Uncapped with Jack Altman
· Peter Fenton
[00:00:00] S2: We’re focusing on the positive case. The negative case, which is useful also to think about—and it’s actually true if you’re an entrepreneur—is this word “inauthentic.” It’s easy over time, over many decades, to see the masks, the fakeness, the posing. If there was one trigger for all of us—and I think this is true in entrepreneurship, it’s true for the employees you’re recruiting—it’s that they think you’re faking it. If there’s a little “fake it to you, make it” thing, put that aside. I think that’s broadly bad advice. If someone’s not willing to be vulnerable with us in the meeting and expose what they don’t know and be real, then how can we have a relationship? There have been people who’ve come in here, who’ve done well, who’ve raised money. Particularly now in the cycle, you get people who are playing a promotional game because there’s something attractive in the external metrics. It could be a research background—pick your favorite—and they think, “Okay, we’ve got to sex that up a bit and then we’ll flip these people.” One of the common threads in Benchmark investments is that there’s very low representation of the promoter. There are exceptions. The case where you find someone who’s really talented but they’re in the wrong market and we don’t back them but we love them, that happens. But when we get in trouble as an industry is when we start to become quite accepting of the… Forgive me, this is the distinguishing trait between founders and entrepreneurs. In a market like the one we’re in, the number of founders increases geometrically. I think the number of entrepreneurs stays as a fixed constant. So what happens is we have a lot of founders. Anyone could be a founder. I could be a founder. You were a founder, but you’re also an entrepreneur. Entrepreneurs have this guile. There’s a sense of leverage. Brendan at Mercor to me is an entrepreneur in any cycle, in any market. He happens to also be a founder right now. I think that’s not the case for a number of people who found companies who would otherwise, if the market was shitty, be employees at big company X, Y, or Z. As a founder, you have to introspect. Do you have the entrepreneurial qualities? Study entrepreneurship. A vast majority of entrepreneurs drop out. The phenotype of the personalities is that they don’t want to be validated by a system they didn’t create.
· Peter Fenton, Eric Vishria, Chetan Puttagunta
They’re not looking for fancy brand names and they’re not attracted to big, fancy whatever. They look for things that are substantive. [00:00:00] S3: Yeah, they’re dropouts, not straight-A students. [00:00:00] S2: And there are exceptions. Bret got great grades. [00:00:00] S3: Bret’s in that Venn diagram, those “six people in the universe”. [00:00:00] S2: This market right now, because it’s so attractive to be a founder, has brought in a degree of promotion and the sorts of stuff that get people into trouble over the mid to long term. Our whole system is identifying and getting proximate to the entrepreneurial energies, which are, as we know, forces beyond all measure. [00:00:00] S1: There was a period of time between Q4 of 2022 and the end of 2023. There was a broader macro tech correction where a bunch of public tech stocks corrected. There was a tightening of the late-stage market. Interest rates were going up and all the tourist capital had fled the scene for a little bit of time. Capital just got a little bit harder to raise. At that time, what was really interesting is if you look at all the seed and Series A deals that we did and where those companies are now, it will look like our hit rate went way up. But I actually think what happened is that if you were willing to start a company at that point in time, in AI, you were a true believer. There was some natural inspiration for what we were doing. Think about it: Lin at Fireworks, Bret at Sierra, Harrison at LangChain. They’re companies where the entrepreneur had some fire.
· Chetan Puttagunta, Eric Vishria, Jack Altman, Peter Fenton
[00:00:00] S1: There was a period of time between Q4 of 2022 and the end of 2023. There was a broader macro tech correction where a bunch of public tech stocks corrected. There was a tightening of the late-stage market. Interest rates were going up and all the tourist capital had fled the scene for a little bit of time. Capital just got a little bit harder to raise. At that time, what was really interesting is if you look at all the seed and Series A deals that we did and where those companies are now, it will look like our hit rate went way up. But I actually think what happened is that if you were willing to start a company at that point in time, in AI, you were a true believer. There was some natural inspiration for what we were doing. Think about it: Lin at Fireworks, Bret at Sierra, Harrison at LangChain. They’re companies where the entrepreneur had some fire. [00:00:00] S3: God, were all those done in that era, that one year? [00:00:00] S1: Yeah. [00:00:00] S0: I think you’re right. A lot of people read it as, “What happened here is they just got to the blue ocean thing first.” Maybe there’s a degree of that. But a lot of it is that if you want to do this at a time when it looks really painful, that’s just a different subset than people who are going to do it at a time when it looks incredibly attractive. [00:00:00] S1: That’s right. [00:00:00] S2: 2008 to 2011, when we did the Series A at Uber, Instagram, Twitter— [00:00:00] S3: Snapchat. [00:00:00] S2: Snapchat. But then by ‘13, ‘14, it became very—
· Peter Fenton, Jack Altman, Chetan Puttagunta, Eric Vishria
[00:00:00] S2: Snapchat. But then by ‘13, ‘14, it became very— [00:00:00] S0: It’s funny because all the think pieces and essays about this stuff are always like, “There was a new technology and on top of that new technology came ‘X’. You get cloud, you get blah blah blah.. You get mobile, you get blah blah blah. You get AI, you get blah blah blah.” I think it’s true, but you don’t really see people talking about how in the moments when the psychology requires a different kind of hardness, it’s probably a bigger explainer. [00:00:00] S1: A hundred percent. And I think in that moment in time in 2022, 2023, early 2024, if you wanted to be in AI applications and AI application enablement, it actually took a special kind of person that truly believed regardless of what anybody else thought. Because at that time it was quite unpopular and weird to decide you wanted to build an AI application. The natural assumption was that fundamentally the foundation models were so powerful that as they reached more and more intelligence, they would just start to gobble up the applications themselves. [00:00:00] S0: Even if you look at the people who worked at the labs in the late 2010s and now you compare those people to the people who are working at the labs… Obviously, the people are brilliant now. But you look at Ilya and Greg Brockman and all these people. They were doing it when it was really not cool. [00:00:00] S3: Yes. [00:00:00] S0: Those are still, I think, the most brilliant people. [00:00:00] S3: Yes. [00:00:00] S1: That’s right.
· Chetan Puttagunta, Jack Altman
[00:00:00] S1: That’s right. [00:00:00] S0: There’s something there. The last topic I want to get to is basically how you all are thinking about AI. I realize it’s something we’ve probably all talked about a lot, but I do think it’s the most interesting thing going, and I don’t think any of us want to talk about politics right now. Going through a lot of your recent investments, it’s actually clear that you guys caught the AI wave in a pretty substantial way. A lot of them were not obvious companies. Even Legora, which is like a middle-of-the-fairway venture type of company, was not an obvious thing to do from Sweden. There was already Harvey. I think Manus was a very unusual investment as well. I think Cerebras is extremely interesting. Obviously Sierra was before it was happening, and when it happened, it’s like, “Wait, Bret Taylor’s doing customer support?” I don’t think you guys were loud about AI, but just empirically speaking, you look back and you caught a lot of it. So what I’m curious about is, as you’re thinking now and looking at companies today, what are you excited about? You guys having these conversations as a partnership and being really curious. What is at the top of your curiosity list in AI right now?
· Chetan Puttagunta
[00:00:00] S1: You just have to roll back to the end of 2022 when we happened to get involved with these spectacular entrepreneurs. The thing that became clear to us sitting around a table was that AI was the thing. Even if it wasn’t the thing, it didn’t matter. That was where we were drawn to. It was the thing that had this gravity pull for us. All we wanted to do was spend all of our time talking about it, thinking about it, meeting all the people working on it. Then you have to overlay your value system on the thing that you’re excited by. The thing that we laid on top of that was: what kind of relationships do we want to get into with companies, in that moment in time? We decided we wanted to be in business with companies where that ethic of being the primary partner—board partner, lead investor, first investor, principal investor, principal believer in the mission—is how we wanted to practice investing in AI. That meant we were looking for spectacular entrepreneurs with unique approaches to the market. If you want to do that in a place where you want to be the first investor and back teams with two, three, four, five people, you’re often meeting people that are probably a little bit early on whatever the next curve is. Remember what was happening in 2022 and early 2023. Everybody wanted to start a foundational lab and everybody wanted to aggregate GPUs. There was a big drive to aggregate capital to buy GPUs that would be utilized for training runs. It wasn’t that we had some hypothesis or some macro view of why we don’t want to do that or do want to do that. We were looking for companies and entrepreneurs that resonated with us and wanted to partner with us. In that moment, we met a lot of people that were working on really aggressive ideas. We thought they were spectacular people with spectacular approaches. As a result, you saw this list of companies that we compiled at that time. That was when we did Sierra, when we did Fireworks. We did LangChain, we did Mercor, we did Levelpath, we did Legora, Manus, et cetera. All of that came together. When Eric did Cerebras, the Series A, it’s all of that same stuff: partnering super early with founders working on something that they’re deeply passionate about. Frankly, it’s cliché to say, but all of those investments at the time were a little bit non-consensus. I think you have to be.