Uncapped with Jack Altman
· 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?
· Jack Altman, Chetan Puttagunta
[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? [00:00:00] S1: We want to be the first call for an entrepreneur. We want to be their most important and most impactful partner. It’s pretty easy to quantify. You can ask any of the companies we all work with. Who do you call first when you hit a patch of bad news? Who do you share that with? We want to be that person. That can only come from being there for the founder, having full trust between you and the entrepreneur, and the entrepreneur knowing that when they speak to one of us they’re getting an authentic experience. I’ve noticed with these large groups that we’ve all been part of, boards and stuff, whenever bad news gets presented in a board meeting, you can see panic in some people in the room because they have to go tell their boss, with the board meeting notes afterwards, “Things are off track.” [00:00:00] S0: By the way, it’s also a reflection of something in the relationship if they’re learning bad news live in a board meeting.
· Jack Altman, Chetan Puttagunta, Eric Vishria
[00:00:00] S0: By the way, it’s also a reflection of something in the relationship if they’re learning bad news live in a board meeting. [00:00:00] S1: Sure, 100%. We’re working with such unformed companies and people that there’s going to be bad news. If you aren’t expecting that, then you’re doing this job all wrong. Things go well, things go badly, things go sideways, things go up, things go down, stuff happens. As long as the entrepreneur knows that they can call you and you’re going to be there and there’s trust there and you’re that first call—that’s what we aspire to in every single one of our relationships. [00:00:00] S3: So there’s that part of it, which we’ve talked about a bunch. And then the other part is the equal partnership. I think that’s a very special thing. Ev’s been here for a quarter, Peter’s been here for twenty years. I think I’m on eleven. You’re on what, eight? [00:00:00] S1: Yeah. [00:00:00] S3: That equal partnership is really special and something that also doesn’t scale, frankly. It has a very special dynamic. I remember when I joined and you’re just this new person. It’s my first investing job. Peter and Bill and Mitch and Matt, who were the four that I joined, they’re asking me about doing things. You’re like, “I have no idea. I have no idea how to do this job or anything else.” But I think it relates to this deep belief in the equal partnership. I think it’s very empowering for a new person. I found it very empowering. [00:00:00] S0: Ev told me he was disempowered.
· Jack Altman, Eric Vishria, Chetan Puttagunta
[00:00:00] S0: Ev told me he was disempowered. [00:00:00] S3: He was disempowered right out of the gate. I think it is very empowering for the new person. It also creates, for the right kind of person, a lot of internal drive and expectation because you’re like, “Oh, I better not fuck this up.” I think that’s a magical piece of it. [00:00:00] S0: Why is it so hard for most people to do this? I think a lot of other firms want it, but it effectively rounds to zero the number that can do it. [00:00:00] S3: I have this belief that the biggest leap wasn’t at the founding of Benchmark. The founders came together and figured out how to cut things up, and they decided it’s equal. But then they had an amazing first fund. Benchmark I was a legendary 70x return or something like that. [00:00:00] S0: eBay. [00:00:00] S3: So they built all this brand value. [00:00:00] S0: They gave it away. [00:00:00] S3: And then they gave it away. I think that was the leap. [00:00:00] S0: Nobody can do that. [00:00:00] S3: That, I think, is the hard part, right? It’s like, “I built the firm, I built the brand. I should get some economics from that.” Whatever it is. [00:00:00] S1: No residual economics is the craziest thing. [00:00:00] S0: Nobody does that. [00:00:00] S3: It’s the craziest thing. It’s the craziest thing. [00:00:00] S0: There’s no incentive really to do it unless you really care about legacy and something other than yourself. The incentives are very thin.