EVERY SPOKEN WORD
120 min read · 24,122 words- 0:00 – 0:47
Why Benchmark dinners exist: connection over agenda
- SPSpeaker
I've spent a lot of time in, in, in, in, in Europe, and the dinners are about three hours, maybe three and a half hours long. So unlike the-
- DRDavid Rosenthal
That's an Acquired episode. [laughing]
- SPSpeaker
Yeah. [laughing]
- SPSpeaker
There you go. And that's the whole point, is that social connection is not something that's transaction. It's fluid, it, it's fun, it's playful. And, and so the idea is people are coming out beaming, smiling after a dinner, as opposed to, um, you know, this sort of rigid structure of a typical dinner with an agenda. There is no agenda.
- SPSpeaker
No agenda.
- SPSpeaker
Yeah.
- DRDavid Rosenthal
No agenda.
- SPSpeaker
I don't have an agenda today.
- SPSpeaker
The agenda is to come together. [laughing]
- SPSpeaker
[upbeat music] Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Hm. Is it you? Is it you? Is it you? Sit me down, say it straight, another story on the way. Who got the truth?
- 0:47 – 2:30
Episode setup: recording the legendary partner dinner
- BGBen Gilbert
Welcome to Season 11, Episode 5 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I am the co-founder and managing director of Seattle-based Pioneer Square Labs, and our venture fund, PSL Ventures.
- DRDavid Rosenthal
And I'm David Rosenthal, and I'm an angel investor based in San Francisco, where we were for this very episode.
- BGBen Gilbert
Indeed, and we are your hosts. Last episode, we told the four-hour story of Benchmark, the legendary venture capital firm that stayed small while all their competitors ballooned in size. At the end of the episode, we mentioned that their partner meeting had this dinner at the end of it, where the five equal partners of Benchmark sit down for an open-ended discussion, sometimes with a special guest. Well, we were talking with the Benchmark partners about that last episode, and they invited us to be their guest for one of these dinners, and for the first time ever, record it, even on video. So we are so pumped to share this with all of you. We got to ask them about a lot of the open questions we had about the future of balancing those out-there consumer investments with their B2B portfolio, how they think about making sure that they see that next world-changing company, the pressure of inheriting a top venture firm and trying desperately not to mess it up, and of course, there's some good war stories from the portfolio companies in there, too, David.
- DRDavid Rosenthal
Indeed, indeed. Bet, this was such a special episode on so many fronts. This is, by far, is a record on an Acquired episode for number of guests that we have concurrently.
- BGBen Gilbert
Oh, we had seven microphones running.
- DRDavid Rosenthal
We had to buy, like, $5,000 worth of gear just for this episode. [chuckles] I think it was worth it, though.
- 2:30 – 6:32
Sponsor segment: Fundrise Innovation Fund and product-led investing
- BGBen Gilbert
Next time, I need to account for the fact that there will be, uh, violent laughter when I'm setting the audio levels, 'cause we had a blast, and you'll definitely hear it when you listen. Well, for our presenting sponsor on this episode, we have a company that you know very well at this point, Fundrise, and this very interesting thing they've been sharing with us this whole season called the Fundrise Innovation Fund, that enables their customers not just to invest in real estate, but also private, late-stage growth tech companies. So we are back today with Ben Miller, the CEO and co-founder, to dive a little deeper into the model.
- DRDavid Rosenthal
I wanna ask how you are identifying companies that you want the Fundrise Innovation Fund to invest in?
- SPSpeaker
So we're a different kind of investor than most venture funds, because we are also a tech company. We have 100 software engineers. When we went out looking for great companies to invest in, we started thinking: "What are great technologies we wanna use?" And if we like the product, and our engineering team can vet them, then pretty much anybody would wanna buy them, and that's a good, good signal that, that we should invest in them. And so we [chuckles] we reached out. We had our engineering team set up calls with companies we thought were potentially interesting. We started integrating even more advanced technologies than we probably would've otherwise. RudderStack, incredible company. Retool, incredible company. We're gonna be customers of those products and, hopefully, investors. We're not investors now, so not to choose anybody, but I think it's very consistent with Fundrise's approach. When we invest, Fundrise wants to bring as much value as we can, so we have a million and a half users and individual investors. That's gonna bring brand awareness. That's gonna bring future developers who adopt the product, and we'll be a customer. You hear dogfooding, right? We don't need to, you know, look at Tigas re- reports to figure out if the product's good. We're gonna actually diligence it with our software engineers. Even though I do like Tigas, it's a great product.
- DRDavid Rosenthal
It is a great product.
- SPSpeaker
Yeah. Every time we make an investment, especially, like, big, notable investments, we send out an investor update that's almost like a combination of an investor report and an Instagram story. It's really how investor reporting should work. And we send it out to, you know, basically, almost 2 million people. A million and a half people will get this. So it's a, it's a whole different form of comms for companies that I think is really gonna be valuable, but people actually never seen it before.
- BGBen Gilbert
It's a little bit like going public.
- SPSpeaker
Yeah, it's just without all the nightmare of actually being public.
- BGBen Gilbert
Our thanks to Fundrise, the largest private investment platform in the world for retail investors. You can click the link in the show notes, and if you're a founder and you wanna get in touch with them about the Innovation Fund participating in your next funding round, email notvc, that's notvc@fundrise.com. Well, we just launched the Acquired 2022 Survey. We would be eternally grateful if you would take the three minutes to participate and help us learn a little bit more about who listens. One winner will get second-generation AirPods Pro, and 10 winners will get T-shirts from our merch store. It's a huge help, so please and thank you. Well, we have an update to the merch store. We got many requests about this: "Gosh, why isn't there a dad hat?" Well, we called up the good folks at Cotton Bureau, and we did some horse trading, 'cause I wanted a really good one. You know, I wanted one that was embroidered, that felt nice. So for the next couple weeks, there'll be a limited edition dad hat embroidered with ACQ right there on the front, so get them before they're gone at acquired.fm/store.... All right, join the Slack acquired.fm/slack. The LP Show has been on fire recently. For those of you who are paying LPs out there, we just dropped an interview on the profitable growth playbook for B2B companies with Jalay Rezaei, the CEO and co-founder of Mutiny. That is live just for LPs right now for another week or so, and then it will hit the public feed. So you can become a LP at acquired.fm/lp, or get those episodes after they're made public by searching
- 6:32 – 11:59
The origin story of the dinner tradition—and the purpose-built table
- BGBen Gilbert
for The LP Show in your favorite podcast player. Now, without further ado, on to the dinner! And listeners, as always, this show is not investment advice. David and I may have investments in the company we discuss, and, uh, this show is for informational and entertainment purposes only. Okay, so our first question is, what are we doing here? Like, what are we at? And Peter, it feels like you would be the best person to explain this dinner tradition.
- BGBen Gilbert
Why do we have a dining room in the office? [laughing]
- SPSpeaker
On the nineteenth floor. [laughing]
- SPSpeaker
When I joined Benchmark, there was great optimism between Bill and me about, you know, injecting new practices, new habits, new ideas into the firm. And Bill had just read the Ben Franklin, uh, biography, and Ben had four dinners, if I recall, a week, but they were, like, going deep on finance, then on, you know, chemistry, and then on life sciences, and, uh... And he took the catalyst to say, like, "Why aren't we doing dinners?" And anyway, we had this like, playful, you know, experiment where we said, "Well, let's try a few of them." And then we did a, a big dinner towards the end of the year, and I think it was like two thousand and seven, maybe two thousand and six. Two thousand and six. It was actually my first year. And, uh, it was amazing, like time stood still. And, and we realized, like-
- BGBen Gilbert
Just, just the partners, or?
- SPSpeaker
No, we had four outside guests: uh, Katarina Fake, uh, Mike McCue-
- BGBen Gilbert
Yep
- SPSpeaker
... um, Gideon Yu, and Martin Mikos, if I'm not mistaken. And it was electric. And we came out of that... Bill had this habit, he'd always call me in the car after, like: "What'd you think of the dinner?" I'm like, "Ah, it was fun-
- BGBen Gilbert
[laughing]
- SPSpeaker
- but I want to go to bed." He's like, "Ah!" [laughing] Alcohol had been served, people were in a bit-
- BGBen Gilbert
Like, it was his baby. He wanted to, like, keep working on the concept?
- SPSpeaker
Well, well, we, we danced with this idea, and so the concept that, that I came to is that firms are full of strategies that aren't coupled to reality. And if you look at a venture firm, eventually, it's just a collection of habits. And this is stealing from William James, who I think was the greatest American thinker, um, that, you know, we are nothing but an amalgamation of our habits, and habits sow character, they sow everything. So the idea that we should be nurturing curiosity, which is the essential lifeblood of the firm, needed a habit. And, and, and Mondays, as much as they're an attempt at that, you sit around the office and you joke around, you try and d- dive into topics, they're, they're limited. And so the dynamic range of a dinner with, um, you know, uh, an open-ended, no agenda, wild explorations of the most bizarre things your partners might be curious about, and I've definitely got in a few, you know, rabbit holes with, with this group-
- BGBen Gilbert
[chuckles]
- SPSpeaker
- and they pulled me out. Uh, you know, it just became one of those things that honored the purpose of the firm, which is the sense of, like, constantly learning and, and activating our curiosity, but, um, you know, collective effervescence of a group that we could never get in a one-on-one dinner. Um, one of the challenges, which is being manifest right now-
- SPSpeaker
[laughing]
- SPSpeaker
- is that in a table, you know, where there's a head of the table, you can get a dominant participant in the dinner conversation.
- BGBen Gilbert
[chuckles]
- SPSpeaker
But the problem with the table is that you either have a rectangular, uh, structure, which carries power structure embedded in it, um, or you have a circular table, which atomizes the group. And so I'd seen this table, uh, The Seven, by Jean-Marie Massaud, who's a French designer, and, um, I ran with the idea. Something that would be organic, that could expand and collapse, but most essentially destruct or deconstruct power centers and, and create a non-hierarchical construct with intimacy. But this table ends up being, um... Ole Lundberg designed it. We gave him- I gave him a hand sketch, and, and he ran with it, and, uh, it's, um, allowed Ole's lifestyle to meaningfully upgrade, because- [laughing]
- BGBen Gilbert
[laughing]
- SPSpeaker
- the number of people with means that have sat at this table have decided they need a table just like this, uh, so-
- BGBen Gilbert
Well, and the people you have at this table, just for listeners who don't understand the gravity of this dinner, it tends not to just be the five partners. You have f- pretty esteemed guests come to these.
- SPSpeaker
It's the spotlight of attention, which is the biggest gift you can give to another human being on an individual. And more often than not, it's somebody that we haven't worked with or invested in, and, uh, I think you guys might have mentioned this in the podcast, that, uh, we've had dinners with people like, um, Dylan Field. And, oh, you come away, you're swept off your feet. You're like, "Why-- This is why we exist, to serve people like that." Um, Tobi from Shopify. Um, you know, Jeff Bezos has been, um... We travel to Jeff. [laughing]
- BGBen Gilbert
[laughing]
- SPSpeaker
Do you bring the table?
- BGBen Gilbert
Unfortunately, it's not portable. [chuckles]
- BGBen Gilbert
The Di- the Diana side, Seattle side, or [chuckles] in LA?
- SPSpeaker
We've been in LA. We have been in LA, we've been in Seattle.
- SPSpeaker
And I think you can tell just from... You can see the ethos of the firm in the structure of the table, too, which is that you can't have a sidebar conversation at this table-
- BGBen Gilbert
Right
- SPSpeaker
... because everybody else can hear it, and so it's all one conversation. And that, um, you know, sort of coming from a, from the outside and then being part of Benchmark, like, the one conversation element of everything that we do on Monday is so powerful. Because we're all tuned in on whatever's being discussed, and sometimes it's not great news, sometimes it's good news, sometimes it's tough news. Whatever it is, getting the whole group tuned in, I think is like the, is the essential power of this structure, and I really like the table for that. [chuckles]
- 11:59 – 13:44
One conversation culture: no pre-selling, no memos, truth-seeking
- DRDavid Rosenthal
I mean, I remember, I'll, I'll never forget, early in my venture career, when I was a venture capitalist, um-... I remember an older partner taking me aside and saying, like, "If you wanna bring something up at the partner meeting, you need to have had a side conversation with everybody else before you bring it up at the table."
- SPSpeaker
Right.
- BGBen Gilbert
Which is so funny-
- DRDavid Rosenthal
Like-
- BGBen Gilbert
'cause Bruce, when we were talking to Bruce Dunlevie, he was like, "Our one rule was no pre-selling a deal."
- SPSpeaker
Right.
- BGBen Gilbert
Like, you can't walk around the hallway and say, like, "Hey, I'm super excited about this one later." Like, if you, you know, y- "I think you'll be excited, too. Like, vote for it." [laughing]
- SPSpeaker
[laughing] That's, uh, one of the great perks, especially for somebody who's come from another venture firm to Benchmark, is you don't write a memo.
- SPSpeaker
Mm.
- SPSpeaker
And it's because the memo, you know, when you're... A memo really is a vehicle to, to, you know, obviously give background on a company, all the work you've done, but it is also a little bit a pre-sell before the company comes in to present.
- DRDavid Rosenthal
It's, it's persuasion.
- SPSpeaker
Yeah. And so, you know, a lot of hours get consumed by the writing of it and the reading of others. And not to, to have, like, a founder come in then and there's none of that.
- SPSpeaker
Mm.
- SPSpeaker
It's a blank sheet, and you just get to have the experience of the founder. It's, um, it's a, it's a nice opening-
- SPSpeaker
Sarah, Sarah uses this phrase, which is truth-seeking, which I think is a really good one-
- SPSpeaker
Yeah
- SPSpeaker
... which is, it's like... Yeah, does it- does the d- is the company incredible, and does that company have a chance to be one of these few extraordinary companies every decade? And, like, that's, that's actually all that matters. Like, that's all that matters for all of us. And if you find that, um, then you really don't need to sell it.
- SPSpeaker
Yeah.
- SPSpeaker
You don't need to sell it.
- 13:44 – 19:08
Doing the work without artifacts: teamwork in real time
- BGBen Gilbert
Do, do you have any sort of format of codifying your thinking? 'Cause, like, memos serve the purpose of forcing you into clarity of thought, in addition to creating an art- a sales artifact. And so how... W- what things do you do in your partnership to gain clarity of thought?
- SPSpeaker
I would say the memo is a crutch often, because, yes, it can force you into clarity of thought, but it also allows you to fill in blanks that the entrepreneur themselves are not saying. And it pushes a sort of bias and perspective that maybe the firm has, or maybe you have a sector thesis, and it's like, there's a lot of manifestation of ego when you put a memo together. Not having a memo does not replace work, and does not replace-
- BGBen Gilbert
Mm-hmm
- SPSpeaker
... the calls and does not replace the conversations. And what I find so amazing about our Monday discussions, when you're relaying the calls you have, relaying the notes you took on those calls, you're actually telling exactly what you've discovered without the overarching bias, without your ego pushing into it. You're not pushing anything into the firm. You're just saying, like, "This is what I've discovered. We all just heard from the entrepreneur." It either confirms their views and sort of, like, how they wanna row through this market, or we found some challenges, and so it's, it's that sort of like... And I think you all mentioned it on your podcast, which is that when you talk to Benchmark partners, it feels like we don't have some hard stop. We can just keep going. [chuckles]
- BGBen Gilbert
Yeah.
- SPSpeaker
And that is the beauty of that Monday meeting, which is that we don't have a next topic to jump to. It's not like we're working through a list, and so we allow ourselves to have that open discussion.
- DRDavid Rosenthal
There's an agenda. [laughing]
- SPSpeaker
[laughing]
- DRDavid Rosenthal
You gotta go through the CRM-
- SPSpeaker
[laughing]
- DRDavid Rosenthal
... and update the CRM.
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
And if you haven't updated your CRM, you're gonna get...
- BGBen Gilbert
Negative points? [chuckles]
- DRDavid Rosenthal
Negative points.
- SPSpeaker
Yeah.
- SPSpeaker
[chuckles]
- SPSpeaker
Like, I don't see all these, all these calls logged into the CRM. [laughing]
- SPSpeaker
[laughing]
- BGBen Gilbert
[laughing]
- SPSpeaker
I also think that, like, the, the artifacts, like, they live in the memories and the lived stories of the partners. And so, like, you sort of... If there's a curiosity in that direction, call up Matt, call up each other, call up Matt, call up Bill. Um, and so the- those learnings, those stories, that wisdom sort of still, still walks, um, successfully.
- SPSpeaker
And one of my first experiences of this unbounded agenda on a Monday was I'd brought up a-
- DRDavid Rosenthal
It's so uncomfortable. [laughing]
- SPSpeaker
[laughing]
- DRDavid Rosenthal
For a new partner coming in, it's like-
- SPSpeaker
No, it actually... Because before, like, you, you know that that's gonna be what Monday is like coming-
- DRDavid Rosenthal
Yeah
- SPSpeaker
... on your first Monday. You're very-
- DRDavid Rosenthal
'Cause four of the five of you-
- SPSpeaker
Yeah
- 19:08 – 25:44
Equal partnership psychology: excellence, fear, joy, and self-renewal
- DRDavid Rosenthal
So one of the things we spent a bunch of time talking about on the first episode was what the psychology must be like, Ben and I speculating, of being a- around this table here as a partner with you guys. And our thesis was that for a ordinary group of people, it would trend towards mediocrity. But if you have a cultural norm of, "We are all bringing it all the time," [chuckles] then it trends towards greatness.
- SPSpeaker
And, and why would it trend toward medi- mediocrity?
- DRDavid Rosenthal
Well, because it's the line that, uh, a bunch of other GPs said about Benchmark when it was getting started was, "That's communist capitalism-
- SPSpeaker
Mm.
- DRDavid Rosenthal
- and it's gonna trend... It's gonna end up like communism."
- SPSpeaker
Right.
- DRDavid Rosenthal
Um, but obviously, that is not the case here. I'm curious what that like, feels like for you guys on a day-to-day, week-to-week basis, knowing we've got this partnership, this relationship, we spend all this time together, but obviously, we each need to, like, really bring it.
- SPSpeaker
So right before Sarah was joining... [laughing] Do you remember this?
- SPSpeaker
Yeah, of course. This is what? Six- five and a half, six years ago.
- SPSpeaker
Yeah.
- SPSpeaker
Something like that. So she texts me on a Saturday. She's like: "Do..." So we hadn't didn't announce, we hadn't, we hadn't decided anything. Like, it was like we're... But we were close. And she's like: "Do you have time tomorrow?" "Okay," this is-
- DRDavid Rosenthal
[laughing]
- SPSpeaker
Um, and so anyways, we got brunch at the pub, and she's like: "Eric, okay. What, what's our job at Benchmark? Like, this is, this is V3 or whatever, Benchmark. Like, what, what is it?" And I was like: "Sarah, [laughing] job number one, don't fuck it up." [laughing]
- SPSpeaker
[laughing] No pressure.
- SPSpeaker
Yeah. [laughing]
- SPSpeaker
Don't fuck it up.
- SPSpeaker
[laughing]
- SPSpeaker
Because I, I think there is a real risk that y- you could imagine a risk where you feel like you're born on third base or whatever the-
- DRDavid Rosenthal
Right
- SPSpeaker
... analogy you wanna use is. A- and I think one of the things that you have to hope for is that every single person who you, you add feels like, "Hey, I'm in service of the entrepreneur, and it's my job to find and work with and help-
- DRDavid Rosenthal
The next eBay-
- SPSpeaker
The next-
- DRDavid Rosenthal
The next-
- SPSpeaker
Yeah
- DRDavid Rosenthal
... you know.
- SPSpeaker
The next great- the next great entrepreneur. And, and believe me, I wake up every fucking morning, like, hungry, that I don't wanna be the beginning of the end.
- DRDavid Rosenthal
Yeah.
- SPSpeaker
You want to contribute, and, um, and that really-
- SPSpeaker
Where, where does that come from for you personally? Why, why are you... Because you don't have to. Mm.
- SPSpeaker
Because I'm a failed entrepreneur. I think that's- I, I, I think that really is, is it for me, which is I know what- I know how hard it is because I did it and failed.
- 25:44 – 28:02
Past partners as “aunts and uncles,” not overlords
- DRDavid Rosenthal
One thing I'm curious, uh, what is the relationship of past Benchmark partners to this group? Uh, we talked about, um... One of the things I remember, you know, from the research and hearing, Eric, you and Bill both talk about is with Cerebras, "We gotta call Bryce. We gotta call the old guys."
- SPSpeaker
Yeah.
- DRDavid Rosenthal
Like, what-
- SPSpeaker
Yeah
- DRDavid Rosenthal
... what is that relationship like for you five?
- SPSpeaker
Um, I mean, the official relationship is they're LPs. Like, that's the official relationship. Like, they're LPs with us, like other LPs. Um, the... I think the more, the feeling relationship is, like, they're... You call them, and they want to see you succeed for all the reasons Peter's talking about. And, and so they pick up the call and, um, and help, and put their network at work to, to help you. And they have a lot of insights and have seen a lot of stuff. Um, and-
- SPSpeaker
I would say one way, one shorthand, they feel more like uncles and aunts than they do like parents or grandparents.
- SPSpeaker
That's a great-
- SPSpeaker
Mm.
- SPSpeaker
Yeah. Uh, that's perfect.
- BGBen Gilbert
And for listeners who don't know, because I didn't know until Chetan just showed us, uh, the Benchmark partners, none of you have offices. Like, you all sit at this crazy, um, round table. It looks like you're going to war, and you're like- [laughing]
- DRDavid Rosenthal
[laughing]
- BGBen Gilbert
... you're, like, you know, trying to put the strategy up on the board. And, um, and, like-
- DRDavid Rosenthal
You guys need a holodeck in the middle. [laughing]
- SPSpeaker
Yeah. [laughing]
- BGBen Gilbert
[laughing]
- SPSpeaker
We had a poop emoji sofa. [laughing]
- BGBen Gilbert
Yeah. [laughing] It was not officially a poop emoji, but just like... [laughing]
- BGBen Gilbert
But, but you have, like, uh... There are aunts and uncles with computers over there. Like, it- there were not five computers. There were seven, eight, nine?
- BGBen Gilbert
Yeah.
- BGBen Gilbert
I mean, it's-
- SPSpeaker
We're getting rid of them. [laughing]
- SPSpeaker
[laughing]
- SPSpeaker
Not fast enough, but they'll be gone soon enough.
- BGBen Gilbert
[laughing] So yeah. Yeah, you, you, you're saying that's, that's... I shouldn't read into that like they're here still physically.
- SPSpeaker
Aunts and uncles, it's fine if they visit. [laughing]
- BGBen Gilbert
Yeah. [chuckles]
- SPSpeaker
But not stay too long. [laughing]
- DRDavid Rosenthal
They can watch the kids every now and then, but like-
- SPSpeaker
Right, but as soon as there's a real problem... It's funny, 'cause aunts and uncles say, "Here's your baby." [laughing]
- 28:02 – 35:08
What hard work looks like: the ‘get on a plane’ commitment story
- DRDavid Rosenthal
What, um... Oh, okay, so picking up on that theme, one of the things that I always have appreciated about you all, uh, having done some co-investments in past lives and just your reputation in the industry, um, the hard work. What are examples of the hard work, like real examples, that like-
- BGBen Gilbert
We're, we're gonna dish this to Chetan-
- DRDavid Rosenthal
The, the-
- BGBen Gilbert
... because I, I know a story.
- DRDavid Rosenthal
Yeah, I know you have a story here, uh, a very recent one. Um-
- SPSpeaker
This guy got off a plane.
- DRDavid Rosenthal
But, like, the aunts and uncles are not gonna do-
- BGBen Gilbert
Yeah. [laughing]
- DRDavid Rosenthal
... not gonna do anymore. [laughing]
- BGBen Gilbert
That's the-
- BGBen Gilbert
[laughing]
- BGBen Gilbert
For the screen.
- BGBen Gilbert
What, what are the ways in which you, uh, get put to work by your portfolio companies, Chetan?
- SPSpeaker
Yeah. Well, this, uh, this, to, to... Chetan, and part of the reason he's discombobulated and has a cold brew in front of him- [laughing]
- BGBen Gilbert
At 5:00 PM
- SPSpeaker
... for those of you who are watching the video, at 5:00 PM, is he got off an international flight three hours ago-
- SPSpeaker
Yeah
- SPSpeaker
... or four hours ago.
- SPSpeaker
But was with us-
- SPSpeaker
Which-
- SPSpeaker
... on Monday
- SPSpeaker
... which was, was with us, uh [laughing]
- BGBen Gilbert
And decided, and decided to go.
- SPSpeaker
And decided to go-
- SPSpeaker
At 11:00
- SPSpeaker
... on, on Monday.
- SPSpeaker
Yeah.
- SPSpeaker
And today's Wednesday, so here we are, 48 hours.
- DRDavid Rosenthal
I'm doing great.
- SPSpeaker
You guys can do the math. [chuckles]
- 35:08 – 41:49
Founder-first vs fiduciary tensions: vulnerability and alignment around purpose
- SPSpeaker
Can, can I ask, and, and this may be, you know, drifting into a, an area that's, that's harder to talk about, and so, uh, we can abstract it a little bit away. We talked about Uber on our episode, but I want to abstract it to, you know, how you think about this generally. The role of a general partner in a venture capital firm, traditionally, is that you have a fiduciary responsibility to your LPs to maximize their returns, and you have a, a second fiduciary responsibility when you join the board of a company, to the company. And it's hairy enough trying to balance the trade-off that... 'Cause sometimes those things are at odds. You're representing all shareholders on the company's side, and with your LPs, you're representing, you know, their interests. And so you then introduce this third thing, which is the thing you care the most about, which is support of the founder-
- SPSpeaker
Mm
- SPSpeaker
... and empowering the founder. W- when do those things get hard? How do you balance those things? I assume most of the time you're indexing strictly to, "We're partnering with this founder, and we trust them." But when, when do you have to juggle those things?
- SPSpeaker
Yeah, I mean, it's, um... People go to therapy, often they only talk about the shit that's going wrong, and I think it's useful to think about what's going right. And if there's not a DSM for flourishing, there's, there, there's a DSM-
- SPSpeaker
[laughing]
- SPSpeaker
... for dysfunctions. We could open that book up, and we're gonna have all sorts of flavors of dysfunctional behavior. [laughing] ... and I'm, I, I think we could do that, and that would be illustrative and informative about how it can go wrong. I would flip it and say, when it works well, what are the preconditions of where you have alignment? And then, and then you look at degradations from that.
- DRDavid Rosenthal
Mm-hmm.
- SPSpeaker
I think one of the words that's sort of vital to any durable founder benchmark partner relationship is vulnerability. And if, if there's ever caution or pause, of "I can't share this information with my..." Then we've, um, degradated the relationship, and we have to fix that, and you fix... Trust is fixed intimately, one-on-one. You have conversations that allow you to zoom up to say, "Okay, what's the collective purpose?" And I think that we could talk about Uber, we could... I, I have every reason to believe Travis's purpose was, um, the biggest, most extraordinary Uber imaginable.
- DRDavid Rosenthal
Mm-hmm.
- SPSpeaker
And, you know, we had a collective gaze on that together, and, and, and in many situations, this was one of them, pathologies creep in. And you learn this through a course of firm experience, which is when you start to see that happening, you need to act immediately. Because the minute we get othered, and it's not about us and this p- joint purpose, but it's you and me, it's my agenda and my LP's agenda and all that. And I sadly see that with a lot of the other firms in the industry, because it's not necessarily the partner in the room that's got the issue. It's their partners that have told them that they need to do this or they need to do that, and I see it, and I'm like: Oh, man, I adore you, b- but [chuckles] your partners, I have different feelings about. And you're here trying to rattle... 'Cause they've said, "Why aren't we meeting our plan?" And so the entrepreneur immediately, vulnerability snaps like that, and it closes-
- DRDavid Rosenthal
Mm. [chuckles]
- SPSpeaker
... and then you have no trust, and now they come to us typically, and they say, "We got a problem with one of our directors." I'm like, "Okay." So we'll, you know, we'll have an off sidebar with them and say, "What's going on here? How can I help you with your partners?" And, um, as much as, you know, you look at, at situations where it falls apart, let me give you an inverse story, which is where it really only could work, I think, in this firm model. I was on the board of a company that wrecked somewhere between two to three hundred million dollars of capital, and I'm pretty accountable. Now, I should be fired if this job actually had-
- DRDavid Rosenthal
[laughing]
- BGBen Gilbert
[chuckles]
- SPSpeaker
... those standards and governance and practices, and that company's called Docker. And I was just in Miami yesterday at their all-hands meeting, and I remember the last time-
- DRDavid Rosenthal
And when you invested, it was called DotCloud, right?
- SPSpeaker
DotCloud. So the last time I did an all-hands meeting with Docker was three years ago, and there were 60 employees that, that we'd spun out of the, um, the prior company, and the valuation was zero. So we'd gone from over a billion, four, a billion, five, to zero, and I was working with some of the great venture capitalists in the industry on that company, and aside from Insight Partners, crickets, gone, all left, bailed. And I... This is okay. Um, what was different with Benchmark, Insight's another story. Um. [chuckles]
- DRDavid Rosenthal
[chuckles] There's a [clears throat] very fun, um, quote that we don't often talk about on the show. I don't think we ever talked about this on the show, but a very prominent firm has a, uh... One of their mantra quotes is, "Focus on your winners."
- SPSpeaker
Yeah.
- DRDavid Rosenthal
And, uh, I think that's what you're talking about here.
- SPSpeaker
Yeah. And, and... Well, at this point, it was a-
- BGBen Gilbert
Let's go through it
- SPSpeaker
... It was, it was a-
- DRDavid Rosenthal
[chuckles]
- SPSpeaker
... it was a pretty big loser.
- DRDavid Rosenthal
[chuckles]
- SPSpeaker
And, um, but the vulnerability that I was able to have with the team that remained, to say, "We made mistakes, we're accountable to it. Here's how we work through this." Because you know what? If you look up, and the purpose of Docker, we're literally at-- this is cliché. It's the beginning. You know, we have 30 million developers that use this product every day. Um, and-
- BGBen Gilbert
Yeah, that's the craziest thing. Unbelievable product success that completely changed the industry, but, like business moder- bu- business model and strategic failure, such that there wasn't effective value capture.
- SPSpeaker
There was value destruction, hundreds of millions of dollars of value destruction. My two partners, I came in, and I said, "I may be drinking my own bathwater. I, I, like, I don't know what to do here." I was really vulnerable, and I said, "If I've gone off the deep end," no part of that truth-seeking exercise would allow me to spin, position, blame, be a victim. Um, I was being accountable, and I said, like: "What have I done? And they said, "Not only do we believe in this company, can we put it in the new fund, too?""
- BGBen Gilbert
[chuckles]
- 41:49 – 59:50
Staying small and early: why no growth fund (and why it helps founders)
- DRDavid Rosenthal
So I wanna do, um, a big topic we really wanted to cover with you guys in this session is staying focused on early stage, not having a growth fund, especially when your entire peer set has become life-cycle capital providers.
- SPSpeaker
Mm.
- DRDavid Rosenthal
And I actually think this is a good entry into it. So Peter, the story you just told of, like, when things are not going right-
- SPSpeaker
Yeah
- DRDavid Rosenthal
... the Benchmark approach. I'm actually really curious, when things are going right, your competitive set has said, "When things are going right, we should go long." We are going to interpret that, I think, in large part, as a competitive response to you guys during the fast Fab Four era.
- SPSpeaker
Mm.
- DRDavid Rosenthal
We are going to become life-cycle capital providers.... we're gonna put a ton of money round after round after round into our best ones.
- SPSpeaker
That wasn't in response to benchmarks, that was in response to there's a crap ton of fees to make on [laughing] And, and the founders will keep taking our money, and we have the brand recognition. [laughing]
- DRDavid Rosenthal
Yes.
- SPSpeaker
That was not like, oh, Benchmark stayed so true to their thing that- [laughing]
- DRDavid Rosenthal
[laughing] Okay, I think there are three classes of firms.
- SPSpeaker
Yeah.
- DRDavid Rosenthal
There's a class of firm that fit that.
- SPSpeaker
Yeah.
- DRDavid Rosenthal
There's Benchmark, and then there's a class of firm that actually, we're making a strategic decision. We care about carry, we're playing for carry, we think we can-
- SPSpeaker
Hundred percent.
- DRDavid Rosenthal
Yeah. And, and those were valid decisions on, on that third class, but you guys have not done that-
- SPSpeaker
Mm-hmm
- DRDavid Rosenthal
... despite, I assume, every opportunity in the world to do so. Why?
- SPSpeaker
Can, can we ask Miles? You were the newest to, to join.
- SPSpeaker
He's gonna try and change that, so [laughing]
- SPSpeaker
[laughing] Well, actually, yeah, funny you ask.
- DRDavid Rosenthal
This is a great point- [laughing]
- SPSpeaker
[laughing]
- SPSpeaker
-to announce-
- SPSpeaker
Yeah. [laughing]
- SPSpeaker
... Benchmark growth.
- DRDavid Rosenthal
We've got an even bigger dining room upstairs. [laughing]
- SPSpeaker
Yeah. [laughing] Twenty-two.
- DRDavid Rosenthal
How far can we stretch this triangle, David? [laughing]
- 59:50 – 1:07:44
Core vulnerability of the model: sourcing without a giant machine
- SPSpeaker
There, there is one big trade-off with our model, though, um, that I think about all the time just because I'm a paranoid person, which is, at the end of the day, like, our job starts... Like, the thing that we have to be paranoid about every day is, how do we make sure we have that first meeting with the founder that's gonna build that next iconic company, right? And so much of what we do is about maximizing that probability that we do get to meet that founder and then end up partnering with them. And a lot of firms, I mean, all the other firms outside of us, have built machines around that. You know, you have legions of people at these firms. I grew up doing this. I was, you know, an analyst at Bessemer-
- DRDavid Rosenthal
Right, cold calling
- SPSpeaker
... cold calling startups.
- DRDavid Rosenthal
Yeah.
- SPSpeaker
Yeah, and so you have all these firms who have built these big teams to do that. They, uh, nurture relationships with seed funds, invest in the seed funds-... relationships with angel investors, incubators, like they have this machinery that's smart, because it's all about making sure that every deal, every round that happens, they're gonna be in the mix.
- DRDavid Rosenthal
Yep.
- SPSpeaker
We- there's five of us. [chuckles] You know? And there's always the risk that, like, a found-- that one of those founders who, you know, kind of mistake, basically, our, our lack of outreach for a lack of interest, when it's really just a constraint. And we do everything we can, of course. Like, it's not like we're just resting on our laurels and waiting for calls. We're doing everything we can to make sure that we are in the mix, but at the same time, we are limited. And-
- DRDavid Rosenthal
Even if you work twenty-four/seven-
- SPSpeaker
Right
- DRDavid Rosenthal
... you still have a lot less hours than-
- SPSpeaker
We're limited, and so that is, that's the, that is the big constraint that I know keeps, keeps, I think, all of us up.
- SPSpeaker
Hmm.
- SPSpeaker
You know, just making sure, how do we... The founder that is gonna raise that round, you know, m- many are intentional about, like, "How do I make sure that I'm gonna find the right partner for me, for the arc of this, you know, the journey that we're all gonna be on together?" But we're still not there-
- DRDavid Rosenthal
Well, I think there's also a, um-
- SPSpeaker
... all the time.
- SPSpeaker
Hmm.
- DRDavid Rosenthal
You know, you guys, at this point, have such a, for better or worse, mystique.
- SPSpeaker
Yeah.
- DRDavid Rosenthal
I think for a lot of, especially first-time founders, that are younger, that are earlier stage, they're probably like, "Oh, I'm not gonna call. I've got these other firms calling me. That's great, I'm gonna go with, but, like-
- SPSpeaker
There's- [chuckles]
- DRDavid Rosenthal
... am I gonna call Benchmark? Like, that seems like, wow, that's a lot of pressure." Like... [chuckles]
- SPSpeaker
And that's, that's, um, that's a potentially lethal risk for us, right?
- DRDavid Rosenthal
Hundred percent.
- SPSpeaker
Because if you think about us being the incumbent, and come back to the fact that, like, you know, a number of the people at this table have a lot of capacity, in the sense that they could dive in, they can give their all, and, and, and it's-- they're very available. And so one of the things you think about is the shift in the last fifteen years since I've been here. Um, you know, the, the investments that are occurring before we get engaged have gone up by about a, I don't know, a hundred X?
- SPSpeaker
Right.
- SPSpeaker
At, at least thirty X. And so-
- DRDavid Rosenthal
I mean, seed was not an asset class. It-
- SPSpeaker
Seed wasn't an asset... I thought, I didn't know I was a seed investor, [laughing]
- DRDavid Rosenthal
[laughing]
- SPSpeaker
[laughing]
- 1:07:44 – 1:15:14
Keeping the radar on: writing, referrals, and conviction-building with founders
- SPSpeaker
What do you do besides the five of your twenty-four seven being on? What things do you do to keep your radar operating, to, to try and address this problem?
- BGBen Gilbert
Yeah, how do you solve that problem?
- SPSpeaker
Yeah.
- SPSpeaker
We all have different ways. I mean, it's, you know, there is no single way for us, I would say. I mean, I like-- I always talk about having an air game and a ground game, you know? And for me, like I... You know, it helps me learn to, to write, and then, you know, you write about things, like, areas that you're interested in, and that tends to be its kind of virtuous loop also of then the founders who are thinking about, you know, building a marketplace or a next, you know, social product, a social network, will see something that I wrote or, or Bill wrote or whoever wrote, and then kind of come into the fold that way. Um, and then there's-- I mean, I think, like, you, you have the, the consumer, you know, the consumer lens that you have, you have a little bit of a wider funnel that you have to kind of keep your... There's-- You never know-
- SPSpeaker
Mm
- SPSpeaker
... where these things are gonna come from. There's so many different domains where the next consumer company might come. I think like the engine, the B2B stuff, the developer-oriented companies are closer to the ground.
- SPSpeaker
Yeah. I think we all have our own strategies, and I would say the one thing that's always interesting is to compare sort of our different strategies of sourcing and how investment- how we source investments. Um, I was sharing this note internally, which was that I found that a hundred percent of the investments that I've made as a Benchmark partner were all sent to us by an entrepreneur.
- SPSpeaker
Mm.
- SPSpeaker
And not necessarily an entrepreneur that we had backed.
- SPSpeaker
Yeah.
- SPSpeaker
It was oftentimes an entrepreneur who had met with us once or twice, and we engaged in their process, and we didn't get to the finish line with them.
- SPSpeaker
Mm.
- SPSpeaker
But they enjoyed the process so much, going back to what Peter said, is they went to the next entrepreneur and said, "You should go to the process. Like, just talk to them."
- SPSpeaker
That's the most meaningful-
- SPSpeaker
Yeah
- SPSpeaker
... introduction we can get.
- SPSpeaker
Yeah. And it's like-
- SPSpeaker
That, that, that carries so much weight. You have them to one of these dinners, and, [laughing] you know-
- SPSpeaker
Yeah. [laughing]
- BGBen Gilbert
Nod, nod.
- SPSpeaker
But I would say, I think, I think it's in part because, like, there isn't really, like, a process.
- SPSpeaker
Mm.
- SPSpeaker
Like, you know, like-
- SPSpeaker
That's true
- SPSpeaker
... if there's, if there's diligence, people, like, oftentimes, uh-
- SPSpeaker
Yeah
- SPSpeaker
... founders will ask: Well, what's your process?
- SPSpeaker
Yeah.
- BGBen Gilbert
It's the funniest question.
- SPSpeaker
I, I don't know. Like, we're just- we're going to explore this together, [laughing] and we'll do a track together.
- 1:15:14 – 1:29:07
How Benchmark actually decides: gut, commitment, pivots, and ‘good failures’
- BGBen Gilbert
As you're evaluating mutual fit on an investment, uh, between the entrepreneur and Benchmark, you know, in E boys, there's some famous line about: venture capital is more a balls business than a brains business. And, like, let's-
- SPSpeaker
Oh, yeah
- BGBen Gilbert
... stop using that phrase immediately, um, [laughing] but-
- SPSpeaker
But it's still E boys.
- SPSpeaker
You like that phrase. [laughing]
- BGBen Gilbert
Uh-
- SPSpeaker
It's the most E boys thing ever. Oh, boy.
- BGBen Gilbert
It seems to me Benchmark has shifted to become much more analytical over time. Uh, d- do you think about that? Do you think about what the right balance of, you know, gut feel and courage versus-
- SPSpeaker
Having done analytical things-
- BGBen Gilbert
Yeah
- SPSpeaker
... I would disagree with that completely. I would say that we're-
- SPSpeaker
I totally agree
- SPSpeaker
... not particularly analytical. [chuckles] And- So it's still a courage more than a brains business? No, I think it's, it's, it's very, like, gut driven, and it's like, it's, um, I would characterize it as like, it's a set of discussions that you have that resonate or don't resonate, and it's like, I really wanna commit to this and this puzzle for the next ten years, and let's go do it. And there's gonna be a lot of, like, fulfillment here, and if everything works and we serve that great purpose that we're all aiming for, then the financial returns are gonna be excellent.
- BGBen Gilbert
Yeah.
- SPSpeaker
But there's no sort of like outcome scenario analysis here that says, like, "Here's the ten percent upside, bull case, bear case." These are all things that-
- BGBen Gilbert
Right
- SPSpeaker
... you know, those of us that came from other places-
- BGBen Gilbert
Yeah
- SPSpeaker
... had all done. And one of the interesting things is, you know, watching the firm externally and seeing how this works inside of boardrooms, like Miles just talked about an example. You know, I was on a board, uh, with Peter for a long time before I joined here, and one of the things-
- BGBen Gilbert
It was Elastic?
- SPSpeaker
Yeah, that's right. And one of the things that... 'Cause I was on a number of boards, and I would see all sorts of board members, and one of the things that stood out to me that I aspire to, and I modeled a lot of my behavior after, was every board meeting, the amount of preparation that Peter would do ahead of the meeting, I mean, he was by far the best-prepared board member I had ever worked with, ever. And the number of discussions he would have, the number of calls he would make, and just how present he was in the board meeting itself, um, was just so far and above, like any other board member that I'd worked with. I was like: I need to model my behavior to that, 'cause that is the model board member. And I don't think that work, that dedication, and that commitment comes from any sort of analytical work you do on the macro, because if you do, then you start getting tied to your own biases, and you never let the company, the founder, the team breathe. Because there may be a thesis, but you rapidly pivot to something else because it's working or you're getting different signal. And so I think that there's so much of this that is just instinct, gut feeling, emotion, commitment, et cetera, et cetera, but- but it's not analytical.
- SPSpeaker
I think most of the investments we make, it differs consumer, enterprise-
- SPSpeaker
Yeah
- SPSpeaker
... marketplace, like all of them, are different in different ways. There's just very little data to analyze, period.
- BGBen Gilbert
But when you're looking at something that's like a consumer social app that seems to be catching fire, like, there are things you can know, like viral coefficient or, like, uh, how, you know, week-over-week growth-
- SPSpeaker
And I think that a lot of those things will lead you the wrong way. [laughing]
- SPSpeaker
Yeah. [laughing]
- SPSpeaker
Yeah. [laughing] Well, you know, the, uh, the truth is, in this market, oftentimes, you're making a commitment before there's enough-
- BGBen Gilbert
Right
- SPSpeaker
... enduring data to really know, know what it is. But the way I-
- 1:29:07 – 1:51:32
Succession and the ‘principal program’: rules, exceptions, and special people
- DRDavid Rosenthal
Oh, the um... Okay, so last big topic. I think a lot of folks- we asked a lot of folks in the ecosystem, what do they want us to ask you? We're the, we're the vehicle for that. Universally, everybody responded they want to know what is the process, what's involved, how do you think about who's taking the next seats at this table? So how does that work here?
- SPSpeaker
I, I think it's like two hundred and fifty hours of board meetings together. [laughing]
- DRDavid Rosenthal
[laughing] It's a ten-year-long process. You have to serve on the board with one of us.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
We have to watch you grow, and then we say, "You know, that person would be pretty great."
- SPSpeaker
You think, you think Mitch was an exception. Bill and Mitch had, you know-
- BGBen Gilbert
Well, that's true
- SPSpeaker
... two hundred hours of board meetings together-
- SPSpeaker
Yeah
- SPSpeaker
... maybe, you know?
- DRDavid Rosenthal
D- uh, Eric, you didn't have any... You're the only one who didn't have any-
- SPSpeaker
I was just joking.
- DRDavid Rosenthal
No, no, no, I know.
- SPSpeaker
But, but in practice-
- DRDavid Rosenthal
But literally, that seems to be the model of, like, serve on a board with a Benchmark partner, and-
- BGBen Gilbert
Well, and that's how you get to know people and build really deep relationships, is you need to go through shit together. Like, y- I mean, it can... the shit can be the company's going really well, and we have to react to a super dynamic environment. But, like, getting coffee every once in a while is not a great way to get to know, should I take someone on as my spouse effectively.
- SPSpeaker
I, I think that's right, and I actually think it's... It's actually, I was just thinking about it, 'cause the- it's been different for everybody, I think. Um, you know, I think the story with Peter is, like, he was repeatedly showing up, competing for investments that Benchmark, before he was here, was working on. You, you were walking out the door as they were walking in.
- SPSpeaker
Yeah.
- DRDavid Rosenthal
Yeah.
- SPSpeaker
And, and so, like, that's a... That's, that's telling. You know, the story with Miles is, Miles was there before. Like, he, he invested in-
- BGBen Gilbert
Three benchling
- SPSpeaker
... Benchling before us and Supergreat before us-
- BGBen Gilbert
Yeah
- SPSpeaker
... um, and was e- was early on Airtable at the same time, and so, like, that's a really important, like, signal. Like, okay, you know, Chetan had worked with Peter on the board. Sarah-
- SPSpeaker
... just, I just glowed by that- [laughing]
- BGBen Gilbert
You glowed! Yeah.
- SPSpeaker
Yeah, actually, S- Sarah, how, uh-
- SPSpeaker
Sarah and I, I think both-
- SPSpeaker
Yeah
- SPSpeaker
... had no, like-
- 1:51:32 – 1:58:57
Closing reflections: what Acquired got right, no swim lanes, and culture as the product
- BGBen Gilbert
Yep. All right, what did we get wrong on the episode? Or what could we have done a better job?
- SPSpeaker
I think there was... I'll start. I think one of the things that, um, you all talked about on the episode was swim lanes-
- BGBen Gilbert
Oh, yeah
- SPSpeaker
... um, and areas of focus.
- BGBen Gilbert
Mm-hmm.
- SPSpeaker
And I think what we had just alluded to-
- BGBen Gilbert
Which I gotta say, it felt extremely weird to be naming each of you in that episode. Like, wh- when we did our Sequoia and Andreessen episodes-
- SPSpeaker
Yeah
- BGBen Gilbert
... like, these things were about firm strategy, and, like, institution building, and programmatic, thoughtful. And then we got to the end of the episode, and I was talking about each of you as individuals and articulating things that, like, you care about and invest in, and on the one hand, I'm like, "I feel gross."
- SPSpeaker
Oh.
- BGBen Gilbert
Like, this feels really reductive-
- SPSpeaker
Oh, yeah
- BGBen Gilbert
... and strange and pointed. And on the other hand, it's kind of the point of Benchmark, that, like, it actually is just about you as humans-
- SPSpeaker
Mm.
- BGBen Gilbert
And not about this, like, institution-
- SPSpeaker
Right
- BGBen Gilbert
... and strategy and [chuckles]
- SPSpeaker
So I think, like, if you look at even when it was, um, Bill, Peter, Mitch, and Matt, you know, it's, it's... If you just look at the kind of work that they did, they were all generalists then. I mean, Peter was doing consumer and deep developer tech, and, you know, Matt was working with consumer companies, and he was on the board of Duo, which was a, a security company.
- SPSpeaker
Mm-hmm.
- SPSpeaker
And Asana.
- SPSpeaker
And Asana, right?
- BGBen Gilbert
Asana.
- SPSpeaker
And so, um-
- SPSpeaker
And an AI company.
- BGBen Gilbert
And so no swim lanes.
- SPSpeaker
Right. And I think if you, as you just look-
- SPSpeaker
You're all in the pool with no, no lane. [chuckles]
- SPSpeaker
Yeah, and if you just look at the kind of companies and ideas that we're bringing to the table on Mondays, that's the thing that you see. And there's a lot of encouragement around the table, which is, like, if you're interested in something, something's, like, really hitting you at the moment, just go for it. Go meet all the relevant people. Bring them in. Let's all learn together. Let's figure this out. And it's, it's never the conversation that I've seen at other places, which is like, "Whoa, whoa, whoa, whoa, whoa"
- BGBen Gilbert
Right.
- SPSpeaker
"Stay in your sector." Like...
Episode duration: 1:58:57
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