Benchmark's GP, Everett Randle on Why Mega Funds Will Not Produce Good Returns

I think we should not be placing that much emphasis on margins today. We need a new taxonomy for AI companies.

I'm thrilled to welcome Benchmark's newest partner, Everett Randall. Benchmark are one of the best firms in venture.

Tiger died, and we got six or seven more tigers. I don't think Ravi or Hemant or even Ben and Mark at this point, I don't think that they can go to LPs and say, "Hey, we're gonna get you 5X net on that." And when you're writing billion-dollar checks, that is your main product. Go talk to the principals, the junior partners, and the associates at those firms, and you tell me that capital velocity is not the North Star of those firms. I think Tiger's gonna end up much better than anyone thought they were going to end up.

What do you think the biggest threat is to Benchmark being successful in the next five years?

I think, um...

Ready to go? (upbeat music) Ev, I am so excited for this. I cannot believe we have not done this before. I think I personally timed it pretty well, if I'm honest. I'm rather chuffed with myself.

(laughs)

Uh, but thank you so much for joining me today.

Thank you, Harry. I have actually been listening to 20 Minute VC since 2017. Which ironically I think is the year that you had Peter on, uh, the first time. And it's just been so fun to watch the show and the platform that you've built grow this way. It's almost like watching a startup become, uh, y- you know, an, an IPO, uh, you know, an IPO-worthy company or something. So congrats to you, Harry.

Do you know what? I've had a man crush on Peter Fenton since that first show. I remember he told me that-

(laughs)

... price is a litmus test for your conviction, and I think about that at least on a weekly basis, and I've repeated it to my team many, many times. Before we dive into Benchmark, you've worked with some of the best from Peter Thiel, obviously, at Founders Fund, Mary Meeker at Bond, Mamoon Hamid, uh, one of my big bros at Kleiner Perkins. If I were to ask you for your biggest takeaway from each, what would you say your biggest investing takeaway is from each of them?

One of the things I really love about the asset class that, that we, that we practice our craft in is that there's so many different ways that you can be successful at it, and there's so many different strategies and frameworks that you can employ and still generate amazing returns. I think, um, and each of the people that you just mentioned have very, very different styles and d- very different ways of, of practicing their craft. I think if I was to lay out for Mary, for Peter, and for Mamoon, um, kind of what I learned from them specifically, I think with Mary, she does such an incredible job. Everyone thinks of her as this quantitative investor. You know, she had th- her time as an equity researcher at Morgan Stanley during the dot-com, um, bubble, and then she came to Kleiner Perkins, obviously. And everyone talks about these DCF models she creates and all the numbers that she does, but she's really the most qualitative investor that I've ever worked with. And it's a, it's a probably a surprise to hear that, but what she does is she, she... it's almost like she's reading the matrix. Like, she lays out all the sequential numbers historically for a company and then all the numbers going forward, and it's almost like she's, you know, reading the, the matrix code as it comes down. And she's seeing what the company will become on an eight to 10-year time horizon when she sees what the numbers are. And so she'll look at a DoorDash model, uh, and that was an investment that she... that, that we had led at KP out of the growth fund at the time, and she won't see, you know, you know, seven years out, 80% growth or something like that. She'll see that, uh, you know, 20% of households are going to be ordering from DoorDash on a monthly basis, and she can visualize that. And so from her, I just learned that when you use numbers in venture growth and when you wanna be quantitatively driven, don't get stuck into a quantitative lens with it. Actually use that to drive the narrative and drive the story of an investment. And that's been, that's been an incredible mental framing that I've used. With, um, with someone like Peter Thiel, Peter, I think so much of his cleverness and so much of his genius is actually in the way that he builds his firms rather even than his investments. So the way that he's designed Founders Fund is that he, he create a... he creates all these incentive structures and mechanisms almost to, like, constantly be testing your conviction. So there's a program, for example, at Founders Fund where, uh, anyone that works on an investment or if you're leading an investment, you can personally invest alongside the firm, uh, in that investment, almost as if you're angel investing. And at, at, you know, first glance, it just looks like this amazing perk that you can have by being an investor at Founders Fund, but deeper down, it's a conviction test because if you're sponsoring some pro rata of a company that's, like, doing okay but not great, but the founder really wants you to do the pro rata to not blow up the round, but you're not doing some of your portion of the individual side of that investment and your angel investment, Peter can go to you and say, "W- do you not think this is better than having your money in the SMP? Like, why would we, um, you know, give our LPs, um, this allocation in this round if you don't even wanna put your own money in this round?" Um, so there's, like, 100 different things like that that exist in, in Founders Fund that aren't, you know, explicit. Like, "Hey, like, are... do you have high conviction?" But test your conviction in deeper ways.