SPEAKER_02
I know that I'm a moment away from any of these people firing me and I want them to. But the minute I become predictable, it's over.
SPEAKER_04
Many things. Predictable is not one of them. Benchmark team, it is an honor to be here with you all. I'm not going to make you all reply in unison to me, but I'm really excited to be doing this with you. I want to start with an observation, which is that of the top VC firms, whatever you call that, but I'm thinking of Founders Fund, Coya, Thrive, Andreessen, most have scaled in a big way. For whatever set of reasons, that has been the dominant strategy. Benchmark has been a stalwart in some ways to hold out with a small firm, small team, smallish capital base. And I'm just curious why. And I'm sure you all have different opinions on this.
SPEAKER_04
So just to pick somebody random, Chathan, I'm curious, what is your take on this whole topic? [SPEAKER_01] You know, we only do one thing, which is partner with founders early. [SPEAKER_01] And we really like to partner with them really early.
SPEAKER_01
I think the favorite amongst all of us is partnering with a founder pre-launch or at idea phase or when it's like two or three people in a room. You know, just growing with that firm. I think just in terms of measuring happiness for each of us, that's where we derive the most amount of professional satisfaction. And if you just think about what that does in terms of alignment of Benchmark with the founders and that company, it's pretty amazing if you're there from step zero. I would argue that you can't do that as you scale. The interests, and we see it all in our board meetings, every round becomes its own thing and its own game and its own whatever.
SPEAKER_01
And one of Benchmark's things that you, we've talked about this, that you're like, [SPEAKER_04] we don't do the future round, so there's no conflict in the middle of those. [SPEAKER_04] And we're fully aligned on dilution. We're fully aligned on trying to make this as the biggest outcome we can do. And I think capital constrains you in that way. Time constrains you in that way.
SPEAKER_04
[SPEAKER_01] And each time you go partner with a founder, you're doing it with extremely high conviction and you're going all in. [SPEAKER_01] That to me personally is an extraordinary experience.
SPEAKER_01
And, you know, different models, different ways of practicing the business. But for me, this is the way I love practicing the business. It's becoming rarer by the day. And then therefore it becomes more differentiated. [SPEAKER_04] Peter, you've been here the longest. [SPEAKER_04] And so you've obviously seen Benchmark in its context through a bunch of changes around you. [SPEAKER_04] Have you felt tempted at any points? [SPEAKER_04] Have you felt strengthened in your clarity on what it should be like? [SPEAKER_02] You know, you have your behavioral experience on a Monday, which is where we aggregate today is a Monday. [SPEAKER_02] We're here with you.
SPEAKER_01
[SPEAKER_02] It feels great.
SPEAKER_04
[SPEAKER_02] And there are eras in the business that I've participated in where the Mondays sort of sucked. [SPEAKER_02] And some of those were just cyclical. [SPEAKER_02] You know, you have a downturn in the economy. [SPEAKER_02] Your partners are bringing in their struggles, their pains, channeling the entrepreneurial landscape at that moment in time.
SPEAKER_02
What I was struck by is the period of time that I've spent. I've had time at Excel and I've had time at Benchmark when that felt more self-inflicted, not market-driven. And so the lived experience, the behavioral experience is the joy of the business is centered on serving entrepreneurs. And as Chathan related, you know, getting close to an entrepreneur, being a partner, de-partner to them, social-emotional partner, strategic partner, all of that. On a Monday, if we're talking about that, it feels really good. It feels aligned and it feels purposeful.
SPEAKER_02
And when the Mondays were talking about our friction with their European effort, and I'm sure the European partners at the time, now called Balderton, were talking about the problems with us, it felt draining. I joined Benchmark and they just raised over a billion-dollar fund in Benchmark 4 and the overhang of the misfit between how do we practice our business of partnering early, going shoulder-to-shoulder with an entrepreneur and deploying that volume of capital. And so there are a number of things that happen when strategies are misaligned with purpose and values. And the main thing that happens is just less fun.
SPEAKER_02
And so I looked at the simple question of how many hours a day, our Monday meetings go, you know, somewhere between six to eight hours. And how much of it is just joyful and aligned and how much of it is dealing with the stuff that's not what brings purpose and meaning and value in the business. And what I feel like we got right is we select people who care mostly about the proximity to the entrepreneur being able to deliver a meaningfully differentiated experience for them. So they come away and they give a reference to us that says Benchmark shows up on all the recruiting calls. Benchmark is at the epicenter of our tough decisions.
SPEAKER_02
They're always available, they being us individually and then as a group. And scaling, just asking the question of more capital equals a whole bunch of activities that I think degrade. Interestingly enough, they eat at the essence of why we practice the business. So the outcome of maximum cash-on-cash multiple, I think, is degraded with scaling. Yeah, definitely that. The quality of the relationship with the entrepreneur is degraded by scaling. I think ultimately the joy, because there's some other thing that's growing, which is an incentive system that fuels more and more, isn't wrong for other people to do it. I just know what their Mondays feel like.
SPEAKER_02
And we leave Monday and carry that energy and that effervescence and the sense of purpose into every day that follows from that. And when we didn't do that and we had more activities, more extracurricular activities, man, it felt the opposite. It's like you wanted Monday to end and then you were a little less of yourself the rest of the week. What about you, Eric? [SPEAKER_00] I think this strategy is not financially maximal. [SPEAKER_00] It's not financially maximal for us. [SPEAKER_00] No one's crying for us. [SPEAKER_00] We're doing fine. [SPEAKER_00] But it's a perfectly fine financial outcome for us or financial strategy for us.
SPEAKER_02
[SPEAKER_00] But it's not financially maximizing. [SPEAKER_00] It's happiness maximizing. [SPEAKER_00] And it's happiness maximizing for the kind of person who wants to do the work. [SPEAKER_04] Can I put a third variable there if there's happiness financial? [SPEAKER_04] Yeah.
SPEAKER_00
[SPEAKER_04] If you had to put a third variable of impact, do you think that you can have the most impact this way? [SPEAKER_04] Or do you think you could increase your impact if you worked with more companies, even if you suffered a little bit for it? It's not financially maximal for us. No one's crying for us. We're doing fine. But it's a perfectly fine financial outcome for us or financial strategy for us. But it's not financially maximizing. It's happiness maximizing.
SPEAKER_04
[SPEAKER_00] And it's happiness maximizing for the kind of person who wants to do the work. [SPEAKER_00] Can I put a third variable there if there's happiness financial? Yeah. If you had to put a third variable of impact, do you think that you can have the most impact this way?
SPEAKER_00
[SPEAKER_04] Or do you think you could increase your impact if you worked with more companies, even if you suffered a little bit for it? [SPEAKER_04] I don't know that the way we do it just doesn't scale, unfortunately. It doesn't scale. Is that because of the board seats? Yeah, it's the engagement. I just say it's the engagement with the entrepreneur that I think is the time limiter and the constraint. Yeah. And that's it.
SPEAKER_04
[SPEAKER_00] That's the time limiter. [SPEAKER_00] Ev, you obviously came from bigger firms, Founders Fund and KP. I guess you're rolling what?
SPEAKER_03
[SPEAKER_04] Are you two months in now?
SPEAKER_04
Three months. [SPEAKER_03] Three months.
SPEAKER_03
[SPEAKER_04] So your experience on this has to be at least notable because it must operate so differently. [SPEAKER_04] I mean, I think today, especially one of the beautiful parts about the asset class is that the menu is so large in terms of how do you want to spend your day to day and what do you want your life to look like as an aggregation of that day to day. So even among firms that are larger, KP is very different from Founders Fund, which is very different from Sequoia, which is very different from Andreessen, which is different from Lightspeed and GC. Everything, some firms are more similar than others, but every firm is actually quite distinct.
SPEAKER_03
But I do think the thing that really stands out about Benchmark, and I think to Chaitan's point around being even more relatively differentiated than it was in the past is as the prevailing trend has been towards scaling and getting to mega scale. I just talked to some of my friends and peers at some of these larger firms and the way that they talk about their day to day and their job and how they're getting fulfillment out of their job. It'll be, let's say it's over the summer and they're like, yeah, I've already done four deals this year.
SPEAKER_04
[SPEAKER_03] So I'm having a pretty good year.
SPEAKER_03
Yeah. [SPEAKER_04] And I'm already deployed a lot. And I'm that, that is the North Star and KPI of what's giving you fulfillment? Do you like the founders? Do you like the companies?
SPEAKER_04
[SPEAKER_03] Or is it just the fact that you've shoved capital into four investments and four companies that's giving you this?
SPEAKER_03
This was one actually that gets at one of the things that was a noteworthy difference for me going from running a company to now doing investing is as a company, money's involved, but the primary work is about a product and customers. [SPEAKER_04] Yeah.
SPEAKER_01
[SPEAKER_03] And I think that's the idea of each of us going out and doing eight investments a year or scaling up massively or something.
SPEAKER_01
Things are off track and you're going to be there and there's trust there and you're that first call. I mean, that's what we aspire to in every single one of our relationships. So there's that part of it. [SPEAKER_00] Which we've talked about a bunch. [SPEAKER_00] And then the other part of it is the equal partnership. [SPEAKER_00] And I think that's a very special thing.
SPEAKER_00
You know, I've been here for a quarter. Peter's been here for 20 years. I think I'm on 11th. You're on eight. That equal partnership is really special, I think, and just something that also doesn't scale. But has a very special dynamic. And I remember when I joined and you're just this new person. It's my first investing job. Peter and Bill and Mitch and Matt, who were the four that I joined, they're asking me about doing things. And you're well, I have no idea. I have no idea. I have no idea how to do this job or anything else. But I think it just relates to this deep belief in the equal partnership. And I think it's very empowering for a new person.
SPEAKER_00
I think, or I found it very empowering. And he was disempowered. He was disempowered right now. I think it's just it's very empowering for the new person. And it also creates, I think for the right kind of person, it creates a lot of internal drive and expectation because you're like, oh, I better not fuck this up. And so I think that's a magical piece of— [SPEAKER_04] Why is it so hard for most people to do this? [SPEAKER_04] Because I think a lot of other firms want it, but effectively rounds to zero the number that can do it. I have this belief that the biggest leap wasn't at the founding of Benchmark. The founding of Benchmark, the founders came together.
SPEAKER_00
It's how do we cut things up? Okay, we cut them up. Okay, it's equal. What else do we do? But then they had an amazing first fund Benchmark One was a legendary, whatever, 70X return or something. Then so they built all this brand value. And they gave it away. And then they gave it away. And I think that was the leap. Nobody can do that.
SPEAKER_04
[SPEAKER_00] And that, I think is the hard part, right? [SPEAKER_00] It's well, I built the firm. [SPEAKER_00] I built the brand. [SPEAKER_00] And I should get some economics from that. [SPEAKER_00] Or whatever it is.
SPEAKER_00
No residual economics is the craziest— [SPEAKER_01] It's the craziest thing. [SPEAKER_01] It's the craziest thing. Then, so they built all this brand value. And they gave it away. And then they gave it away. And I think that was the lead. Nobody can do that. And that, I think is the hard part, right? It's like, well, I built the firm. I built the brand. And I should get some economics from that. Or whatever it is. No residual economics is the craziest thing. [SPEAKER_01] It's the craziest thing. It's the craziest thing.
SPEAKER_00
[SPEAKER_04] There's no incentive, really, to do it unless you really care about legacy and something other than yourself. The incentives are very thin to do it.
SPEAKER_00
[SPEAKER_02] It's also rooted in the culture of Benchmark. And you go back to Bob. It can be Bob, Bruce, Andy. All these founders have played their part. But it was rooted in this idea of respect and affection. You should have a partnership where you really respect and admire. You give all my money to any of my partners. But then you admire them. You say, there's an old saying, like a virtuoso, somebody who surprises even themselves. And I believe that about all my partners practicing the business. They're virtuosos in the aspects of the business that motivate us to do the work. So when Bob raised his hand and I was there, he just said, it's time. I'm out.
SPEAKER_00
[SPEAKER_01] And others had left before,
SPEAKER_00
[SPEAKER_02] Andy and others. But there was never a conversation. It was actually just the opposite. We gave him economics and a fund. They weren't giant economics, but it was a way of saying thank you. And I think the culture, as soon as you get into the parts of everyone's identity that are ego-driven, they lay claim to things psychically that make sense to them. And it would never make sense to ask for something at this firm that was going to entail taking more than you're giving. And I think that's a weird thing to say, but it's a pressure that I feel as the last of the prior generations, knowing that I want to be raising my hand first before I realize I'm not contributing more than I've taken out. Not because it's some explicit trade, but it's a cultural ethic. And the cultures we know as you've found in your company, they're so durable. The inertial forces of culture that get founded. It's one of the things you said, what is Benchmark? And if I read one book that captures Benchmark, it's this book. Partner's different here, but it's the Carl Rogers "On Becoming a Person." And the premise of the book, which is very simplistic in a sense, it was like the apex of client-centered therapy. It's about psychotherapy. Sorry, this is where you wanted to go in this conversation.
SPEAKER_00
[SPEAKER_02] I love psychotherapy. But the premise of the book is that to be useful in a relationship, you have to first permit yourself to understand the other person fully. And I think if Benchmark is doing its best work, an entrepreneur comes in here and says, they see me. I bet if you ask Andrew at Cerebris, who understands him most fully and the founding team, the purpose and the vision of the company, it wasn't, well, he found this hire for me or he gave me this advice about negotiating the contract with the company X, Y, or Z. It's like Benchmark understands what I want to do. And then we do something else, which I think is equally important, unconditional positive regard. And there are examples in the past of Benchmark where that's been broken. And I think an immune system builds around those failures and says, how do we not do that again, as opposed to say, we're defined by that one act. And so I think what you see in the current lineup at Benchmark is an emboldened immune system. We've had some vaccinations from past experiences to say, we never want to be in a position where the relationship degrades, where there isn't that faith that we've delivered unconditional positive regard because we believe in our founders oftentimes more than they believe themselves. And so if you understand the founder fully and you have unconditional positive regard, then you really can empathize with what they're going through. And I think that nurtures the sorts of success possible with founder entrepreneurs that we all hold out as the great examples of why we do this job.
SPEAKER_00
[SPEAKER_04] I remember when we spoke last, you talked about the fact that the Benchmark seat was kind of given to you, that from the beginning is like, I'm going to give this to the next person. And I can see why, you're saying, the seminal moment was actually the handoff because that creates the instigation for all the future handoffs. And you feel responsibility with that. [SPEAKER_04] Yeah. I think all of us feel we feel responsibility.
SPEAKER_00
[SPEAKER_04] that the benchmark seat was given to you from the beginning is like, I'm going to give this to the next person. And I can see why, like you're saying, the seminal moment was actually the handoff because that creates the instigation for all the future handoffs. [SPEAKER_04] Yeah. And you feel responsibility with that. Yeah. I think all of us feel responsibility. That was one of the big things we talked to Ev about when Ev was joining, it's just like— The responsibility for us. That responsibility. [SPEAKER_01] Well, just like you feel it, not everyone feels that. [SPEAKER_04] Not every— Which is fine.
SPEAKER_01
[SPEAKER_04] But— [SPEAKER_04] Totally. Well, also I think, if you're talking about if at the, because it's equal when you walk in, it's like if a bunch is given to you right at the beginning, you're like, I got to pay this off to somebody. And the people who set me up from the beginning, I can't really pay them back anymore. So I can see why you'd be like, I got to make sure I give enough before I go, even though you're in a weird way paying back prior generations. But rooted in that as well—
SPEAKER_04
[SPEAKER_02] Eric says responsibility and I think he feels it and I respect that. I think the founders gave us permission to not take it too seriously. [SPEAKER_02] Yeah, they did. They said, listen, come on, as a group of you, no one's going to be around in a million years. It doesn't have to be so heavy. Everything's ephemeral. [SPEAKER_02] Yes. So what you want is a tight-knit group of people that are at maximum potential manifestation, the energy, the joy, and the heaviness of like, oh, we're going to have to maintain this relic and wheel it out and— [SPEAKER_01] They don't tap tablets in the back about what the founders said, none of that bullshit, man.
SPEAKER_04
[SPEAKER_02] Like, this is a day-to-day thing. By the way, forgive me, we're in an entrepreneurial environment where when somebody has a legacy, we want to destroy it. We're in the business of creative destruction, not permanence and enduring, and forgive me. [SPEAKER_02] Yeah.
SPEAKER_02
Like our startups bubble up from nothing and we stay true to that. And I think the firm's premise is that we should have our own form of creative destruction. There's no legacy or claim to it at Benchmark. It's the immediacy and present moment that we deliver. Everything else is secondary.
SPEAKER_02
[SPEAKER_04] One of the things that you just said, which I hope is okay for me to press on, is, and I've wanted you guys to talk about this, which is, I know each of you individually and I know you all are founder friendly and there's like, it's very easy for people in a competitive venture landscape to poke at one historical example that everybody else has done. If you're just loud, you can poke at people. [SPEAKER_04] Sure.
SPEAKER_02
[SPEAKER_04] I would say you're not loud externally and you sort of have a mindset of like, we're going to let our actions speak. But I've wanted you guys to speak because I know you're very founder friendly and I've talked to founders you work with and all of that. So I'm actually curious to hear your thoughts as you've seen some of the stuff, is it important for you to speak about what you just said? Like there's a thing and then we have an immune reaction to it and the firm updates, or how do you process all that? [SPEAKER_04] Humans are storytelling animals.
SPEAKER_02
Every firm has their story and depending on the situation and what the motivations are of the counterparty, you accentuate certain parts of a firm's history. You know, the ethic of the firm, I think this is borne out, even in our worst moments, is the company must come first. And so we're not more important than the company. Nobody's more important than the company. It's the initiative. It's the collective premise.
SPEAKER_02
Every firm has their story and depending on the situation and what the motivations are of the counterparty, you accentuate certain parts of a firm's history. The ethic of the firm, I think this is borne out and even in our worst moments is the company must come first. And so we're not more important than the company. Nobody's more important than the company. It's the initiative. It's the collective premise of an entity which is bigger than any one individual. And there are moments in the past, look, I've been around through the generations where it used to be the standard model that when are you going to get a real management team? And that faded to, well, perhaps we can go the distance and you have the Steve Jobs narrative, which is what crimes were committed against this notion of general management versus the founder mode reality that we all support. The part that's most relevant, I think, is what happens every day here is we view our job. I do personally, and this has been borne out in the references is making the founders the best version of themselves. And like any relationship, if it's simply sycophantic and enablement and codependency, we make them worse. If it's harsh and it's judgmental or absent, we make them worse. So one of the things I think you need to figure out in references is what questions should you ask? And of course, if you're going to engage with any great firm, you want to go and do references. The one that's the first phone call, but I actually think it's even better, you go a level deeper and say, how does this person make you a better entrepreneur? And how have they unlocked your potential? And what we care about more than happiness is flourishing in our companies, and I think what's borne out in the work that we've done is that if I work with that group, I'm going to be a better version and I'm not going to be living in fear because then you're not a better version of us, nor am I going to be getting what happens in our job right now, I'm struck by the number of boards where I see this is a relationship that's sycophantic, where people are afraid, I should say, to pursue the truth because they don't want to hurt anyone's feelings or worse, I think the greatest crime that occurs in many of the boards that we all serve on is that somebody says something behind the entrepreneur's back they won't say to their face. That's one of the things I think is a deep ethic at Benchmark is that we are transparent. If we're going to say it to your face, we may not say it behind your back, but we're not going to be in a situation where, here's what I really thought about the board meeting and this idea of congruence, which is a key term in psychotherapy is that you really want to know that you can trust your partner because they're not putting a face, a mask on because they want you to feel a certain way, but they're being real. By the way,
SPEAKER_02
[SPEAKER_04] this also goes to your point about if you're not going to, if you don't need to put more dollars into the company, if you structurally almost can't put more dollars if you're hoping to get to win the next round, you don't want to upset them because next month you might be writing a term sheet. And I think there's a lot of, there's the references piece, there's the, I want to put more money into this company thing. There's just the, I don't want to fight type of stuff. And I do think it leads to that, which I think there's the best version of being founder friendly is not comfort all the time, obviously. [SPEAKER_03] That's definitely not. They're the best.
SPEAKER_02
[SPEAKER_04] into this company thing. There's just, I don't want to fight type of stuff. And I do think it leads to that, which I think there's the best version of being founder friendly is not comfort all the time, obviously.
SPEAKER_02
[SPEAKER_03] That's definitely not. They're the best. And there was a recent example of this. I recently led an investment dinner in the dining room where we'll have lunch here in about an hour. And after, during the dinner, they showed a demo, we were going through their commercial strategy and we gave them a lot of very direct feedback. And a lot of it was constructive. It was a really productive, constructive conversation, but not every founder responds super well to that. So I called the founder afterwards and I was like, well, how was that for you? How would you respond to that? And in that call, he said, you as a team are going to make us better founders. And I can tell that right away. And because of that, he really wanted to work together because it wasn't just going to be slapped on the back and congratulations, but it was going to be a relationship where we really pushed both the founders and the whole team to be a better version.
SPEAKER_02
[SPEAKER_04] Does it feel like structurally different to you than KP and founders fund in any way?
SPEAKER_02
[SPEAKER_03] I think maybe the most difference is with founders fund because I do think founders fund obviously really leans on this, the kind of Hippocratic oath of VC, which is do no harm. And in doing so, it's like, hey, we're going to be completely hands-off is the pitch. And then if you need something, call us. I think that sells really easy. I actually do think that it's one of these things that in practice actually materializes sometimes as, I don't want to say laziness, but it is just more passive. It is just like, we should back founders that are going to figure it out all on their own and that they don't need help and they don't need any VC assistance. And sometimes that works out. And sometimes maybe there are founders that are like that, but I think the vast majority of the time, almost every single founder could use feedback, a sparring partner, any of these things.
SPEAKER_02
[SPEAKER_04] Like even Tiger Woods has a coach. It's 100%. [SPEAKER_03] And so I think having that position is something that I think is a great soundbite and goes really well on Twitter. But I think when it comes down to it, there's very few practitioners, even the Tiger Woods of the world that don't benefit from something like that.
SPEAKER_02
This is ultimately the highest accolade of a firm that they seek is a manifestation of a value system. And I, everyone in this room, I've heard this and I know I'm going to hear this on your newest investment is that if we've really done our job and you'll hear this in our references, they feel like a co-founder benchmark. It feels like they were a co-founder. And what does that mean? Well, it wasn't a conditional personal transaction. It wasn't a one-night stand if they gave us money and then we could brag about the brand. But it was they were proximate with me when, what a founder, a co-founder does, it's a bit like being in a partnership where you have a child, where you just say like, there's something existentially deep that's permanent in that relationship. And I believe most companies that have single founders end up finding proxy co-founders because they, you need support systems. You need a relational balance and as the ups and downs of being an entrepreneur. And so if we've achieved that,
SPEAKER_02
where you have a child, where you just say there's something existentially deep that's permanent in that relationship. And I believe most companies that have single founders end up finding proxy co-founders because they need support systems. You need a relational balance and the ups and downs of being an entrepreneur. And so if we've achieved that, you could say well, it's not for everybody. Some firms might want more of just the money, thank you, and the brand. Or they want services that are delivered by people who work at the firm. Yeah, those are different facets, but the depth that can occur when you have that kind of proximate relationship and ends up taking you through troughs that would advise the companies to be sold early or to have a destitute founder who's just tired and doesn't. There's also a through line to it.
SPEAKER_02
[SPEAKER_04] I felt this as a founder where even a long time exec might be four or five, six years, but then you have a board member who's there through the first round and the second round of execs and the third exec team and all of that. So you're working many more hours per day with people on your team. But then when you look back over a decade, you're like, there's somebody who's with you the whole time and it's hopefully your co-founder and your board members. So there's something about the long arc of it too that is special.
SPEAKER_02
[SPEAKER_00] I have moved away from talking about it as guidance or advice or whatever. And I loved your sparring partner thing because I think that's what it is. And that's what the co-founder thing is too. Because startups are hard. They're really hard. And the most successful startups are doing things that are new, innovative, and haven't been done before. Therefore, you're figuring things out for the first time. You're figuring things out for the first time that are challenging, hard, and no one knows. And so a huge part of the co-founder thing or, which we should be careful about using it, but it's the aspiration or that idea is, hey, we're asking each other questions that sharpen our thinking. We are trying to figure things out together. And I think that's a very specific way of working where I feel a lot of times what we're doing is you're talking to somebody and I'm thinking of a very specific example from last week, but it's just where the author knows, she knows what she wants to do and it's in there and you're asking questions to help them realize it and for it to surface or get clarity on it. And that's very different than getting advice, right? That isn't advice. That is a sparring partner.
SPEAKER_02
[SPEAKER_03] And a sounding board and I think that's where you get. [SPEAKER_00] It's part of what I feel like.
SPEAKER_01
[SPEAKER_02] This is where I get to be the older person in the room. The degradation of our industry and it really has been a degradation as I think it's shifted. The system has shifted to winning. Our goal is to win, right.
SPEAKER_02
[SPEAKER_00] Because there's capital supply now. And so you have large sums of capital to be deployed. And so the system is built to create in the mind of the entrepreneur a selection criteria. It would say if you're doing POCs, you want to design the criteria, the POC, so you win it. So what's happening is the industry's programming entrepreneurs in a way to select for things that I think are off target. And they're aligned with the target of the firms.
SPEAKER_02
So you have large sums of capital to be deployed. And the system is built to create in the mind of the entrepreneur a selection criteria. It would say if you're doing POCs, you want to design the criteria, the POC, so you win it. So what's happening is the industry is programming entrepreneurs in a way to select for things that I think are off target. And they're aligned with the target of the firms and the capital basis they're deploying, but they're off target relative to the quality of the relationship the entrepreneur seeks. So what are the big ones? The biggest thing, I'm not going to pick on the off target things. The on target things are when I want a co-founder, what questions do I ask? And do they make me a better version of myself? Do they provide the kind of expansion of my horizons that make me every day feel more joy for doing this work? Do they keep me honest? Are they available? Do they put me first? And a lot of winning as opposed to serving. Winning is a moment in time. We average 10 plus years in our boards. If you go back and look at the history of my boards, 10 plus years. And maybe three or four executive teams, as you say, might go through those years. And the sense of continuity of my partner is there. And I love my relationship with Howie, not to pick one, but with Howie Lew at Airtable. And Howie's going through a genesis right now and a creativity that I think occurred at the beginning of Airtable. And it is so fun to watch, but I understand the human. And I know what he's gone through. I know how to help him at parts say, this is an area you want to be asking some questions about. And I think that's different than winning. Winning is a transaction of take my capital and I got to get onto the next one. Because if you win, you got to win the next one. And we say yes once or twice a year, serve for a decade long. And the differentiation of that, because our incentives aren't the same as deploying capital. So I think that creates in the entrepreneur's mind that they have to ask the right questions. What do you want in that co-founder? Because you can't fire your board member.
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[SPEAKER_04] I'll take a shot at one of the things I think is off target, which is it's become a thing to sell no board seat. And you're like, one of the advantages of working with our firm is we'll give you all this capital with no board seat. And I think there's a misunderstanding of boards as governance and control rather than boards as signing up to work on the company, which I think is how it should be understood in 99.9% of cases. But I think it has been very effectively and somewhat disingenuously sold to founders because it sounds good and you just keep control of your company and there's no risk. And that means we don't have to help. And so we can deploy more capital.
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[SPEAKER_03] Yeah. And probably says something about the experience of the average founder with the average board member. It's like, can you blame a founder for thinking that's a good pitch based on the experience that they probably have with the average firm? Yeah. And also you hear about a terrible situation once and it makes a big impact without nuances. It's hard. It's going on right now. These seed rounds at over a hundred million with no board. And it just, I know how it ends. Between now and then the amount of entrepreneurs that will miss the opportunity to really seek out a close partner. It's a shame. It is.
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[SPEAKER_04] One of the things I wanted to ask you all about was I'm guessing I'll take it as a premise that we probably all agree that a great entrepreneur is unique or odd or strange or just beats to their own drum in some important way. It's just between now and then the amount of entrepreneurs that will miss the opportunity to really seek out a close partner. It's a shame. It is.
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[SPEAKER_04] One of the things I wanted to ask you all about was I'm guessing, I'll take it as a premise that we probably all agree that a great entrepreneur is unique or odd or strange or just beats to their own drum in some important way. You know, maybe there's examples where it's not like that. We could talk about that too. But one of my questions is, do you think to be a great investor, you have to be the same way? Do you have to be unusual as a person to be a great investor? Or is that not the case? And can you just be a regular person who can spot unusualness? You know, [SPEAKER_01] one of the things about Benchmark as we were talking to Ev.
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[SPEAKER_04] I'm asking selfishly because I don't think I've got the oddities that sometimes I wish I had. You know,
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[SPEAKER_01] in our conversations with Ev, I think Peter framed it perfectly, which is like when you know, you know very clearly and then given our structure of equal partnership, you're essentially refounding the firm every time somebody new comes on because the whole dynamic of the partnership changes. The conversations change, the feel changes, everything changes. And so it feels like a refounding moment. There's some alignment that happens. I think it goes back to the core of what values do you prescribe to as a person? And part of it is you are competitive. I think that is important. There is a competition aspect to this asset class. At the end of the day, we are investment managers and you enter a company and then there's competition to enter the company and then you invest. And then the company itself faces competition at some point. You can run competition free for maybe 12 months and then the big guys show up. Each of us has faced immense industrial, competitive threats from external bodies. And you have to have some kind of competitive, persevering spirit about you that can be that stabilizing force for the founders. Because you also have to have that empathy that the founders feel it 10 to 100 times more than you. Because at the end of the day, you as an investor are diversified. You get to work on lots of projects. The founder is simply not diversified at all. This is the only thing that they get to work on. This value system, hyper competitive energy and empathy, that is actually not present in a lot of people.
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[SPEAKER_04] I mean, you and I talked about this a little bit with Max at Lagora. It's an interesting example. You know, you did the seed. We're not here to pump Lagora, but while we're here, it's like, you know, it's like, but it was like NYC. It's a legal tech company. There was already Harvey. And the question I think I asked you right before we sat down was like, why'd you meet? Like, you know, I think once you meet Max, you can see it's good. But I'm like, you know, to the extent that that's a case study in spotting somebody who I think is unusual in a very positive, strong way. Like what was that for you?
SPEAKER_02
[SPEAKER_01] Well, Peter and I actually met Max in this exact room together. That was the first meeting we had. I think within 15 to 30 minutes, we both came away with that unspoken language between us that we want to be in business with this person. Yes, it was legal tech, but there was some core purpose with him as he was expressing it and the founding story of how he picked that problem. And, you know, they're sitting in Stockholm watching Harvey. At the time of our seed round in March 24, I think Harvey had already raised at a billion and a half dollar valuation or two billion. And then by the time the product had launched in October of 2024, I think their number one competitor had already raised a three or four billion dollar valuation. And so, but what we were backing was him, his co-founders, because when we invested, it was a team of five people that had a very core insight.
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[SPEAKER_01] In March 24, I think Harvey had already raised at a billion and a half dollar valuation or two billion. And then by the time the product had launched in October of 2024, I think their number one competitor had already raised a three or four billion dollar valuation. And so what we were backing was him, his co-founders, because when we invested, it was a team of five people that had a very core insight on how to attack the legal market and why LLMs were the perfect fit for lawyers. And when he expressed it, Eric likes to say this a lot, there's a magic of founders when they explain something very complex and they explain their unique insight into it. And it becomes very obvious. That's obviously how the world should work. And with your fire and your energy, that will probably be how the world works. And in Max, you saw that right away, but we saw it right away. And so we needed to be in business with him. And that was it. And the conversation immediately went to, well, great. What are you doing the rest of the day? We just want to spend time with you because clearly you're spectacular. Clearly there's something here. Yeah. And it's been amazing. And we didn't see it, right? The product didn't launch until six months after our money went in. And then I think you don't start to see the amazing stuff that a person can do for a while, but it's amazing.
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[SPEAKER_04] If you look back at other great investments that you've had, do you think it's always clear that the person's unique to you or was something in the Lagora situation did something there jump out faster? Or are there other situations where you don't see it for a while? Do you always see it quickly? [SPEAKER_01] No, I think you see it quickly, but each person spikes differently. I think. Yeah, we all have different.
SPEAKER_02
Coming back to your question of is there one way to succeed as an investor? God, no. In fact, in this firm, we joke, imagine two circles. Entrepreneurs that I respond to, entrepreneurs Eric responds to. There's this tiny little gray area in between with like six people in the universe. [SPEAKER_00] And for two people who do a lot of software infrastructure or enterprise or open source or whatever, for our Venn diagrams of entrepreneurs to be so separate is kind of remarkable. So you guys meet a founder together and one of you will be like, this person's amazing and the other one's like, I don't see it at all. And flipped. [SPEAKER_04] Yeah, no. No, no, no.
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[SPEAKER_00] No. I could never work with that person. That's a different statement than whether they're good or not. Whether they're good or not. I would like benchmarking. To invest, but I don't want to work with them. I think we often.
SPEAKER_02
Yes. Good for you and not for me. Yes. I think we do have that. By the way, Bill Gurley and I had that where it's like, there's almost no intersection. What's interesting, I think this actually relates to any entrepreneur that's thinking about working at a venture firm. A friend of mine was raising money, family friend, so that I, it wasn't appropriate for Benchmark. And I said, you know, he said, how do I choose? And I said, the question I would be asking if I was an entrepreneur is which of these esteemed venture capitalists is most personally resonant with you and committed to you? Yeah. And they're going to say they're committed because they want to win. Codify it. Make them be explicit about the kind of commitment they're going to make and make it uncomfortably concrete. So with most of the entrepreneurs I work with, we speak every Friday and so, but you make it real. And if you don't want to put the time in, if you don't feel that response for you running your fund and for us individually, I knew Max Lagora.
SPEAKER_02
Codify it. Make them be explicit about the kind of commitment they're going to make and make it uncomfortably concrete. So with most of the entrepreneurs I work with, we speak every Friday and so, but you make it real. And if you don't want to put the time in, if you don't feel that response for you running your fund and for us individually, I knew Max Lagora, Chaitzen would be 24-7. He'd fly to Stockholm on a moment and he has. And he is today.
SPEAKER_02
Yeah. It's true. You're going today. He's going today. Okay. So there you go. And so, so as you and respect in your commitments, does it clear that threshold for you personally? Because if it doesn't and you're doing it because it's a good investment, that is a reliable path to a bad investment and a bad relationship. And so I think you're going to find that chasing what is it that you see and then allowing that to get washed with experience because sometimes you're going to get it wrong. And when you get it wrong, you learn, okay, don't make that mistake again because you've seen me make that mistake and vice versa.
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[SPEAKER_04] So it's interesting that you guys have these Venn diagrams that let's just say they don't touch just to make it simple, but they're both good. I know you both make very good investments. Is that basically you can cultivate any set of tastes as long as it includes the good stuff? Is that basically what you shake out to or is it... [SPEAKER_01] There is a lot of overlap on the people though. If you look at the people in these Venn diagrams the four of us have, there is overlap in the quality. In the qualities of people. [SPEAKER_04] Yeah.
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[SPEAKER_01] Something Keith and Vinod said that was interesting when I talked to them together is they're very different people, which is very apparent when you talk to them. And they said one thing that we basically always agree on is did we walk out of the meeting with the founder and was that person special or not? [SPEAKER_04] Which I thought was an interesting thing because I wouldn't have expected that out of the two of them because they are quite different. So I would have thought that there would be these very different tastes in there. That doesn't mean they always want to make the same advice.
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[SPEAKER_01] It's very rare that one of us thinks a person is special and the other person is absolutely not. [SPEAKER_04] Yeah. I mean, another question I always have here is are really special people. Is it that you can miss it? Is it a special ability to tell special people? And take Max at Lagora. Do you think that a hundred reasonably at least okay VCs who have been doing it for a while, do you not think most of them would have come out and been like, this guy is great? Is it unique to be able to see greatness earlier? Or is it more about getting into the right room with Howie and Jack Dorsey at the right time?
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[SPEAKER_00] That's a good question. I think most of the time people react similarly, people who are good at this will identify or see that specialness. We, and we miss it. Everybody misses it sometimes, but I think there's a bigger thing that happens, which is, I think people talk themselves out of stuff for other reasons. The competitive situation, this company or the outcome for what they're working on can be big enough and those kinds of things. I have that in, I'll take Alex at scale. You met Alex and you were like, something's going on. This guy is a winner. When we saw it very, very early, we saw it together. And,
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[SPEAKER_00] Can the outcome for what they're working on be big enough? Those kinds of things. I have that in. I'll take Alex at scale. You met Alex and you were like, something's going on. This guy is a winner. When we saw it very, very early, we saw it together. And.
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[SPEAKER_00] And those were particularly painful because it's like, we absolutely recognized that he was amazing and a super special person. We absolutely recognized that the autonomous vehicle labeling revenue was bullshit and going to go away in not that long. So the facts and the read was correct and the conclusion was incorrect. And it's like, God damn it. And so that's a particular painful one and it's a good lesson for me, which is just like, you thought he was special. [SPEAKER_04] And you thought he was special and passed anyway? [SPEAKER_04] Yes.
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[SPEAKER_04] Have you ever done that? And have you ever passed on a special person because you didn't like something else about the setup and been like, I'm still glad I did that? Or is the lesson just always back if you feel that way no matter what else? [SPEAKER_04] I mean, at this particular moment in time. [SPEAKER_00] I would say yes, I did. With the hindsight benefit, it's like, if you feel that way and I think you have chemistry with person, that's part of it, which is like, who do we respond to? We're focusing on the positive case, the negative case.
SPEAKER_02
Which is useful also to think about. And it's actually true. I think if you're an entrepreneur, is this word inauthentic. And I think it's easy over time, over many decades to see the masks, the fakeness, the posing. And if there was one trigger for all of us in general, I think this is true in entrepreneurship, it's true for the employees you're recruiting, is that they think you're faking it. And if there's the whole fake it till you make it thing, put that aside. I think that's broadly bad advice. If someone's not willing to be vulnerable with us in the meeting and expose what they don't know and be real, then how can we have a relationship? So there have been people come in here who've done well, who've raised money, and particularly now in the cycle, I think you get people who are playing a promotional game because there's something that's attractive in the external metrics. It could be research background, pick your favorite. And they, okay, we got to sex that up a bit and then we'll flip these people. If there was a common thread in the benchmark investments is that very low representation, there are exceptions of the promoter. And the case where you find someone who's really talented, but they're in the wrong market and we don't back them but we love them, that happens. But when we get in trouble as an industry, I think is when we start to become quite accepting of the, this is, forgive me, the distinguishing traits between founders and entrepreneurs. When you find it in a market like we're in, the number of founders increases geometrically. I think the number of entrepreneurs stays as a fixed constant. So what happens, we have a lot of founders because I could be a founder, you could be a founder, you were a founder, but you're also an entrepreneur. Entrepreneurs have this guile. There's a sense of leverage. Brendan Mercore to me is an entrepreneur in any cycle in any market. He happens to also be a founder right now. I think that's not the case for a number of people who've found companies who would otherwise, if the market was shitty, they would be employees at big company X, Y, or Z. So as a founder, you have to, I think, introspect, you have the entrepreneurial qualities and to study entrepreneurship, the vast majority of entrepreneurs drop out.
SPEAKER_02
in any cycle in any market. He happens to also be a founder right now. I think that's not the case for a number of people who've founded companies who would otherwise, if the market was shitty, they would be employees at big company X, Y, or Z. So as a founder, you have to, I think, introspect whether you have the entrepreneurial qualities and to study entrepreneurship, the vast majority of entrepreneurs drop out. The phenotype of the personalities, they don't want to be validated by a system they didn't create. They're not looking for fancy brand names and they're not attracted to big, fancy whatever. They look for things that are substantive.
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[SPEAKER_00] The other dropouts, not straight A students. [SPEAKER_00] Yeah, and there are exceptions. Brett got great grades. And so on. [SPEAKER_00] I'm not done. [SPEAKER_00] Brett's in that Venn diagram. [SPEAKER_00] Six people in the universe stage. [SPEAKER_00] But I think this market right now, because it's so attractive to be a founder, has brought in a degree of promotion and the sorts of stuff that get people into trouble over the mid to long term. And our whole system is identifying and getting proximate to the entrepreneurial energies, which are these forces beyond all measure. [SPEAKER_01] There was a period of time between Q4 of 2022, we call it end of 2023.
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[SPEAKER_01] There was a broader macro tech correction where a whole bunch of public tech stocks corrected. [SPEAKER_01] There was a tightening of the late stage market and interest rates were going up and all the sort of tourist capital had fled the scene for a little bit of time. [SPEAKER_01] And capital just got a little bit harder to raise. [SPEAKER_01] And at that time, what was really interesting is if you look at all the seed and A deals that we did and where those companies are now, it will look like our hit rate went way up.
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[SPEAKER_01] But I actually think what happened is that if you were willing to start a company at that point in time in AI, you were a true believer. [SPEAKER_01] There was some natural inspiration for what we were doing. [SPEAKER_01] So it's companies like Leonard Fireworks, Red Sierra, Harrison and Langchain. [SPEAKER_01] Companies where the entrepreneur had some fire. God, were all those done in that era? [SPEAKER_01] In that one year? [SPEAKER_04] I think you're right. [SPEAKER_04] And I think a lot of people read it as what happened here is they just got to the blue ocean thing first.
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[SPEAKER_04] Maybe there's a degree of that, but a lot of it is if you want to do this at a time when it looks really painful, that's just a different subset than people who are going to do it at a time when it looks incredibly attractive. [SPEAKER_04] That's right. [SPEAKER_00] Yes. [SPEAKER_00] Yeah, 2008, 2011. When we did Series A at Uber, Instagram, Twitter, Snapchat. Snapchat. Yeah. And it was, but then by 13, 14, it became very... Yeah, and it's funny because all the think pieces and essays about this stuff are always like there was a new technology and on top of that new technology came X.
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[SPEAKER_04] You get cloud, you get blah, blah, blah, you get mobile, you get blah, blah, blah, you get AI, you get blah, blah, blah, which I think is true, but you don't really see people talking about in the moments where the psychology requires a different kind of hardness. [SPEAKER_04] 100%. [SPEAKER_01] And I think in that moment in time, bigger explainer. [SPEAKER_04] Like 2022, 2023, early 2024. [SPEAKER_01] If you wanted to be in AI applications, an AI application enablement, it actually took a special kind of person that truly believed regardless of what anybody else thought.
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[SPEAKER_01] Because at that time, it was quite unpopular and weird to decide you wanted to build an AI application, because the natural assumption was that fundamentally the foundation models were so powerful and as they reached more and more intelligence, they would just start to gobble up the applications themselves. [SPEAKER_04] Even if you look at the people who worked at the labs in the late 20-teens, and now you compare those people to the people who are working at the lab. I mean, not that obviously.
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[SPEAKER_01] was that fundamentally the foundation models were so powerful and as they reached more and more intelligence, they would just start to gobble up the applications themselves. Even if you look [SPEAKER_04] at the people who worked at the labs in the late 20-teens, and now you compare those people to the people who are working at the lab. Not that obviously people are brilliant now, but you look and you see Ilya and Greg Brockman and all these people, it's like they were doing it when it was really not cool. [SPEAKER_04] Yes. [SPEAKER_04] And those are still, I think, the most brilliant people. [SPEAKER_04] Yes. [SPEAKER_04] That's right.
SPEAKER_02
[SPEAKER_04] There's something there. The last topic I want to get to is how you all are thinking about AI, which I realize is something that we've probably all talked about a lot, but I do think it's the most interesting thing going, and I don't think any of us want to talk about politics right now, going through a lot of your recent investments, it's actually clear that you guys caught the AI wave in a pretty substantial way. A lot of them were not obvious companies. Even LaGora, which is a middle of the fairway venture type of company, was not an obvious thing to do from Sweden and there was already Harvey. I think Maness was a very unusual investment as well. I think Cerebrus is extremely interesting. Obviously, Sierra was before it was happening, and I think when it happened, it's like, wait, Brett Taylor's doing customer support. I don't think you guys were bullish about AI, but I think just empirically speaking, you look back and you caught a lot of it. So I guess what I'm curious about is as you're thinking now and you're looking at companies today, what are you excited about? What are, to the point of you guys are having these conversations as a partnership and you're being really curious, what is at the top of your curiosity list in AI right now?
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[SPEAKER_01] I think you just have to roll back to end of 2022 when we happened to get involved with these spectacular entrepreneurs. I think the thing that it became clear to us sitting around the table was that AI was the thing. And even if it wasn't the thing, it didn't matter. That was where we were drawn to. It was the thing that had this gravity pull for us. And so all we wanted to do was spend all of our time talking about it, thinking about it, meeting all the people working on it, all that kind of stuff. And then you have to overlay your value system on the thing that you're excited by. And the thing that we laid on top of that was what kind of relationships do we want to get into with companies in that moment in time? And we decided we wanted to be in business with companies where that ethic of being the primary partner, board partner, lead investor, first investor, principal investor, principal believer in the mission is how we wanted to practice investing in AI at that time. And so that meant that we were looking for just really spectacular entrepreneurs with unique approaches to the market. And if you want to do that in a place where you want to be the first investor and you want to back teams with two people, three people, four people, five people, whatever, you're often meeting people that are probably a little bit early
SPEAKER_02
[SPEAKER_01] We were looking for just really spectacular entrepreneurs with unique approaches to the market. And if you want to do that in a place where you want to be the first investor and you want to back teams with two people, three people, four people, five people, whatever, you're often meeting people that are probably a little bit early on whatever the next curve was. And so if you remember what was happening in 2022 and early 2023, everybody wanted to start a foundational lab and everybody wanted to aggregate GPUs. And so there was a big drive to aggregate capital to buy GPUs, which then would be utilized for training runs and stuff like that. And it wasn't that we had some hypothesis or some macro view of why we don't want to do that or do want to do that. We were looking for companies and entrepreneurs that resonated with us, that wanted to partner with us. And in that moment, we met a lot of people that were working on really aggressive ideas that we thought were just spectacular people with spectacular approaches. And as a result, you saw this list of companies that we compiled at that time. So that was when we did Sierra, when we did Fireworks, we did Langchain, we did Mercor, we did Levelpath, we did Legora, Manus, et cetera, et cetera. All of that came together. And when Eric did Cerebrus at the Series A, it's all of that same stuff, which is partnering super early with founders, working on something that they're deeply passionate about. And frankly, it's cliche to say it, but all of those investments at the time were a little bit non-consensus.
SPEAKER_04
[SPEAKER_03] Yeah. I think you have to be. It's interesting because from the outside in, before I joined Benchmark, I think if you look at the investments that were made in that kind of 22, 23 time period, you had an inference cloud with Fireworks, you had a data infrastructure platform with Mercor, you had a horizontal AI play with Sierra, you had a vertical AI play with Legora, and obviously it's only four of the kind of 10 great investments that were done in that era. It was easy to ascribe a thematic nature. Then you got here and were like, oh my God, these guys have no idea what they were doing. [SPEAKER_00] That is correct.
SPEAKER_04
[SPEAKER_03] But I think you come in, you're like, oh wow, they had a vertical, they had horizontal, they did data. It was like, oh, they can have filled out each thing. They must have done a market map. And then you come in and you start asking about each of the investments and the story behind each of the investments. And 90% of the story on every single one of the investments is the person, is the founder and the entrepreneur and the relationship that they built and why the entrepreneur was so special. And that was so revealing to me coming into this organization and this partnership was like, wow, the founder centricity just bled off the page in terms of the stories of all those investments. And so I think that's the way that we're approaching it today is obviously we love to talk about all of the newest and greatest things that are going on in AI every single week. But in terms of the actual investments, it's always, and I think it lends itself especially to this era where I think because the sands are shifting beneath the founder's feet so quickly in AI and things are changing so rapidly, founder centricity as an investment strategy matters more now than any time in the last decade.
SPEAKER_04
[SPEAKER_00] I think the underlying technology substrate is changing very quickly with AI. In a way, any software [SPEAKER_03] and I think it lends itself especially to this era where I think because the sands are shifting beneath the founder's feet so quickly in AI and things are changing so rapidly, founder centricity as an investment strategy matters more now than any time in the last decade.
SPEAKER_04
[SPEAKER_00] I think the underlying technology substrate is changing very quickly with AI. In a way, any software that you could have built in 2022, you could have built in 2010, plus or minus. Once we had the cloud, we got little APIs here and there, but for the most part for 12 years, it was pretty stable. If you compare that to today, you're getting more change every quarter than we did in a decade in terms of the substrate. And so, a founder's ability to navigate that and actually understand where their edge is and where their edge is going to come from and how quickly the moats are deteriorating because they're deteriorating really quickly and how do you build the next one, it's critical. And so, I think it becomes even more important. And so, if I look forward, we see all the same things. It sure feels like the infrastructure cycle is going to continue. It sure feels like five years from now or maybe even sooner, we're going to have really interesting things in robotics. It sure seems like agents are getting really good and the applications are going to get better. And all these things seem really clear, but I don't know that that isn't enough. I don't think that's enough to make an investment. It's impressive to me.
SPEAKER_04
that it would have been so tempting to answer my question with some high-minded thesis about like, and you all just said founders. Well, I think it's also—
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[SPEAKER_02] if you step back and you just think of these as forces, not like specifically AI or social or mobile, there are windows where the disruption is so high that entrepreneurs come in and they see something with such clarity that they can't not do it. And then there's this lag effect, years of like, all the other people then come in afterwards. And in a sense, that happened already with AI. It happened with the first generation. It happened with the people doing, okay, now we've got to do our model company. But when your brother and the team of people were at OpenAI, and that was before it was obvious, then lightning struck. My belief is that that is likely to happen again at least one or two times in the AI cycle where there's something so disruptive that no one can fully understand it. And then there's a completely new kind of entrepreneur that emerges. What we've been watching for the last three months post-Opus 4.5 is the force of that disruption has awakened a whole group of entrepreneurs that were otherwise not seeing things they were seeing that now they weren't seeing them three months ago. I'm a big believer in what you're doing with Sunday and robotics because that's a world where we all know that in a decade we're going to have these things in our house. But the path from here to there, is that an incumbents game where the big companies are going to push down complex products or will there be entrepreneurs? It seems likely that it will bring. So much of this is like, okay, where is there a disruption that. But then the lag effect of our industry is that 90% of the capital flows in afterwards. After the entrepreneurs have figured it out. By the time it's figured out and there's the next thing, it's not for us. And that's our faith that Silicon Valley is an adaptive landscape that will continually have these disruptions that make. As soon as there's a winner, we're not interested, we move on.
SPEAKER_04
It's a great place to end. Thank you, guys. This was really fun. Thank you. was actually the handoff because that creates the instigation for all the future handoffs. Yeah.
SPEAKER_00
And you feel responsibility with that. Yeah. Like, I mean, like, I think all of us feel, we feel responsibility. That was one of the big things we talked to Ev about when, as Ev was joining, it's just like- The responsibility for us. That responsibility.
SPEAKER_01
Well, just like you feel it, like not everyone feels that,
SPEAKER_04
like not every,
SPEAKER_00
you know, which is fine,
SPEAKER_04
but like- Totally. Well, also I think, you know, if you're talking about if at the, because it's equal when you walk in, it's like if a bunch is given to you right at the beginning, you're like, I got to pay this off to somebody. And the people who kind of set me up from the beginning, like I can't really pay them back anymore. So I can see why you'd be like, I got to make sure I give enough before I go, even though it's sort of you're in a weird way, you know, paying back prior generations. But rooted in that as well,
SPEAKER_02
Eric says responsibility and I think he feels it and I respect that. I think the founders gave us permission to basically not take it too seriously. Yeah, they did. They said, listen, come on, like as a group of you, no one's going to be around in, you know, a million years. It doesn't have to be so heavy. Everything's ephemeral. Yes. So what you want is a tight-knit group of people that are at maximum potential manifestation, like the energy, the joy, and the heaviness of like, oh, we're going to, you know, have to maintain this relic and wheel it out and like- They don't tap tablets
SPEAKER_01
in the back about what the founders said, none of that bullshit, man.
SPEAKER_02
Like, you're like, this is like a day-to-day thing. By the way, forgive me, we're in an entrepreneurial environment where like when somebody has a legacy, we want to destroy it. We're in the business of creative destruction, not permanence and enduring and forgive me. Yeah. Like our startups bubble up from nothing and we stay true to that. And I think the firm's premise is that we should have our own form of creative destruction. There's no legacy or claim to it at Benchmark. It's like the immediacy and present moment that we deliver. Everything else is secondary. One of the things
SPEAKER_04
that you just said, which I hope is okay for me to press on, is, and I've wanted you guys to talk about this, which is, I know each of you individually and I know you all are founder friendly and there's like, it's very easy for people in a competitive venture landscape to like poke at one historical example that everybody else has done. If you're just loud, you can just like, you could just poke at people. Sure. I would say you're not loud externally and you sort of have a mindset of like, we're going to let our actions speak. But I've wanted you guys to sort of like speak because I know you're very founder friendly and I've talked to founders you work with
SPEAKER_04
and all of that. So I'm actually curious to hear, you know, your sort of thoughts as you know, you've seen some of the stuff like, is it important for you to sort of just like talk about like what you just said? Like there's like a thing and then we have like an immune reaction to it and the firm updates or like, yeah, how do you process all that? Humans are storytelling animals.
SPEAKER_02
Every firm has their story and depending on the situation and what the motivations are of the counterparty, you accentuate certain parts of a firm's history. You know, the ethic of the firm, I think this is sort of borne out and even in our worst moments is the company must come first. And so we're not more important than the company. Nobody's more important than the company. It's the initiative. It's the collective premise of an entity which is bigger than any one individual. And there are moments in the past, you know, look, I've been around through the generations where it used to be the standard model that, you know, when are you going to get a real management team?
SPEAKER_02
And that sort of faded to, well, perhaps we can go the distance and you have the Steve Jobs narrative, which is like what crimes were committed against this notion of general management versus the founder mode reality that we all support. The part that's sort of most relevant, I think this is, this is what happens every day here is we view our job. I do personally, and this has been borne out in the references is making the founders the best version of themselves. And like any relationship, if it's simply sycophantic and enablement and codependency, we make them worse. If it's, if it's harsh and it's judgmental or absent, we make them worse. So, so one of the things
SPEAKER_02
I think you, you need to figure out in references is like, what questions should you ask? And of course, if you're going to engage with any great firm, you want to go and do references. The one that's, it's the first phone call, but I actually think it's even, you go a level deeper and say, how does this person make you a better entrepreneur? And, and how have they unlocked your potential? And what we care about more than happiness is flourishing and our companies, and I think what's borne out in the work that we've done is that if I work with that group, like, I'm going to be a better version and I'm not going to be living in fear because then you're not
SPEAKER_02
a better version of us, nor am I going to be getting, forgive me, what happens in our job right now, I'm, I'm struck by the number of boards where I see this is a, a relationship that's sycophantic, that, that, that where people aren't afraid, people are afraid, I should say, to pursue the truth because they don't hurt anyone's feelings or worse, I think the greatest crime that occurs in many of the boards that we all serve on is that somebody says something behind the entrepreneur's back, they won't say to their face. That's one of the things I, I think is a deep ethic at Benchmark is that we are transparent. Like, if, if we're going to say it to your face, we,
SPEAKER_02
we may not say it behind your back, but we're not going to be a situation where, here's what I really thought about the board meeting and, and this idea of congruence, which is a key term in psychotherapy is that you really want to know that you can trust your partner because they're not putting a face, a mask on because they want you to feel a certain way, but they're being real. By the way,
SPEAKER_04
this also goes to your point about if you're not gonna, if you don't need to put more dollars into the company, if you structurally almost can't put more dollars if you're hoping to get, to win the next round, you don't want to piss them off because next month you might be writing a term sheet. And I think there's a lot of, there's the references piece, there's the, I want to put more money into this company thing. There's just like, I don't want to fight type of stuff. And I do think it leads to, to that, which I, I think, I think there's like the, the, like the, the best version of being founder friendly is, is not comfort all the time, obviously. Yeah,
SPEAKER_03
that's definitely not. They're the best. And there was, I mean, there was a recent example of this. I recently led an investment dinner in the dining room where we'll have lunch here in about an hour. And after, you know, we, during the dinner, they showed a demo, we were going through their commercial strategy and we gave them a lot of very direct feedback. And, and a lot of it was constructive. It was like a really productive, constructive conversation, but not every founder, you know, responds super well to that. So I called the founder afterwards and I was like, well, how was that for you? You know, how would you respond to that? And in that call, he said,
SPEAKER_03
you as a team are going to make us better founders. And I can tell that right away. And because of that, he really wanted to work together because it wasn't just going to be, you know, slapped on the back and, and congratulations, but it was going to be a relationship where we really pushed both the founders and the whole team to be a better version. Does it feel like structurally
SPEAKER_04
different to you than KP and founders fund in any way?
SPEAKER_03
I think maybe the most difference is with founders fund because I do think founders fund obviously really, really leans on this, the kind of like Hippocratic oath of VC, which is do no harm. And in doing so, it's like, Hey, we're going to be completely hands-off is kind of the pitch. And then if you need something, call us. I think, again, that sells really easy. I actually do think that it's one of these things that in practice actually materializes sometimes as, I don't want to say like laziness, but it is just more passive. It is just like, we should back founders that are going to figure it out all on their own and that they don't need help and they don't need
SPEAKER_03
any VC assistance. And sometimes that works out. And, you know, sometimes maybe there are founders that are like that, but I think the vast majority of the time, almost every single founder could use feedback, a sparring partner, any of these things.
SPEAKER_04
Like even Tiger Woods has a coach. It's like 100%. And so I think like
SPEAKER_03
having that position is something that I think is a great soundbite and like, you know, goes really well on Twitter. But I think when it comes down to it, there's very, very few practitioners, even, you know, the Tiger Woods of the world that don't, don't benefit from something like that. This is ultimately
SPEAKER_02
the highest accolade of a firm that they seek is a manifestation of a value system. And I, everyone in this room, I've heard this and I know I'm going to hear this on your newest investment is that if we've really done our job and you'll hear this in our references, they feel like a co-founder benchmark. It feels like they were a co-founder. And what does that mean? Well, it wasn't a condition personal transaction. It wasn't a one-night stand if they gave us money and then we sort of could, you know, brag about the brand. But it was a, they were proximate with me when, when, what a founder, a co-founder does, it's a bit like being in a partnership where you have a child,
SPEAKER_02
where you just say like, there's something existentially deep that's permanent in that relationship. And I, I believe most companies that have single founders end up finding proxy co-founders because they, they, you need support systems. You need a relational, you know, balance and, and as the ups and downs of being an entrepreneur. And so if we've achieved that, you could say, well, it's not for everybody. Some firms might want more of like, just, just the money, thank you, and the brand. Or they want services that are delivered by people who work at the firm. Yeah, those are different facets, but the depth that can occur when you have that kind of proximate relationship
SPEAKER_02
and, and, and ends up, you know, taking you through troughs that would advise the companies to be sold early or to have a destitute, you know, founder who's just tired and doesn't. There's also a through line to it.
SPEAKER_04
Like, I felt this as a founder where like, even like a, like a long time exec might be four or five, six years, but then you have a board member who's there through the first round and the second round of execs and the third exec team and all of that. So you're working, you know, many more hours per day with people on your team. But then when you look back over a decade, you're like, there's somebody who's with you the whole time and it's, you know, hopefully your co-founder and your board members. So there's, there's something about the long arc of it too that is special. I have moved away
SPEAKER_00
from talking about it as like guidance or advice or whatever. And I loved your sparring partner thing because I think that's what it is. And that's what the co-founder thing is too. Because like, startups are hard. They're really hard. And the most successful startups are doing things that are new, innovative, and haven't been done before. Therefore, you're figuring things out for the first time. Like, you're figuring things out for the first time that are like challenging hard and no one knows. And so like a huge part of the co-founder thing or, you know, which, which we should be careful about like using it, but like it's, it's the, that aspiration or that idea is, hey,
SPEAKER_00
we're asking each other questions that like sharpen our thinking. We are like trying to figure things out together. And I think that's a, that's a very specific way of working where I feel like a lot of times what we're doing is you're, I'm, I'm talking to somebody and I'm thinking of a very specific example from last week, but it's just like, where it's like, the author knows, like she knows what she wants to do and it's like in there and you're asking questions to help them realize, realize it and, and for it to like come surface or get clarity on it. And like, that's very, it's different than getting like advice, right? That isn't advice. That is,
SPEAKER_00
that's a sparring partner. Yeah.
SPEAKER_03
And,
SPEAKER_00
and, and a sounding board and I think that's where you get. It's part of what I feel like
SPEAKER_02
is, forgive me, this is where I get to be the older person in the room. The, the degradation of our industry and it really has been a degradation as I think it's shifted. The, the, the system has shifted to winning. Our goal is to win. Right.
SPEAKER_00
Because there's,
SPEAKER_02
there's capital supply now. And so, so you have this large sums of capital and be deployed. And so the system is built to, I think, create in the mind of the entrepreneur, a selection criteria. It would say if you're doing POCs, you want to design the criteria, the POC, so you win it. So what's happening is the industry's programming entrepreneurs in a way to select for things that I think are off target. And they're aligned with the target of the firms and the capital basis they're deploying, but they're off target relative to the quality of the relationship the entrepreneur seeks. So what are the big ones? The biggest thing, I'm not going to pick
SPEAKER_02
on the off target things. The on target things are when I want a co-founder, what questions do I ask? And do they make me a better version of myself? Do they provide the kind of expansion of my horizons that make me every day feel more joy for doing this work? Do they keep me honest? Are they available? Do they put me first? And so a lot of winning as opposed to serving, winning is, is a moment in time. We average, in our boards, 10 plus years. If you go back and look at the history of my boards, 10 plus years. And so maybe three or four executive teams, as you say, might go through those years. And the sense of continuity of my partner is there. And this is the case of,
SPEAKER_02
I mean, I love my relationship with Howie, not to pick one, but with Howie Lew at Airtable. And, you know, Howie's going through a genesis right now and a creativity that I think occurred at the beginning of Airtable. And it is so fun to watch, but I understand the human. And I know what he's gone through. I know how to help him at parts sort of say, like, this is an area you want to be asking some questions about. And I think that that's different than winning. Winning is a transaction of like, take my capital and I got to get onto the next one. Because if you win, you got to win the next one. And so we say yes once or twice a year, serve for a decade long.
SPEAKER_02
And the differentiation of that, because our incentives aren't the same as deploying capital. So I think that creates, in the entrepreneur's mind, they have to ask the right questions. What do you want in that co-founder? Because you can't fire your board member. Right.
SPEAKER_04
I'll take a shot at one of the things I think is like off target, which is the like, you know, it's become like a thing to sell no board seat. And you're like, one of the advantages of working with our firm is we'll give you all this, you know, capital with no board seat. And I think it's, there's like a misunderstanding of boards as governance and control rather than boards as like signing up to work on the company, which I think is like how it should be understood in like 99.9% of cases. Yeah. But I think it has been very effectively and somewhat disingenuously sold the founders because it like sounds good and you just keep control of your company and there's no risk.
SPEAKER_04
And that means that we don't have to help. And so we can, it aligns with deploying a lot more capital. Deploy more capital.
SPEAKER_03
Yeah. And probably says something about the experience of the average founder with the average board member. It's like, can you blame a founder for thinking that's a good pitch based on the experience that they probably have with the average firm? Yeah.
SPEAKER_04
And also you hear about a terrible situation once and it makes a big impact
SPEAKER_03
without nuances.
SPEAKER_02
It's hard. It's going on right now. You know, like these seed rounds at over a hundred million with no board. And it just, I know how it ends. It's just between now and then the amount of entrepreneurs that will miss the opportunity to really seek out a close partner. It's a shame. It is.
SPEAKER_04
One of the things I wanted to ask you all about was I'm guessing, I'll take it as a premise that we probably all agree that like a great entrepreneur is like unique or odd or strange or just beats to their own drum in some important way. You know, maybe there's examples where it's not like that. We could talk about that too. But one of my questions is, do you think to be a great investor, you have to be the same way? Do you have to be unusual as a person to be a great investor? Or is that not the case? And can you just sort of be like a regular person who can spot unusualness? You know,
SPEAKER_01
one of the things about Benchmark as we were talking to Ev. I'm asking selfishly
SPEAKER_04
because I don't think I've got the oddities that sometimes I wish I had. You know,
SPEAKER_01
in our conversations with Ev, I think Peter framed it perfectly, which is like when you know, you know very clearly and then given our structure of equal partnership, you're essentially refounding the firm every time somebody new comes on because the whole dynamic of the partnership changes. The conversations change, sort of feel changes, everything sort of changes. And so it feels like a refounding moment. There's some alignment that happens. I think it's, it goes back to the core of like, what values do you prescribe to as a person? And part of it is like, you are competitive. I think that is important. Like there is a competition aspect to this, this asset class.
SPEAKER_01
At the end of the day, we are investment managers and you enter a company and then there's competition to enter the company and then you invest. And then the company itself faces competition. competition at some point. Like you can run competition free for maybe 12 months and then the big guys show up. Like each of us has faced immense industrial, like competitive threats from external bodies. and you have to have some kind of competitive, persevering spirit about you that can be that stabilizing force for the founders. Because you also have to have that empathy that the founders feel it 10 to 100 X more than you. Because at the end of the day, you as an investor
SPEAKER_01
are diversified. You get to work on lots of projects. The founder is simply not diversified at all. This is the only thing that they get to work on. This like value system, hyper competitive energy and empathy, like that is actually not present in a lot of people. I mean, you and I
SPEAKER_04
talked about this a little bit with like Max at Lagora. It's an interesting example. You know, you did the seed. We're not here to pump Lagora, but like while we're here, it's like, you know, and it's like, but it was like NYC. It's a legal tech company. Like there was already Harvey. And the question I think I asked you right before we sat down was like, why'd you meet? Like, you know, I think like once you meet Max, you can see it's good. But like, I'm like, you know, to the extent that like that's like a case study in spotting somebody who I think is unusual in a very positive, strong way. Like what was that for you? Well, Peter and I actually
SPEAKER_01
met Max in this exact room together. That was the first reading we had. I think within 15 to 30 minutes, we both came away sort of like that unspoken language between us that we want to be in business with this person. Yes, it was legal tech, but there was some core purpose with him as he was expressing it and the founding story of like how he picked that problem. And, you know, they're sitting in Stockholm watching Harvey. At the time of our seed round in March 24, I think Harvey had already raised at a billion and a half dollar valuation or two billion. And then by the time the product had launched in October of 2024, I think their number one
SPEAKER_01
competitor had already raised a three or four billion dollar valuation. And so, but what we were backing was him, his co-founders, because when we invested, it was a team of five people that had a very core insight on how to attack the legal market and why LLMs were like the perfect fit for lawyers. And when he expressed it, Eric likes to say this a lot, there's a magic of founders when they explain something very complex and they explain their unique insight into it. And it becomes very obvious. Like that's obviously how the world should work. And with your fire and your energy, that will probably be how the world works. And in Max, you saw that right away,
SPEAKER_01
but we saw it right away. And so we needed to be in business with him. And that was it. And like the conversation immediately went to, well, great. Like, what are you doing the rest of the day? Like, we just want to spend time with you because like, clearly you're spectacular. Clearly there's something here. Yeah. And it's been amazing. And like, we didn't see it, right? Like the product didn't launch until six months after our money went in. And then I think like, it's, you don't start to see the amazing stuff that a person can do for a while, but it's amazing.
SPEAKER_04
If you look back at other great investments that you've had, do you think it's always clear that the person's unique to you or was something in the Lagora situation did something there jump out faster? Or like, are there other situations where you don't see it for a while? Do you always see it quickly? No, I think you see it quickly,
SPEAKER_01
but each person spikes differently. Like, I think. Yeah, we all have different,
SPEAKER_02
coming back to your question of like, is there one way to succeed as an investor? God, no. In fact, in this firm, we joke, these, imagine two circles. Entrepreneurs that I respond to, entrepreneurs Eric responds to. There's this tiny little gray area
SPEAKER_01
in between with like six people
SPEAKER_02
in the universe. And for two people
SPEAKER_00
who do like a lot of software infrastructure or enterprise or open source or whatever, for our Venn diagrams of entrepreneurs to be so separate is kind of remarkable. So you guys meet a founder together and one of you
SPEAKER_04
will be like, this person's amazing and the other one's like, I don't see it at all. And flipped.
SPEAKER_00
I don't know about that.
SPEAKER_04
Yeah, no. No, no, no.
SPEAKER_00
No. I could never work with that person. That's a different statement than whether, whether they're good or not. Whether they're good
SPEAKER_02
or not. I would like benchmarking. To invest, but I don't want to work with them. I think we often. Yes. Good for you and not for me. Yes. I think we do have that. By the way, Bill Gurley and I had that where it's like, there's, again, almost no intersection. What's interesting, I think this actually relates to any entrepreneur that's thinking about working at a venture firm. A friend of mine was raising money, family friend, so that I, it wasn't appropriate for benchmark. And I said, you know, he said, how do I choose? And I said, the question I would be asking if I was an entrepreneur is which of these esteemed venture capitalists is most personally resonant with you
SPEAKER_02
and committed to you? Yeah. And they're going to say they're committed because they want to win. Codify it. Like make them be explicit about the kind of commitment they're going to make and make it uncomfortably concrete. So with most of the entrepreneurs I work with, we speak every Friday and so, but you make it real. And if you don't want to put the time in, if you don't feel that response for you running your fund and for us individually, I knew Max Lagora, like Chaitzen would be 24-7. He'd fly to Stockholm on a moment and he has. And he is today. Yeah. It's true. You're going today. He's going today. Okay. So there you go. And so, so as you and respect
SPEAKER_02
in your commitments, does it clear that threshold for you personally? Because if it doesn't and you're doing it because it's a good investment, that is a reliable path to a bad investment and a bad relationship. And so I think you're going to find that chasing what is it that you see and then allowing that to get washed with experience because sometimes you're going to get it wrong. And when you get it wrong, you learn, okay, don't make that mistake again because you've seen me make that mistake and vice versa. So it's interesting
SPEAKER_04
that you guys have like these Venn diagrams that let's just say they don't touch just to make it simple, but they're both good. Like I know you both make very good investments. Is that basically like, you know, you can kind of cultivate any set of tastes as long as it includes the good stuff? Like is that basically what you shake out to or is it like... There is a lot of overlap
SPEAKER_01
on the people though. Like if you look at the people in these Venn diagrams the four of us have, there is overlap in the quality. In the qualities of people.
SPEAKER_04
Yeah.
SPEAKER_01
Something Keith and Vinod
SPEAKER_04
said that was interesting when I talked to them together is they're like, they're really different people which is very apparent when you talk to them. And they said one thing that we basically always agree on is did we walk out of the meeting with the founder and was that person special or not? Which I thought was an interesting thing because I wouldn't have expected that out of the two of them because they are quite different. So I would have thought that there would be these very different tastes in there. That doesn't mean they always want to make the same advice.
SPEAKER_01
It's very rare that one of us thinks a person is special and the other person is like absolutely not. Yeah.
SPEAKER_04
Yeah. I mean, another question I always have here is like, are really special people? Is it like, can you miss it? Like, are like, is it a special ability to tell special people? And like, let's take Max at Lagora. Like, do you think that a hundred reasonably at least okay VCs who are, you know, been doing it for a while, do you not think most of them would have come out and been like, this guy is great? Is it unique to be able to see greatness earlier? Or is it more about getting into the right room with Howie and Jack Dorsey
SPEAKER_00
at the right time? That's a good question. I think most of the time people react similarly, like people who are good at this will identify or see that specialness. Like we, and we miss it. Like everybody misses it sometimes, but do it. But I, I think there's a bigger thing that happens, which is, I think people talk themselves out of stuff for other reasons. Yes. Like they'll, the competitive situation, it's, you know, this company or like, can the outcome for what they're working on be big enough and like, you know, like those kinds of things. Like I, I have that in like, I'll take Alex at scale. Like you met Alex and you were like, something's going on.
SPEAKER_00
This guy is a winner. Like when we saw it very, very early, like we saw it together. Yeah.
SPEAKER_02
And,
SPEAKER_00
and, you know, and those were particularly painful because it's like, we absolutely recognized that he was amazing and a super special person. We absolutely recognized that the autonomous vehicle labeling revenue was bullshit and going to go away in, in like not that long. so the facts and the read was correct and the conclusion was incorrect. And it's like, God damn it. And so like, you know, that's like a particular painful one and it's a good lesson for me, which is just like, you thought he was special
SPEAKER_04
and you thought he was special and passed anyway? Yes. Have you ever done that? And like, have you ever passed on a special person because you didn't like something else about the setup and been like, I'm still glad I did that? Or is the lesson just always back if you feel that way no matter what else? I mean, at this particular moment in time,
SPEAKER_00
I would say like, yes, I did, you know, with the hindsight benefit, it's like, if you feel that way and I think you have chemistry with person, like that's part of it, which is like, who do we respond to? We're focusing on the positive case, the negative case,
SPEAKER_02
which is useful also to think about. And it's actually true. I think if you're an entrepreneur is this word inauthentic. And I think it's easy over time, over many decades to see the masks, the fakeness, the posing. And if there was one trigger for all of us in general, I think this is true in entrepreneurship, it's true for the employees you're recruiting, is that they think you're faking it. And if there's the whole fake it till you make it thing, put that aside. I think that's broadly bad advice. If someone's not willing to be vulnerable with us in the meeting and expose what they don't know and be real, then how can we have a relationship? So there have been
SPEAKER_02
people come in here who've done well, who've raised money, and particularly now in the cycle, I think you get people who are playing a promotional game because there's something that's attractive in the external metrics. It could be research background, pick your favorite. And they, okay, we got to sex that up a bit and then we'll flip these people. If there was a common thread in the benchmark investments is that very low representation, there are exceptions of the promoter. And, you know, the case where you find someone who's like really talented, but they're in the wrong market and we don't back them but we love them, that happens. But, you know, when we get in trouble
SPEAKER_02
as an industry, I think is when we start to become quite accepting of the, this is, forgive me, the distinguishing traits between founders and entrepreneurs. When you find it in a market like we're in, the number of founders increases geometrically. I think the number of entrepreneurs stays as a fixed constant. So what happens, we have a lot of founders because I could be a founder, you could be a founder, you were a founder, but you're also an entrepreneur. Entrepreneurs have this guile. There's a sense of leverage. Like Brendan Mercore to me is an entrepreneur in any cycle in any market. He happens to also be a founder right now. I think that's not the case
SPEAKER_02
for a number of people who've found companies who would otherwise, if the market was shitty, they would be employees at big company X, Y, or Z. So as a founder, you have to, I think, introspect, you have the entrepreneurial qualities and to study entrepreneurship, the vast majority of entrepreneurs drop out. The phenotype of the personalities, they don't want to be validated by a system they didn't create. They're not looking for, you know, fancy brand names and they're not attracted to big, you know, fancy whatever. They look for things that are substantive.
SPEAKER_00
The other dropouts, not straight A students. Yeah, and there are exceptions.
SPEAKER_02
You know, Brett got great grades. And so on.
SPEAKER_00
I'm not done. Brett's in that Venn diagram. Six people in the universe kind of stage. But I think this market right now,
SPEAKER_02
because it's so attractive to be a founder, has brought in a degree of promotion and the sorts of stuff that get people into trouble over the mid to long term. And, you know, our whole system is identifying and getting proximate to the entrepreneurial energies, which are, you know, kind of as we know, these forces beyond all measure. There was a period of time
SPEAKER_01
between Q4 of 2022, we call it like end of 2023. There was like a broader macro tech correction where like a whole bunch of like public tech stocks corrected. There was like a tightening of the late stage market and like, you know, interest rates were going up and like all the sort of like tourist capital had like fled the scene for a little bit of time. And capital just like got a little bit harder to raise. And at that time, what was really interesting is if you look at all the seed and A deals that we did and where those companies are now, like it will look like our hit rate went way up. But I actually think what happened is that if you were willing to start a company
SPEAKER_01
at that point in time in AI, you were a true believer. Like there was some natural inspiration for what we were doing. So it's like Leonard Fireworks, Red Sierra, Harrison and Langchain. Like it's companies where the entrepreneur had some fire that was like, God, we're all those done in that era? In that one year?
SPEAKER_04
I think you're right. And I think a lot of people read it as what happened here is they just got to the blue ocean thing first. Maybe there's a degree of that, but a lot of it is if you want to do this at a time when it looks really painful, that's just a different subset than people who are going to do it at a time when it looks incredibly attractive. That's right.
SPEAKER_00
Yes. Yeah, 2008, 2011
SPEAKER_02
when we did Series A at Uber, Instagram, Twitter, Snapchat. Snapchat. Yeah. And it was, but then by the 13, 14, it became very... Yeah, and it's funny
SPEAKER_04
because all the think pieces and essays about this stuff are always like there was a new technology and on top of that new technology came X. You know, you get cloud, you get blah, blah, blah, you get mobile, you get blah, blah, blah, you get AI, you get blah, blah, blah, which I think is true, but you don't really see people talking about in the moments where the psychology requires a different kind of hardness. 100%.
SPEAKER_01
And I think in that moment in time, bigger explainer.
SPEAKER_04
Like 2022, 2023,
SPEAKER_01
early 2024, if you wanted to be in AI applications, an AI application enablement, it actually took a special kind of person that truly believed regardless of what anybody else thought. Because at that time, it was quite unpopular and weird to decide you wanted to build an AI application. because the natural assumption was that fundamentally the foundation models were so powerful and as they reached more and more intelligence, like they would just start to gobble up the applications themselves. Even if you look
SPEAKER_04
at the people who worked at the labs in the like late 20-teens, and now you compare those people to the people who are working at the lab. I mean, not that obviously people are brilliant now, but like you look and you see like Ilya and Greg Brockman and all these people, it's like they were doing it when it was really not cool. Yes. And those are still, I think, the most brilliant people. Yes. That's right. There's something there. The last topic I want to get to is basically how you all are thinking about AI, which I realize is sort of like something that we've probably all talked about a lot, but I do think it's like the most interesting thing going, and I don't think
SPEAKER_04
any of us want to talk about politics right now, going through sort of a lot of your recent investments, it's actually clear that you guys caught the AI wave in like a pretty substantial way. A lot of them were not obvious companies. You know, even LaGora, which is sort of like a middle of the fairway venture type of company, was not an obvious thing to do from Sweden and, you know, there was already Harvey. I think Maness was a very unusual investment as well. I think Cerebrus is extremely interesting. Obviously, like Sierra was like before it was happening, and I think when it happened, it's like, wait, Brett Taylor's doing customer support. Like, I don't think
SPEAKER_04
you guys were allowed about AI, but I think just empirically speaking, you look back and you caught a lot of it. So I guess what I'm curious about is as you're thinking now and you're looking at companies today, what are you excited about? Like, what are, you know, to the point of you guys are having these conversations as a partnership and you're being really curious, like, what is at the top of your curiosity list in AI right now? I think you just
SPEAKER_01
have to roll back to, you know, call it end of 2022 when we happened to get involved with these spectacular entrepreneurs. I think the thing that it became clear to us sitting around the table was that AI was the thing. And even if it wasn't the thing, it didn't matter. That was, like, where we were drawn to. Like, it was the thing that had this, like, gravity pool for us. And so all we wanted to do was spend all of our time talking about it, thinking about it, meeting all the people, working on it, all that kind of stuff. And then you have to overlay your value system on the thing that you're excited by. And the thing that we laid on top of that was what kind
SPEAKER_01
of relationships do we want to get into with companies in that moment in time? And we decided we wanted to be in business with companies where that ethic of being the primary partner, board partner, lead investor, first investor, principal investor, principal believer in the mission is how we wanted to practice investing in AI at that time. And so that meant that we were looking for just really spectacular entrepreneurs with unique approaches to the market. And if you want to do that in a place where you want to be the first investor and you want to back teams with two people, three people, four people, five people, whatever, you're often meeting people that are probably
SPEAKER_01
a little bit early on whatever the next curve was. And so if you remember what was happening in 2022 and early 2023, everybody wanted to start a foundational lab and everybody wanted to aggregate GPUs. And so there was like a big drive to aggregate capital to basically buy GPUs, which then would be utilized for training runs and stuff like that. And it wasn't that we had some hypothesis or some macro view of why we don't want to do that or do want to do that. We were looking for companies and entrepreneurs that resonated with us, that wanted to partner with us. And in that moment, we met a lot of people that were working on really aggressive ideas that we thought
SPEAKER_01
were just spectacular people with spectacular approaches. And as a result, you saw this list of companies that we compiled at that time. So that was when we did Sierra, when we did Fireworks, we did Langchain, we did Mercor, we did Levelpath, we did Legora, Manus, et cetera, et cetera. All of that came together. And when Eric did Cerebrus at the Series A, like it's all of that same stuff, which is partnering super early with founders, working on something that they're deeply passionate about. And frankly, it's cliche to say it, but all of those investments at the time were a little bit non-consensus. Yeah.
SPEAKER_03
I think you have to be.
SPEAKER_01
It's interesting
SPEAKER_03
because from the outside in, before I joined Benchmark, I think if you look at the investments that were made in that kind of 22, 23 time period, you had like an inference cloud with Fireworks, you had a data infrastructure platform with Mercor, you had a horizontal AI play with Sierra, you had a vertical AI play with Legora, and obviously it's only four of the kind of 10 great investments that were done in that era. It was easy to ascribe kind of like a thematic nature. Then you got here and were like, oh my God, these guys have no idea what they were doing. That is correct.
SPEAKER_00
That is correct.
SPEAKER_03
But I think you come in, you're like, oh wow, they had like a vertical, they had horizontal, they did data. It was like, oh, they can have filled out each thing. They must have done a market map. And then you come in and you start asking about each of the investments and the story behind each of the investments. And like 90% of the story on every single one of the investments is the person, is the founder and the entrepreneur and the relationship that they built and why the entrepreneur was so special. And that was so revealing to me coming into this organization and this partnership was like, wow, the founder centricity just like bled off the page in terms of the stories
SPEAKER_03
of all those investments. And so I think that's the way that we're approaching it today is obviously we love to talk about all of the newest and greatest things that are going on in AI every single week. But in terms of the actual investments, it's always, and I think it lends itself especially to this era where I think because the sands are shifting beneath the founder's feet so quickly in AI and things are changing so rapidly, founder centricity as an investment strategy matters more now than any time in the last decade. I think the underlying
SPEAKER_00
technology substrate is changing very quickly with AI. In a way, any software that you could have built in 2022, you could have built in 2010, plus or minus. Once we had the cloud, we got little APIs here and there, but for the most part for 12 years, it was pretty stable. If you compare that to today, you're getting more change every quarter than we did in a decade in terms of the substrate. And so, a founder's ability to navigate that and actually understand where their edge is and where their edge is going to come from and how quickly the moats are deteriorating because they're deteriorating really quickly and how do you build the next one, it's critical. And so,
SPEAKER_00
I think it becomes even more important. And so, if I look forward, I'm like, we see all the same things. It sure feels like the infrastructure cycle is going to continue. It sure feels like five years from now or maybe even sooner, we're going to have really interesting things in robotics. It sure seems like agents are getting really good and the applications are going to get better. And all these things seem really clear, but I don't know that that isn't enough, I don't think, to make an investment. It's impressive to me
SPEAKER_04
that it would have been so tempting to answer my question with some high-minded thesis about like, and you all just said founders. Well, I think it's also,
SPEAKER_02
if you step back and you just think of these as forces, not like specifically AI or social or mobile, there are windows where the disruption is so high that entrepreneurs come in and they see something with such clarity that they can't not do it. And then there's this lag effect, years of like, all the other people then come in afterwards. And in a sense, that happened already with AI. It happened with the first generation. It happened with the people doing, okay, now we've got to do our model company. But when your brother and the team of people were at OpenAI, and that was before it was obvious, then lightning struck. My belief is that that is likely to happen again
SPEAKER_02
at least one or two times in the AI cycle where there's something so disruptive that no one can fully understand it. And then there's a completely new kind of entrepreneur that emerges. What we've been watching for the last three months post-Opus 4.5 is the force of that disruption has awakened a whole group of entrepreneurs that were otherwise not seeing things they were seeing that now they weren't seeing them three months ago. I'm a big believer in what you're doing with Sunday and robotics because that's a world where we all know that in a decade we're going to have these things in our house. But the path from here to there, is that an incumbents game
SPEAKER_02
where the big companies are going to push down complex products or will there be entrepreneurs? It seems likely that it will bring... So much of this is like, okay, where is there a disruption that... But then the lag effect of our industry is that, you know, 90% of the capital flows in afterwards. After the entrepreneurs have figured it out. By the time it's sort of figured out and there's the next thing, like, it's not for us. And that's our faith that the Silicon Valley is an adaptive landscape that will continually have these disruptions that make... As soon as there's a winner, like, we're kind of uninterested, we move on. So...
SPEAKER_04
It's a great place to end. Thank you, guys. This was really fun. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Ok you. Ok you. Ok you. Ok you.