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Quick takeaways
- Benchmark Capital overcame initial challenges and skepticism to become a top-tier venture capital firm.
- Benchmark's willingness to take calculated risks demonstrated their ambition and confidence.
- The unique equal partnership model at Benchmark fosters trust, collaboration, and teamwork among the partners.
- Maintaining the equal partnership model requires sustained trust, cooperation, and high performance from all partners.
- When selecting new partners, Benchmark looks for experienced investors who have proven themselves in the industry.
- Benchmark has a culture that values experimentation, adaptation, and a flexible approach to investment strategies.
Deep dives
The Challenging Start and Ambitious Vision of Benchmark Capital
Benchmark Capital, a venture capital firm, faced significant challenges in its early years. They had to overcome skepticism from LPs, including Stanford University, who blacklisted the firm. However, Benchmark's reputation for living up to their promises, their stellar team, and their ambitious vision helped them rally. They recruited Dave Marquardt, the number one executive recruiter in Silicon Valley, to inject new energy into the firm. With Marquardt on board, they made key investments, including webvan, a pioneering e-commerce company.
Webvan: A Bold Bet on the Future of E-commerce
Dave Marquardt's first major deal at Benchmark was webvan, an ambitious e-commerce company founded by Louis Borders, the co-founder of Borders Books. Webvan aimed to deliver groceries and other products to customers' doorsteps. While webvan ultimately faced challenges and is often seen as a cautionary tale, the boldness of the investment demonstrated Benchmark's willingness to take calculated risks.
Setting the Stage for Success
Despite the initial doubts and obstacles, Benchmark's early investments laid the foundation for their future success. The firm's willingness to think outside the box and bet on disruptive ideas like webvan showcased their confidence and ambition. Their strong track record and commitment to delivering on their promises helped solidify their reputation as a top-tier venture capital firm.
The Power of the Equal Partnership Model
Benchmark Capital's success is attributed to its unique equal partnership model, where all partners have an equal stake and share of the economics. This model fosters trust, collaboration, and a culture of teamwork among the partners. It eliminates the competition among partners that often exists in other firms, allowing them to focus on bringing the best value to their portfolio companies. The model also cultivates a high level of commitment and dedication from each partner, ensuring that they bring their utmost effort and capabilities to the table.
Challenges in Maintaining the Model
Maintaining the equal partnership model can be challenging, especially when facing dry spells or setbacks in investing. The delicate balance of trust and cooperation within the partnership must be sustained, and partners must support each other during difficult times. Additionally, the model requires that all partners consistently bring their A-game and perform at a high level. Any deviation from this standard could lead to mediocrity and potential misalignment of incentives. Consequently, partners who no longer meet the rigorous demands of the equal partnership may need to leave the firm.
Selecting New Partners: The Benchmark Approach
When selecting new partners, Benchmark seeks individuals who have already proved themselves as successful venture capitalists. They look for experienced investors who have learned from past failures and have had time to refine their investment skills. These potential partners must still have significant career longevity ahead of them. By recruiting seasoned investors, Benchmark can maintain its track record of success while continuing to bring fresh perspectives and expertise into the firm.
The Fab Four Era: The Rise of Benchmark
During the Fab Four era, Benchmark experienced tremendous success and became known for its investments in marketplaces, consumer social, and gaming. The partnership consisted of Bill Gurley, Peter Fenton, Mitch Lasky, and Matt Cohler, each with their respective expertise. With notable investments in companies like Uber, Snap, and Discord, Benchmark saw significant returns and raised multiple successful funds.
Challenges and Controversies: Uber Lawsuit and More
Despite their successes, Benchmark faced challenges and controversies. The partnership's investment in Uber led to a lawsuit against the founder, Travis Kalanick. This action, along with other factors, contributed to a complex and tumultuous period for the company. However, Benchmark remained resilient and continued to navigate the evolving landscape of the venture capital industry.
The Transition and Evolution
As the Fab Four era came to an end, Benchmark faced a transition and the need to adapt to changing dynamics. The partnership began to shift its focus, understanding the need to refocus on their core strengths. New partners, such as Eric Vishria, joined the firm, bringing fresh perspectives and expertise. Benchmark continued to evolve, remaining a respected and influential player in the venture capital world.
Benchmark Capital's Unique Approach to Investing
Benchmark Capital is known for its unique approach to venture capital, focusing on following exceptional founders and embracing a team-based investment strategy. The firm does not adhere to specific investment themes or theses, but instead evaluates opportunities based on the compelling nature of the company and its founders. Benchmark's partners are all experienced and dedicated to their portfolio companies, providing maximum attention and support regardless of investment size. The firm has a track record of successful consumer investments, with companies like Uber, Snapchat, and eBay, but is also open to exploring enterprise opportunities.
Benchmark Capital's Experimental and Learning-Oriented Culture
Benchmark Capital has a culture that values experimentation and learning. The firm regularly conducts partner dinners to gather feedback from CEOs of companies they missed investing in to understand why and make adjustments accordingly. Benchmark has also shown a willingness to adapt and explore different investment strategies, such as mezzanine investing and growth investing. While they have predominantly focused on consumer investments in the past, the firm is open to exploring enterprise opportunities and potentially stepping into areas like public company investing. Benchmark's approach is characterized by being flexible and breaking traditional rules when it makes sense to do so.
1.
Introduction
2min
2.
Fund Rise Innovation Fund
5min
3.
Achieved Dot FM Podcast - I'm So Excited for This One
2min
4.
The 800 Pound Gorilla Kleiner Perkins
2min
5.
The Kliner Perkins Model of Venture Capitalism
3min
6.
Kp Was the Best Venture Firm at the Time
2min
7.
The Rock in Venrock
2min
8.
Tv I Technology Venture Investors
2min
9.
How Does a Venture Firm Actually Work Economically?
2min
10.
The Divided Carry in Venture Capital
2min
11.
The Young Robert Kegel
3min
12.
The Importance of an Equal Partnership
2min
13.
The End of Venture Capital
2min
14.
Totally Copy Paste Those Exact Words
2min
15.
The Bug of Equal Partnership
3min
16.
Are You a True Believer?
2min
17.
Entrepreneurial Dna Is a Good Thing for Venture Firms
4min
18.
Venture Capital - Benchmark Capital
2min
19.
LPs - Is This a Good Allegory?
2min
20.
LPs Love It or Hate It?
2min
21.
Stanford Black Balls Benchmark Insane
2min
22.
Benchmark Fund One
2min
23.
Benchmark's Val Vaden Isn't a Venture Capitalist, Is It?
2min
24.
Venture Capitalist Val Evaden - The Number One Characteristic
2min
25.
The Future of the Benchmark Capital Fund
2min
26.
How Dave Becomes the Leading Executive Search Firm in High Technology
2min
27.
Benchmark Capital vs Netscape
1min
28.
E-Boys by David Bern
2min
29.
The Swagger Bet in Venture Capital
2min
30.
Benchmark Partners - Can We Just Do Food?
3min
31.
The First Inside Account of Venture Capitalists at Work
2min
32.
How to Find a Killer Executive for a Consumer Company
3min
33.
General Magic - Piaar's a Computer Engineer
2min
34.
What's the Deal With eBay?
4min
35.
What Is the Story Behind the AWS Investing in Ebay?
2min
36.
Equity Back Loans to Pare and Jeff
2min
37.
What's in Dr. Asenhar's Head?
2min
38.
The IRR on a $5 Million Fund Is Unreal
2min
39.
The EIR Strategy of Bringing in Entrepreneurs and Residents
2min
40.
eBay and Benchmark - What Are They Gonna Do?
3min
41.
The First Business I Ever Did Was Selling Beanie Babies on eBay
2min
42.
Amazon vs eBay - What's the Difference?
3min
43.
Startup Finance and Accounting for Startups and Growing Companies
2min
44.
Pilot.com Slash Acquired
2min
45.
Creating a Culture of Teamwork
5min
46.
Benchmark and Venture Capital - The Absolute Crux of the Answer
2min
47.
You're Gonna Leave for a GP in a Fund
4min
48.
Benchmark Secret Sauce - It's Harder to Cooperate Your Way to Success
3min
49.
Benchmarks - Having to Have the Swagger
2min
50.
The Biggest Problem Is the Target of People Who Want to Work With You
2min
51.
Are We Cutting Off Our Nose to Despite Our Face?
2min
52.
The New Wave of America's Greatest Companies
2min
53.
The One Thing They Didn't Do Is They Don't Bring on Junior Partners
2min
54.
Benchmark Equal Partnership Model
2min
55.
The Best 30 Year Old Venture Investor
3min
56.
What Can We Say About Bill That Hasn't Been Said
2min
57.
Having Bill Girly on Your Board Is Like Bringing a New Co-Founder
2min
58.
Silicon Valley Open Table History Trivia
4min
59.
Benchmark and Bill's Big Marketplace
2min
60.
How Did Petchbury Build by Combinator?
2min
61.
The Trade-Off of Running a Small Equal Partnership
2min
62.
The Cracks Start Showing in Venture Capital
4min
63.
Is Facebook a Google Size Miss?
2min
64.
Is That Really What It Was?
2min
65.
The Benchmark Roller Coaster
2min
66.
Are They Going to Take No Further Economics?
2min
67.
What's the GP Group Look Like at This Point?
3min
68.
Is Peters a Baby GP?
2min
69.
The Brett Taylor Cinematic Universe Is Unbelievable
2min
70.
Mitch Lasky Is New Partner Number One
2min
71.
The Final Member of the Fab Four
2min
72.
I Don't Think Anyone Understands Mobile Advertising
2min
73.
Is Mitch a Venture Capitalist?
2min
74.
Venture Capital - Is Instagram a Good Investment?
2min
75.
Is Riot Games and Fun Seven?
2min
76.
Benchmark Fund One Is One of the Best Funds of All Time
3min
77.
The Sevenfab Four Glory Fest
2min
78.
We Work
2min
79.
Benchmark Invest Girly Joins the Board
1min
80.
Uber Angel Investors - The Best Partners
2min
81.
I'm Wistful for 2011 2012
2min
82.
Is Uber the End of the Fab for Era?
2min
83.
Uber Is Getting Mark-to-Market Marks From Benchmark Fund Seven
2min
84.
The Impact of the Paper Valuations at Uber
1min
85.
Is This Really an Existential Risk?
2min
86.
Is This the End of the Fab Four Era?
2min
87.
Erics Kills It Again
2min
88.
I Love the Baby GP
2min
89.
How to Make a Non-Consensus Bet on a Cryptocurrency Investment
2min
90.
Spec Hire
2min
91.
NCS Capital David and Miles Grimshaw
2min
92.
Defining Margin of Safety
2min
93.
The Duration of Growth Is More Important Than Just the Growth Rate
2min
94.
Is Benchmark Capital Really Goofy?
2min
95.
Benchmark
3min
96.
I Love This Quote From Benchmarks 1997
2min
97.
Benchmark VCs Are in the Business of Selling American Green Dollars
2min
98.
Sequoia
2min
99.
Benchmark Isn't a Position
2min
100.
Benchmark Partners Aren't Your Next Round of Capital
2min
101.
Is the Benchmark Model Really Working?
2min
102.
Benchmark Playbook Discussion
2min
103.
Is Benchmark a Great Breakout Consumer Investing Firm?
2min
104.
Is Grading a Relic of the Past Unacquired?
4min
Benchmark Capital. We tell the tale of the legendary equal partnership that accomplished something no other venture firm can claim: twice it has produced the highest returning fund of its cycle, each time with a 100% different GP lineup. If ever there were a playbook for successful generational transfer of a generational-defining venture firm, this is it. We spend 3.5+ hours digging into how the dotcom “eBay eBoys” transformed into the rockstar Fab Four of the Uber, Instagram and Snap mobile gold rush (spoiler: not by a straight line!), and what the future holds for Benchmark’s next GP generation. If you’re a student of the venture game from any angle — founder, GP, LP, etc — this is a story you need to tune in for!
If you want more Acquired, you can follow our public LP Show feed here in the podcast player of your choice (including Spotify!).
Sponsors:
Statsig: https://bit.ly/acquiredstatsig24
Vanta: https://bit.ly/acquiredvanta
Crusoe: https://bit.ly/acquiredcrusoe
Links:
- Benchmark’s website circa 1997
- Benchmark’s website circa 2000
- Benchmark’s website today
- Episode sources
Carve Outs:
- Bill Gurley’s Runnin’ Down a Dream talk
- Smartless Podcast
- Mitch Lasky on Invest like the Best
- Ursula Le Guin’s Earthsea Cycle
Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
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