Uncapped #18 | Peter Fenton from Benchmark

Peter Fenton is the longest-serving full-time partner at Benchmark, a renowned venture firm known for its artisanal approach and deep alignment with founders. Over the last two decades, Peter led investments in Twitter, Yelp, Elastic, Docker, Zuora, and many others. He also achieved one of the rarest feats in venture history in 2014 when two of his investments, Hortonworks and New Relic, went public on the same day. More recent investments include Sierra, Ollama, ClickHouse, and Airtable. Peter is considered one of the most successful tech investors of our time and is an incredible person to learn from. We covered: Darwinism and Silicon Valley Who wins as a result of AI Embracing things that don’t scale Sourcing and winning motions Being a great board member --- Timestamps: (0:00) Intro (0:23) Darwinism and Silicon Valley (5:38) Silicon Valley vs everywhere else (12:09) Highly adaptive ecosystems (19:40) Who wins with AI (26:22) Applying Darwinism to venture (36:54) North Stars in venture (42:22) Embracing things that don’t scale (49:51) A young person’s game (57:10) Sourcing methodologies (1:07:50) Convincing founders to choose you (1:10:56) Not a winner-take-all game (1:13:35) Being a great board member --- More on Benchmark and Peter: https://www.benchmark.com/ https://x.com/peterfenton More on Alt Capital and Jack: https://www.altcap.com/ https://x.com/jaltma --- https://linktr.ee/uncappedpod Email: [email protected]

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Six minutes in, you're like, okay, there's 40 coding companies and this and that, but there's one person who has this clarity.

• 0:07Jack Altman?

  Totally.

• 0:07Speaker 00

  And you just don't even have to finish like the five minutes in the meeting, you're done. But then it's clumsy because you're like, it's a relationship. So you want to have a two way, you want to have a, you don't want to just say, oh, my gosh, yes, you had me five minutes in.

• 0:18Jack Altman?

  Peter, really excited to have this conversation with you. Thank you for making time for this.

• 0:22Speaker 00

  Thrilled to be here. What a joy.

• 0:24Jack Altman?

  So I asked you what ideas you've been thinking about lately.

• 0:27Speaker 00

  Yeah.

• 0:28Jack Altman?

  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?

• 0:39Speaker 00

  Well, I think that in the last 50 plus years, the biggest intellectual progression that maybe we'll look back and see in hindsight has been generalizing Darwinism. What does that mean? You know, we're in these complex systems. 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 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,

• 1:23Speaker 00

  be they cities, or companies, or industries. And the three mechanics of evolution, we all know to be random mutation, but I'd call that planned and unplanned variance. Interestingly, unplanned being more important than I think we all have appreciated. And take that for like even the unplanned mutation of chat GPT. 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 reproduction and survive and reproduce. In an ecosystem and a company, it's of course, you know, surviving and then creating more profits,

• 2:08Speaker 00

  more revenue, whatever, more customers. And then the third variable in evolution is of course inheritance. And so there's this, this idea that things are all in a continuum and evolving through these three mechanics. And so why is that relevant to the world of the Silicon Valley? You know, I spent a fair amount of time in France and You know, 10 years ago, and I really got to think, why hasn't the Silicon Valley been created somewhere else? 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 identify,

• 2:50Speaker 00

  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. You know, social and mobile, here. Crypto was interesting, because it sort of was not of a place. 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, this is home. And I think one of those examples, 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

• 3:31Speaker 00

  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's taking with it the past experience of entrepreneurial success. So these things compound, and the health of the ecosystem in Silicon Valley, we were in a malaise in 2021, 22. It's like, you know, we've sort of lost the epicenter. 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 50, 100 years, still be the epicenter? And okay, there's what

• 4:16Speaker 00

  about, you know, New York, Austin, San. I'm not taking anything away from those ecosystems, but there's, I think, real health and understanding, 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 there are mechanisms of natural selection or selection that are there 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

• 4:59Speaker 00

  things that increase the fitness of the organism. So 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, you know, are you in a adaptive pursuit of maximum fitness and maximum flourishing or are you doing things that are maladapted? And this whole feel I think of of what's now broadly called pro-social 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 maximally fit?

• 5:38Jack Altman?

  To ask you about a couple of these applications, do you think in 2021 or whatever the malaise moment was, do you think that the barrier 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 also happen here? Or is there potential even for it to be somewhere else?

• 5:58Speaker 00

  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 more distributed. So Hangzhou, Shanghai, Beijing, whereas I think in the in this market, US, Europe, the Silicon Valley still is the epicenter. And and so I'm comparing the two because I think what's interesting is that The Chinese model, as I have understood it, is far more between-group competition. So one of the things about evolution that you learn is that to increase the adaptive fitness of an ecosystem, it's important to have multiple groups competing.

• 6:42Speaker 00

  And then you identify which one was most successful and then they become, you know, they win, they, 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 varying strategies towards the same objective for video models, for audio models. And 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 multiple-group, you know, competitions. So Anthropic and OpenAI, while they're not competing for the same prize, there's a really

• 7:26Speaker 00

  good pressure that gets put when the proximity of those companies, they're here, they inspire each other. And so the density of startups in the 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 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, bump into people in the street or in the underlying fabric is so rooted in entrepreneurship, that's not the case in other cities. And so could a city emerge that sort of evolves in that direction? It's possible, but then you have all this history, 50-plus years of embedded know-how,

• 8:07Speaker 00

  of highly efficient capital markets, information that, we were talking before we got started about how in the 1970s, the way information was exchanged was over a steakhouse dinner between, you know, corduroy pant-wearing old white men. And that's shifted to this point now where it's just this high velocity of transparent information sharing, reputation, all that. So I don't know, 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's like...

• 8:41Speaker 00

  There's this history of like the Silicon Valley is that's the land of the quick and the dead. Like we have, Benchmark used to have 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 narrative that we're in the high technology business when it turns out entrepreneurship is more about leverage, about pace, about clarity and focus than it is about deep R and D.

• 9:10Jack Altman?

  Interesting.

• 9:10Speaker 00

  That may have shifted a bit. If you look at the nature of the recent successes, large capital, research labs.

• 9:18Jack Altman?

  Yeah. Well, outside the research labs, what you said there might be completely true outside of those research labs right now. Like, most application layer companies, I would say probably do fit what you're saying.

• 9:27Speaker 00

  Yeah. Well, and I think that velocity has been part of this system here, which is that we, part of adaptive landscapes being healthy is that you planned an unplanned variation so that there's, there's, there's high variance. So lots of experiments with the, 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, Y C, of course, has really been a great, like, just build it 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,

• 10:07Speaker 00

  that was, I learned something is tuition. And I think that, the fabric, I don't know. So the, in 2021, 22, and there was the San Francisco socks and like, we have so many problems in the civil society here. And there was a, you know, an exodus that's unmoved to places like Miami and Texas.

• 10:26Jack Altman?

  Texas.

• 10:27Speaker 00

  And I think it misses something, which is Jeffrey West wrote these great books on the, the cities outlive.

• 10:37Speaker 00

  Pretty much everything. They're probably the best idea that we've had as humanity, other than maybe language and fire. But cities endure far longer than the average Fortune 500 company, which is usually dead in about 50 years. But cities can go for hundreds, if not thousands of years. And 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. Like the idea of a top-down model, but it's also not chaos. It's not total law's affair, you know, anything goes. And so there's a, they're an evolving organism, and we're just part of it.

• 11:13Jack Altman?

  What's interesting as I'm listening to you talk about this is I also think that Silicon Valley slash 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, or people wouldn't go out to dinner with their competitors and like talk about what they're thinking and learn from each other. Whereas here, I think there is, which you touched on, there's simultaneously somehow like a respect and competition at the same time, which almost seems like the healthiest possible.

• 11:47Speaker 00

  And 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, 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 doomers, if you want to call them that. But the, one of the big insights in the last, you know, few decades, just in systems thinking, has been this idea of what, what explains the success of certain ecosystems and the failure of others. And Lynn Ostrom got the Nobel Prize in 2009 on this, what she described as the core design principles of highly adaptive functioning ecosystems. So she

• 12:31Speaker 00

  looked at things like fisheries 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 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 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 to get rich? Maybe, but I think that the underlying tone that I sort of find in most of the Silicon Valley,

• 13:16Speaker 00

  which is not necessarily a great thing, is a dissatisfaction with the way the world is today. And a purpose, a desire 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? 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 sort of fully manifest the possibilities that we have as humans. I think that is like at the center of the Silicon Valley. That's why we all go down to places like, you know, Big Sur or Essel and it's like, yeah, it's the same energy. It's the sense of human possibilities manifest. The other design principles are pretty straightforward, like, you know, fast and

• 13:59Speaker 00

  fair conflict resolution, monitoring agreed behavior, so transparency. Other aspects of this are, you know, equitable distribution of gain and effort. And so as you go down the list of these design principles, 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 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. Yeah. And I, you know, part of evolution, this is the thing which also gets the root of the Silicon Valley is that.

• 14:41Speaker 00

  There needs to be extinction. There needs to be, over time, as large organisms build, they develop internal pathologies and some of those are cancerous.

• 14:54Jack Altman?

  Yep.

• 14:54Speaker 00

  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 50 years, they get eclipsed. 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 400 years. If you're an LVMH, that's an attribute. I don't know, like, I'm in the business of, like, those are juicy targets. And, you know, great that they had their day in the sun.

• 15:37Speaker 00

  They rode their wave to the top. But we want that next generation to come up. And part of the evolving landscape is that you have extinction events.

• 15:46Jack Altman?

  Yep.

• 15:46Speaker 00

  And that there's branches on the tree. We can say they're common ancestry, but we evolved past that. And I don't know, I mean, I think it's sort of the ethos here.

• 15:55Jack Altman?

  You also sort of need the, like, meta-big ideas like AI to be able to suck the talent from other ideas that were good but not as good.

• 16:05Speaker 00

  Yes.

• 16:05Jack Altman?

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

• 16:11Speaker 00

  Without question. And I think that, you know, this does the impact. If you take a biologist's perspective, there's punctuated equilibrium. There's points in time where you have dislocations that many companies, and take Google as a good example, there's long conversations about, you know, debates. Are they, are they going to get left behind? Well, they, they have all these assets, right? You know, YouTube, not to mention, like, the whole G-suite, 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. And they find their way through sort of an invisible hand to a peak,

• 16:55Speaker 00

  to a maximum optimization. The internal logic, the invisible hand, as I say, 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 in, in, in these punctuated glimpses, 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- It's like some innovator's dilemma type of stuff. Yeah, but 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 disruptive below. Versions of this to me are like climbing down to go back up is, is an out of body experience.

• 17:38Speaker 00

  And so I think we have a ton of respect for companies that have been able to- What comes, like, well, who comes to mind who has done that kind of thing? Historically, it's done by founders who have the courage to start climbing a new adaptive peak. I think the best example of that, we look over time, the iPhone, AWS. Yeah. Where there was a new peak that was not the core business model, maybe in 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 going to go down. Yeah. We're going to rack our margins. We're going to, we're going to 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.

• 18:22Speaker 00

  So, so part of what's required, and I think what we were living in the last 15 plus years is an incumbents world. Mm hmm. The super majority returns. The fact that our incumbents or network effect businesses growing at 30 plus percent, not slowing down is scary. In an adaptive world where you want to have lots of variance, lots of experiments, lots of heterogeneity, you start to get to these monoliths and, and, you know, the AI dislocation is the first real structural shift in business model that I've seen in, in over a decade, maybe over 20 years. I mean, SaaS is arguably a different business model because it's a subscription based. But when you have a business model dislocation, then you get giant new companies. I don't know if you'd agree with this way of looking at it, but sometimes I think about like-

• 19:07Jack Altman?

  QQQ index versus like aggregate VC returns is just like a way to think about like who's winning right now incumbents or startups. And my guess is over the last, over the last decade, probably like QQQ is probably one I would guess. I haven't actually looked, but.

• 19:23Speaker 00

  For sure. From a, if you, if you take paper marks as fiction, and which I think you have to, in terms of liquidity, no question. It's been an incumbents world for, for probably 10 plus years. That changed, starting in 2022.

• 19:40Jack Altman?

  Do 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 going to get some. But do you think startups are better equipped now to get more of the value when you look at them versus Fang?

• 19:54Speaker 00

  Well, I have a strong belief that we will see three to five trillion dollar market cap companies come out of this that didn't exist before 2022. 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. You know, our companies, 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. In a sense of like, we're going to go talk to customers, find out what their needs are, develop a priority, you know, stack for the roadmap, get the engineers

• 20:36Speaker 00

  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 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 because we go in and say, what's the roadmap? And like, for today. Yeah. Because we're shipping every day. So, so the reason I'm sharing this with you is that the volatility in what a technology this disruptive can do with this much potential with this much human scale impact, requires the kind of work that the startups are doing. Meaning fresh eyes with, with, you know, deeply committed cultures where people are

• 21:18Speaker 00

  trying lots of stuff. No one's afraid. And, and some of it takes, one of the interesting facts in evolution, 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.

• 21:32Jack Altman?

  With AI.

• 21:32Speaker 00

  Yeah.

• 21:33Jack Altman?

  Yeah.

• 21:33Speaker 00

  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 new leaf on the tree.

• 21:43Jack Altman?

  This is like a new route.

• 21:45Speaker 00

  Yeah, and but but they tend to have a common ancestor who's not around anymore. So if you go too far down the path of we've created inorganic life for the first time, it's possible that that looks back on us as the common ancestor, but ancestor is the afterword, but I won't go there. So the point I'm making though about if you get to a speciation event, 90% of the phenotype change occurs in the first 10% of the species' life. Why is that interesting? Well, you look at the iPhone. Okay, so for the first 10% of the iPhone's life, 90% 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.

• 22:25Speaker 00

  So so we're in a zone now 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 2040, and you blur your eyes and say, it all kind of looks the same like it did in 2030. But from 2025 to 2030, it's going to look so different every six months. So this is all along the way saying, I think startups are optimally suited to go pursue that.

• 22:55Jack Altman?

  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?

• 23:07Speaker 00

  Yes, but I think we will have taken 10% of the path up the hill to the adaptive peak, meaning I think there's so much more that we 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 fields from I'm extraordinarily interested 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 look at the whole cell itself as being a digital, you know, artifact that can then be experimented with.

• 23:50Speaker 00

  And then you look at an organism. Of course, we talked about coding and, and you know, there's, there's 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 a whole fields that we don't fully appreciate. Yet the, you know, thing I was blown away on in China is that because they're so proximate to robotics and manufacturing, they're on an adaptive, you know, path with embodied AI that hasn't really taken off here.

• 24:26Jack Altman?

  Yeah.

• 24:27Speaker 00

  That likely means that there's, again, unimaginable applications in our life from like, you know, you have a, somebody that does your, your laundry all the way through to, you know, the whole spectrum of human needs being.

• 24:40Jack Altman?

  Yeah, and embodied robot 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 time scale should be on that.

• 24:49Speaker 00

  Yeah, and then, and then time scales linked to ultimately consumer price points. You know, is it going to come in at 60K? I know, you know, Tesla has their version of this, but then, you know, is there a PC moment there that we're going to go through? So, but I think, I think you could say, Toby said this to us, and I tend to agree from Shopify, that if you stop today, you'd have like $20 trillion of economic value created to go be harvested. And, and we're not stopping today.

• 25:17Jack Altman?

  Yeah.

• 25:18Speaker 00

  But is the incumbent world?

• 25:21Speaker 00

  Going to be extinct or eliminated, it seems unlikely. I think what my sense is that we had, you know, three to $5 trillion market cap companies, they're likely to eclipse, just as the past generation did, the current.

• 25:34Jack Altman?

  Yeah.

• 25:35Speaker 00

  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 such a capital intensive, you know, game at the foundation layer.

• 25:48Jack Altman?

  Yeah.

• 25:49Speaker 00

  That how does that then, you know, include the startup 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 startup opportunity get better or worse?

• 26:04Jack Altman?

  Yeah.

• 26:05Speaker 00

  And unfortunately, I think for like over 80% of them, it's like, it's over.

• 26:09Jack Altman?

  Yeah.

• 26:09Speaker 00

  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 going to be a point of force multiplier for our success and enable more. But I think that's, that's a good debate.

• 26:22Jack Altman?

  How about Darwinianism as it applies to venture? And so like, you know, I'm thinking about over the last 15 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.

• 26:39Speaker 00

  Yeah.

• 26:40Jack Altman?

  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 taken Benchmark out of it, how you've observed the evolution of venture as sort of an industry.

• 26:57Speaker 00

  Yeah, I'm happy to talk about it with Benchmark as being an example.

• 27:01Jack Altman?

  Yeah.

• 27:01Speaker 00

  My belief is that we're in an ecosystem that's nutrient rich and nutrient rich environments that are faced with low selection pressure. And I think ventures have relatively low selection pressure in the last decade.

• 27:24Speaker 00

  Not sure why, you know, I think it's broadly from a liquidity standpoint struggled to outperform the NASDAQ, but it got institutionalized as an asset class. The LPs were sort of like sanctioned through Cambridge Associates to have this allocation to it, to these funds. And so nutrient rich, relatively low selection pressure. And I think there's been a incentive, which maybe is the selection pressure, to raise more capital. That's very real and some sense irresistible. And I think the outcome of that is inevitable that you scale and some of that scaling will have been cancerous, some of it will have been highly adaptive.

• 28:05Speaker 00

  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 I have a ton of respect for firms that have, like Andreessen Horowitz and like Sequoia, 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, more, you know, capital, more resources, more, but obviously, you know, we have a very different philosophy inside of Benchmark. And my view has been, we have at Benchmark, the most adaptive organism

• 28:49Speaker 00

  in the venture ecosystem. You know, what's interesting about Benchmark is it started in the mid 90s 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. Then with a completely different lineup, Benchmark had the top performing fund of social mo, you know, we were lucky enough to be, you know, early at Uber, Instagram, Snap, Twitter. Crypto was not our thing. That was the next wave that created trillion dollar market caps. And I think the question for us now is that do we have with a whole new lineup, me being the last, you know, we said last piece of wood on the ship of

• 29:30Speaker 00

  Theseus, that the continuity, the common ancestry to prior Benchmark, 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 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 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. It's our belief that the next three to five years, we will create multiple trillion dollar companies in our industry.

• 30:13Speaker 00

  And that's how we wake up every day and think about, okay, can we serve those people, those entrepreneurs to their success? Will the other big funds do that too? I expect so, but different models. Our idea is that we serve as close partners to an entrepreneur for a decade plus, individually close partners, meaning serve on the board, 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 the peak of their ambition, of their relevance, of their capacity to serve, which means young. I mean, honestly, I think it means late 30s to mid 40s.

• 30:58Speaker 00

  If you go back over the history of venture, that's when John Doerr is doing his investment in Google or Mike Britz is at his peak. And so 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. 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 idea that each of us is an owner gives us a sense of autonomy, another core design principle.

• 31:43Speaker 00

  And there's not quality control and overhead and processes. And there's no, there's no memos. 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 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 all gone into the data room and we want to cross this threshold with you. We feel this is the full potential partnership for us, but, but you haven't come to our data room yet. You know, our LPs may not like me saying this, but I said, there's nothing good that can come from that. It's like, because I'm going to 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,

• 32:28Speaker 00

  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 going to go with the next set of, you know, releases and, um, and whether or not you're retaining a learning and distance training, you know, user that, that isn't the long-term goal of the business doesn't help me. And, and 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 the cancers need to thrive, um, is they need to hide

• 33:11Speaker 00

  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 Darwinianism 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 is a question for limited partners, is that, you know, they should be the immune system, 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 Ventur is sanctioned as an asset class because it has all these spectacular possibilities, asymmetric return, you know, a dollar can become $10,000. There's nothing like it in the investment world, truly nothing. But it also has been underperforming the NASDAQ.

• 33:55Jack Altman?

  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 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.

• 34:12Speaker 00

  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

• 34:30Speaker 00

  One of the common themes of the really great entrepreneurs is that they play infinite games, not finite games. This is the James Carr's book, who's, I remember that Patrick Carlson and Toby both recommended I read it. It's great. I fucking read that book, you know, 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 maximized net worth, it's not. And I think this ecosystem we're in has had, we've slipped a bit in that we've taken incentives. It could be incentives of, you know, the fees that come from a larger fund, the- And they try to create values based on those incentives?

• 35:14Speaker 00

  And that the values then sort of 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 one of the challenges of venture business, the incentives from a limited partner, allocation to brand name funds, having good marks, you know, benchmark, historically, we keep our 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, they're being evaluated based on the private marks. So I think our view has been that we want to always surprise and delight at the upside in that, you know, we have some sobriety, perhaps. And, you know, if you look over the course of benchmarks funds,

• 35:59Speaker 00

  now 30 years, is that we've been grossly undervaluing our private companies. 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've hatched. But I don't know, I think we're in a different kind of ecosystem. But ultimately, there's this, this long duration of selection pressure put in venture. The long duration is that, you know, maybe they're going to get lucky. And, you know, as one of my former partners said, there's, there's high barriers to exit in venture. No barriers to entry. I mean, you start a fund, which is going to kick ass and it's going to be, I mean, know this because you have value system that I can, I can see of caring to serve entrepreneurs, of having a long game in mind.

• 36:39Speaker 00

  All that, but the barriers to exit are 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.

• 36:53Jack Altman?

  Yeah.

• 36:53Speaker 00

  Who knows?

• 36:54Jack Altman?

  I have a question that is going to sound a little ridiculous, but you said that the thing you're optimizing for is cash on cash returns.

• 37:02Speaker 00

  Yeah.

• 37:02Jack Altman?

  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.

• 37:15Speaker 00

  Yeah.

• 37:15Jack Altman?

  I guess I want to just ask directly, like, why is that the metric that you care about?

• 37:18Speaker 00

  You know, it's, it's a fair question and honestly, not the motivating force in what we do. It turns out it's, it's the outcome that it should create the motivating force. The motivating force is to be early and really close with an entrepreneur on an average of 10 to 15 years of commitment. Where we, in a way, represent the most unconditional support for that founder. I have too many companies in my career where the founders moved on, but I didn't. And I'm on the board of Docker, which has been around now for 10 plus years.

• 37:58Speaker 00

  And Solomon, who's an amazing inventor, running another company, phenomenal human being, just, you know, fatigue, moved on.

• 38:09Speaker 00

  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 conditioned on, is it working or not? Cause if it's not working, we're going to move on, means that we're better off early, better off with enough commitment that in success, you know, we're able to, because of that longstanding commitment, have achieved the compounding effects of a long investment. So if you're getting it early and it's going, growing and it's, and, and that's different than saying 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.

• 38:52Jack Altman?

  But you made a lot of money from it.

• 38:53Speaker 00

  And it feels wrong. You know, I

• 38:57Jack Altman?

  Why do you think that is? Like, or maybe asked differently? That value that you're now, you know, it's kind of like the highest ideal of serving founders, being their partners who are thick and thin. Like, why is that the center of all of this for you?

• 39:08Speaker 00

  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, like, what was durable? What was deep? What was profound and sort of moved my soul and spirit? For me, it always is the relationship with the founder. Like, that is it. If I'm one of many, like, in the sense of, like, there's 40 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 be doing for as long as I'm a conscious being,

• 39:53Speaker 00

  is to seek out the most creative, dynamic people where I can be an amplifier to what they want to do. 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've found also is that depth is a constraint. It's a constraint, which is that, you know, in the same way, I think about our personal lives. Like, why did we stay married? And why did we build these deeper relationships? Well, 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, new trains. There's this like infinite possibility that gets manifested in a few deep relationships

• 40:36Speaker 00

  that I have found I can't achieve in broad scale superficiality.

• 40:40Jack Altman?

  Yeah.

• 40:40Speaker 00

  So it comes back to how do you build a firm that orients against that? My partners share that value, 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? Like, was Amazon going to be Amazon with or without venture capital? Or, you know, yeah, I'm close with Toby at Shopify. We got very close to working together. We didn't, and I have to look at that and say, you know, He was going to be just fine without me. So I'm humble enough to say, and vulnerable enough to say, I don't measure it of like, as like, did this, does the scorecard of a relationship justifies existence in the same way I don't think of my friends that way.

• 41:21Jack Altman?

  Right.

• 41:22Speaker 00

  Or my wife that way, like, unbalanced, 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, 80 billion neurons that have been wired into 107 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 and all these things, but, but the idea that we've localized intelligence in our head. So a lot of this, this may sound like an abstraction, but it's in a company, while

• 42:06Speaker 00

  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 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 a company. It's like, I represent a part of the system that should elevate, amplify, inspire, and it doesn't scale.

• 42:31Jack Altman?

  Yeah.

• 42:31Speaker 00

  Which is the big sort of fissure between our strategy at Benchmark and every other venture firm, which is that we've reconciled, we actually embraced 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.

• 42:47Jack Altman?

  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.

• 42:58Speaker 00

  Yeah.

• 42:58Jack Altman?

  That doesn't scale. Like obviously 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.

• 43:09Speaker 00

  There's a fixed constant. 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 think if I were running a large venture firm, I would think about it as a between group competition game.

• 43:25Jack Altman?

  Like scale, have 20 partners or something.

• 43:27Speaker 00

  Yeah, but I would do it as a, we all know that like five to seven people is the optimal size.

• 43:30Jack Altman?

  Two groups of five.

• 43:30Speaker 00

  So I would do like multiple groups and everything, compete with each other. That's how I would scale a firm and it'd be totally coherent because it would be consistent with what we know about multi-level selection, which is one of the big ideas out of, there was a book that was very popular.

• 43:45Jack Altman?

  Actually, real quick on that, would you have them all be generalist or would you have them be verticalized?

• 43:49Speaker 00

  I would have them do whatever they thought would allow them to generate better returns and then compete.

• 43:53Jack Altman?

  Got it. So super Darwinian.

• 43:54Speaker 00

  Yeah.

• 43:55Jack Altman?

  Yeah.

• 43:55Speaker 00

  That's a completely correct, right. Arguably, that's what LPs were doing. And then they stopped doing that and they started putting it into a few large mega funds. We can talk about that. But so the logic of that Darwinian model, multi-level 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're subscribing to the idea of the selfish gene is that it's all about genetic replication. So 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. Like, why would anyone

• 44:40Speaker 00

  ever? 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 learn when you study economics at Princeton, right? It's like, you know, Milton Friedman, 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 could actually have selection occur at multiple levels. And the individual is part of a group and the group is in competition with other groups, which clustered together

• 45:22Speaker 00

  to form Silicon Valley. Or so if I were running a fund, I would not have one large organism because then you have, then what makes sense is within that group to compete and win. You get 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 if they make it real multi-level selection. So let's say like we're playing monopoly with four people at the table. 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.

• 46:07Speaker 00

  And if the game is no longer to beat your competitors, but to have your table create the most wealth.

• 46:12Jack Altman?

  Yeah.

• 46:13Speaker 00

  That's benchmark.

• 46:14Jack Altman?

  Yeah.

• 46:14Speaker 00

  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 part place. I'm going to 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.

• 46:26Jack Altman?

  And a group that big just can't operate that way.

• 46:28Speaker 00

  Yeah. If you have 40 people playing, good luck coordinating.

• 46:31Jack Altman?

  Yeah.

• 46:31Speaker 00

  So what we do know about human societies is there's breakpoints. And this, I've learned at Benchmark, we got to eight, nine partners. It stopped being fun. And something happened because there was this bifurcation of the dynamic. There were different subgroups. There was cultural fissure. So I think the only way to scale fun, by view, is that you still have the fixed goal. So why don't I do that? Why doesn't Benchmark do that? Because I want to be one of the players in the game. Like, I want to be one of the, one of the sub-funds. Because to me, the substance of the work isn't scaling the entity. And now there's here's a critique, which is like, are we less competitive as benchmarks? Because we don't have all these other entities and all these other resources and all this. My answer to that's very simple, which is that you do references.

• 47:15Speaker 00

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

• 47:28Jack Altman?

  What would happen if you said, I'm going to take everything I just said, but instead of leaving As, I'm going to leave series Cs. And now I'm going to just write four times bigger checks. I'll have four times bigger fund. I'm still going to take a board seat. I'm still going to make that promise. I'm just going to do it later.

• 47:45Speaker 00

  I don't believe that works for one reason. I've trained my entire neural net cosmology, et cetera, for

• 47:55Speaker 00

  That early formative stage and what you'll find in companies is that what you've done with 15 employees or less, you probably found this a lattice, endures free turning. 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 I'm there at that beginning inception stage, my capacities to be there for the duration are infinitely greater. And yeah, I've committed, Airtable had 25 people and I invested, Twitter had 27 people, they were a little later. But I find myself as wishing, wishing that I had been there earlier so that the systems

• 48:39Speaker 00

  that got started that became pathological, I can't take credit for, I mean, that I would have stopped them from happening, but I would have at least felt, you know, connected to them. And so it's sort of like, why am I not a public stock? I could take that to the extreme of why not invest in public stocks, why not invest in, and there's something, as you know, that's so, at that liminal state at the beginning, when we don't know. The other thing which I found is really good about being there at the beginning, Ollama's my most recent example of this, but there are many examples in the history of technology, Twitter, Instagram, Discord, where if we're there at the beginning, we've really made that personal commitment, we're in a position to let the entrepreneur go and be free of

• 49:22Speaker 00

  what they were trying to do that didn't work, to do the thing that might be much more successful. And Ollama was originally called infra.hq. They didn't love that. It was security for Kubernetes, my God, I mean, sorry. And then AI happens and public open source LLMs and I don't know. But by not being 30 people locked into a strategy, series C, okay, we have a financial plan, it just, we have so much more freedom.

• 49:47Jack Altman?

  Yeah.

• 49:47Speaker 00

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

• 49:51Jack Altman?

  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.

• 49:59Speaker 00

  Yeah.

• 50:00Jack Altman?

  Not incredibly young, but you know, why do you see it that way? And like, what have you learned as you've observed sort of, you know, 20 years of Benchmark?

• 50:08Speaker 00

  Yeah, I found that aging.

• 50:13Speaker 00

  Occurs 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 being in the venture business is to continually blow up ossification, sort of to let go, to be more, to be less certain, to be more naive. And why is it you look at other venture compared to say hedge funds or Stan Druckenmiller,

• 50:55Speaker 00

  we talk about it being all this giant, but the absent venod, which is I think a completely different species. It is. Than the venture, and he would probably not ever want to be called a VC to his credit. There are very few exceptions. Venture capitalists tend to get worse after the age of 50. And why? And so you say, okay, was it because their networks have atrophied? Yes. Is it because they've become too rigid in their thinking and too rooted in past generational technologies? Yes. These are all causal factors. I actually think the biggest one is ego.

• 51:34Speaker 00

  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 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 the sense of possibility and wonder. And you know, it's why I'm in my last chapter at Benchmark, because I don't think that

• 52:15Speaker 00

  our firm is the best firm on earth unless we average our age closer to 40. And of really committed.

• 52:23Speaker 00

  At meaning some 30 year olds, late 20 year olds and some, maybe some mid 40 year olds. Because 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, you know, my future partners, 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 50s, they'll give you a different story. But I find that it sort of runs afoul of the history of the industry, which is, which is the sort of, the fresh energy of a young partner, 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 you have a shared fabric. You probably have playlists that aren't that different.

• 53:06Speaker 00

  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 mean this is an industry, and I come back to this, that, that wants to go through creative destruction. But you know, John Doerr, Mike Moritz, these giants, my former partners, Bob Kagle, Bruce Dunleavy, don't run our industry. And I love that. And they, they moved on with grace and you know, they still play a vital role in different ways, but.

• 53:38Jack Altman?

  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 20 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 matches it so it feels natural? Or are you pushing yourself away from holding on?

• 54:07Speaker 00

  I was given two big gifts coming to Benchmark. One is the brand. They represented this sort of mysterious possibility, all those energies, positive stuff that I've loved about Benchmark when I was at, at Excel or before I even got into the venture business. 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, and you know, Bob Kagle, Bruce Dunleavy, Kevin Harvey, raised their hand and said,

• 54:47Speaker 00

  No residual claim on economics, no piece of the management company. And I share this with other people in the investment world who are like, that's crazy to the point of being stupid. And I'm like, no, no, no, it's genius because what they've enabled is that I honor the same thing. So to answer your question concretely, I think that Bill Gurley, who left most recently, and Matt Kohler, they raised their hand and said, it's time. And what a beautiful thing to have none of the drama, none of the like, where's my this or where's my that. And 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 gotta add

• 55:31Speaker 00

  10 years to every new commitment I make and say, okay, then I'll be in my 60s. And there's a point at which like, and more importantly, I think more vitally, I want the energy of Benchmark to be centered, just as it did for Benchmark 1, and then the Benchmark 7, which was the social mobile fund with Uber and Instagram.

• 55:49Jack Altman?

  I guess you being handed the keys in a certain way makes you, I'm sure that imbued a certain duty to do it the same way. 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 gonna do it.

• 56:00Speaker 00

  It's the gift I was given and I really feel it as a gift to be able to say.

• 56:04Jack Altman?

  Man, it's so hard to create that gift. It must be so rare for the first group to make that gift because I can see how if you're handed it, you're like, I need to hand this on, but wow, it's gotta be rare for the first group to not just say, I'm gonna hold these economics.

• 56:19Speaker 00

  Well, you know, Andy Radcliffe and Bob Kegel, and I remember when Bob told us things like, you know, 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 a, yeah, and he was roughly where I am in my life. And what a beautiful thing. And, you know, that's consistent with creative destruction, the ephemeral lineup of Benchmark is juxtaposed to the

• 56:48Speaker 00

  Non ephemeral value system, the non ephemeral structure of like great partners to the, and I actually believe again, an adaptive landscape, we inherit, we evolve, but 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, but it's usually against the backdrop of a very constrained core ethic of what the firm is.

• 57:10Jack Altman?

  Yeah. One of the things I wanted to ask you about is Mark 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 startup to come pitch them. And they would just like swing at the fat pitch. They didn't have to work that hard. And that has gotten dramatically more competitive over time. And he saw that opportunity and everything. You've been doing the business for a long time, both at Benchmark and Prior.

• 57:41Speaker 00

  Yeah.

• 57:41Jack Altman?

  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 20 years of your time here?

• 57:52Speaker 00

  Yeah, my experience has been no one at the beginning ever called me. There was no sushi boat. There's no picking of, you know, warmed over, typically not good sushi on sushi boats. It was always, and still to this day is for me, a, are you nurturing your sense of curiosity? 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 meet a lot of people, but then you're in a meeting and your meeting's

• 58:34Speaker 00

  not going so well, because there's a lot of those in the venture business. And instead of sort of like tuning out and thinking about like, oh, what am I going to do tonight for dinner? Fold that back into what can I do to make this an interesting meeting for me? And it's all entrepreneur. I'll typically say like, you know, okay, well, you, oh, I noticed you were at Stripe. Oh, that's good. You know, who impressed you there? And like, you know, if you think about like your people you mostly want to work with, so you're constantly sort of populating your, your, your awareness with the extraordinary opportunity potential. And to me, as opposed to a sushi boat. And then, you know, 99% of the time, You're reaching out. You're not maybe cold calling privately, but you're going through your networks to get and

• 59:14Jack Altman?

  Yeah, actually, this is really good because like, because I'm doing it without, I'm doing this without experienced partners teaching me how to do stuff. So like, what has sourcing done really well look like? I mean, you just gave a really good example of you're meeting with somebody who you worked that impressed you. But like, what's the body of work in your mind of really good sourcing at its prime?

• 59:31Speaker 00

  Well, I've seen younger partners come up.

• 59:35Speaker 00

  You know, we've worked, you know, talked about Victor today and is a great example. And they're competing strategies for sourcing. Ultimately, it has to manifest 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, 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 be the right strategy. But it has one major risk, which is that great entrepreneurs are going to be more expert than you'll ever be. So you can, you get me. And so who's a good example of that? Fred Wilson was a great example of being an expert on social.

• 1:00:19Jack Altman?

  Yeah.

• 1:00:19Speaker 00

  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 strategy. And he's in New York, so like, he's not like, so the second strategy, which, and these are overlapping, granted, is to be a version of what I would describe I've done.

• 1:00:40Speaker 00

  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 do you do your interviews? He said, I do 41, 42 interviews. I see when I was doing these interviews and more than that, I start, it's not so fun. But I, but I know pretty quickly, I'm like, well, what is it? And he's like, yeah, you know, you feel it. There's an authenticity. There's the idea this person's not taking someone else's society concepts and mashing them up. They're manifesting, and it may not be the right thing they're saying, but they, but you see it in the clarity from which they come at the end. They're fearsome, and so you feel like you can't control them and all these other attributes.

• 1:01:23Speaker 00

  So the second model, which I think is highly recommended for someone like yourself, is to put yourself in a position so that when somebody you meet firsthand, secondhand or pitches you that you can receive in an instant, like that's different. How do you do that? So I think about my time when I met Evan Spiegel, when I met Toby, and I didn't invest in Toby, but I felt it. I mean, I fucking knew. It sounds really

• 1:01:50Speaker 00

  hard 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 ostriches. So I want to give that back to people.

• 1:02:35Speaker 00

  And there was like, again, an oceanic feeling like this person, once he starts to do this, it's going to compound and grow. And I, by the, it's so real because I can look back over that last prior year. I don't remember a single meeting and it's going to 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 in and presented. And Eric brought a bunch of companies in that year. But when Alex presented, it was like, And the one that stands out, you should always do it. Historically, it will lead you to some of your greatest failures and some of your greatest successes. But that's the symmetry of the business. Yes, that's the basket you want. And I tell you, the other side is equally damning, which is the, it kind of makes sense.

• 1:03:18Speaker 00

  It checks the boxes. I like the numbers. So by the way, that so this is the second Don't do that. Well, if you pursue that, my model of venture investing has been that, which is I met Howie Lou and like I knew five minutes and like, there's something here that is oceanic that I want to be there. And like, we build an energy together because it's self selection too. Like, you're not going to respond to everybody who's great. And I wish I'd spent time with Parker. Honestly, I didn't. You know, you're a guy. The third, the strategy, which I think is one that works quite well as a complement to the other two, is to be a business model investor. And I think there are people who've been extraordinary at that. My partner, Bill Gurley, stands out of a course of the industry of saying, he

• 1:04:03Speaker 00

  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 random topic restaurants, which is OpenTable. He was a business model investor. Among other things he did, all the other aspects. And there's certain people who can say, like, so today, what would that look like? A business model investor today would say, we're going to disrupt. Two thirds of the economy is going to be completely upended by AI. Let's pick the top 10% that are vulnerable to margin expansion to the use of AI. So we're going to start with accounting firms, real estate office, even on the list. And to me, that's, that's a different model. And how do you source in that model? Well,

• 1:04:46Speaker 00

  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 responded to open source investment, J. Boss, Mark Flurry, because the person was sort of, yeah, thermonuclear. And that then landed me in the shores of open source in 2003. And then I did 20 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.

• 1:05:24Jack Altman?

  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, 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?

• 1:05:52Speaker 00

  It's a good question. It gets back to the sushi boat. The sushi boat isn't full of Michael Truell. The sushi boats, if there are sushi boats, are filled with the people who aren't on that typically. So what I found is that people who have that density of excellence of like, they're known.

• 1:06:11Jack Altman?

  Yeah.

• 1:06:11Speaker 00

  Like, people don't meet Sam Altman and walk away and say, I just met him. No, they meet and, and so you have to have a nerve, enervate your, your, your network, for lack of a better term, enervate your life with people who are likely to bump into those folks. And if you do enervate your life and they, and then encourage them to tell you about them. So the, the fact is, you're likely going to have to reach out to that individual. I remember meeting Michael Truell and like, this is pretty fucking obvious. Six minutes in, you're like, okay, there's 40 coding companies and this and that, but there's one person who has this clarity.

• 1:06:54Jack Altman?

  Totally.

• 1:06:54Speaker 00

  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, you want to, it's a relationship. So you want to have a two-way, you want to have a, you don't want to just say, oh my gosh, yes, you had me five minutes in. Because I think the next thing is, it's one thing to be extraordinary. It's the other is, can you be an amplifier for them?

• 1:07:11Jack Altman?

  Yeah.

• 1:07:11Speaker 00

  And do they come out of the meeting saying like, oh, I want more of that?

• 1:07:14Jack Altman?

  Yeah. And, and Brett Taylor, who obviously you're very close to, you speak to him for 30 minutes, you know, you're not talking to a regular person.

• 1:07:19Speaker 00

  I met Brett five minutes in, 2007. John Lilly, who is an awesome human, introduced me and he's like, you gotta meet Brett. That's, that's a good example of like, I innovated my network. I mean, John knew that I was responsive to those kinds of people. At the time, he was at Mozilla. So John sends it to me, I met Brett. I'm like, Yes. Like, what do we do? As he became an entrepreneur residence, and this is before Google had built an immune system to stop good people from leaving. So I think.

• 1:07:50Jack Altman?

  Okay, so then you meet these people somehow. Then you're like, wow, this person's special. You met, you know, young Patrick Collison and like the rest of the world, you realize it's a special person or whatever. Now what? Like, how do you, what have you learned about convincing those people to work with you? I mean, obviously, listening to you talk, I can hear a lot on sort of the way you talk about partnership with you. And I'm sure that's like a big piece of it. But like, are there any generalizable learnings you've had?

• 1:08:19Speaker 00

  Yes, one, one very simple thing. And I made a lot of mistakes early in my venture career when I was insecure. I still am, we all are. It was understanding, deeply understanding, how could I be an enabler, an amplifier, a positive force that's deep and real. And the mistakes I made early on was I thought that was through expertise. Let me tell you about this thing I learned about. 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 single most important thing, which I,

• 1:08:59Speaker 00

  which I focus on early on is deeply understanding what this person is trying to do. And if I really understand, not, not at some superficial level, because it's a hot deal, or, and we're all tempted to do this momentum, go do it. But understand that 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 vista on the horizon? And so if, in a way,

• 1:09:32Speaker 00

  They feel real and deep understanding of what they're doing. Then there's trust.

• 1:09:37Jack Altman?

  I love the answer because it's like 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.

• 1:09:47Speaker 00

  Yeah.

• 1:09:48Jack Altman?

  And you have to see what your customer really wants and what they care about and what drives them. And what are they afraid of? And, you know, what, what do they need to accomplish? And it sounds like the fact that you started with listening, that seems, that seems like that's pointing at the right direction.

• 1:10:02Speaker 00

  Yes. And then, and then I think in a good relationship, there, there's tension. It can't just be.

• 1:10:08Jack Altman?

  Saying yes to whatever they think they want.

• 1:10:09Speaker 00

  And so I think you have to, after you achieve understanding, you know, through, through the 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? 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 success, but even at a higher level through this relationship. And it doesn't always work. There are cases where you try to do that and it falls short.

• 1:10:52Speaker 00

  And you know what? I'm really okay with, one of the beautiful things about ventures, it's never going to be a winner takes all game. We have a heterogeneous ecosystem of models of people. And, and to recognize if you're forcing it, it's not for me.

• 1:11:06Jack Altman?

  Yeah.

• 1:11:07Speaker 00

  There are certain people who I know, I'm not going to name names, but I'm like, they did great investments, but like, that would not have been a good relationship for me.

• 1:11:13Jack Altman?

  Totally.

• 1:11:14Speaker 00

  And then there's others where it breaks my heart because I think that's the kind of person that, so my haunted, you know, you've been, if anyone ventures 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. There are those that, that. For whatever reasons, like, they wouldn't have activated me.

• 1:11:37Jack Altman?

  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.

• 1:11:43Speaker 00

  It would have meant the world to me. Still, we have the relationship. We talk, we hang out and visit him in Toronto as much as I can.

• 1:11:49Jack Altman?

  Yeah. No, but I know what you mean where it's like, there are 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. And I have no way to help that company. And so I shouldn't really force this.

• 1:12:02Speaker 00

  Yeah.

• 1:12:03Jack Altman?

  Or we'll see, you know, a different lens on the same thing is there's investors, like, you know, when I spoke with Vennod.

• 1:12:09Speaker 00

  Yeah.

• 1:12:09Jack Altman?

  Who I'm like, this is a brilliant person and he is able to see things that I'm not going to be able to see. And so that's just a different type of thing where you can like, respect that. Even when I was hearing you talk about the thing that drives you of the relationship. Vennod would say something that I think is sort of like equally aspirational, but totally different, which is like the technology.

• 1:12:30Speaker 00

  Totally.

• 1:12:31Jack Altman?

  And that's cool.

• 1:12:31Speaker 00

  Yes.

• 1:12:32Jack Altman?

  It's just different.

• 1:12:32Speaker 00

  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 there's this beautiful Buddhist self-immolation sacrifice that I'm about to go through, that we go through in the venture business. It's 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 awful thing. It's productive because like, oh my God, that's happening. I didn't see it and all that. 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.

• 1:13:15Speaker 00

  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 like getting the investment wrong, who cares? Like, it's, it's, it's missing that opportunity for a deep partnership.

• 1:13:35Jack Altman?

  Maybe as like a closing question, because 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 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?

• 1:13:55Speaker 00

  Yeah.

• 1:13:55Jack Altman?

  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?

• 1:14:04Speaker 00

  Being a great board member starts with this beginning commitment. And we talked about it, just really understanding the purpose and motivation of the 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 being a source of accountability. But ultimately, what motivates

• 1:14:43Speaker 00

  me in a board is 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 de-oxidize 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's a eating glass, it's suffering, it's many days, weeks, months of feeling like you're in a groundless existence because there's no certainties in startups. By definition, that's what makes them so dynamic. So first thing ethic I have is to stay close and proximate to the purpose of the business. Because that

• 1:15:25Speaker 00

  is the sorting function. That's why we do it. Then the role I think as a director you play, and I'm about to go to a board meeting, is to really have done the work. You do the pre reads. One of the things I insist, and this is a bit of a Crotchety old venture capitalists 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 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 gives you context. And then in the meeting itself, in the board dynamic, you're sort of looking at three layers.

• 1:16:08Speaker 00

  And 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 the point of it? What are we doing here? And you can lose sight of that pretty quickly. 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 and 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 organism. And oftentimes you flip the order, you're talking about people and not talking about structure or strategy. So as a director, I think the best we do is we sort of get clarity. So it feels like, okay, we were aligned with our purpose.

• 1:16:51Speaker 00

  And so when there's dissonance in the system, which is what a board member, I think should hopefully identify, you can illuminate the awareness of the team and the leadership, the CEO to navigate around that. 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.

• 1:17:21Jack Altman?

  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.