The Craft of Early Stage Venture | Peter Fenton, General Partner at Benchmark | Ep. 18

Jack Altman 0:00 six minutes in, you're like, "Okay, there's forty coding companies," and this and that, but there's one person who has this clarity.

Peter Fenton 0:07 Totally.

Jack Altman 0:07 And you just don't even have to finish. Like, the, the five minutes in the meeting, you're done. But then it's clumsy because you're like, it's a relationship, so you wanna have a two-way, you wanna have a-- You don't wanna just say, "Oh, my gosh, yes, you had me five minutes in." [upbeat music] Peter, really excited to have this conversation with you. Thank you for making time for this.

Peter Fenton 0:22 Thrilled to be

Peter Fenton 0:23 here. What a joy!

Jack Altman 0:24 So I asked you what ideas you've been thinking about lately.

Peter Fenton 0:28 Yeah.

Jack Altman 0:28 And you shared that the idea of Darwinism, you think, is still underappreciated, and how evolution applies to areas outside of biology. Can you just share a little bit about that idea?

Peter Fenton 0:39 Well, I think that in the last fifty plus years, the biggest intellectual progression that, that, um, maybe we'll look back and see in, in hindsight, has been generaliz- generalizing Darwinism. What does that mean? You know, we're in these complex systems. Um, we're sitting at the center of the Silicon Valley, which is an interesting, complex ecosystem that is undergoing the same mechanisms of Darwinism that I think you can see visible in, in evolution by natural selection, but also in cultural evolution, in technology evolution. And it comes down to these sort of very base mechanics that I think generalize and give us insight into the systems that we work in, be they cities or, or companies or industries. And the, the three mechanics of evolution, um, we all know to be random mutation, but I'd call that planned and unplanned variance. And interestingly, unplanned being more, um, important than I think we all have appreciated, and take that for, like, even the unplanned mutation of ChatGPT.

Jack Altman 1:46 Mm-hmm.

Peter Fenton 1:47 Secondly, you have selection, which is some force that determines the reproductive or fitness or whatever, is usually just what's the likelihood that that thing is going to be around? In evolution by natural selection, it's a, it's reproduction and survive and reproduce. In an ecosystem, in a company, it's of course, you know, surviving and then creating more profits, more revenue, whatever, more, more customers. Um, and then the third variable in, in evolution is, of course, inheritance. And so there's this, this idea that things are all on a continuum and evolving through these three mechanics. And so w- why is that relevant to the world of the Silicon Valley? You know, I spent a fair amount of time in, in France and, you know, ten years ago, and, and I'm-- I, I really got to think, w- why hasn't the Silicon Valley been created somewhere else? A- and then you ask another question, is it, why is it most likely, in probabilistic thinking, that the next trillion-dollar company will come out of the Silicon Valley? Why is the Silicon Valley the most likely ecosystem to, to identify, adopt, and scale the next disruptive technology? I mean, you look at the Internet, it didn't have to happen here, but it did. Of course, obviously, there's Amazon up in Seattle, but I think if you look at the super majority of market cap, the gravity's here. Um, you know, social and mobile, here. Crypto is interesting because it sort of was not i- of a place-

Jack Altman 3:11 Yeah

Peter Fenton 3:11 ... even though Coinbase got started here, and you'd still say that it's rooted in the Silicon Valley. But then AI, of course, is, is, this is home. And I, I think one of those examples, uh, any one of them sort of reveals the whole picture of, like, we have the most adaptive ecosystem in the Silicon Valley because it's evolved, and it has the mechanisms of being able to tolerate mutations, identify and put selection pressure, which to me is like capital, teams, entrepreneurs, and then the inheritance is that each company is taking with it the, the past experience of entrepreneurial success. So, so these things compound, and the health of the ecosystem in Silicon Valley, we were in a malaise in twenty twenty-one, twenty two-

Jack Altman 3:54 Yeah

Peter Fenton 3:54 ... of like, you know, we've, we've sort of lost the epicenter. It's, it's now like a Zoom world. Everything's distributed, and what's come back, rocketing back, and I think you feel it every day when you walk in these streets, is that this ecosystem is so vital and so adaptive that we will, I think, in fifty, a hundred years, still be the epicenter. And, okay, there's what about, you know, New York, Boston, San-- I'm not taking anything away from those, those ecosystems, but there's, I think, real health and understanding what, what's behind the evolutionary power, the adaptive landscape. I think the same model, I've spent a lot of time in board meetings. I'm on fifteen boards, and I'm challenging my companies to think about this idea of you have an evolving organism, and, and there are mechanisms of natural selection or selection that are, that are at work, and either they're implicit and you're not tracking them, or they're explicit and you can, you can guide them. And when you learn about evolution, you think about it, there's maladaptive things like cancers that emerge, and there's adaptive things that increase the fitness of the organism. So o- one of the really healthy things, I think, in looking at generalizing Darwinism is to ask in a company, in a venture fund, which we can talk about, um, you know, are you in a adaptive, um, pursuit of maximum fitness and maximum flourishing, or are you doing things that are maladapted? And this whole field, I think of, of what's now broadly called pro-social, um, uh, systems, have sort of internalized this mechanism of Darwinism so that it's actually applicable and useful, and you can actually apply it to say, okay, how do you think about constructing a company and a culture that, that is, uh, maximally fit?

Jack Altman 5:38 To ask you about a couple of these applications, do you think in twenty twenty-one or whatever the malaise moment was, do you think that the Bay Area was actually hanging in the balance, or do you think it just seemed like that? In other words, like, are you pretty sure that the next two revolutions will al- also happen here, or is there potential even for it to be somewhere else?

Peter Fenton 5:58 Our partnership went to China-... about a month and a half ago, and it's for sure happening there. But what's different in China is that it's less of a place, it's, it's more distributed. So Hangzhou, Shanghai, Beijing. Whereas I think in the, in this market, the US, Europe, the Silicon Valley still is the epicenter. And, and so I'm, I'm, I'm comparing the two because I think what's interesting is that the, the Chinese model, as I have understood it, is, um, far more between group competition.

Jack Altman 6:32 Hmm.

Peter Fenton 6:32 So one of the things about evolution that you learn is that to increase the adaptive fitness of a, of an ecosystem, it's important to have multiple groups competing. And then you identify which one was most successful, and then they become, you know, they win. They-- you, you know, you inherit their adaptations, then you start all over again. The Chinese have a dozen plus driverless car companies. They have, in their model development, which blew us away when we were there, is that ByteDance and Tencent, they all have multiple teams pursuing, uh, varying strategies towards the same objective for video models, for, for audio models. And, um, I think that's a mindset in China that is something we can learn from. Relative to Silicon Valley, you know, you think about the pressures of, um, multiple group, you know, competition, so Anthropic and, and, and OpenAI, while they're not competing for the same prize, there's a really good pressure that gets put-

Jack Altman 7:28 Mm-hmm.

Peter Fenton 7:28 -when, when the proximity of those companies, they're here, they inspire each other. And so the, the density of startups in a ecosystem, I think, is a major variable. And if you look at the... What's the backdrop of the Silicon Valley? It's this. It's, it's our world. It's, it's, it's when you go to the restaurants, that's what people are talking about. When you go, you know, uh, bump into people on the street or, or in, uh... The underlying fabric is so rooted in, in entrepreneurship. That's not the case in other cities. And so could a city emerge that, that sort of evolves in that direction? It's possible, but, but then you have all this history, fifty plus years of embedded know-how, of, um, highly efficient capital markets, information that we were talking before I started about how in the nineteen seventies, the way information was exchanged was over a steakhouse dinner-

Jack Altman 8:17 Mm-hmm

Peter Fenton 8:17 ... between, you know, corduroy pant-wearing old white men. And, uh, a- a- and that's shifted to this point now, where it's just this high velocity of transparent information sharing, reputation, all that. So I, I don't know. I, I would have a hard time believing that we are dislocated, except if there was some new basis of innovation. So for example, if it, it's like, um, th- there's this history of like the Silicon Valley is it's the land of the q- of the quick and the dead. Like, we, we have, um, Benchmark used to have a, a belief that, like, nine months from inception to shipping product was a high correlate, nine months or less, to success. So there's this, this narrative that we're in the high technology business, when it turns out entrepreneurship is more about leverage-

Jack Altman 9:05 Hmm

Peter Fenton 9:05 ... about pace, about clarity and focus, than it is about deep R&D.

Jack Altman 9:10 Interesting.

Peter Fenton 9:10 That may have shifted a bit if you look at the, the nature of, of, of the recent successes, uh, f- large capital research labs.

Jack Altman 9:18 Yeah. Well, outside the research labs, what you said there might be completely true outside of those research labs right now. Like-

Peter Fenton 9:23 Yeah

Jack Altman 9:24 ... most application layer companies, I would say, probably do fit what you're saying.

Peter Fenton 9:27 Yeah. Well, and I, I think that velocity has been part of this system here, which is that we... P- part of adaptive landscapes being healthy is that you, um, planned and unplanned variation so that there's h- there's, there's high, um, variance.

Jack Altman 9:44 Mm-hmm.

Peter Fenton 9:44 So lots of experiments. With the Silicon-- I'm just saying that, like, we don't know a priori until we get into the market and we, and we ship something. I mean, YC, of course, has really been a great... Like, just build it and, and stop, you know, get out of your head and into the world. I think that that culture here is, requires you to then have a tolerance for the, the failure that comes with unplanned and planned variance, which is that you accept it as like, "Okay, that was-- I learned something. It's tuition." And I, I think that, uh, the fabric, I don't know. I-- so the, in twenty twenty-one, twenty twenty-two, when there was the San Francisco Sox, and, like, we have so many s- problems in the civil society here, and, um, there was a, uh, you know, an exodus at some level to places like Miami and-

Jack Altman 10:26 Texas

Peter Fenton 10:26 ... Austin, Texas. And I think it misses something, which is Jeffrey West wrote these great books on, um... That the cities outlive pretty much everything. They're probably the best idea that we've had as humanity-

Jack Altman 10:40 Hmm

Peter Fenton 10:40 ... um, other than maybe language and fire, [chuckles] and, but cities endure far longer than the average Fortune five hundred company, which is usually dead in about fifty years. But cities can go for hundreds, if not thousands of years. And, um, part of that, and the logic of a city, I think, is embedded in the Silicon Valley ecosystem, which is the highly adaptive, responsive to outside forces, not planned.

Jack Altman 11:02 Mm-hmm.

Peter Fenton 11:02 Like, the idea of a top-down model, but it's also not chaos. It's not total laissez-faire, you know, anything goes. And, and so there's a, um, they're a, they're an evolving organism, and, and we're just part of it.

Jack Altman 11:13 What's interesting as I'm listening to you talk about this, is I, I also think that Silicon Valley/tech, the way that it competes with itself is in a much more communal way than other cities and industries. Like, I feel like in New York finance, people would never share all their best ideas on a podcast.

Peter Fenton 11:31 Yeah.

Jack Altman 11:32 Or people wouldn't go out to dinner with their competitors-

Peter Fenton 11:34 Right

Jack Altman 11:34 ... and, like, talk about what they're thinking and learn from each other. Whereas here, I think there's, which you touched on, there's simultaneously somehow, like, a respect and competition at the same time-

Peter Fenton 11:44 Yeah

Jack Altman 11:44 ... which almost seems like the healthiest possible way.

Peter Fenton 11:47 Well, and, and th- this is the... By the way, it's not to say that our ecosystem doesn't go off a cliff at times, and I think we're, um, we're struggling with, of course, in AI, understanding where, where might it go wrong. I think there's a real, real sensitivity to that and obviously debate.... between optimists, of which I put myself in that camp, and, and doomers, if you want to call them that.

Jack Altman 12:08 Yeah.

Peter Fenton 12:08 But

Peter Fenton 12:09 the, um, one of the big insights in the last, you know, few decades just in, in systems thinking has been this idea of what, what explains the success of certain ecosystems and the failure of others? And Lin Ostrom got the Nobel Prize in two thousand and nine on this, what she described as the core design principles of highly adaptive functioning ecosystems. So she looked at things like fisheries-

Jack Altman 12:32 Mm.

Peter Fenton 12:33 -and forestries, things where, you know, the tragedy of the commons could destroy the resource. Common shared resource wiped out by, by self-interest, the individual actor at the expense of the group. But some of these ecosystems are flourishing. And, and so she came up with these eight principles, core design principles, that to me are like, they're somewhat obvious, but they're directly applicable-

Jack Altman 12:54 Mm-hmm

Peter Fenton 12:54 ... to our startups. And so as we serve on a board, part of what I'm trying to reveal is that, like, the Silicon Valley actually embodies the core design principles. So the first one is, you know, common shared identity and purpose. I think that here, like, okay, is it, is it to get rich? Maybe. But I think that the, the, the underlying tone that I sort of find in most of the Silicon Valley, which is not necessarily a great thing, is a dissatisfaction with the way the world is today, and a purpose, a desire to, to have a meaningful impact by organizing against some objective that's not a net worth target, it's not a fixed object, it's the true infinite game, right?

Jack Altman 13:32 Mm-hmm.

Peter Fenton 13:33 So this idea of, like, when you hear that what gets us excited when Brian Chesky talks about founder mode, is that activation of purpose to, to sort of fully manifest the possibilities that we have as humans. And I think that is, like, at the center of the Silicon Valley. That's why we all go out to places like, you know, Big Sur or Esalen, and it's like, yeah, it's the same energy. It's the sense of human possibilities manifest. The other divine- design principles are pretty straightforward, like, you know, fast, uh, and, and, um, fair conflict resolution, monitoring agreed behavior, so transparency. Um, o- other aspects of this are, um, you know, equitable distribution of gain and, and, and effort. Um, uh, and so as you go down the list of these design principles, they're, they're, like, rooted in the Silicon Valley. And I don't think it's like a meritocracy, which I think is ultimately a fallacy because there's no... How do you really think about that systemically? It's much more of a adaptive organism where w- we know how to cooperate with others, and when it starts to go off the rails, there is an immune system in the Silicon Valley where we self-correct.

Jack Altman 14:34 Yeah.

Peter Fenton 14:34 And, and I... You know, part of evolution, this is the thing which also gets to the root of the Silicon Valley, is that, um, there needs to be extinction. There, there needs to be, uh, over time, as large organisms build, they develop internal pathologies, and some of those are cancerous.

Jack Altman 14:54 Yep.

Peter Fenton 14:54 And we, as an industry, benefit from the creative destruction that's at the heart of everything. Every big company here is a target for the next generation coming up. And while we can celebrate the success of Meta and Google and Apple, like, we all know that in fifty years, they get eclipsed. But, but, but it's the people here that believe that, that are doing it. And I think in other industries, there's something nice about the, "Well, you know, it's been around for four hundred years." If you're, you're at LVMH, that's a, that's an attribute. I, I don't know, like, I'm in the business of, like, those are juicy targets.

Jack Altman 15:33 Mm-hmm.

Peter Fenton 15:34 And, you know, great that they had their day in the sun, they rode their wave to, to, to the top, but we want that next generation to come up, and part of the evolving landscape is that you have extinction events-

Jack Altman 15:46 Yep

Peter Fenton 15:47 ... and that there's some branches on the tree where we can say they're common ancestries, but, but we evolved past that. And I, I don't know. I mean, I think it's sort of the ethos here.

Jack Altman 15:55 You also sort of need the, like, meta big ideas like AI to-

Peter Fenton 15:59 Yes

Jack Altman 16:00 ... be able to suck the talent from other ideas that were good, but not as good.

Peter Fenton 16:05 Yes.

Jack Altman 16:05 And so you kind of also need, like, the talent to get released back into the pool to push broad things like AI forward.

Peter Fenton 16:11 Without question, and I think that, um, you know, this does lean back, if you take a biologist perspective, there's punctuated equilibrium. There's points in time where you have dislocations that many companies... I think Google is a good example. We've-- There's long conversations about, you know, uh, debates. D- are they, are they gonna get left behind? Will they... They have all these assets, right? They, [chuckles] you know, um, YouTube, um, not to mention, like, the whole G Suite, all the, all the information they have on users, and yet the dislocation of AI, which came from many of the researchers inside of Google. And I think what happens is that companies' business models are also in an adaptive landscape. They-- And they find their way through sort of an invisible hand to a peak, to a maximum optimization. The internal logic, the invisible hand, as I say, of, of like, you know, we're, we're doing this thing every day a little bit better, and then you're on top of that peak, and then one of the things you learn i- in, in, in these punctuated equilibriums, you have a shock to the system that requires you to climb down that adaptive peak, which sucks, and that's like business model terror because you-

Jack Altman 17:18 It's like some innovator's dilemma type stuff.

Peter Fenton 17:20 Yeah, but it's, i- it is an innovator's dilemma, but it's a little different insofar as it's not... Yes, you, you deny the new thing. Innovator's dilemma is partly like to, to serve the high end of the customer base, which then leaves you vulnerable for something that disrupted below. Versions of this to me are like climbing down to go back up is, is an out-of-body experience. And so I think we have a ton of respect for companies that have been able to have-

Jack Altman 17:42 Well, kind of like, well, who comes to mind who has done that kind of thing?

Peter Fenton 17:45 Historically, it's done by founders who have the courage to start climbing a new adaptive peak. And I think the best example of that, we look over time, the iPhone, AWS-

Jack Altman 17:57 Yeah

Peter Fenton 17:57 ... where there was a new peak that was not the core business model. It may have been the core culture.... of like integrated products, or the case of Amazon operational excellence, applied to a new adaptive peak. But I, I can't think of a great example. Perhaps Netflix is one, where there's a- we're gonna go down. [chuckles]

Jack Altman 18:13 Yeah.

Peter Fenton 18:13 We're gonna rack our margins, we're gonna, we're gonna go into the valley in the shadow of death and try and come out the other side, because the culture you build, the internal systems, the resistance is so giant. So, so part of what's required, and I think what we were living in the last fifteen plus years, is an incumbents world.

Jack Altman 18:28 Mm-hmm.

Peter Fenton 18:29 The super majority returns. The fact that our incumbents are network effect businesses growing at thirty plus percent, not slowing down, is scary. In an adaptive world where you want to have lots of variance, lo-lots of experiments, lots of heterogeneity, you start to get to these monoliths. And, and, you know, the AI, um, dislocation is the first real structural shift in business model that I've seen in, in over a decade, maybe over twenty years. I mean, SaaS is arguably a different business model because it's subscription-based, but when you have a business model dislocation-

Jack Altman 19:02 Mm-hmm

Peter Fenton 19:03 ... then you get giant new companies.

Jack Altman 19:04 I don't know if you'd agree with this way of looking at it, but sometimes I think about like QQQ index versus like aggregate VC returns as just like a way to think about, like, who's winning right now, incumbents or-

Peter Fenton 19:15 Yeah

Jack Altman 19:16 ... startups. And it, my guess is over the last, over the last decade, probably QQ- like QQQ is probably one I would guess. I haven't actually looked, but-

Peter Fenton 19:24 For sure, from a-- if you, if you take paper marks as, um, fiction, and [chuckles] -

Jack Altman 19:29 Yeah

Peter Fenton 19:29 ... which I think you have to-

Jack Altman 19:30 Yeah

Peter Fenton 19:31 ... in terms of liquidity, no question. It's been an incumbents world for, for probably ten plus years. Um, that changed starting in twenty

Peter Fenton 19:40 twenty-two.

Jack Altman 19:40 Do n- now you feel like startups are more equipped? Like, if you think about who gets the value from AI, obviously, like, incumbents and startups are both gonna get some.

Peter Fenton 19:49 Yeah.

Jack Altman 19:49 But do you think startups are better equipped now to get more of the value when you look at them versus Fang?

Peter Fenton 19:54 Well, I have, you know, a strong belief that we will see three to five trillion dollar market cap companies come out of this that didn't exist before twenty twenty-two. OpenAI is one of them, so they did. But, but the idea being that business model dislocation opens up this field. Again, a completely new adaptive landscape. So one of the things that's fun to watch is that a lot of it's unplanned. Y-y-you know, our companies... W-we went to China. One of the big insights that we took out of it was, product management, as we know it, actually doesn't apply right now in AI.

Jack Altman 20:29 Mm-hmm.

Peter Fenton 20:29 In the sense of, like, we're gonna go talk to customers, find out what their needs are, develop a priority, you know, stack for the roadmap, get the engineers to build it. Instead, what's happening is that this world of discovery, put it out there, see what they like, respond to it in terms of being maximally, um, responsive in product transformation. Manus is one of our investments, is a great example of this. They laugh at the idea of a product roadmap, 'cause we go in there and say, "What's the roadmap?" And they're like, "For today? "

Jack Altman 20:55 Yeah. [chuckles]

Peter Fenton 20:56 'Cause we're shipping every day. So, so the reason I'm sharing this with you is that, um, the, the volatility in what a technology this disruptive can do with this much potential, with this much human scale impact, um, requires the kind of work that the startups are doing.

Jack Altman 21:12 Mm.

Peter Fenton 21:12 Meaning fresh eyes with, with, you know, deeply committed cultures, where people are trying lots of stuff, no one's afraid, and, and some of it takes... One of the interesting facts in, in evolution, I k- I keep coming back to this point, is that if you look at speciation, and I think there's a good debate that we might have actually had a speciation event.

Jack Altman 21:32 With AI?

Peter Fenton 21:32 Yeah.

Jack Altman 21:33 Yeah.

Peter Fenton 21:33 I, I think there's an argument which- the only-- the negative of that argument is that speciation events tend to create a new, in cladistics, you know, a, a, a new, um, [chuckles] leaf on the tree.

Jack Altman 21:44 This is like a new root.

Peter Fenton 21:45 Yeah, and but, but they tend to have a common ancestor who's not around anymore. So if, if you go too far down the path of we've created organ- inorganic life for the first time, um, it's possible that that looks back on us as the common ancestor.

Jack Altman 21:57 Mm-hmm.

Peter Fenton 21:57 But, but ancestor is the operative [chuckles] word.

Jack Altman 21:59 Yeah.

Peter Fenton 22:00 But I won't go there. So the, the point I'm making, though, about, um, if you, if you get to a, a speciation event, ninety percent of the phenotype change occurs in the first ten percent of the species' life. Wh-why is that interesting? Well, you look at the iPhone. Okay, so for the first ten percent of the iPhone's life, ninety percent of the change, of course, like, that's when the camera gets added on the front, that's when you have video, and then it sort of goes to an asymptote. So, so we're in a zone now, in, in this, I think maybe it's a three- to five-year period, could be seven, who am I to say? Where we're having radical variance. And what will happen is we'll look back, I think, in twenty forty, and, and you blow your eyes and say, "It all kind of looks the same like it did in twenty thirty."

Jack Altman 22:45 Mm-hmm.

Peter Fenton 22:45 But in, from twenty twenty-five to twenty thirty, it's gonna look so different every six months.

Jack Altman 22:50 Mm-hmm.

Peter Fenton 22:51 So this is all a long-winded way of saying, I think startups are, are optimally suited to go pursue that.

Jack Altman 22:55 Do you take the view that if that rate of change stops tomorrow in AI, that we would already just be able to kind of harvest insane gains from what's available today?

Peter Fenton 23:07 Yes, but I think we will have taken ten percent of the path up the hill to the adaptive peak. Meaning, I think there's so much more that we're yet to even, even imagine. And what's, what's more likely, if you take my worldview of unplanned variance, it's more likely that we trip over it. It's more likely that we look back and say, "Oh, isn't that obvious?" You know, we're looking at all these, all these fields from... I'm extraordinarily interested in the, in the application of AI to the language of life through biology, and where will that go? You know, it's one thing to look at protein folding, it's another to look at the whole cell itself as being a digital, you know, um, um, artifact that can then be experimented with, and then you look at an organism. Um, of course, we talked about coding, and, and, you know, there's, there's, um, the, the core application sphere today, customer support, all these things, they're all undergoing a very, almost systemic now, sustained innovation. But I think there'll also be whole fields that we don't fully appreciate, um-... The, the other, you know, thing I was blown away on in, in China is that because they're so proximate to, um, robotics and manufacturing, they're on an adaptive, you know, uh, path with embodied AI-

Jack Altman 24:22 Mm.

Peter Fenton 24:23 -that hasn't really taken off here.

Jack Altman 24:26 Yeah.

Peter Fenton 24:27 That, um, likely means that there's, again, unimaginable applications in, in our life from, like, you know, you have a somebody that does your, your laundry all the way through to, you know-

Jack Altman 24:38 Yeah

Peter Fenton 24:39 ... the whole spectrum of human needs being met.

Jack Altman 24:40 Yeah, and embodied robots-

Peter Fenton 24:42 Yeah

Jack Altman 24:42 -seems like that would be sci-fi in an amazing way. But it does seem to me like... It seems like it ought to be inevitable. I just have no idea what the timescale should be on that.

Peter Fenton 24:50 Yeah, and then, and then timescales link to, um, uh, ultimately consumer price points. You know, is it gonna come in at, at sixty k? I know, you know, Tesla has their version of this, but then, you know, is there a PC moment there that we're gonna go through? So but I, but I think, I think you could say, T-Toby said this to us, and I tend to agree, from Shopify, that if you stop today, you'd have, like, twenty trillion dollars of economic value created to, to go be harvested.

Jack Altman 25:15 Mm-hmm.

Peter Fenton 25:15 And, and we're not stopping today.

Jack Altman 25:18 Yeah.

Peter Fenton 25:18 But, um, is the incumbent world, um, going to be e-extinct or eliminated? It seems unlikely. I think what's... My sense is that we had, you know, three to five trillion dollar market cap companies, they're likely to eclipse, just as the past generation did, the current.

Jack Altman 25:35 Yeah.

Peter Fenton 25:35 And it seems unbelievable today, given the scale, network effect, businesses, all this free cash flow. The one sort of counter to this, which I think is real, is that, you know, it's, it's a such a capital-intensive, you know, game at the foundation layer-

Jack Altman 25:49 Yeah

Peter Fenton 25:49 ... that how does that then, you know, occlude the start-up opportunity? And I think we're, we're in every new investment asking that question, which is: if you took the models and you projected them getting an order of magnitude better, does your start-up opportunity get better or worse?

Jack Altman 26:04 Yeah.

Peter Fenton 26:05 And, and unfortunately, I think for, like, over eighty percent of them, it's like, it's over.

Jack Altman 26:09 Yeah.

Peter Fenton 26:09 Like, they swallow your invention. And so for some, you want to ride that wave, and you stay in front of it and say, "No, that's gonna be a point of, um, force multiplier for our success and enable more." But I think that's, that's a, that's a good debate.

Jack Altman 26:22 How about Darwinism as it applies to venture? And so, like, you know, I'm thinking about over the last fifteen years, you know, in 2010, there were, like, a lot more firms that looked like Benchmark does today, where it's, you know, small partnership, medium-sized funds. You don't have all the frills, the platform stuff.

Peter Fenton 26:40 Yeah.

Jack Altman 26:40 And a lot of them went through some process which, you know, you could say was a unhealthy growth, you could say was like a healthy Darwinian type of growth. Maybe there's elements of both. But I'm curious how you've, maybe taking Benchmark out of it, how you've observed the evolution of venture as sort of an industry.

Peter Fenton 26:57 Yeah. I'm happy to talk about it with Benchmark as being an example.

Jack Altman 27:01 Yeah.

Peter Fenton 27:02 My belief is that we're in a, in an ecosystem that's nutrient rich, and, and nutrient-rich environments that are faced with low selection pressure, and I think ventures had relatively low selection pressure in the last decade. Um, not sure why. You know, I think it's broadly from a liquidity standpoint, struggled to outperform the Nasdaq, but, but it got institutionalized as an asset class. The LPs were sort of, like, sanctioned through Cambridge Associate to have this allocation to it, to these funds.

Jack Altman 27:39 Mm-hmm.

Peter Fenton 27:39 And so, nutrient-rich, relatively low selection pressure, and I think there's been a incentive, which maybe is the selection pressure, um, to raise more capital that's very real and in some sense irresistible. And I think the outcome of that is inevitable that, that you scale, and some of that scaling will have been cancerous-

Jack Altman 28:03 Mm-hmm

Peter Fenton 28:03 ... some of it will have been highly adaptive. So what we don't yet have is the culling effect of the going back through and saying, "Okay, what is the... Who gets-- Who survives? What's, what is the inheritance?" And, um, I have a ton of respect for firms that have, um, like Andreessen Horowitz and like Sequoia, um, among others, that have scaled the capital base and tried to do it with a really intentional, "What does this mean to the entrepreneurs so that they have more?" M-more, you know, capital, uh, more resources, more... But obviously, you know, we have a very different philosophy inside of Benchmark.

Jack Altman 28:40 Yeah.

Peter Fenton 28:41 And my view has been, we have, at Benchmark, the most adaptive organism in the venture ecosystem.

Jack Altman 28:50 Mm.

Peter Fenton 28:51 You know, what's interesting about Benchmark is it started in the mid-nineties, and it was the top-performing fund of that era. You know, got lucky, obviously. eBay, it's all luck anyway at the end of the day. Um, then, with a completely different lineup, Benchmark had the top-performing fund of social mobile. You know, we were lucky enough to be, you know, early at Uber, Instagram, Snap, Twitter. Crypto was a n-not our [chuckles] thing. That was the next wave that created trillion-dollar market caps. Um, and I think the question for us now is that, do we have, with a whole new lineup, me being the last, you know, um, we said, last piece of wood on the ship of Theseus, um, that the con-continuity, um, the common ancestry to prior Benchmark, um, to be a top-performing fund? And for me, top performing is not, you know, largest fund. It's not... It's very simple: it's the, the largest cash and cash multiple for early stage venture. We don't need to win because it's not a game where there's a winner and a loser. It's, it's a, you know, are we able to get close to and be, you know, deep partners to the best entrepreneurs of this generation? Arguably, the best entrepreneurs so far have come out of foundation models. Look at your brother, the whole team at OpenAI, or Dario and the team at Anthropic. Um, it's our belief that the next three to five years, we will create-... multiple trillion-dollar companies in our industry, and, and that's how we wake up every day and, and think about, "Okay, can we serve those people, those entrepreneurs, to, to their success?" Will the other big funds do that, too? Ex-- I expect so, but different models. Our idea is that we serve as close partners to, um, an entrepreneur for a decade plus, individually close partners, meaning serve on the board, um, build a close relationship, be there with them in good times and bad. And I think that five, plus or minus, so four to six equal partners at, at the peak of their ambition, of their relevance, of their, um, capacity to serve, um, which, which means young. I mean, honestly, I think it means late thirties to mid-forties. If you go back over the history of venture, that's when John Doerr is doing his investment in Google, or Mike Moritz is at his peak. And so we-- our adaptive model has been different than the large funds, which is that we've accepted the fact that Benchmark is completely ephemeral. Like, the lineup is completely ephemeral, no names on the door. Um, it is designed to be destroyed from within and reborn, but the mechanism is the same. The adaptive mechanism is all those things we talk about, core design principles, shared identity. There's clarity across all the partners in exactly what we're doing. Fast and inclusive decision-making. You know, the, um, idea that each of us is an owner gives us a sense of autonomy, another core design principle. And there's not quality control and overhead and processes, and there's no, there's no memos.

Jack Altman 31:48 Mm-hmm.

Peter Fenton 31:48 There's, there's no... You know, when someone shows us a data room, we tend to laugh and like, "Oh, God." I have an example. This may come back and haunt us, but, um, we invested in a company called HeyGen. Joshua said at the end of the process, he's like: "Well, you know, we're talking to a lot of other firms, and they've, they've all gone into the data room, and we want to cross the threshold with you. W-we feel this is the full potential partnership for us, but, but you haven't gone to our data room yet." And, you know, our LPs may not like me saying this, but I said, "There's nothing good that can come from that." [chuckles] It's like, because I'm gonna go in there and ask a bunch of questions that undermine the commitment you're getting from us, which, which is to say that you, Joshua, at HeyGen, with Wayne and your team, are building a generational company, and that I've seen what I've seen from how you've talked about the product roadmap, how we've brainstormed about where you're gonna go with the next set of, you know, releases, and, um, a- a- and whether or not you're retaining a learning and distance training, you know, user that, that isn't the long-term goal for the business doesn't help me. And, and I don't... I think so that, that value proposition is different to entrepreneurs, and it's somewhat, um, it's, it's a not a rejection of these other models, but I do think the nutrient-rich environment that venture's been in has created, um, cancerous growth. Where and how? I think that one of the things that, that cancers need to thrive, um, is they need to hide from the immune system. My sister's facing a rare cancer, which she's been fighting and is, is today free of it, and but it gave me a window into just how Darwinism and evolution and natural selection actually apply as much to, to, to our pathologies as they do to our, our well-adapted things. And so, um, one of the challenges, and I guess this is a question for limited partners, is that, you know, they should be the immune system.

Jack Altman 33:35 Mm-hmm.

Peter Fenton 33:36 But, you know, they've been very patient, and I think at some point there's a question of, like, in the same way that ven- venture is sanctioned as an asset class because it has all these spectacular possibilities, asymmetric return, you know, a dollar can become ten thousand dollars. There's nothing like it in the investment world, truly nothing. But it also has been underperforming the Nasdaq.

Jack Altman 33:55 Yeah. Well, and I guess part of what's going on there is just like we're all fallible humans, the LPs are also fallible humans that have their own incentives that are not perfectly rational on a-

Peter Fenton 34:06 Yes

Jack Altman 34:07 ... broader scale, too. So there's probably a lot at play there that, through the whole pipeline, that makes the whole system hard to change.

Peter Fenton 34:13 And, and I've, I've been struck by humans have an ability to turn incentive systems into value systems. And, and I've struggled, and I've gone through this myself in my own life, which is sometimes, um, you look at the incentive at a startup, and one of the common themes of the really great entrepreneurs is that they play infinite games, not finite games. This is the James Carse book, who's, um... I remember that, uh, Patrick Collison and, and Toby both recommended I read it.

Jack Altman 34:42 It's a great book.

Peter Fenton 34:42 Fucking read that book, [chuckles] you know, because those are... And, and their attraction to that, one of the things I guess we sort of see in the great entrepreneur is that their value system is first, and the incentives that sort of flow from that sort of support it, but they're not the motivating factor. It's not maximizing net worth, it's not... And I think this ecosystem we're in has had, um, we've slipped a bit in that we've taken incentives-

Jack Altman 35:07 Mm-hmm

Peter Fenton 35:07 ... and it could be incentives of, you know, the fees that come from a larger fund, the-

Jack Altman 35:11 And then try to create values based on those incentives?

Peter Fenton 35:14 And the, the values then sort of are, are rationalized as a way of supporting those incentives. I don't know that that's conscious, like, I don't think people are calculating that way, but I, but I... One of the challenges of the venture business is the incentives for a limited partner, allocation to brand name funds, having good marks. You know, Benchmark, historically, we keep our, our, um, valuations that we report to limited partners at a fraction of the last round price. And it's an interesting conversation with the limited. So, like, because they ne-- you know, they, they're being evaluated based on the s- the private marks. So I think our, our view has been that we want to always surprise and delight at the upside, and that, you know, we have some sobriety, perhaps, and, and, you know, if you look over the course of Benchmark's funds, now thirty years, is that we've been grossly undervaluing our private companies. Not, not, we don't publicize any of this, but it's... Part of it's the value of surprise and delight. Don't, don't count it, don't count your chickens until they [chuckles] hatched. And, but I don't know. I, I think we're in a different kind of ecosystem, but ultimately, there, there's this, this long duration of selection pressure put in venture. The long duration is that, you know-... maybe they're gonna get lucky.

Jack Altman 36:22 Mm-hmm.

Peter Fenton 36:22 And, you know, as, as one of my former partners, uh, said, "There's, there's high barriers to exit in venture." No barriers to entry. I mean, you started a firm which is gonna kick ass, and it's gonna be-- I mean, I know this because you, you have value system that, that, that I can, I can see of caring to serve entrepreneurs, of having a long game in mind and all that. But the barriers to exit are, um, also now sort of stuffed into multiple funds with multiple commitments, and so I don't know what the selection pressure looks like. AI may hopefully make that irrelevant because we create so much wealth out of this that nobody actually asks that question.

Jack Altman 36:53 Yeah.

Peter Fenton 36:53 Who

Peter Fenton 36:54 knows?

Jack Altman 36:54 I have a question, um, that is gonna sound a little ridiculous, but you said that the thing you're optimizing for is cash-on-cash returns-

Peter Fenton 37:02 Yeah.

Jack Altman 37:02 -which I think is probably how the game was always supposed to be played, and, you know, that was all... You know, I feel silly for even asking it, but because in recent years, people have felt no longer embarrassed to admit that there's other games to play-

Peter Fenton 37:15 Yeah.

Jack Altman 37:15 -I guess I want to just ask directly, like, why is that the metric that you care about?

Peter Fenton 37:18 You know, it's, it's a fair question, and it's honestly not the motivating force in what we do. It turns out it's, it's the outcome that it should create, the mo- the motivating force. The motivating force is to be early and really close with an entrepreneur on an average of ten to fifteen years of commitment, where we, in, in a way, represent the most unconditional support for that founder. I, I have too many companies in my career where the founders moved on, but I didn't.

Jack Altman 37:54 [chuckles]

Peter Fenton 37:54 And I'm on the board of Docker, which has been around now for ten-plus years, and, um, Solomon, who's an amazing inventor, running another company, phenomenal human being, just, you know, fatigued, moved on.

Jack Altman 38:08 Mm-hmm.

Peter Fenton 38:08 Um, and but I have other examples where it's not, it's not the goal, believe me, but it's the, the idea that we're not, um, conditioned on, "Is it working or not? Because if it's not working, we're gonna move on," means that we're better off early, better off with enough commitment that, um, in success, y- you know, we're, um, able to, because of that long-standing commitment, have ach- achieved the compounding effects of a long investment. So if you're getting in early, and it's been growing, and it's... And, and, and that's different than, say, buying a stock or, or having a position, and we've deviated from that occasionally, and it doesn't feel great, meaning we've made investments that have been low- relatively low stakes and not on the board, low commitment.

Jack Altman 38:52 But you made a lot of money from it.

Peter Fenton 38:53 And it feels wrong.

Jack Altman 38:54 Mm.

Peter Fenton 38:55 You know, I, I-

Jack Altman 38:57 Why do you think that is? Like, what... or, or maybe asked differently, that value that you're now-- you know, is kind of like the highest ideal of serving founders, being their partners through thick and thin-

Peter Fenton 39:05 Yeah.

Jack Altman 39:06 -like, why is that the center of all of this for you?

Peter Fenton 39:08 Yeah, I've done this job for enough time to have been able to reflect on what brings joy. You know, we get into a career, you're in this now, and you'll figure out, "Okay, this feels good," but sometimes the feels good stuff wears off. And, and then in, you know, kind of looking back, almost like, you know, the obituary ethics mindset-

Jack Altman 39:28 Mm-hmm

Peter Fenton 39:28 ... like, what was durable, what was deep, what was profound, and sort of moved my soul and spirit? For me, it, it always is the relationship with the founder. Like, that is it.

Jack Altman 39:37 Mm-hmm.

Peter Fenton 39:37 If I'm one of many, like in the sense of like there's forty people helping me and more money and like, "This is great, we get together once every six months," that's different than a close, deep relationship. So the motivational factor for me, which is what I'll, I'll be doing for as long as I'm a conscious being, is to seek out the most creative, dynamic people, where I can be an amplifier to what they want to do, wh- where the relationship, they come away and they say, "I have more energy after I spend time with that person." We both do. Like, and, like, that's what I orient to. And what I found also is that depth is a constraint. It's a, it's a constraint, which is that, you know, in the same way I, um, think about our personal lives, like, why do we stay married, and why do we build these deeper relationships? Well, the- they're iterative gains, and there's something about, like, you know, the next year of learning and experience, you make new mistakes in a relationship, you discover new vistas and new terrains, so there's this, like, infinite possibility that gets manifested in a few deep relationships that I, I've found I can't achieve in broad-scale superficiality.

Jack Altman 40:40 Yeah.

Peter Fenton 40:40 So it comes back to: How do you build a firm that orients against that? My partners share that value-

Jack Altman 40:45 Mm

Peter Fenton 40:45 ... like that, that strong desire to have deep personal relationships. And we can ask the question, I'll ask it for you, which is like, to what end? You know, like, what do we really do at the end of the day?

Jack Altman 40:55 Yeah.

Peter Fenton 40:55 Like, was Amazon going to be Amazon with or without venture capital? Or, you know-

Jack Altman 41:01 Yeah.

Peter Fenton 41:01 I'm close with Tobi at Shopify. We got very close to working together. We didn't, and I'd have to look at that and say, "You know, he was gonna be just fine without me." [chuckles]

Jack Altman 41:09 Mm-hmm. Mm-hmm.

Peter Fenton 41:10 So I'm humble enough to say and vulnerable enough to say, I don't measure it if, like, as, like, did this-- does the scorecard of the relationship justify its existence, in the same way I don't think of my friends that way-

Jack Altman 41:22 Right

Peter Fenton 41:22 ... or my wife that way. Like, it, it... on balance, be- because I don't view myself as being... There's this great insight that I think we've, we've come to recently, which is that intelligence isn't in your head. In your head is a, you know, eighty billion neurons, um, that have been wired into a hundred and seven billion humans who've ever lived, that have created a collective intelligence that, through language and other things that are not you, but that are us, makes you bright and intelligent, creative, and all that. Now, you have endorphins and hormones, all these things, but, but the idea that we've localized intelligence in our head, so a lot of this, this sound, may sound like an abstraction, but it's in a company, while it is an individual heroic move and courageous to get to go down that path, it's always the network, it's the system, it's, it's, it's the entity that is created as the organism, it's not the individual. And so I feel the same way in terms of how I work with, um, a company. It's like

Peter Fenton 42:22 I, I represent a, um, part of the system that should elevate, amplify, inspire, and it doesn't scale-

Jack Altman 42:31 Yeah

Peter Fenton 42:31 ... which is the big sort of fissure between our strategy at Benchmark and every other venture firm, which is that we've-... reconcile, we actually embrace the fact that it doesn't scale. And that hard constraint means that the value system we have of depth of relationship is really at odds with-

Jack Altman 42:47 Yeah, and specifically, what you're saying is that this relationship doesn't scale. Like, fundamentally, it's the, the, the amount of time that needs to go into the relationship to get what you're talking about-

Peter Fenton 42:58 Yeah

Jack Altman 42:58 ... that doesn't scale. Like, obviously, the, a venture business can, you know, empirically scale, but those, those deep relationships from a board member at the early stages, there's just not enough hours in the day, basically.

Peter Fenton 43:09 There's a fixed concept. And then I think two other things which I would point to that don't scale, if you can-- you could say a very logical response to that is, like, scale the capital and then scale the people in a way that's... And I, I think if I were running a large venture firm, I would think about it as a between-group competition game.

Jack Altman 43:25 Like scale, have twenty partners or something.

Peter Fenton 43:27 Yeah, but I would do it as a p- we all know that, like, five to seven people is the optimal size.

Jack Altman 43:30 Four group size.

Peter Fenton 43:31 So I would do, like, multiple groups and have them compete with each other, and, and that's how I would scale a firm, and it'd be totally coherent 'cause it would be consistent with what we know about multilevel selection-

Jack Altman 43:41 Mm-hmm

Peter Fenton 43:41 ... which is one of the big ideas out of, out of... There was a book that was very popular, um-

Jack Altman 43:45 Actually, real quick on that, would you have them all be generalists, or would you have them be verticalized?

Peter Fenton 43:49 I would have them do whatever they thought would allow them to generate better returns and then compete.

Jack Altman 43:53 Got it. So super Darwinian.

Peter Fenton 43:54 Yeah.

Jack Altman 43:55 Yeah.

Peter Fenton 43:55 That's a completely correct, that's right. Arguably, that's what LPs were doing, and then they stopped doing that, and they started putting it into to a few large mega funds. Well, we, we can talk about that, but so, so the logic of that, that Darwinian model, multilevel selection is a really disruptive idea that people don't actually understand. So, so right now, if you look at most people in biology, they, they're subscribing to the idea of the selfish gene, is that it's all about genetic replication. So, uh, um, Dawkins wrote a book called The Selfish Gene. It's very popular. Why is that relevant to this? Well, because if you think about the world as a bunch of individuals or genes trying to replicate, and that that's where selection occurs, you completely bulldoze over the fact of how organisms evolve, how species evolve, and, and you can't explain things like altruism.

Jack Altman 44:39 Mm.

Peter Fenton 44:40 Like, why would anyone ever... So, so there's these, like, in the world we live in, there's these two competing narratives that we're seeing today. There's, on the one hand, laissez-faire, you know, individual first, homo economicus, and that's probably what you learned when you studied economics at Princeton, right?

Jack Altman 44:54 Mm-hmm.

Peter Fenton 44:54 Yeah, it's like, you know, Milton Friedman, um, maximize your individual utility. At the other end of the spectrum, you have, like, you know, top-down planned communities. It's all like, you know, systemic. You know, it feels like communism. It's a very extreme on the other side. And, and I think what we learned is that there's a third way, which is you, you could actually have, um, selection occur at multiple levels, and the individual is part of a group, and the group is in competition with other groups which cluster together to form, I mean, Silicon Valley or s- so, so if I were running a fund, I would not have one large organism, because then you have, i-- then, then what makes sense is within that group to compete and win, you, you get, um, individual selection, not group selection, and you get cancer. You get people who sort of... The best example is if you think about Monopoly, like, i- if the g- make it real, multilevel selection. So let's say, like, we're playing Monopoly with four people at the table.

Jack Altman 45:49 Mm-hmm.

Peter Fenton 45:50 The game is to win, so you try and maximize the amount of money you have in Monopoly. But let's say there's, like, five other tables here, and each table has four people. Now, there's a new game. The game is, your table needs to have the most wealth after the four hours of Monopoly play, which people lose the will to live at the end of a Monopoly game. And if the game is no longer to beat your competitors, but to have your table create the most wealth-

Jack Altman 46:12 Yeah

Peter Fenton 46:13 ... that's Benchmark.

Jack Altman 46:14 Yeah.

Peter Fenton 46:15 And if you think about it, the nature of a five-person partnership who wants the table to be most full means that you have park place. "I'm gonna give you some of my stuff here, so you can give me some of your stuff there," and then the table gets larger and larger.

Jack Altman 46:26 And a group that big just can't operate that way.

Peter Fenton 46:28 Yeah. If you have forty people playing, good luck coordinating.

Jack Altman 46:31 Yeah.

Peter Fenton 46:32 So what we do know about whole human societies is there's break points, and this, this... I've learned it at Benchmark. We got to eight, nine partners, it stopped being fun.

Jack Altman 46:40 Mm.

Peter Fenton 46:40 And something happened because there was this bifurcation of the, of the, uh, dynamic. There were different subgroups. There was cultural fissure. So I think the only way to scale a fund, my view, i- is that you, you still have the fixed cost. So why don't I do that? Why doesn't Benchmark do that? Because, like, I wanna be one of the players in the game. Like, I wanna be one of the, one of the, the sub-funds, because to me, the substance of the work isn't scaling the, the, the, the entity. Um, and now there's shares of critique, which is, like, are we less competitive as Benchmark because we don't have all these other entities and all these other resources and all this? My answer to that is very simple, which is that you do references.

Jack Altman 47:15 Mm-hmm.

Peter Fenton 47:15 If you find somebody who says that we're anything less than the most powerful, deep, transformative relationship, if, if you find that in our ecosystem of people we work with, we've fallen short of our ethic.

Jack Altman 47:28 What would happen if you said, "I'm gonna take everything I just said, but instead of leading As, I'm gonna lead series Cs, and now I'm gonna just write four times bigger checks. I'll have four times bigger fund. I'm still gonna take a board seat. I'm still gonna make that promise. I'm just gonna do it later"?

Peter Fenton 47:45 I, I don't believe that works for one reason: I've trained my entire neural net, cosmology, et cetera, for that early formative stage. And what you'll find in companies is that what you've done with fifteen employees or less, you've probably found this at Lattice, endures returning. And the impact you have at the beginning, at that embryonic stage, in being in the dialectic, in getting close to the sources of energy that led to that person to do the irrational thing called starting a company, if, if I'm there at that beginning inception stage, my capacities to be there through the duration are infinitely greater. And yeah, I've in- I've committed, Airtable had twenty-five people when I invested. Twitter had twenty-seven people. They were a little later. Um, and, but I find myself as wishing-... wishing that I had been there earlier so that the systems that got started that became pathological, [chuckles] I can't take credit for it. I mean, that I would have stopped them from happening, but I would've at least felt, you know, connected to them. And so it's, it's sort of like, why am I not a stock, a, a public stock? I could take that to the extreme of why not invest in public stocks? Why not invest in-- And there's, there's something, as you know, that's, that's so at that liminal state at the beginning when we don't know. Um, the other thing which I found is, is really good about being there at the beginning, Ollama is my most recent example of this, but there are many examples in the history of technology: Twitter, uh, Instagram, Discord, where if we're there at the beginning, we've really made that personal commitment, we're, we're in a, we're in a position to let the entrepreneur go and be free of what they were trying to do that didn't work, to do the thing that might be much more successful. And, uh, Ollama was originally called Infra.hq. They didn't love that. It was security for Kubernetes. My God! I mean, you know, sorry. Uh, and then AI happens and public open source LLMs and, and I don't know. By, by not being thirty people locked into a strategy, Series C, okay, we have a financial plan. It just we have so much more freedom.

Jack Altman 49:47 Yeah.

Peter Fenton 49:47 And I don't know, then maybe that, that's an incomplete answer, but it's certainly how I live it.

Jack Altman 49:51 One of the other things you said earlier is that you really see the game you're playing and the way you play it as, like, a younger person's activity.

Peter Fenton 49:59 Yeah.

Jack Altman 50:00 Um, not incredibly young, but you know. Why, why do you see it that way? And, like, what have you learned as you've observed sort of, you know, twenty years of Benchmark?

Peter Fenton 50:09 You know, I, I found that aging occurs in, in all parts of your life, and sometimes aging makes you better because you have wisdom and perspective. Other times, it leads to ossification, to sort of like, "Well, don't do that, because back then we did that, and that was a mistake." And so you start to harden yourself. And I think one of the greatest challenges of, of being in the venture business is, is to continually blow up ossification, sort of to, to let go, to, to be more-- to be less certain, to be more naive. And, and why is it you look at other venture, um, compared to, say, hedge funds or, um, Stan Druckenmiller, we talk about it being, oh, this giant, but the absent Vinod, which is, I think, a completely different species-

Jack Altman 51:01 It is

Peter Fenton 51:02 ... [chuckles] than the venture, and he would probably not ever want to be called a VC, to his credit. There are very few exceptions. Uh, venture capitalists tend to get worse after the age of fifty. And why? And so you say, okay, well, is it because their networks have atrophied? Yes.

Jack Altman 51:18 Mm-hmm.

Peter Fenton 51:18 Is it because they've become too rigid in their thinking and too rooted in past generational technologies? Yes. Um, these are all, um, causal factors. Um, I actually think the biggest one is ego.

Jack Altman 51:34 Hmm.

Peter Fenton 51:34 Because entrepreneurs that are at the beginning, that are by definition, operating in uncharted terrain, where past success and old people and all their stories, they're not why they're in the game. They're, they're there to create the new future. And so our egos tend to give us the sense of like, we know better, we've seen there, been there, done that, and believe me, I have all those experiences, many of them, that I could tell stories about, but, but in a way that blocks you from the fresh eyes and, and, and the sense of possibility and wonder. And, um, you know, it's why I'm in my last chapter at Benchmark, because I don't think that our firm is the best firm on earth unless we average our age closer to forty. And of, of really committed, uh, at meaning some thirty-year-olds-

Jack Altman 52:24 Mm-hmm

Peter Fenton 52:24 ... late twenty-year-olds, and maybe some mid forty-year-olds, because the-- our center of gravity at that point is maximally attuned to the entrepreneurial wave coming up. What I'd love to do is support those people, uh, you know, my future partners, uh, well, as a limited partner. But, but, you know, there'll, there'll be others, and I'm sure if you talk to my peers in their fifties, they'll give you a different story, but I find that it sort of runs afoul of the history of the industry-

Jack Altman 52:49 Hmm

Peter Fenton 52:50 ... which is, which is the sort of the fresh energy of a young partner, um, just enough experience to be helpful and really where you are right now. 'Cause you're meeting the entrepreneur where they are in their life, and, and you, you have a shared fabric. You probably have playlists that aren't that different. [chuckles] You know, you have tastes that have been shaped in the same forces, and I think that that, um, that matters. It matters for the depth of relationship, it matters for the duration, all those things that, um, that, that mean this is an industry, and I come back to this, that, that wants to go through creative destruction. Um, but, you know, John Doerr, Mike Moritz, these giants, my former partners, Bob Kagel, Bruce Dunlevie, don't run our industry.

Jack Altman 53:30 Mm-hmm.

Peter Fenton 53:31 And I, I love that. And they, they moved on with grace and, you know, they still play a vital role in different ways, but-

Jack Altman 53:38 Do you, um, like, as you're reflecting and saying this stuff out loud, do you experience it as like: I wish that I was-- that I could do another twenty years, but I think it's, like, best for me not to, for the firm and its longevity and just the ecosystem? Or are you-- have you also had your own evolution where you're like: I've done this for a lot of years, and I'm also gonna have new chapters? Like, do you have an evolution of your own that-

Peter Fenton 54:02 Yeah

Jack Altman 54:03 ... matches it, so it feels natural, or are you pushing yourself away from holding on?

Peter Fenton 54:07 I was given two big gifts coming to Benchmark. One is the brand, um, that represented this sort of mysterious possibility, all those energies, the positive stuff that I loved about Benchmark when I was at, at Excel or before I even got into the venture business. A-and I was given the ethic of the equal partnership, where no one lays any claim, no one has any purchase or right or ownership. Every one of my partners, founding partners, you know, Bob Kagel, Bruce Dunlevie, Kevin Harvey-... raised their hand and said, "It's yours." No residual claim on economics, no piece of the management company. It- and I share this with other people in the investment world, they're like: "That's crazy to the point of being stupid!" And I'm like: "No, no, no, it's genius," because what, what they've enabled is that I honor the same thing.

Jack Altman 55:04 Mm-hmm.

Peter Fenton 55:04 So to answer your question concretely-

Jack Altman 55:06 Yeah.

Peter Fenton 55:06 -I think that Bill Gurley, who left most recently, and Matt Cohler, like, they raised their hand and said, "It's time." And what a beautiful thing to, to have none of the drama, none of the, like, "Where's my this?" or, "Where's my that?" And, um, so, so my answer to this question is that I'm at a point in my career, I love the job, I'll make a few more investments that'll get my heart and soul, but then I've got to add ten years to every new commitment I make and say, "Okay, then I'll be in my sixties." And there's a point at which, like-

Jack Altman 55:37 Yeah

Peter Fenton 55:37 ... you know? And, and more importantly, I think more vitally, I want the energy of Benchmark to be centered, just as it did for Benchmark One, and then Bench- the Benchmark Seven, which was the, the social mobile fund with Uber and Instagram.

Jack Altman 55:49 I guess you being handed the keys in a certain way makes you pro- I'm sure that imbued a certain duty to do it the same way.

Peter Fenton 55:55 Yes.

Jack Altman 55:56 It also sets an example for your younger partners, that they're gonna watch you do it a certain way, and then that's how they're-

Peter Fenton 56:00 It's the gift I was given, and I, I really feel it as a gift to be able to say-

Jack Altman 56:04 Man, it's so hard to create that gift from... It, it, it must be so rare for the first group-

Peter Fenton 56:09 Yeah

Jack Altman 56:09 ... to make that gift. Because I can see how if you're handed it, you're like: "I need to hand this on."

Peter Fenton 56:14 Yeah.

Jack Altman 56:14 But wow, it's got to be rare for the first group to not just say: "I'm gonna hold these economics."

Peter Fenton 56:20 Well, you know, Andy Rachleff and Bob Kagle, and, and I remember when Bob told us, and he's like: "You know, I, I now feel like I can do this." Because he wanted to feel the firm was at a point where he could move on and not have it, um... Yeah, and, and he was roughly where I am in my life.

Jack Altman 56:35 Yeah.

Peter Fenton 56:36 And what a, what a beautiful thing! And, you know, that's consistent with creative destruction. The ephemeral, you know, um, line up of Benchmark is juxtaposed to the non-ephemeral value system, the non-ephemeral structure of, like, great partners to the... And I actually believe, and again, in an adaptive landscape, we inherit, we evolve. But, um, and it's not to say we won't- like, Benchmark will experiment. We've experimented in the past. We had a European fund, we had a Israel fund, um, w- but it's usually ag- against the backdrop of a very constrained core ethic of what the

Peter Fenton 57:10 firm is. So...

Jack Altman 57:10 Yeah. One of the things I wanted to ask you about is, um, Marc Andreessen, when he was on the pod, talked about this analogy of, like, the sushi boat back in the day. And when he started Andreessen, that he experienced a lot of Sand Hill VCs as just, like, waiting for the sushi to come down the line, which was waiting for the start-up to come pitch them, and they would just, like, swing at the fat pitch. They didn't have to work that hard, and that it has gotten dramatically more competitive over time, and he saw that opportunity and everything. You've been doing-

Peter Fenton 57:38 Yeah

Jack Altman 57:38 ... the business for a long time, both at Benchmark and, and prior.

Peter Fenton 57:41 Yeah.

Jack Altman 57:42 I'm curious if you've experienced truth in that. What has been different in your experience from that? You know, how much more competitive does it all feel over the twenty years of your time here?

Peter Fenton 57:52 You know, my experience has been, no one at the beginning ever called me. There was no sushi boat, there was no picking of, um, you know, warmed over, typically not good sushi on sushi boats. It was always, and, and still to this day is, for me, a are you nurturing your sense of curiosity? Are, are you really activated in identifying not, not just, like, trends, but, like, who, who in this ecosystem is, you know, many standards of deviation more exceptional based on how they're showing up every day? And that, to me, is a constant, like, you know... So you read a lot, you, you meet a lot of people, but then you're in a meeting, and, and your meeting's not going so well, eh, because there's a lot of those in the venture business. And, and instead of sort of, like, tuning out and thinking about, like: "Oh, what am I going to do tonight for dinner?" Um, fold that back into: "What can I do to make this an interesting meeting for me and this entrepreneur?" I'll typically say, like, you know: "Okay, well, you- oh, I noticed that you were at Stripe. Oh, that's great. You know, uh, who impressed you there?" And like, you know, if you think about, like, your people you most want to work with, who... So you're constantly sort of populating your, your-

Jack Altman 59:00 Mm

Peter Fenton 59:00 ... your, um, awareness with the extraordinary opportunity, potential, and, and to me, as opposed to a sushi boat. And then, you know, ninety-nine percent of the time, you're reaching out. You're, you're not maybe cold calling-

Jack Altman 59:12 Yeah

Peter Fenton 59:12 ... proverbially, but you're going through your networks to get in-

Jack Altman 59:14 Yeah, actually, this is really good because, like, because I'm doing it without, uh, I'm doing this without experienced partners teaching me how to do stuff. So, like-

Peter Fenton 59:20 Yeah

Jack Altman 59:20 ... what is sourcing done really well look like? I mean, you just gave-

Peter Fenton 59:23 Yeah

Jack Altman 59:23 ... a really good example of it. You're meeting with somebody, who have you worked with that impressed you? But, like, what's the body of work in your mind of really good sourcing-

Peter Fenton 59:31 Yeah

Jack Altman 59:31 ... at its prime?

Peter Fenton 59:31 Well, I, I've seen younger partners come up. Uh, you know, we worked, you know, talked about Victor today, and is a great example. Um, there are competing strategies for sourcing. Ultimately, I think it has to manifest to you. So I'll give you one strategy: being the expert. Not my strategy, but I did play that game for a while in open source-

Jack Altman 59:51 Mm

Peter Fenton 59:51 ... where you say, "Okay, here's an area that I know will create great opportunities, and I'm going to get in front of it and be a thought leader." And that strategy, in certain cycles and certain, you know, subsectors, can, can be the right strategy, but it has one major risk-

Jack Altman 1:00:08 Mm

Peter Fenton 1:00:08 ... which is that great entrepreneurs are going to be more expert than you'll ever be. So you can just... You get me. And so who's a good example of that? Fred Wilson was a great example of being an expert on social.

Jack Altman 1:00:19 Yeah.

Peter Fenton 1:00:19 And, and he was blogging. He lived it. He was authentic, and he sourced in a way that Tumblr, Twitter, and Fred was there. That's a great sourcing strat- And he's in New York, so, like, he's not, like, so... The second strategy, which, and these, these are overlapping, granted, um, is to be a version of what I would describe I've done. Um, uh, to, to, to have an ability to see and cultivate your capacity to see extraordinary human beings. And I think we're all extraordinary. Yes, every snowflake is unique. PG said this once to me, and he's like: "You know, how, how do you do your interviews?"... So I do forty-one, forty-two interviews, uh, I see when I was doing these interviews, and more than that, I start, it's not so fun. Um, but I, but I know pretty quickly. I'm like: "Well, what is it?" And he's like: "Yeah, you know, you, you feel it. There's an authenticity. There's the idea this person's not taking someone else's i- concepts and mashing them up. They're manifesting it, and it may not be the right thing they're saying, but, but they-- but you see it in the, in the clarity from which they come at the... And they're fearsome."

Jack Altman 1:01:21 Mm.

Peter Fenton 1:01:21 "And so you feel like you can't control them, and all these other attributes." So the second model, which I think is highly recommended for someone c- like yourself, is to put yourself in a position so that when somebody you meet firsthand, secondhand, or pitches you, that, that you can resee in an instant, like, that's different.

Jack Altman 1:01:40 How do you do that?

Peter Fenton 1:01:41 So I, I think about my time when I met Evan Spiegel or when I met Toby, and I didn't invest in Toby, but I felt it. I mean, I fucking knew. It, it, it sounds really hard to, to, to, to put to words, but it's, it's not just taste. It's not like when you, when you hear a musician play, you think, "Wow, there's something there." But my experience of this is, is I become... And I really think this is a common theme that goes throughout. Even when I met Jack Dorsey, I felt this way. It's an oceanic feeling, as crazy as that sounds. But you say, when Evan said, "I am motivated to do this because of what has happened with social media, has taken away people's capacity to share without self-awareness." And when you share with self-awareness, it constrains what you do because you feel like the, all those mechanisms that you get at age six, seven, and eight of, like, shame and ostracism. It's like, I wanna give that back to people, and there was like, again, an oceanic feeling, like this person, once he starts to do this, it's gonna compound and grow, and I, I-- by the way, it's so real because I can look back over that last prior year, I don't remember a single meeting, and it's gonna happen to you. Maybe it's hindsight bias, but you'll say, "That meeting stood out." I mean, for us, it was Alex, you know, from Scale, who came and presented him, and Eric brought a bunch of companies in that year, but when Alex presented, it was like-

Jack Altman 1:03:00 And the one that stands out, you should always do it?

Peter Fenton 1:03:02 Historically, [chuckles] it will lead you to some of your greatest failures- [chuckles]

Jack Altman 1:03:06 Yeah

Peter Fenton 1:03:06 ... and some of your greatest success.

Jack Altman 1:03:08 But that's a good basket.

Peter Fenton 1:03:08 That's the asymmetry of the business.

Jack Altman 1:03:09 Yeah.

Peter Fenton 1:03:09 Yes, that's the basket you want. And I tell you, the other side is, is, is equally damning, which is the... It kinda makes sense, it checks the boxes, I like the numbers. So by the way, that-- so this is the second model.

Jack Altman 1:03:24 Don't do that.

Peter Fenton 1:03:25 Well, if you pursue that, my model of venture investing has been that, which is, um, I met Howie Liu, and, like, I knew five minutes in, like, there's something here that is oceanic, that, that I wanna be there, and, like, we build an energy together because it's self-selection, too. Like, you're not gonna respond to everybody who's great, and I wish I'd spent time with Parker. Honestly, I, I, I didn't, you, you know, you know the guy. The third m- the strategy, which I think is one that works quite well as a complement to the other two, is to, to be a business model investor.

Jack Altman 1:03:55 Mm.

Peter Fenton 1:03:56 And I think there are people who've been extraordinary at that. My partner, Bill Gurley, stands out of the course of the industry as saying he understood marketplaces and the systemic network effect that gets activated. And to me, that's different than being an expert because he was never an expert in, like, you know, marketplaces for, pick your fa- ran- random topic, restaurants, which is OpenTable. He, he was a business model investor.

Jack Altman 1:04:19 Yeah.

Peter Fenton 1:04:19 Among other things, he did all the other aspects, and there are certain people who can say, like, "So today, what would that look like?" A business model investor today would say, "We are going to disrupt... Two-thirds of the economy is going to be completely upended by AI. Let's pick the top ten percent, um, that are vulnerable to margin expansion through the use of AI."

Jack Altman 1:04:39 Mm.

Peter Fenton 1:04:39 "So we're gonna start with accounting firms, real estate off..." You get on the list, and to me, that's a, that's a different model. And how do you source in that model? Well, you, you're kind of systemically looking through that category, and you could do all three. The biggest gift I had in venture was I took... Not gift, whatever, but I, I, I responded to, uh, an open source invest- i- investment, JBoss, uh, Mark Fleury, 'cause the person was sort of, yeah, thermonuclear. Um, and that then landed me on the shores of open source in two thousand and three, and then I did twenty-plus years of open source investing. So it turns out, like, once you build a little practice area, it gets a lot easier. You see things that aren't visible to other people, and you're in the... But it all comes back to that same personal thing.

Jack Altman 1:05:24 You mentioned, like, you know, in there, you know, Jack Dorsey, Toby, Evan Spiegel, which I guess, as I'm listening to that, is the, is the rarer, harder, more valuable thing to do, to notice greatness when you meet those people, or simply to have met those people, period? In other words-

Peter Fenton 1:05:42 Yeah

Jack Altman 1:05:43 ... are there fewer people who could see greatness if they met that cast of characters, or are there fewer people who could get into the room with that cast of characters at the right time?

Peter Fenton 1:05:52 It's a good question. It gets back to the sushi boat. The sushi boat isn't full of Mi- Michael Truell. The sushi boats, if there are sushi boats, are filled with the people who aren't on that-

Jack Altman 1:06:01 Yeah

Peter Fenton 1:06:02 ... typically.

Jack Altman 1:06:02 Yeah.

Peter Fenton 1:06:02 So what, what I found is that people who have that density of excellence, of like, they're known.

Jack Altman 1:06:11 Yeah.

Peter Fenton 1:06:11 Like, people don't meet Sam Altman and walk away and say, "I just met..." No. They, they meet an expe-- And, and so you have to have a nerve, innervate your, your n- your network, for lack of a better term, innervate your life with people who are likely to bump into those folks. And if you do innervate your life, and they, and then encourage them to tell you about them. [chuckles] So the, the, the fact is, you're likely gonna have to reach out to that individual.

Jack Altman 1:06:40 Right.

Peter Fenton 1:06:40 I remember meeting Michael Truell, uh, and, like, this is pretty fucking obvious.

Jack Altman 1:06:46 Mm-hmm.

Peter Fenton 1:06:47 Six minutes in, you're like, okay, there's forty coding companies and this and that, but there's one person who has this clarity.

Jack Altman 1:06:54 Totally.

Peter Fenton 1:06:54 And you just don't even have to finish, like, the, the five minutes in the meeting, you're done. But then it's clumsy because you're like, y- you wanna-... it's a relationship, so you wanna have a two-way, you wanna have a-- You don't wanna just say, "Oh, my gosh, yes," you had me five minutes in. Because I think the next thing is, it, it's one thing to be extraordinary, it's the other is, can you be an amplifier for them?

Jack Altman 1:07:11 Yeah.

Peter Fenton 1:07:11 And do they come out of the meeting saying like, "Oh, I want more of that"?

Jack Altman 1:07:14 Yeah.

Peter Fenton 1:07:14 And, and-

Jack Altman 1:07:15 Or, or Brett Taylor, who obviously you're very close to, you speak to him for thirty minutes, you know you're not talking to a regular person.

Peter Fenton 1:07:19 I met Brett five minutes in, two thousand and seven. Um, John Lilly, uh, who is an awesome human, introduced me, and he's like: "You gotta meet Brett." Um, that's, that's a examp-- good example of, like, I innovated my network. I mean, John knew that I was responsive to those kinds of people. Um, at the time, he was at Mozilla. So John said to me, "I met Brett." I'm like: "Yes! Like, what do we do?" So he became an entrepreneur in residence, and this is before Google had built an immune system to stop good people from leaving.

Jack Altman 1:07:47 Mm-hmm.

Peter Fenton 1:07:48 So I think [chuckles]

Peter Fenton 1:07:50 -

Jack Altman 1:07:50 Okay, so then you meet these people somehow. Then you're like, "Wow, this person's special." You met, you know, young Patrick Collison-

Peter Fenton 1:07:57 Yeah

Jack Altman 1:07:57 ... and like the rest of the world, you realize it's a special person or whatever.

Peter Fenton 1:08:00 Yeah.

Jack Altman 1:08:01 Now what? Like, how do you-- what, what have you learned about convincing those people to work with you? I mean, obviously-

Peter Fenton 1:08:07 Yeah

Jack Altman 1:08:08 ... listening to you talk, I can hear a lot in sort of the way you talk about partnership with you, and I'm sure-

Peter Fenton 1:08:14 Yeah

Jack Altman 1:08:14 ... that's like a big piece of it. But, like, are there any generalizable learnings you've had about-

Peter Fenton 1:08:19 Yes, one, one very simple thing, and I made a lot of mistakes early in my venture career when I was insecure. Eh, I still am, but we all are. It was understanding, deeply understanding, how could I be an enabler, an amplifier, um, a positive force-

Jack Altman 1:08:36 Yeah

Peter Fenton 1:08:37 ... that's deep and real?

Jack Altman 1:08:38 Yeah.

Peter Fenton 1:08:38 And the mistakes I made early on was I thought that was through expertise. Let, let, let me tell you about this thing I learned about, and, uh... and I've learned that that wasn't something that you have the right to do until you've earned it over many years of seeing things and calibrating the way they see the world, the way you see the world. So the, so, so the single most important thing, which I, which I focused on early on, is deeply understanding what this person is trying to do.

Jack Altman 1:09:04 Mm.

Peter Fenton 1:09:05 And, and if I really understand, not, not at some superficial level because it's a hot deal or... and we're all tempted to, there's momentum, go do it. But understand it, the purpose, really, for lack of a better term, not the objectives, the purpose, and to meet the entrepreneur at that point and then go further with them and to say, like: "That's interesting, but do you realize that there's another p- vista on the horizon?" A-and so if, if in a way, they feel real and deep understanding of what they're doing, then there's trust.

Jack Altman 1:09:37 I love the answer because it's like, um, the best salespeople I ever worked with at, you know, Lattice and software sales in general, if you ask them, how do they do it? The first thing they'll say is: "Well, you have to be a really good listener."

Peter Fenton 1:09:48 Yeah.

Jack Altman 1:09:48 "And you have to see what your customer really wants and what they care about-

Peter Fenton 1:09:51 Yeah

Jack Altman 1:09:51 ... and what drives them, and what are they afraid of, and, you know, what, what do they need to accomplish?" And it sounds like, um, the fact that you started with listening, that seems, that seems like that's pointing in the right direction.

Peter Fenton 1:10:02 Yes. And then, and then I think in a good relationship, there, there's tension. It can't just be-

Jack Altman 1:10:08 Saying yes to whatever they-

Peter Fenton 1:10:09 Yes

Jack Altman 1:10:09 ... think they want.

Peter Fenton 1:10:10 And, and so I th-- I think you have to, after you achieve understanding, you know, through, through the di- dialectic, substantively expand their thinking. And, and I mean, it could be around something as simple as when do I hire the VP of Engineering, or how do I think about building a pro-social organization where it's high-functioning at scale versus pathological, like most big companies and... But you, but you meet them at the edge of their understanding and then advance it in a way that they feel like: Oh, my gosh, I'm a better entrepreneur. I'm more likely to achieve, um, success, but even at a higher level, through this relationship, and it doesn't always work.

Jack Altman 1:10:48 Mm.

Peter Fenton 1:10:48 There are cases where you try to do that, and it falls short. And you know what? I'm really okay. One of the beautiful things about venture is, um,

Peter Fenton 1:10:56 it's never gonna be a winner-takes-all game. We have a heterogeneous ecosystem of models, of people, of ex-- and, and, and to recognize if you're forcing it, it's not for me.

Jack Altman 1:11:06 Yeah.

Peter Fenton 1:11:07 Um, there are certain people whom I, I know I'm not gonna name names, but I'm like, uh, they're great investments, but, like, that would not have been a good relationship for me [chuckles] .

Jack Altman 1:11:13 Totally.

Peter Fenton 1:11:14 And, and then there's others where it breaks my heart because I think that's the kind of person that... So my, my haunted, you know, you-- if anyone in venture has been as long as I have, you have a list of, like: Oh, my God, like, I shouldn't be allowed to practice because I didn't say yes to, to Toby, and as an example, and that haunts me. Um, there are others that, that, that, um, for whatever reasons, like, they wouldn't have activated me.

Jack Altman 1:11:37 Well, I feel like that one, from the way you've been talking about it, it sounds like it haunts you because you feel like you would have really enjoyed the relationship, too.

Peter Fenton 1:11:43 It would have meant the world to me.

Jack Altman 1:11:44 Yeah.

Peter Fenton 1:11:44 And still, we have the relationship. We talk, we hang out, and, and, um, visit him in Toronto as much as I can.

Jack Altman 1:11:49 Yeah. No, but I know what you mean, where it's like, um, there's certain companies even, you know, I'm so early into this, but that I'll meet, and I'm like, "That's a great company."

Peter Fenton 1:11:57 Yeah.

Jack Altman 1:11:57 "And I have no way to help that company, and so I shouldn't really force this."

Peter Fenton 1:12:02 Yeah.

Jack Altman 1:12:03 Or I'll see, you know, a different lens on the same thing is there's investors like, you know, when I spoke with Vinod-

Peter Fenton 1:12:09 Yeah

Jack Altman 1:12:09 ... who I'm like, "This is a brilliant person-

Peter Fenton 1:12:11 Completely.

Jack Altman 1:12:11 ... and he is able to see things that I'm not gonna be able to see."

Peter Fenton 1:12:15 Yeah.

Jack Altman 1:12:15 And so that's just a different type of thing where you can, like, respect that ga-- you know, even-

Peter Fenton 1:12:20 Yeah

Jack Altman 1:12:20 ... when I was hearing you talk about the thing that drives you of the relationship, Vinod would say something that I think is sort of like equally aspirational, but totally different, which is, like, the technology.

Peter Fenton 1:12:30 Totally.

Jack Altman 1:12:31 And that's cool.

Peter Fenton 1:12:32 Yes.

Jack Altman 1:12:32 It's just different.

Peter Fenton 1:12:32 And I think he has built a system totally aligned with what motivates him. I've tried to do the same, and I think Benchmark embodies that, but then I'm also faced with the reality that, um, I-- there's this beautiful Buddhist self-immolation sacrifice that I'm about to go through, that we go through in the venture business.

Jack Altman 1:12:53 Yeah.

Peter Fenton 1:12:54 Um, it's, uh, sublimating that and then finding a new form, but, but knowing that Benchmark contains that value. And then, you know, there's this thing in the venture business, FOMO, and it's an, it's an awful thing. It's productive because, like, oh, my God, that's happening, I didn't see it, and all that, a-and then it's an anxiety, and I would tell you, that's the one thing that I'm looking forward to letting go of.... that etches you in, in, in the sense that it's constantly your responsibility when you wake up to say, "If the next Michael Terrell gets going, what's not acceptable is that you didn't spend time with him." If you're not a value system fit, if it doesn't connect, okay. Like, you know, and I don't even think that getting the investment wrong, who cares? Like, it's, it's, it's missing that opportunity for a deep partnership.

Jack Altman 1:13:35 Maybe as like a closing question, 'cause we kind of talked about how to see great companies, maybe winning sort of the last part of the job, and, you know, I think this is probably very sort of central to you and Benchmark-

Peter Fenton 1:13:47 Yeah

Jack Altman 1:13:48 - is the sort of North Star of being a great board member, and what should that relationship look like when it's done at, like, peak performance?

Peter Fenton 1:13:55 Yeah.

Jack Altman 1:13:55 And maybe if you can give, like, sort of like the North Star of what that relationship is like when things are going really well, and then, like, what's the North Star when things aren't going well?

Peter Fenton 1:14:04 Being a great board member starts with this beginning commitment, and we talked about it, just really understanding the purpose and motivation of a founder. And if you're rooted in that, you're grounded in that, you serve that. And the organism that gets built, that the board sort of, you know, is interfacing with, carries the ambition of the then team, right? And the purpose and the motivations and all that. And so often, as you get going, that runs into trouble. You know, boards have these different roles. There's governance, there's advice, there's, um, being a source of accountability. Um, but ultimately, what, like, motivates me in a board is, um, when I see companies get oxidized with the stresses of being in the market, of scaling, of growing, of dealing with customer pains and product issues and team issues, the first ethic I have is to, to, to deoxidize them, to stay close to and proximate to the source of joy. Why do they do this in the first place? Because as we were talking about, it's not a rational thing to go start a company. It is... It's, uh, eating glass, it's suffering, it's many days, weeks, months of feeling like you're on a groundless existence because there's no certainties in startups. By definition, that's what makes them so, um, dynamic. So first thing ethic I have is to stay close and proximate to the purpose of the business, 'cause that, that is the sorting function. That's why we do it. Then, then the role I think as a director you play, um, and I'm about to go to a board meeting, is to really have done the work. You, you do the pre-reads. One of the things I insist, and this is a bit of a crotchety old venture capitalist, I hate slides. I think it's really healthy for the companies to do pre-reads, for them more than it is maybe even for the board, to lay out their thinking in a crisp way, because I, I find that is a vehicle to make everyone better. So do the work as a director means you do the pre-read, you really understand as best you can, that, that, um, gives you context. And then in the, the meeting itself, in the board dynamic, um, you're sort of looking at three layers, and, uh, for lack of a better way of saying this, it's simplistically the, the strategy. To me, that's the purpose. Like, why are we doing this? What's, what's, what's the point of it? What are we doing here? And you can lose sight of that pretty quickly in a startup. [chuckles]

Jack Altman 1:16:22 Mm-hmm. Mm-hmm.

Peter Fenton 1:16:22 You probably don't want to change that every board meeting. You know, that's one that gets updated, but it's broadly, you know, strategic in kind. There's structure, which is what's the organism that you're building to manifest that strategy? And then there's staff, which are the people that then inhabit that, that, that organism. And oftentimes you flip the order, and you're talking about people and not talking about structure or, or strategy. So as a director, I, I think the best we do is we sort of get clarity, so it feels like, okay, we-we're aligned with our purpose. And so when there's dissonance in the system, which is what a board member I think should hopefully identify, you, you can illuminate the awareness of the team a-and the leadership, the CEO, to navigate around that.

Jack Altman 1:17:03 Mm.

Peter Fenton 1:17:04 But a big part of that starts by listening and saying, "Okay, what's keeping you up at night? What are the things that haunt you?" And so as a director, the North Star is they come out of a board meeting, and when we've done our job, they feel more energy, more aware, more conscious, and if I did anything at the end of the day, more curious.

Jack Altman 1:17:22 I love it. Well, I gotta let you go to your board meeting. This was amazing. Could have gone another hour. Thank you so much for this. [upbeat music]