The Benchmark Partnership: Peter Fenton, Eric Vishria, Chetan Puttagunta, Ev Randle | Ep. 41

Peter Fenton 0:00 I know that I'm a moment away from many of these people firing me, and I want them to.

Eric Vishria 0:03 [chuckles]

Peter Fenton 0:03 Um, but the minute I become predictable, it's over. [chuckles]

Eric Vishria 0:08 Many things, predictable is not one of them. [laughing]

Jack Altman 0:11 Benchmark team, it is an honor to be here with you all. I'm not gonna make you all reply in unison to me, but I'm really excited to be doing this with you.

Eric Vishria 0:18 [laughing]

Jack Altman 0:18 I want to start with an observation, which is that of the sort of top VC firms, whatever you call that, but like, you know, I'm thinking of Founders Funds, Sequoia, Thrive, Andreessen, most have scaled in a big way. For whatever set of reasons, that has been sort of like the dominant strategy. Benchmark has been a stalwart in some ways, to hold out with small firm, small team, smallish capital base, and I'm just curious, like, why? And I'm sure you all have sort of like different opinions on this. So just to pick somebody random, like Chetan, I'm curious, like, what is your take on this whole topic?

Chetan Puttagunta 0:54 You know, we only do one thing, which is partner with founders early, and we really like to partner with them really early. Like, I think the favorite amongst all of us is partnering with a founder pre-launch or at idea phase, or when it's, like, two or three people in a room. You know, and just growing with that firm, I think just like in terms of measuring happiness for each of us, like, that's where we derive the most amount of like, professional satisfaction. And if you just think about what that does in terms of alignment of Benchmark with the founders and that company, it's pretty amazing if you're there from, like, step zero. I would argue that you can't do that as you scale. Like the interests... And we see it all in our board meetings, like, every round becomes its own thing and its own game and its own whatever.

Jack Altman 1:42 And one of Benchmark's things that you-- and we've talked about this, that you're like, we don't do the future rounds, so there's no conflict in the middle of this.

Chetan Puttagunta 1:47 That's right. And we're fully aligned on dilution. We're fully aligned on trying to make this as the biggest outcome we can do. And I think capital constrains you in that way, time constrains you in that way, and each time you go partner with a founder, you're doing it with extremely high conviction, and you're going all in. That, to me personally, is an extraordinary experience and, you know, different models, different ways of practicing the business. But for me, this is the way I love practicing the business. It's becoming rarer by the day, and then therefore, it becomes more differentiated.

Jack Altman 2:26 Peter, you've been here the longest, and so you've obviously seen Benchmark in its context through a bunch of sort of changes around you. Have you felt tempted at any points? Have you felt strengthened in sort of your clarity on what it should be like?

Peter Fenton 2:41 You know, you have your behavioral experience on a Monday, which is where we aggregate. Today is Monday. We're here with you. It feels great. And, and there are eras in the business that I've participated in where the Mondays sort of sucked, and some of those were just cyclical. You know, you have a downturn in the economy, your partners are bringing in their, their struggles, their pains, the, the channeling the entrepreneurial landscape at that moment in time. What I was struck by is the period of time that I've spent... I, I've had time at Accel, and I've had time at Benchmark, when that felt more self-inflicted, not market driven. And, and so the lived experience, the behavioral experience, is the joy of the business is centered on serving entrepreneurs. And as Chetan related, you know, getting close to an entrepreneur, being a partner, deep partner to them, um, social, emotional partner, strategic partner, all of that. On a Monday, if we're talking about that, it feels really good, it feels aligned, and it feels purposeful. And when the Mondays we're talking about our friction with their European effort, um, and I'm sure the European partners at the time, now called Balderton, were talking about the problems with us, uh, it felt draining. Um, I joined Benchmark, and they just raised over a billion-dollar fund, uh, in, in Benchmark four, and the overhang of the misfit between how, how do we practice our business of partnering early, going shoulder to shoulder with an entrepreneur, and deploying that volume of capital? And so there are a number of things that happen when strategies are misaligned with purpose and values, and the main thing that happens is it's just less fun. And, and so I looked at the simple question of like, how many hours a day... Our Monday meetings go, you know, somewhere between six to eight hours, and h- how much of it is just joyful and aligned, and how much of it is dealing with the stuff that's not sort of what brings purpose and meaning and value in the business? And, and what I feel like we got right is we select people who care mostly about the proximity to the entrepreneur, being able to deliver a meaningfully differentiated experience for them. So they come away, and they give a reference to us that says, "Benchmark shows up on all the recruiting calls. Benchmark is at the epicenter of our tough decisions. They're always available," they being us individually and then as a group. And

Peter Fenton 4:58 scaling and just asking the question of, like, more capital equals a whole bunch of activities that I think degrade. Interestingly enough, they, they, they, they eat at the essence of why we practice the business. So the outcome of maximum cash on cash multiple, I think, is degraded with scaling.

Jack Altman 5:15 Yeah, definitely that.

Peter Fenton 5:16 The quality of the relationship with the entrepreneur is degraded by scaling. The, uh, you know, I think the-- ultimately, the joy, because there's some other thing that's growing, which is an incentive system that fuels more, is more, um, you know, isn't wrong for other people to do it. I just know what their Mondays feel like.

Jack Altman 5:36 Mm-hmm.

Peter Fenton 5:36 And, like, we, we leave Monday and carry that energy and that effervescence and the sense of purpose into every day that follows from that. And when we didn't do that, and we had more activities, more extracurricular activities, man, it felt the opposite.

Jack Altman 5:50 Yeah.

Peter Fenton 5:50 It's like you want a Monday to end, and then you were a little less of yourself the rest of the week.

Jack Altman 5:55 What about you, Eric?

Eric Vishria 5:56 I think this strategy is not finance-- financially maximal.... it's not financially maximal for us. No one's crying for us, we're doing fine. But like, [chuckles] it's-- so it's, it's a perfectly fine financial outcome for us or financial strategy for us, but it's not financially maximizing, it's happiness maximizing.

Jack Altman 6:14 Mm.

Eric Vishria 6:15 And it's happiness maximizing for the kind of person who wants to do the, the work.

Jack Altman 6:21 Can I put a third variable there? If there's happiness, financial-

Eric Vishria 6:24 Yeah.

Jack Altman 6:24 If you had to put a third variable of, like, impact, do you think that you can have the most impact this way? Or do you think you could increase your impact if you worked with more companies, even if you suffered a little bit for it?

Eric Vishria 6:38 I don't know that the way we do it, it, it just doesn't scale, unfortunately. Like, it doesn't scale.

Jack Altman 6:44 Is that because of the board seats?

Eric Vishria 6:45 Yeah, it's the engagement. I'd, I'd just say it's like the engagement with the entrepreneur that I think is the, is the time limiter and the constraint.

Jack Altman 6:53 Yeah.

Eric Vishria 6:54 And that's it. That's the time limiter.

Jack Altman 6:55 Ev, you obviously came from, like, bigger firms, Founders Fund and KP. I guess you're rolling, what? Are you two months in now, on the-

Ev Randle 7:02 Uh, three months.

Jack Altman 7:02 Three months.

Ev Randle 7:03 Yeah.

Jack Altman 7:03 So, like, your experience on this has to be at least notable, 'cause it must operate so differently.

Ev Randle 7:08 I mean, I, I, I think today, especially, one of the beautiful parts about the asset class is that the menu is so large in terms of how do you want to spend your day-to-day, and what do you want your life to look like as an aggregation of that day-to-day? So even among firms that are larger, like KP, is very different from Founders Fund, which is very, very different from Sequoia, which is very different from Andreessen, which is different from Lightspeed and GC. Like, everything... Some firms are more similar than others, but every firm is actually quite distinct. But I do think the thing that really stands out about Benchmark, and I think to Chetan's point around being even more relatively differentiated than it was in the past, is as the prevailing trend has been towards scaling and getting to mega scale, I just-- I talked to some of my friends and peers at some of these larger firms, and the way that they talk about their day-to-day and their job and, y- you know, how they're getting fulfillment out of their job, you know, it'll be... Let's say it's over the summer, and they're like: "Yeah, I've already done four deals this year, so I'm having a pretty good year."

Eric Vishria 8:04 Mm-hmm. [chuckles] Yeah.

Ev Randle 8:05 And I'm like-

Eric Vishria 8:05 You have to play a lot.

Ev Randle 8:07 [chuckles] Yeah. And I'm like, I'm like, "That, that is, like, the-

Jack Altman 8:09 Yeah.

Ev Randle 8:10 That is the North Star and KPI of, like-

Jack Altman 8:12 Yes, it is

Ev Randle 8:12 ... what's giving you fulfillment?" I'm like: "Do you like the, the founders? Do you like the companies, or is it just the fact that you've shoved capital into four, four investments and four companies that's-

Jack Altman 8:20 Yeah

Ev Randle 8:20 ... it's giving you?"

Jack Altman 8:20 This is one actually, that gets at one of the things that was a noteworthy difference for me, going from running a company to now doing investing is, as a company, like, money's involved, but, like, the primary work is about a product and customers.

Ev Randle 8:33 Yeah.

Jack Altman 8:33 And then in venture, there is at least one way to practice it, where it's primarily about dollars-

Ev Randle 8:39 Yeah

Jack Altman 8:39 ... which I just don't think that's, like, a path to happiness.

Ev Randle 8:42 Yeah. I mean, and it, and it can be for some people-

Eric Vishria 8:43 Can be for some people, yeah

Ev Randle 8:43 ... but I think, like, this is, this is a group-

Jack Altman 8:45 You can track the score

Ev Randle 8:46 ... that's very much self-selected into, you know, maybe the Charlie Munger punch card approach, where it's like, over your lifetime, you might only have ten meaningful partnerships. So every single one of those partnerships should be unbelievably meaningful for you, for the founder that you're working with, and I think that fundamentally comes into conflict with the idea of, you know, each of us going out and doing eight investments a year or scaling up massively

Ev Randle 9:08 or something like that.

Jack Altman 9:09 What are, like, the principles or, like, foundational tenets of Benchmark? If you had to describe, like, the three to five things that, like, define what Benchmark's about, like, how would you name those?

Chetan Puttagunta 9:21 We wanna be the first call for an entrepreneur, and we wanna be their most important and most impactful partner. And I think it's, like, pretty easy to quantify. You can ask any of the companies we all work with, "Who do you call first when you hit a patch of bad news? Like, who do you share that with?" We wanna be that person. That can only come from being there for the founder, having full trust between you and the entrepreneur, and the entrepreneur knowing that when they speak to one of us, they're getting an authentic experience. Like, it's not... I noticed, you know, with these, like, large groups that we've all been part of and boards and stuff, like, whenever bad news gets presented in a board meeting, you can see panic in some people in the room, 'cause they have to go tell their boss, with the board meeting notes, afterwards, [chuckles] like, things are off track. And-

Jack Altman 10:11 Also, by the way, it's a reflection of something in the relationship if they're learning bad news live in a board meeting.

Chetan Puttagunta 10:15 Sure.

Eric Vishria 10:15 Yeah, totally.

Chetan Puttagunta 10:15 Yeah, 100%.

Eric Vishria 10:16 Shouldn't happen.

Chetan Puttagunta 10:17 And, you know, like, we're working with such unformed companies and people that, like, there's gonna be bad news. And if you, like, aren't expecting that, then you're doing this job all wrong. And so, like, things go well, things go badly, things go sideways, things go up, things go down. Stuff happens. And as long as the entrepreneur knows that they can call you, and you're gonna be there, and there's trust there, and you're that first call, I mean, that's what we aspire to in every single one of our relationships.

Eric Vishria 10:45 So there's that, that part of it, which we've talked about a bunch, and then the other part of it is the equal partnership. Um, and I think that's a... It's very special. Like, it's a very special thing. You know, Ev's been here for a quarter, Peter's been here for twenty years. I think I'm on eleven. You're on, what, eight?

Chetan Puttagunta 11:03 Yeah.

Eric Vishria 11:04 That equal partnership is really special, I think, and just something that also doesn't scale, frankly, um, but has a, a very kind of special dynamic. And I, I remember when I joined, and you're just, like, this new person. It's my first investing job. You know, Peter, and Bill, and Mitch, and Matt, who were the four that, that I joined, they're, like, asking me about doing things, and then you're like: "Well, I have no idea." Like, "I, I have no idea. I have no idea how to do this job or anything else." But I think it's just- it, it relates to this, you know, deep belief in the equal partnership, and I think it's, it's very empowering for a new person. Um, I think, or I, I found it very empowering.

Jack Altman 11:45 Ev told me he was disempowered [chuckles]

Eric Vishria 11:47 He was disempowered right out of the gate.

Jack Altman 11:48 Was disempowered.

Eric Vishria 11:49 Um, I think it's just, like, it's very empowering for the new person, and it's, and it's also... It, it has-- it also, like, creates, I think for the right kind of person, it creates a lot of internal drive and expectation, 'cause you're like: "Oh, I better not fuck this up." And, um, and so I, I think that's a magical piece of-

Jack Altman 12:06 Why is it so hard for most people to do this? 'Cause, like, I think a lot of other firms, you know, want it, but-... effectively, you know, rounds to zero the number that can do it.

Eric Vishria 12:14 I have this belief that the biggest leap wasn't at the founding of Benchmark. The founding of Benchmark with, like, the founders came together, it's like, how do we cut things up? Okay, we cut them up. Okay, it's equal, what else do we do? But then they had an amazing first fund. Benchmark one is, like, a legendary, um, you know, whatever-

Jack Altman 12:32 Ebay

Eric Vishria 12:32 ... seventy X return or something like that. Then, so they built all this brand value. Like, they-

Jack Altman 12:39 And they gave it away.

Eric Vishria 12:40 And then they gave it away, and I think that was the leap.

Jack Altman 12:42 Nobody can do that.

Eric Vishria 12:43 And that, that I think is the hard part, right? It's like, well, I, I, I built the firm, I built the brand, I should get some economics from that. I should do... Or whatever it is, like-

Chetan Puttagunta 12:52 No residual economics is the craziest-

Eric Vishria 12:54 It's the craziest thing.

Jack Altman 12:54 Nobody does that.

Eric Vishria 12:56 It's the craziest thing.

Jack Altman 12:57 And there's no incentive really to do it, unless you really care about legacy and something other than yourself. I mean, there's-- the incentives are very thin to do it.

Peter Fenton 13:06 It's also just root-- I think, rooted in the culture of Benchmark, and you go back to Bob. I mean, Bob, Bruce, Andy, all these, the founders have, have played their part, but it was, uh, rooted in this idea of respect and affection, is that you should have a partnership where you really respect and, and admire. You give them... I'd give all my money to any of my partners, but then you admire them. You'd say, there, there's an old saying, like a virtuoso is somebody who surprises even themself, and I believe that about all my partners practicing the business. They're virtuosos in the aspects of the business that motivate us to do the work. So when Bob raised his hand, and I was there, he just said, "It's time. I'm out."

Jack Altman 13:47 Mm-hmm.

Peter Fenton 13:48 And others had left before, you know, Andy and others, but there was never a conversation. It was actually just the opposite. It's we want to-- we, we gave him, we gave him economics in the fund. Um, they weren't giant economics, but it was just, um, yeah, a way of saying thank you. And I think the culture, you know, as soon as you get into the, the parts of

Peter Fenton 14:07 everyone's identity that, that are ego-driven, they, they, they lay claim to things psychically that make sense to them. And, and it never-- it would never make sense to ask for something at this firm that was going to entail taking more than you're giving. And I, and I think that's a weird-

Eric Vishria 14:23 Yeah, you feel that.

Peter Fenton 14:23 -thing to, to say, but it's a pressure that I feel as the last of the prior generations, knowing that I want to be raising my hand first before I realize I've-- I'm not contributing more than I've taken out. Not because, y- you know, it's, it's some explicit trade, but just it's a, it's a cultural ethic, and the, the cultures we know as you've found in your company, like, they're so durable. Like, the inertial forces of a culture that get founded. It's one of the things you said, what is Benchmark? And if I read one book that captures Benchmark, it's this book. Every, uh, partner is different here, but it's the Carl Rogers on Becoming a Person. Um, and th-that-- the premise of the book, which is very simplistic in a sense, it was like the, the apex of client-centered therapy. It's about psychotherapy. Sorry, this is [chuckles] not where you wanted to go in this conversation.

Jack Altman 15:09 We love psychotherapy.

Peter Fenton 15:09 But, but, but the premise of the book is that to be useful in a relationship, you have to first permit yourself to understand the other person fully. And, and I think if Benchmark is doing its best work, an entrepreneur comes in here and says, "They see me." I bet if you ask Andrew at Cerebras, you know, who understands him most fully, and the founding team, the purpose and the vision of the company, it wasn't, "Well, he, he found this hire for me, or he gave me this advice about negotiating the contract with company X, Y, or Z." It's that, like, Benchmark understands what I want to do, and then we do something else, which I think is equally important, unconditional positive regard. And there are examples in the past at Benchmark where that's been broken, and, and I think an immune system builds around those, those failures and says, "How do we not do that again?" As opposed to say, "We're defined by that one act."

Jack Altman 15:59 Mm.

Peter Fenton 15:59 And so I think what you see in the current lineup at Benchmark is a really a, a, a, an emboldened immune system. We've had some, uh, vaccinations from past experiences to basically say, like: We never want to be in a position where the relationship degrades, where there isn't that faith that we've delivered unconditional positive regard, because we believe in our founders oftentimes more than they believe themselves.

Jack Altman 16:21 Yeah.

Peter Fenton 16:21 And so, so if you, if you understand the founder fully and you have unconditional positive regard, then you really can empathize with what they're going through. And I think that that, that nurtures the sorts of success possible with founder entrepreneurs that we all hold out as the great examples of why we do this job.

Jack Altman 16:37 I remember when we spoke last, you talked about the fact that bench... like, the Benchmark seat was kind of given to you. Like, that from the beginning is, like, I'm gonna give this to the next person, and I can see why, like, you're saying, like, the seminal moment was actually the handoff.

Peter Fenton 16:50 Yeah.

Jack Altman 16:50 Because that creates-

Peter Fenton 16:51 Yeah

Jack Altman 16:52 ... the instigation for all the future handoffs.

Eric Vishria 16:54 Yeah, and you feel responsibility with that.

Jack Altman 16:55 Yeah.

Eric Vishria 16:55 Like, I, I mean, like, I think all of us feel, we feel responsibility. That was one of the big things we talked to Ev about when, as Ev was joining us, just like-

Jack Altman 17:02 The responsibility.

Eric Vishria 17:04 Yeah, that responsibility. Well, just like you feel it, like, not everyone feels that.

Jack Altman 17:06 Yeah.

Eric Vishria 17:06 Like, and not every, you know... Which is fine, but like-

Jack Altman 17:08 Totally. Well, also, I think, you know, if you're talking about if at the-- because it's equal, when you walk in, it's like if a bunch is given to you right at the beginning, you're like: I got to pay this off to somebody, and the people who kind of set me up from the beginning, like, I can't really pay them back anymore. So I can see why you'd be like, "I gotta make sure I give enough before I go."

Peter Fenton 17:25 Yeah.

Jack Altman 17:25 Even though it's sort of your, in a weird way, you know, paying back-

Peter Fenton 17:29 Yeah

Jack Altman 17:29 ... prior generations.

Peter Fenton 17:30 But, but, but rooted in that as well, Eric says responsibility, and I think he feels it, and I respect that. I think the founders gave us permission to basically-

Eric Vishria 17:39 They did

Peter Fenton 17:39 ... not take it too seriously.

Eric Vishria 17:40 Yeah, they did.

Peter Fenton 17:41 They said, "Listen, come on, like, there's a group of you. No one's gonna be around in, you know, a million years. Come on."

Jack Altman 17:47 It doesn't have to be so heavy.

Peter Fenton 17:47 Everything's ephemeral.

Eric Vishria 17:49 Yes, that's right.

Peter Fenton 17:49 So what you want is, is, is a tight-knit group of people that are at maximum potential manifestation, like the energy, the joy, the... And the heaviness of like, "Oh, we're gonna, you know, have to maintain this relic and wheel it out," and, like- [laughing]

Jack Altman 18:04 ...

Peter Fenton 18:04 "They build tap- tablets in the back about what the founders said." [laughing] None of that bullshit, man. Like, you're like, this is like a day-to-day thing. By the way, forgive me, we're in an entrepreneurial environment where, like, when somebody has a legacy, we wanna destroy it. We're, we're, we're in the business of creative destruction-

Jack Altman 18:19 Mm-hmm

Peter Fenton 18:19 ... not, not permanence and enduring and... Forgive me.

Jack Altman 18:23 Yeah.

Peter Fenton 18:23 Like, our startups bubble up from nothing, and we stay true to that, and I think the firm's premise is that we should have our own form of creative destruction. There's no legacy or claim to it at Benchmark. It's like the immediacy and present moment that we deliver. Everything else is secondary.

Jack Altman 18:37 One of the things that you just said, which I hope is okay for me to-... press on is, um, and I've wanted you guys to talk about this, which is I know each of you individually, and I know you all are founder-friendly, and there's like, it's very easy for people in a competitive venture landscape to, like, poke at one historical example that everybody else has done. If you're just loud, you can just, like, you can just poke at people.

Ev Randle 19:00 Sure.

Jack Altman 19:01 I would say you're not loud externally, and you sort of have a mindset of like, we're gonna let our actions speak. But I've wanted you guys to sort of, like, speak, 'cause I know you're very founder-friendly, and I've talked to founders you work with and all of that. So I'm actually curious to hear, you know, your sort of thoughts as, you know, you've seen some of the stuff. Like, is it important for you to sort of just, like, talk about, like, what you just said? Like, there's, like, a thing, and then we have, like, an immune reaction to it, and the firm updates or like... Yeah, how do you process all of that?

Peter Fenton 19:30 Humans are storytelling animals, so every firm has their story. And, and depending on the situation and what the motivations are of the counterparty, you accentuate certain parts of a firm's history. Um, you know, the ethic of the firm, and I think this is sort of borne out, and even in our worst moments, is the company must come first. And so we're not more important than the company. Nobody's more important than the company. It's the initiative. It's the collective premise of an en- entity which is bigger than any one individual. And there are moments in the past, you know, look, I was-- I've been around through the generations, where it used to be the standard model that, you know, "When are you gonna get a real management team?" And, and that sort of faded to, "Well, perhaps we can go the distance," and you have the Steve Jobs narrative, which is like, what crimes were committed against this notion of general management versus the founder mode reality that we all support? The part that's sort of most relevant, and I think this is, this is what happens every day here, is we, we view our job, I do personally, and this has been borne out in the references, is making the founders the best version of themselves. And, and like any relationship, if it's simply sycophantic and enablement and codependency, we make them worse. If it's, if it's harsh and it's judgmental or absent, we make them worse. So, so one of the things I think you, you, you need to figure out in references is, like, what questions should you ask? And of course, if you're gonna engage with any great firm, you want to go and do references. The one that... it's, it's the first phone call, but I actually think it's even-- you go a level deeper and say: How does this person make you a better entrepreneur? And, and how have they unlocked your potential? And what we care about more than happiness is flourishing. And our companies, and I think what's borne out in the work that we've done, is that if I work with that group, like, I'm gonna be a better version, and I'm not gonna be living in fear, because then you're not a better version of yourself, nor am I gonna be getting... Forgive me, what happens in our job right now, I'm, I'm struck by the number of boards where I see this, is a, a relationship that's sycophantic, that, that, that, where people aren't afraid to, um-- people are afraid, I should say, to pursue truth because they don't want to hurt anyone's feelings. Or worse, I think the greatest crime that occurs in many of the boards that we all serve on is that somebody says something behind the entrepreneur's back they won't say to their face. It's one of the things I, I think is a deep ethic at Benchmark, is that we are transparent. Like, if, if we're gonna say it to your face, we, we may not say it behind your back, but we're not gonna be in a situation where, "Here's what I really thought about the board meeting." And, and this idea of congruence, which is a key t-term in psychotherapy, is that you really wanna know that you can trust your partner because they're not putting a face or mask on because they want you to feel a certain way, but they're being real.

Jack Altman 22:08 By the way, this also goes to your point about if you're not gonna-- if you don't need to put more dollars into the company, if you structurally almost can't put more dollars into the company, then you just wanna tell them the truth.

Peter Fenton 22:17 You're truth-seeking.

Jack Altman 22:18 If you're hoping to get to win the next round, you don't wanna piss them off because next month-

Peter Fenton 22:21 It's true

Jack Altman 22:21 ... you might be writing a term sheet. And I think there's a lot of, there's the references piece, there's the, "I wanna put more money into this company" thing, there's just, like, "I don't wanna fight" type of stuff.

Peter Fenton 22:28 Yeah.

Jack Altman 22:28 And I do think it leads to, to that, which I, I think, um, I think there's, like, the, the, like, the, the best version of being founder-friendly is, is not comfort all the time, obviously.

Peter Fenton 22:39 Yeah, absolutely not.

Jack Altman 22:39 That's probably not the best.

Ev Randle 22:40 Yeah. And there was, I mean, there was a recent example of this. I recently led an investment that's still unannounced, but we actually had the founders over for dinner in the dining room where we'll, where we'll have lunch here in, in about an hour. Um, and after they eat-- you know, we-- during the dinner, they showed a demo, we were going through their commercial strategy, and we gave them a lot of very direct feedback, and, and a lot of it was constructive. It was, like, a really productive, constructive conversation. But not every founder, you know, responds super well to that. So I called the founder afterwards, and I was like: "Well, how was that for you? Um, you know, how would you respond to that?" And in that call, he said, um, "You, as a team, are gonna make us better founders." Um, and I can tell that right away, and, um, because of that, he really wanted to work together. Um, because it wasn't just going to be, you know, slaps on the back and, and congratulations, but it was gonna be a relationship where we really pushed both the founders and the whole team to be better versions

Ev Randle 23:31 of themselves.

Jack Altman 23:31 Does it feel, like, structurally different to you than KP and Founders Fund in any way?

Ev Randle 23:35 I think maybe the most difference is with Founders Fund, because I do think Founders Fund obviously, um, really, really leans on this, the, the kind of, like, Hippocratic oath of VC, which is do no harm, and in doing so, it's like, "Hey, we're gonna be completely hands-off," is, is kind of the pitch, "and then if you need something, call us." I think, again, that sells really easy. I actually do think that it's one of these things that, um, in practice, actually, uh, materializes sometimes as, I don't wanna say, like, laziness, but it is just more passive. It is just like we should back founders that are gonna figure it out all on their own, and that they don't need help, and they don't need any VC assistance. And sometimes that works out, and, you know, sometimes maybe there are founders that are like that, but I think the vast majority of the time, almost every single founder could use feedback, a sparring partner, um-

Jack Altman 24:25 Yeah

Ev Randle 24:25 ... any of these things.

Jack Altman 24:26 Like, even Tiger Woods has a coach.

Ev Randle 24:27 It's like hundred percent. And I, and I-- and so I think, like, having that position is something that I think is a great soundbite and, like, you know, uh, goes really well on, on Twitter. But I think when it comes down to it, there's very, very few practitioners, even, you know, the Tiger Woods of the world, that don't, don't benefit from something like that.

Peter Fenton 24:44 But this, this is, um, ultimately the highest accolade of a firm-... that they seek is a manifestation of a value system. And I, everyone in this room, I've heard this, and I know I'm gonna hear this on, hear this on your newest investment, is that if we've really done our job, and you'll hear this in our references, they feel like a co-founder, Benchmark. It feels like they were a co-founder. And what does that mean? Well, it wasn't a conditional transaction. It wasn't a one-night stand if they gave us money, and then we sort of could, you know, brag about the brand, but it was a-- they were proximate with me when, when... What, what a founder and a co-founder does, it's a bit like being in a partnership where you have a child, where you just say, like, there's something existentially deep that's permanent in that relationship. And I, I believe most companies that have single founders end up finding proxy co-founders 'cause they, they, you need support systems. You need a relational, you know, balance and, and as the ups and downs of being an entrepreneur. And so if we've achieved that, it's-- you could say, well, it's not for everybody. Some firms might want more of, like, just, just the money, thank you, and the brand, um, or they want services that are delivered by people who work at the firm. Yeah, tho- those are different facets, but the depth that can occur when you have that kind of, um, proximate relationship and, and, and, um, ends up, you know, taking you through troughs that would otherwise lead companies to be sold early or to have a destitute, you know, um, founder who's just tired and doesn't-

Jack Altman 26:09 There's also a through line to it. Like, I felt this as a founder, where, like, even, like, a, a, like, a long-time exec might be four, five, six years, but then you have a board member who's there through the first round-

Peter Fenton 26:19 So true

Jack Altman 26:19 ... the second round of execs-

Peter Fenton 26:20 Yeah

Jack Altman 26:20 ... and the third exec team and all of that. So you're working, you know, many more hours per day with people on your team. But then when you look back over a decade, you're like, there was somebody who was with you the whole time, and it's-

Peter Fenton 26:30 Yeah

Jack Altman 26:30 ... you know, hopefully your co-founder and your board members. So I-- there's, there's something about the long arc of it, too, that is special.

Eric Vishria 26:36 I have moved away from talking about it as, like, guidance or advice or whatever, and I loved your sparring partner thing 'cause I think that's what it is, and that's what the co-founder thing is, too. 'Cause, like, startups are hard. They're really hard, and the most successful startups are doing things that are new, innovative, and haven't been done before. Therefore, you're figuring things out for the first time. Like, you're figuring things out for the first time that are, like, challenging and hard, and no one knows. And so, like, a huge part of the co-founder thing or, um, you know, which, which we should be careful about, like, using it, but, like, it's, it's the-- that aspiration or that idea is, "Hey, we're asking each other questions that, like, sharpen our thinking. We are, like, trying to figure things out together." And I think that's a, that's a very specific way of working, where I feel like a lot of times what we're doing is you're... I'm, I'm talking to somebody, I'm, I'm thinking of a very specific example from last week, but it's just like, where it's like the entrepreneur knows, like, she knows what she wants to do, and it's, like, in there, and you're asking questions to help them realize, realize it and, and for it to, like, come to surface or get clarity on it. And, like, that's very... It's different than getting, like, advice.

Peter Fenton 27:56 Mm.

Eric Vishria 27:56 Right? That isn't advice. That is... That's a sparring partner.

Jack Altman 27:59 Yeah.

Eric Vishria 28:00 And, um, and a, and a sounding board, and I think that's what you get.

Peter Fenton 28:04 It's part of what I feel like is... Forgiving, this is where I get to be the older person in the room. The de- the degradation of our industry, and it really has been a degradation, is I think it's shifted. The, the, the system has shifted to winning. Our goal is to win.

Eric Vishria 28:17 Right, because there's, there's capital supply now.

Peter Fenton 28:19 And so, so you have this-

Eric Vishria 28:20 Right

Peter Fenton 28:20 ... large sums of capital that need to be deployed.

Eric Vishria 28:22 No, that's true.

Peter Fenton 28:22 And so the system is built to, I think, create, in the mind of the entrepreneur, a selection criteria. The old saying, if you're doing POCs, you want to design the criteria of the POC so you win it. So what's happening is the industry's programming entrepreneurs in a way to select for things that I think are off target, and they're aligned with the target of the firms and the capital bases they're deploying, but they're off target relative to the quality of the relationship the entrepreneur seeks.

Jack Altman 28:47 So what are the big ones?

Peter Fenton 28:48 The biggest thing, I'm, I'm not gonna pick on the off-target things. The on-target things-

Eric Vishria 28:52 [chuckles]

Peter Fenton 28:52 ... are, when I want a co-founder, what questions do I ask?

Eric Vishria 28:54 Mm.

Peter Fenton 28:55 And do they make me a better version of myself? Do they provide the kind of expansion of my horizons that make me, every day, feel more joy for doing this work? Do they keep me honest? Um, are they available? Do they put me first? Uh, uh, and so a lot of winning as opposed to serving, wi- winning is, is a moment in time. We average, uh, in our boards, ten plus years. If you go back and look at the history of my boards, ten plus years, and so maybe three or four executive teams, [chuckles] as you say, might go through those years.

Eric Vishria 29:27 Yes. Yes.

Peter Fenton 29:28 And the sense of continuity if my partner is there, and this is the case of... I mean, I, I love my relationship with Howie, not to pick one, but with Howie Liu at Airtable, and, you know, How- Howie's going through a genesis right now and a creativity that I think occurred at the beginning of Airtable, and it is so fun to watch, but I, but I understand the human, and I know what he's gone through. I know how to help him at, at parts or to say, "Hey, you-- like, this is an area you wanna be asking some questions about." And, and I, and I think that that's different than winning. Winning was a, is a transaction of, like, "Take my capital-

Eric Vishria 29:56 Mm-hmm

Peter Fenton 29:56 ... and I gotta get on to the next one," because if you win, you gotta win the next one. And so we, we say yes once or twice a year, serve for a decade long, and the differentiation of that, and because our incentives aren't the same as deploying capital. So I think that creates... In the entrepreneur's mind, they, they have to ask the right questions. What do you want in that co-founder? 'Cause you can't fire your board member.

Jack Altman 30:15 Right. I'll take a shot at one of the things I think is, like, off target, which is the, like, you know, it's become, like, a, a thing to sell no board seat. And you're like, "One of the advantages of working with our firm is we'll give you all this, you know, capital with no board seat." And I think it's, um, there's, like, a misunderstanding of boards as governance and control rather than boards as, like, signing up to work on the company, which I think is, like, how it should be understood-

Peter Fenton 30:39 Yeah

Jack Altman 30:39 ... in, like, ninety-nine point nine percent of cases.

Peter Fenton 30:41 Yeah.

Jack Altman 30:42 But I think it has been very effectively and somewhat disingenuously sold to founders because it, like, sounds good, and you just keep control of your company, and there's no risk, and that means that we don't have to help, and so we can-- it aligns with deploying a lot more capital.

Eric Vishria 30:54 Deploy more capital, yeah.

Jack Altman 30:55 Yeah. It probably says something about the experience of the average founder with the average board member. It's like, can you-... blame a founder for thinking that's a good pitch based on the experience that they've probably had with the average firm. Yeah, and also you hear about a terrible situation once- Right, right ... and it makes a big impact. Without nuance, and it's hard.

Peter Fenton 31:10 It's, it's going on right now. You know, like, the, the, these seed rounds at over a hundred million with no board, and it just-- I, I know how it ends. [chuckles] It's just between now and then, the amount of entrepreneurs that will miss the opportunity to really seek out a close partner is such a-- it's a shame.

Jack Altman 31:28 It is.

Jack Altman 31:29 One of the things I wanted to ask you all about was, I'm, I'm guessing I'll take it as a premise, that we probably all agree that, like, a great entrepreneur is, like, unique or odd or strange or just beats to their own drum in some important way. You know, maybe there's examples where it's not like that, and we could talk about that too. But one of my questions is: do you think to be a great investor, you have to be the same way? Do you have to be unusual as a person to be a great investor, or is that not the case, and can you just sort of just be like a, a regular person who can spot unusualness?

Chetan Puttagunta 32:01 You know, one of the things about Benchmark as we were talking to Ev-

Jack Altman 32:06 I'm asking selfishly because I don't think I've got the oddities that sometimes I wish I had. [laughing]

Chetan Puttagunta 32:10 [laughing] You know, in our conversations with Ev, I think Peter framed it perfectly, which is like when you know, you know very clearly, and then given our structure of equal partnership, you're essentially refounding the firm every time somebody new comes on. Because the, the whole dynamic of the partnership changes, the conversations change, sort of feel changes, everything sort of changes, and so it feels like a refounding moment. There's some alignment that happens. I think it's-- it goes back to the core of, like, what values do you prescribe to as a person? And part of it is, like, you are competitive. I think that is important. Like, there is a competition aspect to this g- this asset class. At the end of the day, we are investment managers, and you enter a company, and then there's competition to enter the company, and then you invest, and then the c-company itself faces competition at some point. Like, you can run competition-free for maybe twelve months, and then the big guys show up. Like, each of us has faced immense industrial, like, competitive threats from external bodies, and you have to have some kind of competitive, persevering spirit about you that can be that stabilizing force for the founders. Because you also have to have that empathy that the founders feel it ten to a hundred X more than you. Because at the end of the day, you as an investor are diversified. You get to work on lots of projects. The founder is simply not diversified at all. This is the only thing that they get to work on. This, like, value system, hyper-competitive energy and empathy, like, that is actually not present in a lot of people.

Jack Altman 33:52 I mean, you and I talked about this a little bit with, like, Max at Legora-

Chetan Puttagunta 33:55 Yeah

Jack Altman 33:55 ... interesting example. It, you know, you did the seed. We're not here to pump Legora, but, like, while we're here, [laughing] it's like-

Chetan Puttagunta 34:00 Let's pump!

Peter Fenton 34:00 [laughing]

Jack Altman 34:01 ... you know, and it's like, but it was like NYC, it's a legal tech-

Chetan Puttagunta 34:04 Yes

Jack Altman 34:04 ... company. Like-

Chetan Puttagunta 34:05 Yeah

Jack Altman 34:05 ... there was already Harvey. And the question I think I asked you right before we sat down was, like, "Why'd you meet?" Like, you know, I, I think, like, once you meet Max, you can see it's good, but, like, I'm, like, you know, to the extent that, like, that's like a case study in spotting who-- somebody who I think is unusual in a very positive, strong way. Like, what was that for you?

Chetan Puttagunta 34:24 Well, Peter and I actually met Max in this exact room together. That was the first meeting we had. And I think within fifteen to thirty minutes, we both came away sort of like that unspoken language between us, that we want to be in business with this person. Yes, it was legal tech, but there was some core purpose with him as he was expressing it and the founding story of, like, how he picked that problem. And, you know, they're sitting in Stockholm watching Harvey. At the time of our seed round in March twenty-four, I think Harvey had already raised a, a billion-and-a-half-dollar valuation or two billion. And then by the time the product had launched in October of twenty twenty-four, I think their number one competitor had already raised a three or four billion dollar valuation. And so... But what we were backing was him, his co-founders, because when we invested, it was a team of five people that had a very core insight on how to attack the legal market and why LLMs were, like, the perfect fit for lawyers. And when he expressed it, Eric likes to say this a lot, there's a magic of founders when they explain something very complex and they expl-explain their unique insight into it, and it becomes very obvious. Like, that's obviously how the world should work, and with your fire and your energy, that will probably be how the world works. And in Max, you saw that right away. We saw it right away, and so we needed to be in business with him. That was it, and, like, the conversation immediately went to: "Well, great," [chuckles] like, "what are you doing the rest of the day? Like, we just want to spend time with you because, like, clearly you're spectacular. Clearly, there's something here." Yeah, and it's, it's been amazing. And, like, we didn't see it, right? Like, the product didn't launch until six months after our money went in. And then I think, like, it's-- you don't start to see the amazing stuff that a person can do for a while, but it's

Chetan Puttagunta 36:15 amazing.

Jack Altman 36:15 If you look, if you look back at other great investments that you've had, do you think it's always clear that the person's unique to you? Or was something in the Legora situation-- Did something there jump out faster? Or, like, are there other situations where you don't see it for a while? Do you always see it quickly?

Chetan Puttagunta 36:30 No, I think you see it quickly, but each person spikes differently.

Jack Altman 36:33 Mm.

Chetan Puttagunta 36:34 Like, I think-

Peter Fenton 36:35 Well, yeah, we all have different... C-coming back to your question of, like, is there one way to succeed as an investor? God, no. In fact, in this firm-... We joke, these, these, imagine two circles. Entrepreneurs that I respond to, entrepreneurs Eric responds to. [laughing]

Jack Altman 36:49 [laughing] There's this tiny little gray area in between with, like, six people in the universe.

Peter Fenton 36:53 Yeah. [chuckles]

Eric Vishria 36:54 And for two people who do, like, a lot of software infrastructure-

Peter Fenton 36:58 Open source

Eric Vishria 36:58 ... or enterprise or open source or whatever, for our Venn diagrams-

Peter Fenton 37:02 It's crazy [chuckles]

Eric Vishria 37:04 ... of entrepreneurs to be so separate is, is remarkable.

Jack Altman 37:05 So you guys will meet a founder together, and one of you will be like, "This person's amazing," and the other one's like, "I don't see it at all?"

Peter Fenton 37:10 Well, I-

Jack Altman 37:11 And flipped?

Peter Fenton 37:11 I don't know about that.

Eric Vishria 37:12 Yeah, no. [chuckles]

Peter Fenton 37:13 No, no. [laughing]

Jack Altman 37:14 [laughing]

Peter Fenton 37:14 No. I, I, I could never work with that person. But-

Eric Vishria 37:16 That's, that's a different-- that's a different statement than whether-

Jack Altman 37:20 Whether they're good or not.

Eric Vishria 37:21 Whether they're good or not.

Jack Altman 37:21 I would like Benchmark to invest, but I don't work with them.

Eric Vishria 37:23 I think we often-

Peter Fenton 37:24 Yeah.

Jack Altman 37:24 Yes.

Eric Vishria 37:25 I, I-

Peter Fenton 37:25 Good for you and not for me.

Eric Vishria 37:26 Yes. [chuckles] I, I think, I think we do have that.

Peter Fenton 37:28 By the way, Bill Gurley and I had that, where it's like there's, again-

Eric Vishria 37:31 Yes

Peter Fenton 37:31 ... almost no intersection. What's, what's, what's interesting, and this actually relates to any entrepreneur that's thinking about working with a venture firm, a friend of mine was raising money, um, family friend, so that I... It wasn't appropriate for Benchmark. And I said... You know, he said: "How do I choose?" And I said, "You..." "The question I would be asking if I was an entrepreneur is, which of these esteemed venture capitalists is most personally resonant with you and committed to you?"

Eric Vishria 37:55 Yeah.

Peter Fenton 37:55 And they're gonna say they're committed because they wanna win. Codify it. Like, make them be explicit about the kind of commitment they're gonna make, and make it uncomfortably concrete. So with most of the entrepreneurs I work with, we speak every Friday and, and so, uh... But you, you make it real, and if you don't wanna put the time in, if you don't feel that response for you with running your fund and for us individually, um... I, I knew Max at Legora, like, Chetan would be twenty-four seven. He'd fly to Stockholm on a moment's, and he has.

Jack Altman 38:24 And he is today.

Peter Fenton 38:25 Yeah. [chuckles]

Jack Altman 38:26 Yeah. [chuckles]

Peter Fenton 38:26 It's true.

Jack Altman 38:26 You're going tonight.

Eric Vishria 38:27 He's going today. [chuckles]

Peter Fenton 38:28 Okay, so there you go.

Jack Altman 38:29 [chuckles]

Peter Fenton 38:29 And, and so, so, so as [chuckles] you and respect in your commitments, does it clear that threshold for you personally? Because if, if it doesn't, and you're doing it because it's a good investment, that is a reliable path to a bad investment and a bad relationship. And, and so I think you're gonna find that, that chasing what is it that you see and then, and then allowing that to get washed with experience, because sometimes you're gonna get it wrong.

Jack Altman 38:52 Mm.

Peter Fenton 38:53 And, and when you get it wrong, you learn, okay, don't make that mistake again because you've seen me make that mistake, and vice versa, so-

Jack Altman 38:58 So it's interesting that you guys have, like, these Venn diagrams that... let's just say they don't touch.

Peter Fenton 39:02 Yeah.

Jack Altman 39:02 Just to make it simple.

Eric Vishria 39:02 Yes.

Jack Altman 39:02 But they're both good. Like, I know you both make very good investments. Is that basically like, uh, you know, you can kind of cultivate any set of tastes as long as it includes the good stuff? Like, is that basically what you shake out to, or is it like-

Chetan Puttagunta 39:14 There is a lot of overlap on the people, though. Like, if you look at the people in these Venn diagrams-

Peter Fenton 39:19 [chuckles]

Chetan Puttagunta 39:19 -the four of us have-

Jack Altman 39:20 Yeah

Chetan Puttagunta 39:21 ... there is overlap in the, in the quality.

Eric Vishria 39:23 In the qualities of the people.

Chetan Puttagunta 39:24 Yeah.

Eric Vishria 39:25 Yeah.

Jack Altman 39:25 Something Keith and Vinod said that was interesting when I talked to them together is they're like they're really different people, which is very apparent when you talk to them, and, um, but they said one thing that we basically always agree on is, did we walk out of the meeting with a founder, and was that person special or not? Which I thought was an interesting thing because I wouldn't have expected that out of the two of them because they are quite different. So I would have thought that there would be these very different tastes in there. That doesn't mean they always want to make the same investment-

Chetan Puttagunta 39:49 It's very rare that one of us thinks a person is special and the other person is like, "Absolutely not."

Eric Vishria 39:55 Yeah,

Eric Vishria 39:56 yeah.

Jack Altman 39:56 I mean, another question I always have here is, like, are really special people... Is it? Like, can you miss it? Like, are-- Like-

Chetan Puttagunta 40:03 Yes!

Jack Altman 40:03 ... Is it a special-

Chetan Puttagunta 40:04 Definitely

Jack Altman 40:04 ... ability to tell special people? And like, I-- It's like, let's take Max at Legora.

Eric Vishria 40:08 Yeah.

Jack Altman 40:08 Like, do you think that a hundred reasonably, at least okay VCs who are, you know, been doing it for a while, do you not think most of them would have come out and been like: "This guy is great"? Is it unique to be able to see greatness-

Eric Vishria 40:22 Well, I-

Jack Altman 40:22 ... earlier, or is it more about getting into the right room with Howie and Jack Dorsey at the right time?

Eric Vishria 40:27 That's a good question. I think most of the time, people react similarly. Like, people who are good at this will identify or see that specialness. Like, I... We-- And we miss it, like, everybody misses it sometimes, but do it. But I, I think there's a bigger thing that happens, which is I think people talk themselves out of stuff-

Jack Altman 40:43 Mm-hmm

Eric Vishria 40:44 ... for other reasons.

Jack Altman 40:45 Yes.

Eric Vishria 40:46 Like, they will-- The competitive situation, it, you know, this company, or, like, can the outcome for what they're working on be big enough? And like, you know, like those kinds of things. Like, I, I have that in like... I'll, I'll take Alex at scale. Like, you met Alex, and you were like-

Jack Altman 41:02 Something's going on

Eric Vishria 41:02 ... This guy is a winner. Like, and we saw it very, very early. Like, we saw it together.

Jack Altman 41:07 Yeah.

Eric Vishria 41:07 And, um, and, you know, and, and th- those were particularly painful, uh, because it's like we absolutely recognized that he was amazing and a super special person. We absolutely recognized that the autonomous vehicle labeling revenue was bullshit and gonna go away in, in, like, not that long. So the facts and the read was correct, and the conclusion was incorrect. [chuckles]

Jack Altman 41:30 [chuckles]

Eric Vishria 41:30 And it's like, damn it! And so, like, it... You know, that's, like, a particular painful one, and it's a good lesson for me, which is just like-

Jack Altman 41:35 But you thought he was special any... You thought he was special and passed anyway?

Eric Vishria 41:38 Yes.

Jack Altman 41:38 Have you ever done that, and, like, have you ever passed on a special person because you didn't like something else about the setup and been like, "I'm still glad I did that"? Or is the lesson just always back if you feel that way, no matter what else?

Eric Vishria 41:50 I mean, at this particular moment in time, [chuckles] I would say, like: Yes, I do. You know, with the, the hindsight benefit, it's like, if you feel that way, and, and I think you have a chemistry with the person, like, that's part of it, which is, like, who do we respond to?

Peter Fenton 42:04 We're focusing on the positive case. The negative case, which is useful also to think about, and it's actually true, I think, if you're an entrepreneur, is this word inauthentic. And, and I, I think it's easy over time, over many decades, to see the masks, the fakeness, the posing. And if there was one trigger for all of us in general, I think this is true in entrepreneurship, it's true for the employees you're recruiting, is that they think you're faking it.

Eric Vishria 42:32 Yeah.

Peter Fenton 42:32 And, and, and if there's, there's the whole fake it till you make it thing, put that aside. I think that's broadly bad advice. If someone's not willing to be vulnerable with us in the meeting and expose what they don't know and, and be real, then we-- how can we have a relationship? So there, there have been people come in here who've done well, who've raised money, and particularly now in the cycle, I think you get people who are playing a promotional game-... because there's something that's, that's attractive in the external metrics. It could be, you know, research background, pick your favorite. And they, and they, "Okay, we gotta sex that up a bit, and then we'll, we'll flip these people." Um, one of the-- if there was a common thread in the Benchmark investments, is that very low representation, there are exceptions, of the promoter. And, you know, the case where you find someone who's, like, really talented, but they're in the wrong market, and we, we don't back them, but, but we love them, that happens. But, you know, when we get in trouble, uh, as an industry, I think, is when we start to be- become quite accepting of the, um... this, this, this is, forgive me, the distinguishing traits between founders and entrepreneurs. When you find in a, in a market like we're in, the number of founders increases geometrically.

Jack Altman 43:38 Mm.

Peter Fenton 43:39 I think the number of entrepreneurs stays as a fixed constant. So what happens is we have a lot of founders, 'cause anyone, I could be a founder, you could be a founder, or you were a founder-

Jack Altman 43:46 You know, they don't-

Peter Fenton 43:47 But you're also an entrepreneur.

Jack Altman 43:48 Small founders. Small founders.

Peter Fenton 43:48 Entrepreneurs have this guile. There, there's a sense of, of, um, leverage. Like, um, Brendan McCord, to me, is a, uh, uh, an entrepreneur in any cycle, in any market. Um, he happens to also be a founder right now. I think that's not the case for a number of people who've found companies who would otherwise, if, if the market was shitty, they would be employees at big company X, Y, or Z.

Jack Altman 44:13 Yeah.

Peter Fenton 44:13 So a- as, as, as a founder, you have to, I think, introspect, do you have the entrepreneurial qualities? And to study entrepreneurship, um, the vast majority of entrepreneurs drop out.

Jack Altman 44:22 Mm.

Peter Fenton 44:22 The, the phenotype of the personality is they don't want to be validated by a system they didn't create. They're not looking for, you know, fancy brand names, and they're not attracted to big, you know, fancy whatever. They, they, they look for things that are substantive, and-

Jack Altman 44:34 The other dropouts, not straight A students.

Peter Fenton 44:35 Yeah, and there are exceptions. You know, Brett got great grades. [laughing]

Jack Altman 44:39 [laughing] X dot com.

Peter Fenton 44:41 Brett's in that Venn diagram, like in that, uh, six people in the universe-

Jack Altman 44:45 Yeah

Peter Fenton 44:45 ... kind of stage.

Jack Altman 44:46 And but I think this, this market right now, because it's so attractive to be a founder, has brought in a degree of promotion and, um, the sorts of stuff that get people into trouble over the mid to long term. And, and, you know, our whole system is identifying and, and getting proximate to the entrepreneurial energies, which are, you know, kind of, as we know, these forces beyond all measure.

Chetan Puttagunta 45:06 There was a period of time between Q4 of twenty twenty-two, we call it, like, end of twenty twenty-three, there was, like, a broader macro tech correction, where, like, a whole bunch of, like, public tech stocks corrected. There was, like, a tightening of the late stage market and, like, you know, interest rates were going up, and, like, all this sort of, like, tourist capital had, like, fled the scene for a little bit of time. And capital just, like, got a little bit harder to raise. And at that time, what was really interesting is, if you look at all the seed and A deals that we did and where those companies are now, like, it would look like our hit rate went way up.

Jack Altman 45:43 Mm-hmm.

Chetan Puttagunta 45:43 But I actually think what happened is that if you were willing to start a company at that point in time in AI, you were a true believer. Like, there was some natural inspiration for what you were doing, so it's like-

Peter Fenton 45:53 Sierra

Chetan Puttagunta 45:54 ... Fireworks, Brett Sierra, Harrison at LangChain. Like, it's, it's companies where the entrepreneur had some fire. That was like, "I need to do this."

Peter Fenton 46:03 God, were all those done in that era?

Chetan Puttagunta 46:04 Yeah.

Peter Fenton 46:05 That one year?

Jack Altman 46:06 I think you're right.

Peter Fenton 46:06 Oh, sure.

Jack Altman 46:06 And I think a lot of people read it as what happened here is they just got to the blue ocean thing first.

Chetan Puttagunta 46:11 Yeah.

Jack Altman 46:11 Maybe there's a degree of that, but a lot of it is if you want to do this at a time when it looks really painful-

Chetan Puttagunta 46:16 Right

Jack Altman 46:16 ... that's just a different subset than people who are gonna do it at a time when it looks incredibly attractive.

Chetan Puttagunta 46:20 That's right.

Peter Fenton 46:21 Yes. Yeah, two thousand and eight, two thousand and eleven, when we did Series A at Uber, Instagram-

Jack Altman 46:26 Mm-hmm

Peter Fenton 46:26 ... Twitter-

Jack Altman 46:27 Snapchat.

Peter Fenton 46:27 Snapchat, like...

Jack Altman 46:29 Yeah.

Peter Fenton 46:29 And it was-- but then by the, like, thirteen, fourteen, it became very-

Jack Altman 46:33 Yeah, and it's funny 'cause all the, like, think pieces and essays about this stuff are always like, there was a, there was a new technology, and on top of that new technology came X. You know, you get cloud, you get blah, blah, blah, you get mobile, you get blah, blah, blah, you get AI, you get blah, blah, blah. Which I think is true, but you don't really see people talking about in the moments where the psychology requires a different kind of hardness. It's just-

Chetan Puttagunta 46:53 Hundred percent. And I think in that moment in time-

Jack Altman 46:55 And it's probably a bigger explainer

Chetan Puttagunta 46:56 ... like, twenty twenty-two, twenty twenty-three, early twenty twenty-four, if you wanted to be in AI applications and AI application enablement-

Jack Altman 47:04 Mm-hmm

Chetan Puttagunta 47:04 ... it actually took a l-- took a ki- a special kind of person that truly believed, regardless of what anybody else thought. Because at that time, it was quite unpopular and weird to decide you wanted to build an AI application.

Jack Altman 47:18 Yeah.

Chetan Puttagunta 47:19 Because the natural assumption was that fundamentally, the foundation models were so powerful, and as they reached more and more intelligence, like, they would just start to gobble up the applications themselves.

Jack Altman 47:29 Even if you look at the people who worked at the labs in the, like, late twenty-teens-

Peter Fenton 47:34 Yeah

Jack Altman 47:34 ... and now you compare those people to the people who are working at the la- I mean, not-- obviously, the people are brilliant now, but, like, you look and you see, like, Ilya and Greg Brockman and all these people, it's like they were doing it when it was really not cool.

Peter Fenton 47:45 Yes. Yes.

Chetan Puttagunta 47:46 Yeah.

Jack Altman 47:46 And those are still-

Peter Fenton 47:47 Yes

Jack Altman 47:47 ... I think, the most brilliant people.

Peter Fenton 47:48 Yes.

Chetan Puttagunta 47:48 That's right.

Peter Fenton 47:48 Yes.

Jack Altman 47:49 There's something there.

Jack Altman 47:50 The last topic I want to get to is basically how you all are thinking about AI, which I realize is sort of, like, something that we've probably all talked about a lot, but I do think it's, like, the most interesting thing going, and I don't think any of us want to talk about politics right now. Going through sort of a lot of your recent investments, it's actually clear that you guys caught the AI wave in, like, a pretty substantial way. A lot of them were not obvious companies. You know, even Legoro, which is sort of like a middle-of-the-fairway venture type of company, was not an obvious thing to do from Sweden, and, you know, there was already Harvey. I think Manus was a very unusual investment as well. I think Cerebras is extremely interesting. Obviously, like, Sierra was, like, before it was happening, and I think when it happened, it's like, wait, Brett Taylor's doing customer support. Like, I don't think you guys were loud about AI, but I think just empirically speaking, you look back, and you caught a lot of it. So I guess what I'm curious about is, as you're thinking now, and you're looking at companies today, what are you excited about? Like, what are, you know, to the point of you guys are having these conversations as a partnership, and you're being really curious, like, what is at the top of your curiosity list in AI right now?

Chetan Puttagunta 48:55 I think you just have to roll back to, you know, call it-

48:59 ... end of twenty twenty-two, when we happened to get involved with these spectacular entrepreneurs, I think the thing that it became clear to us sitting around the table was that AI was the thing. And even if it wasn't the thing, it didn't matter. That was like, where we were drawn to. Like, it was the thing that had this, like, gravity pull for us. And so all we wanted to do was spend all of our time talking about it, thinking about it, meeting all the people working on it, all that kind of stuff. And then you have to overlay your value system on the thing that you're excited by. And the thing that we laid on top of that was: what kind of relationships do we want to get into with companies in that moment in time? And we decided we wanted to be in business with companies where that ethic of being the primary partner, board partner, lead investor, first investor, principal investor, principal believer in the mission is how we wanted to practice investing in AI at that time. And so that meant that we were looking for just really spectacular entrepreneurs with unique approaches to the market. And if you want to do that in a place where you want to be the first investor, and you want to back teams with two people, three people, four people, five people, whatever, you're often meeting people that are probably a little bit early on whatever the next curve was. And so if you remember what was happening in twenty twenty-two and early twenty twenty-three, everybody wanted to start a foundational lab, and everybody wanted to aggregate GPUs. And so there, there was, like, a big drive to aggregate capital to basically buy GPUs, which then would be utilized for training runs and stuff like that. And it wasn't that we had some hypothesis or some macro view of why we don't want to do that or do want to do that. We were looking for companies and entrepreneurs that resonated with us, that wanted to partner with us. And in that moment, we met a lot of people that were working on really aggressive ideas that we thought were just spectacular people with spectacular approaches. And as a result, you saw this list of companies that we compiled at that time. So that was when we did Sierra, when we did Fireworks, we did LangChain, we did Mercore, we did LevelPath, we had Legora, Manus, et cetera, et cetera. All of that came together, and when Eric did Cerebras, the Series A, like, it's all of that same stuff, which is partnering super early with founders working on something that they're deeply passionate about. And frankly, it's cliché to say it, but all of those investments at the time were a little bit non-consensus.

Ev Randle 51:42 Yeah, they were.

Chetan Puttagunta 51:43 I think you have to be.

Ev Randle 51:44 It's interesting because from the, from the outside in, before I joined Benchmark, I think if you look at the investments that were made in that kind of twenty two, twenty three time period, you had, like, an inference cloud with Fireworks, you had a data infrastructure platform with Mercore, you had a horizontal, um, AI play with Sierra, you had a vertical AI play with Legora, and obviously, that's only four of, of the, the kind of ten great investments that were done in that era. It was easy to ascribe kind of like a thematic nature. [laughing]

Eric Vishria 52:10 [laughing] Then you got here, and we're like, "Oh, my God! These guys have no idea what they're doing."

Ev Randle 52:13 Yeah. [laughing]

Eric Vishria 52:14 That is correct. That is correct.

Ev Randle 52:16 No, but, but I, I think you come in, you're like, "Oh, wow, they had like a vertical, they had horizontal, they had data." It was like-

Eric Vishria 52:21 They must have done a market map. [chuckles]

Ev Randle 52:23 ... Like, they must have done a market map. And then you come in, and you start asking about each of the investments and the story behind each of the investments. And like, ninety percent of the story on every single one of the investments is the person, is the founder and the entrepreneur, um, and the relationship that they built and why the entrepreneur was so special. And that was, that was, um, so revealing to me, coming into this organization and this partnership, was like: Wow, it, like, the founder centricity just, like, bled off the page, um, in terms of the stories of all those investments. And so I think that's the way that we're approaching it today, is obviously, we love to talk about all of the newest and greatest things that are going on in AI every single week. But in terms of the actual investments, it's always... A- and I think it, it lends itself, especially to this era, where I think

Ev Randle 53:06 because the sands are shifting beneath the founders' feet so quickly in AI and things are changing so rapidly, like, founder centricity as an investment strategy matters more now than, than-

Eric Vishria 53:17 I agree

Ev Randle 53:17 ... you know, any time in the last decade.

Eric Vishria 53:19 I think the underlying, like, technology substrate's changing very quickly with AI in a way, like, just anything, any software that you could have built in, like, twenty twenty-two, you could have built in twenty ten, plus or minus. Like, once we had the cloud, you know, we got little APIs here and there, but for the most part, for twelve years, like, it was pretty stable. If you compare that to today, you're getting more change, like, every quarter than, you know, we did in a decade in terms of the substrate. And so a founder's ability to navigate that and actually, like, understand where their edge is and where their edge is going to come from, and how quickly the moats are deteriorating, because they're deteriorating really quickly, and how do you build the next one? Like, it's just- it's critical, and so I think it becomes even more important. And so if I look forward, I'm like, you know, we, we see all the same things. Like, it sure feels like the infrastructure cycle is going to continue. It sure feels like, you know, five years from now or, or, or maybe even sooner, we're going to have really interesting things in robotics. It, it sure seems like-

Ev Randle 54:14 Agents are getting really good.

Eric Vishria 54:15 Agents are going to get really good, and the applications are going to get better. And, like, it-- all these things, like, seem, like, really clear. But I don't know that that, that isn't enough, I don't think, to make an investment.

Ev Randle 54:24 It's impressive to me that, um, it would be-- it would have been so tempting to answer my question with some high-minded thesis about, like... And you all just said, founders.

Eric Vishria 54:32 [chuckles] Yeah. Yeah.

Chetan Puttagunta 54:33 Well, I, I think it's also... If you step back and you just think of these as, as, um, uh, forces, not, not like specifically AI or social or mobile, um, there, there are windows where the disruption is so high that it-- that entrepreneurs come in, and they see something with such clarity that they can't not do it. And then there's this lag effect, years of, like, all the other people then come in afterwards. And, and in a sense, that happened already with AI. It happened with the first generation. It happened with the people doing, "Okay, now we've got to do our model company. Now we've got..." But, but when your brother and the team of people were at OpenAI, and that was before it was obvious, then lightning struck. My belief is that that is likely to happen again at least one or two times in the AI cycle, where there's something so disruptive that no one can fully understand it, and then there's a completely new kind of entrepreneur that emerges. What we've been watching for the last three months, um, post Opus four point five, is the force of that disruption has awakened a whole group of entrepreneurs that were otherwise not seeing things they were seeing, uh, that now they weren't seeing them three months ago. I'm a big believer in what you're doing with Sunday and robotics, because that's a world where we all know that in a decade we're going to have these things in our house. But the path from here to there, is that an incumbents game, where the big companies are going to push down complex products, or will there be entrepreneurs? It seems likely that it will be, be-- So, so, so much of this is like, okay, where is there a disruption that... But then the lag effect of our industry is that, you know, ninety percent of the capital flows in afterwards-

Ev Randle 56:06 Mm-hmm

Chetan Puttagunta 56:06 ... after the entrepreneurs have figured it out. By the time it's sort of figured out and there's the next thing, like, it's not for us. And, and that's our faith, that the Silicon Valley is an adaptive landscape that will continually have these disruptions that, that make a-- As soon as there's a winner, like, we're kind of uninterested, we move on, so.

Ev Randle 56:23 It's a great place to end. Thank you, guys. This was really fun.

Eric Vishria 56:25 Thank you.

Chetan Puttagunta 56:26 Thank you. [upbeat music]