The Benchmark Partnership: Peter Fenton, Eric Vishria, Chetan Puttagunta, Ev Randle | Ep. 41
We dive into why they've built an equal partnership, eliminated residual economics, and resisted scale – and what that enables for founders, decision-making, and practicing venture as a craft.
Peter Fenton is the longest-serving full-time general partner at Benchmark. Over the last two decades, Peter led investments in Twitter, Yelp, Elastic, Docker, Zuora, and many others. More recent investments include Sierra, Ollama, ClickHouse, and Airtable. Peter has been on the Forbes Midas list 18 years in a row.
Eric Vishria is a general partner at Benchmark. Eric led investments in Confluent and Amplitude, both of which IPO’ed in 2021. He is also an investor and board member at Cerebras Systems, Benchling, Contentful, among others. Most recent investments include Fireworks, Quilter, and Greptile. Before joining Benchmark, Eric was the co-founder and CEO of a social web browser company called Rockmelt, which was sold to Yahoo.
Chetan Puttagunta is a general partner at Benchmark. Eric is an investor and actively involved with Elastic (which IPO’ed in 2018), Legora, Manus, LangChain, Airbyte, Cursor, Reducto, Numeral, and the list of great companies goes on. Noteworthy exits include MuleSoft, which was acquired for $6.5B by Salesforce and Acquia, which was acquired for $1B in 2019. Prior to Benchmark, Chetan was a general partner at NEA for seven years.
Ev Randle is the newest general partner at Benchmark. Prior to joining the firm, Ev invested in Anthropic, Chainguard, Databricks, Flock Safety, and SpaceX, among others as a partner at Kleiner Perkins. Through his experience at Founders Fund and with personal capital, Ev also has invested in Rippling, Ramp, Wave, Faire, Figma, among others.
Timestamps:
(0:00) Intro
(0:18) Becoming more rare to stay small
(4:58) Activities that degrade with scale
(9:08) The principles of Benchmark
(14:07) Contributing as much as you take out
(18:37) Doing the right, hard-to-sell things
(23:31) Benchmark’s relationship with founders
(31:29) What makes a quality investor
(36:15) Cultivating different tastes in founders
(39:56) Spotting special people
(46:06) Consensus vs non-consensus bets
(47:50) Investing in founders, then AI
(53:06) Founder centricity matters more than ever
Links:
https://x.com/peterfenton
https://x.com/ericvishria
https://x.com/chetanp
https://x.com/EverettRandle
https://x.com/jaltma
Watch on YouTube; listen on Apple Podcasts or Spotify
Clips
What degrades with scale
As many VCs raise eye poppingly large funds, Benchmark is one of the few hold outs staying small.
Peter articulates why this is integral to how Benchmark works.
"More capital equals a whole bunch of activities that...eat at the essence of why we practice the business.”
Most people talk themselves out of investing
Eric Vishria is an incredibly clear thinker and communicator.
Here he talks about passing on investing even when the founder is clearly special -- he gives the example of Alex at Scale.
"People will see that specialness...and talk themselves out of stuff for other reasons."
Transcript
Disclaimer: Transcript generated with AI assistance and lightly edited for clarity and accuracy.
Why Benchmark Stays Small
Jack Altman
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?
Chetan Puttagunta
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.
Jack Altman
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.
Chetan Puttagunta
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.
Jack Altman
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
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. 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.
Jack Altman
How about you, Eric?
Eric Vishria
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.
Jack Altman
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?
Eric Vishria
I don’t know that the way we do it scales, unfortunately. It just doesn’t scale.
Jack Altman
Is that because of the board seats?
Eric Vishria
Yeah, it’s the engagement. The engagement with the entrepreneur is the time limiter and the constraint. That’s it.
Jack Altman
Ev, you obviously came from bigger firms, Founders Fund and KP. I guess you’re only two months in now?
Everett Randle
Three months.
Jack Altman
Your experience on this has to be notable because it must operate so differently.
Everett Randle
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.”
Jack Altman
That’s quite a lot.
Everett Randle
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?
Jack Altman
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.
Everett Randle
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.
The Equal Partnership and Benchmark’s Culture
Jack Altman
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?
Chetan Puttagunta
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.”
Jack Altman
By the way, it’s also a reflection of something in the relationship if they’re learning bad news live in a board meeting.
Chetan Puttagunta
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.
Eric Vishria
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?
Chetan Puttagunta
Yeah.
Eric Vishria
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.
Jack Altman
Ev told me he was disempowered.
Eric Vishria
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.
Jack Altman
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.
Eric Vishria
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.
Jack Altman
eBay.
Eric Vishria
So they built all this brand value.
Jack Altman
They gave it away.
Eric Vishria
And then they gave it away. I think that was the leap.
Jack Altman
Nobody can do that.
Eric Vishria
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.
Chetan Puttagunta
No residual economics is the craziest thing.
Jack Altman
Nobody does that.
Eric Vishria
It’s the craziest thing. It’s the craziest thing.
Jack Altman
There’s no incentive really to do it unless you really care about legacy and something other than yourself. The incentives are very thin.
Peter Fenton
It’s also just rooted in the culture of Benchmark. You go back to Bob, Bruce, Andy. All the founders have played their part. But it was rooted in this idea of respect and affection. You should have a partnership where you really respect and admire your partners. You’d give all your money to any of your partners but then you admire them. There’s an old saying that a virtuoso is somebody who surprises even themself. I believe that about all my partners practicing the business. They’re virtuosos in the aspects of the business that motivate us to do the work.
So Bob raised his hand, I was there, and just said, “It’s time. I’m out.” Others had left before, Andy and others, but there was never a conversation. It was actually the opposite. We gave him economics in the fund. They weren’t giant economics, but it was just a way of saying thank you.
I think as soon as you get into the parts of everyone’s identity that are ego-driven, they lay claim to things psychically that make sense to them. It would never make sense to ask for something from this firm that would entail taking more than you’re giving.
It’s a weird thing to say, but it’s a pressure that I feel as the last of the prior generations. I want to be raising my hand first, before I realize I’m not contributing more than I’ve taken out. Not because it’s an explicit trade, but it’s a cultural ethic.
Cultures, as you’ve found in your company, are so durable. The inertial forces of a culture that gets founded… You asked, what is Benchmark? If I read one book that captures Benchmark, it’s Carl Rogers’ book, On Becoming a Person. The premise of the book is very simplistic in a sense. It was the apex of client-centered psychotherapy. The premise of the book is that to be useful in a relationship, you have to first permit yourself to understand the other person fully.
I think if Benchmark is doing its best work, an entrepreneur comes in here and says, “They see me.” I bet if you ask Andrew at Cerebras who understands him and the founding team most fully—the purpose and the vision of the company—it wasn’t that we found this hire for him, or we gave him this advice about negotiating a contract with company XYZ. It’s that Benchmark understands what he wants to do.
We then do something else that I think is equally important: unconditional positive regard. There are examples in the past at Benchmark where that’s been broken. I think an immune system builds around those failures and says, “How do we not do that again?” as opposed to saying we’re defined by that one act.
So what you see in the current lineup at Benchmark is a really emboldened immune system. We’ve had some vaccinations from past experiences to basically say that we never want to be in a position where the relationship degrades, where there isn’t that faith that we’ve delivered unconditional positive regard. We believe in founders, oftentimes more than they believe in themselves.
If you understand the founder fully and you have unconditional positive regard, then you really can empathize with what they’re going through. I think that nurtures the sorts of success possible with founder-entrepreneurs that we all hold out as the great examples of why we do this job.
Jack Altman
I remember when we spoke last, you talked about the fact that when the Benchmark seat was given to you, from the beginning it’s like, “I’m going to give this to the next person.” I can see why. You’re saying the seminal moment was actually the handoff, because that creates the instigation for all the future handoffs.
Eric Vishria
Yeah and you feel responsibility with that. I think all of us feel responsibility. That was one of the big things we talked to Ev about as Ev was joining.
Jack Altman
The responsibility.
Eric Vishria
That responsibility, you just feel it. Not everyone feels that, which is fine, but—
Jack Altman
Totally. Also, I think if you’re walking in and it’s equal from the beginning, a bunch is given to you at the start. You’re like, “I gotta pay this off to somebody. The people who set me up from the beginning, I can’t really pay them back anymore.” So I can see why you’d be like, “I gotta make sure I give enough before I go”, even though you’re, in a weird way, paying back prior generations. That makes sense.
Peter Fenton
Rooted in that as well, Eric says responsibility and I think he feels it and I respect that. I think the founders gave us permission to basically not take it too seriously.
Eric Vishria
Yeah, they did.
Peter Fenton
They said, “Listen, come on. There’s a group of you. No one’s going to be around in a million years.”
Jack Altman
It doesn’t have to be so heavy.
Peter Fenton
“Everything’s ephemeral.” So what you want is a tight-knit group of people at maximum potential manifestation. The energy, the joy.
The heaviness of “Oh, we’re going to have to maintain this relic and wheel it out. The old tablets in the back about what the founders said…” None of that bullshit. This is a day-to-day thing.
By the way, forgive me. We’re in an entrepreneurial environment where when somebody has a legacy, we want to destroy it. We’re in the business of creative destruction, not permanence and enduring. Forgive me.
Our startups bubble up from nothing, and we stay true to that. I think the firm’s premise is that we should have our own form of creative destruction. There’s no legacy or claim to it at Benchmark. It’s the immediacy and present moment that we deliver. Everything else is secondary.
Being Founder Friendly
Jack Altman
One of the things you just said, I hope is okay for me to press on. I’ve wanted you guys to talk about this. I know each of you individually and I know you all are founder friendly. It’s very easy for people in a competitive venture landscape to poke at one historical example that everybody else has done. If you’re just loud, you can poke at people.
I would say you’re not loud externally and you have a mindset of “we’re going to let our actions speak.” But I’ve wanted you guys to speak because I know you’re very founder friendly. I’ve talked to founders you work with and all of that.
So I’m actually curious to hear your thoughts. You’ve seen some of this stuff. Is it important for you to talk about… It’s what you just said. There’s a thing and then you have an immune reaction to it and the firm updates? How do you process all of that?
Peter Fenton
Humans are storytelling animals. Every firm has their story, and depending on the situation and the motivations of the counterparty, you accentuate certain parts of a firm’s history.
The ethic of the firm—and I think this is borne out even in our worst moments—is that the company must come first. We’re not more important than the company. Nobody’s more important than the company. It’s the initiative, the collective premise of an entity that’s bigger than one individual.
There are moments in the past—and I’ve been around through the generations—where it used to be the standard model that at some point you’d ask, “When are you going to get a real management team?” That sort of faded to, “Well, perhaps we can go the distance. You have the Steve Jobs narrative, which raises the question of what crimes were committed against this notion of general management versus the founder mode reality that we all support.
The part that’s most relevant, and this is what happens every day here, is that we view our job—I do personally, and this has been borne out in the references—as making the founders the best version of themselves. Like any relationship, if it’s simply sycophantic and enabling and codependent, we make them worse. If it’s harsh and judgmental or absent, we make them worse.
So one of the things you need to figure out in references is, what questions should you ask? If you’re going to engage with any great firm, you want to do references. First it’s a phone call but I actually think you could go a level deeper and ask, “How does this person make you a better entrepreneur? How have they unlocked your potential?”
What we care about more than happiness is flourishing. In our companies, I think what’s borne out in the work we’ve done is that if I work with that group, I’m going to be a better version. I’m not going to be living in fear, because then you’re not a better version of yourself. Nor am I going to be getting… Forgive me, what happens in our job right now, I’m struck by the number of boards where I see a relationship that’s sycophantic, where people are afraid to pursue truth because they don’t want to hurt anyone’s feelings.
Worse, I think the greatest crime that occurs in many boards is that somebody says something behind the entrepreneur’s back that they won’t say to their face. One of the things I think is a deep ethic at Benchmark is that we are transparent. We’re going to say it to your face. We may not say it behind your back. We’re not going to be in a situation where it’s like, “here’s what I really thought about the board meeting….”
This idea of congruence, which is a key term in psychotherapy, is that you really want to know that you can trust your partner, that they’re not putting on a mask because they want you to feel a certain way. They’re being real.
Jack Altman
By the way, this also goes to your point about not putting more dollars into the company. If you almost structurally can’t put more dollars into the company, then you just want to tell them the truth.
Peter Fenton
You’re truth-seeking.
Jack Altman
If you’re hoping to win the next round, you don’t want to piss them off because next month you might be writing a term sheet.
There’s the references piece. There’s the “I want to put more money into this company” thing. There’s just the “I don’t want to fight” type of stuff. I do think it leads to that. I think the best version of being founder friendly is not comfort all the time, obviously.
Everett Randle
There was a recent example of this. I recently led an investment that’s still unannounced. We actually had the founders over for dinner in the dining room where we’ll have lunch in about an hour. During the dinner they showed a demo. We were going through their commercial strategy and we gave them a lot of very direct feedback. A lot of it was constructive. It was a really productive conversation. But not every founder responds super well to that.
So I called the founder afterwards and said, “How was that for you? How would you respond to that?” In that call he said, “You as a team are going to make us better founders. I can tell that right away.” Because of that, he really wanted to work together, because it wasn’t just going to be slaps on the back and congratulations. It was going to be a relationship where we really pushed both the founders and the whole team to be a better version of themselves.
Jack Altman
Does it feel structurally different to you than KP and Founders Fund in any way?
Everett Randle
I think maybe the biggest difference is with Founders Fund, because Founders Fund really leans on this kind of Hippocratic Oath of VC, which is “do no harm.” In doing so, we’re going to be completely hands off, that’s kind of the pitch, and if you need something, call us.”
I think that sells really easy. But in practice, I think it sometimes materializes as… I don’t want to say laziness, but it is more passive. It’s like, “We should back founders that are going to figure it out all on their own and don’t need help and don’t need any VC assistance.” Sometimes that works out, and maybe there are founders like that. But I think the vast majority of the time, almost every single founder could use feedback, a sparring partner, any of these things.
Jack Altman
Even Tiger Woods has a coach.
Everett Randle
A hundred percent. Having that position is a great soundbite and goes over really well on Twitter, but when it comes down to it, there are very few practitioners, even the Tiger Woods of the world, that don’t benefit from something like that.
Peter Fenton
Ultimately, the highest accolade of a firm that it seeks is a manifestation of its value system. Everyone in this room—I’ve heard this and I know I’m going to hear this on your newest investment—is that if we’ve really done our job, and you’ll hear this in our references, they feel like a co-founder. Benchmark feels like they were a co-founder.
What does that mean? It wasn’t a conditional transaction. It wasn’t a one night stand where “they gave us money and then we could brag about the brand.” It was that they were proximate with me. What a co-founder does, it’s a bit like being in a partnership where you have a child. There’s something existentially deep that’s permanent in that relationship.
I believe most companies with single founders end up finding proxy co-founders because they need support systems. They need a relational balance with the ups and downs of being an entrepreneur. If we’ve achieved that— You could say it’s not for everybody. Some firms might want more of just the money and the brand. Or they want services delivered by people who work at the firm. Those are different facets.
But the depth that can occur when you have that kind of proximate relationship ends up taking you through troughs that would otherwise leave companies to be sold early or to have a destitute founder who’s just tired.
Jack Altman
There’s also a through-line to it. I felt this as a founder where even a longtime exec might be four or five or six years, but then you have a board member who’s there through the first round, and the second round of execs, and the third exec team. So you’re working many more hours per day with people on your team. But when you look back over a decade, there was somebody who was with you the whole time and it’s hopefully your co-founder and your board members. There’s something about the long arc of it too that is special.
Eric Vishria
I have moved away from talking about it as guidance or advice. I loved your “sparring partner” thing because I think that’s what it is. That’s what the co-founder thing is too. Startups are hard. They’re really hard. The most successful startups are doing things that are new, innovative, and haven’t been done before. Therefore, you’re figuring things out for the first time. They’re things that are challenging and hard and no one knows the answer.
A huge part of the co-founder thing… We should be careful about using it, but that aspiration or that idea is: we’re asking each other questions that sharpen our thinking. We are trying to figure things out together.
That’s a very specific way of working. I’m thinking of a very specific example from last week. Oftentimes, the entrepreneur knows what she wants to do and it’s in there. You’re asking questions to help them realize it and have it surface or get clarity on it. That’s very different from getting advice. That isn’t advice. That’s a sparring partner and a sounding board.
Peter Fenton
Part of what I feel is—forgive me, this is where I have to be the older person in the room—the degradation of our industry. It really has been a degradation. The system has shifted to winning. Our goal is to win.
Eric Vishria
Right, because there’s capital supply now.
Peter Fenton
You have these large sums of capital that need to be deployed. The system is built to create, in the mind of the entrepreneur, a selection criteria. The old saying: if you’re doing POCs, you want to design the criteria of the POC so you win it.
What’s happening is that the industry is programming entrepreneurs in a way to select for things that I think are off target. They’re aligned with the target of the firms and the capital basis they’re deploying, but they’re off-target relative to the quality of the relationship the entrepreneur seeks.
Jack Altman
So what are the big ones?
Peter Fenton
The biggest thing— I’m not going to pick on the off-target things. The on-target things are: when I want a co-founder, what questions do I ask? Do they make me a better version of myself? Do they provide the kind of expansion of my horizons that makes me feel more joy every day for doing this work? Do they keep me honest? Are they available? Do they put me first?
A lot of winning, as opposed to serving… Winning is a moment in time. We average 10+ years on our boards. If you go back and look at the history of my boards, it’s 10+ years. Maybe three or four executive teams, as you say, might go through those years.
The sense of continuity of, “my partner is there.” Not to pick one, but I love my relationship with Howie Liu at Airtable. Howie’s going through a genesis right now and a creativity that I think occurred at the beginning of Airtable. It is so fun to watch. But I understand the human and I know what he’s gone through. I know how to help him at parts, to say, “This is an area you want to be asking some questions about.”
I think that’s different from winning. Winning was a transaction: “Take my capital, I’ve got to get onto the next one.” Because if you win, you’ve got to win the next one.
We say yes once or twice a year, and serve for a decade long. The differentiation of that—because our incentives aren’t the same as deploying capital—creates in the entrepreneur’s mind that they have to ask the right questions. What do you want in that co-founder? Because you can’t fire your board member.
Jack Altman
I’ll take a shot at one of the things I think is off target. It’s become a thing to sell “no board seat”. The pitch is, “one of the advantages of working with our firm is we’ll give you all this capital with no board seat.”
I think there’s a misunderstanding of boards as governance and control rather than boards as signing up to work on the company, which is how it should be understood in 99.9% of cases. But I think it has been very effectively and somewhat disingenuously sold to founders because it sounds good. You keep control of your company and there’s no risk. That means we don’t have to help, so we can deploy a lot more capital.
Everett Randle
It probably says something about the experience of the average founder with the average board member. Can you blame a founder for thinking that’s a good pitch based on the experience that they’ve probably had with the average firm?
Jack Altman
Yeah and also you hear about a terrible situation once and it makes a big impact without nuance. It’s hard.
Peter Fenton
It’s going on right now. These seed rounds at over a hundred million with no board. I know how it ends. It’s just that between now and then, the amount of entrepreneurs that will miss the opportunity to really seek out a close partner, it’s such a shame.
What Makes a Great Founder
Jack Altman
Here’s one of the things I wanted to ask you all about. I’ll take it as a premise that we probably all agree a great entrepreneur is unique or odd or strange or just beats to their own drum in some important way. Maybe there are examples where it’s not like that. We can talk about that too.
Do you think to be a great investor you have to be the same way? Do you have to be unusual as a person to be a great investor? Or is that not the case? Can you just be a regular person who can spot unusualness? I’m asking selfishly because I don’t think I’ve got the oddities that sometimes I wish I had.
Chetan Puttagunta
One of the things about Benchmark in our conversations with Ev… I think Peter framed it perfectly, which is that when you know, you know very clearly. Given our structure of equal partnership, you’re essentially refounding the firm every time somebody new comes on, because the whole dynamic of the partnership changes. The conversations change, the feel changes, everything sort of changes. So it feels like a refounding moment.
There’s some alignment that happens. It goes back to the core of what values you prescribe to as a person. Part of it is that you are competitive. I think that is important. There is a competition aspect to this asset class. At the end of the day, we are investment managers. You enter a company and there’s competition to enter the company, then you invest, and then the company itself faces competition at some point.
You can run competition-free for maybe twelve months, and then the big guys show up. Each of us has faced immense industrial competitive threats from external bodies. You have to have some kind of competitive, persevering spirit about you that can be that stabilizing force for the founders.
You also have to have that empathy that the founders feel it 10-100x more than you. At the end of the day, you as an investor are diversified. You get to work on lots of projects. The founder is simply not diversified at all. This is the only thing they get to work on. This value system of hyper-competitive energy and empathy, that is actually not present in a lot of people.
Jack Altman
You and I talked about this a little bit with Max at Legora. It’s an interesting example. You did the seed. We’re not here to pump Legora, but while we’re here—
Chetan Puttagunta
Let’s pump.
Jack Altman
It was in YC. It’s a legal tech company in Stockholm. There was already Harvey. The question I think I asked you right before we sat down was: why’d you meet? I think once you meet Max, you can see it’s good. But to the extent that that’s a case study in spotting someone who I think is unusual in a very positive, strong way, what was that for you?
Chetan Puttagunta
Peter and I actually met Max in this exact room together, and that was the first meeting we had. I think within fifteen to thirty minutes, we both came away with that unspoken language between us that we want to be in business with this person.
Yes, it was legal tech, but there was some core purpose with him as he was expressing it and the founding story of how he picked that problem. They’re sitting in Stockholm watching Harvey. At the time of our seed round in March 2024, I think Harvey had already raised at a billion and a half dollar valuation or two billion. By the time the product had launched in October of 2024, I think their number one competitor had already raised at a three or four billion dollar valuation.
But what we were backing was him and his co-founders. When we invested, it was a team of five people. They had a very core insight on how to attack the legal market and why LLMs were the perfect fit for lawyers.
When he expressed it… Eric likes to say this a lot. There’s a magic when founders explain something very complex and they explain their unique insight into it, and it becomes very obvious. That’s obviously how the world should work, and with their fire and their energy, that will probably be how the world works.
In Max, we saw it right away. So we needed to be in business with him. That was it. The conversation immediately went to, “Great. What are you doing the rest of the day? We just want to spend time with you because clearly you’re spectacular. Clearly there’s something here.” It’s been amazing.
We didn’t see it right? The product didn’t launch until six months after our money went in. You don’t start to see the amazing stuff that a person can do for a while, but it’s amazing.
Jack Altman
If you look back at other great investments that you’ve had, do you think it’s always clear that the person’s unique to you? In the Legora situation, did something jump out faster? Or are there other situations where you don’t see it for a while? Do you always see it quickly?
Chetan Puttagunta
No, I think you see it quickly, but each person spikes differently.
Peter Fenton
Coming back to your question of whether there’s one way to succeed as an investor: God, no. In this firm, we joke: imagine two circles, entrepreneurs that I respond to, entrepreneurs Eric responds to. There’s this tiny little gray area in between with six people in the universe.
Eric Vishria
For two people who do a lot of software infrastructure, enterprise, or open source or whatever, for our Venn diagrams of entrepreneurs to be so separate is—
Jack Altman
You guys will meet a founder together and one of you will be like, “This person’s amazing,” and the other one’s like, “I don’t see it at all”?
Eric Vishria
I don’t know about that.
Peter Fenton
No, no… “I could never work with that person.”
Eric Vishria
That’s a different statement than whether they’re good or not. I think we often—
Peter Fenton
“Good for you, not for me.”
Eric Vishria
Yes. We do have that.
Peter Fenton
By the way, Bill Gurley and I had that where there’s almost no intersection. This actually relates to any entrepreneur thinking about working with a venture firm. A friend of mine was raising money, a family friend so it wasn’t appropriate for Benchmark. He asked, “How do I choose?” I said, “The question I would be asking if I was an entrepreneur is: which of these esteemed venture capitalists is most personally resonant with you and committed to you?”
They’re going to say they’re committed because they want to win. Codify it. Make them be explicit about the kind of commitment they’re going to make and make it uncomfortably concrete. With most of the entrepreneurs I work with, we speak every Friday. Make it real.
If you don’t want to put the time in, if you don’t feel that response for you with running your fund and for us individually… I knew with Max at Legora, Chetan would be 24/7. He’d fly to Stockholm on a moment’s notice, and he has. And he is today.
Eric Vishria
You’re going today?
Peter Fenton
He’s going today. So there you go. As you introspect in your commitments, does it clear that threshold for you personally? Because if it doesn’t and you’re doing it because it’s a good investment, that is a reliable path to a bad investment and a bad relationship.
I think you’re going to find… Chasing what is it that you see and then allowing that to get washed with experience… Sometimes you’re going to get it wrong. When you get it wrong, you learn. “Okay, don’t make that mistake again.” Because you’ve seen me make that mistake, and vice versa.
Jack Altman
So it’s interesting that you guys have these Venn diagrams. Let’s just say they don’t touch, to make it simple. But they’re both good. I know you both make very good investments. Is that basically because you can cultivate any set of tastes as long as it includes the good stuff? Is that basically what you shake out to?
Chetan Puttagunta
There is a lot of overlap on the people, though. If you look at the people in these Venn diagrams that the four of us have, there is overlap in that.
Eric Vishria
In the qualities of the people.
Jack Altman
Something Keith and Vinod said something interesting when I talked to them together is that they’re really different people. It’s very apparent when you talk to them. But they said one thing that they basically always agree on is: did we walk out of the meeting with a founder and was that person special or not?
I thought that was interesting because I wouldn’t have expected that out of the two of them. They’re quite different, so I would’ve thought there would be very different tastes in there. That doesn’t mean they always want to make the same investment.
Chetan Puttagunta
It’s very rare that one of us thinks a person is special and the other person thinks absolutely not.
Seeing Greatness and Avoiding Mistakes
Jack Altman
Another question I always have is: with really special people, can you miss it?
Chetan Puttagunta
Yes definitely.
Jack Altman
Is it a special ability to identify special people? Let’s take Max at Legora. Let’s say you have a hundred reasonably okay VCs who’ve been doing it for a while. Do you not think most of them would’ve come out and been like, “This guy is great”? Is it unique to be able to see greatness early, or is it more about getting into the right room with Howie and Jack Dorsey at the right time?
Eric Vishria
That’s a good question. I think most of the time people react similarly. People who are good at this will identify or see that specialness. We miss it, everybody misses it sometimes. But there’s a bigger thing that happens, which is that people talk themselves out of stuff for other reasons. The competitive situation. Can the outcome for what they’re working on be big enough? Those kinds of things.
Take Alex at Scale. You met Alex and you were like—
Jack Altman
Something’s going on.
Eric Vishria
This guy is a winner. We saw it very early. We saw it together. Those were particularly painful because we absolutely recognized that he was amazing and a super special person. We absolutely recognized that the autonomous vehicle labeling revenue was bullshit and going to go away in not that long.
So the facts and the read were correct, and the conclusion was incorrect. It’s like, “goddamnit”. That’s a particularly painful one and a good lesson for me.
Jack Altman
But you thought he was special and you passed anyway?
Eric Vishria
Yes.
Jack Altman
Have you ever passed on a special person because you didn’t like something else about the setup and still been glad you did that? Or is the lesson just always to back them if you feel that way, no matter what else?
Eric Vishria
At this particular moment in time, I would say: yes, I did. With the hindsight benefit, if you feel that way… And I think you have chemistry with the person, that’s part of it. Who do we respond to?
Peter Fenton
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. They’re not looking for fancy brand names and they’re not attracted to big, fancy whatever. They look for things that are substantive.
Eric Vishria
Yeah, they’re dropouts, not straight-A students.
Peter Fenton
And there are exceptions. Bret got great grades.
Eric Vishria
Bret’s in that Venn diagram, those “six people in the universe”.
Peter Fenton
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.
Chetan Puttagunta
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.
Eric Vishria
God, were all those done in that era, that one year?
Chetan Puttagunta
Yeah.
Jack Altman
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.
Chetan Puttagunta
That’s right.
Peter Fenton
2008 to 2011, when we did the Series A at Uber, Instagram, Twitter—
Eric Vishria
Snapchat.
Peter Fenton
Snapchat. But then by ‘13, ‘14, it became very—
Jack Altman
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.
Chetan Puttagunta
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.
Jack Altman
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.
Eric Vishria
Yes.
Jack Altman
Those are still, I think, the most brilliant people.
Eric Vishria
Yes.
Chetan Puttagunta
That’s right.
Jack Altman
There’s something there.
Investing in AI
Jack Altman
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
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.
Everett Randle
It’s interesting because from the outside in, before I joined Benchmark, if you look at the investments that were made in that ‘22, ‘23 time period… You had an inference cloud with Fireworks, you had a data infrastructure platform with Mercor, you had a horizontal AI play with Sierra, you had a vertical AI play with Legora. Obviously it’s only four of the ten great investments that were done in that era. It was easy to ascribe a kind of thematic nature.
Eric Vishria
Then you got here and you were like, “Oh my God!”
Everett Randle
“These guys had no idea what they were doing!”
Eric Vishria
That is correct.
Everett Randle
But you come in and you’re like, “Oh wow, they had vertical, they had horizontal, they had data. They must have done a market map.” Then you come in and start asking about each of the investments and the story behind each of them. 90% of the story on every single one of the investments is the person, the founder and the entrepreneur, and the relationship that they built and why the entrepreneur was so special.
That was so revealing to me coming into this organization and this partnership. The founder centricity just bled off the page in terms of the stories of all those investments. The way we’re approaching it today, obviously we love to talk about all of the newest and greatest things going on in AI every single week. But in terms of the actual investments, it’s always founder-centric.
It lends itself especially to this era, because the sands are shifting beneath the founder’s feet so quickly in AI and things are changing so rapidly. Founder centricity as an investment strategy matters more now than anytime in the last decade.
Eric Vishria
I agree. The underlying technology substrate is changing very quickly with AI. Any software that you could have built in 2022, you could have built in 2010, plus or minus. Once we had the cloud, we got little APIs here and there, but for the most part, for twelve years it was pretty stable. If you compare that to today, you’re getting more change every quarter than we did in a decade in terms of the substrate.
A founder’s ability to navigate that and actually understand where their edge is and where their edge is going to come from, and how quickly the moats are deteriorating—because they’re deteriorating really quickly—and how do you build the next one… It’s critical.
So I think it becomes even more important. We see all the same things. It sure feels like the infrastructure cycle is going to continue. It sure feels like five years from now, or maybe even sooner, we’re going to have really interesting things in robotics.
Everett Randle
Agents are getting really good.
Eric Vishria
Agents are going to get really good and the applications are going to get better. All these things seem really clear. But that isn’t enough to make an investment.
Jack Altman
It’s impressive to me. It would’ve been so tempting to answer my question with some high-minded thesis, and you all just said “founders.”
Peter Fenton
Also if you step back and think of these as forces, not specifically AI or social or mobile, there are windows where the disruption is so high that entrepreneurs come in and they see something with such clarity that they can’t not do it. Then there’s this lag effect where years later all the other people come in afterwards.
In a sense, that happened already with AI. It happened with the first generation. It happened with the people saying, “Okay, now we’ve got to do our model company.” But when your brother and the team of people were at OpenAI, before it was obvious, lightning struck. My belief is that it is likely to happen again at least one or two times in the AI cycle. There’s something so disruptive that no one can fully understand it. Then there’s a completely new kind of entrepreneur that emerges.
What we’ve been watching for the last three months, post-Opus 4.5, is that the force of that disruption has awakened a whole group of entrepreneurs that were otherwise not seeing things— they’re seeing them now—three months ago.
I’m a big believer in what you’re doing with Sunday and robotics, because that’s a world where we all know that in a decade we’re going to have these things in our house. But the path from here to there, is that an incumbents’ game where the big companies are going to push down complex products? Or will there be entrepreneurs?
So much of this is, where is there disruption? But then the lag effect of our industry is that 90% of the capital flows in afterwards, after the entrepreneurs have figured things out. By the time it’s figured out and there’s the next thing, it’s not for us. That’s our faith: Silicon Valley is an adaptive landscape that will continually have these disruptions. As soon as there’s a winner, we’re uninterested. We move on.
Jack Altman
It’s a great place to end. Thank you, guys. This was really fun.