Sep 28, 2022 · 3h 48m · acquired
Benchmark Part I · Acquired
David Rosenthal · 1h 58m spoken Ben Gilbert · 1h 22m spoken Ben Miller · 2m spoken Acquired Theme Singer · 8s spoken Acquired Theme Backing Vocals · 3s spoken
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In this deep dive, Acquired hosts Ben Gilbert and David Rosenthal chronicle the origins, egalitarian culture, and legendary investment history of Benchmark Capital. They explore how Benchmark's radical equal-partnership model powered unprecedented venture returns from eBay to Uber while navigating generational succession and the discipline of staying small.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ben and David hold 98.7% of the talking time here. How this is scored →
Ben and David as informed peer 0.1 Guest teaching 0.0 Guest disagreement 0.0 Ben and David pushing back 0.0
speaking balance: gold is Ben and David, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 4:19 Ben Miller challenges traditional late-stage VC tolls
Fundrise CEO Ben Miller critiques traditional venture capital structures for charging a 20 percent carried interest fee on late-stage rounds without early-stage value add.
Hardest push from Ben and David ▶ 2:09:20 David pushes back on 'balls over brains' VC tropeDavid Rosenthal vocalizes frustration with the eBoys book's premise that venture capital is purely balls over brains rather than a combination of rigorous analytical insight and courage.
Biggest teaching moment ▶ 4:50 Explaining the public-private market divideBen Miller breaks down why retail investors are excluded from private unicorns despite those companies being larger and more stable than historic IPOs like Amazon.
Ben and David hold their own ▶ 3:31:30 Ben demonstrates venture pricing power dynamicsBen Gilbert details how Benchmark extracts superior valuations because their brand equity nearly guarantees portfolio companies an institutional Series B financing.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ben and David as informed peer | Guest teaching | Guest disagreement | Ben and David pushing back | Why |
|---|---|---|---|---|---|---|
| Episode Prelude and Acquired Theme Music | 2 | 1 | 0 | 0 | Ben and David introduce the Benchmark episode theme before cutting to sponsor guest Ben Miller of Fundrise, who explains late-stage venture access. The tone is entirely conversational and promotional. | |
| Community Announcements and Show Disclaimer | 0 | 0 | 0 | 0 | The hosts transition through housekeeping announcements and set the stage for early Silicon Valley venture history with John Doerr and Kleiner Perkins. | |
| 2480 Sand Hill Road: TVI, Merrill Pickard, and Microsoft | 0 | 0 | 0 | 0 | David and Ben narrate the history of 2480 Sand Hill Road, TVI's sole venture investment in Microsoft, and the economic division of management fees versus carry. | |
| Bob Kagle's Background and the Moral Case for Equal Partnership | 0 | 0 | 0 | 0 | The hosts outline Bob Kagle's background in Flint, Michigan, and his philosophical conviction regarding an equal partnership structure. | |
| Assembling the Founding Partnership: Rachleff, Harvey, and Vaden | 0 | 0 | 0 | 0 | The narrative covers the founding assembly of Benchmark, including recruiting Andy Rachleff, Kevin Harvey, and Val Vaden, alongside naming the firm. | |
| The Institutional Backlash, Stanford's Blackball, and 'Built to Last' | 0 | 0 | 0 | 0 | David and Ben discuss institutional backlash against Benchmark's premium carry, Stanford's blackballing, and Val Vaden's subsequent departure. | |
| Recruiting Executive Search Superstar David Beirne | 0 | 0 | 0 | 0 | The hosts tell the story of recruiting superstar executive recruiter David Beirne to inject competitive fire and swagger into the firm. | |
| The Webvan Investment and Randall Stross's 'eBoys' Project | 0 | 0 | 0 | 0 | Analysis of the Webvan bet and author Randall Stross embedding with the partnership to write 'eBoys' with unfettered access. | |
| The Emergence of eBay and Pierre Omidyar's Traction | 0 | 0 | 0 | 0 | The narrative charts Pierre Omidyar's creation of eBay/AuctionWeb and Benchmark structuring a unique deal to win the Series A. | |
| eBay's Historic Returns and Generational Wealth Creation | 0 | 0 | 0 | 0 | The hosts dissect the unprecedented returns of eBay, generating over four billion dollars distributed to limited partners from a 6.7 million dollar check. | |
| Deconstructing eBay's Rapid Rise and Compounding Moats | 0 | 0 | 0 | 0 | David and Ben analyze why eBay's intrinsic value and valuation multiple exploded so rapidly post-IPO, comparing its trajectory to Amazon. | |
| The Mechanics and Psychology of the Equal Partnership | 0 | 0 | 0 | 0 | The hosts break down the psychological and operational dynamics of equal carry, showing how it removes internal career friction. | |
| Why Equal Partnerships Are Rare: The Knife-Edge Equilibrium | 0 | 0 | 0 | 0 | Discussion of why equal partnerships are rare and fragile, highlighting the psychological pressure and knife-edge equilibrium required. | |
| Post-eBay Triumphs, Inundation, and the Temptation to Scale | 0 | 0 | 0 | 0 | The hosts cover the aftermath of eBay, the inundation of corporate partnership requests, and internal debates about scaling capacity. | |
| Bill Gurley's Background, 'Above the Crowd', and Joining Benchmark | 0 | 0 | 0 | 0 | The recruitment of Bill Gurley from Hummer Winblad, his analytical marketplace frameworks, and the partnership's early evaluation of his fit. | |
| Benchmark's Imperial Era: International Expansion and Mega Funds | 0 | 0 | 0 | 0 | Benchmark's imperial expansion into Europe and Israel, raising billion-dollar mega funds, and the operational strain that followed. | |
| Sins of Omission: Missing Google, Skype, and Facebook | 0 | 0 | 0 | 0 | A retrospective look at Benchmark's misses during their expansion era, failing to pursue Google, Skype, and Facebook. | |
| The Arrival of Peter Fenton and Re-Founding the Firm | 0 | 0 | 0 | 0 | The restructuring of Benchmark back to Silicon Valley early-stage roots, the clean exit of founding partners, and recruiting Peter Fenton. | |
| Fund Six Transitions and the Instagram Win | 0 | 0 | 0 | 0 | Forming the 'Fab Four' with Mitch Lasky and Matt Cohler, leading into historic wins in Fund Six and Fund Seven like Instagram and Uber. | |
| Uber Governance Crises, Litigation, and Partner Transitions | 0 | 0 | 0 | 0 | The hosts dissect the Uber governance crisis, Travis Kalanick's ouster, Benchmark's lawsuit, and the end of the Fab Four era. | |
| Introducing the Next Generation of Benchmark Partners | 0 | 0 | 0 | 0 | Introduction of Benchmark's current general partner roster: Eric Vishria, Sarah Tavel, Chetan Puttagunta, and Miles Grimshaw alongside Peter Fenton. | |
| Sponsor Segment: NZS Capital on Redefining Margin of Safety | 0 | 0 | 0 | 0 | Ben and David present sponsor NZS Capital's white paper on redefining margin of safety around corporate adaptability rather than pure valuation. | |
| Strategic Power: Counter-Positioning, Branding, and Fund Sizing | 0 | 0 | 0 | 0 | Strategic analysis of Benchmark's 7 Powers advantages: textbook counter-positioning, brand pricing power, and resisting multi-stage fund sizes. | |
| Playbook Lessons: Non-Thesis Investing and Future Market Focus | 0 | 0 | 0 | 0 | Playbook takeaways on non-thesis investing, learning loops, selling discipline, and closing reflections on future consumer investing. |
Statements from this episode (73)
Generating top returns and generational succession are VC's hardest feats
“The hardest thing to do in venture capital is create those massive outsized returns that only come from investing in one of the five or so truly important companies each decade. Then, once you've done that, the next hardest thing is to keep doing it with an en…”
Benchmark refuses fund scaling, junior partners, platform teams, and CRM software
“Benchmark famously believes that venture capital doesn't scale. They have zigged when others have zagged. They have not grown their fun size. They haven't tried junior partners. They don't have a platform team. They are not multi-stage. And I've heard they don…”
Bill Gurley is not a general partner in Benchmark's next fund
“Bill Gurley is not a general partner in the Next Benchmark Fund, and the majority of the current partners joined in the last five years.”
John Doerr was the lone 800-pound gorilla of 1990s VC
“I mean, he was alone the 800 pound gorilla in the VC ecosystem in the early 19 nineties and specifically leading up to and during the internet era.”
There are 100 times as many venture capitalists today as the 1990s
“To set a little context for how you could do well even if you weren't ambitious, there are 100 times as many venture capitalists now as there were then.”
John Doerr and Mike Moritz backed Google at a $100M valuation
“I mean, it was crazy when John and Mike Moritz did Google at a hundred million dollar valuation in the Series A, you know, that was earth changing.”
John Doerr won deals personally before delegating board seats to junior partners
“He aggressively came in to try and court the deal, win the deal, and then he would try and pass off the board seat to a junior partner. And Jeff, of course, didn't let that happen, but many entrepreneurs did.”
1990s product-market fit depended on business development gatekeepers as much as product
“Product market fit was a lot less organic and quite frankly, a lot less real because you didn't get this immediate signal of users finding your product and paying for it in this sort of high fidelity organic way. You had few products available to you, and they…”
Kleiner Perkins forced business development partnerships across its portfolio companies
“A core part of this Caretzi model at Kleiner was, we helped facilitate, and some would argue they would do more than help facilitate, they would force these partnerships, biz dev relationships, Upon their portfolio companies.”
TVI was the only venture capital investor in Microsoft before its IPO
“But TVI, technology venture investors, they had the unique honor and what made them single-handedly really part of the then top tier of venture capital firms is they were the only venture capital investor in Microsoft.”
TVI invested $1 million for a 5% pre-IPO stake in Microsoft
“One million dollars to own five percent of the company. I don't believe they raised another dollar until the IPO.”
Traditional VC firms denied junior partners management company governance and fee rights
“The split of the carry in any individual fund, while it tends to reflect ownership in the management company, these are two wholly different entities. And so what you often had and what you had with all these firms, these old firms back at this point in time, …”
VC management company owners sweep net management fee profits at year-end
“It has always been a well-compensated profession, so it's not like the owners of the management company were back there saying, we're not gonna pay any cash out and sell, no, they would pay a high salary, but then they would get to keep everything remaining in…”
Benchmark GPs receive equal carry and free ownership of the management company
“It both means that each of the partners in a given fund have equal carry, but also all of the current GPs own the management company without paying for it. The management company is always just given to whoever the equal current GPs are.”
Venture capital is an intensely personal relationship business that cannot scale well
“The venture business is an intensely personal relationship business, and it's not an industry that scales well.”
Benchmark launched its inaugural Fund I demanding a 30% premium carried interest
“Benchmark comes out, the new Benchmark Capital swinging right out of the gate with 30% carry. Premium carry.”
Stanford's endowment blackballed Benchmark's Fund I over its 30% carry demand
“Literally almost all of these folks who are starting Benchmark, they get so angry that not only do they not invest in the fund, they start organizing against this young benchmark capital. They call up all of their peers, the other university endowments across …”
Benchmark gave copies of 'Built to Last' to prospective Fund I LPs
“They actually hand a copy of the book to every LP as they're pitching them going around for fund one, which is really funny because a, I think they did believe in the values espoused there in, but it's also brilliant marketing.”
Benchmark's first fund delivered a 92x return on invested capital
“Certainly nobody would think that this current fund that they are investing out of and this current basket of companies, inclusive of the ones they would do over the next 12 months, would be a 92 X in just a few years.”
David Beirne recruited Jim Barksdale as Netscape CEO before joining Benchmark
“So David ends up doing the CEO searches for Netscape. He brings in Jim Barksdale, which of course is a Kleiner company and a John Doar company. He does the same for Excite.”
Benchmark and Sequoia split Webvan's $7 million round with $3.5 million each
“So it's a seven million dollar round. Benchmark splits the deal with Mike Moritz at Sequoia. Sequoia does three and a half million. Benchmark does three and a half million. Moritz and Byrne join the board.”
Webvan reached an $8 billion market cap after its dot-com IPO
“And then web van goes public. You know, during the go-go eras, it trades up to an eight billion dollar market cap.”
Early-stage VCs should maximize risk taking across a 30-company portfolio
“And as a venture investor, you want to be buying all that risk. You don't really want to be making these sort of risk mitigated bets and have a port. No, that is why you have a portfolio of 30 companies. Go get all the risk you can.”
General Magic invented the early concepts of cloud and mobile computing
“They invented the concept of cloud. They invented the concept of mobile.”
Pierre Omidyar created eBay while employed full-time at General Magic
“He was still a full-time employee at General Magic when creating eBay.”
eBay might have become a non-profit resource if not for server costs
“It is funny that like if Pierre hadn't Needed to pay for the server costs. There's a really good chance this could have gone the way of the Linux foundation or Craigslist. And I know Craigslist is a real business now, but like it could have been Wikipedia coul…”
Benchmark offered $6.7 million for eBay at a $20 million valuation
“They give Pierre and Jeff a term sheet to invest 6.7 million dollars total in the company in a series A financing at a twenty million dollar pre-money Evaluation.”
eBay was profitable and growing 10% monthly at its Series A round
“And an interesting thing to note is, at this point, eBay is growing 10% a month. So check, fast growth company. It's profitable. All these checks that are getting mailed in, like, it is generating cash and growing.”
Knight Ridder offered Pierre Omidyar and Jeff Skoll $50 million for eBay
“The reason you would get acquired is they offer Pierre and Jeff Fifty million dollars. Five zero million dollars.”
Benchmark structured $1.5 million in founder loans to win the eBay deal
“It was also reported by the Washington Post after the IPO of eBay that Benchmark had also structured Equity-backed loans to Pierre and Jeff in the amount of 750,000 dollars each as a way to, like, prevent them essentially, give them an incentive not to take th…”
Early secondary liquidity prevents premature startup acquisitions, enabling massive long-term outcomes
“Allow the entrepreneurs to take some money off the table so they don't sell the company for fifty million dollars and instead let everybody make fifty billion dollars.”
Benchmark's $6.7 million eBay investment reached over $4 billion after IPO lockup
“By the time the lockup expires the next spring in 1989, that stake is worth over four billion dollars on an eighty-five million dollar fund.”
Benchmark's eBay investment generated $1.5 billion in carried interest for partners
“That's one and a half billion dollars of carry dollars to be distributed amongst the equal partnership after the eBay investment.”
Benchmark allocated portions of fund carried interest to their executive assistants
“They gave pieces of carry to their assistants.”
PayPal succeeded because incumbents repeatedly missed opportunities to preempt the startup
“There were so many points in time where like the window should have closed for PayPal to be started. There's no reason that that company should have been successful or existed yet.”
All five Benchmark Fund I partners made identical profit on eBay
“David Byrne made as much money on eBay as Bob Cagle made on eBay, as Bruce Dunleavy, as Kevin Harvey, as, you know, Andy Ratcliffe made on eBay. They all made the same.”
Equal VC partnerships fail unless every partner delivers equal value and output
“The only way this works is if everyone truly brings the same amount of value to the partnership. Because otherwise, over time, you will have a situation where even if you're equal economically, you become unequal in everybody realizing, hey, that person's not …”
Equal-partnership VC models trend toward mediocrity due to diluted individual responsibility
“For most groups of people, I think it actually trends towards mediocrity. And this was some of the criticism of LPs and some of the other GPs in the early days thinking they were crazy. They called it communist capital. This looks like communism, right? Like i…”
Benchmark partners retire past their forties because 100% effort is strictly required
“And I also think that's why they have to retire once they sort of age too far out of their forties, because it is an implicit thing among the group of you gotta be bringing it all day, every day. And at some point, if you want to notch down to 90%, it's time f…”
Roelof Botha experienced a prolonged dry spell after early YouTube success
“He took over for Leone, right? And one of his very first investments was YouTube. So right out the gate, he's crushing it. But then he hit a dry spell, and it was really hard on him, and it was hard on the partnership, and he talks about it.”
Founders need board members who possess psychological safety at their venture firm
“Really what you want is a board member who feels psychological safety in their partnership to do the things that they think are right without conflicting incentives. It is crazy how rare that is for someone to actually have that psychological safety.”
Post-eBay, Benchmark expanded overseas and raised a $1 billion fund
“They tried everything. They threw the kitchen sink at corporate partnerships. They expanded to multiple continents at the same time. They were like, oh, bigger fund, let's raise a billion dollar fund. And they tried it all.”
Benchmark cannot test junior partners before granting equal GP economics
“You can't bring them in as a junior partner and see what happens and be like, oh, you know, you'll get a sliver of economics in this fund. We'll see if the partnership gels, you know, we'll see if you perform here, you know, and then no, you can't do that. You…”
Developing a competent VC takes seven years or $50 million in losses
“It takes seven years or it takes fifty million dollars to make a VC, which I think are all quite reasonable because your first several investments, you're like, it's like, you're getting the crap out.”
Benchmark originally branded as a seed and startup firm, not Series A
“Which is really interesting because Benchmark mostly markets themselves at this point as a Series A firm. That is not how they marketed themselves then. They said, we do seed and startup investments. Seed being pre-business plan and startup being post-business…”
Backing a repeat entrepreneur in the enterprise sector is near risk-free
“Backing a repeat entrepreneur in the enterprise sector is near risk free.”
Benchmark lacked an eBay-sized investment win until backing Bill Gurley's Uber
“Benchmark did not have an eBay-sized win until Bill's big marketplace.”
Small equal partnerships spend 90% of their time on investing
“You get to spend all your time on the field when you're a small equal partnership. Yes. You're not spending your time managing the firm, or worrying about managing the firm, or worrying about where your career is going, or worrying about this, that, or the oth…”
Benchmark almost assuredly could have won a slot in Google's Series A
“But could they have beaten one of those two firms to get one of the two primary VC slots in Google? Almost assuredly. I mean, at this point, this was Bench where they had just done eBay. You know, they were at the height of their powers. They were the internet…”
Friendster CEO Tim Koogle blocked Benchmark from investing in Facebook's Series A
“Specifically what happened was Benchmark had invested in Friendster, and so was conflicted out. Now you could argue that was an unavoidable mistake, you know, but like, boy does that hurt. And supposedly, I think it was Bob Kegel who was on the board of Friend…”
Benchmark founding partners stepped down in 2005 with zero tail economics
“David Byrne and Andy Ratcliffe, and they had brought on another GP during that period, Alex Balkansky, in the 2005, 2006 fund they raised then, they all step back and they don't take tail economics, meaning they're out of the management company, no longer form…”
Peter Fenton walked away from Accel's Facebook fund carry to join Benchmark
“He had GP economics, even if they were baby GP economics, in the Facebook fund. And he's walking away from that to join Benchmark.”
Peter Fenton rapidly backed Twitter, Docker, and New Relic at Benchmark
“In short order, Peter goes on to do Twitter, Docker, Zora, Hortonworks, New Relic, Elastic.”
A venture capitalist's job is to see the present clearly
“Our job as venture capitalists is not to see the future, but to see the present very clearly.”
Benchmark returned Fund VI entirely from Facebook's acquisition of Instagram
“I mean, they returned the fund on the investment, but, like, with the sale to Facebook.”
Sequoia invested in Instagram 48 hours before the Facebook acquisition
“It's also funny that Sequoia claims Instagram was one of their investments where it sold 48 hours after they invested.”
Most modern Series A funding rounds occur before achieving product-market fit
“Most series A's are not done post product market fit anymore. Now seed and A and B are often pre-product market fit.”
Benchmark's 2011 fund reached a 25x gross return before fees
“According to a 2018 Wall Street Journal article, they reported that before fees, the 20 11 fund was sitting on a 25 X on that five hundred and fifty million.”
Benchmark partners average one board seat yearly for 15% to 20% ownership
“On average, each partner takes one board seat per year, and when they take a board seat, they invest at the Series A and they own 15, 20 plus percent.”
Benchmark's equity stake in Uber was valued at $8 billion in 2018
“In 2018, when that Wall Street Journal piece came out, their holding in Uber was worth eight billion dollars, so that alone would have sixteen-xed the fund.”
Benchmark realized $1 billion selling half its Snap stake in 2018
“You got February, 2018, Benchmark sold almost half of its stake in Snap and realized a billion dollars in gains somewhere.”
Benchmark led Uber's Series A at a $60 million post-money valuation
“20 11. A ten million dollar Series A at a, 10 or 11, at a sixty million dollar post money valuation.”
Suing Travis Kalanick did not directly harm Benchmark's investment business
“I think pretty unambiguously at this point, both in my opinion and just looking at what's happened in the intervening, god, it's been five years since then, the answer to that, like, does this meaningfully negatively impact benchmark is no. Directly, no.”
The Uber crisis precipitated the end of Benchmark's 'Fab Four' GP era
“Indirectly, yeah, very little doubt in my mind that this precipitates the end of the Fab Four era.”
Peter Fenton is Benchmark's only remaining active 'Fab Four' GP
“2018, they do fun nine. Matt and Mitch step back at that point. Bill sticks around for one more fun cycle. And then of course, you know, probably everybody knows at this point, certainly if you're still listening at this point, Bill has stepped back now at thi…”
Eric Vishria led Confluent's Series A at a $24 million valuation
“His first deal was Confluent. Series A. Seven million at a 24 post. The company's trading at a 7.6 billion dollar market cap today.”
Sarah Tavel led Chainalysis's Series A round during a crypto winter
“The very first investment that she made after she moved over from Greylock and joined Benchmark was Chainalysis, which does not fit any of those categories and was a very, very non-consensus deal to do in the middle of ICO crypto winter in 2017, early 20 18. S…”
Venture investors should aim to quickly become consensus and right
“You want that to be true when you make the investment, but you don't want to be very non-consensus for long. You want to quickly be consensus and right. You just don't want anybody to see it until you make that bet. But like, you don't want to make that bet an…”
Nearly 100% of Benchmark portfolio companies successfully raise a Series B
“The thing that is not squishy at all is, it has to be close to a hundred percent of benchmark companies that raise a Series B.”
Early-stage VC board meetings avoid pitch dynamics when firms lack growth funds
“Where this shows up for a founder is, how nice is it to have your board member be someone that you're not pitching? Board meetings aren't pitches because they are not your next round of capital.”
Benchmark Capital is not a thesis-driven venture capital firm
“The first thing that I just want to say after doing the research is they are just not a thesis driven firm. Period.”
Benchmark hosts annual dinners with Jeff Bezos and founders they missed backing
“On Monday nights after the partner meeting, they do these dinners. They invite somebody, you know, Bezos comes every year. Like, this is crazy. Public company CEOs. Yeah. So Michael Lewis, you know, blah, blah, blah. You know, part of that I'm sure is just fun…”