Benchmark Part II: The Dinner

We sit down with all five current Benchmark GPs for one of their legendary weekly dinners, during which we ask all of the unresolved burning questions from Part 1. How do THEY think about Benchmark v3? What are their day-to-day emotions trying to keep the equal partnership “bending toward greatness? Why is there no growth fund? What does it take to become the next Benchmark GP? Why is there a secret Principal program? We cover all these and much, much more. We also recorded the whole thing on video — which we highly recommend watching even if you normally only listen to the audio feed! *Links:* - Dad hats are live in the Acquired Merch Store! https://shop.acquired.fm/products/acquired-dad-hat-2 *More Acquired:* - Get email updates https://www.acquired.fm/email and vote on future episodes! - Join the Slack http://acquired.fm/slack - Check out the latest swag in the ACQ Merch Store https://www.acquired.fm/store! _Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions._

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

• 0:00Speaker 00

  I've spent a lot of time in Europe and the dinners are about three hours, maybe three and a half hours long.

• 0:07David Rosenthal?

  That's an acquired episode.

• 0:08Speaker 00

  Yeah. And that's the whole point is that social connection is not something that's transaction. It's fluid. It's fun. It's playful. And so the idea is people are coming out beaming, smiling after a dinner. As opposed to, you know, this sort of rigid structure of a typical dinner with an agenda. There is no agenda.

• 0:27David Rosenthal?

  Yeah.

• 0:28Speaker 00

  I don't have the agenda today.

• 0:28Speaker 02

  The agenda is to come together.

• 0:47Ben Gilbert?

  Welcome to season 11, episode 5 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert and I am the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

• 1:01David Rosenthal?

  And I'm David Rosenthal and I'm an angel investor based in San Francisco, where we were for this very episode.

• 1:10Ben Gilbert?

  Indeed. And we are your hosts. Last episode, we told the four-hour story of Benchmark, the legendary venture capital firm that stayed small while all their competitors ballooned in size. At the end of the episode, we mentioned that their partner meeting had this dinner at the end of it, where the five equal partners of Benchmark sit down for an open-ended discussion, sometimes with a special guest. Well, we were talking with the Benchmark partners about that last episode and they invited us to be their guest for one of these dinners. And for the first time ever, record it, even on video. So we are so pumped to share this with all of you.

• 1:50Ben Gilbert?

  We got to ask them about a lot of the open questions we had about the future of balancing those out-there consumer investments with their B2B portfolio, how they think about making sure that they see that next world-changing company, the pressure of inheriting a top venture firm and trying desperately not to mess it up. And of course, there's some good war stories from the portfolio companies in there too, David.

• 2:11David Rosenthal?

  Indeed, indeed. Yeah, this was such a special episode on so many fronts. This by far is a record on an acquired episode for a number of guests that we have concurrently.

• 2:23Ben Gilbert?

  Oh, we had seven microphones running.

• 2:25David Rosenthal?

  We had to buy like $5,000 worth of gear just for this episode. I think it was worth it, though.

• 2:30Ben Gilbert?

  Next time, I need to account for the fact that there will be violent laughter when I'm setting the audio levels because we just had a blast and you'll definitely hear it when you listen. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:58David Rosenthal?

  Yep, your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote "shadow AI" running with no security review at all.

• 3:19Ben Gilbert?

  Right, and that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes and cuts the time that you'd spend on vendor assessments in half.

• 3:41David Rosenthal?

  In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 3:59Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. Well, we have an update to the merch store. We got many requests about this. Gosh, why isn't there a dad hat? Well, we called up the good folks at Cotton Bureau and we did some horse trading because I wanted a really good one. You know, I wanted one that was embroidered that felt nice.

• 4:40Ben Gilbert?

  So for the next couple of weeks, there will be a limited edition dad hat embroidered with ACQ right there on the front. So get them before they're gone at acquired.fm/store. All right, join the Slack, acquired.fm/slash/Slack. The LP show has been on fire recently. For those of you who are paying LPs out there, we just dropped an interview on the Profitable Growth Playbook for B2B Companies with Jaleh Rezai, the CEO and co-founder of Mutiny. That is live just for LPs right now for another week or so, and then it will hit the public feed. So you can become a LP at acquired.fm/lp or get those episodes after they're made public by searching for the LP Show in your favorite podcast player. Now, without further ado, on to the dinner.

• 5:24Ben Gilbert?

  And listeners, as always, this show is not investment advice. David and I may have investments in the company we discuss, and this show is for informational and entertainment purposes only. Okay, so our first question is, what are we doing here? Like, what are we at? And Peter, it feels like you would be the best person to explain this dinner tradition.

• 5:44Speaker 00

  Why do we have a dining room in the office?

• 5:46Ben Gilbert?

  On the 19th floor.

• 5:48Speaker 00

  When I joined Benchmark, there was great optimism between Bill and me about, you know, injecting new practices, new habits, new ideas into the firm. And Bill had just read the Ben Franklin biography, and Ben had four dinners, if I recall, a week, but they were like going deep on finance, then on, you know, chemistry, and then on life sciences. And he took the catalyst to say, like, why aren't we doing dinners? And anyway, we had this like playful, you know, experiment where we said, well, let's try a few of them. And then we did a big dinner towards the end of the year, and I think it was like 2007. Maybe 2006, 2006, it was actually my first year. And it was amazing, like time stood still. And we realized like-

• 6:33Ben Gilbert?

  Just the partners?

• 6:34Speaker 00

  No, we had four outside guests. Katerina Fake, Mike McHugh, Gideon Yu, and Martin Micos, if I'm not mistaken. And it was electric. And we came out of that, Bill had this habit, he'd always call me in the car after like, "What did you think of the dinner?" I'm like, "Ah, it was fun, but I want to go to bed." He's like, "Ah!" Alcohol had been served, people were in a-

• 6:59Ben Gilbert?

  Like it was his baby, he wanted to like, keep working on the concept?

• 7:02Speaker 00

  Well, we danced with this idea. And so the concept that I came to is that firms are full of strategies that aren't coupled to reality. And if you look at a venture firm, eventually it's just a collection of habits. And this is stealing from William James, who I think was the greatest American thinker. That, you know, we are nothing but an amalgamation of our habits. And habits sow character, they sow everything. So the idea that we should be nurturing curiosity, which is the essential lifeblood of the firm, needed a habit. And Mondays, as much as they're an attempt at that, you sit around the office and you joke around, you try and dive into topics, they're limited. And so the dynamic range of a dinner with, you know,

• 7:45Speaker 00

  an open-ended, no agenda, wild explorations of the most bizarre things your partners might be curious about. And I've definitely gotten a few, you know, rat holes with this group, and they pulled me out. You know, it just became one of those things that honored the purpose of the firm, which is the sense of like constantly learning and activating our curiosity. But, you know, collective effervescence of a group that we could never get in a one-on-one dinner. One of the challenges, which is being manifest right now, is that in a table, you know, where there's a head of the table, you can get a dominant participant in the dinner conversation. But the problem with the table is that you either have a rectangular structure, which carries power structure embedded in it,

• 8:28Speaker 00

  or you have a circular table which atomizes the group. And so I'd seen this table, The Seven, by Jean-Marie Massoud, who's a French designer. And it ran with the idea. Something would be organic that could expand and collapse, but most essentially destruct or deconstruct power centers and create a non-hierarchical construct with intimacy. But this table ends up being, Ole Lundberg designed it. We gave him, I gave him a hand sketch and he ran with it. And it's allowed Ole's lifestyle to meaningfully upgrade. Because the number of people with means that have sat at this table that decided they need a table just like this.

• 9:08Ben Gilbert?

  Well, the people you have at this table, just for listeners who don't understand the gravity of this dinner, it tends not to just be the five partners. You have pretty esteemed guests come to these.

• 9:17Speaker 00

  It's the spotlight of attention, which is the biggest gift you can give to another human being on an individual. And more often than not, it's somebody that we haven't worked with or invested in. And I think you guys might have mentioned this in the podcast, that we've had dinners with people like Dylan Field. And oh, you come away, you swept off your feet. You're like, why, this is why we exist, to serve people like that. Toby from Shopify. You know, Jeff Bezos has been, we travel to Jeff.

• 9:48Speaker 00

  Do you bring the table?

• 9:49Speaker 04

  Unfortunately, it's not portable.

• 9:51Ben Gilbert?

  The Dyna side, Seattle side, or LA?

• 9:54Speaker 00

  We've been in LA, we've been in Seattle.

• 9:57Speaker 04

  And I think you can tell just from, you can see the ethos of the firm in the structure of the table too, which is that you can't have a sidebar conversation at this table because everybody else can hear it. And so it's all one conversation. And that, you know, sort of coming from, from the outside and then being part of Benchmark, like the one conversation element of everything that we do on Mondays, so powerful. Because we're all tuned in on whatever's being discussed. And sometimes it's not great news. Sometimes it's good news. Sometimes it's tough news. Whatever it is, getting the whole group tuned in,

• 10:38Speaker 04

  I think is like, is the essential power of this structure. And I really like the table for that.

• 10:46David Rosenthal?

  I mean, I remember, I'll never forget, early in my venture career, when I was a venture capitalist, I remember an older partner taking me aside and saying, like, if you want to bring something up at the partner meeting, you need to have had a side conversation with everybody else before you bring it up at the table.

• 11:02Ben Gilbert?

  Which is so funny, because Bruce, when we were talking to Bruce Dunleavy, he was like, our one rule was no pre-selling a deal. Like, you can't walk around the hallway and say, like, hey, I'm super excited about this one later. Like, if you, you know, I think you'll be excited too. Like, vote for it.

• 11:17Speaker 05

  That's one of the great perks, especially for somebody who's come from another venture firm to benchmark. So you don't write a memo. And it's because the memo, you know, when you're, a memo really is a vehicle to, to, you know, obviously give background on a company, all the work you've done, but it is also a little bit a pre-sell before the company comes in to present.

• 11:40David Rosenthal?

  It's persuasion.

• 11:41Speaker 05

  Yeah. And so, you know, a lot of hours get consumed by the writing of it and the reading of others. And not to have, like, a founder come in then, and there's none of that. It's a blank sheet, and you just get to have the experience of the founder. It's a, it's a, it's a nice.

• 11:57Speaker 06

  Sarah uses this phrase, which is treat-seeking, which I think is a really good one, which is, it's like, yeah, does it, does the, is the company incredible? And does that company have a chance to be one of these few extraordinary companies every decade? And like, that's, that's actually all that matters. Like, that's all that matters for all of us. And if you find that, then you really don't need to sell it.

• 12:28Speaker 05

  Yeah.

• 12:30Speaker 06

  You don't need to sell it.

• 12:31Ben Gilbert?

  Do you have any sort of format of codifying your thinking? Because, like, memos serve the purpose of

• 12:38Ben Gilbert?

  Forcing you into clarity of thought in addition to creating a sales artifact. And so what things do you do in your partnership to gain clarity of thought?

• 12:48Speaker 04

  I would say the memo is a crutch often because yes, it can force you into clarity of thought, but it also allows you to fill in blanks that the entrepreneur themselves are not saying. And it pushes a sort of bias and perspective that maybe the firm has, or maybe you have a sector thesis and it's like, there's a lot of manifestation of ego when you put a memo together. Not having a memo does not replace work and does not replace the calls and does not replace the conversations. And what I find so amazing about our Monday discussions, when you're relaying the calls you have, relaying the notes you took on those calls,

• 13:29Speaker 04

  you're actually telling exactly what you've discovered without the overarching bias, without your ego pushing into it. You're not pushing anything into the firm. You're just saying like, this is what I've discovered. We all just heard from the entrepreneur. It either confirms their views and sort of like how they want to rove through this market, or we found some challenges. And so it's that sort of like, and I think you all mentioned it on your podcast, which is that when you talk to benchmark partners, it feels like we don't have some hard stop. We can just keep going.

• 14:00Ben Gilbert?

  Yeah.

• 14:00Speaker 04

  And that is the beauty of that Monday meeting, which is that we don't have a next topic to jump to. It's not like we're working through a list. And so we allow ourselves to have that open discussion.

• 14:10Speaker 06

  There's an agenda. You gotta go through the CRM and update the CRM. And if you haven't updated your CRM, you're gonna get.

• 14:18Speaker 02

  Negative points.

• 14:19Speaker 06

  Negative points.

• 14:20Speaker 04

  Yeah, like I don't see all these, all these calls logged into the CRM.

• 14:26Speaker 02

  I also think that like the artifacts, like they live in the memories and the lived stories of the partners. And so like, if there's a curiosity in that direction, call up Matt, call up each other, call up Matt, call up Bill.

• 14:42Speaker 02

  And so those learnings, those stories, that wisdom sort of still, still walks.

• 14:48Speaker 04

  And one of my first experiences, this unbounded agenda on a Monday was. I brought up.

• 14:54David Rosenthal?

  It's so uncomfortable.

• 14:57Speaker 05

  Actually, just before, like, you, you know that that's going to be what Monday is like coming when your first Monday.

• 15:04David Rosenthal?

  Cause four of the five of you were GPs at other firms.

• 15:07Speaker 04

  Yes.

• 15:07Speaker 05

  Yeah. Yeah, yeah.

• 15:08Speaker 04

  Yes.

• 15:09Speaker 05

  So we've all read you boys and like you talk to Bruce or whoever and this like just Monday has no agenda. I get that.

• 15:16Ben Gilbert?

  Like you can intellectually get.

• 15:17Speaker 05

  Yeah, you get it. And then I remember my first Monday and sorry, I interrupted you on your first Monday, but you sit there and you keep on waiting for like, well, when are we going to talk about pipeline or when are we going to talk about, you know, the portfolio updates, you know, and it like doesn't happen. And instead it's like these random roving conversations, but then, but then the, you know, the topic of substance will come out in a natural way.

• 15:41Ben Gilbert?

  You have to really enjoy being around each other in order for that to work.

• 15:46Speaker 05

  One of the things we didn't talk about for our dinners is like, we really, you know, you just, by getting to engage on these topics that aren't just the business of our day, you know, what we do every day, you just get to enjoy being together and then and you get to know each other in different dimensions, some of the stories that get told.

• 16:06David Rosenthal?

  Last week was a deep dive in psychedelics.

• 16:08Speaker 05

  Yes.

• 16:09David Rosenthal?

  For a deal or for?

• 16:12Ben Gilbert?

  Prepare for a deal.

• 16:17Ben Gilbert?

  Expansive money.

• 16:18Speaker 05

  There may be one, yes. But it is, it is, it is critical to then what happens on the Mondays and, and everything in between.

• 16:26David Rosenthal?

  What, so Sarah, you and Jason both mentioned, lack of structure, lack of memo is not a replacement for doing the work.

• 16:33Speaker 05

  Yeah.

• 16:33David Rosenthal?

  That I assume happens during the week. I'm curious, what does?

• 16:37Speaker 04

  And in the meeting itself.

• 16:38Speaker 05

  Mm hmm.

• 16:38Speaker 04

  There's no reason why we can't call somebody that we want to talk to when we're together.

• 16:42Speaker 05

  Yeah.

• 16:43David Rosenthal?

  Do you put them on speakerphone?

• 16:43Speaker 04

  Yeah. It's like, hey, you're on speaker with all of us. We have a couple of questions for you.

• 16:48David Rosenthal?

  What is it? How do entrepreneurs react when they get a call from the partnership?

• 16:51Ben Gilbert?

  Hey, it's Benchmark.

• 16:54Speaker 04

  Yes. No, I think it's it's surprising to everybody, whether it's entrepreneurs or whether it's like people that we call in the industry, we're just like, hey, we're all together. This question came up and we want to talk to you about it. It's like, oh, wow. Like, that's actual teamwork. Like, you're working together as a team. And I think you both have investigated the venture industry so much that sort of like all the stories that are told at Benchmark are all about the group going and accomplishing something. And there's a lot of like, we did this, we did that, and then this happened, and then we did this. And then I think broadly, the stories are natural in the industry naturally

• 17:34Speaker 04

  tend to be one person. Like, there's like, the venture capitalist is the hero. And the truth is, that's hardly the truth. And part of that is, all five of us deeply engaged on that and working as a team for that. And so, when you call somebody together, you're exercising that motion, you're exercising that muscle.

• 17:55David Rosenthal?

  So, one of the things we spent a bunch of time talking about on the first episode was what the psychology must be like, Ben and I speculating of being around this table here as a partner with you guys. And our thesis was that for a ordinary group of people, it would trend towards mediocrity. But if you have a cultural norm of, we are all bringing it all the time, then it trends towards greatness.

• 18:26Ben Gilbert?

  And why would it trend for mediocrity?

• 18:29David Rosenthal?

  Well, because it's the line that a bunch of other GPs said about Benchmark when it was getting started was, that's communist capitalism, and it's going to trend, it's going to end up like communism.

• 18:39Ben Gilbert?

  Right.

• 18:40David Rosenthal?

  But obviously, that is not the case here. I'm curious what that like feels like for you guys on a day-to-day, week-to-week basis, knowing we've got this partnership, this relationship, we spent all this time together. But obviously, we each need to like, really bring it.

• 18:56Speaker 06

  So, right before Sarah was joining.

• 19:00Speaker 06

  Do you remember this?

• 19:01Speaker 05

  Yeah, of course.

• 19:02Ben Gilbert?

  This is like six, five and a half, six years ago.

• 19:04Speaker 05

  Yeah.

• 19:05Speaker 06

  Something like that. So she texts me on a Saturday. She's like, do you, so it hadn't been announced. We hadn't, we hadn't decided anything like it was like we were, but we were close. And she's like, do you have time tomorrow? Okay.

• 19:22Speaker 06

  Um, and so anyways, we got brunch at the pub. And she's like, Eric, okay.

• 19:32Speaker 06

  What?

• 19:34Speaker 06

  What's our job at benchmark? Like this is, this is the three or whatever benchmark, like what? What is it? And I was like, Sarah?

• 19:45Speaker 06

  Job number one. Don't fuck it up.

• 19:50Ben Gilbert?

  No pressure.

• 19:51Speaker 06

  Don't fuck it up. Because I, I think there is a real risk that you, you could imagine a risk where you feel like you're born on third base or whatever the analogy you want to use is. And I think one of the things that you have to hope for is that every single person who you, you add feels like, hey, I'm in service of the entrepreneur and it's my job to find and work with and help. The next eBay, the next. Yeah, the next great, the next great entrepreneur and, and believe me, I wake up every fucking morning.

• 20:30Speaker 06

  Like,

• 20:32Speaker 06

  hungry. That I don't want to be the beginning of the end. Yeah. You want to contribute and.

• 20:41Ben Gilbert?

  Where does that come from for you personally? Why, why are you, because you don't have to.

• 20:45Speaker 06

  Because I'm a failed entrepreneur. I think that's, I, I think that really is, is it for me, which is I know what? I know how hard it is. Because I did it and failed. Did not live up to expectations. Did not live up to expectations and I started a company and it was really hard and it didn't work. And, um,

• 21:07Speaker 06

  And so I think you just like realize like how how difficult it is. There's a lot. There's so. The privilege of the job is there are people out there who are super smart, who have an idea that's often against the grain that want to change the world in some way. And, you know, the it's it's doing what you can to help them. And and so I think about that all the time. And and I think that is a that's a chip on your shoulder or whatever to to go prove.

• 21:46Speaker 00

  I that the they're different motivational systems.

• 21:50Speaker 06

  Yeah, fair enough, fair enough.

• 21:51Speaker 00

  I think some part of them, all of us, some of those motivational systems are fear based. Don't fuck it up. Some are joy based. And I remember saying to Bruce, we had a long conversation about, well, you know, you guys are moving on. I really don't want to. You know, I'm going to leave the firm in a better place than I joined. And it doesn't get to the core of your question, which is how do you maintain standards of excellence? Well, peer pressure is a really powerful mechanism in a lot of directions. So why why does it bend towards excellence? And I think we had this sort of insight that the joy you feel, the total, complete joy

• 22:32Speaker 00

  of working with a great entrepreneur is contagious, is energizing, is the lifeblood of it's the currency of our of our firm. And if we look up towards that, we can all recognize that Benchmark probably isn't going to be around in 30 years. And Bruce said to me, you don't need to keep me like benchmark. It's like, we didn't try and start this so it would outlive us. I mean, it was a sort of an accident.

• 22:58Speaker 06

  They didn't name the firm Benchmark, though.

• 23:00Speaker 00

  Indeed, they didn't attach Rego to its name, which I thought was a.

• 23:06Speaker 00

  Telling and you know, but the idea that this is ephemeral. And you said like, everything's ephemeral, like the structure, we don't have any institution, franchise, all those words make us nauseous because it's really the nature of the business we're in is that we want to destroy the incumbents. And I think we're collectively aligned around being anti authoritarian, destroy the incumbent. So the last thing you want to become-

• 23:32David Rosenthal?

  Which absolutely was the DNA of the founding of Benchmark. As we talked about in great detail.

• 23:35Speaker 00

  And so we want no part of this firm to become the incumbent. And so how do you do that? Violent rejuvenation with a common culture of collective joy in serving entrepreneurs. And if you stay true to that and ruthlessly true to it, then you fire yourself. Because there's a day where you realize, I will not give to the firm more than I take. And in the case of everyone who's left this firm, and I've never seen this in the history of investing, you study all these firms, every single partner fired themselves. And it was that ethic that was recursive and you feel it and it's intrinsic. And I think it's also partly because the minute you're in a position to be the incumbent, I'm the last man standing.

• 24:19Speaker 00

  I want my partners to destroy me. That's joy, which means I've succeeded. Now we're big limited partners. So that's, that's also joy.

• 24:30David Rosenthal?

  One thing I'm curious, what is the relationship of past Benchmark partners to this group? We talked about, one of the things I remember, you know, from the research and hearing Eric, you and Bill both talk about is with Cerebrus, we got to call Bruce, we got to call the old guys. Like, what is that relationship like for you five?

• 24:53Speaker 06

  I mean, the official relationship is their LPs. Like, that's the official relationship. Like, they're LPs with us, like other LPs. The, I think the more, the feeling relationship is like-

• 25:09Speaker 06

  There you call and they want to see you succeed for all the reasons Peter's talking about and and so they pick up the call and and help and put their network at work to to help you and they have a lot of insights and have seen a lot of stuff.

• 25:26Speaker 00

  I would say one way one shorthand, they feel more like uncles and aunts than they do like parents or grandparents.

• 25:34Speaker 06

  That's great. Yeah, that's perfect.

• 25:36Ben Gilbert?

  And for listeners who don't know, because I didn't know until Chathan just showed us, the Benchmark Partners, none of you have offices, like you all sit at this crazy round table, it looks like you're going to war and you're like, you're like, you know, trying to put the strategy up on the board and and like.

• 25:53Speaker 00

  You guys need a holodeck in the middle. We had a poop emoji so far.

• 25:58Ben Gilbert?

  Not officially a poop emoji, but just. But but you have like, there are aunts and uncles with computers over there, like there were not five computers, there were seven, eight, nine.

• 26:08Speaker 00

  We're getting rid of them. Not fast enough, but they'll be gone soon enough.

• 26:13Ben Gilbert?

  So, yeah, you're saying that's that's I shouldn't read into that, like they're here still.

• 26:19Speaker 00

  Our aunts and uncles, it's fine if they visit.

• 26:21Ben Gilbert?

  Yeah.

• 26:22Speaker 00

  But not stay too long. They can watch the kids every now and then, but like. Right, but as soon as there's a real problem, it's funny, because aunts and uncles say, here's your baby. And literally, that's what happens. Whoa, whoa, this is going to be hard work. Oh, no, no, no, no, you're the parents, I gotta go home. It's great being an aunt or an uncle, you know, I have five children and I can tell you, I should have learned that lesson, I love my children dearly, but my brother's in a good position.

• 26:47David Rosenthal?

  What, okay, so picking up on that theme, one of the things that I always have appreciated about you all, having done some co-investments in past lives and just your reputation in the industry, the hard work, what are examples of the hard work, like real examples?

• 27:08Ben Gilbert?

  We're gonna dish this to Chathan, because I know.

• 27:10David Rosenthal?

  Yeah, I know you have a story here, a very recent one. But like, the aunts and uncles are not gonna do, not gonna do anymore.

• 27:16Ben Gilbert?

  What are the ways in which you get put to work by your portfolio companies, Chathan?

• 27:22Speaker 06

  Well, this, this, Chathan, and part of the reason he's discombobulated and has a cold brew in front of him, for those of you who are watching the video at 5:00 PM, is he got off an international flight. Three hours ago, four hours ago.

• 27:39Speaker 02

  But was with us on Monday.

• 27:40Speaker 06

  Which was with us.

• 27:43Speaker 02

  Decided to go.

• 27:44Speaker 06

  It decided to go on Monday. And today's Wednesday. So here we are, 48 hours later.

• 27:51Speaker 04

  I'm doing great. I'm not just coming. Yeah, I'm not. I'm doing great.

• 27:55Ben Gilbert?

  So what are the circumstances that lead to you suddenly deciding that you need to be in Europe?

• 27:59Speaker 04

  I think this is a great story of, you know, how the firm and we as a group operate, which is, you know, there was a portfolio company that was going through an important decision. And, you know, there was, there was a decision that was made Friday morning. It felt like there was a finality to that decision. It was like, okay, this is what we're going to do. And then, you know, people go to the weekend, emotions rise up, they have conversations with their friends. And, you know, stuff starts to get off track. And I get a call, you know, Sunday night, it's just like,

• 28:39Speaker 04

  you know, things are getting off track. What do we do? And, you know, we're all on a group chat. And so I put it immediately in the group chat that says, here's what's going on. I'm looking for advice. It was late at night and Eric called me at 11 or 11:30 PM. And we talk for 30, 40 minutes where we're just walking through everything. And what was so incredible about that moment is when you're in it, it's really hard not to get wrapped up in the emotion and sort of stop thinking logically. And what was great about that conversation is Eric was able to zoom out and say, "Look, we're in the service of entrepreneurs. We only recommend and guide entrepreneurs.

• 29:25Speaker 04

  It's ultimately their company. It's their decision." And so what Eric said on the call is what I would do. Is and what I know you would do is

• 29:38Ben Gilbert?

  That's a good assumption.

• 29:41Speaker 04

  Is I know you, Nathan, would do this, right? Right? Yeah, which is, you know, if you were, if you weren't in the moment, you would, you would make the phone call and say, hey, this is your decision. I'm here and 100% supportive no matter what. And so we got off the phone. I made that phone call.

• 29:58Ben Gilbert?

  But also, here's what I think.

• 30:00Speaker 04

  Yeah, well, no, I think because you've gone through all of that.

• 30:03Speaker 06

  The thought had already, yeah, it had already been done.

• 30:04Speaker 04

  There is no more thinking.

• 30:06Speaker 06

  It's your call. We're a sounding board. You make the call.

• 30:09Speaker 04

  All the facts, all the reasoning, all of that had been laid out. There was no more logic and there was no more explanation required. It was, at this point, it was emotional. And, you know, after that conversation with Eric, I made a call. I just said, it's your company. That was Sunday night. This was Sunday night.

• 30:28Speaker 06

  Then Monday partner meeting.

• 30:29Speaker 04

  This is like midnight. I made the call. So you're all in the circle on Monday. And so we come in Monday morning, we're talking.

• 30:38Speaker 04

  And then at some point during the conversation, Peter said, this is not a conversation that should happen on the phone or on Zoom. It needs to happen in person.

• 30:48Speaker 04

  I was like, okay, let's do it. Okay, yeah. And then it's like, okay, I should get on a plane right now. And so here we go, like, time to go to San Francisco Airport. And then as I was leaving, Eric goes, are you going to come back for the quarantine?

• 31:06Speaker 04

  I was like, oh, yeah. Okay, don't worry. I'll find a way to get back.

• 31:08Ben Gilbert?

  Not only am I getting on a last minute flight to Europe, yeah.

• 31:11Speaker 04

  And you have to come back by a certain hour on Wednesday. And what transpired was as I was getting on the plane, that meant so much and set such a positive signal. That by the time I landed, everything had just like gotten in place. Like, I didn't say anything, I didn't do anything, just showing that level of support and commitment changed sort of like all the dynamics, which is like, hey, this is, oh, you actually meant what you said, that you're here to just support me and support us and support the team. And you're right, it is our decision. And, and that was it.

• 31:55Speaker 04

  It changed the tenor of the conversation completely.

• 31:59Speaker 02

  I would say it's like also broadly a manifestation of like the orientation to investing, right? Like, there's a lot of people who would say of investing, oh, like, we made this bet. Like, you might hear that word a bunch of times. Oh, like, well, it's a good bet, or it's a good risk-adjusted bet, or hopefully it'll be a good bet. And there's a, there's a very passive-

• 32:16Speaker 06

  I'd like to own that asset.

• 32:18Speaker 02

  Yeah, I'd like to own that asset. It's investment banker speak. It's a metaverse play. But it's sort of like pervades a very passive view of almost like trying to superforecast a set of odds, and you did the diligence to superforecast those odds. And like, we'll never, we never talk in, in that way. It's like, when we think about partnering with a founder, it's not, oh, we want to make a good bet. It's like, we want to make a commitment. And that commitment manifests like as a group, to be vulnerable and honest here and collectively get that feedback. And then with the, with the founders to be on the field, denting those odds, right? Each year, big years and, and even a couple of times at every year, there's, there's important moments where you can, you can tell, you can't transform necessarily, we're not saying we've got some silver bullet.

• 33:03Speaker 02

  But that commitment can really change the odds.

• 33:06Speaker 05

  You know, each of us make one or two of these commitments a year.

• 33:10Speaker 06

  Not bets.

• 33:10Speaker 05

  Right, they're not bets, they're, and there, there's a level of relationship that then happens with the founders because there's only one or two a year. And it's, and what you end up feeling is that you really just care about every company that you work with. And the founders and the teams and everything. And so when these moments happen, it's not a transactional thing of one of, you know, a lot of companies with which you work. It's, you know, a founder that you really work closely with, that you know so much about and that, you know, that level of support doesn't feel like something unusual for us to do. It's something that we, we just expect of ourselves and that's the relationship that we'll have with these teams.

• 33:54Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 34:08David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 34:22Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 34:32David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 34:50Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 35:06David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 35:23Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 35:32David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 35:43Ben Gilbert?

  Can I ask, and this may be drifting into an area that's harder to talk about. And so we can abstract it a little bit away. We talked about Uber on our episode, but I want to abstract it to how you think about this generally. The role of a general partner in a venture capital firm traditionally is that you have a fiduciary responsibility to your LPs to maximize their returns, and you have a second fiduciary responsibility when you join the board of a company to the company. And it's hairy enough trying to balance the trade-off, because sometimes those things are at odds. You're representing all shareholders on the company's side, and with your LPs, you're representing their interests. And so you then introduce this third thing, which is the thing you care the most about, which

• 36:26Ben Gilbert?

  is support of the founder and empowering the founder. When do those things get hard? How do you balance those things? I assume most of the time you're indexing strictly to we're partnering with this founder and we trust them. But when do you have to juggle those things?

• 36:45Speaker 00

  Yeah, I mean, it's... People go to therapy often, they only talk about the shit that's going wrong. And I think it's useful to think about what's going right. And if there's not a DSM for flourishing, there's a DSM for dysfunctions. We could open that book up and we can have all sorts of flavors of dysfunctional families. And I think we could do that, and that would be illustrative and informative about how it can go wrong. I would flip it and say, when it works well, what are the preconditions of where you have alignment? And then you look at degradations from that. I think one of the words that's sort of vital to any durable founder, benchmark, partner relationship is vulnerability. And

• 37:28Speaker 00

  if there's ever caution or pause of, I can't share this information with my... Then we've...

• 37:35Speaker 00

  Degradated the relationship and we have to fix that. And you fix trust is fixed intimately, one on one. You have conversations that allow you to zoom up to say, okay, what's the collective purpose? And I think that we could talk about Uber. We could, I have every reason to believe Travis's purpose was the biggest, most extraordinary Uber imaginable. Mm hmm. And, you know, we had a collective gaze on that together. And, and, and in many situations, this was one of them, pathologies creep in. And you learn this through a course of firm experience, which is when you start to see that happening, you need to act immediately. Because the minute we get othered, and it's not about us and this joint purpose, but

• 38:18Speaker 00

  it's you and me, it's my agenda and my LP's agenda and all that. And I sadly see that with a lot of the other firms in the industry, because it's not necessarily the partner in the room that's got the issue. It's their partners that have told them that they need to do this, or they need to that. And I see it, I'm like, oh, man, I adore you, but your partners I have different feelings about. And you're here trying to rattle, because they've said, why aren't we meeting our plan? And so the entrepreneur immediately, vulnerability snaps like that and it closes. And then you have no trust. And now they come to us typically and they say, we got a problem with one of our directors. I'm like, okay. So we'll, you know, we'll have an off sidebar with them and say, what's going on here? How can I help you with your partners? And as much as, you know, you look at situations where it falls apart, let me give you an

• 39:00Speaker 00

  inverse story, which is where it really only could work, I think, in this firm model. I was on the board of a company that wrecked somewhere between 200 to 300 million dollars of capital. And I'm pretty accountable. Now, I should be fired if this job actually had standards and governance and practices. And that company's called Docker. And I was just in Miami yesterday at their all hands meeting. And I remember the last- And when you invested, it was called Doc Cloud, right? Doc Cloud. So last time I did an all hands meeting at Docker was three years ago, and there were 60 employees that we'd spun out. Of the prior company and the valuation was zero. So we'd gone from over a billion, four billion, five to zero. And I was working with some of the great venture capitalists in the industry on that company.

• 39:43Speaker 00

  And aside from Insight Partners, crickets, gone, all left, bailed. And I think this is okay. What was different with Benchmark? Insights, another story.

• 39:55David Rosenthal?

  There's a very fun quote that we don't often talk about on the show. I don't think we ever talked about this on the show, but a very prominent firm has a, one of their mantra quotes is focus on your winners. And I think that's what you're talking about here.

• 40:07Speaker 00

  Yeah. And, well, at this point, it was, it was, it was a, it was a pretty big loser. And, but the vulnerability that I was able to have with the team that remained to say, we made mistakes, we're accountable to it. Here's how we worked through this. Because you know what? If you look up and the purpose of Docker, we're literally, this is cliche. It's the beginning. You know, we have 30 million developers that use this product every day.

• 40:30Ben Gilbert?

  Yeah, that's the craziest thing. Unbelievable product success that completely changed the industry, but like business model, business model and strategic failure, such that there wasn't effective value capture.

• 40:41Speaker 00

  There was value destruction, hundreds of millions of dollars of value destruction. My two partners, I came in and I said, I may be drinking my own bath water. I like, I don't know what to do here. I was really vulnerable. And I said, if I've gone off the deep end, no part of that truth-seeking exercise would allow me to spin, position, blame, be a victim. I was being accountable. And I said, like, what have I done? And they said, not only do we believe in this company, can we put it in the new fund too? And I thought, well, that's crazy. It's like, but you're right. If you believe, you have to have that founder level. Lewis joked, you know, employees can quit, founders can't unfound a company. And I think we feel that way in our commitments. We can't uncommit that founder permanence.

• 41:21Speaker 00

  And oftentimes it outlives every executive that gets recruited. Not every, but like a hyper majority of executives. And so this is a case of flourishing. And then that was a case of.

• 41:35Speaker 00

  You know, trust, all these things that come to stress, the LP's agenda, the founder's agenda, the company, it's not that hard. You just look up and say, what's the purpose of the company? Let's resolve around that and that'll sort the rest of this stuff out. It's the, you know, Bezos saying the long term, there really is no conflict, but creating, you know, delighting and allowing and Shareholder value. Yeah. Impressing the customer and creating shareholder value. Our customer isn't, it's not the founder. We say it is, but it's really the purpose of the founder. Yeah. And it turns out that purpose, if that's the customer. Yeah. One of us may be deviating from that and we can keep each other accountable and that happens internally. Like my partner said, no, the purpose of Docker is just the beginning. My God, is they're going to get developers to program the global computer?

• 42:17Speaker 00

  Okay. So then you could dust off $300 million of lost capital.

• 42:24David Rosenthal?

  So I want to do a big topic. We really wanted to cover with you guys in this session is staying focused on early stage, not having a growth fund, especially when your entire peer set has become lifecycle capital providers. And I actually think this is a good entry into it. So Peter, the story you just told of like when things are not going right, the benchmark approach, I'm actually really curious, when things are going right, your competitive set has said, when things are going right, we should go long. We are going to interpret that, I think in large part as a competitive response to you guys during the Fab Four era. We are going to become lifecycle capital providers. We're going to put a ton of money

• 43:10David Rosenthal?

  round after round after round into our best.

• 43:11Ben Gilbert?

  Wasn't in response to Benchmark. That was in response to there's a crap ton of fees to make on.

• 43:17Ben Gilbert?

  And the founders will keep taking our money and we have the brand with L E's.

• 43:23David Rosenthal?

  Yes.

• 43:23Ben Gilbert?

  That was like, Benchmark stayed so true to their thing that.

• 43:28David Rosenthal?

  Okay. I think there are three classes of firms. There's a class of firm that fit that.

• 43:31Ben Gilbert?

  Yeah.

• 43:32David Rosenthal?

  There's Benchmark. And then there's a class of firm that actually, we're making a strategic decision. We care about carry. We're playing for carry. We think we can.

• 43:40Speaker 00

  Hundred percent.

• 43:40David Rosenthal?

  Yeah. And those were valid decisions on that, their class. But you guys have not done that. Despite, I assume, every opportunity in the world to do so. Why?

• 43:52Ben Gilbert?

  Can we ask Miles? You were the newest to join.

• 43:55Speaker 00

  He's going to try and change that.

• 43:58Speaker 04

  Well, actually.

• 44:00David Rosenthal?

  This is a great point. To announce.

• 44:04Speaker 07

  Best mark, bro.

• 44:05David Rosenthal?

  We've got an even bigger dining room upstairs.

• 44:10David Rosenthal?

  How far can we stretch this triangle?

• 44:14Speaker 02

  Look, I think there is certainly all of those opportunities to do that.

• 44:22Speaker 02

  I think Sarah says it nicely in part, like, our job, we're really focused on how do we scale the company, those companies, right? And how, as part of that, having a relationship that doesn't get sort of adultered by this question of us making another commitment decision. It's like, we're in and we're not evaluating anymore. We're not deciding what a fair price is anymore. We're not trying to decide how to maybe make a strategic call with a company that optimizes for a moment for us to get more capital in. Like, there should be, we want to remove any chance of doubts or alternative incentives or questions in that relationship, right? So it can be fully vulnerable.

• 45:03Speaker 02

  And if we do that well, and we've partnered with ideas with great purpose and a long endless runway to work on, we'll scale, our success will scale through their success. And we don't need to scale ourselves, you know, independently of those companies scaling. And so I think we'll all, the beauty of being small is like, we'll all do perfectly well.

• 45:29David Rosenthal?

  But they're literally like million dollar bills on the ground for you to pick up if you were to just put more money in your own companies.

• 45:36Speaker 06

  I totally agree with Miles. And I would just add one thing is like, it doesn't feel like work if you love doing it. What do you love doing? And I think that's the biggest thing, which is if you love working with founders, then you want to spend your time working with founders.

• 46:00Speaker 06

  And that means you don't want to spend your time managing a staff that's scaling. You don't want to spend your time doing marketing to LPs or others. Like, you don't want to spend your time meeting investments that are outside of your purview. Like, it's just like, that's like, you want to spend your time with those founders. And I think that's, that's the, what do you love doing? And, and I think that's the biggest thing. I don't think there's any question that over the last few years, the growth investors have done extraordinarily well. Extraordinarily well. And there was millions of dollars to be picked up doing that.

• 46:45Speaker 06

  But, but I think the question of like, what do you love doing really resonates? And one thing that's super nice is, you know, the cycles turn and the strategy persists through cycles. And so I also don't worry about 100 million dollar holes.

• 47:00David Rosenthal?

  Right. And we were joking before we started, like, I would imagine when we're here eating dinner, you, you guys must be licking your chops right now. Like, this is your time to shine here in late 2022.

• 47:11Speaker 00

  Well, yeah. With the caveat that I think we sort of, because we're early stage, what does that mean? It's moved, it's in terms of its definition. We have faith that every year, some number above zero, companies will be founded that are going to be worth more than $10 billion. And then about every two or three years, a company is going to be founded that's going to be worth more than 100 billion. And it seems to be independent of the cycle. So, yeah, things get a little crazier when things are, and they get a little depressed. But the growth fund thing, I'll come back to answer it a little differently, which is that I would like this group, I guess I'm part of this group, to set a high watermark for a multiple on a fund.

• 47:54Speaker 00

  And I think it's kind of fun to think about, okay, it's great, you can scale capital. But, you know, if we had a 20x fund, can we get a fixed 50x fund? I'm not sure we can do that if we start, all we're doing, we're investing more money at late stages. We're lowering our returns. That's all we're doing because our commitment is fixed. It's not like we're going to be more committed. So. You could say we're getting more cash from cash. Yeah, but we're lowering our returns. And the hack of the venture business, which is coupling capital from other people and ourselves with the partnership that it comes with. I think it's a little more inflamed when you're stuffing large sums of money into a company as it gets, you know, as opposed to keeping it pure. And I will say, like, what would make me proud is if this team, maybe after I'm gone,

• 48:38Speaker 00

  you know, sets a new high watermark. They won't do that with a growth fund. And the rest of it, you know, it's like, should we care? That's cash flowing on. Yeah, but I also want to know with our limited partners, say, there's nothing like a benchmark fund. And when it works, it sets the pace in the industry. And so, you know.

• 48:54Speaker 02

  It's sort of like, there's the, there's the, what's the quote Sarah and I used with the team the other day, the Johnny Ive quote. Yeah. Of like, you know, what's focus? I was gonna say something. Right? Focus is when, in some ways, every bone in your body thinks an idea is a really good idea, but you don't do it. Yeah.

• 49:12Ben Gilbert?

  It's about saying no.

• 49:13Speaker 02

  And, and it's a fine idea. We would, I think, it's not to say we don't have opinions on later stage.

• 49:19Speaker 00

  If you guys had a billion dollar opportunity fund stapled to benchmark with the same team, you would for sure have good returns.

• 49:26Ben Gilbert?

  It would be one of the best growth funds in the industry.

• 49:29Speaker 02

  And we like to think so.

• 49:31Ben Gilbert?

  But that's not an interesting.

• 49:32Speaker 02

  If we're gonna do it. But I think to be able to have that focus, that, you know, a conversation on Monday and our time together on Monday is an hour of roving curiosity of like fertile ideas, the right at the edges that seem weird and bizarre.

• 49:47Speaker 00

  Because you gotta be weird.

• 49:49Speaker 02

  Instead of, instead of, instead of, okay, what's the growth pipeline? And, you know, is that a good valuation? Is now a good moment to sort of get in? And, and I think it's the, the focus is.

• 49:59Speaker 04

  And we'd have to have a CRM if we did a growth.

• 50:03Speaker 05

  Sorry, like that, it's, you know, for us, it is at the end, like, we're all here because we want to partner with founders as early as possible. In that kind of relationship on the board and anything, you know, to this Johnny I, you know, just the focus, like, like anything that distracts from that and we, we have five people, like

• 50:23David Rosenthal?

  This is it.

• 50:24Speaker 05

  This is it. And like, the capacity

• 50:28David Rosenthal?

  We gotta ask you about the principal program, but we'll come back to that.

• 50:30Speaker 05

  Yeah, but the capacity to take on more things would take away from our, you know, getting in the room with that founder who is going to build that next iconic company and supporting the ones that we have. And so we just, we're, we're forced in a way by the constraint of how many people, you know, the SEAL team of six people, never be more than that, to be ruthlessly focused. And that's, that's what, that's what we're here for.

• 50:55Ben Gilbert?

  That's super real. I mean, the, the, just to validate it, like, there's lots of opportunities that you can always pursue that seem like good ideas. And like, we have this struggle at acquired. We're two people.

• 51:06David Rosenthal?

  Oh, yeah, oh my God.

• 51:07Ben Gilbert?

  And, and, and there's a thing that we know is uniquely differentiating, which is these like ridiculous deep dive podcasts that are just us. And sometimes we have guests like, wonderful to be here. Thank you for doing this with us. But we know that the most differentiating thing that we do is this like

• 51:21David Rosenthal?

  Four hours on benchmark capital.

• 51:22Ben Gilbert?

  That just we can do. And every time we start taking on more stuff, I'm like, oh, man, the golden goose is getting worse. I can feel the golden goose getting worse because we're doing other stuff.

• 51:33David Rosenthal?

  You're really good about keeping us both honest on that, too. That's a

• 51:37Speaker 06

  It's funny that you use that phrase. In 2008, I was, this is the first time somebody said to me, you should consider venture capital. I didn't join benchmark until 2014, so 2008. And a very famous, nameless venture capitalist said, our early stage program is our golden goose.

• 52:05Speaker 02

  How much AUM does that famous venture capital have now?

• 52:09Speaker 00

  That early stage, that's everything that we do protects that golden

• 52:15David Rosenthal?

  Longtime listeners will probably know exactly what you're talking about.

• 52:20Ben Gilbert?

  So Peter, I just want to clarify something that you said. It's interesting. You defined the scoreboard as fund multiple and it's not total cash return to LPs. I think that's an interesting, like that's a clarifying mindset about the way that you guys look at this.

• 52:33Speaker 00

  I can tell you this, I think of it as an LP and the benchmark fund, of course, again, the purpose is not, we don't come show up and say, let's drive returns. It's, it would be alienating to everything we stand for to think of it that way. It's the outcome, right? Not the input. But I think the cash and cash multiple, both as an LP and it's a real problem for LPs. I will say, because we have large LPs who look at us and like, why do we waste our time with benchmarks? We're a tool and I say, oh, yes.

• 53:03David Rosenthal?

  Can you say the number of your largest LP, like what, what their dollar per fund?

• 53:08Speaker 00

  They're like 25, 30 million. I could get it wrong. I probably piss one of them off who listened to this.

• 53:14David Rosenthal?

  Listen, in the context of a Harvard or a Stanford, like that's nothing. That's barely worth their time. Right?

• 53:20Speaker 00

  It.

• 53:22Speaker 02

  Except for when we have high multiple.

• 53:25Speaker 05

  When it works, it matters. Some of our retired partners are our largest LPs.

• 53:31Speaker 00

  Indeed. And. Paying full fees. There are some discussions among some people in the firm that that over time is the way the model sort of endures is that the LPs become the former GPs. It's, anyway, it's not, it's hard, it's hard to say that the LP construction has much to do with anything of our day to day performance. I do think this idea though, of the principle of the firm being.

• 53:56Speaker 00

  Standards of asymmetry in our exposure to the volatile material of the startup. Asymmetry is a 20x, 50x, 100x fund. And if we degrade that, it sort of misses the point. You know, and I want this to be, I'm already, we're, many of us are this place where our, we pay crazy. As a GP, I pay carried interest and management fee to my fellow GPs as an LP. And that's, well, that's crazy. And this, this, this is-

• 54:27Ben Gilbert?

  Oh, you don't get like a GP allocation that doesn't-

• 54:30Speaker 00

  I get a tiny, in my view, tiny little- Now we expose the tension. But for the, for the super majority of my investment in Benchmark, I'm paying limited partner rates and management fee.

• 54:43Speaker 02

  But I would say that's where-

• 54:43Speaker 00

  It's not tax efficient. But this is the point. We have aunts and uncles. We don't have overlords that are there getting their bequeathed-

• 54:51Speaker 02

  To the point of equality, right? Like an equal partnership. Like that is, you know, taking it to, taking it to every extreme along the way.

• 54:59Speaker 06

  You never want the new partner to feel like they're working for Peter, in this case.

• 55:05David Rosenthal?

  Am I understanding this right? That the longer tenure you have as a Benchmark GP, the worse your economic deal gets?

• 55:13Speaker 00

  It's, it's the same.

• 55:14Speaker 06

  Wow, that's a horrible way to characterize it.

• 55:16David Rosenthal?

  As your LP commitment goes up and you're paying fees and carry on-

• 55:22Speaker 06

  You know what? I think the counter- What would Bruce- The Bruce counter argument, which I think is, is 100% right, is it, isn't the worst economic, it's not a worse economic arrangement because the returns will be higher. So you'd be happy to pay the fees.

• 55:40David Rosenthal?

  This is the Mike Muritz thesis of every successive generation of technology should be bigger outcomes.

• 55:46Speaker 00

  That's right.

• 55:47David Rosenthal?

  Because you're addressing bigger markets.

• 55:48Speaker 00

  I'll make it more simple. You cannot get allocation to the Benchmark funds. And so getting any allocation is going to be better than the alternative.

• 55:55Speaker 06

  You're happy to pay the fees.

• 55:57David Rosenthal?

  I see, I see.

• 55:58Speaker 06

  You're happy to pay the fees and carry because it works and it's still the best-

• 56:02David Rosenthal?

  I see. Your marginal economic deal goes down, but your aggregate economic deal gets better.

• 56:07Ben Gilbert?

  Your cash on cash, even though your multiple goes down, your cash on cash.

• 56:11Speaker 02

  You guys know more about this than we do.

• 56:14David Rosenthal?

  Well, we did spend a lot of time.

• 56:17Speaker 07

  We all learned from this.

• 56:20David Rosenthal?

  Okay, one more thing I want to say, because I think, I kind of think only we can say this, you can't really say this, on the strategy before we move on.

• 56:30David Rosenthal?

  I think one of the most persuasive things that we heard in our research for part one about maintaining the model is we definitely talked to entrepreneurs in the current benchmark portfolio who believe that aggregate in the long run, they took less dilution by having benchmark invest and you guys not having a growth fund and having to put more money into them, than they would have had you or whatever early-stage firm they had taken money from been wanting to put more money in in subsequent rounds. Because, just to connect the dots, if that had been the case, then you would be, have

• 57:11David Rosenthal?

  a conflict as that investor when things are going well to put more money in at a better advantaged valuation for yourself. And you don't have that conflict.

• 57:20Ben Gilbert?

  Versus, and what you actually have is quite the opposite. It's not even, because this happens all the time, where someone is an investor and they're like, ooh, this company's doing well, I'm going to preempt their round and I'm going to see if I can get a slightly lower basis than if they went to market. And so that's firm A. Firm B is a not benchmark firm who also doesn't have a growth fund. They go out and they raise at market rates. But then there is a benchmark brand. So like, option C is take benchmarks money. And I think, and you guys probably are sure of this, your companies tend to go raise better Series Bs at higher valuations with more certainty than your average Series A-funded startup. Is that the dot? Is that the picture that you're sort of?

• 58:01David Rosenthal?

  Yeah, I'm just speaking purely in the realm of when things are going right, a company is super hot. The fact that there's not a conflict in a future round allows the entrepreneur to optimize valuation for future rounds better than if you were to try and put more money in.

• 58:16Speaker 06

  Yeah, I totally believe that.

• 58:17Ben Gilbert?

  So this is a question, are we just selling for benchmarks?

• 58:19David Rosenthal?

  That's, yeah. I didn't think they would say it, but I think it's important. We literally heard that from multiple entrepreneurs.

• 58:24Speaker 06

  I believe that the founders own more of their companies at exit, at S1 time, whatever it is, in this case, for those reasons. And one other really important reason, which is...

• 58:41Speaker 06

  A founder is going to raise a series B or series C or series D or IPO one time in their career, maybe two times in their career.

• 58:49David Rosenthal?

  Yep.

• 58:50Speaker 06

  If we're doing our jobs and the people around this table have all done this multiple times. And you will help them raise better rounds from better investors, have a better process, and get to a better outcome.

• 59:08David Rosenthal?

  You'd have to talk to the entrepreneurs that I've invested in, but I suspect if you were to talk to them, the value that I can provide to them, since I stopped being a professional venture capitalist as part of a firm, exponentially higher than when I was within a firm.

• 59:24Speaker 06

  Totally.

• 59:24David Rosenthal?

  Like, because there's no conflict.

• 59:26Speaker 06

  Because there's no conflict.

• 59:29Speaker 06

  And you can do that. You can do that. You can help them through that, that part. And that outcome results in de-risked, like, the subsequent rounds are de-risked, sure. There's, I think there are a bunch of brands, firms that can say that same thing. There's no conflict. I think there's very few firms that can say that part. And the multiplicative effect of those two, plus the help, I think, should yield better outcomes.

• 1:00:02Ben Gilbert?

  Strategy is just all about making trade-offs and aligning all of your trade-offs so that they're a force multiplier rather than in conflict with each other. And if I had to sort of summarize why Benchmark works, it seems like every, all the trade-offs are actually just thought through very clearly and tried to align them all so they sort of like, they play well, amplify each other rather than conflicting with each other.

• 1:00:25Speaker 05

  There is one big trade-off with our model, though, that I think about all the time just because I'm a paranoid person, which is, at the end of the day, like, Our job starts, like the thing that we have to be paranoid about every day is, how do we make sure we have that first meeting with the founder that's going to build that next iconic company? Right? And so much of what we do is about maximizing that probability that we do get to meet that founder and then end up partnering with them. And a lot of firms, I mean, all the other firms outside of us have built machines around that, you know, you have legions of people at these firms. I grew up doing this. I was, you know, an analyst at Bessemer.

• 1:01:09David Rosenthal?

  Right, at college, right?

• 1:01:10Speaker 05

  Cold call startups, yeah. And so you have all these firms who have built these big teams to do that. They nurture relationships with seed funds, invest in the seed funds, relationships with angel investors, incubators, like they have this machinery that's smart. Because it's all about making sure that every deal, every round that happens, they're going to be in the mix.

• 1:01:34Speaker 05

  We, there's five of us, you know? And there's always the risk that like a founder, that one of those founders who, you know, kind of mistake basically our, our lack of outreach for a lack of interest, when it's really just a constraint. And we do everything we can, of course, like it's not like we're just resting on our laurels and waiting for calls. We're doing everything we can to make sure that we are in the mix. But at the same time, we are limited.

• 1:02:02David Rosenthal?

  Even if you work 24/7, you still have a lot less hours.

• 1:02:04Speaker 05

  We're limited. And so that is, that's the, that is the big constraint that I know keeps, keeps, I think, all of us up. You know, just making sure, how do we, the founder that is going to raise that round, you know, many are intentional about like, how do I make sure that I'm going to find the right partner for me for the arc of this, you know, the journey that we're all going to be on together, but we're still not there.

• 1:02:28David Rosenthal?

  You know, you guys at this point have such a, for better or worse, mystique.

• 1:02:32Speaker 05

  Yeah.

• 1:02:32David Rosenthal?

  I think for a lot of, especially first time founders that are younger, that are earlier stage, they're probably like, oh, I'm not going to call, I've got these other firms calling me, that's great, I'm going to go with, but like, am I going to call Benchmark? Like, that seems like, wow, that's a lot of pressure.

• 1:02:47Speaker 00

  And that's, that's, um.

• 1:02:50Speaker 00

  That's a potentially lethal risk for us, right? Hundred percent. Because if you think about us being the incumbent and come back to the fact that like, you know, a number of the people at this table have a lot of capacity in the sense that they could dive in, they can give their all and they're very available. And so one of the things you think about is the shift in the last 15 years since I've been here, you know, the investments that are occurring before we get engaged have gone up by about a, I don't know, 100x, at least 30x. And so I mean, seed was not an asset class. Seed wasn't an asset. I thought, I didn't know I was a seed investor, but I guess I was a seed investor. About a third of what I've done is like formation of a company investments, right? And so when, it's so weird when people say to us, I didn't think you were at this early stage, because then some people say You're like, new relic was incubated in our office.

• 1:03:35Speaker 00

  Yeah, and it's like, what, you know, okay. I think our challenge, and I think you say it well, is that I would love to know, which is why if someone sends us something and anybody who listens to your podcast, but I start with the premise emphatic, yes, let's meet. Because I have always, will create time as much as it may impact week, when I don't have enough time to take that next marginal meeting, I shouldn't be practicing. And what I would love to know is that people who send it to us say, this is the biggest favor I can do to this entrepreneur is to open this door because the gold plated, whatever terms you want to use, high quality experience they're going to get, it's going to stretch their thinking. And there's so many times when someone comes back, even when we don't say yes and say,

• 1:04:17Speaker 00

  I'm so glad we met because I learned something that really helped shape the course of the company. And so the point of this is that our competitors, if we call them that, there are peers most of the time, have tried to build vertical systems, which is to say, integrate into the very inception of the company, all the way through to the last drip of capital going in as they go, you know, off of the whatever. From seed to IPO and beyond. And sounds familiar to me. Seed to grave. Yeah. And one of the, one of the strategic vulnerabilities we have is that, that people tell stories that we're this way or they're that way. No, we're just like everybody else, but we're highly available to meet and we're quite responsive. And the last two or three investments I've made are an example of the following, which

• 1:05:02Speaker 00

  is that there's, there was an angel in the ecosystem who saw a deal going down and they said, you know, you probably should talk to Benchmark. And when they did, we committed in the last two instances in less than a day. Oh, if we knew it was only a day, we would have talked about it. Then you would have taken a week if you had more. But this is illustrative because the system we built is to do just that. And so our biggest risk is that people tell stories. And I think sometimes those stories are propagating their agendas. We're widely available and open. We're most times an emphatic yes for someone who introduces something to us. And what we'd love to know is the person who makes the introduction, and we honor this, says, wow, I just did a huge favor for the founder. Now, we have to earn that every single time we meet the founder. Every meeting.

• 1:05:47Speaker 00

  And we don't always get it right. We've screwed up in the past. We've been less than fully present. Okay, we take that seriously. But that's the vulnerability of the model, which is that capital always carries its agenda. Oh, let me tell you about the way we're this, we're that. And it's like, and it's always threatening and attacking other layers. And like, we're hoping that we play a different game, which is like, you know, serving the founder's purpose and like, show up and be decisive less than a day. That's pretty common.

• 1:06:13Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:06:26David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:06:43Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:06:58David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:07:22Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:07:41David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:08:11Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you.

• 1:08:36David Rosenthal?

  What do you do besides the five of your 24/7 being on? What things do you do to keep your radar operating to try and address? How do you solve that problem?

• 1:08:49Speaker 05

  We all have different ways. I mean, it's, you know, there is no single way for us, I would say. I mean, I like, I always talk about having an air game and a ground game, you know? And for me, like I, you know, it helps me learn to write. And then, you know, you write about things like areas that you're interested in. And it tends to be, it's kind of virtuous loop also of then the founders who are thinking about, you know, building a marketplace or a next, you know, social product, a social network will see something that I wrote or Bill wrote or whoever wrote and then kind of come into the fold that way. And then there's, I mean, I think like you have the, the consumer, you know, the consumer lens that you have, you have a little bit of a wider.

• 1:09:34Speaker 05

  Funnel that you have to kind of keep you there's you never know where these things are going to come from. There's so many different domains where the next consumer company might come. I think like the B two B stuff, the developer oriented companies are closer to the ground.

• 1:09:48Speaker 04

  Yeah, I think we all have our own strategies. And I would say the one thing that's always interesting is to compare sort of our different strategies of sourcing and how investments, how we source investments. I was sharing this note internally, which was that I found that 100% of the investments that I've made as a benchmark partner were all sent to us by an entrepreneur. And not necessarily an entrepreneur that we had backed. It was oftentimes an entrepreneur who had met with us once or twice, or we engaged in their process and we didn't get to the finish line with them. But they enjoyed the process so much, going back to what Peter said, is they went to the next entrepreneur and said, you should go to the process.

• 1:10:32Speaker 04

  Like, just talk to them.

• 1:10:33Speaker 06

  That's the most meaningful introduction we can get.

• 1:10:37Speaker 04

  Yeah.

• 1:10:37Speaker 06

  That carries so much weight. You have them to one of these dinners.

• 1:10:44Speaker 02

  But I would say, I think it's in part because like, there isn't really like a process. Like, you know, like, if there's diligence, people like oftentimes founders will ask, well, what's your process?

• 1:10:55Ben Gilbert?

  It's the funniest question.

• 1:10:56Speaker 02

  I don't know, like, we're just, we're going to explore this together and we'll do a chat together.

• 1:11:05Speaker 02

  I think to what Sarah said.

• 1:11:06Speaker 06

  So what you're saying, it's like the Elon Musk's tweets.

• 1:11:09Speaker 02

  Yes, it's exactly like that. Let's just text back and forth a bit. What did you do today?

• 1:11:15Ben Gilbert?

  But to frame it like more precisely, so for founders who are like, I don't, what does that mean? You do as much diligence as you need to do to get conviction.

• 1:11:24Speaker 02

  Yeah, and I would say, I think of it, the experience hopefully is great for the founders in part because we're not trying to sell internally, we're trying to truth seek. And the coming in, meeting with all of us or meeting in small groups of us is not us like trying to get some information, again, to like such super forecast and odds. It's to, we're putting ourselves in the shoes, because we made the commitment to start working on this and work together to say, Okay, how will we think about navigating that? Like, where could sort of, you know, false starts or, you know, local maximas be? And how could we realize the full purpose? And that comes with dynamic sharing of stories and history and learnings from the past.

• 1:12:09Speaker 02

  And I think you find, hopefully, that's sort of leads to a lot of the introductions and come out of that is in part because it was, it was sort of this reverberation of discussion around the potential that they had and how to navigate that correctly. And they got an interesting view on their own business together. And that's

• 1:12:27Speaker 06

  I think the best founders ask questions on these things. And so like, one of the things that, that I've noticed is like, the great founders will often use their fundraising process to get connections and introductions. And, you know, sometimes it's customer introductions, sometimes it's, sometimes it's just like luminaries, like people, connections to people who've been there before you. We just went through this process on a recent investment and we introduced the founder to other CEOs who were further along. And she extracted knowledge basically from them and, and not in a, in a reference context, but in a literally like, how do you build the company?

• 1:13:12Speaker 06

  How did you make this decision? How did you know when you had product market fit? How did you raise the next round? And, and, and pulled and build connections that way. And I think, I think that's a sign of

• 1:13:24Ben Gilbert?

  That's what it's like whenever you meet with someone who's worked at Amazon for a long time. It's like scary. You sit there and they're silent and they manage to just extract all this information from you.

• 1:13:32Speaker 05

  But you know, you said like, our process is as long as it is for us to get conviction. But actually, I think it's really important that it's a process of gain conviction on each other. And, and that should be

• 1:13:45Speaker 06

  The greatest partner.

• 1:13:45Speaker 05

  Part of it is like, this is, you know, I, like, one of the things that makes me sad about kind of some of the conversation in the industry is this like, Like, just the idea that a board member is just somebody who shows up. It's kind of like, it feels like that's what everybody's been reduced to. And we hold a higher bar for ourselves. Like, we, we, you know, try to have that level of commitment that ends up manifesting in all different ways for the company, whether it's helping close, like, an IC engineer, or, you know, whatever, you know, having those, like, late-night conversations, or whatever it is, like, that is, in the best form, can be a really meaningful relationship for the founder,

• 1:14:30Speaker 05

  and for the company, from the very beginning. And a founder should realize that that is, like, you know, of course, you get into the, the anxiety and the stress of, am I gonna get funded? What are the terms gonna be? All those things, I wanna get back to building my business, all that. But at the end of the day, it is this relationship that you're beginning. And it's really important for the founder to recognize also that they are getting conviction through the process on what it's gonna be like to partner with that person.

• 1:15:01Speaker 02

  There's this trope in the industry, right? Which is, you wanna be the founder's first call. And it's like, I've never really liked it insofar as it's, like, very reactionary. It's like, oh, they'll call me, I'll pick up the phone and, and respond. It's a low bar. I think it's a, it's a low bar. And I think that, hopefully, founders would say of us, like, we're, we're their best caller. Like, they've, they've been proactive and had the space and thoughtfulness and context and trust to be able to do that. I remember when, when Peter and I worked on Airtable, not, pretty recently, pretty, uh, close to the, the initial investment, um, right after it had happened. Peter, you could imagine it was a decently high price in some ways, like, a high multiple, you know, okay, let's press sales, whatever.

• 1:15:46Speaker 02

  And Peter, Peter came in and, and was proactively sort of shattering the frame and saying, let's give away more for free, right? Like, why, why constrain this and squeeze juice from what we have? Or, let's unfurl this even further. It's a database at the end of the day. Why would you constrain people putting stuff in a database? There's so much that happens on top of that.

• 1:16:06Ben Gilbert?

  As you're evaluating mutual fit on an investment, uh, between the entrepreneur and benchmark? You know, in e-boys, there's some famous line about venture capital is more a balls business than a brains business. And like, let's stop using that phrase immediately.

• 1:16:22David Rosenthal?

  But it's so e-boys.

• 1:16:25David Rosenthal?

  It's the most e-boys thing ever.

• 1:16:27Ben Gilbert?

  It seems to me Benchmark has shifted to become much more analytical over time. Do you think about that? Do you think about what the right balance of, you know, gut feel and courage versus?

• 1:16:38Speaker 04

  Having done analytical things, I would disagree with that completely. I would say that we're not particularly analytical and...

• 1:16:46David Rosenthal?

  So it still occurs more than a brains business?

• 1:16:48Speaker 04

  No, I think it's, it's, it's very like gut-driven. And it's like, it's, I would characterize it as like, it's a set of discussions that you have that resonate or don't resonate. And it's like, I really want to commit to this and this puzzle for the next 10 years. And let's go do it. And there's going to be a lot of like fulfillment here. And if everything works and we serve that great purpose that we're all aiming for, then the financial returns are going to be excellent. But there's no sort of like outcome scenario analysis here that says like, here's the 10% upside, bull case, bear case. These are all things that, you know, those of us that came from other places had all done. And one of the

• 1:17:27Speaker 04

  interesting things is, you know, watching the firm externally and seeing how this works inside of boardrooms, like Miles just talked about an example. You know, I was on a board with Peter for a long time before I joined here.

• 1:17:41Ben Gilbert?

  And was it elastic?

• 1:17:43Speaker 04

  Yeah, that's right. And one of the things that, because I was on a number of boards and I would see all sorts of board members. And one of the things that stood out to me that I aspired to, and I modeled a lot of my behavior after, was every board meeting, the amount of preparation that Peter would do ahead of the meeting. I mean, he was by far the best prepared board member I had ever worked with, ever. And the number of discussions he would have, the number of calls he would make, and just how present he was in the board meeting itself, was just so far and above like any other board member that I'd worked with. I was like, I need to model my behavior to that because that is the model board member. And...

• 1:18:28Speaker 04

  I don't think that work, that dedication, that commitment comes from any sort of analytical work you do on the macro, because if you do, then you start getting tied to your own biases and never let the company, the founder, the team breathe, because there may be a thesis, but you rapidly pivot to something else because it's working or you're getting different signal. And so I think that there's so much of this that is just instinct, gut feeling, emotion, commitment, et cetera, et cetera, but it's not analytical.

• 1:19:02Speaker 06

  I think most of the investments we make differs consumer, enterprise, marketplace, like all of them are different in different ways. There's just very little data to analyze, period.

• 1:19:12Ben Gilbert?

  But when you're looking at something that's like a consumer social app that seems to be catching fire, like there are things you can know, like viral coefficient, or like how, you know, week over week growth.

• 1:19:23Speaker 06

  A lot of those things will lead you the wrong way.

• 1:19:26Speaker 05

  You know, the truth is in this market, oftentimes you're making a commitment before there's enough enduring data to really know, know what it is, but the way I

• 1:19:36David Rosenthal?

  Which is different than 10 years ago.

• 1:19:37Speaker 05

  Which is very different.

• 1:19:38David Rosenthal?

  10 years ago, benchmark was making commitments when there was like Uber, like Instagram, like it was early, but there was data proving that like.

• 1:19:44Speaker 05

  I think, I think of it more as like, I always think, you know, in a way to make great investments, you have to be okay looking crazy, maybe even stupid in the short term on the outside, like, and then, but it comes from a place of deep conviction when you're, when you're in front of the entrepreneur and they have, they see something that other people don't see, you feel it too, and nobody else who hasn't had that conversation sees it. And, and so from the outside, and you see all the time, like it could be, people always critique other people's, you know, investments, like, oh, I can't believe that person did this. I can't, you know.

• 1:20:24Ben Gilbert?

  I looked at that deal and that's

• 1:20:25Speaker 05

  Yeah, exactly. Well, I remember when we, when we invested in Chainalysis, it was when all these ICOs

• 1:20:31David Rosenthal?

  Which was your first deal here, right?

• 1:20:31Speaker 05

  Yes. It was when all ICOs were going crazy. Everybody was thinking about tokens and Two people I remember calling me after we announced it was like, you invested in a like a SaaS company like shouldn't you be putting the money in tokens or like

• 1:20:47Speaker 00

  They're going to the moon, what are you doing?

• 1:20:48Speaker 05

  And you know, not wrong, but also not right. Like it looked like, you know, a stupid investment in the beginning before it can have the room. And so I think part of the relationship that we then have with each other is that comfort that something, you know, seeing something that can be contrarian or misunderstood from the outside and you have to nurture that.

• 1:21:10Speaker 00

  One benchmark, no pun intended, I guess, one measure of quality for the firm will be how good our failures are. Webvan was a really good failure. We talked about this a lot. Webvan was awesome. You should make that bet a thousand times over. The shame that most venture capitalists felt towards, maybe contempt towards the venture firm just before I was here and it's laughable, it's stupid. And if we start to look like we're, we should probably get worried about the long-term degradation of, eventually we go away, so it all doesn't matter. But I would love for us to be, I think we pulled it off in the last fund or two. Does that include Fund Seven?

• 1:21:51Speaker 00

  A real stinkers that I did honor the fact that we are still just as gullible, just as naive and fallible as the prior generations. Not yet more so, but we're working at it.

• 1:22:04Speaker 06

  I think some of those are really like, that's a good, Webvan is a good venture investment.

• 1:22:10Speaker 00

  Great.

• 1:22:11Speaker 06

  And I think there are a set of them, I think of them in my head in recent funds where like, it's definitely a good venture investment. It was a good use of venture capital dollars. It was a worthwhile endeavor. An entrepreneur pursuing that should get funded and they should get funded by the best and they should have, we should do everything we can to give them the best odds of success.

• 1:22:37Speaker 00

  And have another partner be on the board.

• 1:22:45Speaker 04

  And I think that if you just look at, you know, the last, yeah, I joined right before our ninth fund. And so I've been here through Fund Nine and we're now deploying Fund Ten. There's a lot in there that that wasn't. I mean, most of it is not analytical. And I would say like, if you just look into it, you know, there are going to be some bad investments that come out of it. But it doesn't mean that had we gone through the process and we look back at how we made those decisions. It's exactly what Eric was talking about. It's, that was worth the shot. It was like, that was worth the effort.

• 1:23:20Ben Gilbert?

  Well, and the pivots validate why you can't be super analytical. It's like, did you think that the game was gonna be? Discord. You guys are the best pivot. Like multi-billion. Discord, Nextdoor. Docker. As a business model. It's like Uber. I mean, like, learning from Lyft's discovery of the Uber X model. Like, that's the business.

• 1:23:39Speaker 02

  Okay. I think it's like you have some starting theories and you get, you get in the mud.

• 1:23:43Ben Gilbert?

  Yeah. It was always funny reading my old investment memos, and I've only been doing this four or five years, but like, the amount of wrong, like, I don't think I could have predicted how wrong I was about what the businesses would ultimately go on to do when you're doing this ridiculously early-stage stuff.

• 1:23:59Speaker 02

  Hundred percent. That's why we don't write memos.

• 1:24:01Speaker 00

  Yeah. There's no, no artifacts of how stupid you are. We don't, we don't do portfolio reviews. At least they, they try and do portfolio reviews and I, and I don't show up. So, I do remember one attempt at a portfolio review a while back, and it was like, the apex of failure at Benchmark. And, you know, I think I have one of those in my portfolio now. You guys can guess. And Kevin Harvey said, "This one has the dual benefit of being a bad idea poorly executed." It turns out that a bad idea well-executed is a problem, because then you give it more money. But, or a good idea poorly executed, well, that hurts because you think, oh, I mean, we can think of companies like Friendster and think, oh.

• 1:24:45Speaker 00

  But the bad idea poorly executed is higher. It's so true. Those are the second-best investments in venture, like, that clearly that was wrong. It's the middle ones that are...

• 1:24:52David Rosenthal?

  Hundred percent. Seven's kill companies.

• 1:24:54Speaker 00

  I love, I love Norm MacDonald's joke, where he was like, trying to explain the fact, when you get in front of, you're doing a stand-up, and Bless is already died, of course, and nobody laughs. And he says, "Then I start laughing to myself." It's like, here I am, these people have paid money, it's a whole thing, and I just did this thing just to make them laugh, and nobody laughed. And then we have a few of those. If we're not doing that... That was the early days of Aquanet. If we're not doing that, then, like, he'll never be great.

• 1:25:19Ben Gilbert?

  Can I ask, I had a really dumb question prepared that we sent over and I want to try and ask a smarter question. The dumb question was, well, to maximize your chances of getting that, you know, great decade-making company in the portfolio, double the partnership, keep the same number of board seats, raise twice as much money, double the partnership. That way, everyone's managing the same amount of capital that they are now on an average basis. But I would ask the opposite question. If the thing that makes this all work is the fact that all of you can be ridiculously focused and say no to most distractions on your time, could you raise less money and have a more concentrated portfolio?

• 1:25:54Speaker 00

  I've thought about this and I think it's an interesting provocation. There's the extreme, of course, which is to raise no money. And just go on the boards and say, we're tired of the hack. It's a hack to take. I'm gonna, I mean, tell this is a funny story because you say, okay, oh, it's nice to meet you. It's imagined dating and then you have a relationship. And it's like, by the way, a bunch of people that you don't, you and I, I don't really know them very well. You definitely don't know them, they're gonna be moving in and they're gonna take up about 20% of your cap table. And they're pension funds, they're very decent people and they're...

• 1:26:30Ben Gilbert?

  Noble causes.

• 1:26:30Speaker 00

  We do work for noble causes. Why are they on my cap table? And it's like, because you gotta work with me. Like, but I didn't choose them. Well, you kinda did because I bring them along wherever I go. And they're unpacking their stuff right now in your basement and they're gonna have more equity in this company than your VP of Sales or your VP of Engineering. Well, that doesn't seem right. And so, you play with this idea and as an LPN benchmark, I don't like, you know, there's a limit to where you're gonna take this idea.

• 1:26:57Ben Gilbert?

  GP, I think.

• 1:26:59Speaker 00

  As a GP, yeah. But I think this interesting construct is that what's the residual value that is separable from the capital? Bruce used to joke, we can pay a higher price because we add more value. So, isn't there a benchmark discount? I don't think you pay a lower price. But we can afford to pay a higher price and get better returns if we add more value. It's a joke, but the point is the same, which is that we've confused these two things. Capital, which seems to have been free, now it's not free. Okay, so now they're maybe are fused again in capital and partnership. And I think that...

• 1:27:36David Rosenthal?

  You guys have done some deals where you put no capital in.

• 1:27:39Speaker 00

  There have been examples and we're, we don't, there's some awkwardness to talking about it publicly. One of the ones is probably a good example is Tinder.

• 1:27:46David Rosenthal?

  Yeah.

• 1:27:47Speaker 00

  And, you know, Barry Diller said, what do you want? And it's like, well, we want equity in Tinder.

• 1:27:53David Rosenthal?

  He was like, shut up. What do you want?

• 1:27:56Speaker 00

  We want equity in Tinder. And like, I said, I don't need cash. It's like.

• 1:27:59David Rosenthal?

  I'm just imagining being the fly on the wall of Benchmark negotiating with Barry Diller. That must have just like, I would, I would pay a lot of money to watch that.

• 1:28:08Speaker 00

  It's, it's, it's more bizarre than your imagination can allow. So go there and then go past that and you'll get close. So this, this question of like, can we decouple is something that I kind of look at as like the residual value of the firm is are we, are we generating multiple equity points for our contribution? I think that's what I would love to know is our best reference, which is if founders are able to say, I look at my cap table and I look at where the equity went. And this is what burns me, which is there's a lot of people on that cap table, they'll say, they bought a ticket, you know, they were in the, they got a ticket. Versus they made a huge impact on our total success.

• 1:28:53Speaker 00

  And, and that's equity that was the best return on my allocation of that equity. And every time you're taking on, on Delucia and you're asking that question of like, what's the return on that, on that allocation? I think a lot of times the return is like, it's a hundred percent towards the person who got on the cap table, not the other way around. And, and that's our ethic. And maybe there'll be a model where we're not going to be CAA where we take 10% and all that. But, you know, the capital light, you couldn't raise less. Why not?

• 1:29:16Ben Gilbert?

  I bet if you raised 400 million in your next fund and you have five fewer companies, your scoreboard number, that multiple could go up.

• 1:29:24Speaker 00

  I'm the person that the last discussion of like, we were going to do at the same size fund. I'm like, why don't we cut it in half? And people that, well, then people, others will say we're becoming irrelevant. I'm like, ah, no, but.

• 1:29:32Ben Gilbert?

  Oh, it's just so different than they say now.

• 1:29:35Speaker 00

  Anyway, we might one day. Who knows?

• 1:29:38Speaker 04

  Instead of 425, go down to 200.

• 1:29:41Speaker 00

  Yeah.

• 1:29:42David Rosenthal?

  Okay.

• 1:29:43Speaker 00

  Go to 40. Was it 40 per partner per year?

• 1:29:47David Rosenthal?

  Oh, the own Benchmark website.

• 1:29:49Ben Gilbert?

  That was such a good line. Other firms are overfunded with over 20 million per partner of capital.

• 1:29:55David Rosenthal?

  The layback machine is such a gift to humanity.

• 1:30:00David Rosenthal?

  The, um, okay. So last big topic.

• 1:30:04David Rosenthal?

  I think a lot of folks, we asked a lot of folks in the ecosystem, what do they want us to ask you? We're the vehicle for that. Universally, everybody responded. They want to know, what is the process? What's involved? How do you think about who's taking the next seats at this table? So how does that work here?

• 1:30:28Speaker 02

  I think it's like 250 hours of board meetings together.

• 1:30:33Speaker 04

  It's a 10-year-long process. You have to serve on the board with one of us. We have to watch you grow. And then we say, you know, that person would be pretty good here.

• 1:30:41Speaker 02

  You think Mitch was an exception, Bill? And Mitch had, you know, 200 hours of board meetings together, maybe?

• 1:30:48David Rosenthal?

  Eric, you didn't have any, you're the only one who didn't have any.

• 1:30:51Speaker 02

  I was just joking.

• 1:30:52David Rosenthal?

  No, no, no, I know. But literally, that seems to be the model of like, serve on a board with a benchmark partner.

• 1:30:57Ben Gilbert?

  And that's how you get to know people and build really deep relationships, is you need to go through shit together. Like, I mean, the shit can be, the company is going really well and we have to react to a super dynamic environment. But like, getting coffee every once in a while is not a great way to get to know, should I take someone on as my spouse, effectively?

• 1:31:16Speaker 06

  I think that's right. And I actually think it's, it's actually, I was just thinking about it because it's been different for everybody, I think. You know, I think the story with Peter is, like, he was repeatedly showing up, competing for investments that Benchmark, before he was here, was working on.

• 1:31:36David Rosenthal?

  You were walking out the door as they were walking in.

• 1:31:38Speaker 06

  Yeah, and so like, that's telling. You know, the story with Miles is Miles was there before. Like, he invested in Benchling before us and SuperGreat before us and was early on Airtable at the same time. And so like, that's a really important like signal. Like, okay, you know, Chathin had worked with Peter on the board. Sarah...

• 1:32:05Ben Gilbert?

  I just glowed by myself. Yeah, actually, Sarah, how...

• 1:32:11Speaker 06

  Sarah and I, I think both had no like professional overlap in that context.

• 1:32:20David Rosenthal?

  Who made the first phone call to issue? I've lost track.

• 1:32:27David Rosenthal?

  Peter, what's that?

• 1:32:28Speaker 00

  Yeah.

• 1:32:29Ben Gilbert?

  I'm like, I don't think he's lost track.

• 1:32:32Speaker 00

  I don't think Peter loses track of life.

• 1:32:33Ben Gilbert?

  No, that's not right.

• 1:32:35Speaker 00

  I think the way in is something that's

• 1:32:40Speaker 00

  common, what we've heard for the people we've recruited and maybe Eric's an example of this.

• 1:32:47Speaker 00

  But it's that they don't want to join a venture firm that like the only firm they could imagine being at would be Benchmark. It's the last job you're going to take. So there's this underlying love of the craft and it sounds again, a little

• 1:33:02Speaker 00

  romantic, but it's intended that way. I left Stanford Business School embarrassed that I went there, maybe at some level. And I dreamed about getting a job at Benchmark and Bruce canceled his meeting with me and then I waited and then, you know, another time he was late. He sent me a handwritten note saying, oh, I have bigger things to deal with. Basically is what the note said.

• 1:33:21Speaker 00

  And then, and then like, you know, I think he gave me like a T-shirt. Seven years passed and I think I sent like typically I sent him a note saying, hey, I'm working at Excel just to see if I could catch his interest. And he said, good luck.

• 1:33:36Speaker 00

  Did that motivate you? Like, were you thinking in the back of your mind? Do you know Peter Fenton? I mean, I feel like I do.

• 1:33:43Ben Gilbert?

  Put it out up on your wall.

• 1:33:46Speaker 00

  Oh, man.

• 1:33:50Speaker 00

  And then Kevin and I went on a board together

• 1:33:53Speaker 00

  at a company that was not particularly successful. And I was wondering, why is Kevin doing this investment? And you know, I said, what does that say about Benchmark?

• 1:34:02Speaker 00

  He later confessed that he felt the same way, but you know, and then, then you get, you get to work with the firm and there's something though, I would say underneath it, which is that the totality of like, I would do the job even if I didn't get paid, that sense of all in, this is a craft and I so am oriented towards that. When I first met Matt in 2005, when you, around the time he presented Facebook to us at, at Excel. You knew immediately that he was going to be in the venture business. There wasn't like, well, one day, maybe. No, Matt was going to be a great venture capitalist because the single most important thing we have to do in our job is to partner with, earn the trust and respect, earn the ability to be a partner and a guide, in his case, to both Reid Hoffman and to Mark Zuckerberg.

• 1:34:45Speaker 00

  So you think, okay, he's overqualified at some level because these are giants of our industry. And if you're doing that, if you're really close to one of the great, and you were doing with Ben at Pinterest, and I, of course, knew about Sarah because we both tried to invest in GitHub. And that's a funny story for another, maybe before drinks later.

• 1:35:05David Rosenthal?

  Yeah, so I think if I remember right, another firm did that at a very high valuation.

• 1:35:10Ben Gilbert?

  For the time.

• 1:35:11David Rosenthal?

  A moment that seemed, that that seemed crazy and was actually a good idea.

• 1:35:14Ben Gilbert?

  It was like a hundred on...

• 1:35:16David Rosenthal?

  Seven fifty, I think, was the post.

• 1:35:17Ben Gilbert?

  A hundred million on seven fifty post. But like at the time, for a series, like that was the first institutional capital.

• 1:35:22Speaker 00

  There might have been some secondary selling. One of the things I found is when there's secondary selling, it does tend to clarify people's interest in price.

• 1:35:30Ben Gilbert?

  What they optimize for.

• 1:35:31Speaker 00

  It's one thing if you're just selling, you know, equity on the cap table, but when you're selling your own shares, you start to get really focused on the, but you know, we're not running an auction, but it is the highest price. And we seem to, all of a sudden, you know, that seems to be the right answer. Anyway, so the point is that, you know, we orient towards extraordinary. So to get close to benchmark, get close to extraordinary. Who are the best entrepreneurs? You know, build that rapport and relationships. And the single best thing that we can see is that you've earned that trust and respect and to be a confidant, to be a partner to the great ones, you know, or serve on a board with us with one of those entrepreneurs. I guess there's some self-serving interest. We could say, send us your best investments. That will help.

• 1:36:14Speaker 00

  But our responsibility is to be, you know, the best introduction that you make if you're looking at a great company. And if we don't, if we fall short of that, we deserve to be told and punched in the stomach.

• 1:36:27Ben Gilbert?

  Can I, maybe I can ask a related question, which gets to Eric's, this is what we love to do and wake up and focus on every single day. And that's, if each of you have a sort of bias on things you're obsessed with, like Chathin, you wake up in the morning and you look at net retention rates. Like it's just your, I don't know, what I'm trying to call it was some boring enterprise software thing.

• 1:36:52Ben Gilbert?

  But like

• 1:36:54Ben Gilbert?

  Like Chaythan just like eat, sleeps and breathes sales kickoff.

• 1:36:59Speaker 04

  This is getting better for me.

• 1:37:01David Rosenthal?

  This is you're just digging like Chaythan is so far underground right now.

• 1:37:06Ben Gilbert?

  Well, he showed up. I'm really grateful for.

• 1:37:08David Rosenthal?

  He did. He's here. He came all the way here for this.

• 1:37:11Ben Gilbert?

  Are you looking for? There are, there are probably a dozen people on a shortlist that you're like, gosh, we would kill to work with that person. And ultimately a factor in that probably needs to be. There's a thing that they're obsessed with that we need on our team at this moment in the technology industry. Is that part of the calculus? Like, do you look for where do we need additional strength?

• 1:37:36Speaker 06

  Loosely. I, I mean, I, I think about it and it happened. It didn't, it didn't, it wasn't intentional. At least for the part, when I joined Benchmark in 2014. At the end of the Fab Four era or at the whatever, as, as you called it.

• 1:37:55Speaker 06

  You know, the partnership, the four were predominantly consumer investors. Like Peter was working on Twitter at the time. Obviously Bill with Uber. You know, Mitch with Snapchat. And Discord and Matt having just come off Instagram, among others. And and like

• 1:38:19Ben Gilbert?

  Which that's just all that just that you just listed is ridiculous.

• 1:38:22Speaker 06

  It's ridiculous. And, and so you join that group and in a way it was just like the perfect time. As someone who had some enterprise exposure. And, and then the, you know, lucky enough, the first investment that walked in the door was confluent. And for me, and, and so.

• 1:38:42Speaker 06

  But now, if you look at the group, it's almost like it's almost turned, right? In the sense that there's a lot, lot more enterprise heaviness. That wasn't intentional, I don't think. I don't like it didn't come up, but it happened over time naturally. And I think this is just a big element of Benchmark overall, which is the entrepreneurs lead the way and the markets lead the way. And, and we're, we're following that in some sense and hopefully seeing it in conjunction with the market evolving, but it's less intentional. So when, when Chathen joins and, and does Modern Treasury as an example, like, or Sarah

• 1:39:24Speaker 06

  joins and does Chainalysis, like you're, that wasn't intentional, like, oh, there's like this big crypto thing and Sarah's an expert in crypto. I don't think she knew anything about crypto at the time, or maybe she knew a little bit. I don't know, but that wasn't, that wasn't part of it. And so I think the, the firm evolves. And if you go back even further, obviously the firm had semiconductor expertise. Like we have no semiconductor expertise anymore. Like it's you do. Well, I have a semiconductor investment. Different thing than having expertise in it. And so I think that, I think it's just the, the market takes us and entrepreneurs take us.

• 1:39:59Speaker 00

  We make a mistake repeatedly, probably once a week in the portfolio of confusing phenotype and genotype, meaning we hire people because of the phenotype that has been, you know, expressed because they have experience in areas X, Y, or Z. And the underlying genotype doesn't actually get our attention. So you would tend to lower your, your selectivity when someone has some background of relevance. The issue that you're seeing at Benchmark today is sort of a question of where's the equity value been created? Where, where the $10 to $100 billion outcomes of the last seven to 10 years? Well, consumer has been a little more ephemeral in that regard, or a little harder to capture because of the incumbency effects.

• 1:40:43Speaker 00

  So what's going on in the phenotype of the firms, it may look more tilted enterprise, but I can tell you the genotype is we are total generalists. So I can say very explicitly, I think that somewhere between AI, crypto, and

• 1:40:59Speaker 00

  Not ARVR, sorry for the future ARVR. But I think those areas don't have the incumbency of some of the traditional, you know, network effect, giant trillion-dollar market cap companies. And so our genotype is such that we will then go populate those arenas. And you'll see us become what looks like experts in those areas, but that's not who we are. So is our next partner likely to have some background and experience in an area with high disruption? Absolutely, yeah. And it'd be great. We got Kohler to join the firm at the, still the beginning quarter of the social, in the social over. Who knows? I mean, you could say, the issue with like a social over is like, we have a big problem with incumbency. Yep. And distribution being constrained.

• 1:41:42Speaker 00

  On top of that, yeah, I mean, it's, you know, capital was, at least for a long time, limitless. So you're looking at things that are little increments at the end. It's sort of like, you know, Feynman complained about this in physics, which is like, if you came 30 years after the theory of relativity, you were sort of cleaning up the mess. You missed it. Yeah, whereas the people are there, the first three years looked like geniuses. Even they were third-rate physicists, they were working on first-rate problems. We can be first-rate, you know, whatever, working on third-rate problems if we're not in areas of high disruption. So what are the areas of high disruption now is something that we obsess over. Yeah, totally. And, and, you know. But you don't think about it as like, we need expertise in that area. I think the genotype is, we want somebody that is a roving, curious.

• 1:42:27Speaker 00

  There's no great venture capitalist, in my view, that isn't aspiring to be wide dynamic range. This is why Eric is going to become one of the great consumer internet investors of the next decade. He doesn't know this yet. No pressure. But, you know, John Doerr, Mike Muritz, my former partner, Jim Gatz, those are the people who've shown that you can do both. Because the underlying connection with the entrepreneurs, they're not so different. There's similar gestalt, and Chathin's next to them, he'll probably beat Eric to the internal dynamic. Chathin's going to be the sales kicker.

• 1:43:01Speaker 00

  Sarah already crossed the line with SaaS.

• 1:43:03David Rosenthal?

  Yeah.

• 1:43:04Speaker 02

  I think even if you look at the greatest companies, right? Amazon, Microsoft, Shopify, Adobe, Square. Like, they're all crossover, right? Like, and even if we took something of high disruption like AI, right? What's happening in generative media and large language? It's unbelievable.

• 1:43:21Ben Gilbert?

  Right, our LLM is just going to be a consumer thing? Absolutely not.

• 1:43:24Speaker 02

  Exactly, right? Like, the first version of it might be something like Jasper, right? Which is actually a B2B product. But there's really interesting opportunity of what is a what's the version of a Twitch relationship that starts to form? And sort of a parasocial relationship, but it's with a bot potentially, right? An artificial character that has a relationship with you. And is that a consumer thing or is that an AI thing?

• 1:43:47David Rosenthal?

  We just did an LP episode with Mutiny and they're using GPT-3 to like generate landing page copy.

• 1:43:53Speaker 06

  I think the technical, like, we're not, it's not our the founders and entrepreneurs know the product. They know the technology. Like, that's what they bring. That is the thing they bring. That's their invention.

• 1:44:05Speaker 04

  And they've discovered the insight.

• 1:44:06Speaker 06

  And they've discovered the insight.

• 1:44:08Speaker 04

  Here we go.

• 1:44:09Speaker 06

  But there's a whole bunch of things that come to turn that technology into a product and that product into a company that's really valuable. And like, that's the part that we can partner on.

• 1:44:24Speaker 04

  How many success stories are there, inventor? And even through benchmarks history of that market was dead. That market is done. Or that market doesn't exist. That market isn't real.

• 1:44:36David Rosenthal?

  That's the best time to invest.

• 1:44:37Speaker 04

  Yeah, and it's like the founder figuring something out and

• 1:44:40Speaker 06

  Having that insight, that's the, that's the part where you're like, you're sitting in the meeting. You're sitting in the meeting and you're like three minutes in and the founder says something that you've never heard anywhere else.

• 1:44:55Speaker 06

  Nobody else has said, nobody's put a blog post out, it's an insight. And that insight is, that's the magic.

• 1:45:04Speaker 04

  Yes, obviously. Yes, that's obviously how it should work.

• 1:45:08Speaker 02

  And that's why I think I would say, like, to say there's a specific, specific sort of set of experience when needed, like, would imply we'd be maybe thesis driven. It's like, I don't think anyone here is terribly thesis driven, but like, we're very change aware. And there's the question of that pulling the curiosity and sort of roving into it, not like with physicists with a set of rules we've got to check, or a net dollar retention that's got to be a set.

• 1:45:33Speaker 05

  I was like, biology.

• 1:45:34Speaker 06

  Have you had a million dollar rut?

• 1:45:36David Rosenthal?

  How do you guys deal with, so, in my, you know, prior life, I was trying to do that for, you know, a living, poorly. One of the hardest parts I found about early stage, I totally agree with everything you're saying. You guys, and you vote with your feet, you only have one of those moments in the first three minutes of a pitch, once, maybe twice a year, maybe zero times a year. The rest of the days can get kind of depressing, like.

• 1:46:02Speaker 02

  You can learn something in every moment.

• 1:46:03Speaker 06

  You can learn something in every bit. That's the, that's the amazing thing about the job is, every day, people come in and talk to you about something they're experts in.

• 1:46:12Speaker 02

  Or you can help someone who is great, maybe you don't see it entirely, but like, someone who's fantastic and help them.

• 1:46:17Speaker 06

  And they, and they, they'll teach you something, and you'll learn something, and you'll just ask questions, and, you know, they'll tell you, and you like, learn.

• 1:46:28Speaker 00

  There's a firm that show our main nameless. Came in, they said, "Why don't you have a clock on your wall?" I'm like, "I don't know." Because then, maybe we're in a meeting, we don't want to be in it, we look at it, and it's not so good. And this person said, "No, no, no, no. We move all our clocks six minutes forward. So if it's a bad meeting, we can get out." Because we're going to say, "Oh." So that's one way to deal with it. We didn't do that. Like, people suggested this, and it happens. I would just, anytime you go to a venture firm, check the clock on the wall, and look at your, and then, you know, are they playing that game?

• 1:47:00Speaker 04

  This clock doesn't work, by the way.

• 1:47:02Ben Gilbert?

  I was looking at it earlier, and David and I made a comment to each other, like, that is a really subtle way to put a clock in the room, but if it doesn't work, that's...

• 1:47:09Speaker 02

  Doesn't work?

• 1:47:10Speaker 00

  Oh, look. It's 2:30, it's time for dinner.

• 1:47:15David Rosenthal?

  It's right twice a day. We gotta ask before we, um, we can't, another thing we can't let go. What's the purpose of the principal program?

• 1:47:25Speaker 00

  To honor the statement that force consistency is the hobgoblin of little minds. Was it Thoreau who said that?

• 1:47:32David Rosenthal?

  Okay, you gotta unpack that.

• 1:47:35Ben Gilbert?

  God, Peter's just on another level.

• 1:47:38David Rosenthal?

  I mean, I feel like I'm.

• 1:47:40Ben Gilbert?

  I don't know if the level's here or there.

• 1:47:41David Rosenthal?

  For context, for everybody who doesn't, so you all are deeply committed to the equal partnership model, clearly.

• 1:47:48Speaker 00

  We don't have principles, so we have principles.

• 1:47:51Speaker 02

  I think it's a, it's a way to surround ourselves with a, with a person who we want amongst us all that pushes us, challenges us as well.

• 1:48:00Speaker 00

  Yeah, maybe I'll loosen up the response. We don't know what we're doing. I mean, like, and Blake is amazing. And you meet Blake, you wanna work with Blake.

• 1:48:08Speaker 02

  Do you find a way?

• 1:48:08Speaker 00

  Find a way. And, and I think that, is it a program?

• 1:48:12Speaker 02

  No.

• 1:48:14Speaker 02

  No.

• 1:48:15Speaker 00

  But, you know, Miles seems to like, uh, Miles has got a British accent, it's a little hierarchical, so. He should hire an associate. I don't wanna work with that associate, bless his heart, but, uh, whether you call him a junior partner, baby partner. He can go hire a baby partner.

• 1:48:29David Rosenthal?

  Baby TB, that's right.

• 1:48:31Speaker 00

  But he won't be coming in to, um, I'll spare you. Blake is amazing. And so you meet Blake and you say, you find a way.

• 1:48:39Ben Gilbert?

  Yeah.

• 1:48:40Speaker 00

  And, um, it's been a pretty good launch path, it turns out, for people who come in for our non-principal principal program.

• 1:48:49David Rosenthal?

  The principal program that you don't talk about, that you're talking about?

• 1:48:51Speaker 00

  Yes, because you don't wanna have force consistency. Is it false consistency or force consistency? It was Thoreau who said that, or is it Emerson? It's exactly right, though, which is that when you have a little inner fundamentalist, you need to have a conversation with that person and tell them to calm down. Because, you know, now, that doesn't mean we're gonna have eight partners and a growth fund, and then there's some hard lines. We just say, but this is, you know, getting closer to people who are. Embody our values, but at a different stage in their career, that's okay with us.

• 1:49:20Ben Gilbert?

  You gotta break your rules when you find an exciting circumstance.

• 1:49:23Speaker 00

  You do.

• 1:49:24David Rosenthal?

  I've definitely found too, like, maybe this is like an institutional version of this. Like, the times in my life when I've held too tightly to something is when like, you're aft. And so like, is this a way to like, hold tightly to the thing that's like a core value of the firm, but not too tightly?

• 1:49:39Speaker 06

  I think we should call it a fellow. But.

• 1:49:43Speaker 02

  We constantly, constantly oriented to special people. And sometimes there's a special person like Blake, I'd wanted to work with Blake for quite some time. And Sarah had too. And we said, Blake, you wanna come work together?

• 1:49:56Speaker 04

  Yeah.

• 1:49:56Speaker 02

  Like, let's do it.

• 1:49:57Speaker 04

  I would say that we don't have associates, but one of us may hire an associate. We don't have principals, we have a principal. We have EIRs, we have venture partners. It's just, you're trying to figure stuff out.

• 1:50:12Speaker 06

  We have venture partners.

• 1:50:12Ben Gilbert?

  You don't do growth stage investing, but you guys did Dropbox.

• 1:50:15Speaker 04

  Like, we just, it's just, you come to the table and you say, I wanna, I wanna do this. I wanna go explore this area. I wanna go work with this person. And you just kind of figure it out. And like, it's not always straightforward, right? Cause there's, people have their own constraints. And so you're trying to fit their own model of how they can engage with you. And so you just figure it out. And so.

• 1:50:40Speaker 06

  None of that should violate the authenticity

• 1:50:43Speaker 04

  Right.

• 1:50:43Speaker 06

  of what we do and how we interact with people. And I think that's the biggest thing that we have to be protective of. And that is what we're protective of. And the relationship we all have and how we work together as a team. And I think if we preserve that than anything else, the fees are to be used for exactly those kinds of experiments. And, and those types of trials. And then, and you can do anything you want with that.

• 1:51:09Speaker 02

  I think this is the longest discussion we've had on the idea of a principal program.

• 1:51:14David Rosenthal?

  Well, hey, we're here to provide value to you guys.

• 1:51:16Speaker 02

  This is the most, this is the most.

• 1:51:17Ben Gilbert?

  How can we help?

• 1:51:18David Rosenthal?

  How can we?

• 1:51:18Speaker 04

  Yeah. And then, you know, I also think about how we think about EIRs. So, you know, Eric had worked with Josh at Benchling. And Josh was gonna leave Benchling and just explore ideas. And I was like, okay, well, why doesn't he just come hang out with us and explore some ideas? And we called it an EIR. I knew Ravi from Heap. And he had left Heap and he wanted to explore ideas. So I brought him in. Those two knew each other from prior lives and then they were like, oh, we're both at Benchmark exploring ideas. Why don't we like share ideas that we're exploring? And then they decided to start a company together. It was like.

• 1:51:54David Rosenthal?

  Which is Airplane.

• 1:51:55Speaker 04

  Which is Airplane, which Eric is on the board of. And, you know, that wasn't sort of like this. We have a hyper like thesis.

• 1:52:02Ben Gilbert?

  Funnel you're managing.

• 1:52:03Speaker 04

  Yeah, we have this thesis and we need to go attack this thesis. So let's go recruit some EIRs and let's go set them up and let's give them my. None of that. There's so much. Beauty and amazing things that can come out of just like organic development and opening yourself up. To organically finding cool things is I think ultimately the goal.

• 1:52:24Ben Gilbert?

  Yep. All right. What did we get wrong on the episode?

• 1:52:28Ben Gilbert?

  Or what could we have done a better job?

• 1:52:30Speaker 04

  I'll start. I think one of the things that you all talked about on the episode was swim lanes.

• 1:52:38Speaker 04

  And areas of focus. And I think what we had just alluded to.

• 1:52:41Ben Gilbert?

  I gotta say, it felt extremely weird to be naming each of you in that episode. Like when we did our Sequoia and Andreessen episodes, like these things were about firm strategy. And like institution building and programmatic thoughtful. And then we got to the end of the episode and I was talking about each of you as individuals and articulating things that like you care about and invest in. And on the one hand, I'm like, I feel gross. Like this feels really reductive and strange and pointed. And then the other hand. It's kind of the point of Benchmark that like it actually is just about you as humans and not about this like institution and strategy and.

• 1:53:16Speaker 04

  So I think like if you look at even when it was Bill, Peter, Mitch, Matt. You know, it's, it's, if you just look at the kind of work that they did, they were all generalists then. I mean, Peter was doing consumer in deep developer tech and, you know, Matt was working with consumer companies and he was on the board of Duo, which was a security company. And Asana, right? And so. An AI company.

• 1:53:43Ben Gilbert?

  All right. So no swim lanes.

• 1:53:44Speaker 04

  Right. And I think if you, as you just.

• 1:53:46David Rosenthal?

  You're all in the pool with no.

• 1:53:48Speaker 04

  Yeah. And if you just look at the kind of. Companies and ideas that we're bringing to the table on Mondays. That's the thing that you see and there's a lot of encouragement around the table, which is like, if you're interested in something, something's like really hitting you at the moment, just go for it. Go meet all the relevant people, bring them in. Let's all learn together, let's figure this out. And it's, it's never the conversation that I've seen at other places, which is like, whoa, whoa, whoa, whoa, whoa. Stay in your sector.

• 1:54:14Speaker 06

  Well, I went on a drone kick and definitely Peter was like, stop it.

• 1:54:23Speaker 00

  Stop droning up. The only way to kill the conversation about drones would be brought in D-drone. And was that the like, the shooting down the drones?

• 1:54:35Speaker 00

  Eric's like, okay, I got the point.

• 1:54:39Speaker 00

  And we didn't do that. It's probably done pretty well.

• 1:54:41Speaker 06

  Yeah, probably was.

• 1:54:42Ben Gilbert?

  All right, other stuff we missed?

• 1:54:45Speaker 00

  You know, when you, when you look at anything from the outside and you were there, you can't help but say, particularly like books are written because journalists tend to write the story from the perspective of a loner who's projecting this sort of Shakespearean plot. If I was there, what was the intention? I've read these books about us at Uber or Twitter or WeWork. I'm like, it was so much more interesting. You guys did a remarkably good job of capturing the essential primitives of the firm. I don't know if it's interesting to other people, but it is right that this, you know, deep commitment to equality that Bob feels permeates to this day through everything we do.

• 1:55:25Speaker 00

  And from the way we treat our people that aren't in the investment team and to the notion that, you know, we book most of our own meetings. Like I, you know, we do so ourselves because we're not below anything or above anything. And I think that that, that's the through line that you captured so, so well. And I think it was, as you say, asymmetric. And was it in reaction to the, the era's leading venture capitalists? I don't know, but I can tell you that there was a humanity to it that always felt to me at least something you really. You want to honor, like if benchmarks anything, it's that we're available, we're flat, there's no arrogance and it's you guys got to the central core of that and that comes now really from Bob's history and you know, they say this about our companies,

• 1:56:07Speaker 00

  right? The founding two or three employees set the culture and it doesn't change unless there's some catastrophic event where it has to get reborn. But good luck with Elon at Twitter. You know, that culture was set in motion and that its root system goes so deep. We'll see what happens. I'm very interested. It's a good lesson and if it does transform, then that's, that's an example of one form of transformation. If it doesn't, then you'd say, okay, this, believe me, people have been trying to fuck up the benchmark culture and we haven't done it yet, but we're trying.

• 1:56:41David Rosenthal?

  I thought you meant Twitter. I was like, yeah, we had.

• 1:56:42Speaker 00

  And Twitter.

• 1:56:43David Rosenthal?

  No, no Twitter. We have a, we have a, actually, there's been a lot of discussion in the quiet Slack about like, why have you guys not covered Elon and Twitter? And just like, that, no, that's not what we do here. To TMZ. Yeah, that's, we're not the TMZ of Silicon Valley.

• 1:56:56Speaker 00

  I'll have eight years of experience there.

• 1:56:57David Rosenthal?

  Oh, boy. All right. Well, we should end it on that now. Yeah. Thank you all. Thank you.

• 1:57:08David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:57:14Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:57:25David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:57:45Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:57:58David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:58:09Ben Gilbert?

  Ah, so fun, David.

• 1:58:11David Rosenthal?

  Man, what a special experience. Thank you to Benchmark Partnership, too, for inviting us, doing this.

• 1:58:17Ben Gilbert?

  Having a pretty candid conversation with us. That's not what I was expecting going in.

• 1:58:21David Rosenthal?

  No, no, they're great. They were very gracious hosts.

• 1:58:24Ben Gilbert?

  Yes, well, we love your feedback, too. Please chime in at acquired.fm/Slack. Come hang out with us. Get your sweet t-shirts from the merch store at acquired.fm/store. We also have a dad hat that is limited edition, in part because that is the only way we could embroider it. And so I wanted them to be great hats. And so you can go and get that just for the next couple of weeks. So make sure you get your order in if you want one.

• 1:58:52David Rosenthal?

  See, this is how, we know that you are not a dad because you're like, actually like caring about the details of your hats. Once you become a dad.

• 1:59:03Ben Gilbert?

  No, you show up like wearing appropriate hats whenever we go visit various people around San Francisco. I often see you in their merch. Like, it's a premeditated decision.

• 1:59:11David Rosenthal?

  It is, it is, but that's without the kit.

• 1:59:13Ben Gilbert?

  That's true. That's true.

• 1:59:16Ben Gilbert?

  All right, well, LP Show, if you want to listen, the episode with Jaleh was awesome on the B2B Profitable Growth Playbook. Her story's super impressive, so check that out. Becoming an LP at acquired.fm/LP or searching LP Show in the podcast player of your choice. With that, listeners, thank you, or thanks to the very good people at Benchmark, and we'll see you next time.

• 1:59:41David Rosenthal?

  We'll see you next time.