Uncapped with Jack Altman
· Jack Altman, Chetan Puttagunta
[00:00:00] S0: Benchmark team, it is an honor to be here with you all. I’m not going to make you all reply in unison to me, but I’m really excited to do this with you. I want to start with an observation. Of the top VC firms, whatever you want to call that—I’m thinking of Founders Fund, Sequoia, Thrive, Andreessen—most have scaled in a big way. For whatever set of reasons, that has been the dominant strategy. Benchmark has been a stalwart in some ways to hold out, with a small firm, small team, small-ish capital base. I’m curious why. I’m sure you all have different opinions on this, so to pick somebody randomly, Chetan, what is your take on this topic? [00:00:00] S1: We only do one thing, which is partner with founders early. We really like to partner with them really early. I think the favorite amongst all of us is partnering with a founder pre-launch, at the idea phase, or when it’s two or three people in a room, and just growing with the firm. In terms of measuring happiness for each of us, that’s where we derive the most professional satisfaction. If you think about what that does in terms of alignment between Benchmark and the founders and that company, it’s pretty amazing if you’re there from step zero. I would argue you can’t do that as you scale, the interests… We see it in all our board meetings. Every round becomes its own thing, its own game. [00:00:00] S0: One of Benchmark’s things that we’ve talked about is that you don’t do the future rounds. There’s no conflict of interest.
· Jack Altman, Chetan Puttagunta
[00:00:00] S0: One of Benchmark’s things that we’ve talked about is that you don’t do the future rounds. There’s no conflict of interest. [00:00:00] S1: That’s right. We’re fully aligned on dilution. We’re fully aligned on trying to make this the biggest outcome we can. Capital constrains you in that way. Time constrains you in that way. Each time you partner with a founder, you’re doing it with extremely high conviction and going all in. That, to me personally, is an extraordinary experience. There are different models, different ways of practicing the business, but for me, this is the way I love practicing it. It’s becoming rarer by the day, and therefore it becomes more differentiated. [00:00:00] S0: Peter, you’ve been here the longest, so you’ve obviously seen Benchmark in its context through a bunch of changes around you. Have you felt tempted at any points? Have you felt strengthened in your clarity on what it should be?
· Peter Fenton
[00:00:00] S2: You have your behavioral experience on a Monday, which is when we aggregate. Today is a Monday, we’re here with you. It feels great. There have been eras in the business that I’ve participated in when the Mondays sucked. Some of those were just cyclical. You have a downturn in the economy. Your partners are bringing in their struggles, their pains, channeling the entrepreneurial landscape at that moment in time. What I was struck by is that period of time that I’ve spent—I’ve had time at Accel and I’ve had time at Benchmark—when that felt more self-inflicted, not market-driven. The lived experience, the behavioral experience, the joy of the business, is centered on serving entrepreneurs. As Chetan related, getting close to an entrepreneur, being a deep partner to them, a social, emotional partner, strategic partner. On a Monday, if we’re talking about that, it feels really good. It feels aligned and purposeful. When the Mondays were talking about friction with the European effort—and I’m sure the European partners at the time, now called Balderton, were talking about problems with us—it felt draining. When I joined Benchmark, they had just raised over a billion-dollar fund in Benchmark IV. The overhang of the misfit of how we practice our business of partnering early, going shoulder to shoulder with the entrepreneur, and deploying that volume of capital… There are a number of things that happen when strategies are misaligned with purpose and values. The main thing that happens is it’s just less fun. I looked at this simple question. Our Monday meetings go somewhere between six to eight hours. How much of it is joyful and aligned, and how much is dealing with stuff that doesn’t bring us purpose and meaning and value in the business? What I feel like we got right is that we select people who care mostly about the proximity to the entrepreneur and being able to deliver a meaningfully differentiated experience for them. So they come away and give a reference to us that says, “Benchmark shows up on all the recruiting calls. Benchmark is at the epicenter of our tough decisions. They’re always available.” “They” being us individually, and then as a group. Scaling, just asking the question of more capital, equals a whole bunch of activities that I think degrade, they eat at the essence of why we practice the business.
· Peter Fenton, Jack Altman, Eric Vishria
The outcome of maximum cash-on-cash multiple is degraded with scaling. The quality of the relationship with the entrepreneur is degraded by scaling. Ultimately the joy is degraded because there’s some other thing that’s growing, an incentive system that fuels “more is more.” It isn’t wrong for other people to do it. I just know what their Mondays feel like. We leave Monday and carry that energy and effervescence and sense of purpose into every day that follows. When we didn’t do that and we had more activities, more extracurricular activities, man, it felt the opposite. You wanted Monday to end, and then you were a little less of yourself the rest of the week. [00:00:00] S0: How about you, Eric? [00:00:00] S3: This strategy is not financially maximal, for us. No one’s crying for us, we’re doing fine, but it’s not financially maximizing. It’s happiness maximizing. It’s happiness maximizing for the kind of person who wants to do the work. [00:00:00] S0: Can I put a third variable there? There’s happiness and financial. If you had to put a third variable of “impact”, do you think that you can have the most impact this way? Or do you think you could increase your impact if you worked with more companies, even if you suffered a little bit for it? [00:00:00] S3: I don’t know that the way we do it scales, unfortunately. It just doesn’t scale. [00:00:00] S0: Is that because of the board seats? [00:00:00] S3: Yeah, it’s the engagement. The engagement with the entrepreneur is the time limiter and the constraint. That’s it.
· Eric Vishria, Jack Altman, Ev Randle
[00:00:00] S3: Yeah, it’s the engagement. The engagement with the entrepreneur is the time limiter and the constraint. That’s it. [00:00:00] S0: Ev, you obviously came from bigger firms, Founders Fund and KP. I guess you’re only two months in now? [00:00:00] S4: Three months. [00:00:00] S0: Your experience on this has to be notable because it must operate so differently. [00:00:00] S4: One of the beautiful parts about the asset class today is that the menu is so large in terms of how you want to spend your day to day and what you want your life to look like as an aggregation of that. Even among firms that are larger, KP is very different from Founders Fund, which is very different from Sequoia, which is very different from Andreessen, which is different from Lightspeed and GC. Some firms are more similar than others, but every firm is actually quite distinct. The thing that really stands out about Benchmark—to Chetan’s point about it being even more relatively differentiated than it was in the past—is that as the prevailing trend has been toward scaling and getting to mega scale… I talk to some of my friends and peers at some of these larger firms and the way that they talk about their day to day and their job and how they’re getting fulfillment out of their job… Let’s say it’s over the summer, they’re like, “Yeah, I’ve already done four deals this year, so I’m having a pretty good year.” [00:00:00] S0: That’s quite a lot.
· Jack Altman, Ev Randle
[00:00:00] S0: That’s quite a lot. [00:00:00] S4: That is the North Star and KPI of what’s giving you fulfillment? Do you like the founders? Do you like the companies? Or is it just the fact that you’ve shoved capital into four investments and four companies? [00:00:00] S0: This gets at one of the things that was a noteworthy difference for me, going from running a company to now doing investing. As a company, money’s involved, but the primary work is about a product and customers. In venture, there is at least one way to practice it where it’s primarily about dollars. I just don’t think that’s a path to happiness. [00:00:00] S4: It can be for some people. This is a group that’s very much self-selected into maybe the Charlie Munger punchcard approach, where over your lifetime you might only have ten meaningful partnerships. So every single one of those partnerships should be unbelievably meaningful for you and for the founder you’re working with. I think that fundamentally comes into conflict with the idea of each of us going out and doing eight investments a year or scaling up massively. [00:00:00] S0: What are the principles or foundational tenets of Benchmark? If you had to describe the three to five things that define what Benchmark’s about, how would you name those?