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.
00:42:35 · Molly O'Shea
[00:42:35] S1: We've definitely alluded to this a bunch during the conversation, but I'm really curious to get your perspective. The public markets are seeing the largest IPOs of all time, it's all apparently gonna be happening this year. And so like, how do you think the markets are gonna take that? Will it be absorbed? Will it be kind of like aftershocks? How will that actually then affect this asset class?
00:43:02 · Ev Randle
[00:43:02] S0: Yeah, I think in a few ways. The first is I did this analysis, this very quick analysis, because I was just like, I know that just using a single example with Anthropic, after the $380,000,000,000 round, I was like, man, I know this is so much bigger of a deal than we've ever seen in a growth round ever, and I also, I know it's like, and I also know that we're not talking about it enough currently, just how different it is, and so I did this analysis where I basically charted out, over the last ten years, I took four of the best pre IPO investments ever over the last decade in terms of both just the raw scale, like they were big rounds, and then also the investors did really well in the rounds. And so I think it was Slack, DoorDash, Snowflake, and NewBank. And typically in those rounds, they were like, the total round size for the pre IPO round was like 500,000,000 to 2,000,000,000, and the investors over a four year period made from like a two to 5x, And everyone went home happy with that. That was a great outcome for all involved. So I think the Snowflake pre IPO round over a four year period ended up was like $500,000,000 turned into $2,500,000,000 That's insane. That's amazing. When you think about the Anthropic $380,000,000,000 round, if Anthropic was to go public and get liquid at a $1,500,000,000,000 valuation, which they just raised at about a trillion dollar valuation, don't think people would think that's that ambitious of an estimate, and I think a lot of people would have their estimates higher than that. The gross return of their $380,000,000,000 round, the 30,000,000,000 that they raised at $3.80, it would return 35 times that of the Snowflake pre IPO round. So it's 35 Snowflake pre IPO rounds in a single round, and like I have friends, I know several people that have like 3 to $4,000,000,000 invested into Anthropic, and it's like so hard to even talk about, like these numbers are so big that it's hard to even comprehend because five years ago, a growth fund was like a billion dollars.
00:45:18 · Ev Randle, Molly O'Shea
Like until COVID brought all these growth fund sizes up, a normal growth fund was like a billion dollars, and now there's an individual company that these people have $4,000,000,000 invested in, and they might return five times their money in less than five years on $4,000,000,000 like it's unbelievable, and at least SpaceX took twenty plus years to make everyone rich and put all this money in the ecosystem, but I just don't know if people really understand and are ready for the impact that this much liquidity could have on the ecosystem. I think the one place that people are definitely predicting it and are already seeing it is in the SF housing market. [00:46:03] S1: Oh my god. [00:46:05] S0: Where it's like, you know, everything's going for two x asking price at this point, Or and it's all [00:46:10] S1: in equity. [00:46:11] S0: Or in lab equity, but I think there's so many knock on effects in terms of like, what do those employees do? What do they invest in? What causes or companies do they then invest in? Do they start new companies? Do they stay at these labs? It's going to be a shock that's going to impact every single aspect of life, both practical life in Silicon Valley, but then also the lives of employees, investors, and founders in the ecosystem as well.