Benchmark Part II: The Dinner

I've spent a lot of time in Europe and the dinners are about three hours, maybe three and a half hours long. That's an acquired episode. Yeah. And that's the whole point is that social connection is not something that's transaction. It's fluid. It's fun. It's playful. And so the idea is people are coming out beaming, smiling after a dinner as opposed to, you know, this sort of rigid structure of a typical dinner with an agenda. There is no agenda.

Yeah. I don't have an agenda today. The agenda is to come together. Yeah. Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Who got the truth? Welcome to Season 11, Episode 5 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert.

And I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures. And I'm David Rosenthal. And I'm David Rosenthal. And I'm an angel investor based in San Francisco, where we were for this very episode. Indeed. Indeed. And we are your hosts. Last episode, we told the four-hour story of Benchmark, the legendary venture capital firm that stayed small while all their competitors ballooned in size. At the end of the episode, we mentioned that their partner meeting had this dinner at the end of it, where the five equal partners of Benchmark sit down for an open-ended discussion, sometimes with a special guest.

Well, we were talking with the Benchmark partners about that last episode, and they invited us to be their guest for one of these dinners, and for the first time ever, record it, even on video. So we are so pumped to share this with all of you. We got to ask them about a lot of the open questions we had about the future of balancing those out-there consumer investments with their B2B portfolio, how they think about making sure that they see that next world-changing company, the pressure of inheriting a top venture firm and trying desperately not to mess it up.

And of course, there's some good war stories from the portfolio companies in there, too, David. Indeed. Indeed. Ben, this was such a special episode on so many fronts. This, by far, is a record on an Acquired episode for a number of guests that we have concurrently. Oh, we had seven microphones running. We had to buy like $5,000 worth of gear just for this episode. I think it was worth it, though. Next time, I need to account for the fact that there will be violent laughter when I'm setting the audio levels, because we just had a blast, and you'll definitely hear it when you listen.

All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Lagora, the agentic operating system that is redefining how the world's best legal teams work. Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Lagora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

So the founders did exactly what great founders do. Operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lagora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work.

And this means that the pie can grow even as each individual task takes less time. And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting.

The early Lagora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Lagora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months. Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client.

If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at lagora.com slash acquired, and just tell them that Ben and David sent you. Well, we have an update to the merch store. We got many requests about this. Gosh, why isn't there a dad hat? Well, we called up the good folks at Cotton Bureau, and we did some horse trading, because I wanted a really good one.

You know, I wanted one that was embroidered, that felt nice. So for the next couple weeks, there will be a limited edition dad hat embroidered with ACQ right there on the front. So get them before they're gone at acquired.fm slash store. All right, join the Slack, acquired.fm slash Slack. The LP show has been on fire recently. For those of you who are paying LPs out there, we just dropped an interview on the profitable growth playbook for B2B companies with Jale Rezaie, the CEO and co-founder of Mutiny.

That is live just for LPs right now for another week or so, and then it will hit the public feed. So you can become a LP at acquired.fm slash LP or get those episodes after they're made public by searching for the LP show and your favorite podcast player. Now, without further ado, on to the dinner. And listeners, as always, this show is not investment advice. David and I may have investments in the company we discuss, and this show is for informational and entertainment purposes only.

Okay, so our first question is, what are we doing here? Like, what are we at? And Peter, it feels like you would be the best person to explain this dinner tradition. Why do we have a dining room in the office? On the 19th floor. When I joined Benchmark, there was great optimism between Bill and me about, you know, injecting new practices, new habits, new ideas into the firm. And Bill had just read the Ben Franklin biography.

And Ben had four dinners, if I recall, a week. But they were, like, going deep on finance and then on, you know, chemistry and then on life sciences. And he took the catalyst to say, like, why aren't we doing dinners? And anyway, we had this, like, playful, you know, experiment where we said, well, let's try a few of them. And we did a big dinner towards the end of the year. And I think it was, like, 2007.

Maybe 2006. 2006, that was actually my first year. And it was amazing. Like, time stood still. And we realized, like... Just the partners? No, we had four outside guests. Katerina Fake, Mike McHugh, Gideon Yu, and Martin Mikos, if I'm not mistaken. And it was electric. And we came out of that. Bill had this habit. He'd always call me in the car after, like, what did you think of the dinner? I'm like, ah, I think it was fun, but I want to go to bed.

He's like, ah! Alcohol had been served. People were in a fit. Like, it was his baby. He wanted to, like, keep working on the concept. Well, we danced with this idea. And so the concept that I came to is that firms are full of strategies that aren't coupled to reality. And if you look at a venture firm, eventually it's just a collection of habits. And this is stealing from William James, who I think was the greatest American thinker.

That, you know, we are nothing but an amalgamation of our habits. And habits show character. They show everything. So the idea that we should be nurturing curiosity, which is the essential lifeblood of the firm, needed a habit. And Mondays, as much as they're an attempt at that, you sit around the office and you joke around, you try and dive into topics, they're limited. And so the dynamic range of a dinner with, you know, an open-ended, no agenda, wild explorations of the most bizarre things your partners might be curious about.

And I've definitely gotten a few, you know, rat holes with this group and they pulled me out. You know, it just became one of those things that honored the purpose of the firm, which is the sense of, like, constantly learning and activating our curiosity. But, you know, collective effervescence of a group that we could never get in a one-on-one dinner. One of the challenges, which is being manifest right now, is that in a table, you know, where there's a head of the table, you can get a dominant participant in a dinner conversation.

But the problem of the table is that you either have a rectangular structure, which carries power structure embedded in it, or you have a circular table, which atomizes the group. And so I'd seen this table, The Seven, by Jean-Marie Massoud, who's a French designer, and ran with the idea. Something that would be organic, that could expand and collapse, but most essentially destruct or deconstruct power centers and create a non-hierarchical construct with intimacy. But this table ends up being, Ole Lundberg designed it.

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

And more often than not, it's somebody that we haven't worked with or invested in. And I think you guys might have mentioned this in the podcast that we've had dinners with people like Dylan Field. And, oh, you come away. You're swept off your feet. You're like, this is why we exist to serve people like that. Toby from Shopify. Jeff Bezos has been, we travel to Jeff. Do you bring the table? Unfortunately, it's not portable. Medina side, Seattle side, LA.

We've been in LA. We've been in Seattle. And I think you can tell just from, you can see the ethos of the firm in the structure of the table too, which is that you can't have a sidebar conversation at this table because everybody else can hear it. And so it's all one conversation. And that, you know, sort of coming from the outside and then being part of Benchmark, like the one conversation element of everything that we do on Monday is so powerful because we're all tuned in on whatever's being discussed.

And sometimes it's not great news. Sometimes it's good news. Sometimes it's tough news. Whatever it is, getting the whole group tuned in, I think is like the essential power of this structure. And I really like the table for that. I mean, I remember, I'll never forget early in my venture career when I was a venture capitalist. I remember an older partner taking me aside and saying, like, if you want to bring something up at the partner meeting, you need to have had a side conversation with everybody else before you bring it up at the table.

Which is so funny because Bruce, when we were talking to Bruce Dunleavy, he was like, our one rule was no pre-selling a deal. Like, you can't walk around the hallway and say, like, hey, I'm super excited about this one later. Like, if you, you know, I think you'll be excited too. Like, vote for it. That's one of the great perks, especially for somebody who's come from another venture firm to Benchmark. So you don't write a memo.

And it's because the memo, you know, when you're, a memo really is a vehicle to, you know, obviously give background on a company, all the work you've done. But it is also a little bit a pre-sell before the company comes in to present. It's persuasion. Yeah. And so, you know, a lot of hours get consumed by the writing of it and the reading of others and not to have, like, a founder come in then and there's none of that.

It's a blank sheet and you just get to have the experience of the founder. It's a nice. Sarah uses this phrase, which is treat seeking, which I think is a really good one, which is it's like, yeah. Does it, does the, is the company incredible and does that company have a chance to be one of these few extraordinary companies every decade? And like, that's, that's actually all that matters. Like, that's all that matters for all of us.

And if you find that, then you really don't need to sell it. Yeah. You don't need to sell it. Do you have any sort of format of codifying your thinking? Because, like, memos serve the purpose of forcing you into clarity of thought in addition to creating a sales artifact. And so, what things do you do in your partnership to gain clarity of thought? I would say the memo is a crutch often. Because, yes, it can force you into clarity of thought, but it also allows you to fill in blanks that the entrepreneur themselves are not saying.

And it pushes a sort of bias and perspective that maybe the firm has, or maybe you have a sector thesis. And it's like, there's a lot of manifestation of ego when you put a memo together. Not having a memo does not replace work and does not replace the calls and does not replace the conversations. And what I find so amazing about our Monday discussions, when you're relaying the calls you have, relaying the notes you took on those calls, you're actually telling exactly what you've discovered.

Without the overarching bias, without your ego pushing into it, you're not pushing anything into the firm. You're just saying, like, this is what I've discovered. We all just heard from the entrepreneur. It either confirms their views and sort of, like, how they want to rove through this market. Or we found some challenges. And so, it's that sort of, like, and I think you all mentioned it on your podcast, which is that when you talk to benchmark partners, it feels like we don't have some hard stop.

We can just keep going. And that is the beauty of that Monday meeting, which is that we don't have a next topic to jump to. It's not like we're working through a list. And so, we allow ourselves to have that open discussion. Dude, there's an agenda. You got to go through the CRM and update the CRM. And if you haven't updated your CRM, you're going to get... Negative points. Negative points. Yeah. Like, I don't see all these calls logged in the CRM.

I also think that, like, the artifacts, like, they live in the memories and the lived stories of the partners. And so, like, sort of, if there's a curiosity in that direction, call up Mac, call up each other, call up Mac, call up Bill. And so, those learnings, those stories, that wisdom sort of still walks. And one of my first experiences of this unbounded agenda on a Monday was... I brought up a... It's so uncomfortable. For a new partner coming in, it's like...

No, actually, it could just be for, like, you know that that's going to be what Monday is like coming when you're first Monday. Because four of the five of you were GPs at other firms. Yes. Before this. Yeah, yeah. So, we've all read it, boys. And, like, you talk to Bruce or whoever, and they say, just Monday has no agenda. You're like, I get that. Like, you can intellectually get it. Yeah, you get it. And then I remember my first Monday.

And sorry, I interrupted you on your first Monday. But you sit there and you keep on waiting for, like, well, when are we going to talk about pipeline? Or when are we going to talk about, you know, the portfolio updates? You know, and it, like, doesn't happen. And instead, it's, like, these random roving conversations. But then the, you know, the topic of substance will come out in a natural way. You have to really enjoy being around each other in order for that to work.

One of the things we didn't talk about for our dinners is, like, we really, you know, you just, by getting to engage on these topics that aren't just the business of our day, you know, what we do every day, you just get to enjoy being together. And then, again, and you get to know each other in different dimensions. Some of the stories I get told. Last week was a deep dive in psychedelics. For a deal or for a deal?

No, no, no. Prepare for a deal. Yeah. Prepare for a deal. Expansive money. There may be one. Yes. But it is critical to then what happens on the Mondays and everything in between. So, Sarah, you and Jason both mentioned lack of structure, lack of memo is not a replacement for doing the work that I assume happens during the week. I'm curious, what does that work mean? And in the meeting itself. There's no reason why we can't call somebody that we want to talk to when we're together.

Do you put them on speakerphone? Yeah. It's like, hey, you're on speaker with all of us. We have a couple questions for you. What is it? How do entrepreneurs react when they get a call from the partnership? Hey, it's benchmark. Yes. No, I think it's surprising to everybody, whether it's entrepreneurs or whether it's like people that we call in the industry. We're just like, hey, we're all together. This question came up and we want to talk to you about it.

It's like, oh, wow. Like that's actual teamwork. Like you're working together as a team. And I think you both have investigated the venture industry so much that sort of like all the stories that are told at Benchmark are all about the group going and accomplishing something. And there's a lot of like we did this, we did that, and then this happened, and then we did this. And then I think broadly the stories in the industry naturally tend to be one person.

Like there's like the venture capitalist is the hero, and the truth is that's hardly the truth. And part of that is all five of us deeply engaged on that and working as a team for that. And so when you call somebody together, you're exercising that motion, you're exercising that muscle. So one of the things we spent a bunch of time talking about on the first episode was what the psychology must be like, Ben and I speculating, of being around this table here as a partner with you guys.

And our thesis was that for a ordinary group of people, it would trend towards mediocrity. But if you have a cultural norm of we are all bringing it all the time, then it trends towards greatness. And why would it trend towards mediocrity? Well, because it's the line that a bunch of other GPs said about Benchmark when it was getting started was that's communist capitalism. And it's going to trend, it's going to end up like communism. Right.

But obviously that is not the case here. I'm curious what that like feels like for you guys on a day-to-day, week-to-week basis, knowing we've got this partnership, this relationship, we spend all this time together. But obviously we each need to like really bring it. So right before Sarah was joining, do you remember this? Yeah, of course. This is like five and a half, six years ago. Yeah. Something like that. So she texts me on a Saturday.

Okay. She's like, do you? So it hadn't been announced. We hadn't decided anything. Like it was like we were, but we were close. And she's like, do you have time tomorrow? I was like, okay. And so anyways, we got brunch at the pub. And she's like, Eric, okay. What's our job at benchmark? Like this is V3 or whatever benchmark. Like what is it? And I was like, Sarah, job number one, don't fuck it up. No pressure.

Don't fuck it up. Because I think there is a real risk that you could imagine a risk where you feel like you're born on third base or whatever the analogy you want to use is. And I think one of the things that you have to hope for is that every single person who you add feels like, hey, I'm in service of the entrepreneur. And it's my job to find and work with and help. The next eBay.

The next. Yeah. The next great. The next great entrepreneur. And believe me, I wake up every fucking morning like hungry. I don't want to be the beginning of the end. Yeah. You want to contribute. Where does that come from for you personally? Why are you? Because you don't have to. Because I'm a failed entrepreneur. I think that really is it for me, which is I know what – I know how hard it is because I did it and failed.

Did not live up to expectations. Did not live up to expectations. And I started a company and it was really hard and it didn't work. And so I think you just like realize like how difficult it is. There's a lot. There's so – the privilege of the job is there are people out there who are super smart, who have an idea that's often against the grain that want to change the world in some way. And, you know, it's doing what you can to help them.

And so I think about that all the time. And I think that is a – that's a chip on your shoulder or whatever to go prove. There are different motivational systems. Yeah, fair enough. Fair enough. That's why. I think some part of them, all of us, some of those motivational systems are fear-based. Don't fuck it up. Some are joy-based. And I remember saying to Bruce, we had a long conversation about, well, you know, you guys are moving on.

I really don't want to – you know, I'm going to leave the firm in a better place than I joined. And it doesn't get to the core of your question, which is how do you maintain standards of excellence? Well, peer pressure is a really powerful mechanism in a lot of directions. So why does it bend towards excellence? And I think we had this sort of insight that the joy you feel, the total, complete joy of working with a great entrepreneur is contagious.

It's energizing. It's the lifeblood of – it's the currency of our firm. And if we look up towards that, we can all recognize that benchmark probably isn't going to be around in 30 years. And Bruce said to me, you don't need to keep me like benchmark. It's like we didn't try and start this so it would outlive us. I mean, it was sort of an accident. They didn't name the firm benchmark though. Indeed. They didn't attach your ego to its name, which I thought was telling.

And, you know, but the idea that this is ephemeral. And you said like everything's ephemeral. Like the structure, we don't have any – we're an institution, franchise. All those words make us nauseous. Because it's really the nature of the business we're in is that we want to destroy the incumbents. And I think we're collectively aligned around being anti-authoritarian, destroy the incumbents. And so the last thing you want to become – Which absolutely was the DNA of the founding of Benchmark.

Absolutely. As we talked about in great detail. And so we want no part of this firm to become the incumbent. And so how do you do that? Violent rejuvenation with a common culture of collective joy in serving entrepreneurs. And if you stay true to that and ruthlessly true to it, then you fire yourself. Because there's a day where you realize, I will not give to the firm more than I take. And in the case of everyone who's left this firm – and I've never seen this in the history of investing.

You study all these firms. Every single partner fired themselves. And it was that ethic that was recursive. And you feel it. And it's intrinsic. And I think it's also partly because the minute you're in a position to be the incumbent, I'm the last man standing. I want my partners to destroy me. That's joy. Which means I've succeeded. Now we're big limited partners. So that's also joy. One thing I'm curious. What is the relationship of past Benchmark partners to this group?

We talked about one of the things I remember from the research and hearing Eric, you and Bill both talk about is with Cerebris, we got to call Bruce. We got to call the old guys. Yeah. What is that relationship like for you five? I mean, the official relationship is their LPs. That's the official relationship. There are LPs with us like other LPs. I think the feeling relationship is like you call them. And they want to see you succeed for all the reasons Peter's talking about.

And so they pick up the call and help and put their network at work to help you. And they have a lot of insights and have seen a lot of stuff. I would say one way, one shorthand, they feel more like uncles and aunts than they do like parents or grandparents. That's a great thing. Yeah. That's perfect. And for listeners who don't know, because I didn't know until Chathan just showed us, the Benchmark partners, none of you have offices.

Like you all sit at this crazy round table. It looks like you're going to war. And you're like trying to put the strategy up on the board. You guys need a holodeck in the middle. We had a poop emoji sofa. It's not officially a poop emoji. But you have like there are aunts and uncles with computers over there. Like there were not five computers. There were seven, eight, nine. We're getting rid of them. Not fast enough.

But they'll be gone soon enough. So yeah. You're saying that's, I shouldn't read into that like they're here still. Our aunts and uncles, it's fine if they visit. Yeah. But not stay too long. They can watch the kids every now and then. Right. But as soon as there's a real problem, it's funny because aunts and uncles say, here's your baby. And literally that's what happens. Whoa, whoa. This is going to be hard work. Oh, no, no, no, no.

You're the parents. I got to go home. It's great being an aunt or an uncle. You know, I have five children. And I can tell you, I should have learned that lesson. I love my children dearly. But my brother's in a good position. What? Okay. So picking up on that theme. One of the things that I always have appreciated about you all having done some co-investments in past lives and just your reputation in the industry. The hard work.

What are examples of the hard work? Like real examples. We're going to dish this to Chathan because I know a story. Yeah, I know you have a story here. A very recent one. This guy got off a plane. But the aunts and uncles are not going to do anymore. What are the ways in which you get put to work by your portfolio companies, Chathan? Well, this is Chathan and part of the reason he's discombobulated and has a cold brew in front of him.

For those of you who are watching the video at 5 p.m. Is he got off an international flight three hours ago, four hours ago. But was with us on Monday. Which was with us. And decided to go. And decided to go on Monday. And today's Wednesday. So, here we are. 48 hours late. I'm doing great. I'm not as confident. Yeah, I'm not. I'm doing great. So, what are the circumstances that lead to you suddenly deciding that you need to be in your room?

I think this is a great story of, you know, how the firm and we as a group operate. Which is, you know, there was a portfolio company that was going through an important decision. And, you know, there was a decision that was made Friday morning. It felt like there was a finality to that decision. And I was like, okay, this is what we're going to do. And then, you know, people go to the weekend. Emotions rise up.

They have conversations with their friends. And, you know, stuff starts to get off track. And I get a call, you know, Sunday night. It's just like, you know, things are getting off track. What do we do? And, you know, we're all on a group chat. And so, I put it immediately in the group chat that says, here's what's going on. I'm looking for advice. It was late at night. And Eric called me at 11 or 11.30 p.m.

And we talk for 30, 40 minutes. We're just walking through everything. And what was so incredible about that moment is when you're in it, it's really hard not to get wrapped up in the emotion. And sort of stop thinking logically. And what was great about that conversation is Eric was able to zoom out and say, look, we're in the service of entrepreneurs. We only recommend and guide entrepreneurs. It's ultimately their company. It's their decision. And so, what Eric said on the call is what I would do is, and what I know you would do is.

That's a good inception. Here's the peer pressure. I know you, Tathan, would do this, right? Yeah. Which is, you know, if you weren't in the moment, you would make the phone call and say, hey, this is your decision. I'm here and 100% supportive no matter what. And so, we got off the phone. I made that phone call. But also, here's what I think. Yeah. Well, no, I think because you've gone through all of that. The think part had already, yeah, it had already been done.

There is no more thinking. It's your call. We're a sounding board. You make the call. All the facts, all the reasoning, all of that had been laid out. There was no more logic and there was no more explanation required. It was, at this point, it was emotional. And, you know, after that conversation with Eric, I made a call. I just said, it's your company. I'm going to support you. This was Sunday night. Then Monday partner meeting.

This was like midnight I made the call. So, you're all in the circle on Monday. And so, we come in Monday morning. We're talking. And then, at some point during the conversation, Peter said, this is not a conversation that should happen on the phone or on Zoom. It needs to happen in person. I was like, okay, let's do it. Okay, yeah. And then, I was like, okay, I should get on a plane right now. And so, here we go.

Time to go to San Francisco Airport. And then, as I was leaving, Eric goes, are you going to come back for the acquired thing? I was like, oh, yeah. Okay, don't worry. I'll find a way to get back. Not only am I getting on a last-minute flight to Europe, yeah. And you have to come back by a certain hour on Wednesday. And what transpired was, as I was getting on the plane, that meant so much and set such a positive signal that by the time I landed, everything had just, like, gotten in place.

Like, I didn't say anything. I didn't do anything. Just showing that level of support and commitment changed sort of, like, all the dynamics. Which is like, hey, this is, oh, you actually meant what you said. That you're here to just support me and support us and support the team. And you're right. It is our decision. And that was it. It changed the tenor of the conversation completely. I would say it's, like, also broadly a manifestation of, like, the orientation to investing, right?

Like, there's a lot of people who would say of investing, oh, like, we made this bet. Like, you might hear that word a bunch of times. Oh, like, well, it's a good bet or it's a good risk-adjusted bet or hopefully it'll be a good bet. And there's a very passive. I'd like to own that asset. Yeah, I'd like to own that asset. It's investment banker speak. It's a metaverse play. But it sort of, like, pervades a very passive view of almost, like, trying to super forecast a set of odds.

And you did the diligence to super forecast those odds. And, like, we never talk in that way. It's like when we think about partnering with a founder, it's not, oh, we want to make a good bet. It's like we want to make a commitment. And that commitment manifests, like, as a group to be vulnerable and honest here and collectively get that feedback. And then with the founders to be on the field denting those odds, right? Each year, big years, and even a couple times at every year, there's important moments where you can tell.

You can't transform necessarily when I'm saying we've got some silver bullet. But that commitment can really change the odds. You know, each of us make one or two of these commitments a year. Not bets. Right. They're not bets. And there's a level of relationship that then happens with the founders because there's only one or two a year. And what you end up feeling is that you really just care about every company that you work with and the founders and the teams and everything.

And so when these moments happen, it's not a transactional thing of one of, you know, a lot of companies with which you work. Like, it's, you know, a founder that you really work closely with that you know so much about. And that, you know, that level of support doesn't feel like something unusual for us to do. It's something that we just expect of ourselves. And that's the relationship that we'll have with these teams. All right, listeners.

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We're huge fans of Vanta over here, and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com slash acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off. And just tell them that Ben and David sent you. Can I ask, and this may be, you know, drifting into an area that's harder to talk about. And so we can abstract it a little bit away.

We talked about Uber on our episode, but I want to abstract it to, you know, how you think about this generally. The role of a general partner in a venture capital firm traditionally is that you have a fiduciary responsibility to your LPs to maximize their returns. And you have a second fiduciary responsibility when you join the board of a company to the company. And it's hairy enough trying to balance the tradeoff that because sometimes those things are at odds.

You're representing all shareholders on the company's side. And with your LPs, you're representing, you know, their interests. And so you then introduce this third thing, which is the thing you care the most about, which is support of the founder and empowering the founder. When do those things get hard? How do you balance those things? I assume most of the time you're indexing strictly to we're partnering with this founder and we trust them. But when do you have to juggle those things?

Yeah. I mean, it's people go to therapy often. They only talk about the shit that's going wrong. And I think it's useful to think about what's going right. And if there's not a DSM for flourishing, there's a DSM for dysfunctions. We could open that book up and we can have all sorts of flavors of dysfunctional family. And I think we could do that. And that would be illustrative and informative about how it can go wrong. I would flip it and say when it works well, what are the preconditions of where you have alignment?

And then you look at degradations from that. I think one of the words that's sort of vital to any durable founder benchmark partner relationship is vulnerability. And if there's ever caution or pause of I can't share this information with my – then we've degradated the relationship and we have to fix that. And you fix – trust is fixed intimately one-on-one. You have conversations that allow you to zoom up to say, okay, what's the collective purpose? And I think that we could talk about Uber.

I have every reason to believe Travis's purpose was the biggest, most extraordinary Uber imaginable. And, you know, we had a collective gaze on that together. And in many situations, this was one of them, pathologies creep in. And you learn this through a course of firm experience, which is when you start to see that happening, you need to act immediately. Because the minute we get othered and it's not about us and this joint purpose, but it's you and me.

It's my agenda and my LP's agenda and all that. And I sadly see that with a lot of the other firms in the industry because it's not necessarily the partner in the room that's got the issue. It's their partners that have told them that they need to do this or they need to do that. And I see it and I'm like, oh, man, I adore you. But your partners I have different feelings about. And you're here trying to rattle because they've said, why aren't we meeting our plan?

And so the entrepreneur immediately, vulnerability snaps like that and it closes. And then you have no trust. And now they come to us typically and they say, we got a problem with one of our directors. I'm like, okay. So we'll, you know, have an off sidebar with them and say, what's going on here? How can I help you with your partners? And as much as, you know, you look at situations where it falls apart, let me give you an inverse story, which is where it really only could work, I think, in this firm model.

I was on the board of a company that racked somewhere between $200 to $300 million of capital. And I'm pretty accountable. Now, I should be fired if this job actually had those standards and governance and practices. And that company is called Docker. And I was just in Miami yesterday at their all-hands meeting. And I remember the last time. And when you invested, it was called dot cloud, right? Dot cloud. So last time I did an all-hands meeting at Docker was three years ago.

And there were 60 employees that we'd spun out of the prior company. And the valuation was zero. So we'd gone from over $1.4 billion, $1.5 billion to zero. And I was working with some of the great venture capitalists in the industry on that company. And aside from Insight Partners, crickets, gone, all left, bail. And this is okay. What was different with Benchmark? Insight's another story. There's a very fun quote that we don't often talk about on the show.

I don't think we ever talked about this on the show. But a very prominent firm has a – one of their mantra quotes is focus on your winners. And I think that's what you're talking about here. Yeah. And well, at this point, it was a pretty big loser. But the vulnerability that I was able to have with the team that remained to say we made mistakes. We're accountable to it. Here's how we work through this. Because you know what?

If you look up in the purpose of Docker, we're literally – this is cliche. It's the beginning. You know, we have 30 million developers that use this product every day. Yeah. That's the craziest thing. Unbelievable product success that completely changed the industry. But like business model and strategic failure such that there wasn't effective value capture. There was value destruction. Hundreds of millions of dollars of value destruction. My two partners, I came in and I said, I may be drinking my own bath water.

I don't know what to do here. I was really vulnerable. And I said, if I've gone off the deep end, no part of that truth-seeking exercise would allow me to spin, position, blame, be a victim. I was being accountable. And I said, like, what have I done? And they said, not only do we believe in this company, can we put it in the new fund too? And I thought, well, that's crazy. I was like, but you're right.

If you believe, you have to have that founder level. I always joke, you know, employees can quit. Founders can't unfound a company. And I think we feel that way in our commitments. We can't uncommit that founder permanence. And oftentimes, it outlives every executive that gets recruited. Not every, but like a hyper majority of executives. And so this case of flourishing, and then that was a case of, you know, trust, all these things that come to stress.

The LP's agenda, the founder's agenda. It's not that hard. You just look up and say, what's the purpose of the company? Let's resolve around that. And that'll sort the rest of the stuff out. That's the, you know, Bezos thing. The long term, there really is no conflict between creating, you know, delighting and wowing. Customer and shareholder value. Yeah. Impressing the customer and creating shareholder value. Our customer isn't, it's not the founder. We say it is, but it's really the purpose of the founder.

Yeah. And it turns out that purpose, that's the customer. Yeah. One of us may be deviating from that and we can keep each other accountable. And that happens internally. Like my partner said, no, the purpose of Docker is just the beginning. My God, they're going to get developers to program the global computer. Okay. So then you could dust off $300 million of lost capital. So I want to do a big topic we really wanted to cover with you guys in this session is staying focused on early stage, not having a growth fund, especially when your entire peer set has become lifecycle capital providers.

And I actually think this is a good entry into it. So Peter, the story you just told of like when things are not going right, the benchmark approach, I'm actually really curious when things are going right. Your competitive set has said when things are going right, we should go long. We are going to interpret that. I think in large part as a competitive response to you guys during the fast fab four era, we are going to become lifecycle capital providers.

We're going to put a ton of money round after round after round into our best. That wasn't in response to benchmark. That was in response to there's a crap ton of fees to make on. And the founders will keep taking our money and we have the brand. Yes. That was like benchmark stayed so true to their thing. Okay. I think there are three classes of firms. There's a class of firm that fit that. Yeah. There's benchmark.

And then there's a class of firm that actually we're making a strategic decision. We care about carry. We're playing for carry. We think we can. 100%. Yeah. And those were valid decisions on that third class. But you guys have not done that. Despite, I assume, every opportunity in the world to do so. Why? Can we ask Miles? You were the newest to join. He's going to try and change that. Well, actually. It's funny you ask. This is a great point.

To announce. Yeah. That's more growth. We've got an even bigger dining room upstairs. Yeah. Yeah. Yeah. How far can we stretch this triangle? Yeah. Yeah. Yeah. Yeah. Look, I think there is certainly all of those opportunities to do that. I think Sarah says it nicely in part. Like, our job, we're really focused on how do we scale those companies, right? And as part of that, having a relationship that doesn't get sort of adulted by this question of us making another commitment decision.

It's like we're in and we're not evaluating anymore. We're not deciding what a fair price is anymore. We're not trying to decide how to maybe make a strategic call with a company that optimizes for a moment for us to get more capital. And like, there should be, we want to remove any chance of doubts or alternative incentives or questions in that relationship, right? So it can be fully vulnerable. And if we do that well and we've partnered with ideas with great purpose and a long, endless runway to work on, our success will scale through their success.

And we don't need to scale ourselves independently of those companies scaling. And so I think we'll all, the beauty of being small is like, we'll all do perfectly well. But they're literally like million dollar bills on the ground for you to pick up if you were to just put more money in your own companies. I totally agree with my all-sudden. I would just add one thing is like, it doesn't feel like work if you love doing it.

What do you love doing? And I think that's the biggest thing, which is if you love working with founders, then you want to spend your time working with founders. And that means you don't want to spend your time managing a staff that's scaling. You don't want to spend your time doing marketing to LPs or others. Like, you don't want to spend your time meeting investments that are outside of your purview. Like, it's just like, that's like, you want to spend your time with those founders.

And I think that's the, what do you love doing? And I think that's the biggest thing. I don't think there's any question that over the last few years, the growth investors have done extraordinarily well. Extraordinarily well. And there was millions of dollars to be picked up doing that. But I think the question of like, what do you love doing really resonates. And one thing that's super nice is, you know, the cycles turn and the strategy persists through cycles.

And so I also don't worry about $100 million holes. Right. We were joking before we started. Like, I would have met when we were here eating dinner. You guys must be licking your chops right now. Like, this is your time to shine here in late 2022. So? Well, yeah. With the caveat that I think we sort of, because we're early stage, what does that mean? It's moved. It's in terms of its definition. We have faith that every year, some number above zero, companies will be founded that are going to be worth more than $10 billion.

And then about every two or three years, a company is going to be found out that's going to be worth more than $100 billion. And it seems to be independent of the cycle. So, yeah, things get a little crazier when things are, and they get a little depressed. But the growth fund thing, I'll come back to answering it a little differently, which is that I would like this group, I guess I'm part of this group, to set a high watermark for a multiple on a fund.

And I think it's kind of fun to think about, okay, it's great, you can scale capital. But if we had a 20x fund, can we get a fixed 50x fund? I'm not sure we can do that if we start. All we're doing, we're investing more money in late stages. We're lowering our returns. That's all we're doing. Because our commitment is fixed. It's not like we're going to be more committed. So you could say we're getting more cash on cash.

Yeah, but we're lowering our returns. And the hack of the venture business, which is coupling capital from other people and ourselves with the partnership that it comes with, I think it's a little more inflamed when you're stuffing large sums of money into a company as it gets, as opposed to keeping it pure. And I will say, what would make me proud is if this team, maybe after I'm gone, sets a new high watermark. They won't do that with a growth fund.

And the rest of it, it's like, should we care? That's cash on the ground. Yeah, but I also want to know with our limited partners say, there's nothing like a benchmark fund. And when it works, it sets the pace in the industry. And so, you know. And sort of like there's the quote Sarah and I used with a team the other day. The Johnny Ive quote. Yeah. Of like, you know, what's focus? I was going to say this.

Right? It's like focus is when, in some ways, every bone in your body thinks an idea is a really good idea, but you don't do it. Yeah. It's about saying no. And it's a fine idea. We would, I think, it's not to say we don't have opinions on later stage. Later stage ideas or valuation. If you guys had a billion dollar opportunity fund stapled to benchmark with the same team, you would for sure have good returns.

It would be one of the best growth funds in the industry. We like to think so. But that's not interesting. If we're going to do it. But I think to be able to have that focus that, you know, a conversation on Monday and our time together on Monday is an hour of roving curiosity of like fertile ideas that are right at the edges that seem weird and bizarre. Because at least you've got to be weird. Instead of, okay, what's the growth pipeline?

And, you know, is that a good valuation? Is now a good moment to sort of get in? And I think it's the focus is... And we'd have to have a CRM if we did a growth pipeline. Sorry, like that it's, you know, for us, it is at the end of like the, we're all here because we want to partner with founders as early as possible in that kind of relationship on the board and anything, you know, to this Johnny Ive, you know, just the focus, like, like anything that distracts from that.

And we, we have five people. Like, there's not... This is it. This is it. And like the capacity... We got to ask you about the principal program, but we'll come back to that. Yeah, but the capacity to take on more things would take away from our, you know, getting in the room with that founder who is going to build that next iconic company and supporting the ones that we have. And so we just, we're forced in a way by the constraint of how many people, you know, the SEAL team of six people never being more than that to be ruthlessly focused.

And that's, that's what, that's what we're here for. That's super real. I mean, the, the, just to validate it, like there's lots of opportunities that you can always pursue that seem like good ideas. And like, we have this struggle at Acquired. We're two people. Oh, my God. And, and, and there's a thing that we know is uniquely differentiating, which is these like ridiculous deep dive podcasts that are just us. And sometimes we have guests like wonderful to be here.

Thank you for doing this with us. But we know that the most differentiating thing that we do is this like unique format that just we can do. And every time we start taking on more stuff, I'm like, oh man, the golden goose is getting worse. I can feel the golden goose getting worse because we're doing other stuff. You're really good about keeping us both honest on that too. That's a, it's funny that you use that phrase.

I, in 2008, I was, there's a first time somebody said to me, you should consider venture capital. I didn't join benchmark until 2014. So 2008. And a very famous nameless venture capitalist said, our early stage program is our golden goose. How much AUM does that famous venture capital firm have now? That early stage, that's everything that we do protects that golden goose. Long time listeners will probably know exactly what you're talking about. So Peter, I just want to clarify something that you said.

It's interesting. You define the scoreboard as fund multiple and it's not total cash return to LPs. I think that's an interesting, like that's a clarifying mindset about the way that you guys look at this. I can tell you, I think of it as an LP and the benchmark fund, of course, again, the purpose is not, we don't show up and say, let's drive returns. It would be alienating to everything we stand for to think of it that way.

It's the outcome, right? Not the input. But I think the cash and cash multiple, both as an LP and it's a real problem for LPs, I will say, because we have large LPs who look at us and like, why do we waste our time with benchmark? We're a toy. And I say, oh, yes. Can you say the number of your largest LP, like what their dollar per fund? They're like 25, 30 million. I could get it wrong.

I probably pissed one of them off if you listen to this, but in the context of a Harvard or Stanford, like that's nothing. That's barely worth their time, right? Except for when we get a high multiple. Right. Except for when it works. It matters. Some of our retired partners are our largest LP. Indeed. Yeah. Painful fees. There are some discussions among some people in the firm that that over time is the way the model sort of endures is that the LPs become the former GPs.

Anyway, it's hard to say that the LP construction has much to do with anything of our day-to-day performance. I do think this idea, though, of the principle of the firm being standards of asymmetry in our exposure to the volatile material of the startup. Asymmetry is a 20x, 50x, 100x fund. And if we degrade that, it sort of misses the point. And I want this to be, and I'm already, many of us are at this place where we pay crazy.

As a GP, I pay carried interest and management fee to my fellow GPs as an LP. And that's, well, that's crazy. And this is- Oh, you don't get like a GP allocation that doesn't- I get a tiny, in my view, tiny little- Now we expose the tension. But for the super majority of my investment in Benchmark, I'm paying limited partner rates and management fee. But I would say that's where- It's not tax efficient. But this is the point.

We have aunts and uncles. We don't have overlords that are there getting their- To the point of equality, right? Like an equal partnership. Like that is taking it to every extreme along the way. You never want the new partner to feel like they're working for Peter, in this case. Am I understanding this right, that the longer tenure you have as a benchmark GP, the worse your economic deal gets? It's the same. Wow, that's a horrible way to characterize it.

What? As your LP commitment goes up and you're paying fees and carry on- You know what? I think the counter-argument- The Bruce counter-argument, which I think is 100% right, is it isn't the worst economic- It's not a worst economic arrangement because the returns will be higher. So you'd be happy to pay the fees. This is the Mike Moritz thesis of every successive generation of technology should be bigger outcomes because you're addressing bigger markets. I'll make it more simple.

You cannot get allocation to the benchmark funds. And so getting any allocation is going to be better than the alternative. You're happy to pay the fees. I see. I see. You're happy to pay the fees and carry because it works and it's still the best- I see. Your marginal economic deal goes down, but your aggregate economic deal gets bad. Your cash on cash, even though your multiple goes down. Your cash on cash. Yeah, it's different. There's no more about this than we do.

Well, we did spend a lot of time. We all learned from it. Yes. Wow. Okay, one more thing I want to say because I think- I kind of think only we can say this. You can't really say this on the strategy before we move on. I think one of the most persuasive things that we heard in our research for part one about maintaining the model is we definitely talked to entrepreneurs in the current benchmark portfolio who believe that aggregate in the long run, they took less dilution by having benchmark invest and you guys not having a growth fund and having to put more money into them than they would have had you or whatever early stage firm they had taken money from been wanting to put more

money in in subsequent rounds. Because just to connect the dots, if that had been the case, then you would have a conflict as that investor when things are going well to put more money in at a better advantaged valuation for yourself. And you don't have that conflict. Versus- And what you actually have is quite the opposite. It's not even- Because this happens all the time where someone is an investor and they're like, ooh, this company is doing well.

I'm going to preempt their round and I'm going to see if I can get a slightly lower basis than if they went to market. And so that's firm A. Firm B is a not benchmark firm who also doesn't have a growth fund. They go out and they raise at market rates. But then there is a benchmark brand. So like option C is take benchmarks money. And I think, and you guys probably are sure of this, your companies tend to go raise better Series Bs at higher valuations with more certainty than your average Series A funded startup.

Is that the dot? Is that the picture that you're sort of- Yeah. I'm just speaking purely in the realm of when things are going right. A company is super hot. The fact that there's not a conflict in a future round allows the entrepreneur to optimize valuation for future rounds better than if you were to try and put more money in. Yeah, I totally believe that. So this is a question we're just selling for benchmarking. I didn't think they would say it, but I think it's important.

We literally heard that from multiple entrepreneurs. I believe that the founders own more of their companies at exit, at S1 time, whatever it is, in this case, for those reasons. And one other really important reason, which is a founder is going to raise a Series B or Series C or Series D or IPO one time in their career, maybe two times in their career. Yeah. If we're doing our jobs and the people around this table have all done this multiple times, and you will help them raise better rounds from better investors, have a better process, and get to a better outcome- Yeah.

You'd have to talk to the entrepreneurs that I've invested in, but I suspect if you were to talk to them, the value that I can provide to them since I stopped being a professional venture capitalist as part of a firm- Goes up. Exponentially higher than when I was within a firm. Totally. Because there's no conflict. Because there's no conflict. And you can do that. You can do that. You can help them through that part of it.

And that outcome results in de-risked, like the subsequent rounds are de-risked, sure. I think there are a bunch of brands, firms that can say that same thing. There's no conflict. I think there's very few firms that can say that part. And the multiplicative effect of those two plus the help, I think, should yield better outcomes. Better outcomes. Strategy is just all about making trade-offs and aligning all of your trade-offs so that they're a force multiplier rather than in conflict with each other.

And if I had to sort of summarize why benchmark works, it seems like all the trade-offs are actually just thought through very clearly and tried to align them all so they sort of amplify each other rather than conflicting with each other. There is one big trade-off with our model, though, that I think about all the time just because I'm a paranoid person, which is, at the end of the day, our job starts. The thing that we have to be paranoid about every day is, how do we make sure we have that first meeting with the founder that's going to build that next iconic company?

Right. And so much of what we do is about maximizing that probability that we do get to meet that founder and then end up partnering with them. And a lot of firms, I mean, all the other firms outside of us have built machines around that. You know, you have legions of people at these firms. I grew up doing this. I was, you know, an analyst at Bessemer. Right at Collins, right? Cold Collins startups. Yeah. And so you have all these firms who have built these big teams to do that.

They nurture relationships with seed funds, invest in the seed funds, relationships with angel investors, incubators. Like, they have this machinery that's smart because it's all about making sure that every deal, every round that happens, they're going to be in the mix. Yeah. We, there's five of us, you know? And there's always the risk that like a found that one of those founders who, you know, kind of mistake basically our, our lack of outreach for a lack of interest when it's really just a constraint.

And we do everything we can, of course, like, it's not like we're just resting on our laurels and waiting for calls. We're doing everything we can to make sure that we are in the mix, but at the same time, we are limited. Even if you work 24 seven, you still have a lot less hours. We're limited. And so that is, that's the, that is the big constraint that I know keeps, keeps, I think all of us up, you know, just making sure how do we, the founder that is going to raise that round, you know, many are intentional about like, how do I make sure that I'm going to find the right partner for me for the arc of this, you know, the journey that we're

all going to be on together. But we're still not there all the time. You know, you guys at this point have such a, for better or worse, mystique. Yeah. I think for a lot of, especially first time founders that are younger, that are earlier stage, they're probably like, oh, I'm not going to call, I've got these other firms calling me. That's great. I'm going to go with, but like, am I going to call Benchmark? Like, that seems like, wow, that's a lot of pressure.

And that's, that's, that's potentially lethal risk for us, right? Because if you think about us being the incumbent and come back to the fact that like, you know, a number of the people at this table have a lot of capacity in the sense that they could dive in, they can give their all and it's, they're very available. And so one of the things you think about is the shift in the last 15 years since I've been here.

You know, the, the investments that are occurring before we get engaged have gone up by about a hundred X, at least 30 X. And so. I mean, seed was not an asset class. Seed wasn't an asset. I thought, I didn't know I was a seed investor, but I guess I was a seed investor. About a third of what I've done is like formation of a company investments, right? And so when, it's so weird when people say to us, I didn't think you're at this early stage because then some people say.

You're like new relic was incubated in our office. Yeah. And it's like, you know, okay. I think our, our challenge, and I think you say it well, is that I would love to know which is why if someone sends us something and anybody who listens to your podcast, but I start with the premise emphatic. Yes, let's meet because I have always will create time as much as it may impact week. When I don't have enough time to take that next marginal meeting, I shouldn't be practicing.

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

And so the point of this is that our competitors, if we call them that, they're our peers most of the time, have tried to build vertical systems, which is to say integrate into the very inception of the company all the way through to the last strip of capital going in as they go, you know, off of the whatever. From seed to IPO and beyond. It sounds familiar to me. Seat to grave. Yeah. And one of the strategic vulnerabilities we have is that people tell stories that we're this way or they're that way.

No, we're just like everybody else, but we're highly available to meet and we're quite responsive. And the last two or three investments I've made are an example of the following, which is that there was an angel in the ecosystem who saw a deal going down and they said, you know, you probably should talk to benchmarks. And when they did, we committed in the last two instances in less than a day. Oh, if you knew it was only a day, we would have talked about it.

And you would have taken a week if you had one. But this is illustrative because the system we built is to do just that. And so our biggest risk is that people tell stories. And I think sometimes the stories are propagating their agendas. We're widely available and open. We're most times an emphatic yes for someone who introduced something to us. And what we'd love to know is the person who makes the introduction and we honor this says, wow, I just did a huge favor for the founder.

Now, we have to earn that every single time we meet the founder. Every meeting. And we don't always get it right. We've screwed up in the past. We've been less and fully present. Okay, we take that seriously. But that's the vulnerability of the model, which is that capital always carries its agenda. Oh, let me tell you about the way we're this, we're that. And it's like, and it's always threatening and attacking other layers. And like, we're hoping that we play a different game, which is like, you know, serving the founder's purpose and like show up and be decisive less than a day.

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But the question is, who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out ServiceNow.com slash acquired and tell them that Ben and David sent you. What do you do besides the five of your 24-7 being on? What things do you do to keep your radar operating to try and address this problem? Yeah, how do you solve that problem? Yeah. We all have different ways.

I mean, there is no single way for us, I would say. I mean, I always talk about having an air game and a ground game, you know? And for me, it helps me learn to write. And then, you know, you write about things like areas that you're interested in. And that tends to be it's kind of virtuous loop also of then the founders who are thinking about, you know, building a marketplace or the next, you know, social product, social network, will see something that I wrote or Bill wrote or whoever wrote and then kind of come into the fold that way.

And then there's, I mean, I think like you have the consumer, you know, the consumer lens that you have, you have a little bit of a wider funnel that you have to kind of keep. You never know where these things are going to come from. There's so many different domains where the next consumer company might come. I think like the B2B stuff, the developer-oriented companies are closer to the ground. Yeah, I think we all have our own strategies.

And I would say the one thing that's always interesting is to compare sort of our different strategies of sourcing and how investments, how we source investments. I was sharing this note internally, which was that I found that 100% of the investments that I've made as a benchmark partner were all sent to us by an entrepreneur and not necessarily an entrepreneur that we had backed. It was oftentimes an entrepreneur who had met with us once or twice or we engaged in their process and we didn't get to the finish line with them.

But they enjoyed the process so much. Going back to what Peter said is they went to the next entrepreneur and said, you should go to the process. Like just talk to them. That's the most meaningful introduction we can get. Yeah. That carries so much weight. You have them to one of these dinners. I think it's in part because there isn't really like a process. Like if there's diligence, people are like, oftentimes founders will ask, what's your process?

It's the funniest question. I don't know. Like we're just, we're going to explore this together and we'll do a chat together. And I think to what Sarah said. So what you're saying, it's like the Elon Musk's tweets. Yes. It's exactly like that. Let's just text back and forth a bit. What did you do today? But to frame it like more precisely. So for founders who are like, I don't know, what does that mean? You do as much diligence as you need to do to get conviction.

Yeah. And I would say, I think of it, the experience hopefully is great for the founders in part because we're not trying to sell internally. We're trying to truth seek. And the coming in, meeting with all of us or meeting in small groups of us is not us like trying to get some information, again, to like super forecast some odds. It's to, we're putting ourselves in the shoes because we make a commitment to start working on this and work together to say, okay, how will we think about navigating that?

Like where could sort of, you know, full starts or, you know, local maximas be and how could we realize the full purpose? And that comes with dynamic sharing of stories and history and learnings from the past. And I think you find, hopefully that sort of leads to a lot of the introductions and come out of that as in part because it was sort of this reverberation of discussion around the potential that they had and how to navigate that correctly.

And they got an interesting view on their own business together. And that's- I think the best founders ask questions on these things. And so like one of the things that I've noticed is like the great founders will often use their fundraising process to get connections and introductions. And, you know, sometimes it's customer introductions, sometimes it's not. Sometimes it's just like luminary, like people, connections to people who've been there before you. We just went through this process on a recent investment and we introduced the founder to other CEOs who are further along.

And she extracted knowledge basically from them and not in a reference context, but in a literally like, how do you build the company? How did you make this decision? How did you know when you had product market fit? How did you raise the next round? And pulled and build connections that way. And I think that's a sign of- That's what it's like whenever you meet with someone who's worked at Amazon for a long time. It's like scary.

You sit there and they're silent and they manage to just extract all this information from you. But, you know, you said like our process is as long as it is for us to get conviction. But actually, I think it's really important that it's a process of getting conviction on each other. And that should be part of it. One of the things that makes me sad about kind of some of the conversation in the industry is this like, just the idea that a board member is just somebody who shows up.

It's kind of like it feels like that's what everybody's been reduced to. And we hold a higher bar for ourselves. Like we, you know, try to have that level of commitment that ends up manifesting in all different ways for the company, whether it's helping close like an IC engineer or, you know, whatever, having those like late night conversations or whatever it is. Like that is in the best form can be a really meaningful relationship for the founder and for the company from the very beginning.

And a founder should realize that that is like, you know, of course, you get into the anxiety and the stress of am I going to get funded? What are the terms going to be? All those things. I want to get back to building my business. All that. But at the end of the day, it is this relationship that you're beginning. And it's really important for the founder to recognize also that they are getting conviction through the process on what it's going to be like to partner with that person.

There's this trope in the industry, right, which is you want to be the founder's first call. And it's like, I've never really liked it insofar as it's like very reactionary. It's like, oh, they'll call me. I'll pick up the phone and respond. It's a low bar. I think it's a low bar. And I think that hopefully founders would say of us, like, we're their best caller. Like, they've been proactive and had the space and thoughtfulness and context and trust to be able to do that.

I remember when Peter and I worked on Airtable not pretty recently, pretty close to the initial investment right after it happened. Peter, you could imagine it was a decently high price in some ways, like a high multiple. Well, you know, okay, let's press sales. And Peter came in and was proactively sort of shattering the frame and saying, let's give away more for free. Right? Like, why constrain this and squeeze juice from what we have? Let's unfurl this even further.

It's a database at the end of the day. Why would you constrain people putting stuff in a database? There's so much that happens on top of that. As you're evaluating mutual fit on an investment between the entrepreneur and benchmark, you know, in e-boys, there's some famous line about venture capital is more a balls business than a brains business. And, like, let's stop using that phrase immediately. But it's so e-boys. Sorry, you hate that phrase. It's the most e-boys thing ever.

It seems to me benchmark has shifted to become much more analytical over time. Do you think about that? Do you think about what the right balance of, you know, gut feel and courage versus – Having done analytical things, I would disagree with that completely. I would say that we're not particularly analytical. So it's still a courage more than a brains business. No, I think it's very, like, gut-driven. And it's, like, it's – I would characterize it as, like, it's a set of discussions that you have that resonate or don't resonate.

And it's, like, I really want to commit to this and this puzzle for the next 10 years. And let's go do it. And there's going to be a lot of, like, fulfillment here. And if everything works and we serve that great purpose that we're all aiming for, then the financial returns are going to be excellent. But there's no sort of, like, outcome scenario analysis here that says, like, here's the 10% upside, bull case, bear case. These are all things that, you know, those of us that came from other places had all done.

And one of the interesting things is, you know, watching the firm externally and seeing how this works inside of boardrooms. Like, Miles just talked about an example. You know, I was on a board with Peter for a long time before I joined here. And one of the things – It was elastic? Yeah, that's right. And one of the things that – because I was on a number of boards and I would see all sorts of board members.

And one of the things that stood out to me that I aspired to and I modeled a lot of my behavior after was every board meeting, the amount of preparation that Peter would do ahead of the meeting. I mean, he was by far the best prepared board member I had ever worked with. Ever. And the number of discussions he would have, the number of calls he would make, and just how present he was in the board meeting itself was just so far and above, like, any other board member that I had worked with.

I was like, I need to model my behavior to that because that is the model board member. And I don't think that work, that dedication, that commitment comes from any sort of analytical work you do on the macro. Because if you do, then you start getting tied to your own biases. And you never let the company, the founder, the team breathe because there may be a thesis, but you rapidly pivot to something else because it's working or you're getting different signal.

And so I think that there's so much of this that is just instinct, gut, feeling, emotion, commitment, et cetera, et cetera. But it's not analytical. I think most of the investments we make differs consumer, enterprise, marketplace. Like, all of them are different in different ways. There's just very little data to analyze, period. But when you're looking at something that's like a consumer social app that seems to be catching fire, like, there are things you can know, like viral coefficient or, like, you know, week-over-week growth.

And I think that a lot of those things will lead you the wrong way. You know, the truth is in this market, oftentimes you're making a commitment before there's enough enduring data to really know what it is. Which is different than 10 years ago. Which is very different. 10 years ago, Benchmark was making commitments when there was, like, Uber, like, Instagram. Like, it was early, but there was data proving it. I think of it more as, like, I always think, you know, in a way to make great investments, you have to be okay looking crazy, maybe even stupid in the short term on the outside.

Like, and then, but it comes from a place of deep conviction when you're in front of the entrepreneur and they have, they see something that other people don't see, you feel it too. And nobody else who hasn't had that conversation sees it. And so from the outside, and you see all the time, like, it could be people always critique other people's, you know, investments. Like, oh, I can't believe that person did this. I can't, you know.

I looked at that deal and that's, you know. Yeah, exactly. I remember when we invested in Chainalysis, it was when all these ICOs. Which was your first deal, right? Yes. It was when all the ICOs were going crazy. Everybody was thinking about tokens. And two people, I remember calling me after we announced it, it's like, you invested in, like, a SaaS company? Like, shouldn't you be putting the money in tokens or, like, Bitcoin? They're going to the moon.

What are you doing? And, you know, not wrong, but also not right. Like, it looked like, you know, a stupid investment in the beginning before it can have the room. And so I think part of the relationship that we then have with each other is that comfort that something, you know, seeing something that can be contrarian or misunderstood from the outside. And you have to nurture that. One benchmark, no pun intended, I guess, one measure of quality for the firm will be how good our failures are.

Webvan was a really good failure. Webvan, we talked about this a lot. It's a perfect venture. Webvan was awesome. You should make that bet a thousand times over. The shame that most venture capitalists felt towards maybe contempt towards the venture firm just before I was here. And it's laughable. It's stupid. And if we start to look like we're – which is why we get worried about the long-term degradation of – eventually we go away so it all doesn't matter.

But I would love for us to be – He definitely. I think we pulled it off in the last fund or two. Like we have a few – Is that a food fund seven? A real stinkers that I think honor the fact that we are still just as gullible, just as naive, infallible as the prior generations. Not yet more so, but we're working at it. I think some of those are really – like that's a good – Webvan is a good venture investment.

Great. All day long. There are a set of them I think of in my head in recent funds where like it's definitely a good venture investment. It was a good use of venture capital dollars. It was a worthwhile endeavor. An entrepreneur pursuing that should get funded. And they should get funded by the best. And they should have – we should do everything we can to give them the best odds of success. And have another partner be on the board.

And I think that if you just look at the last – yeah, I joined right before our ninth fund. And so I've been here through fund nine and we're now deploying fund ten. There's a lot in there that wasn't – I mean most of it is not analytical. And I would say like if you just look into it, there are going to be some bad investments that come out of it. But it doesn't mean that had we gone through the process and we look back at how we made those decisions.

It's exactly what Eric was talking about. It's – that was worth the shot. It was like – that was worth the effort. Well, and the pivots validate why you can't be super analytical. It's like did you think that the game was going to be – You guys are the best pivot. Like multi-billion – Discord, Nextdoor. Docker. Docker. It's a business model. It's like Uber. I mean like learning from Lyft's discovery of the UberX model. Like that's the business.

Okay. So – I think it's like you have some starting theories and you get in the mud. Yeah. And it was always funny reading my old investment memos. And I've only been doing this four or five years. But like the amount of wrong – like I don't think I could have predicted how wrong I was about what the businesses would ultimately go on to do when you're doing this like ridiculously early stage stuff. 100%. That's why we don't write memos.

Yeah. Yeah, right. There's no artifacts of how stupid you are. We don't do portfolio reviews. At least they try and do portfolio reviews and I don't show up. So I do remember one attempt at a portfolio review a while back and it was like the apex of failure at Benchmark. And I think I have one of those in my portfolio now. You guys can guess. And Kevin Harvey said, this one has the dual benefit of being a bad idea, poorly executed.

It turns out that a bad idea, well executed, is a problem because then you give it more money. Or a good idea, poorly executed, well that hurts because you think, oh. I mean we can think of companies like Friendster and think, oh. But the bad idea, poorly executed. It's so true. Those are the second best investments in venture. Like clearly that was wrong. Yeah. It's the middle ones that are. Totally. 100%. 100%. I love more McDonald's joke.

He was like trying to explain the fact when you get in front of you doing a stand up. Bless his already died of course. And nobody laughs. And he says, then I start laughing to myself. He's like, here I am. These people have paid money. It's a whole thing. And I just did this thing just to make them laugh and nobody laughed. And we have a few of those. If we're not doing that. That was the early days of a quail.

For sure. We're not doing that man. But you'll never be great. Can I ask, I had a really dumb question prepared that we sent over. And I want to try and ask a smarter question. The dumb question was, well, to maximize your chances of getting that great decade making company in the portfolio, double the partnership. Keep the same number of board seats. Raise twice as much money. Double the partnership. That way everyone's managing the same amount of capital that they are now on an average basis.

But I want to ask the opposite question. If the thing that makes this all work is the fact that all of you can be ridiculously focused and say no to most distractions on your time, could you raise less money and have a more concentrated portfolio? I've thought about this. And I think it's an interesting provocation. There's the extreme, of course, which is to raise no money and just go on the boards and say, we're tired of the hack.

It's a hack to take. I'm going to, I mean, tell this as a funny story because you say, okay, I'm like, oh, it's nice to meet you. It's imagined dating. And then you have a relationship. And it's like, by the way, a bunch of people that you don't, you and I, I don't really know them very well. You definitely don't know them. They're going to be moving in and they're going to take up about 20% of your cap table and their pension funds are very decent people.

And they're noble causes. We do work for your noble causes. Whoa, whoa, whoa. Why are they on my cap table? And it's like, because you got to work with me. Like, but I didn't choose them. Well, you kind of did because I bring them along where we're going. And they're unpacking their stuff right now in your basement and they're going to have more equity in this company than your VP of sales or your VP of engineering.

Well, that doesn't seem right. And so you play with this idea. And as an LPM benchmark, I don't like, you know, there's a limit to where you're going to take this idea. GP, I think. As a GP, yeah. So, but I think this interesting construct is that what's the residual value that is separable from the capital? Well, Bruce used to joke, we can pay a higher price because we add more value. So isn't there a benchmark?

I like you paid a lower price. But we can afford to pay a higher price and get better returns if we add more value. It's a joke. But the point is the same, which is that we've confused these two things. Capital, which seems to have been free. Now it's not free. Okay. So now they're maybe are fused again in capital and partnership. And I think that you get- You guys have done some deals, right, where you put no capital in.

There have been examples. And we don't, there's some awkwardness to talking about it publicly. One of the ones that's probably a good example is Tinder. Yeah. And, you know, Barry Diller said, what do you want? And it's like, well, we want equity in Tinder. He was like, shut up. What do you want? We want equity in Tinder. And like, I said, I don't need cash. It's like- I'm just imagining being the fly on the wall of benchmark negotiating with Barry Diller.

That must have just like, I would pay a lot of money to watch that. It's more bizarre than your imagination can allow. So go there and then go past that. And you'll get close. So this question of like, can we decouple is something that I kind of look at as like the residual value of the firm is, are we generating multiple equity points for our contribution? And I think that's what I would love to know is our best reference, which is a founder is able to say, I look at my cap table and I look at where the equity went.

And this is what burns me, which is there's a lot of people on that cap table that'll say, they bought a ticket. You know, they were in the, they got a ticket. Versus they made a huge impact on our total success. And that's equity. That was the best return on my allocation of that equity. And every time you're taking on dilution, you're asking that question of like, what's the return on that allocation? I think a lot of times the return is like, it's 100% towards the person who got on the cap table and not the other way around.

And that's our ethic. And maybe there'll be a model where we're not going to be CIA where we take 10% and all that. But you know, the capital light, you couldn't raise less. Why not? I bet if you raised 400 million in your next fund and you have five fewer companies, your scoreboard number, that multiple could go up. I'm the person that the last discussion of like, we were going to do it the same size fund.

I'm like, why don't we cut it in half? And people thought, well, then people, others will say we're becoming irrelevant. I'm like, oh, no, but it's so different than they say now. So anyway, we might one day. Yeah. Who knows? It's a 425. Go down to 200. Yeah. Go to 40. Yeah. Go to 40. Was it 40 per partner per year? Oh, the benchmark website. That was such a good line. Other firms are overfunded with over 20 million per partner of capital.

The Wayback Machine is such a gift to humanity. Yeah. Yeah. Oh. Okay. So last big topic. I think a lot of folks, we asked a lot of folks in the ecosystem, what do they want us to ask you? We're the vehicle for that. Universally, everybody responded. They want to know what is the process? What's involved? How do you think about who's taking the next seats at this table? So how does that work here? I think it's like 250 hours of board meetings together.

Right. It's a 10-year-long process. You have to serve on the board with one of us. We have to watch you grow. And then we say, you know, that person would be pretty good here. You think Mitch was an exception, Bill? And Mitch had, you know, 200 hours of board meetings together, maybe? You know? Eric, you didn't have any. You're the only one who didn't have any. I was just joking. No, no, no. I know. But literally, that seems to be the model of like serve on a board with a benchmark partner.

And that's how you get to know people and build really deep relationships is you need to go through shit together. Like, I mean, the shit can be the company is going really well and we have to react to a super dynamic environment. But like getting coffee every once in a while is not a great way to get to know should I take someone on as my spouse effectively. I think that's right. And I actually think it's actually, I was just thinking about it because it's been different for everybody, I think.

You know, I think the story with Peter is like he was repeatedly showing up competing for investments that benchmark before he was here was working on. You were walking out the door as they were walking. Yeah. And so like that's a, that's, that's telling, you know, the story with Miles is Miles was there before. Like he, he invested in benching before us and super great before us and was, was early on Airtable at the same time.

And so like, that's a really important like signal. Like, okay. You know, Chathan had worked with Peter on the board. Sarah. I just glowed by myself. You glowed. Yeah. Yeah. Actually, Sarah, how, Sarah and I, I think both had no like professional overlap. Yeah. Yeah. Um, in that context. Um, but who made the first phone call to issue? I've lost track. Peter, what's the guy? I'm like, I don't think he's lost track. I don't think Peter loses track.

No, that's not right. I think the way in is, um, something that's, uh, common what we've heard for the people we've recruited. And, and maybe Eric's an example of this. Um, but it's that they don't want to join a venture firm that like the only firm they could imagine being at would be benchmark. It's the last job you're going to take. So there's this underlying love of the craft and it sounds, again, a little, um, romantic, but it's intended that way.

I, I left Stanford business school embarrassed that I went there maybe at some level. Um, and I, and I dreamed about getting a job with benchmark and Bruce canceled his meeting with me. And then I waited. And then, you know, another time he was late and he'd send me a handwritten note saying, Oh, I have bigger things to deal with. Basically is what the note said. And, uh, and then, and then like, you know, I think he gave me like a t-shirt.

And I, not, and then seven years pass. And I think I sent like typically I sent him a note saying, Hey, I'm working at Excel just to see if I could catch his interest. And he said, good luck. Did that motivate you? Like, were you thinking in the back of your mind? I, you know, Peter Fenton. I mean, I feel like I do. Was that put out up on your wall? He, we, oh man. And then Kevin and I went on a board together, um, at a company that was not particularly successful.

And I was wondering why is Kevin doing this investment? And, you know, I said, what does that say about benchmark? And he later confessed that he felt the same way. But, uh, you know, and then, and then you get, you get to work with the firm and there's something that I would say underneath it, which is that, um, the, the totality of like, I would do the job, even if I didn't get paid that sense of all in, this is a craft.

And I so am oriented towards that. When I first met Matt in 2005, when he, around the time he presented Facebook to us at, um, at Excel, you knew immediately that he was going to be in the venture business. There wasn't like, well, one day, maybe no, Matt was going to be a great venture capitalist because the single most important thing we have to do in our job is to partner with, earn the trust and respect, earn the ability to be a partner and a guide in his case to both Reed Hoffman and to Mark Zuckerberg.

So you think, okay, he's overqualified at some level because he's, these are giants of our industry. And, um, if you're doing that, if you're really close to one of the great, and you were doing with Ben at Pinterest and I of course knew about Sarah because, you know, we both try to invest in GitHub and, um, that's a funny story for another, maybe before it drinks later. Uh, yeah. So I think if I remember right, another firm did that at a very high valuation.

And at the moment that seemed that, that seemed crazy and was actually a good idea. It was like a hundred on... 750, I think was the post. A hundred million on 750 post. But like at the time for a series, like that was the first institutional capital in. There might've been some secondary selling. One of the things I found is when there's secondary selling, it does tend to clarify people's interest in price. What they optimize for.

It's one thing if you're just selling this, you know, equity on the cab table, but when you're selling your own shares, you start to get really focused on the, but you know, we're not running an auction, but it is the highest price. And you seem to, all of a sudden, you know, that seems to be the right answer. Um, anyway, so, so the point is that, you know, we orient towards extraordinary. So to get close to benchmark, get close to extraordinary.

Who are the best entrepreneurs, you know, build that rapport and relationships. And the single best thing that we can see is that you've earned that trust and respect and, and to, to be a confidant, to be a partner to the great ones, you know, or serve on a board with us with one of those entrepreneurs. Um, I guess there's some self-serving interest. We could say, send us your best investments. That will help. But our responsibility is to be, you know, the, um, the best introduction that you make if you're looking at a great company.

And if we, if we don't, if we fall short of that, we deserve to be told and punched in the stomach. Can I, maybe I can ask a related question, which gets to Eric's, this is what we love to do and wake up and focus on every single day. And that's, if each of you have a sort of bias on things you're obsessed with, like Chathan, you wake up in the morning and you look at net retention rates.

Like it's just your, I don't know what I'm trying to call it with some boring enterprise software thing. But like, like Chathan just like eat, sleeps and breathe sales kickoffs. This is getting better for me. You're just digging. Chathan is so far underground right now. Well, he showed up, which I'm really grateful for. He did. He's here. He came all the way here for this. Are you looking for, there are, there are probably a dozen people on a short list that you're like, gosh, we would kill the work with that person. And ultimately a factor in that probably needs to be, there's a thing that they're obsessed with that we need on our team at this moment in the technology

industry. Is that part of the calculus? Like, do you look for where do we need additional strength? Loosely. I mean, I, I think about it and it happened. It didn't, it didn't, it wasn't intentional. At least for the part, when I joined Benchmark in 2014, at the end of the Fab Four era or at the whatever, as, as you called it, you know, the partnership, the four were predominantly consumer investors. Like Peter was working on Twitter at the time, obviously, Bill with Uber, you know, Mitch with Snapchat, um, and, and discord and Matt having just come off Instagram, um, among others. And, and like, which that's just, all that just that you just listed is ridiculous. It's ridiculous. It's ridiculous. And, and so you join that group and in a way it was

just like the perfect time as someone who had some enterprise exposure and, and then the, you know, lucky enough, the first investment that walked in the door was confluent. And, um, for me, and, and so, but now if you look at the group, it's almost like, it's almost turned right. And, in the sense that there's a lot, lot more enterprise heaviness that wasn't intentional. I don't think, um, I don't like, it didn't come up, but it happened over time naturally. And I think this is just a big element of Benchmark overall, which is the entrepreneurs lead the way and the markets lead the way.

And, and, and we're, we're following that, um, in, in some sense and hopefully seeing it in conjunction with the market evolving. Um, but it's less intentional. So when, when Chathan joins and, and does modern treasury, um, as an example, um, like, or Sarah joins and does chain analysis, like you're, that wasn't intentional. Like, oh, there's like this big crypto thing. And Sarah's an expert in crypto. I don't think she knew anything about crypto at the time, or maybe she knew a little bit, I don't know, but that wasn't a, that wasn't part of it. Um, and so I think the, the, the firm evolves. And if you go back even further, obviously the firm had semiconductor expertise. Like we have no semiconductor expertise anymore.

I guess you do. Well, I have a semiconductor investment. Different thing than having expertise in it. And so I think that, I think it's just the, the market takes us and entrepreneurs take us. There's a, we make a mistake repeatedly, probably once a week in the portfolio of confusing phenotype and genotype. Meaning we hire people because of the phenotype that has been, you know, expressed because they have experience in areas X, Y, or Z. And the underlying genotype doesn't actually get our, um, attention. So you would tend to lower your, your selectivity when someone has some background of relevance. The issue that you're seeing at benchmark today is sort of a question of wake.

Where's the equity value been created? Where, where the 10 to a hundred billion dollar outcomes of the last seven to 10 years? Well, consumer has been a little more ephemeral in that regard, or a little harder to, to capture because of the incumbency effects. So what's going on in the phenotype of the firms that may look more tilted enterprise, but I can tell you the genotype is we are total generalists. So I can say very explicitly, I think that somewhere between AI, crypto, and not ARVR, sorry for the future ARVR, but I think those areas don't have the incumbency of some of the traditional, you know, network effect, giant trillion dollar market cap companies. And so our genotype is such that we will then go populate those arenas and you'll see us become what looks

like experts in those areas, but that's not who we are. So is our next partner likely to have some background and experience in an area with high disruption? Absolutely. Yeah. And it'd be great. We got Kohler to join the firm at the, still the beginning quarter of the social and the social over, who knows? I mean, you could say I, the issue with like a social over is like, we have a big problem with incumbency and distribution being constrained. Uh, on top of that. Yeah. I mean, it's, um, you know, capitals was at least for a long time limitless. So you're looking at things that are little increments at the end. It's sort of like, you know, uh, Feynman complained about this in physics, which is like,

if you came 30 years after the theory of relativity, you were sort of cleaning up the, the mess. Yeah. Whereas the people are there, the first three years look like geniuses. Even they were third rate physicists. They're working on first rate problems where we can be first rate, you know, whatever we're working on third rate problems if we're not, um, in areas of high disruption. So what are the areas of high disruption right now is something that we obsess over and, and, you know, but you don't think about it as like, we need, uh, expertise in that area.

I think the genotype is we want somebody that is a roving, curious. There's no great venture capitalist in my view that isn't aspiring to be wide dynamic range. This is why Eric is going to become one of the great consumer internet investors. So if the next decade, he doesn't know this, but you know, John Doerr, Mike Meritz, we, so my, my former partner, Jim Getz, those are the people who shown that you can do both because the underlying connection with the entrepreneurs, they're not so different. They're, they're, they're, they're similar Gestalt and Chathan's next to them. He'll probably beat Eric to the, uh, uh, internal dynamic.

Chathan's still going to be the sales kicker. Sarah already crossed the line with SaaS. Yeah. So like the game's all the guys. I think even if you look at the greatest companies, right? Amazon, Microsoft, Shopify, Adobe, Square, like they're all crossover, right? Like, and even if we took something of high disruption like AI, right? What's happening in generative media and large language, it's, it's unbelievable. Right. Our LLM is just going to be a consumer thing. Absolutely not.

Exactly. Right. Like the first version of it might be something like Jasper, right? Which is actually a B2B product, but there's really interesting opportunity of what, what is a, what's the version of a Twitch relationship that, that starts to form and sort of a parasocial relationship, but it's with a bot potentially, right? An artificial character that has a relationship with you. And is that a consumer thing or is that an AI thing? We just did an LP episode with Mutiny and they're using GPT-3 to like generate landing page copy.

Yeah. Yeah. Yeah. I think the technical, like we're not, it's not our, the founders and entrepreneurs know the product. They know the technology. Like that's what they bring. That is the thing they bring. That's their invention. And they've discovered the insight. And they've discovered the insight. Here we go. But there's a whole bunch of things that come to turn that technology into a product and that product into a company that's really valuable. And like, that's the part that we can partner on.

How many success stories are there in venture? And even through benchmarks history of that market was dead. That market is done. Or that market doesn't exist. That market isn't real. That's the best time to invest. Yeah. And it's like the founder figuring something out and having that insight. That's the, that's the part where you're like, you're sitting in the meeting, you're sitting in the meeting and you're like three minutes in and the founder says something that you've never heard anywhere else. Nobody's else has said, nobody's put a blog post down on it. It's an insight.

And that insight is, that's the magic. I think like if you- Yes, obviously. Yes, that's obviously how it should work. And that's why I think I would say, like, to say there's a specific sort of set of experience one needed, like would imply we'd be maybe thesis driven. That's like, I don't think anyone here is terribly thesis driven, but like we're very change aware. And there's the question of that pulling the curiosity and sort of roving into it, not like with physicists with a set of rules we've got to check or a net dollar attention that's got to be a set.

But like- I was like, you needed his net dollar attention. Have you had a million dollar rut? Yeah. How do you guys deal with so- In my, you know, prior life I was trying to do that for, you know, a living poorly. One of the hardest parts I found about early stage events, I totally agree with everything you're saying. You guys, and you vote with your feet, you only have one of those moments in the first three minutes of a pitch once, maybe twice a year, maybe zero times a year.

The rest of the days can get kind of depressing. No. You can learn something in every moment. You can learn something in every moment. That's the amazing thing about the job is every day people come in and talk to you about something they're experts in. Or you can help someone who is great. Maybe you don't see it entirely, but like someone who's fantastic and help them. And they'll teach you something and you'll learn something. And you'll just ask questions and, you know, they'll tell you and you like learn.

There's a firm that shall remain nameless. Came in and they said, why don't you have a clock on your wall? I'm like, I don't know. Because then maybe we're in a meeting and we don't want to be in and we look at it and it's not so good. And this person said, no, no, no, no, no. We move all our clocks six minutes forward. So if it's a bad meeting, we can get out. So that's a good way to deal with it. We didn't do that. Like people suggested this and it happens. I would just, anytime you go to a venture firm, check the clock on the wall and look at your, and then you know, are they playing that game?

This clock doesn't work, by the way. I was looking at it earlier and David and I made a comment to each other. Like that is a really subtle way to put a clock in the room, but if it doesn't work, then it doesn't work. Oh, look, it's two 30. It's time for dinner. It's right twice a day. We got to ask before we, um, we can't, another thing we can't let go. Um, what's the purpose of the principal program?

To honor the statement that forced consistency is the hobgoblin of little minds. Is it Thoreau who said that? Okay. You got to unpack that. God, Peter's just on another level. I mean, I feel like I'm, for context for everybody who doesn't, so you all are deeply committed to the equal partnership model. Clearly we don't have principles, so we have principles. I think it's a, it's a way to surround ourselves with a, with a person who we want amongst us all. It pushes us, challenges us as well.

Yeah. Maybe I'll loosen up the response. We don't know what we're doing. I mean, like, and, and Blake is amazing. And you meet Blake, you want to work with Blake. Do you find a way? Find a way. And, and I think that, is it a program? No. No. But, you know, Miles seems to like, uh, Miles has got a British accent. It's a little hierarchical. So, he should hire an associate. I don't want to work with that associate. Bless his heart.

But, uh, remember you call him a junior partner, baby partner? You can hire a baby partner. Baby GP, that's right. But, but he won't be coming to, um, I'll spare you. Blake is amazing. And so, you meet Blake and you say, you find a way. And, um, it's been a pretty good launch pad, it turns out, for people who come in for our non-principle principal program. The principal program that you don't talk about that you're talking about.

Yes, because you don't want to have forced consistency. Is it false consistency or forced consistency? It was Thoreau who said that, or is it Emerson? It's exactly right though, which is that when you have a little inner fundamentalist, you need to have a conversation with that person and tell them to calm down. Because, you know, now that doesn't mean we're going to have eight partners and a growth fund. And, uh, then there's some hard lines where you just say, but this is, you know, getting closer to people who are, um, embody our values, but, uh, at a different stage in their career, that's okay with us.

You got to break your rules when you, you find an incendiating circumstance. You do. I've definitely found too, like, I don't, maybe this is like an institutional version of this. Like the times in my life when I've held too tightly to something is when like, that's like, you're effed. Like, and so like, is this a way to like hold tightly to the thing that's like a core value of the firm, but not too tightly? Like, I think we should call it a fellow, but it just wouldn't mean anything to anybody. But we constantly, constantly oriented to special people. Yeah. And sometimes there's a special person like Blake. I'd wanted to work with Blake for quite some time.

I know Sarah had too. And we said, Blake, you want to come work together? Yeah. Like, let's do it. I would say that we don't have associates, but one of us may hire an associate. We don't have principals. We have a principal. We have EIRs. We have venture partners. It's just, you're trying to figure stuff out. That's true. We have venture partners. You don't do growth stage investing, but you guys did Dropbox. Like, we just, it's just, you come to the table and you say, I want to, I want to do this. I want to go explore this area. I want to go work with this person. And you just kind of figure it out.

And like, it's not always straightforward, right? Because there's, people have their own constraints. And so you're trying to fit their own model of how they can engage with you. And so you just figure it out. And so. None of that should violate the authenticity of what we do and how we interact with people. And I think that's the biggest thing that we have to be protective of. And that is what we're protective of. And the relationship we all have and how we work together as a team.

And I think if we preserve that than anything else, the fees are to be used for exactly those kinds of experiments. And, and, and those types of trials and, and, and you can do anything you want with that. I think this is the longest discussion we've had on the idea of a principal program. Well, hey, we're here to provide value to you guys. This is the most, this is the most, how can we help? How can we help?

Yeah. And then, you know, I also think about how we think about EIRs. So, you know, Eric had worked with Josh at Benchling and Josh was going to leave Benchling and just explore ideas. And I was like, okay, well, why doesn't he just come hang out with us and explore some ideas? And we called it an EIR. I knew Ravi from Heap and he had left Heap and he wanted to explore ideas. So I brought him in. Those two knew each other from prior lives. And then they were like, oh, we're both at Benchmark exploring ideas. Why don't we let like share ideas that we're exploring? And then they decided to start a company together.

It was like, if you were to... Which is an airplane. Which is an airplane, which Eric is on the board of. And, you know, that wasn't sort of like this, we have a hyper like thesis. You have a funnel you're managing for the EIR program. Yeah, we have this thesis and we need to go attack this thesis. So let's go recruit some EIRs and let's go set them up and let's give them my... None of that. There's so much beauty and amazing things that can come out of just like organic development and opening yourself up to organically finding cool things is I think ultimately the goal.

Yep. All right. What did we get wrong on the episode? Or what could we have done a better job? I'll start. I think one of the things that you all talked about on the episode was swim lanes and areas of focus. And I think what we had just alluded to... I gotta say, it felt extremely weird to be naming each of you in that episode. Like when we did our Sequoia and Andreessen episodes, like these things were about firm strategy and like institution building and programmatic, thoughtful. And then we got to the end of the episode and I was talking about each of you as individuals and articulating things that like you care about and invest in.

And on the one hand, I'm like, I feel gross. Like this feels really reductive and strange and pointed. And on the other hand, it's kind of the point of benchmark that like it actually is just about you as humans and not about this like institution and strategy. And so I think like if you look at even when it was Bill, Peter, Mitch, Matt, you know, it's, it's, if you just look at the kind of work that they did, they were all generalists then. I mean, Peter was doing consumer and deep developer tech and, you know, Matt was working with consumer companies and he was on the board of Duo, which was a security company.

And Asana, right? And so... An AI company. All right. So no swindlings. Right. And I think if you, as you just look at... You're all in the pool with no, you know, no lanes. Yeah. And if you just look at the kind of companies and ideas that we're bringing to the table on Mondays, that's the thing that you see. And there's a lot of encouragement around the table, which is like, if you're interested in something, something's like really hitting you at the moment, just go for it. Go meet all the relevant people, bring them in. Let's all learn together. Let's figure this out. And it's, it's never the conversation that I've seen at other places, which is like, whoa, whoa, whoa, whoa, whoa. Stay in your sector.

Like... Well, I went on a drone kick and definitely Peter was like, stop. Stop droning up. The only way to kill the conversation about drones is if we brought in D-drone. And Eric said... Oh, was that the like, the shooting down the drones? Yeah. And Eric's like, okay, I got the point. And we didn't do that. It's probably done pretty well. Yeah, probably wouldn't have done well. All right. Other stuff we missed? You know, when you, when you look at anything from the outside and you were there, you can't help but say, ah, particularly like books are written because journalists tend to write the story from the perspective of a loner who's projecting this sort of Shakespearean plot.

If I was there, what was the intention? And I've read these books about us at Uber or Twitter or WeWork. I'm like, it was so much more interesting. You guys did a remarkably good job of capturing the essential primitives of the firm. I don't know if it's interesting to other people, but it is right that this, you know, deep commitment to quality that Bob feels permeates to this day through everything we do. And from the way we treat our people that aren't in the investment team and to the notion that, you know, we book most of our own meetings.

Like, you know, we do this to ourselves because we're not below anything or above anything. And I think that that's the through line that you captured so well. And I think it was, as you say, asymmetric. And was it in reaction to the era's leading venture capitalists? I don't know. But I can tell you that there was a humanity to it that always felt, to me at least, something you really, you want to honor. Like, if benchmarks anything, it's that we're available, we're flat, there's no arrogance.

And it's, you guys got to the central core of that. And that comes to me really from Bob's history. And, you know, they say this about our companies, right? The founding two or three employees set the culture. And it doesn't change unless there's some catastrophic event where it has to get reborn. But good luck with Elon at Twitter. You know, that culture was set in motion. And its root system goes so deep. We'll see what happens.

I'm very interested. It's a good lesson. And if it does transform, then that's an example of one form of transformation. If it doesn't, then you'd say, okay, believe me, people have been trying. It's a fuck of the benchmark culture. And we haven't done it yet, but we're trying. I thought you meant Twitter. I was like, yeah, we had Twitter. No, no Twitter. We have a, we have a, actually, there's been a lot of discussion in the acquired Slack about like, why have you guys not covered Elon on Twitter?

And just like, no, that's not what we do here. Through TMZ. Yeah. We're not the TMZ of Silicon Valley. I'll have eight years of experience there. Oh, boy. All right. Well, we should end it on that now. Yeah. Thank you all. Thank you. Thank you. Thank you. A lot of fun. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig. Yes. Long time acquired partner. There is a reason why the best product teams at companies like OpenAI and Notion, Atlassian, Figma, Rippling, Brex, and more rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

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They're measuring what actually moved engagement, retention, and ultimately revenue. And as more teams build with AI, that learning loop becomes even more important. Building with LLMs introduces non-determinism into your product experience. The same input doesn't always produce the same output, and behavior can shift in subtle ways in real-world use. So doing offline evals will give you part of the picture, but you can really only understand the impact once your product is live with real users, and then you can measure how their behavior actually changes.

It's very different than the way that you would ship features in a pre-AI world where you knew exactly what the software was going to do in production. Yeah, exactly. So this is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. The result is a tighter feedback loop and learning that compounds over time so you don't just ship more, you ship better.

So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. Ah, so fun, David. Man, what a special experience. Thank you to the Benchmark Partnership, too, for inviting us, doing this. Having a pretty candid conversation with us. That's not what I was expecting going in. No, no. They're great. They're very gracious hosts. Yes. Well, we'd love your feedback, too.

Please chime in at acquired.fm slash slack. Come hang out with us. Get your sweet t-shirts from the merch store at acquired.fm slash store. We also have a dad hat that is limited edition, in part because that is the only way we could embroider it. And so I wanted them to be great hats. And so you can go in and get that just for the next couple weeks. So make sure you get your order in if you want one.

See, this is how we know that you are not a dad because you're like actually like caring about the details of your hats. Once you become a dad. No, you show up like wearing appropriate hats whenever we go visit various people around San Francisco. I often see you in their merch. Like it's a premeditated decision. It is. It is. But that's without the kit. That's true. That's true. All right. Well, LP show, if you want to listen, the episode with Jale was awesome on the B2B profitable growth playbook.

Her story is super impressive. So check that out, becoming an LP at acquired.fm slash LP or searching LP show in the podcast player of your choice. With that, listeners, thank you. Our thanks to the very good people at Benchmark. And we'll see you next time. We'll see you next time. Bye.