Benchmark, every mention

Benchmark Part I · Acquired Sep 28, 2022 · 100 mentions

• ▶ 1:06:12 David Rosenthal Benchmark splits the deal with Mike Moritz at Sequoia.
• ▶ 1:06:18 David Rosenthal Benchmark does three and a half million.
• ▶ 1:06:38 David Rosenthal Sequoia and Benchmark don't put more money into the company before they go public.
• ▶ 1:06:50 David Rosenthal So, you know, at the high point for this web van bet that Benchmark and Sequoia each put three and a half million into.
• ▶ 1:08:27 David Rosenthal So that starts to bring some swagger back to Benchmark, and then you alluded to Eboys.
• ▶ 1:08:56 David Rosenthal And it's like the benchmark guys, they got nothing to lose again at this point.
• ▶ 1:09:40 David Rosenthal I suspect that the benchmark partners thought that something ballsy like this, which was sure to make the gray beards of the guild squirm, must ipso facto be a good thing, you know, which is funny.
• ▶ 1:16:39 David Rosenthal Benchmark, though, is interested, and Bruce is interested, and he's like, you know, as you were saying, Ben, my partner Bob is actually really interested in consumer stuff and consumer marketing and consumer psychology.
• ▶ 1:19:15 David Rosenthal There is a version of the story where none of the money that Benchmark invested in eBay was actually used by the company.
• ▶ 1:19:30 Ben Gilbert I think of the portion of the 6.7 million dollar Benchmark investment that went to the company's balance sheet, I don't think any of it ever left the balance sheet.
• ▶ 1:19:49 David Rosenthal What we do know is that Benchmark got 20% or more of the equity in eBay for their equity investment in eBay.
• ▶ 1:20:01 David Rosenthal It was also reported by the Washington Post after the IPO of eBay that Benchmark had also structured
• ▶ 1:20:45 Ben Gilbert I have also heard from a podcast where another benchmark partner at the time said that three of the six was used as a secondary.
• ▶ 1:21:02 Ben Gilbert At least something, and there's enough sort of smoke here around the equity back loans that was reported not only by the Washington Post, but then was an SEC filings that in addition to the equity investment that Benchmark made, there was…
• ▶ 1:22:18 Ben Gilbert And it's like, the benchmark eBay deal, that may have been 50% of the round, or at least 25%.
• ▶ 1:22:36 David Rosenthal In September 1998, just a little over a year later, by which point in time the company, and with Benchmark and David Byrne, highly involved, has recruited Meg Whitman, the superstar Meg Whitman from Hasbro and
• ▶ 1:23:11 David Rosenthal At the IPO in September, in 1988, benchmark stake of the 6.7 million they invested is worth four hundred million.
• ▶ 1:23:20 David Rosenthal Fortunately for them, though, they're still locked up for another six months.
• ▶ 1:23:24 David Rosenthal They can't distribute.
• ▶ 1:24:22 David Rosenthal So whether you're talking about 4,000,000,005 billion, whatever, and Benchmark distributes that.
• ▶ 1:24:28 David Rosenthal They lock that in.
• ▶ 1:24:35 Ben Gilbert And we do know for sure that they distributed four billion dollars.
• ▶ 1:24:57 Ben Gilbert So depending on when they got out of certain things, at the point that eboys was published, the mark on this fund was 92 X.
• ▶ 1:25:56 David Rosenthal And they had, you know, slices of carry, you know, I'm sure Val retained some carry after he left.
• ▶ 1:26:03 David Rosenthal They gave pieces of carry to their assistants.
• ▶ 1:26:05 David Rosenthal You know, the stories about like benchmark assistants becoming multimillionaires, like that was it.
• ▶ 1:26:15 David Rosenthal But after eBay is clearly working and Meg Whitman is there, Benchmark had been doing for a while and would really embrace bringing in entrepreneurs in residence and doing the EIR strategy of company formation, bring somebody who wants to…
• ▶ 1:27:11 David Rosenthal Benchmark partnership gets super excited about this.
• ▶ 1:27:25 David Rosenthal Benchmark does.
• ▶ 1:28:05 David Rosenthal And we talked about this on the amazon.com episode, but, uh, fortuitously for them and for Benchmark, Amazon was starting to think about competing directly with eBay and launching Amazon auctions.
• ▶ 1:28:25 David Rosenthal So Benchmark gets some Amazon stock.
• ▶ 1:28:31 Ben Gilbert There's a sort of long-standing relationship between Jeff and Benchmark.
• ▶ 1:29:02 David Rosenthal Ah, so fun, such a fun sidebar and fun to tell it now from the eBay and benchmark side of things as we, you know, we told it from the Amazon side a little bit ago.
• ▶ 1:29:13 Ben Gilbert In less than two years, Benchmark's stake grew 100,000 percent.
• ▶ 1:29:22 Ben Gilbert And to put a finer point on that, they invested at a twenty million dollar pre-money valuation, and by the next spring, the company was worth twenty-one billion dollars.
• ▶ 1:30:09 David Rosenthal But there was another non-consensus from a Silicon Valley perspective aspect to the eBay deal that Benchmark was willing to see and exploit that nobody else did, which was that the external facing aspects of this company did not look…
• ▶ 1:33:18 Ben Gilbert However many years later this is, uh, 22 years later, right around the market cap where Benchmark got liquid.
• ▶ 1:34:08 David Rosenthal I want to talk about the benchmark architecture itself and analyze why the equal partnership and the teamwork and everything worked here.
• ▶ 1:37:39 David Rosenthal Alright, so we've told now the story of Benchmark Fund One from pre-founding up through Fund One, raising it, the marketing, the founding religious fervor around equal partnership, the rocky start, and then the hiring of David Byrne, the…
• ▶ 1:38:00 David Rosenthal I think maybe before we continue on the rest of the very much more to come of benchmark history, I think we should take a step back and talk about like, okay, this equal partnership thing itself that they marketed so much around the…
• ▶ 1:39:03 David Rosenthal Not only did that not happen at Benchmark because there were no junior partners to hand the board seat off to, it was like in the case of eBay,
• ▶ 1:42:28 David Rosenthal And just as one small example that the, you know, sort of the older generation and some of the current generation benchmark partners like to talk about, you know, the older folks thinking back to their previous firms, say, you know,…
• ▶ 1:44:18 David Rosenthal I won't say a hundred percent, but probably 95% of all the content out there about benchmark.
• ▶ 1:44:24 David Rosenthal And I think this is hopefully the biggest piece of context we can bring to the understanding of benchmark and venture capital in our industry with this episode.
• ▶ 1:44:34 David Rosenthal There is a very obvious question when you look at benchmark and you look at their success and you look at their success over generations, which is if this obviously works so well, why doesn't everybody do it?
• ▶ 1:44:48 David Rosenthal And the benchmark firm model is very, very much in the minority.
• ▶ 1:45:05 David Rosenthal There's two ways that this partnership model in the benchmark style can play out depending on the personalities involved.
• ▶ 1:46:36 David Rosenthal And that's, I think, a big part about what that sort of, ah, the initial swagger that Benchmark had, and then that reset afterwards, I think, really set that as the tone.
• ▶ 1:49:22 David Rosenthal So like now imagine you're within the benchmark partnership, and one of the partners, or multiple of the partners, hit one of these dry spells.
• ▶ 1:49:51 David Rosenthal So I think this is the trade-off implicit architecting a firm like Benchmark the way that they have if you're going to maintain world-class performance.
• ▶ 1:50:23 Ben Gilbert Rich famously started Expedia by spinning that out of Microsoft and then started Zillow where Benchmark was an investor and Rich for a long time was a venture partner with
• ▶ 1:50:33 Ben Gilbert Benchmark.
• ▶ 1:50:56 Ben Gilbert But this cooperating your way to success is the benchmark secret sauce.
• ▶ 1:51:00 Ben Gilbert And because of that, and because the relationship with a benchmark board member who is almost like a co-founder and the entrepreneur is so tight and the communication is so frequent.
• ▶ 1:51:52 David Rosenthal This absolutely spills over into the portfolio company relationship, both between the kind of lead, you know, the board member within Benchmark, but, you know, even more so, and I think this is what, one of the things that makes Benchmark…
• ▶ 1:52:58 David Rosenthal You know, a big theme at this first part of the benchmark story we just told was having to have the swagger.
• ▶ 1:53:41 Ben Gilbert Okay, so now that we've laid this groundwork of how delicate it is, and how essential it is, and how at the core of benchmarks every fiber of their being it is, now let's talk about the first time that they recruited someone new into the…
• ▶ 1:55:57 David Rosenthal Even as the tech bubble starts to burst, Benchmark is now one of the top tier firms.
• ▶ 1:56:27 David Rosenthal So literally Goldman Sachs calls them up and is like, we want to benchmark Goldman Sachs joint venture.
• ▶ 1:59:53 Ben Gilbert Where you might expect us to go here is, but Benchmark didn't do any of that.
• ▶ 1:59:58 Ben Gilbert They stuck to their guns.
• ▶ 1:59:59 Ben Gilbert They knew what made them special, and they chose to ignore all the temptation.
• ▶ 2:00:09 Ben Gilbert They tried everything.
• ▶ 2:00:11 Ben Gilbert They threw the kitchen sink at corporate partnerships.
• ▶ 2:00:14 Ben Gilbert They expanded to multiple continents at the same time.
• ▶ 2:00:17 Ben Gilbert They were like, oh, bigger fund, let's raise a billion dollar fund.
• ▶ 2:00:21 Ben Gilbert And they tried it all.
• ▶ 2:01:35 David Rosenthal That's not benchmark.
• ▶ 2:02:05 David Rosenthal Now it's benchmark.
• ▶ 2:02:07 David Rosenthal Back then it was benchmark capital.
• ▶ 2:02:10 David Rosenthal Like now it's benchmark.
• ▶ 2:02:14 David Rosenthal You go to the 97 website and the 2002 website is comical to see like the word benchmark in this, like they're selling so hard and they don't sell at all now, at least in a public facing way.
• ▶ 2:02:28 David Rosenthal And it's almost like someone made a cartoon about benchmark.
• ▶ 2:02:40 Ben Gilbert And it's like, here's San Francisco, here's San Jose, here's Stanford, and here's benchmark.
• ▶ 2:02:46 David Rosenthal So now when you're bringing in a partner with the benchmark equal partnership model, there's no try before you buy.
• ▶ 2:03:08 David Rosenthal When you accept that that's the set of constraints you operate in, there's actually a sort of very narrow path that it makes sense in a very, very narrow pool to fish in for future benchmark partners, which is if you want to be reasonably…
• ▶ 2:03:32 David Rosenthal Well, but you can't at benchmark.
• ▶ 2:04:41 David Rosenthal And back to the original founding impetus of Benchmark, somebody who's operating within a firm context where they are not an equal partner with full economics, and it's going to be very attractive for them.
• ▶ 2:07:39 Ben Gilbert He would always leave at the bottom, like, if you have feedback, email, I think it was, like, atc at benchmark.com.
• ▶ 2:09:54 David Rosenthal At that era, and all of what had gone into making benchmark benchmark at that point in time,
• ▶ 2:10:34 David Rosenthal At the stage that Benchmark was investing, you weren't investing on product traction.
• ▶ 2:10:39 Ben Gilbert Which is really interesting because Benchmark mostly markets themselves at this point as a Series A firm.
• ▶ 2:10:45 Ben Gilbert That is not how they marketed themselves then.
• ▶ 2:10:48 Ben Gilbert They said, we do seed and startup investments.
• ▶ 2:11:41 Ben Gilbert Right, because it was consumer so hits driven that Benchmark basically said, okay, we'll let you guys take that risk and we'll invest at the point of traction or the point of product market fit because these consumer products are such…
• ▶ 2:12:20 David Rosenthal So Bill joins from Hummer Winblad, and uh, do you know what Bill's first deal at Benchmark was?
• ▶ 2:13:59 David Rosenthal First, we got to talk about the imperial era, but first, let's flash forward a little bit, and I want to talk about Bill and his investing and how it ends up transforming the firm over time.
• ▶ 2:14:41 Ben Gilbert Well, Benchmark did not have an eBay-sized win until Bill's big marketplace.
• ▶ 2:14:48 David Rosenthal But I think it's very retrospectively, and there's so much randomness tied into all this, but I do think that inside of the Series A style investing, I think Bill and Benchmark in the sort of next generation recognized that shift of, like,
• ▶ 2:15:05 David Rosenthal Benchmark used to invest in seed and formation stage taking the product risk.
• ▶ 2:15:27 David Rosenthal And that was the era when Benchmark really shined.
• ▶ 2:16:26 David Rosenthal Decisions and opportunities now that benchmark is benchmark.
• ▶ 2:17:25 David Rosenthal Benchmark couldn't have built Y Combinator.
• ▶ 2:19:35 David Rosenthal But the reality was, especially in those early days, there was a lot of work involved from benchmark.
• ▶ 2:19:40 David Rosenthal It was benchmark LPs that were investing.
• ▶ 2:19:43 David Rosenthal It was the benchmark brand.
• ▶ 2:19:44 David Rosenthal And then they had to go recruit the partners and put everything together and then instill the benchmark way in them or try to.
• ▶ 2:20:02 David Rosenthal We didn't mention this earlier, but there was one last tidbit I wanted to say on the upside benefit of the trade-off of running a partnership like Benchmark.
• ▶ 2:21:17 David Rosenthal you know, it's very similar here, but benchmark to take the personal analogy.
• ▶ 2:22:43 Ben Gilbert Does Google pitch benchmark?