saying I came into the research thinking benchmark has Had one opinion about what venture capital should be and always did that and that's just like not true all these dot com partnerships Playing around with mezzanine investing even recently trying growth investing like in 2011

at the beginning of the fab four era They did a late stage growth investment in dropbox in their four billion dollar round Weird, right the israel europe doing the billion dollar fund They made some noises in the most recent fund announcement about they might do some public company investing, you know

They held open table for a long time while it was still public which I think this is something that puts a fine point on the analytical side of benchmark and particularly bill girley's analytical side, which is I also came in thinking they know when to sell they always sell Going into the ipo or they

sell a lot because They know that they are private investors and the goal is to get into the companies that are an ipo for the most and then exit Near ipo but actually I think what they are is in some ways their value investors They're good at understanding the intrinsic value of something which I think

is why we saw them dump We work what why they were holding open table while still public in the terrible whatever that was 2008 9 10 That era where it was just massively undervalued because lots of public companies were massively undervalued So I think that illustrates for me like sure there are lots

of quote unquote rules for how benchmark works But the main thing that they're good at is breaking them when it makes sense to break them Yep I think we could go on on some more playbooks here.

I've got plenty. I mean one.

I want to highlight quickly is uh It's just all stars team aspect of benchmark We've beat that horse plenty through this episode But like, you know if sekoia is the yankees benchmark is the all -star team and those are two very different conceptions I think we might have an opportunity to do some more

benchmark playbook discussion Ooh, I think I know where you're going with this.

Yes. I think we may too One open question I have going forward and I just want to leave listeners with this at that end of playbook Is really around consumer investing in the future going forward because all of their biggest wins in the past have been consumer companies Uber snap ebay riot twitter discord

is still privately held, but you know will be a big win These were all very contrarian bets at first and you know We've talked about people thought they were idiots for investing in ebay because big consumer investments seem really weird And as more and more prestige has accrued to the firm Will they

try and keep that prestigious track record going or will they do really weird consumer stuff?

You know are they going to do more of these near risk free early stage enterprise investments?

And if you look at the partner team right now, they're set up really well to do that so In the current partnership sarah no doubt is a primarily consumer investor But she seems like the only one that's like really actually focused on it And the swim lanes are not as clear as they were in the fab four

era So I think their next partner will be really telling on this and I think it'll be interesting to see Does benchmark stay a great breakout consumer investing?

Firm or do they look a lot more like high -performing SaaS b2b enterprise investors It's also just a weird moment in the consumer investing landscape right now, too That is probably the counter argument the fab four era was at the beginning of mobile And so when there's a massive disruptive paradigm

and trillion dollar companies could get built.

You probably should Try actually trillion dollar companies the wrong probably the wrong thing but ipos that could be like hundred -ish billion dollar ipos That's probably the right time and so until It becomes clear with machine learning or ar or crypto that we have the next iphone moment Maybe this fund

is the time to be going more enterprise and then we'll come back to consumer.

I don't know Yeah Okay How are we going to grade this thing?

Let me throw something out.

I think grading is a relic of the past unacquired.

Oh Boom, I love it I think like i'd like to pull a benchmark here and say grading made a lot of you are kevin harvey in 2004 in the partner meeting being like why the f.

Am I getting on a plane to go to europe?

I need to be here. There's just too many episodes that are this style where we're like, let's cover this incredible story That is no doubt.

I mean we just named two of the highest returning venture funds of all time What do we grade them a plus?

This is stupid. Yeah, what are we gonna say here done?

Grading to be revisited in some future episode where it makes sense to do that Yeah, or not.

It's stupid the grade is obvious by the time we i'm at five hours and eight minutes recording here Like if you don't know the grade like whatever Yes dead Carveouts I have to one of them is directly related to this episode Literally everyone listening to this should go watch running down a dream on youtube.

Ah the best It is a talk that bill girly gave to a I believe a room full of mba's at university of texas It's inspiring informative educational slightly analytical but mostly It's the best of vc pattern matching applied to helping people understand what to do with their lives And bill's just a terrific

speaker heartily seconded.

Yes My second one is the smart list podcast If you watch the rest development and you like jason bateman and will arnett it is the two of them and sean hayes who is On will and grace and it is so funny.

It is like Just some of the best Bullshitting of people sitting around they have guests on I just listened to chris pratt.

There's a bradley cooper episode.

They're so Entertaining like it's just great to just leave on in the background.

I don't know. I want to bring some smart lists to acquired Love it.

I love like I do the same thing like our each like Outside interest this is kind of related to the benchmark, you know dinner thing like There's so much we can learn and bring from Other podcasts other shows other mediums that are not at all our world business attack to make it quite better.

Ah, so okay Uh, really i'm gonna do the same model as you then my related To the episode carve out.

I already mentioned it earlier, but go listen to mitch on um, invest like the best such a good episode he's just so so entertaining both mitch and patrick and okay, so that's my related and then my Unrelated one, you know, i'm gonna go with what i've been a recarve out but uh Recarve a recarve recarve

outing No, but at an updated and expanded I mentioned ursula de la guin on The amazon i think was on the amazon .com episode where it started the earth c series rc cycle and i'm now like four books in and it's really good.

She's really good. It's very very Different science fiction all of her stuff is so different from one another Highly recommend.

All right We would love to have you in the slack 13 000 other smart courteous kind people in the acquired community acquired .fm slash slack We get a job board acquired .fm slash jobs find your next great career move Finally we have merch acquired .fm slash store All right All right with that Listeners.

Thank you so much and we will 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?

[基准资本：反规模化的风险投资传奇与平等合伙制的胜利]-[Benchmark Part I]

📋 Summary

基准资本：反规模化的风险投资传奇与平等合伙制的胜利

起源：对公平与平等的宗教式狂热

转折点：找回“swagger"与 eBay 的奇迹

核心架构：平等合伙制的双刃剑

“梦幻四人组”与系列 A 的战略转型

结语：坚守本心的长期主义

🎯Key Sentences

📝Key Phrases

📖 Transcript