Benchmark GP, Victor Lazarte: The 3 Traits All the Best Founders Have

Victor Lazarte 0:00 ... become an SEO, talking about like, "Oh, no, AI... AI is not replacing people. AI is actually augmenting people's abilities." Like, this is bullshit. You know, like, it's fully replacing people. But then, the first question that we ask is, if models get a lot better, is your company worse or is your company better? Like, is there a bubble? Are people getting paid the risk they are taking? What I'm telling you is, in the next three years, I'm sure someone will start a company that's gonna be worth a trillion dollars. So I think, on average, buying the winners today will work out.

Harry Stebbings 0:30 Ready to go?

Narrator 0:32 (Intro music playing)

Harry Stebbings 0:42 Vitor, dude, I have basically stalked the shit out of you for the last 24 hours. I spoke to Peter Chaitin, Sarah, Bruce Dunlevy. I spoke to, um, Pat Grady, um, the Brex founders. I mean, I did my work for this one. So thank you for joining me.

Victor Lazarte 1:00 It's great to be here. Thank you for having me.

Harry Stebbings 1:03 Now, when I spoke to Pedro, he was like, "Not many people know, but, you know, respectively, Vitor really came from nothing." Like, $100 to building a huge $350 million, I believe, revenue gaming business. Can you take me to that b- a business build journey, and one or two moments that really shaped who you are as a person and what you learned?

Victor Lazarte 1:27 So, so yeah, I bootstrapped, uh, a mobile gaming business and it, it makes for a good story, but the reality is, we tried really hard to raise money. Like, we didn't bootstrap by choice. (laughs)

Harry Stebbings 1:37 Why don't you think you could raise? Like, what did you do wrong in hindsight?

Victor Lazarte 1:40 So, (sighs) so, I was never... like, I wasn't very, like, business sophisticated and, I mean, this was like 2011 in Brazil, so like the venture capital scene there, like, wasn't as developed, right? But the idea was like, I, I loved mobile games and I thought it was, it was going to be a good business. But there wasn't like a very strong, well thought out thesis. And I g- I guess that's why like the best term sheet that we got is, someone offered us like $50,000 for half the company, right? Which obviously we, we, we couldn't take.

Harry Stebbings 2:16 That's a relief. We had Oscar on the show from Glovo in Europe, and they sold a third for €100,000.

Victor Lazarte 2:23 Yeah. Yeah. Oh, you know, there's so many horror stories from, like, investors in Brazil at a ti- at that time, and I think like less sophisticated... Uh, so I wasn't very sophisticated, but there were people that were even less sophisticated. So I had friends that they raised money in Brazil, and they agreed to like a 20 times liquidation preference, which seems like a, oh, there's th- yeah, there's this clause in the contract, but I don't really know what it is. And yeah, like, eh, people do that and they end up losing their own company, the- their whole company, right?

Harry Stebbings 2:54 Wow. That's absolutely nuts. Okay, so you're like-

Victor Lazarte 2:56 Yeah.

Harry Stebbings 2:56 ... "Shit, we can't fundraise." (laughs)

Victor Lazarte 2:58 Yeah.

Harry Stebbings 2:58 "No one's giving us money. We need to-"

Victor Lazarte 3:00 Yeah.

Harry Stebbings 3:00 ... "build this business just naturally." What happens then?

Victor Lazarte 3:02 I think that the core, like the core insights, like the core thing that made us, uh... So I, I started the company when I brought in, like the core thing that made us choose to do mobile games is, like in college we, we loved video games and initially said, "Hey, like let's, let's build a company to compete with Nintendo." But that sounded like a really bad business idea. But then like we came, like we looked at around and said, "Hey, like what's working in the world?" And we saw that app downloads, like this was 2010, we're still in the market and app downloads had grown 42 times from '29, from 2008 to tw- 2009. Appy downloads, mobile app downloads had grown like 42 times. I was like, "Wow, like this is, like this growth is insane." So, so we should make mobile apps and we love games, so like let's, let's make mobile games, right? So like, I think that was the, that was like a great insight. And so we started the company and the first few games we did everything ourselves. Like we didn't have any employees.

Harry Stebbings 4:04 Does that shape your thinking on market timing? Because what you basically-

Victor Lazarte 4:08 Yes.

Harry Stebbings 4:08 ... just referenced there is like-

Victor Lazarte 4:09 100%. 100%. So-

Harry Stebbings 4:11 How do you think about that?

Victor Lazarte 4:13 I think

Victor Lazarte 4:14 when people wanna start companies, a lot of times they're, they're trying to predict the future, but it turns out it's very hard to predict the future. It's much easier to understand the present. So a good heuristic is like, hey, what's working? What's working right now? And there's the famous story that Jeff Bezos, he was at D. E. Shaw and like he saw the internet was growing like 23 times a year and said, "Hey, like I'm, I need to make a, a business on the internet," right? And that was, that was the, the initial insight. And then, like what's the insight right now? And it's quite clear. LLM usage has grown 100X in the last two years. So if you measure, if you measure like in the number of FLOPS, it went from like one exaFLOP to 100 exaFLOPS now, and like of course this, this data is not very precise, but it's directionally correct. So, so I think the first thing is understanding like what's happening today, what's working, and then like how can you build on top of that? So in, in the two, like in the year 2000, building a, an internet company was an amazing thing. In 2010, building a mobile gaming company, bui- building like any app company was a great thing. And like that's why you have like some mobile gaming companies that were successful and other companies that were even more succes- successful, like Uber and like, uh, and Instagram and all that. They were all started around the same time. And now like LLM companies, it's, it's quite clear it's the best time in over a decade to start a company because we have this insane phenomena of adoption, like adoption of LLM inference. We started like, okay, how, what's the thing in LLMs that is working? I think a year and a half ago, there was basically like two things that were working. I think there was like ChatGPT and, and Character.AI. I would say, I would say Character.AI was one of the things that was really working. Uh, and now I think you can argue that...... there's like, Character.AI, ChatGPT, and Cursor, right? So, like, those, those are, okay, what are the things that are working that people love, that there's a lot of usage, like, like, tens of millions of, of users, right? And what these things have in common, and a lot of times, like, they're, the great opportunities is they, they're adjacent to things that are working today. So I think a great place to start is just, like, having a very profound, profound understanding of, of what's working.

Harry Stebbings 6:30 And then build adjacencies to it.

Victor Lazarte 6:32 Yeah, or like, build things that are, that, that are inspired by it, right? So when you look at the, the history of the best companies, like the most impactful companies, you know, like Facebook was not the first social network. Like, when Zuck built Facebook, there was, uh, Myspace and Friendster before it, right? But you could see that there was, there were things in that direction that were working. And so the, the thing that I'm most excited right now, like, the thing that frankly I'll, the company that I would love, most love to work on is an AI companion. And I think, I think in a few years we're gonna look back and we're gonna say that Character.AI was Friendster. And what I mean by that is there's gonna be a company that is gonna be very important and we will s- we'll look back and we'll say, "Character.AI was the precursor of that." And, and the reason I believe that is before the internet, the way businesses interacted with, with people was, like, through physical branches. And then you have the internet and business interactive websites, and then in 2010 you had mobile apps, and then, like, business interacts with, like, with mobile apps. And now the really cool thing that we have is agents, and this is just starting but the smartest, the smartest businesses, they realize that the way customers will interact with the businesses, it's as if they were able to talk to the business owner. Like, they talk to this, to w- this thing that feels like a person, that knows everything about the business and is able to, like, solve anything you want and sell you anything you want. So there's agents, right? Like, I think some of the incumbents will reinvent themselves to have, like, an agent interface, but whenever you have a shift, like a UI shift of this magnitude, a lot of the businesses, like, they don't adapt. And so I think there's an opportunity to recreate a lot of the successful business of today in an agent

Victor Lazarte 8:30 format. So I think there's three categories. Like, there's the category of incumbents that will adapt, there's the category of incumbents that will not adapt, and then startups who will just recreate those businesses but on an agent-first framework, and then there's a third category which is businesses that weren't possible before but now are possible because the, the agent interface is, is, is the right one, right? But, but on, on that topic, I think, like, social networking and, like, we now have software that makes us more efficient at to w- that makes us more efficient at connecting with our friends. You know, like, you have WhatsApp and you have, like, Facebook and Instagram. What does an agents for that look like? What's an, what's an agent for, for your social, uh, for your social life?

Harry Stebbings 9:19 I mean, i- is it not bluntly the removal of other humans? It's a 24-hour-a-day constant companion that understands how you feel, responds to you in real time and is your continuous on-demand friend.

Victor Lazarte 9:31 So I think, I think that's a really powerful idea.

Harry Stebbings 9:34 Do you know what astounds me, Victor, honestly? And sorry, w- you said beforehand you wanted something conversational, and I agree with you. I'm terrified about the mental health pandemic that we have today. Like-

Victor Lazarte 9:43 Yeah.

Harry Stebbings 9:44 ... the, the y- young men are more likely to die of suicide than they are cancer. That is a terrifying statistic. And what I find astounding is that really the largest mental health company is, is what? Calm? Respectfully, it's not a huge business. Uh, it's, you know, one and a half billion. Uh, a great, a fantastic journey, but y- it's not a huge business.

Victor Lazarte 10:03 Yeah.

Harry Stebbings 10:05 If our jobs is to solve humanity's biggest problems, what's going, where's the disconnect?

Victor Lazarte 10:11 I wouldn't even make, like, a, a, a larger claim, and the claim is humanity, like, what do people want? And, like, in the end people just wanna be happy. And there's a lot of study on, like, what makes someone happy, right? And turns out that wealth makes people happier, like the, the, the more material wealth you have the happier you are, but it's actually, it's not like a linear relationship; it's like log-linear, right? So if you get to, like, $75,000 a year for a US household, like, you start to taper off. And so making people wealthier actually does not affect their happiness that much. And then what does technology do? Like, technology helps us b- be more productive which is, like, hey, it makes us wealthier and it makes us achieve the goals that we want, like, better, right? So it makes us more productive. But research shows that the biggest predictor for happiness is, like, the quality and depth of your relationships, right? And technology has not attacked that. But I think that the, the really cool thing now is we're able to have a digital friend, and I think that'll be fantastic. I think w- you look at the studies and, like, like, religious people on average are happier than the non-religious people, a lot of the difference is explained because, like, religions, people, like, they have the stronger relate- uh, ties with the community but also religious people, they have a relationship with God, so, like, God is this friend that, like, you'll never see, but you talk to, to God but, like, God doesn't talk back. And so to me, like, that's a existence like tha- that proves that you can have this entity that you never see that is an important relationship to you and that, that makes you that much happier.

Harry Stebbings 11:58 I say actually that the death of religion is the thesis for CPG and consumer brand investors today and you're like, "What?"... thesis for the- because we've shifted cult-like worshiping-

Victor Lazarte 12:10 Hmm.

Harry Stebbings 12:10 ... from God, Buddha, and these deist figures to HYROX, and CrossFit, and Taylor Swift, and Lululemon. And they are, ironically, in the minds of modern consumers, a community which consolidates beliefs and brings unity. SoulCycle, it is this feeling of togetherness, which is extraordinary to say (laughs) that's replaced God, uh, maybe as signifying of society. But I think about that a lot. Question, would you not say that social has brought more high quality and depth to relationships if you think about your ability to follow your friend's wedding on Instagram?

Victor Lazarte 12:46 No, I think social, I think social is definitely positive. And, you know, at first, like, at first I started interacting with my wife, I met my wife, like, three years ago, and I first interacted with her, like, through Instagram. We had, like, friends in common, so I started following her and, like, commenting on her stories. And, you know, maybe our relationship wouldn't have happened because of Instagram and, and she's the biggest source of joy in my life. So, incredibly, incredibly grateful that, that, that these things exist. But I think this thing just scratches the surface. Like, I think the way Instagram is, is set up, like, it does not help you connect nowhere near the way it would be able to, right? When you think about why, why is it adaptive to have friends? And a lot of it is like, okay, we need to have a story that helps us understand what's happening with us, right? Like, we create our own, like, internal narrative. And when you have a friends, like, you explain your narratives with your friends, and your friends comments on your narrative and helps you shape it, and that, that makes you better able to understand yourself and where you're going, right? So humans, they have this intense need to feel seen and understood, and this is very adaptive. We're at a point where AI is able to do that for you. Like, AI is able to help you shape, like, okay, what is your personal narrative? Like, I, I have this very strong belief that five years from now, for the majority of, majority of people, the person that will understand you the most is going to be an AI.

Harry Stebbings 14:19 Is that a world that you want your kids to grow up in?

Victor Lazarte 14:22 I think that's, like, that's where I disagree with a lot of people, I think we're always very afraid of technology, like, humans are always very afraid of what's coming next. I actually think it's gonna be wonderful. You know? I think people feel isolated, and, like, being isolated is bad for a bunch of reasons 'cause, like, you feel like you don't understand yourself, like, and if, and if, if you have a challenge, you have a hard time thinking about this challenge. Like, imagine you have this hyper-capable friend that helps you understand yourself, like, knows everything about you, and whatever situation you have, he helps you, like, figure that out so you feel supported, like you feel, you feel like you're never alone. Even more than that, like, I think a lot of people say, "Oh, that's very dystopic 'cause, like, once you have this AI friends, like, you won't have, like, regular friends." I, I, I think, I think this is very untrue because in the end, like, this is, we still wanna see people in person. And your AI friend not only, not only will help you, like, understand yourself, but it will help you connect with great people. It will help you, like, find out, like, hey, I know you really well and turns out that there's, there's 100 million people that I know really well, and I'm gonna connect you guys. But it's gonna function, like, very much in the way that a person introdi- introducing you to someone else functions, which is, like, you got this intro, but you have a common friend, so you know you have to behave well. 'Cause if you don't behave well, it's like, hey, I'm gonna tell your AI friend that, that you're an asshole, and your AI friend is never gonna introduce you to anyone anymore.

Harry Stebbings 15:56 Speaking of AI friends and the quality and depth of relationships, when I bluntly spoke to so many people about you, there was one relationship in particular which struck me, which was when I spoke to Pedro at Brex about you.

Victor Lazarte 16:08 Yeah.

Harry Stebbings 16:09 Um, and he mentioned a number of things which just really highlighted the depth of your friendship. You invested pre-product.

Victor Lazarte 16:16 Yeah.

Harry Stebbings 16:16 Pre-revenue. Can you take me to that, and what that journey has taught you about investing, company trajectory-

Victor Lazarte 16:25 Yeah.

Harry Stebbings 16:25 ... and shaped you actually?

Victor Lazarte 16:26 So the way I met Pedro was, so I was building my company in Brazil and, you know, as I, as I said, we started, uh, we, we bootstrapped the business. Like, we eventually grew it, uh, to over a billion users, and there were very few people building technology companies in Brazil at the time. And then Pedro, he had a problem with, uh, with an investor. He was, when he was 16, he, he created his first, uh, payments company in Brazil, and turns out that he signed a, a, a deal that he shouldn't have, and he lost control of the company, and the investors made it impossible for him to capture any value. So I spent a ton of time with him and, like, with lawyers and say, "Hey, how, how do we get out of this?" And after, aft- and, like, had no shares, like, I was just like, man, I was just, "Hey, this kid is so smart. Like, this kid is so, so good, he deserves to succeed," right? So I really wanted him to succeed. And then after a while, like, I was like, "Hey, man, I'm selling, like, my mobile gaming company. We sell things in the US, and, and, and the US is s- is, is a much better market. And you should just, you should just, like, let go of the company that you have and you should go build something similar in the US." Uh, and so eventually he agreed to it, and, and so he moved to the US and he started Brex. And then when he started Brex, he's like, "Hey, like, can you, can you invest on my seed round, and, like, can you be my first board member?" And I was like, "Yeah, of course. I would, I would love to do that." And so I think our relationship came in from this shared distrust of investors and this idea that, hey, we're gonna, we're gonna have each other's back. Uh, and, and the other part that, that I really enjoyed is like, to me, it was just so fun spending time with this young kid that just loved business so much, and frankly...I don't think I would have ha- I would have invested in Mercore if I hadn't invested in Brex, because when I met the Mercore guys, like, you know, at first glance, like, the businesses are so different. But I met the Mercore guys and, like, the company was doing a million dollars in, in annual revenue. But, like, Brandon reminded me so much of the Brex founders, and the-

Harry Stebbings 18:36 Why?

Victor Lazarte 18:37 ... 'cause, you know, like, there's

Victor Lazarte 18:38 these two traits that, that I look for in entrepreneurs that they both have, and it's two traits that they rarely come together. And so I like to invest in founders that they're very open-minded, but they're very disagreeable. And, and normally like if someone is very open-minded, like, okay, you say something and like he wants to learn more and is very curious about what you're saying, like you make your whole argument, and then you start feeling, oh, okay, like I convinced this person because he's just so interested in what I have to say. But then by the end of it, it's like the person says, "No, I actually think that the opposite is true." So this idea that I'm, I'm interested in what you have to say, but I have no problem disagreeing with you to the point that it's gonna upset you. And both Pedro and Brandon had that to, like, a very high, high degree.

Victor Lazarte 19:27 And, and the other thing is, like, I think a great way to, to understand founders is, like, ask them, like, uh, how they spend their free time. I think, I think if you understand, like, how founders spend their free time, like, you get a very deep, uh, window into, into who they are.

Harry Stebbings 19:46 Can you unpack that? When you ask that-

Victor Lazarte 19:48 Yeah. Sure.

Harry Stebbings 19:48 ... how do the best display themselves?

Victor Lazarte 19:51 So-

Harry Stebbings 19:51 What are the va- varying responses?

Victor Lazarte 19:53 And I, and, and to be honest, like, this is a trick, this is a trick that, that I stole from, uh, Uri Milner. So it was, I was having breakfast with Uri, and I was asking him, like, "Hey, like, what makes you a good investor?" And he was telling me, like, "Oh, you know, when I meet a founder, I ask them, like, 'Hey, what's your day like?' But it's not like, oh, what, tell me two, three things you do." No, no. What time you wake up, what is the first thing you do? And then walk through the entire day, and then, like, what time you go to bed and what do you do in bed." And these choices that people, the, the choices that people make on their free time are the ones that, that really tell you who they are. And for Pedro, it's like, "Hey, on my free time, man, I love sitting in front of my computer and tracking the packages that iOS, uh, that, that iPhones send to servers, 'cause I really under- understand, like, how that architecture is done, 'cause if I pay enough attention, then I'm, I got a chance to, like, hack it." Like, that's how he, he found, like, one of the, one of the jailbreaks that, that, that, like, back in the day. He was, he was the first person to find one of the jailbreaks that for the iPhone, right? But he did that for, like, no reason, like, you know? Like, he didn't make money out of it. It's just like, you know, like, it's just, okay, I like going very deep on this, on this technical thing. And then with Brandon, you know, like, our first conversation, like, the guy's, okay, the guy's 21 years old, but you're talking with him about business, and it feels like you're, it feels like you're talking to your peer about business. And he was telling me, you know, like, "What is it like to work with Bill Gurley? Like, I, I've read all the blog posts." And I'm, "Man, like, why would you read, like, all of Bill Gur- like, Bill Gurley's blog posts from, like, years and years and years ago?" And like, "Yeah, like, I heard all the podcasts," and, like, there wasn't a specific reason for the person to do that, but it's like, hey, I just love, like, studying, studying businesses and, like, how these businesses work. When you have very young people that they spend a ton of time on some of these that are just like an intrinsic passion for them, like, this thing compounds really well over time, right? So, so to me, it's like, hey, really smart kid, in a very promising space, but it's a kid that is not just smart, is, like, very, very special because of this almost obsessiveness of, like, understanding businesses, right? And then little did I know that Mercore and Brendan would have something else in common, which is Brex went from, like, zero to $100 million in revenue in like 18 months after launch, and Mercore went from, like, $1 million in revenue when I invested to, like, over 100 million, like, in 11 months.

Harry Stebbings 22:43 I, I wanna talk about the revenue scale, and do you just wanna talk about actually emotional maturity? I look back to myself when I was 21. I, I work with 21-year-olds. As brilliant as they are and as insightful as they are, in my mind, you gain scar tissue nuance, just a little bit of wisdom with age.

Victor Lazarte 23:04 Yeah.

Harry Stebbings 23:04 And you can sup- plant that with great mentors. But do you find you have to change the type of investor that you are, the board member that you are, the coach that you are, with a younger founder?

Victor Lazarte 23:15 Yes. Like, I think 100%. And, you know, I think a lot about what's the, what's the role of a

Victor Lazarte 23:22 board member. I think that's related to, like, what's, what's special about Silicon Valley. And, you know, I, I was, I was trying to come up with a number, but if you start a company in the West Coast of the United States, like, you are 1,000 times more likely to build a, a giant- uh, a tech giant in the West Coast of the United States than you are anywhere else in the world, right? So, and, like, the, the, the raw math is, um, like, 70% of the largest tech comp- 70% of, like, all companies in the world were started in the West Coast of the United States, like, like, there, Seattle, and I think 0.1% of people live there, so, like, you do the math, it's, like, roughly, like, 1,000 times more, more likely, right? So, so why is that? 'Cause, 'cause people are just as smart, like, in Silicon Valley than they are in Europe or, like, in Brazil. But the big difference here is there's so much knowledge about how companies are built...And when someone starts a company, like, is able to access all that knowledge, right? So when, when Zuck did, uh, Facebook, like he hired a bunch of people from Google and, like, had board members that had been at other places. So I think a lot of the, the role of a board member is how do you h- like, how do you catalyze that? How do you help a founder access all the knowledge of what has worked before? And then in, in the Brandon case, it's like, okay, he's a 21 year old running a company doing $100 million a year. Like, there's very few people that have been in that place, but turns out that Pedro has been in that place, you know, like early 20s, running a company at 100 millions. And, like there's a bunch of common pathologists that, that emerge and then it's like, "Hey, I'm gonna connect you guys," and they go, they spend time together and then it's like, "Hey, Pedro, like what were the things that you didn't know that, that you wish you did?" And those types of things are very valuable, right? I think the way a board member adds- adds- adds value is like, it's- it's a function of two things. One is like how exposed have you been to hyper growth in the past? And then how much time do you put in to actually understand the context of that company so that they- that you're able to draw from the, from the right lessons?

Harry Stebbings 25:35 Do you like being a board member?

Victor Lazarte 25:38 I love being a board member. (laughs) I wish, I wish that was the job.

Harry Stebbings 25:43 How many companies do you meet a week on average? Net new.

Victor Lazarte 25:47 I probably meet like one or two companies a day.

Harry Stebbings 25:49 Okay.

Victor Lazarte 25:50 Yeah.

Harry Stebbings 25:50 So like five to 10 a week.

Victor Lazarte 25:51 Yeah.

Harry Stebbings 25:52 Interested, how many of those are raw inbound?

Victor Lazarte 25:57 Like one.

Harry Stebbings 25:59 One a week?

Victor Lazarte 26:00 Yeah.

Harry Stebbings 26:01 That's pretty-

Victor Lazarte 26:01 And-

Harry Stebbings 26:02 That's pretty good.

Victor Lazarte 26:04 So w- so one inbound, nine outbound. Is that good?

Harry Stebbings 26:08 Do you do active outbound, like where you're like hunting?

Victor Lazarte 26:10 No. So the- so the- so the majority, like the majority of what I do is like outbound, like the majority of what I do is outbound.

Harry Stebbings 26:15 Really?

Victor Lazarte 26:15 Yeah. And- and frankly like-

Harry Stebbings 26:18 It's heavy.

Victor Lazarte 26:19 I think-

Harry Stebbings 26:19 Everyone thinks you join Benchmark or you join-

Victor Lazarte 26:22 Yeah.

Harry Stebbings 26:22 ... Sequoia and-

Victor Lazarte 26:23 Yeah.

Harry Stebbings 26:23 ... just deals come to you. Deals just come. Does that happen?

Victor Lazarte 26:27 So there's a lot of things that come to you, but- but the question is, the- are the deals that- that you want to do, are they coming to you or not? And- and in my... I think as you build, like as you build your network and like I'm not from Silicon Valley and frankly like I've been a founder for 13 years and I've been an investor for like a year and a half. So a lot of people don't think me, uh, don't think of me as an investor. So- so very little of what I want to do just comes inbound or someone's like, "Hey, go meet this company." Most of the time it's like you're talking to really high quality people and you ask them like, "Hey, what has impressed you mostly?" Or you get- you get super interested in a, in a sector and then it's say, "Okay, like what are all the..." We go to someone and say, "Hey, like what are all the companies in this sector?" And you do a little bit of homework, and then it's like, "Oh, okay. This is s- this is an interesting company." Yeah. So I've done, I've done... So I'm in, I've done four companies since I started at Benchmark. Three have been this way, and then the fourth one, the fourth one I actually... I'm a co-founder, so I started the company with someone that- that I knew for a long time.

Harry Stebbings 27:29 You started a company?

Victor Lazarte 27:31 Yeah. We're still, we're still in stealth, so like we're not, we're not talking too much about it, but maybe a year from now I'll come back and- and tell you all about it.

Harry Stebbings 27:38 I- I- I absolutely love that. Um, okay. So we have that. Can we ask, when we go back to Macaw and Brex, as you said there-

Victor Lazarte 27:45 Yeah.

Harry Stebbings 27:46 ... the revenue scaling, I think Brex was 18 months to 100 million, Macaw was 11 months. Insane.

Victor Lazarte 27:51 Yeah.

Harry Stebbings 27:51 The challenge that I have is, have revenue rules broken in terms of scaling expectations? And have we lied to a generation of founders that triple, triple, double, double,

Harry Stebbings 28:02 and now that's just not the case?

Victor Lazarte 28:03 Yeah. I do think that... I think SAS was a moment in time where like rule-based invest- investing worked really well. You know, like you got- you get to $10 million in- in revenue, like you're- you're a category winner. I think this is no longer true. So-

Harry Stebbings 28:21 Why?

Victor Lazarte 28:21 ... revenue... I think it's because the nature of the revenue, I think a lot of the AI revenue is experimental. And the reality is, it's now incredibly easy to take ChatGPT and say, "Okay. What are companies using ChatGPT for?" Let's say their lawyers are using ChatGPT to write, uh, demand letters. So okay, I'm gonna make this very thin workflow around ChatGPT and then I'm gonna go after like every law firm that- that writes demand letters and say, "Hey," like, "buy my tool." And you are going to get revenue, like you're gonna get, you're gonna get millions of dollars in revenue. But if that's all you're doing, it's- there's just no, like, enterprise value. Because the reality is, like, as the models get better, like the workflow you're building becomes less valuable. So- so one test that we always do is company comes in and pitches... First y- you have revenue growth. Like, it's still worth something. It's not worth what- what it was worth before, but it's like, hey, you have, you have revenue growth. Okay. We should pay attention. But then the first question that we ask is, if models get a lot better, is your company worse or is your company better? Right? And if s- if your company is worse, then it's gonna be very hard to touch it. But if your company is like, "Hey, as the models get better, my company gets better," then it's like, oh, like that's a, that's a great, that's a great place to be in, right? So for example, on Macaw, what got me excited is... So first thing, one thing that I think is super exciting right now is like just replacing people. It- it sounds, it sounds really bad when you say it this way, but- but I- I actually think it's the most exciting opportunity in venture right now and it's actually gonna be fantastic for humanity.

Victor Lazarte 30:15 So it's like, okay, figure out like what's- what's a profile person that does knowledge work that you can like replace with a model? And- and Macaw was like replacing a human, like replacing a recruiter. I was like, oh, like that's pretty cool.... a, I think models are gonna be better interviewing than, than, than people. And, and like the, the recruiting process now is just so inefficient, that if you have like a, a, a model interviewing, like that's gonna make it a lot better. But then there's, there's a few things that make it super interesting, which is interviewing someone is a, a very hard problem. You know? Even you talk to, you talk to the best founders in the world, like Elon Musk, like, like Bezos, they all spent a ton of time interviewing. 'Cause like figuring out like who's the right person, it's, it's... you continue to have like gains to quality, right? So okay, there's a very... there's a problem where we already have value now, but it continues... like as you get better, it continues to be valuable. And so investing a lot of money solving that specific problem is valuable. And then if you get specific data, it's like you hire people, you see how they perform, you know, adjust your model, like having that model's just incredibly valuable. And the other thing is, you have this network effect with like, okay, there's a platform, everyone is coming to the platform, so you have this marketplace of people, right? So to me it's like, okay, at the time they didn't have a lot of revenue, like this w- they had a million dollars, but I was like, "Oh, this is a place where AIs are gonna do a much better job than humans and, and you have like a lot of defensibility."

Harry Stebbings 31:48 We spoke about kind of quality of revenue and applying that to Mercore. You know, uh, I had them on the show. Uh, love the guys.

Victor Lazarte 31:55 Yeah.

Harry Stebbings 31:56 Um, people were like, "It's not revenue. It's not like ARR, Harry." And I had like smart people in my DMs be like, "Harry, that's not revenue." Is it revenue? Is it not revenue? Was I wrong?

Victor Lazarte 32:10 No, it's revenue. It's revenue for sure. And then on the defensibility-

Harry Stebbings 32:13 But is it ar- is it, is it ARR?

Victor Lazarte 32:15 No, it's not. It's not like... you don't have like a, an annual contract that people are signing those annual contracts. It's, it's a run rate, right?

Harry Stebbings 32:23 Yeah.

Victor Lazarte 32:23 And I think, I think a lot of, um... so some people criticize, and the criticism that, that, that I hear is, okay, um, you have this recruiter and you're building this platform, and a lot of, like a lot of the growth is coming from labs. And like the labs, they need... before, there were like three, three, three stages of, uh, language models, right? Like I think the first stage of language models is you just take text from the internet, you train your model, and you have like GPT-3, which was very cool, but people didn't w- didn't like to use it. And then, and then first like you had RLHF, which is models produced... so you take your base model, you produce a bunch of answers, and then you had humans pick like what they like best, and then you, you build a model that give answers that humans like a lot more, and then like you have ChatGPT. Like that was the big ChatGPT innovation was like RLHF. And now like we're getting to this third, third moment in models, which is like pure RL. So it's like this... I think this is the d- most interesting thing happening right now in AI, which is models, they... if you want to get a model to be better in something, what you do is like you find a deep expert in that subject, and th- the expert will create a question that the model is not able to answer, and then instead of like giving the model the answer, it will create a rubric to tell the models like, "Hey, for any answer to that question, here's how s- how you're going to rate it." And, and then once that's done, the model produces like a very large number of answers, and then you have like this very large n- number of, of pairs of like question and answers that are graded and used then to, to train your model, right? So this is the most interesting thing happening in, in RL and like this is a big... in, in AI, like this is a big deal because what this means is we're getting to a point where if you're able to create a benchmark for any task, then through reinforcement learning, and like just through throwing a lot of compute at it, you're able to create a model that surpasses that benchmark, right? And so wat- where does Mercore come in? It turns out that to create questions that the models are not able to answer, and to find people that are able to create these rubrics, this evaluation criteria, it's very hard. You gotta be an amazing interviewer to find these people. And that's the, that's the interviewing that, that, that, that Mercore does. So Mercore helps like all the labs get, get a lot of the, the really best people. And then so the person's like, "Hey, is this recurring?" It's not. It's not an annual contract. But the reality is, for as long as humans are better than computers at any knowledge task, you're going to need people to create these evals so that you create this... you can create this RL environment that will make better models, right?

Harry Stebbings 35:38 Completely understand and agree. My question to you is, am I getting paid for the risk that I'm taking?

Victor Lazarte 35:43 Yeah.

Harry Stebbings 35:43 And when you have a reduction in revenue quality, like revenue run rate versus enterprise ARR, or I'm just like, take a, um, HeyGen. A lot of it, like other people in the space, it's experimental revenue, it's not super sticky service now revenue. You need to be paid for the risks that you're taking. Do you think we're getting paid for the risk that we're taking, giving the price premiums that AI companies are demanding?

Victor Lazarte 36:07 So I think, I think in the case of a... it's, it's very much on a case by case. And I think like HeyGen and Mercore, I think they were like very cheap rounds. And, you know, I feel so lucky that, that I was able to like-

Harry Stebbings 36:21 Do you think two billion was cheap? Like we've, we've done-

Victor Lazarte 36:23 I know. I was talking about, I was talking, I was talking about the round that I did.

Harry Stebbings 36:27 Ah, right.

Victor Lazarte 36:28 Yeah. Uh...

Harry Stebbings 36:30 (laughs)

Victor Lazarte 36:31 (laughs) Uh, and then, but then like just a framework to talk about...... like, the rounds in general, right? I think, as an asset class, like is there a bubble? Are people getting paid for the, for the... the risk they are taking, right? So you think about, like, I don't know, like Entropic at 60 or you think about Perplex City at 15, right? Uh, I think the reality is AI is a big shift. I think AI is much bigger than mobile. Maybe like all- all the magnitude of the internet. And then if you take a basket of the winners, it's gonna work out.

Harry Stebbings 37:10 (sniffs)

Victor Lazarte 37:10 'Cause I- what I'm telling you is, in the next three years, I'm sure someone will start a company that is gonna be worth a trillion dollars. And how, how do you make sure you are in this company? It's like, okay, w- where's the best place to find this company? So it's like, what are the interes- interesting spaces that have great teams and it's working? Because, okay, there's these trillion dollar companies out there and the space, like, okay, the- the early winners, like, there's not that many, right? So I think smart investors, they're saying, "Hey, if software spend in the US is like a trillion dollars, but labor's spend is like 10 trillion, and- and now, like, the AI companies are going after the labor's spends, and so the outcomes are gonna be, like, insanely larger than they were before." So, okay, there's gonna be huge winners, so we gotta make sure that we're there. Like, we gotta make sure in that we're in these companies, right? So I think on average, buying the winners today will work out. Are there some winners that are overpriced? I- in retrospect, the answer will be yes.

Harry Stebbings 38:15 A- uh, absolutely. Um, listen, Gali's spoken before about passing on Google on price and his lessons from that and, you know, I always think of that. Um, the question is, if you see this shift in budget from labor to technology spend, something that I just worry inherently about is, like, the increasing chasm between rich and poor and the-

Victor Lazarte 38:33 Yeah.

Harry Stebbings 38:33 ... inequality that comes as a result.

Victor Lazarte 38:35 Yeah.

Harry Stebbings 38:35 Even if there are 5,000 people in that company that's worth a trillion dollars, it could replace a trillion dollars-

Victor Lazarte 38:41 Yeah.

Harry Stebbings 38:41 ... of spend on labor.

Victor Lazarte 38:43 Yeah.

Harry Stebbings 38:44 Do you share my concern? And, and is that just an inevitable-

Victor Lazarte 38:47 100%.

Harry Stebbings 38:48 ... progression?

Victor Lazarte 38:49 100%. What percentage of knowledge work as we know today will exist in 10 years? Like, if you define w- work, knowledge work as work you do behind a computer, I think it's probably like 1%. You know, the thing that I worry most about is if you're college, if you're someone coming out of college, what are the things that you can do, like if you're coming out of law school, like, what are things you can do that- that a model won't be able to do, like, in three years? You know, there's not gonna be that many things. And at the same time, like, companies will be more valuable because they- they're gonna reduce costs so much, so people that own companies, people that own shares will get richer, founders will get way richer, you're gonna have this trillion dollar companies being done by very small teams. So that's a very destabilizing force and that's something that, that is something to worry about.

Victor Lazarte 39:41 And I think, and people... All these things are controversial, so you see these big leaders talking, like, the big company CEO talking about like, "Oh, no, AI, AI is not replacing people. AI is actually augmenting people's abilities." Like, this is bullshit, you know? Like, it's fully replacing people, right?

Harry Stebbings 39:57 M- my favorite line that we get on the show, "We're just not hiring new, but we're keeping everything as is."

Victor Lazarte 40:02 Yeah.

Harry Stebbings 40:02 And you're like, "Really?" (laughs)

Victor Lazarte 40:04 Yeah. You know, but net-net, I think this will be tremendous for society, because I think companies are humanity's best invention and if we need less people to create companies, like, we're gonna have more companies, right? So, so I grew up in Brazil and Brazil is not a great place to, to grow up in. And then I moved to the US and, like, the Bay Area turns out it's, it's a fantastic place to live. And the principal difference between Brazil and the Bay Area is the quality of the companies, right? So overall, it's gonna be fantastic for society, but then there's a huge problem of, okay, how do you distribute that wealth?

Harry Stebbings 40:43 I don't buy UBI, by the way. I think that-

Victor Lazarte 40:46 You don't?

Harry Stebbings 40:46 ... is fundamentally la- No, i- i- the humanity requires purpose.

Victor Lazarte 40:51 Yeah.

Harry Stebbings 40:51 If you remo- if you add UBI, you remove purpose.

Victor Lazarte 40:55 Yeah.

Harry Stebbings 40:55 Um, and people say, "Oh, we're gonna fish and we're gonna paint." I promise you that is not how human psychology works. That's why we have addiction, that's why we have drugs, it's why we have gambling, it's why we have prostitution. Sorry, this is the dark side of humanity. We will not paint and write poetry.

Victor Lazarte 41:10 Yeah. Well, I think we either have UBI or it's the end of democracy. Like, imagine this society where there's a lot of abundance and, like, there's a lot of, like there's a lo- a lot of wealth, but the m- majority of the people are not accessing that wealth. Like, that wealth is very concentrated, but it's a democracy.

Harry Stebbings 41:29 Is that not what we have today?

Victor Lazarte 41:31 It's gonna get way more extreme. And, and the other thing is I think it's gonna be much harder for politicians to not do what's best for the entire population because the entire population will have a very powerful AI system on their pockets, so they will know. Like, they will just ask the assistant, it's like, "Hey, this politician, like, the stuff that he voted on, is that good for the general population or not?" And then someone will come in and will have an agenda that is like, "Hey, big redistribution, redistribution of wealth." And it's like a very populist, like a pop- very populist agenda. And then I think people, if people very selfishly ask their AIs, like, "Hey, is this politician better for me or not?" Like, "Is this politician gonna get me more material wealth or not?" I think people that wanna redistribute, redistribute a lot, like, they'll, they'll, they'll get votes, right? So I think that's very destabilizing for democracy. And then a lot of the people that are in control, they're gonna, they're gonna say, "Hey, like, right now, like, you have, you have people that are in control, like, are, are they gonna, like, just cede control? Are they gonna be less powerful? Are they really gonna, like...... uh, let go of, of all the influence that they have. So, so I think AI is a destabilizing force because it makes the entire population w- way more informed and, and knowing, like, what's best for them, and at the same time, it, it concentrates wealth, which, which makes the scenario, like, more propense to, like, hey, the population wanted to, like, get more. But then there, I think there's one, I think China is actually a very stabilizing force because I think the US right now has this external threat, and the US cannot, cannot spend a lot of time, like, with, with internal conflict. 'Cause like, you know, we're at a very important moment in time where, like, someone will get to, to a powerful AI very soon, and it needs to be the US 'cause, like, we wanna live in a world where, like, where, like, powerful AI is controlled by the US. And if we spend too much time, like, in internal conflict, like, China will do it, right? So, so I think China's actually a very stabilizing force for the

Victor Lazarte 43:44 US.

Harry Stebbings 43:44 I mean, it, the best way to unite is to have a common enemy. Um-

Victor Lazarte 43:47 Exactly. Yeah.

Harry Stebbings 43:49 So I agree with you. That said, I, I don't feel the US is winning the race against China. I think China are absolutely crushing the US. I mean, Europe's not even in the fucking race. (laughs)

Victor Lazarte 44:00 Yeah.

Harry Stebbings 44:01 Um, when you look at the investments that China have into their education and infrastructure systems and the depths of their talent-

Victor Lazarte 44:08 Yeah.

Harry Stebbings 44:08 ... respectfully, it, it, and the, and the work ethic that they have-

Victor Lazarte 44:11 Yeah.

Harry Stebbings 44:11 ... it just completely destroys anything we have elsewhere on the planet.

Victor Lazarte 44:16 Yeah. I think China has better work ethic and they have more people, so they have more people working harder, but I'm still so bullish on the US because there's just so much knowledge here, like, I think our, I think our advantage is... It's like the true net- like, the true network effect is a city, right? So, like, we have, like, we have Silicon Valley, and you, you say, "Hey, like, I think China's winning," I think by all m- like, I think by all measures, like, the US is winning. If you look at, like, all the AI products, like, ChatGPT is the, is the most used, uh, AI system in the world, and sure, you can talk about, like, oh, how about DeepSeek and this and that? But the reality is, like, like, ChatGPT still is the best, uh, product out there.

Harry Stebbings 44:58 Yeah, I mean, look at-

Victor Lazarte 45:00 No? What's, like, what's better-

Harry Stebbings 45:01 ... I, I-

Victor Lazarte 45:02 ... than ChatGPT?

Harry Stebbings 45:03 L- listen, uh, I, I do not, I completely agree with what you say. I do not trust or believe anything that China says, and I think they have an armory of weapons, AI related, that they do not show the world that they have ready to go. I think TikTok is a weapon of consumer data aggregation and acquisition. I think they are so strategic and smart in how they've leveraged Shein and Temu as well. I, I, their infrastructure investments in Africa, I think people don't spend enough time on. It's a shit answer from me because I'm not really giving you one. I'm just saying, I don't underestimate them, and I know-

Victor Lazarte 45:47 Yeah.

Harry Stebbings 45:47 ... that they are doing strategic things (laughs) which I don't even know about, which I think we're not doing.

Victor Lazarte 45:53 No, I, I-

Harry Stebbings 45:53 But I th-

Victor Lazarte 45:53 ... agree. It's like, it's a very, it's, like, a very serious competitor. Like, I 100% agree with you. I think we're, we're still in the lead, but we cannot afford to waste time on anything else. You know, like, we cannot afford to waste time into, like, in, like, internal disagreements and stuff like that.

Harry Stebbings 46:08 Can I ask you, you know, I think it's very easy for us to get excited by, uh, you know, transitions, um, by improvements in human lives and how we won't be doing mundane tasks that we all kind of fucking hate doing anyway. But then it's very easy to get caught up in the kind of short term. Do you think we overestimate adoption in the short term and underestimate it in the long, or do you think this will happen much quicker than we think?

Victor Lazarte 46:35 Yeah, I think, I think there's a lot of wisdom in saying, like, "Hey, we, we, we overestimate what we can do in a year and underestimate what we can do in 10." Right? I think, I think there's a lot of truth to that. I still think a- in AI, if you look at how much, like, three years ago, like, we didn't have, we didn't have ChatGPT, and now there's, like, close to a billion people that, that use it every month, and they have, like, a meaningful different experience, right? So I personally think that in the next, not in the next year, but in the next five years, like, lives will be meaningfully changed. So I think AI is gonna happen, like, way faster than, than people believe.

Harry Stebbings 47:18 What crazy thing or what thing do we do today that we will look back on and go, "That's crazy." Like, do you remember, like, hey, you'll find your loved one on a dating app?

Victor Lazarte 47:29 Yeah. Yeah.

Harry Stebbings 47:29 Bullshit you won't.

Victor Lazarte 47:30 Yeah.

Harry Stebbings 47:30 Hey, you'd put your credit card details into the internet. No way.

Victor Lazarte 47:33 Yeah.

Harry Stebbings 47:34 What, what's that?

Victor Lazarte 47:35 Yeah. I think this thing that will happen quite soon is, like, we're gonna have an app and, like, you're gonna wake up and you're gonna look at your app and you're gonna read what it says and you're just gonna do it. Like, the app will tell you, it's like, "Go do this." You're not gonna understand, but you're just gonna do it. And you're gonna do it, and turns out that you're gonna be happier after you do this thing. And over time, like, you just learn to trust the app. It's gonna be a complete reversal. Like, you're not going to apps to make it easier to do the things you wanna do. For example, like, oh, I go on Instacart so I get my groceries. Like, you know what you wanna do, you go there, and it just makes it easier to, for that to be h- to happen. It's like, you go to the app for the app to tell you what to do, and you just blindly trust and does whatever the app says.

Harry Stebbings 48:25 How far away do you think that is?

Victor Lazarte 48:26 We see glimpses of this, right? So, you know, there's these companion apps, like, there's a, I don't know if it's like Finch or, like, this, like, self-care pads, you know? It's like, oh, I'm gonna help you...... like, exercise, like I'm gonna be your accountability buddy. I'm gonna help you, like, exercise every day and like, I'm gonna help you, like- like, make sure you're drinking water and, like, taking your meds. So I think it's actually, like, the s- simple things. You know, like, you- you open up your app. So for example, I- I try to work out every morning for, like, 20 minutes. But a lot of times, like, I- you know, like, I wake up and I just don't have the energy. Imagine if you wake up, it's like, "Hey, it's your 20 minutes. Like, remember, 'cause like if you do that for like X days, you're gonna be better." And then like you're just- just getting to these routines, like it's gonna... Like these apps, like, they're helping you, like, form routines. So that's like, I think that's the beginning, like, these apps that are helping you form routines. They're telling you what to do. And it will get to a point where, like, AIs are gonna be smarter than us. Like, AI is gonna be smarter than us on most things, and they're just gonna learn how to trust their judgment, right? So they- they have context on you, they know what your long-term goals is, and so you wake up and say, "Hey, go spend an hour, like, reading this book." And like, you just do it. "Now, like, go meet with that person,"

Victor Lazarte 49:44 and you just do it.

Harry Stebbings 49:45 It's funny, I got asked the other day, "What advice do you have for me? I'm leaving university." Uh, sorry, "I'm leaving school, about to go into university." And I said, "Very simple. Become a brain surgeon or a dentist. Promise you'll be safe for about 20 years, minimum." What advice would you have?

Victor Lazarte 49:59 I have the opposite view. Like, I think go study computer science.

Harry Stebbings 50:03 Really?

Victor Lazarte 50:04 Yes. And to me- to me it's like-

Harry Stebbings 50:06 That is like completely antithetical to what everyone is saying. That's- that's a fascinating-

Victor Lazarte 50:10 Yeah, I know.

Harry Stebbings 50:10 ... piece of advice.

Victor Lazarte 50:10 Yeah. It's like, hey, go- go and compare science. Like, to me it's very, I feel very strongly about that. And to me it's like, before we had calculators, machines, like, we had human calculators, right? It's like- like if you saw the, like, Apollo movie and, like there's a, they're typically women, and they're like count, like they're calculating these, like, tables, right? There are people that are just like doing- doing math. And then calculators were invented. And then, like, when calculators were invented, it's not like, "Oh, like people shouldn't study math." No, people should study math. And if you study math, the reality is like you're studying math in- in high school and like you're studying math in college, like the first few years of- of college, you're doing stuff that computers can do, but it doesn't matter 'cause like first, like, you're understanding the technology, and two, like there's so much transfer learning. I think when we train models to code, they get better at a lot of other stuff. So I think why I advise people on like, "Hey, go in computer science," is the transformation right now, it's- it's technology transformation, it's the AI transformation. So go study computer science 'cause like even if you're not gonna be a developer, and like you're probably not gonna be a developer, but just having the basis to understand like how that's done is gonna be extremely helpful. And then like the transfer learning of like, hey, just being very logical and be able to take a big task and break down into smaller tasks and be very rigorous, I think that will continue to be very valuable.

Harry Stebbings 51:45 When you look at the AI companies of the last 18 months, you're in several absolute bangers. Which one are you not in that you had the chance to and you just missed?

Victor Lazarte 51:57 So we made, like, we participated in- in one round of Cursor. I think the- the coding- coding space is very interesting. I think I, like-

Harry Stebbings 52:06 That- that's an interesting one. You participated in one round. I'm just interested, like Benchmark are famed for like the leading the A.

Victor Lazarte 52:14 Yeah.

Harry Stebbings 52:14 How do you think in a partnership now about plasticity around stage and whether you have to lead? You know, I- I obviously know Phantom well and he did our table, I think in the C. Um, Girlie's-

Victor Lazarte 52:25 Yeah.

Harry Stebbings 52:25 ... had flexibility around... How do you think about actually the rigidity of knowing we have to lead the A?

Victor Lazarte 52:31 Uh, I think rigidity is nonsense. And frankly, what makes, what defines Benchmark, we wanna be a partner to the most important companies being created, which is similar to- to most venture firms out there. And I think the difference is we wanna be the first call. Like, we wanna be the first call to like every- every entre- entrepreneur that- that we work with. And in order to do that, like the easiest way to do-

Harry Stebbings 52:57 Can I be a, can I be a dick as a fr-

Victor Lazarte 52:58 Sure.

Harry Stebbings 52:59 ... like, as a friend?

Victor Lazarte 53:00 Yeah.

Harry Stebbings 53:00 Every VC says that. Uh, I don't even want to be a first call. Like, your mum should be your first call.

Victor Lazarte 53:06 Yeah.

Harry Stebbings 53:07 (laughs)

Victor Lazarte 53:07 No, I think that's fair.

Harry Stebbings 53:09 Right?

Victor Lazarte 53:09 Fair game.

Harry Stebbings 53:09 I don't want to be your worst call in terms of like when the shit really hits the fan, call me.

Victor Lazarte 53:15 Yeah.

Harry Stebbings 53:15 It may never happen. But that-

Victor Lazarte 53:18 So-

Harry Stebbings 53:18 ... terrible time, I'm the person who's gonna help you.

Victor Lazarte 53:21 All else being equal, I think everyone wants to be the closest partner. But I think the part that changes is like the all else being equal, right? And I think it's like, hey, we're willing to take a lot of trade-offs in order to be- to be a very close partner, right? So why does Benchmark make very few investments? It's because we spend more time with our companies. And, you know, you're saying like all investors want to be the first call. Y- I don't think it's true 'cause- 'cause the reality is if you're a financial investor, you don't want to be the call. You wanna, okay, you made your investments, you wanna find the next company. And like there's a lot of investors, there's a lot of really smart investors that say, "You know what? Like, I hate the board work, you know? I wanna write- write the check." And there's some investors that say, "Hey, like, that's not a problem that I have. Like, I put my check in and that's it."

Harry Stebbings 54:05 Do you think an investor can move the needle for a founder? And Keith Rabois says that, you know, the best founders don't need you.

Victor Lazarte 54:11 If you call the people that I work with, you sh- and you should call them, and it's like, I think-

Harry Stebbings 54:15 I did.

Victor Lazarte 54:16 I think you can.

Harry Stebbings 54:17 (laughs)

Victor Lazarte 54:17 Right? And like so- so one thing that made me very happy is, like a few months back, like Pedro came to me and said, "Hey, uh, man, I'm so grateful that- that you've been a partner on this and- and that you're the closest thing that I have to a co-founder outside of the company," right? So can you make, can you make a difference... I think it's actually very hard to make a significant difference from the outside, but the way you do it is founders need a thought partner and founders...... needs a way to, like, access all the knowledge in the ecosystem and you can catalyze that. But I think, like, the good founders, like, they have access to a bunch of people. Like, the- the good, the good founders, like, they don't work in isolation. They have access to a bunch of people, but the difference, like the thing that you can do as a board member that is very hard for other people to do is, you know, like, I've- I've been at the Brax board for, I don't know, like, seven years? And for every important hire that he did, like, I discussed that with him. And I've done, like, so many sa- like, close calls with candidates that once he has a problem, like, he calls me just because I have way more context than he does. Th- th- than, than other people do, right? So I think, like, how do you add value, like, what's the way to add value is like, "Hey, you have a lot of context." But the thing is, like, it's just very costly to have context. And like that's why we... The- the reason we do very few deals is because getting context on the companies, like, takes a bunch of time.

Harry Stebbings 55:40 If you're then flexi on your insertion point, maybe participating in a cursor round or doing a later round, do you have that ability to add context even? 'Cause you're probably not on the board.

Victor Lazarte 55:52 So not in all... When we're, when we're participating, like, we don't have that ability.

Harry Stebbings 55:57 Mm.

Victor Lazarte 55:57 And that's why we don't do it, so normally. And- and the reason we do it sometimes, like, "Hey, maybe this is a way to, like, start building a relationship with the founder, and, like, over time, like, we'll, we'll grow our position and, like, we'll build a relationship." But the reality is, like, if you write a small check and, like, you're one of many, then, like, you don't make any difference. It doesn't matter how smart you are.

Harry Stebbings 56:17 Did you feel the weight of the B- Benchmark GP role? When you come into any investing role, it's a lot of responsibility.

Victor Lazarte 56:25 Yeah.

Harry Stebbings 56:25 Respectfully, you're a GP at Benchmark-

Victor Lazarte 56:28 Yeah.

Harry Stebbings 56:29 ... as your first inv- I know you're, like, a billion dollar founder, but it's still, like, a steep position to come into.

Victor Lazarte 56:35 Yeah. Yeah. You know, the thing that I love about Benchmark is... So I came in and the partner said, "Hey, you're coming here to co-found the firm." And, like, there's a lot of tradition, but a venture firm that is, like, sticking to its tradition is soon gonna be very irrelevant, so, so we, we believe a lot in, like, creative destruction. And, like, you feel like, "Oh." Okay, you almost feel like, "Really?" And then I met, I met with the, with the, with the founding partners at at Benchmark, and they were just like, "Hey, yeah. Like the only way, like the only way, uh, we continue to be a great firm is, like, if we have no, uh, attachment to, to just how the way things were done," right? And I, I actually think that this is, this is a big advantage for Benchmark is, like, because we don't have any process and we have a small team, it's, it's easier for us to, like, change things, right? So, and I think venture is changing. I think venture is changing a lot.

Harry Stebbings 57:28 How do you think venture is changing?

Victor Lazarte 57:30 You think about, like, couple decades ago, like, the role of a board member was the governance. It's like capital was so scarce, they said, "Hey, once you put capital into a company, a lot of your job is just, like, managing the downsides." Like, "Hey, make sure that this guy is not gonna, like, lose all your money," right? And the reality, and that's understandable because there, there had been, like, less big outcomes in tech, so people that invested, they're kind of afraid. You know, like, fast-forward to today, like, everyone knows investing in technology i- it's a, it's a great thing. People should do that, right? And y- it turns out that it's more important to, like, maximize the upside than it is to, uh, manage your losses, right? So, and the way this changes the role of a board member is you're not that concerned with like, "Oh, like some of, some of your investments, like, are gonna lose money." And, like, you- your role is not governance. Like, your role is not there to say, "Hey, like, founder, like, you can do this, or you can..." No. Your role is to, like, maximize what the founder wants to do. So it goes from, like, oversight to, to, like, catalyzing, like, to amplifying the- the founder's ambition.

Harry Stebbings 58:40 Really? If you... Uh, I, I, I agree with you, but, like, o- officially, the job of a board member is to- to have a fiduciary duty to shareholders. Fiduciary duty to shareholders is not always the same as maximizing a founder's ambition. How do you think about that?

Victor Lazarte 58:57 If you're taking a lot of, uh, s- decisions in isolation, it's like, "Oh, okay, like, in this case, I believe that if we do this, like, it's gonna be better for the shareholders." But if you look at an aggregate, like your policy is, "I'm gonna, I'm gonna choose the best founders and I'm, I'm gonna trust them." And my fiduciary duty comes in at the moment where I write the check. It's like, I'm underwriting that person. It's like, "Hey, do I think this guy will be a good CEO?" And once you're there, it's like, "I'm just, I'm here to enable this guy. And, like, even when I disagree with him, I'm just gonna, like, help him do what he wants to do."

Harry Stebbings 59:34 Have you ever lost faith in a founder?

Victor Lazarte 59:36 Like, describe, describe what lost faith means. So it's like-

Harry Stebbings 59:39 When you no longer, when you no longer believe that actually they are d- the right person to strive the company and actually you don't trust the decisions that they make are the best decisions. It's the thing I find hardest.

Victor Lazarte 59:51 Yeah, so the reality is, like the reality is, I haven't done a ton of investments, right? But I've done a couple, like I've done a couple of angel investments where it didn't go well. And then in that case, man... Like, one of the things that I, I've learned, like, after joining Benchmark and, uh, and, like, so I work a lot with Peter, and, like, Peter sits on two of my boards and I sit on two of his boards. And, you know, you see these companies go through the dop- ups and downs, and, like, the thing that I learned is, like, like we don't give up, you know? It's like, "Hey, as long as the founder wants to do it," and it's completely uneconomical. Completely uneconomical. It's like, hey, you know, so I was talking with Peter and, like, there was a company that wasn't doing well, and it's like, I know, I know, I know what we have to do. A lot of venture capitalists would be saying, "Hey, like, just cut it loose, you know? Like, forget about this thing." We should double the frequency of the board meetings.... it's, oh, okay. (laughs) And it's because we're here for as long as the founder wants to try it. So it's like, you made the commitment to the founder, and from that point on, you try to be true to this, like, unconditional belief in the founder.

Harry Stebbings 1:01:08 So you mentioned Peter there. Um, what would you most change about the current process Benchmark has for investment decision-making?

Victor Lazarte 1:01:17 I think our process, it's- it's a very lightweight process, which is very good. So the way we work is, you know, we find a company. If you like it, you need to, like, get your partner, your partners, uh, opinion, but you don't need to get your partner's approval, right? So-

Harry Stebbings 1:01:35 Do you bring them in, do you bring them into early meetings with team, with founders? Do you kind of ha- hunt as solo? How does that work? Do you tag-team?

Victor Lazarte 1:01:44 It's all optional. It's like all optional. The one thing that is not optional is, like, you have to present the idea to the other partners, and everything else is optional. But the way it typically works is, like, you meet the, you meet a founder, and then you do a second meeting, like, where you bring another partner in, so you guys can, like, have that discussion. But then, like, if you know you wanna do it and you like it, typically, like, you bring the company in, everyone talks to the company, and then people vote. But it doesn't matter what the vote is. If you really wanna do it, you can do it.

Harry Stebbings 1:02:13 And so why vote? The vote is just a temperature gauge.

Victor Lazarte 1:02:18 So the vote is to disambiguate what people actually think. It's like, you got a clear- clear signal 'cause, you know, you're- you're gonna bring a company in. It doesn't matter what the company is. There's always, like, a ton of reasons to do it and a ton of reasons not to do it. And then people are like, "They'll argue both sides," so you force them to, like, give- put a number to it. That, and that number carries a lot of information, so, like, we vote from one to ten, and then you can't vote five.

Harry Stebbings 1:02:44 I asked Peter what should I ask him, and he said, "The one question I'd really wanna know from Victor is," (laughs) "if you look back in ten years, in what ways do you want to have meaningfully changed Benchmark to prevent its extinction?"

Victor Lazarte 1:02:58 I- I don't know if, like, prevents the extinction is the, is the function we're trying to maximize. I think the function we're trying to maximize is, like, there's gonna be $10 trillion companies created in the next decade. How do we make it so that we're in a large number of them, and we have a deep relationship with those founders? Like, I think that's, I think that's a maximizing function. And to me, it's just like, it works backwards from how are you, like, obviously the right choice for the founders that have a ton of choices? And right now, Benchmark, like, when we wanna do something, like, w- w- we typically do it. You know, like, typically, we have the chance to- to partner with the companies that we wanna partner. But the problem is, because we're a small firm, there's a lot of stuff that we don't even see, and, like, there's a lot of stuff that... And then sometimes, like, people are raising a round that doesn't look like a Benchmark round, and I think, I think that is the thing that is most important for us to change. It's like, a lot of times people think, "Oh, this is benchmark round. Like, this is not a Benchmark round." So I think what it means, like, it needs to be clear to everyone, was like, "Hey, what is, what's a Benchmark round?" And a Benchmark round is when there's a founder that is very capable going after a very big market, and as long as you have that, like, that's a Benchmark founder. It doesn't matter if you're raising, like, five million or if you're raising, like, like, 200 million.

Harry Stebbings 1:04:29 Is the fund size now a constraint? The constraint always was beautiful to everyone. It was a craft of Benchmark. In today's AI landscape, the f- the rounds we just see are so big, there's, like, you know, 25, 50 million to start.

Victor Lazarte 1:04:45 Yeah.

Harry Stebbings 1:04:45 Shit, if you want 15% ownership, you're putting 10% of the fund out on the first check.

Victor Lazarte 1:04:51 Yeah. So my first, my first check at Benchmark was a $55 million check into HeyGen, right? So, like, this was my (laughs) F- this was my inaugural-

Harry Stebbings 1:05:00 It was $55 million?

Victor Lazarte 1:05:02 Yeah. I wrote it, yeah, so th- this is my first check, $55 million check.

Harry Stebbings 1:05:05 Hoo! (laughs)

Victor Lazarte 1:05:07 And, yeah, 'cause, you know, and then, like, hey, we gotta be true to- to-

Harry Stebbings 1:05:10 No, I know, but dude, that, that's, that's 10.5% of the fund-

Victor Lazarte 1:05:15 Yeah.

Harry Stebbings 1:05:15 ... if it's a 500 fund.

Victor Lazarte 1:05:16 So it's like a 600-

Harry Stebbings 1:05:17 That's, that's big.

Victor Lazarte 1:05:17 It's actually a $600 million fund. Uh-

Harry Stebbings 1:05:19 Okay. That's a, that's a lot. I mean, that's amazing balls, dude.

Victor Lazarte 1:05:22 And, you know, I think a lot of funds, like, they think about, you know, portfolio construction and this and that, but the reality is, like, our LPs, like, they're the same LPs in all funds. So if you wanna do, like, one, like, one, like, $3 billion fund, or if you wanna do, like, five, like, $600 million funds, like, for our LPs, like, it's actually the same. Uh, and so I think the- the- the- the fund size has never been a, has never been a constraint. I think the constraint is, where it can make a difference is, like, in the beginning, so it's, like, early. And we work best with founders that wanna have a relationship. Like, some founders, some founders, they're like, "Hey, I do think it's valuable to have a sounding partner that is gonna have a lot of context on the business." And if you believe in that, then it's like, yeah, Benchmark is a, is- is- is a good fit. Most early rounds are less than 50 million, uh, but, you know, we- we've done, like, we've done things that are later. Like, we've done larger checks, and, like, sometimes if we're gonna do a lot- a larger check, we- like, we do an SBB. But this, the check size, is not... If we're talking, if we're talking about, like, inception rounds, like, it's not a, it's not, it's never been a constraint.

Harry Stebbings 1:06:33 Does, like, Brad Taylor come in and pitch to Partnership? Like, that, he's a special dude. Ciara's a (laughs) special company. Does he, like, come in and be like, "This is what I'm offering."

Victor Lazarte 1:06:42 So I think, I think on Brad's, I think on Brad's case is like, I think he had dinner with the partners. It was more like a conversation than, uh, than a pitch. Uh, I think, uh, like, Brad Taylor's case, you know, I think it's a good example. It's like, "Hey.... the guy is so accomplished, like, he could raise from anyone, he could do whatever he wanted. But I think he values, like, he valued the relationship with Peter, and said, "Hey, like, I think it's gonna be valuable to, like, have you along this way," right? And because it's an equal partnership, it's like, "Hey, these people, they're gonna be my partners in this company." So, it's like- it's like- it's a get to know you much more than it's like, "Hey, like, I'm pitching you," right?

Harry Stebbings 1:07:14 That is an insane one. Like, Brad could fund it himself for- for the rest of eternity in- in many respects, but he values Peter so much that he brings him in at that stage, so that's pretty special.

Victor Lazarte 1:07:25 Yeah. And- and frankly-

Harry Stebbings 1:07:26 I love it.

Victor Lazarte 1:07:26 ... I think it's a ... and I think that's a smart choice, and I think, you know, the best people, what they're gonna maximize for is like, "Hey, how do I get my conditions, my ini- initial conditions right? How- how do I get, like, the- the smartest people around the table?" 'Cause in the end, the initial conditions, like, they affect so much what it can actually do.

Harry Stebbings 1:07:48 Dude, I could talk to you all day. Um, do you mind if we do a quick-fire round and then-

Victor Lazarte 1:07:52 Let's do it.

Harry Stebbings 1:07:52 ... I'll let you actually get on with some proper work.

Victor Lazarte 1:07:55 Let's do it.

Harry Stebbings 1:07:55 Um, what do you believe that most around you disbelieve?

Victor Lazarte 1:07:58 So I think ... I- I- I believe that, like, pretty soon ... Uh, this thing that we talked about, I think that pretty soon we're gonna have an app, and like, we're just gonna wake up and do whatever the app tell us to do. And, in a way, it's like we're gonna be obedience to machines and we're gonna love

Victor Lazarte 1:08:15 it.

Harry Stebbings 1:08:15 Single biggest lesson from working with Peter Fenton?

Victor Lazarte 1:08:18 I think the thing that Peter does better than anyone I've met is, he can ... understands people, and like, he can get people to open up. So, lots of times, before- before we decide to- to work with a founder, like, Peter takes people to dinner. And- and- and a lot of times, like, I would introduce people to Peter and like, and I'd take him, I'd take Peter to dinner with someone. And even ... So for example, I took the Brax COO to have dinner with Peter, and it's someone that I've known for many, many years. At the end of like that two and a half hour dinner, I felt like I knew the person a lot better than I did before. And so I think Peter does this thing where he's able to make people open up in a way, and the effect that it has is like people leave the dinner and they said, "Wow, like, I just had a really special dinner." Right? So I think it's a superpower, and I think that's kind of known that- that- that this thing happens. So, a lot of times, like if you wanna- if you wanna spend time with someone and, like, it's kind of hard, a lot of times I invite, "Hey, like, you wanna go have dinner with Peter and I?" And- and most times people say yes. And people say yes, they have a fantastic experience, and then they'll tell more people, it's like, if you get the invite-

Harry Stebbings 1:09:36 I would love-

Victor Lazarte 1:09:36 ... like, you take them.

Harry Stebbings 1:09:36 I would love the man that is like, "Nah, sorry, I'm watching Netflix." (laughs) Do you know what

Narrator 1:09:42 (laughs)

Victor Lazarte 1:09:42 That- that hasn't ... I'm sure it will happen at some point, but that hasn't happened yet.

Harry Stebbings 1:09:45 No. I- I don't think it's gonna happen, uh, don't worry. That's- that's just too

Harry Stebbings 1:09:48 funny. If you can buy and hold one public company stock for 10 years, what do you buy and hold?

Victor Lazarte 1:09:54 Duolingo. Man, AI is gonna change people's lives in, you know, very- in really important ways, and I think one really important thing is like, the way we're going to learn is gonna be through AI teachers, and- and Duolingo i- i- like, I think it's very sneaky. Sneaky in a good way, like they're starting with like this language app, but they're making like, they're making your AI friend that teaches languages, and then they're gonna teach more stuff. And- and- and Luis, the founder, like, he's a, like, he's a total genius. So I think- I think he's going to make a free AI tutor for everyone, that's gonna be incredibly important to humanity, and it's gonna be a very valuable company.

Harry Stebbings 1:10:34 You can invest in one seed fund and one growth fund. I'm not choosing A, 'cause that's tough for you. Who do you choose?

Victor Lazarte 1:10:42 Oh, there's so many great ones. Like, uh, like I- I'm- I'm actually an investor, like, so there is a, there's a, there's a- -objective answer to that, is like, I'm invested in, uh, GreenOaks, uh, I think, I think they're really good. Uh, and it-

Harry Stebbings 1:10:57 Neil Mason, just take me already. I mean, God, this man is brilliant. (laughs)

Victor Lazarte 1:11:01 Yeah, he's amazing. No, he's- I- I really like, 'cause his- I really like him. And then I'll- I'll go, like on early I'll go with Conviction, 'cause I think Sarah, Sarah's great.

Harry Stebbings 1:11:11 Okay. Uh, final one. When you think about the next 10 years for you, if we do this in 2034, where do you want to be then, and what do you want to have achieved? What does Victor Lazarte look like then?

Victor Lazarte 1:11:23 I want to be an important part to the most important companies created. And that can be a early board member, and that can be a co-founder, but I wanna look back and say, "Hey, AI is gonna solve so many of humanity's biggest problems," you know, like from, like, education to security, and these companies are being created now to companionship, and I wanna be an important part of their story.

Harry Stebbings 1:11:57 Dude, I am so glad that we had this schedule that I completely ignored, and I- I think you saw that it was a much more free-flowing discussion. I- I so appreciate you rolling with the free-flowing discussion. Um, you've been fantastic to have on. Thank you so much for joining me, man.

Victor Lazarte 1:12:14 Thank you, man. This was a lot of fun.