Sarah Tavel, General Partner at Benchmark, discusses her Hierarchy of Engagement framework for growing a consumer startup and her Hierarchy of Marketplaces framework for building a marketplace startup. She highlights the importance of measuring cohorts, focusing on core actions, and dominating the market. Tavel provides examples of core user actions from Pinterest and YouTube, and emphasizes the value of starting in underestimated markets. Plus, a lightning round of questions and answers.

Sarah Tavel from Benchmark discusses the future of foundation models, application layers, and AI. She talks about the shift towards selling work outcomes facilitated by AI, challenges in AI training costs, and the importance of strong partnerships in venture capital investments.

Sarah Tavel has spent the past four years as a general partner at venture capital firm Benchmark, after previously serving in the same role with Greylock Partners and as the first-ever product manager at Pinterest. In this episode Shane and Sarah how studying philosophy helped in her career as a venture capitalist, the value of intellectual rigor, her concept of the net-present value of pain, why every strength has a corresponding weakness, where executive boards go wrong, assessing the performance of a CEO, lessons of rapidly scaling at Pinterest, and so much more. -- Want even more? Members get early access, hand-edited transcripts, member-only episodes, and so much more. Learn more here: https://fs.blog/membership/   Every Sunday our Brain Food newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/   Follow Shane on Twitter at: https://twitter.com/ShaneAParrish

Benchmark GPs Sarah Tavel and Eric Vishria discuss central ideas of Benchmark's firm-building beliefs, including platform teams' role in aiding general partners. They explore venture capital challenges, the impact of capital on investment strategy, and the importance of playing your own game in a competitive market.

It’s been a sad state of affairs for consumer companies not named TikTok. Poparazzi just shut down. (At least some of the team went to Instagram.) Popshop is struggling. The venture capital firm Benchmark helped establish both companies as consumer startups to watch by leading their Series A rounds. Sarah Tavel, who led the investment in Poparazzi and has worked closely with Popshop, agreed to come on the Newcomer podcast to talk about the brutal state of consumer startups. “Our deep belief at Benchmark is that our job is not to predict the future, but to try as best we can to see the present clearly,” Tavel told me.Of course, it’s not just Benchmark’s once high-flying startups that are reeling. Andreessen Horowitz audio company Clubhouse laid off more than half of its employees. Hype for the photo company BeReal seems to be dying down. (Searches for the company’s name on Google are at less than half their peak.) “It is a really tough environment right now to build that type of company,” Tavel said about startups building for consumers. “It’s always been difficult, but the level of difficulty has been turned all the way on. Because right now, anybody building something in consumer has to compete with the most addictive consumer format that we’ve ever had — which is short video.”Tavel, who co-led an early investment in Pinterest and then became the company’s first product manager, talked through some of the most promising opportunities in startups. Artificial intelligence seems poised to create new consumer startups. Tavel flagged the legal artificial intelligence company EvenUp, which just raised at a $350 million valuation from Bessemer, as one such promising startup. I marveled at the bootstrapped rise of Midjourney. But, of course, many generative AI startups, especially ones building foundation models, are raising such large rounds that it can be difficult for a firm like Benchmark to rationalize an investment. We also talked about one of Tavel’s most successful investments at Benchmark, Chainalysis. The blockchain data company raised $170 million at $8.6 billion last year. The New York Times wrote a glowing profile of the company last month. Tavel, who doesn’t like to announce her startup investments, revealed that she has secretly invested in an unannounced NFT company.“Crypto is a bad word now,” Tavel told me. “It’s really hard to train consumers to trust something again — once a consumer has made a first impression. It’s much easier to teach a user a first impression than to rewrite that first impression.”Finally, I asked Tavel to give us a peek behind the curtain at Benchmark. Fortune’s Jessica Mathews recently interviewed Benchmark’s Bill Gurley about his decision to step back.Mathews wrote:“The venture business, if you want to be at the top, requires insane, remarkable hustle… You have to live in fear that the next Google is going to get funded by a firm that’s not yours,” he says. “Either you’re in there rowing as hard as you can, because we’re all a team, or you’re not.”That said, he still has strong instincts about the future of tech. “If I were still active as a venture capitalist, I’d be looking at a lot of the vertical applications of A.I. I look at the coding stuff, and it’s insane… If you’re not using it, I think you’re probably writing your own death certificate as a programmer, because people are going to be so much more efficient. And the question is: What are other applications that have that kind of productivity boost or lift, and I think people are trying to figure that out.”But in the end, it was a book by Steve Martin, Born Standing Up, that helped convince Gurley it was time to step back. “One day, [Martin] is in Vegas and he comes out, and the top row is empty, the first time he’s ever seen the top row empty. He quits the next day—never does standup again. And then he goes off and he does his banjo and his theater and his acting.… Like I said, I don’t think I ever played the stage, so I’d rather not say I’m the same. It influenced me. That notion influenced me.”Today, the Benchmark partnership is made up of Tavel, Peter Fenton, Eric Vishria, Chetan Puttagunta, and Miles Grimshaw. Tavel said about the firm, “We’ve always had a pretty simple idea, which is that there’s this creative destruction.”“Once you start — there’s no training wheels. So you’re thrown into the deep end. You’re an equal partner and you’re expected to be 100% until the minute that you retire,” Tavel said. “And when you have an equal partnership, it kind of pushes you in the direction of just recognizing — as Bill said in that interview — the hustle may not be in you anymore. And if you feel that way, then the model — as was set up by the founders — is such that it’s time to raise your hand and move on.”Of course, my understanding is that partners like Gurley, Matt Cohler, and Mitch Lasky remain fairly heavily involved at Benchmark even so. “It’s like an affliction. The reason they’re here in the first place was because the curiosity and competitiveness and the drive for learning and relevance, being in the mix, that never leaves you,” Tavel said. “They are a significant portion of our LP base, they’re still there on Mondays, and I’m texting all of them all the time.”Find the Podcast Get full access to Newcomer at www.newcomer.co/subscribe

In this discussion, Sarah Tavel, a seasoned VC known for her insights into Foundation Model companies, shares her thoughts on the enormous investments by hyperscale companies in AI. She explores the tension between proprietary and commoditized models. Tavel also highlights the competitive challenges faced by Meta as it develops Llama 3, and the rising accessibility initiatives that are vital for engaging communities. Additionally, she addresses the economic dynamics driving AI investment and the potential risks of a tech bubble.

Sarah Tavel from Benchmark discusses tactics for navigating the venture landscape, emphasizing enduring value over hype. They explore governance in startups, strategic hiring, and making non-consensus bets in investments. The conversation also covers the challenges of vanity metrics, AI in software models, and the importance of building strong founder relationships.

My guest this week is Sarah Tavel, a general partner at Benchmark, working alongside past guests Bill Gurley and Chetan Puttagunta. Sarah has a long history as both an investor and as an operator.  She was an early product leader at Pinterest before joining Benchmark. Sarah has become one of my go-to resources for topics like networks, consumer technology, and marketplaces among many other topics. I’ve used her framework for how to think about client engagement, company data, and marketplace liquidity and quality over and over again in my business life. I’m so excited to finally have her on the show.  Please enjoy our conversation. For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 1:24 – (First question) - Lessons learned from watching the food delivery space 5:44 – Hip camp and how they are thinking about the space rental sector             5:45 - The a16z Marketplace 100 7:47 – Valuing private companies vs public companies 9:37 – Building marketplaces 14:24 – Tipping a market             14:30 – Bill Gurley Podcast Episode 18:09 – How to incorporate reputation scores into a network 19:55 – Search ranking as a tool for marketplaces 21:00 – Size of marketplaces vs their competitors 22:15 – Niching of marketplaces             22:21 - Chetan Puttagunta Podcast Episode 23:26 – State of the consumer social sector 27:50 – The LinkedIn problem and how she would build a social platform 30:42 – Things that are piquing her interest in the consumer space 32:20 – Lessons learned about scaling while working at Pinterest 38:42 – Pricing and the marketplace 41:25 – Identifying and optimizing a Core Action in a digital business 44:18 – Accruing benefits and mounting losses as part of the product design 47:48 – Her investment in Reci 52:18 – How should companies gather the best data from their business 56:03 – Lessons to SaaS investing 56:29 – Kindest thing anyone has done for Sarah 57:45 – Most interesting philosophy lesson             58:09 – Creating a Kingdom of Ends   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on Twitter at @patrick_oshag

Sarah Tavel and Auren discuss selling work in SaaS industry, AI impacts, consumer social transformation, AI avatars, and unconventional wisdom in Harvard, UAPs, TikTok, and fundraising.

Benchmark's Sarah Tavel discusses strategies for competing in the venture landscape, governance's role in startups, and the relationship between hype and investments. Topics include valuation, founder relationships, and portfolio management challenges. They emphasize hiring the right team, building enduring value, and investing in non-consensus opportunities.