The Exchanges

Q Do you think that you always need to play the game on the field? Bill Gurley, your partner or former partner said, said that once.

A Yeah. I also like, yeah, I mean, to some extent you always have to play the game on the field or you always have to, maybe, maybe a different way to say it is like, you always have to be aware and cognizant of the game on the field. So like that it is the game is the game. Um, you can chase, you can always choose to play more or less. So you can choose to play more or less. So I, I'll give you a really concrete example. Right. Was like SAS craziness, everything craziness, right? Like everything was running and everything else. I think in 20, 21, we made like three new investments as a firm. Three. And that was just, that was the game on the field. And just saying, you know what? That's okay. I'm okay not playing that game. And, and like, and that was great. And that's great. And I have no regrets on that at all. I think that is fabulous. And this year, 20, 24, the game on the field is we have a major, major shift in AI, which is like, You know, could be bigger than any of these other shifts, uh, maybe combined. Um, it's really big. There's a lot of interesting work happening. Um, there's a lot of uncertainty without a doubt, but we've been more active than we've been since. 2010 and 2011. What was happening in 2010 and 2011? Mobile shift.

AI assessment note: “to some extent you always have to play the game on the field”

Q Final one for you. You said about call the vote. What does the vote look like?

A Our vote system, which is, Somewhat irrelevant, but it's a way to kind of quantify people's feedback. So a company comes in, we all talk about it, you know, at this point in time, most of the time, like there's only five of us, right? So, um, at this point in time, you know, we would have Chatted about the company and at least two or three partners would have met typically. And so you're there, there's a decent amount of institutional knowledge about the company. And then, um, and then at the end, we, you kind of quantify, um, your feedback. And so it's a way for partners to quantify their feedback to others. And so our voting system is you vote one to 10. You can't vote five. Six and above is yes. Four and below is no. And it's kind of strength of conviction, right? If you, if you get a bunch of tens, amazing. That, that, I've never seen that happen. Um, and then, um, you know, if you get a four, like this partner's telling you they didn't really like it, but it's not whatever. If you get a two, your partner's telling you they're really discouraging you from doing it. I don't know if you're gonna, if your next question is what happens if you don't have the vote and you still want to do it, I have no idea. I don't know what happens.

AI assessment note: “our voting system is you vote one to 10. You can't vote five.”

Q Why do you think they are better investors?

A You know, like anything at the highest level, like it just practice and reps matter. And, and so if you're kind of, if you take somebody who's 15 years into their career as an example, And there were an operator on that time. They may have seen, you know, if they, if they were a good operator and diligent and whatever, they may have seen like three to five companies that they, they worked on and know them really deeply and know the ins and outs of them. If you're a career investor over 15 years, you will have seen 30 or 35 companies at some level of depth and hundreds and 100,000 of Of, of pitches, and, and then, and of those pitches, you'll be thinking about, well, like, I saw this one, and this is what it looked like then, and 15 years from now, like, or 10 years later, or five years later, like, you've run this, like, very long-term, uh, longitudinal experiment, and you have, you have data and mental models around that, and so I think that, that's really helpful. It can, it can actually hold people back, too, but, but I think that's really helpful For investors. And so that's why I think the career investors tend to be really better investors.

AI assessment note: “practice and reps matter”

Q Do you think that you always need to play the game on the field? Bill Gurley, your partner or former partner said, said that once.

A Yeah. I also like, yeah, I mean, to some extent you always have to play the game on the field or you always have to, maybe, maybe a different way to say it is like, you always have to be aware and cognizant of the game on the field. So like that it is the game is the game. Um, you can chase, you can always choose to play more or less. So you can choose to play more or less. So I, I'll give you a really concrete example. Right. Was like SAS craziness, everything craziness, right? Like everything was running and everything else. I think in 20, 21, we made like three new investments as a firm. Three. And that was just, that was the game on the field. And just saying, you know what? That's okay. I'm okay not playing that game. And, and like, and that was great. And that's great. And I have no regrets on that at all. I think that is fabulous. And this year, 20, 24, the game on the field is we have a major, major shift in AI, which is like, You know, could be bigger than any of these other shifts, uh, maybe combined. Um, it's really big. There's a lot of interesting work happening. Um, there's a lot of uncertainty without a doubt, but we've been more active than we've been since. 2010 and 2011. What was happening in 2010 and 2011? Mobile shift.

AI assessment note: “to some extent you always have to play the game on the field”

Q In the deals where your partners have saved you, as you mentioned many times, What did they see that you did not see most often?

A I'll give you a great example where Sarah saved me. We were looking at a company and she's like, Eric, and this goes back to your sector thing. It's just, it's like a perfect example that ties this thing together is like, she's like, Eric, I'm telling you, you're used to looking at software companies. At this company, like, gross margin and, like, these unit economics, like, really, really matter, and they suck. And there isn't a path to get better and the entrepreneur is not engaged on the topic. And so it was just like a great insight because like for us, you know, as your kind of traditional software investor and like doing things, it really doesn't matter. Like, it's just like all of these things end up, you know, your SaaS companies are going to end up in like between 75 and 83% gross mark. Like they're just going to end up there. Like it's fine. It works itself out. And so like a company that starts there, like You know, way less than then. It's just like, whatever. And you, you'll fix that. And, um, but you know, I think it was like a great insight that like kept me out of it. Cause there were a ton of things that I loved about the entrepreneur. Um, and, and it was really like a compelling individual, but I think her point on the nature of the business and the fit between entrepreneur and the nature of that business and Pacific just was, was spot on. And so Sarah saved m…

AI assessment note: “gross margin and, like, these unit economics, like, really, really matter, and they suck”

Q Why do you think they are better investors?

A You know, like anything at the highest level, like it just practice and reps matter. And, and so if you're kind of, if you take somebody who's 15 years into their career as an example, And there were an operator on that time. They may have seen, you know, if they, if they were a good operator and diligent and whatever, they may have seen like three to five companies that they, they worked on and know them really deeply and know the ins and outs of them. If you're a career investor over 15 years, you will have seen 30 or 35 companies at some level of depth and hundreds and 100,000 of Of, of pitches, and, and then, and of those pitches, you'll be thinking about, well, like, I saw this one, and this is what it looked like then, and 15 years from now, like, or 10 years later, or five years later, like, you've run this, like, very long-term, uh, longitudinal experiment, and you have, you have data and mental models around that, and so I think that, that's really helpful. It can, it can actually hold people back, too, but, but I think that's really helpful For investors. And so that's why I think the career investors tend to be really better investors.

AI assessment note: “like anything at the highest level, like it just practice and reps matter.”

Q Eric, does AI allow companies to charge more price per seat and have better revenues, or does it merely denigrate their margins because of the increased cost of implementing AI?

A Oh, I mean, the answer is for sure both. Like, like, and, and I would just, I would, I would maybe tweak your question, which is to say, I don't know that it's going to be, like, the price per seat model. But I'll give you a simple way to, to, to look at it. Let's take the, the AI coding area, right? We've seen like tremendous amount of capital go into AI coding and co-pilots and AI software engineers and whatever. So let's say you're fully loaded IT or software person is 200 grand for just for argument's sake. And if you think about that 200 grand, there is call it 10,000 dollars for every one of these software engineers or IT people. There's 10,000 dollars of tool spend. In that, I would put, like, Jira, um, which is Atlassian, GitHub, ServiceNow, you know, a computer, whatever, development environment, Git, whatever. Like, so all that's, call it 10 grand a year, roughly, right? On that 10 grand a year of spend, how many hundreds of billions of market cap has been created? Like, 304 105 hundred, some, some big number of market cap has been created on 10,000 dollars worth of spend for each of these, like, software engineers. So if the AI, if you can get AI good enough to eat much more of the, the 200,000 dollars of value attributed to your software engineer, IT person, it, it just follows that there's like 20 x more value creation and And, like, there will be giant, giant outc…

AI assessment note: “Oh, I mean, the answer is for sure both.”

Q In the deals where your partners have saved you, as you mentioned many times, What did they see that you did not see most often?

A I'll give you a great example where Sarah saved me. We were looking at a company and she's like, Eric, and this goes back to your sector thing. It's just, it's like a perfect example that ties this thing together is like, she's like, Eric, I'm telling you, you're used to looking at software companies. At this company, like, gross margin and, like, these unit economics, like, really, really matter, and they suck. And there isn't a path to get better and the entrepreneur is not engaged on the topic. And so it was just like a great insight because like for us, you know, as your kind of traditional software investor and like doing things, it really doesn't matter. Like, it's just like all of these things end up, you know, your SaaS companies are going to end up in like between 75 and 83% gross mark. Like they're just going to end up there. Like it's fine. It works itself out. And so like a company that starts there, like You know, way less than then. It's just like, whatever. And you, you'll fix that. And, um, but you know, I think it was like a great insight that like kept me out of it. Cause there were a ton of things that I loved about the entrepreneur. Um, and, and it was really like a compelling individual, but I think her point on the nature of the business and the fit between entrepreneur and the nature of that business and Pacific just was, was spot on. And so Sarah saved m…

AI assessment note: “gross margin and, like, these unit economics, like, really, really matter, and they suck”

Q Fire on people. You've got one takeaway from working with Gurley, Fanton, and Matt Kohler. I just chose them because they're my favorites. Uh, sorry. Uh, but I'm like historical as well. Uh, so I thought I could do that. So what's the biggest takeaway from working with Gurley?

A Even great companies can be overvalued, but I think one of the things that, you know, that, that Bill is really good at is, is like thinking about fundamentals, right? He, he, he came from public marketing, investing way, way, way back when, Um, at the beginning of his career, he has that mindset, that analytical mindset. And so, you know, he can kind of, he, he thinks through that and says like, Hey, on a fundamentals basis, like you will trade sometime under, uh, 30 times free cashflow. And so like, that's a thing, right? Like we're all, you and I were talking about like, what's the ARR number and the revenue and all this stuff. And so like, but like, ultimately, you know, you, you talked about the four areas, um, Which is sourcing, picking, winning, helping build, right? There's a really important fifth stage that nobody talks about, and not every venture capitalist gets to you, which is exiting. Ultimately, we, our job is to return money back to our investment partners, right? And, um, and so when you kind of like think through that, You do have to ultimately, hopefully everyone gets to a place where they're thinking about this like fifth step. Not everyone does. And in that place, you do have to kind of think about, um, these fundamentals. And so occasionally you have an amazing company. Um, that you really believe in. Um, but it can be overvalued too.

AI assessment note: “Even great companies can be overvalued, but I think one of the things”

Q What's the most challenging aspect of your role at Benchmark day-to-day?

A You can say two things. You know, one of the things about being on part of a firm like this is The expectations are obviously amazing and are incredibly high. And so you wake up every morning and you want to be the absolute best and, and compete at the highest level. That is no joke. And that's something that we, I take very seriously. And like, you certainly don't want to be the person that was at the beginning of the end of a, of a story franchise. And I, you know, I'd say the second thing is being a small partnership. There are five investors at Benchmark. You're constantly struggling with coverage. Like how do you see all the opportunities that are out there Because there are so many, and that's a, you know, that's a constant tension and constant challenge.

AI assessment note: “being a small partnership. There are five investors at Benchmark. You're constantly struggling with coverage.”

Q Can I ask, what do you think the benefits are of having such a focus on the kind of early stage A and B?

A I think the context switching in terms of like, if you think about how you evaluate seeds or how you evaluate Growth or evaluate some of these other things? Or how do you evaluate making a kind of quote unquote active investment where you take a board seat versus a quote unquote passive investment where you don't take a board seat? Like those are really tough context switches. And I don't know that that's easy to kind of switch frame of mind to, you know, look at a seed opportunity and then three hours later, look at a growth opportunity. Like the way you evaluate those two things is so different. You know, I think one of the advantages of the focus is, You can actually have some kind of consistent way of thinking through these things and, and hopefully make better decisions as a result.

AI assessment note: “one of the advantages of the focus is, You can actually have some kind of consistent”

Q What's the most challenging aspect of your role at Benchmark day-to-day?

A You can say two things. You know, one of the things about being on part of a firm like this is The expectations are obviously amazing and are incredibly high. And so you wake up every morning and you want to be the absolute best and, and compete at the highest level. That is no joke. And that's something that we, I take very seriously. And like, you certainly don't want to be the person that was at the beginning of the end of a, of a story franchise. And I, you know, I'd say the second thing is being a small partnership. There are five investors at Benchmark. You're constantly struggling with coverage. Like how do you see all the opportunities that are out there Because there are so many, and that's a, you know, that's a constant tension and constant challenge.

AI assessment note: “There are five investors at Benchmark. You're constantly struggling with coverage.”

Q Final one for you. You said about call the vote. What does the vote look like?

A Our vote system, which is, Somewhat irrelevant, but it's a way to kind of quantify people's feedback. So a company comes in, we all talk about it, you know, at this point in time, most of the time, like there's only five of us, right? So, um, at this point in time, you know, we would have Chatted about the company and at least two or three partners would have met typically. And so you're there, there's a decent amount of institutional knowledge about the company. And then, um, and then at the end, we, you kind of quantify, um, your feedback. And so it's a way for partners to quantify their feedback to others. And so our voting system is you vote one to 10. You can't vote five. Six and above is yes. Four and below is no. And it's kind of strength of conviction, right? If you, if you get a bunch of tens, amazing. That, that, I've never seen that happen. Um, and then, um, you know, if you get a four, like this partner's telling you they didn't really like it, but it's not whatever. If you get a two, your partner's telling you they're really discouraging you from doing it. I don't know if you're gonna, if your next question is what happens if you don't have the vote and you still want to do it, I have no idea. I don't know what happens.

AI assessment note: “our voting system is you vote one to 10. You can't vote five.”

Q Is there anything you would have done differently about your CEO ship? Now you've worked with some of the best CEOs. The best found.

A Oh, a million. I, I do a million things differently. Like I, I, and I say this to, to the CEOs I work with now, um, I would never, like some of the big mistakes that I made were, well, one, definitely not thinking about distribution enough. That's always, that's always a big thing too. You really, There were a couple times or two people and specifically that I think about where like what they wanted in comp and what I was like willing to give were, were separate. Like they were just off and they were so far out of market in terms of what their ask was. And I, I think I would, I, at least for one of them, I would have just broken all the rules and, and thrown it out, um, and, and hired them. Um, You know, those are, those are two examples, but I think those things, you know, you can get into real trouble if you kind of keep doing something like that and see how it's, it's always a balance.

AI assessment note: “one, definitely not thinking about distribution enough.”

Q Why are they not the best board members?

A Um, for, well, going back to, they haven't actually done these things at depth. They haven't done them themselves. Um, they often lack like empathy and understanding. I think they often think that things are more deterministic than, than I think they actually are. Um, and so like all of those things, I think actually really, Can get in the way. And I was talking to my partners yesterday about kind of, we were talking about a board member and, you know, who, who's at a different firm, who is on a couple of boards with us. And it's like, The, the, the challenge with that career investor is they think, like, if a company has a plan and they miss the plan, that's because the company messed up. And if the company had a plan and they exceeded the plan, it's because the company did great. And like, you know, or execute, or management did great, or management messed up. And it's just like, there's about 47 other ways that could go wrong. Like, the plan could just be gobbledy good from the beginning. It could be totally wrong. And messed up the, there could be external reasons for it. And like the whole job that we have is to try to figure out root cause on those things and help them figure out root cause on them and then like fix it. And it isn't a, like, you're not helping your three-year-old like fall or not fall or teach them a lesson. Like that isn't the job. And so, you know, it's…

AI assessment note: “they haven't actually done these things at depth. They haven't done them themselves.”

Q Is there anything you would have done differently about your CEO ship? Now you've worked with some of the best CEOs. The best found.

A Oh, a million. I, I do a million things differently. Like I, I, and I say this to, to the CEOs I work with now, um, I would never, like some of the big mistakes that I made were, well, one, definitely not thinking about distribution enough. That's always, that's always a big thing too. You really, There were a couple times or two people and specifically that I think about where like what they wanted in comp and what I was like willing to give were, were separate. Like they were just off and they were so far out of market in terms of what their ask was. And I, I think I would, I, at least for one of them, I would have just broken all the rules and, and thrown it out, um, and, and hired them. Um, You know, those are, those are two examples, but I think those things, you know, you can get into real trouble if you kind of keep doing something like that and see how it's, it's always a balance.

AI assessment note: “some of the big mistakes that I made were, well, one, definitely not thinking about distribution”

Q Why are they not the best board members?

A Um, for, well, going back to, they haven't actually done these things at depth. They haven't done them themselves. Um, they often lack like empathy and understanding. I think they often think that things are more deterministic than, than I think they actually are. Um, and so like all of those things, I think actually really, Can get in the way. And I was talking to my partners yesterday about kind of, we were talking about a board member and, you know, who, who's at a different firm, who is on a couple of boards with us. And it's like, The, the, the challenge with that career investor is they think, like, if a company has a plan and they miss the plan, that's because the company messed up. And if the company had a plan and they exceeded the plan, it's because the company did great. And like, you know, or execute, or management did great, or management messed up. And it's just like, there's about 47 other ways that could go wrong. Like, the plan could just be gobbledy good from the beginning. It could be totally wrong. And messed up the, there could be external reasons for it. And like the whole job that we have is to try to figure out root cause on those things and help them figure out root cause on them and then like fix it. And it isn't a, like, you're not helping your three-year-old like fall or not fall or teach them a lesson. Like that isn't the job. And so, you know, it's…

AI assessment note: “they haven't actually done these things at depth. They haven't done them themselves.”

Q Do you think that's the right question to ask?

A No, I don't. I like, it hasn't really, I just, I think like I go back to my software engineer example, like, The, the prize is so big. Like, the prize is, like, forget about AGI for a second. The prize is so big even without AGI. Like, the prize is so big. And so, like, yeah, the, the revenue will materialize. There's a lot to figure out. I was talking, we, we had a dinner guest yesterday. And, um, and, you know, we, we, we do these dinners, um, as a partnership with the guests, um, on Mondays. And, um, and You know, one of the kind of conversations around it was we were kind of unpacking is like, if you think about search, so search, we, we started first seeing the search, the first search engines call it 1995 or so, um, is when you started to see the first search engines. And then Google series A was 1998. Um, I believe and, you know, and like immediately was like a better search engine and a better trap and everything else. But what I think is lost in time is, is like Google didn't figure out the monetization. Of course they did it through an acquisition. They didn't actually figure it out themselves. Like the, they didn't figure out the monetization of search until like a one, I think. And so like, or late 2000. And so we had like five or six years Of these search engines, which anybody at that time was using them every day, and like, there were, there were crappy display a…

AI assessment note: “No, I don't.”

Q You said about markets being large enough to support massive companies. How do you think about market creation?

A I think you have to say, and this goes back to the insight thing, which is, like, if this thing, whatever the product is, accomplished what it was supposed to, and what the entrepreneur said it could do, Like, would there be market creation there, right? And so, like, and you just, you mentioned Uber, like, Uber's a good example of this, where it's like, if you could actually, and this was goes back to the whole, like, that professor, um, and the, like, taxi cab analysis that was done, like, in the early days of Uber, where it was like, oh, the entire market's this big, and it's like, well, if you can imagine, Everybody has a smartphone in their pocket, and if you could actually request a ride instantly and pay for it easily with not, with shorter wait time and much more accuracy and much less cumbersome communication, like, could a market be created? Yeah. And I think that was a huge part of, you know, Gurley and the rest of the benchmark teams at that time, which predates me, um, It was a huge part of their insight and in terms of the investment thesis. And, and so like when you kind of think about a situation like that, you're like, okay, that's market created. That's a good example of market creation. And we have those all over. Like if you were like, I'll, I'll, I'll give you another one. That's kind of like really interesting right now, which is AI medical scribes. Right.…

AI assessment note: “if this thing, whatever the product is, accomplished what it was supposed to”

Q But there's a lot of other competitors to 11 acts. I'm with you. I've met five medical scribe companies. I thought Nabla was the best, but there were like. 20 and I, I don't have a fricking clue who's going to win. So how do you filter when everyone does the same says the same?

A I think this is where we go back to where, where we started, which is our, Is there an insight that we believe? Like, do we have an extraordinary entrepreneur that you believe in? Do you have an insight? Do you think they have an insight that is cogent? And I would say this, maybe this is a more useful way to say it. The more competitive the market is, the higher the bar you have to hold on those two things, I think. And so like in a hyper competitive market, you have to really believe in the entrepreneur And really believe in the, in the, in the, like, heart of the insight and their execution ability. Um, and in a, in a less competitive market, um, you can, like, I think it's just misery in life to work as a venture capitalist and serve on the board of, Um, if you don't like really love the entrepreneur and, and really like love the area. So that's a thing for me, which is, I think about a lot when, when I'm kind of looking at a company is like, am I going to be able to authentically help this entrepreneur close great talent? Like, am I going to be able to talk to them and tell them why, like, this should be an amazing, uh, like, this is an amazing person that I can tell somebody That like, this should be their life's work, like, and help convince them to join a company, right? Like that's, you know, just, which is a big part of what we do. And like, and so when you look at th…

AI assessment note: “The more competitive the market is, the higher the bar you have to hold”

Q Eric, does AI allow companies to charge more price per seat and have better revenues, or does it merely denigrate their margins because of the increased cost of implementing AI?

A Oh, I mean, the answer is for sure both. Like, like, and, and I would just, I would, I would maybe tweak your question, which is to say, I don't know that it's going to be, like, the price per seat model. But I'll give you a simple way to, to, to look at it. Let's take the, the AI coding area, right? We've seen like tremendous amount of capital go into AI coding and co-pilots and AI software engineers and whatever. So let's say you're fully loaded IT or software person is 200 grand for just for argument's sake. And if you think about that 200 grand, there is call it 10,000 dollars for every one of these software engineers or IT people. There's 10,000 dollars of tool spend. In that, I would put, like, Jira, um, which is Atlassian, GitHub, ServiceNow, you know, a computer, whatever, development environment, Git, whatever. Like, so all that's, call it 10 grand a year, roughly, right? On that 10 grand a year of spend, how many hundreds of billions of market cap has been created? Like, 304 105 hundred, some, some big number of market cap has been created on 10,000 dollars worth of spend for each of these, like, software engineers. So if the AI, if you can get AI good enough to eat much more of the, the 200,000 dollars of value attributed to your software engineer, IT person, it, it just follows that there's like 20 x more value creation and And, like, there will be giant, giant outc…

AI assessment note: “the answer is for sure both.”

Q Fire on people. You've got one takeaway from working with Gurley, Fanton, and Matt Kohler. I just chose them because they're my favorites. Uh, sorry. Uh, but I'm like historical as well. Uh, so I thought I could do that. So what's the biggest takeaway from working with Gurley?

A Even great companies can be overvalued, but I think one of the things that, you know, that, that Bill is really good at is, is like thinking about fundamentals, right? He, he, he came from public marketing, investing way, way, way back when, Um, at the beginning of his career, he has that mindset, that analytical mindset. And so, you know, he can kind of, he, he thinks through that and says like, Hey, on a fundamentals basis, like you will trade sometime under, uh, 30 times free cashflow. And so like, that's a thing, right? Like we're all, you and I were talking about like, what's the ARR number and the revenue and all this stuff. And so like, but like, ultimately, you know, you, you talked about the four areas, um, Which is sourcing, picking, winning, helping build, right? There's a really important fifth stage that nobody talks about, and not every venture capitalist gets to you, which is exiting. Ultimately, we, our job is to return money back to our investment partners, right? And, um, and so when you kind of like think through that, You do have to ultimately, hopefully everyone gets to a place where they're thinking about this like fifth step. Not everyone does. And in that place, you do have to kind of think about, um, these fundamentals. And so occasionally you have an amazing company. Um, that you really believe in. Um, but it can be overvalued too.

AI assessment note: “Even great companies can be overvalued, but I think one of the things”

Q Do you think that's the right question to ask?

A No, I don't. I like, it hasn't really, I just, I think like I go back to my software engineer example, like, The, the prize is so big. Like, the prize is, like, forget about AGI for a second. The prize is so big even without AGI. Like, the prize is so big. And so, like, yeah, the, the revenue will materialize. There's a lot to figure out. I was talking, we, we had a dinner guest yesterday. And, um, and, you know, we, we, we do these dinners, um, as a partnership with the guests, um, on Mondays. And, um, and You know, one of the kind of conversations around it was we were kind of unpacking is like, if you think about search, so search, we, we started first seeing the search, the first search engines call it 1995 or so, um, is when you started to see the first search engines. And then Google series A was 1998. Um, I believe and, you know, and like immediately was like a better search engine and a better trap and everything else. But what I think is lost in time is, is like Google didn't figure out the monetization. Of course they did it through an acquisition. They didn't actually figure it out themselves. Like the, they didn't figure out the monetization of search until like a one, I think. And so like, or late 2000. And so we had like five or six years Of these search engines, which anybody at that time was using them every day, and like, there were, there were crappy display a…

AI assessment note: “No, I don't. I like, it hasn't really, I just, I think”

Q You said about markets being large enough to support massive companies. How do you think about market creation?

A I think you have to say, and this goes back to the insight thing, which is, like, if this thing, whatever the product is, accomplished what it was supposed to, and what the entrepreneur said it could do, Like, would there be market creation there, right? And so, like, and you just, you mentioned Uber, like, Uber's a good example of this, where it's like, if you could actually, and this was goes back to the whole, like, that professor, um, and the, like, taxi cab analysis that was done, like, in the early days of Uber, where it was like, oh, the entire market's this big, and it's like, well, if you can imagine, Everybody has a smartphone in their pocket, and if you could actually request a ride instantly and pay for it easily with not, with shorter wait time and much more accuracy and much less cumbersome communication, like, could a market be created? Yeah. And I think that was a huge part of, you know, Gurley and the rest of the benchmark teams at that time, which predates me, um, It was a huge part of their insight and in terms of the investment thesis. And, and so like when you kind of think about a situation like that, you're like, okay, that's market created. That's a good example of market creation. And we have those all over. Like if you were like, I'll, I'll, I'll give you another one. That's kind of like really interesting right now, which is AI medical scribes. Right.…

AI assessment note: “if this thing, whatever the product is, accomplished what it was supposed to”

Q Can I ask, what do you think the benefits are of having such a focus on the kind of early stage A and B?

A I think the context switching in terms of like, if you think about how you evaluate seeds or how you evaluate Growth or evaluate some of these other things? Or how do you evaluate making a kind of quote unquote active investment where you take a board seat versus a quote unquote passive investment where you don't take a board seat? Like those are really tough context switches. And I don't know that that's easy to kind of switch frame of mind to, you know, look at a seed opportunity and then three hours later, look at a growth opportunity. Like the way you evaluate those two things is so different. You know, I think one of the advantages of the focus is, You can actually have some kind of consistent way of thinking through these things and, and hopefully make better decisions as a result.

AI assessment note: “one of the advantages of the focus is, You can actually have some kind of consistent”

Q who says hi, by the way. Uh, but I asked Pat Grady on the show, uh, and I said, do you have to be contrarian and right? What if a founder says, I think that actually the world is moving to cloud. Duh. And I'm going to facilitate that much quicker. There's not really an insight. Does that matter? Do you have to be contrarian and right in your insight?

A You know, there, there are levels to it. Like, yeah, it, you know, you can say like, Hey, we're going to cloud and we're doing this, but normally there's an insight. I would say like, if you look at most of the successful companies, there's an insight, like there can be an insight underneath that, right? Which is like, yeah, it's going to cloud and this is the right way to attack it, or it's going to cloud and, um, you know, and the like core differentiation is going to be like here, not here. Like normally there's an insight there. I think there's a couple of cases You know, and you really have to think about it. There's a couple of cases where just like violent execution by a determined team in a hyper competitive market where like nobody has an insight has worked.

AI assessment note: “a couple of cases where just like violent execution by a determined team”

Q who says hi, by the way. Uh, but I asked Pat Grady on the show, uh, and I said, do you have to be contrarian and right? What if a founder says, I think that actually the world is moving to cloud. Duh. And I'm going to facilitate that much quicker. There's not really an insight. Does that matter? Do you have to be contrarian and right in your insight?

A You know, there, there are levels to it. Like, yeah, it, you know, you can say like, Hey, we're going to cloud and we're doing this, but normally there's an insight. I would say like, if you look at most of the successful companies, there's an insight, like there can be an insight underneath that, right? Which is like, yeah, it's going to cloud and this is the right way to attack it, or it's going to cloud and, um, you know, and the like core differentiation is going to be like here, not here. Like normally there's an insight there. I think there's a couple of cases You know, and you really have to think about it. There's a couple of cases where just like violent execution by a determined team in a hyper competitive market where like nobody has an insight has worked.

AI assessment note: “normally there's an insight... There's a couple of cases where just like violent execution”

Q But there's a lot of other competitors to 11 acts. I'm with you. I've met five medical scribe companies. I thought Nabla was the best, but there were like. 20 and I, I don't have a fricking clue who's going to win. So how do you filter when everyone does the same says the same?

A I think this is where we go back to where, where we started, which is our, Is there an insight that we believe? Like, do we have an extraordinary entrepreneur that you believe in? Do you have an insight? Do you think they have an insight that is cogent? And I would say this, maybe this is a more useful way to say it. The more competitive the market is, the higher the bar you have to hold on those two things, I think. And so like in a hyper competitive market, you have to really believe in the entrepreneur And really believe in the, in the, in the, like, heart of the insight and their execution ability. Um, and in a, in a less competitive market, um, you can, like, I think it's just misery in life to work as a venture capitalist and serve on the board of, Um, if you don't like really love the entrepreneur and, and really like love the area. So that's a thing for me, which is, I think about a lot when, when I'm kind of looking at a company is like, am I going to be able to authentically help this entrepreneur close great talent? Like, am I going to be able to talk to them and tell them why, like, this should be an amazing, uh, like, this is an amazing person that I can tell somebody That like, this should be their life's work, like, and help convince them to join a company, right? Like that's, you know, just, which is a big part of what we do. And like, and so when you look at th…

AI assessment note: “in a hyper competitive market, you have to really believe in the entrepreneur”

Q But even now, actually, you could argue that say like in an Uber lift case, which is exactly what I was thinking, the insight I think would be that broad is better than narrow in terms of market expansion and being everywhere is more important than honing one. There's always insights. Do you see what I mean?

A Yeah. I mean, I think, I think you could say like that, you know, and that's a good case of violent, violent execution by a determined team. I think there's also a, and so I think there are insights there. As you said, there's like little execution detailed insights in, in your point. And, and so it's not like it doesn't have to be some pie in the sky insight. Like that's like, oh my God, you know, like AGI is coming in Q three of 20, 25. Like that's not the kind of insight that we're talking about. We're talking about Like actual things that are nuances that help like that build a company. And so, yeah, they think they come at different levels. I would also say there, and you know, this is a difference and I've been fortunate to work with Pat, um, on a board and, um, and, and work with the, the larger squad team on a number of companies. And. You know, there is a difference also in stage, right? They're growth investors, like at least Pat and his team are growth investors and we're early stage. And so like, there's also like a, a stage difference in terms of how we evaluate

AI assessment note: “there are insights there. As you said, there's like little execution detailed insights”

Q He's amazing. I have such a man crush on Peter. I haven't told him, and so it's lucky that this isn't the podcast. But, uh, my question to you there is, is that not dangerous? Should a partner not be the counterbalance, not the Duracell battery to your energy?

A Well, I think both are true. My partners have over my 10 years at Benchmark. They have kept me out of countless companies that like, it's amazing. You asked the sector question earlier. We were talking about it is like, there's, I spend a lot of time trying to like understand chemistry Um, my chemistry with an entrepreneur and, and try to figure out, like, am I gonna love working with this person? Do I believe this person is a learning machine? Um, you know, and, or not. So I, I spend a lot of time on that. I spend a lot of time trying to believe, like, do I think that insight is cogent or not cogent? Um, like, the insight that they have and, like, does that, does it hold together? And, and I spend a lot less time on, like, the sector specifics because I just feel like I, I, like, If I'm an F on a sector, like if with best effort, I can get to a D plus, like that's not good enough. Like, and so I just rather like not, and I actually think this is, this is maybe contrarian and total aside, but like, I think this is why the memo writing culture at a lot of firms gets you in trouble because you put a lot of information You, you basically are, are, it encourages putting a lot of information that is like third and fourth order stuff Into document as if that is impacting your investment decision, where like most of these investments, there's really like one or two questions that real…

AI assessment note: “Well, I think both are true. My partners have over my 10 years at Benchmark.”