I know that I'm a moment away from many of these people firing me and I want them to. But the minute I become predictable, it's over. And many things, predictable is not one of them.
Benchmark team, it is an honor to be here with you all. I'm not going to make you all reply in unison to me, but I'm really excited to be doing this with you. I want to start with an observation, which is that of the sort of top VC firms, whatever you'll call that, but like, you know, I'm thinking of Founders Fund, Khosla, Thrive, Andreessen, most have scaled in a big way for whatever set of reasons. That has been sort of like the dominant strategy. Benchmark has been a stalwart in some ways to hold out with small firm, small team, smallish capital base. And I'm just curious, like, why? And I'm sure you all have sort of like different opinions on this. So just to pick somebody random, like Chathan, I'm curious, like, what is your take on this whole topic?
You know, we only do one thing, which is partner with founders early. And we really like to partner with them really early. Like, I think the favorite amongst all of us is partnering with a founder pre-launch or at idea phase or when it's like two or three people in a room, you know, and just growing with that firm. I think just like in terms of measuring happiness for each of us, like, that's where we derive the most amount of like professional satisfaction. And if you just think about what that does in terms of alignment of Benchmark with the founders and that company, it's pretty amazing if you're there from like step zero. I would argue that you can't do that as you scale. Like the interests, and we see it all in our board meetings, like every round becomes its own thing and its own game and its own whatever. And one of the Benchmark's things that we've talked about this, that you're like, we don't do the future round, so there's no conflict in both of those, and we're fully aligned on dilution. We're fully aligned on trying to make this as the biggest outcome we can do. And I think capital constrains you in that way. Time constrains you in that way. And each time you go partner with a founder, you're doing it with extremely high conviction and you're going all in. That to me personally is an extraordinary experience. And you know, different models, different ways of practicing the business, but for me, this is the way I love practicing the business. It's becoming rare by the day and then therefore it becomes more differentiated.
Peter, you've been here the longest and so you've obviously seen Benchmark in its context through a bunch of sort of changes around you. Have you felt tempted at any points? Have you felt strengthened in sort of your clarity on what it should be like?
You know, you have your behavioral experience on a Monday, which is where we aggregate. Today is a Monday. We're here with you. Feels great. And there are eras in the business that I've participated in where the Mondays sort of sucked. And some of those were just cyclical. You know, you have a downturn in the economy, your partners are bringing in their struggles, their pains, channeling the entrepreneurial landscape at that moment in time. What I was struck by is the period of time that I've spent. I've had time at Excel and I've had time at Benchmark when that felt more self-inflicted, not market driven. And so the lived experience, the behavioral experience is the joy of the business is centered on serving entrepreneurs. And as Chathan related, you know, getting close to an entrepreneur, being a partner, deep partner to them, social emotional partner, strategic partner, all of that on a Monday, if we're talking about that, it feels really good. It feels aligned and it feels purposeful. And when the Mondays were talking about our friction with their European effort, and I'm sure the European partners at the time, now called Balderton, were talking about problems with us, it felt draining. I joined Benchmark and they had just raised over a billion dollar fund in Benchmark 4, and the overhang of the misfit between how do we practice our business of partnering early, going shoulder-to-shoulder with entrepreneur, and deploying that volume of capital. And so there are a number of things that happen when strategies are misaligned with purpose and values. And the main thing that happens is just less fun. And so I looked at the simple question of like, how many hours a day our Monday meetings go, you know, somewhere between 6 to 8 hours, and how much of it is just joyful and aligned, and how much of it is dealing with the stuff that's not sort of what brings us purpose and meaning and value in the business. And what I feel like we got right is we select people who care mostly about the proximity to the entrepreneur, being able to deliver a meaningfully differentiated experience for them. So they come away and they give a reference to us that says, Benchmark shows up on all the recruiting calls. Benchmark is at the epicenter of our tough decisions. They're always available. They being us individually and them as a group. And scaling, just asking the question of like, more capital equals a whole bunch of activities that I think degrade. Interestingly enough, they eat at the essence of why we practice the business. So the outcome of maximum cash on cash multiple, I think is degraded with scaling.
Yeah, definitely that the quality of the relationship with the entrepreneur is degraded by scaling. You know, I think ultimately the joy, because there's some other thing that's growing, which is an incentive system that fuels more is more. You know, isn't wrong for other people to do it. But I just know what their Mondays feel like. And like, we leave Monday and carry that energy and that effervescence and the sense of purpose into every day that follows from that. And when we didn't do that and we had more activities, more extracurricular activities, man, it felt the opposite. It's like you wanted a Monday to end and then you were a little less of yourself the rest of the week.
I think this strategy is not financially maximal. It's not financially maximal for, no one's crying for us. We're doing fine. But like, it's a perfectly fine financial outcome for us or financial strategy for us. But it's not financially maximizing. It's happiness maximizing. And it's happiness maximizing for the kind of person who wants to do the work.
Can I put a third variable there? If there's happiness, financial, yeah. If you had to put a third variable of like impact, do you think that you can have the most impact this way or do you think you could increase your impact if you worked with more companies even if you suffered a little bit for it?
I don't know that the way we do it, it just doesn't scale unfortunately, like it doesn't scale.
Is that because of the board seats?
Yeah, it's the engagement. I just say it's like the engagement with the entrepreneur that I think is the time limiter and the constraint.
Yeah. And that's it. That's the time limit.
Ev, you obviously came from like bigger firms, Founders Fund and KP. I guess you're rolling, what are you, two months in now?
Three months. So like your experience on this has to be at least notable because it must operate so differently.
I mean, I think today especially one of the beautiful parts about the asset class is that the menu is so large in terms of how do you want to spend your day-to-day and what do you want your life to look like as an aggregation of that day-to-day. So even among firms that are larger, like KP is very different from Founders Fund, which is very, very different from Sequoia, which is very different from Andreessen, which is different from Lightspeed and GC, like everything, some firms are more similar than others, but every firm is actually quite distinct. But I do think the thing that really stands out about Benchmark, and I think to Chathan's point around being even more relatively differentiated than it was in the past, is as the prevailing trend has been towards scaling and getting to mega scale, I just, I talked to some of my friends and peers at some of these larger firms and the way that they talk about their day-to-day and their job and, you know, how they're getting fulfillment out of their job. You know, it'll be, let's say it's over the summer and they're like, 'Yeah, I've already done four deals this year, so I'm having a pretty good year.' And I'm like, that is like the north star and KPI of like what's giving you fulfillment. I'm like, do you like the founders? Do you like the companies? Or is it just the fact that you've shoved capital into four investments in four companies that's giving you this?
This was one actually that gets at one of the things that was a noteworthy difference for me going from running a company to now doing investing. Is as a company, like money's involved, but like the primary work is about a product and customers. And then in venture, there is at least one way to practice it where it's primarily about dollars, which I just don't think that's like a path to happiness. I mean, and it can be for some people, but I think like this is a group that's very much self-selected into, you know, maybe the Charlie Munger approach where it's like over your lifetime, you might only have 10 meaningful partnerships. So, every single one of those partnerships should be unbelievably meaningful for you, for the founder that you're working with. And I think that fundamentally comes into conflict with the idea of, you know, each of us going out and doing eight investments a year or scaling up massively or something like that.
What are like the principles or like foundational tenets of Benchmark? If you had to describe like the three to five things that like define what Benchmark's about, like how would you name those?
We want to be the first call for an entrepreneur and we want to be their most important and most impactful partner. And I think it's like pretty easy to quantify. You can ask any of the companies we all work with, who do you call first when you hit a patch of bad news? Like who do you share that with? We want to be that person. That can only come from being there for the founder, having full trust between you and the entrepreneur, and the entrepreneur knowing that when they speak to one of us, they're getting an authentic experience. Like it's not, I noticed, you know, with these like large groups that we've all been part of in boards and stuff, like whenever bad news gets presented in a board meeting, you can see panic in some people in the room because they have to go tell their boss with the board meeting notes afterwards. Like things are off track. And also, by the way, it's a reflection of something in the relationship if they're learning bad news live in a board meeting. Yeah, 100% shouldn't happen. And you know, like we're working with such uninformed companies and people that like there's going to be bad news. And if you like aren't expecting that, then you're doing this job all wrong. And so like things go well, things go badly, things go sideways, things go up, things go down, stuff happens. And as long as the entrepreneur knows that they can call you and you're going to be there and there's trust there and you're that first call, I mean, that's what we aspire to in every single one of our relationships. So there's that part of it which we've talked about a bunch. And then the other part of it is the equal partnership. And I think that's a very special, like it's a very special thing. You know, Ev's been here for a quarter, Peter's been here for 20 years. I think I'm on 11. You're on what, eight?
That equal partnership is really special, I think, and just something that also doesn't scale frankly, but has a very kind of special dynamic. And I remember when I joined and you're just like this new person, it's my first investing job. You know, Peter and Bill and Mitch and Matt who were the four that I joined. They're like asking me about doing things and you're like, 'Well, I have no idea. Like I have no idea. I have no idea how to do this job or anything else.' But I think it just relates to this, you know, deep belief in the equal partnership. And I think it's very empowering for a new person. I think, or I found it very empowering.
Told me he was disempowered. He was disempowered right out again.
I think it's just like it's very empowering for the new person and it also creates, I think for the right kind of person, it creates a lot of internal drive and expectation because you're like, oh, I better not mess this up. And so I think that's a magical piece of why it's so hard for most people to do this. Because like I think a lot of other firms, you know, want it but effectively, you know, rounds to zero the number that can do it. I have this belief that the biggest leap wasn't at the founding of Benchmark. The founding of Benchmark with like the founders came together. It's like how do we cut things up? Okay, we cut them up. Okay, it's equal. What else do we do? But then they had an amazing first fund. Benchmark 1 was like a legendary, you know, whatever, 70x return or something like that. Then so they built all this brand value, like they, and then they gave it away and I think that was the leap.
Nobody can do that. And that I think is the hard part, right? It's like, well, I built the firm, I built the brand, I should get some economics from that, I should do or whatever it is. Like, no residual economics is the craziest thing. It's the craziest thing. It's the craziest thing. And there's no incentive really to do it unless you really care about legacy and something other than yourself. I mean, the incentives are very thin to do it. It's also just rooted, I think, rooted in the culture of Benchmark. Can you go back to Bob? I mean Bob, Bruce, Andy, all these, the founders have played their part, but it was rooted in this idea of respect and affection, is that you should have a partnership where you really respect and admire. You give them, I give all my money to any of my partners, but then you admire them. You say there's an old saying like a virtuoso is somebody who surprises even themselves. And I believe that about all my partners practicing the business. They're virtuosos and the aspects of the business that motivate us to do the work. So when Bob raised his hand and I was there, he just said it's time, I'm out. And others had left before, you know, Andy and others, but there was never a conversation. It was actually just the opposite, as we want to, we gave him, we gave them economics in the fund. They weren't giant economics, but it was just a way of saying thank you. And I think the culture, you know, as soon as you get into the parts of everyone's identity that are ego-driven, they lay claim to things psychically that make sense to them. And it would never make sense to ask for something at this firm that was going to entail taking more than you're giving. And I think that's a weird thing just to say, but it's a pressure that I feel as the last of the prior generations, knowing that I want to be raising my hand first before I realize I'm not contributing more than I've taken out. Not because, you know, it's some explicit trade, but just it's a cultural ethic. And the cultures we know, as you founded your company, like they're so durable, like the inertial forces of culture that get founded. There's one of the things you said, what is Benchmark? And if I read one book that captures Benchmark, it's this book. Every partner is different here, but it's the Carl Rogers 'On Becoming a Person.' And the premise of the book, which is very simplistic in a sense, it was like the apex of client-centered therapy. It's about psychotherapy. Sorry, this is where you wanted to go in this conversation.
But the premise of the book is that to be useful in a relationship, you have to first permit yourself to understand the other person fully. And I think if Benchmark is doing its best work, an entrepreneur comes in here and says, they see me. I bet if you ask Andrew at Cerebras, you know, who understands him most fully and the founding team, the purpose and the vision of the company. It wasn't, well, he found this hire for me or he gave me this advice about negotiating the contract with company XYZ. It's like, Benchmark understands what I want to do. And then we do something else which I think is equally important: unconditional positive regard. And there are examples in the past of Benchmark where that's been broken and I think an immune system builds around those failures and says how do we not do that again as opposed to say we're defined by that one act. And so I think what you see in the current lineup at Benchmark is a really, an emboldened immune system. We've had some vaccinations from past experiences to basically say like we never want to be in a position where the relationship degrades, where there isn't that faith that we've delivered unconditional positive regard because we believe in founders often times more than they believe themselves. And so if you understand the founder fully and you have unconditional positive regard, then you really can empathize with what they're going through. And I think that nurtures the sorts of success possible with founder entrepreneurs that we all hold out as the great examples of why we do this job.
I remember when we spoke last, you talked about the fact that like the Benchmark seat was kind of given to you like that from the beginning, is like I'm going to give this to the next person. And I can see why like you're saying like the seminal moment was actually the handoff because that creates the instigation for all the future handoffs.
Yeah. And you feel responsibility with that. Like, I mean, like I think all of us feel, we feel responsibility. That was one of the big things we talked to Ev about when as Ev was joining, you just, responsibility.
That responsibility, well just like you feel it, like not everyone feels that, like, and not every, you know, which is fine, but like, totally. Well also I think, you know, if you're talking about, if at the, because it's equal when you walk in, it's like if a bunch is given to you right at the beginning, you're like, I got to pay this off to somebody. And the people who kind of set me up from the beginning, like I can't really pay them back anymore. So, I can see why you'd be like, I got to make sure I give enough before I go, even though it's sort of your, in a weird way, you know, paying back prior generations of.
But rooted in that as well, Eric says responsibility, and I think he feels it and I respect that. I think the founders gave us permission to basically not take it too seriously. They said, 'Listen, come on.' Like, as a group of you, no one's going to be around in, you know, a million years. Come on. Everything's ephemeral. Yes. So, what you want is a tight-knit group of people that are at maximum potential manifestation. Like the energy, the joy, and the heaviness of like, oh, we're going to, you know, have to maintain this relic and wheel it out and like little tap tablets in the back about what the founders said. None of that, man. Like, this is like a day-to-day thing. By the way, forgive me. We're in an entrepreneurial environment where like when somebody has a legacy, we want to destroy it. We're in the business of creative destruction, not permanence and enduring. And forgive me. Yeah. Like our startups bubble up from nothing and we stay true to that. And I think the firm's premise is that we should have our own form of creative destruction. There's no legacy or claim to it at Benchmark. It's like the immediacy and present moment that we deliver. Everything else is secondary.
One of the things that you just said which I hope is okay for me to press on is, and I've wanted you guys to talk about this, which is I know each of you individually and I know you all are founder friendly and there's like, it's very easy for people in a competitive venture landscape to like poke at one historical example that everybody else has done if you're just loud, you can just like, you could just poke at people. I would say you're not loud externally and you sort of have a mindset of like we're going to let our actions speak. But I've wanted you guys to sort of like speak because I know you're very founder friendly and I've talked to founders you work with and all of that. So I'm actually curious to hear, you know, your sort of thoughts is, you know, you've seen some of the stuff like is it important for you to sort of just like talk about like what you just said like there's like a thing and then we have like an immune reaction to it and the firm updates or like, yeah. How do you process all of that?
Humans are storytelling animals. Every firm has their story and depending on the situation and what the motivations are of the counterparty, you accentuate certain parts of a firm's history. The ethic of the firm, and I think this is sort of borne out in even in our worst moments, is the company must come first. And so we're not more important than the company. Nobody's more important than the company. It's the initiative. It's the collective premise of an entity which is bigger than anyone individual. And there were moments in the past, look, I've been around through the generations, where it used to be the standard model that, you know, when are you going to get a real management team? And that sort of faded to, well, perhaps we can go the distance. And you have the Steve Jobs narrative which is like what crimes were committed against this notion of general management versus the founder mode reality that we all support. The part that's sort of most relevant, and I think this is what happens every day here, is we view our job, I do personally, and this has been borne out in the references, is making the founders the best version of themselves. And like any relationship, if it's simply sycophantic and enablement and codependency, we make them worse. If it's harsh and it's judgmental or absent, we make them worse. So one of the things I think you need to figure out in references is like what question should you ask. And of course if you're going to engage with any great firm, you want to go and do references, it's the first phone call. But I actually think it's even, you go a level deeper and say how does this person make you a better entrepreneur? And how have they unlocked your potential? And what we care about more than happiness is flourishing in our companies. And I think what's borne out in the work that we've done is that if I work with that group, like I'm going to be a better version. And I'm not going to be living in fear because then you're not a better version of us, nor am I going to be getting, forgive me, what happens in our job right now. I'm struck by the number of boards where I see this is a relationship that's sycophantic, where people aren't afraid to, people are afraid, I should say, to pursue truth because they don't want to hurt anyone's feelings or worse. I think the greatest crime that occurs in many of the boards that we all serve on is that somebody says something behind the entrepreneur's back, they won't say to their face. That's one of the things I think is a deep ethic at Benchmark is that we are transparent. Like if we're going to say it to your face, we may not say it behind your back, but we're not going to be in a situation where, here's what I really thought about the board meeting. And this idea of congruence, which is a key term in psychotherapy, is that you really want to know that you can trust your partner because they're not putting a face, a mask on because they want you to feel a certain way, but they're being real.
By the way, this also goes to your point about if you're not going to, if you don't need to put more dollars into the company, if you structurally almost can't put more dollars into the company, then you just want to tell them the truth. If you're hoping to get to win the next round, you don't want to piss them off because next month you might be writing a term sheet. And I think there's a lot of, there's the references piece, there's the I want to put more money into this company thing, there's just like I don't want to fight type of stuff. And I do think it leads to that, which I think, I think there's like the best version of being founder friendly is not comfort all the time. Obviously that's not to the best.
There was, I mean, there was a recent example of this. I recently led an investment that's still unannounced, but we actually had the founders over for dinner in the dining room where we'll have lunch here in about an hour. And after, you know, we during the dinner, they showed a demo. We were going through their commercial strategy and we gave them a lot of very direct feedback and a lot of it was constructive. It was like a really productive, constructive conversation, but not every founder, you know, responds super well to that. So, I called the founder afterwards and I was like, 'Well, how was that for you?' You know, how would you respond to that? And in that call, he said, 'You as a team are going to make us better founders.' And I can tell that right away. And because of that, he really wanted to work together. Because it wasn't just going to be, you know, slaps on the back and congratulations, but it was going to be a relationship where we really pushed both the founders and the whole team to be better versions of themselves.
Does it feel like structurally different to you than KP and Founders Fund in any way?
I think maybe the most difference is with Founders Fund because I do think Founders Fund obviously really, really leans on this, the kind of like Hippocratic oath of VC, which is do no harm. And in doing so, it's like, hey, we're going to be completely hands-off is kind of the pitch, and then if you need something, call us. I think again, that sells really easy. I actually do think that it's one of these things that in practice actually materializes sometimes as, I don't want to say like laziness, but it is just more passive. It is just like we should back founders that are going to figure it out all on their own and that they don't need help and they don't need any VC assistance. And sometimes that works out and, you know, sometimes maybe there are founders that are like that, but I think the vast majority of the time almost every single founder could use feedback, a sparring partner, any of these things.
Like even Tiger Woods has a coach.
Like 100%. And so I think like having that position is something that I think is a great sound bite and like, you know, goes really well on Twitter, but I think when it comes down to it there's very, very few practitioners, even, you know, the Tiger Woods of the world, that don't benefit from something like that.
This is ultimately the highest accolade of a firm that they seek is a manifestation of a value system. And I, everyone in this room, I've heard this and I know I'm going to hear this on your newest investment, is that if we've really done our job, and you'll hear this in our references, they feel like a co-founder. Benchmark feels like they were a co-founder. And what does that mean? Well, it wasn't a conditional transaction. It wasn't a one night stand of they gave us money and then we sort of could, you know, brag about the brand, but it was they were proximate with me when, what a founder, a co-founder does, it's a bit like being in a partnership where you have a child where you just say like there's something existentially deep that's permanent in that relationship. And I believe most companies that have single founders end up finding proxy co-founders because you need support systems. You need a relational balance and as the ups and downs of being an entrepreneur. And so if we've achieved that, you could say, well, it's not for everybody. Some firms might want more of just the money, thank you, and the brand. Or they want services that are delivered by people who work at the firm. Yeah, those are different facets, but the depth that can occur when you have that kind of proximate relationship ends up taking you through troughs that would otherwise leave companies to be sold early or to have a destitute founder who's just tired and doesn't.
There's also a throughline to it. Like I felt this as a founder where like even like a longtime exec might be four, five, six years, but then you have a board member who's there through the first round, the second round of execs, and the third exec team and all of that. So you're working, you know, many more hours per day with people on your team, but then when you look back over a decade, you're like there was somebody who was with you the whole time and it's, you know, hopefully your co-founder and your board members. So there's something about the long arc of it too that is special. I have moved away from talking about it as like guidance or advice or whatever. And I loved your sparring partner thing because I think that's what it is and that's what the co-founder thing is too. Because like startups are hard. They're really hard. And the most successful startups are doing things that are new, innovative, and haven't been done before. Therefore, you're figuring things out for the first time. Like you're figuring things out for the first time that are like challenging and hard and no one knows. And so like a huge part of the co-founder thing, or, you know, which we should be careful about like using it, but like it's that aspiration or that idea is, hey, we're asking each other questions that like sharpen our thinking. We are like trying to figure things out together. And I think that's a very specific way of working where I feel like a lot of times what we're doing is, I'm talking to somebody, I'm thinking of a very specific example from last week, was just like where it's like the entrepreneur knows, like she knows what she wants to do and it's like in there and you're asking questions to help them realize it and for it to like come surface or get clarity on it. And like that's very, it's different than getting like advice, right? That isn't advice. That is, that's a sparring partner.
Yeah. And a sounding board. And I think that's what you get. It's part of what I feel like is, forgive me, this is where I got to be the older person in the room, the degradation of our industry, and it really has been a degradation, is I think it's shifted, the system has shifted to winning. Our goal is to win,
Right? Because there's capital supply now. And so you have these large sums of capital that need to be deployed. And so the system is built to, I think, create in the mind of the entrepreneur a selection criteria. They're saying if you're doing PCs, you want to design the criteria of the PC so you win it. So what's happening is the industry is programming entrepreneurs in a way to select for things that I think are off-target. And they're aligned with the target of the firms and the capital bases they're deploying, but they're off-target relative to the quality of the relationship the entrepreneur seeks.
