00:34:50 · Ev Randle, Molly O'Shea
[00:34:50] S0: Mhmm. [00:34:50] S1: And there's different types of funding that's happening. I mean, I think we're like literally across from General Catalyst and they have their CVF fund and like, there's people who are going after debt for tokens and trying to create the right mix. The kind of like, like, the undercurrent of all of this is companies are raising money faster than ever before. One in one of the questions in our, like, conversation before is like, do we talk about the bubble? I don't think the bubble is very interesting. I'm, like, most interested in, like, what are the biggest concerns right now with that? Because reading through the cracks of all of it, right, it's like what I think we all know when companies are running off the tracks. [00:35:31] S0: Mhmm. [00:35:31] S1: And, when they're overfunded to an extent, but then again, like there are, it's a weird time. Like there are total hail Marys where these companies are outperforming what you thought they were doing. So And they raise another round. And then six months after that, they raise another round and then they just keep on getting more and more capital under them. But okay, so to this point, the funding ecosystem has changed dramatically. Like the playbook is out the door. And so with a firm like Benchmark, who is just fundamentally on the early stages, how do you capture that value at the early stages and continue that?
00:36:04 · Ev Randle
[00:36:04] S0: Yeah, I think, I mean, it's something that we talk about a lot internally, because you're right that even the funding market, it's not just like, I think the one that everyone talks about, the change in the funding market and the venture growth asset class, the trend that everyone talks about is companies staying private for longer. That's been the prevailing trend that everyone talks about is that have, mean name your company, I mean obviously some of these companies are now going public like SpaceX, but before it was like SpaceX is never going public and Stripe is never going public and Databricks is never, if this was 2005, all these companies would've been public for years, and now there's just so much capital available for them in the private markets via these venture growth platforms that they just stay private essentially indefinitely. And I think a more recent change is that, as you're mentioning, AI is just so so different because depending on what you wanna do, oftentimes there are massive like day one costs. Like if you wanna create a NeoLab, and you have some incredible research direction that you wanna pursue, but you need $2,000,000,000 of compute to see whether it's gonna work or not, That's very, very different than Airbnb raising the 500 ks or whatever they raised at YC in their seed to see if Airbnb would have any product market pit. It's just a completely different equation and type of funding mechanism and just, like it's a completely different capital market. Also, think what you're seeing is now because of the staying private longer thing, you also have these crazy situations where oftentimes you almost like see a rebirth of a company, where oftentimes people think like oh well when it's a growth stage, it's like early stage you get high multiples on money, but you know it's higher risk, and then late stage you get like, you know you can get like a two to three X, but it's much lower risk. And I think the crazy thing is that because these markets are so big in AI and elsewhere, and because these companies are staying private for much longer, you actually have these situations where a late stage company can have much higher upside than like a Series C, which is super weird.
00:38:39 · Molly O'Shea
[00:38:39] S1: So
00:38:39 · Ev Randle
[00:38:39] S0: weird. It's so weird, it's like my first investment when I was at Kleiner Perkins was SpaceX, and it was at an over $100,000,000,000 valuation. Talking with peers and friends at the time, it's like man, you gunning for like a two and a half X? Like how much upside could there possibly be if you're getting in at a triple digit billion entry valuation? And I think the thing that ended up being true for SpaceX was like, well actually you had this thing called Starlink that had started a couple years before that and had really started to scale, and that was like a rebirth of the company. And if you look at the P and L today and in the S1, the vast majority of the business is their consumer broadband business, and B2B broadband business via Starlink, it's not even the launch business. And so I think the two things that we grapple with and think about a lot is like how do we continue to be the best venture capital firm that partners with entrepreneurs very early in their journeys and is their most meaningful partner when you have a much, much more capital intensive early life cycle for some of these AI businesses, and when you have these businesses that actually sort of go through these transformational moments at later stages where it feels like actually even though they're fifteen years in, they're still only 1% done with their journey. So I don't have a great answer for that. I think we're extremely flexible in what we do. Like we don't say that we just do seed or we don't say we just do series A. Like we partner with the very best entrepreneurs in the world when we think that we can deliver unbelievable upside for our LPs and be the most meaningful partner to them. Those are the kind of the constraints that we think about, and I think the trends that we're seeing both in AI and in capital markets writ large definitely expand our thinking in terms of like, what actual rounds and what type of situations are applicable to a firm like Benchmark.
00:40:31 · Molly O'Shea
[00:40:31] S1: There are definitely new types of funding vehicles too, like private credit has really taken over where banks left off, and different kinds of funding to add into it, so how has venture capital in the grand scheme of the alternative asset class changed, and how has the rule changed?
00:40:49 · Ev Randle
[00:40:49] S0: Yeah, think this is where things get tricky when people are having these discussions, is that these firms can completely change what they are, and yet we still just use the term venture capital. And so whenever I write an occasional blog post or something, I always say venture growth because I'm like venture capital is something very particular, and so even when I'm discussing something like a Databricks or something, I'm like that should be called something different, and so I'll call it venture growth, and that's like one way to do it. But I think a lot of these firms, they have just become alternative asset managers, and that is what they are, and they have venture products, but they are not venture capital firms. And that's not me being like oh, they're not VC firms because they're bad. I think a lot of these firms are wonderful, but like General Catalyst and Andreessen Horowitz, those are alternative asset managers because they have so many products. You know, many of these places have, like if you think about like an Iconic, like yeah, like Iconic has like a great growth stage venture practice, but they also have, like they started as like a high net worth wealth management practice as well. Like that's a very different thing than just being a venture capital firm, so I think as these firms have evolved, one of the things that I think as an industry we haven't done a good job of is just evolving our nomenclature and the terminology of how we talk about these things, and so yes, General Catalyst still has a venture product and they also have a growth product and they also have a debt product and they also have a health insurance product and they have a wealth management product because they're an alternative asset manager. And so I think that venture in many ways is still the same, but it's a product now for many of these firms, it's not the firms themselves.