Prompt Cast
The Unique Approach and Success of Benchmark Capital in Venture Capital Investing
TLDR Benchmark Capital has achieved success in the venture capital industry by taking a unique approach that involves not scaling their fund size, not trying junior partners, not having a platform team, and not being multi-stage. They have been early backers of many important companies and have set a new benchmark for performance in the industry.
Timestamped Summary
00:00
This episode of the podcast is about the venture capital firm Benchmark and their unique approach to investing, which involves not scaling their fund size, not trying junior partners, not having a platform team, and not being multi-stage. Despite this, they have been the early backers of many important companies.
09:44
This section discusses the dominance of Kleiner Perkins in the venture capital industry, their unique style of leadership, and their adoption of a modern kuretsu model for partnerships, while also mentioning other top-tier firms such as Sequoia, Graylock, Venrock, and IVP.
20:22
Bob Kegel, a partner at Technology Venture Investors, felt strongly about the idea of an equal partnership in venture capital firms and left TVI to pursue this vision, leading him to connect with his friend Bruce Dunleavy at Maryl Pickard.
30:17
Benchmark Capital was formed by Bob Kegel, Bruce Dunleavy, Andy Wrackliffe, Kevin Harvey, and Val Vadin in 1994, with the goal of creating an equal partnership and setting a new benchmark for performance in the venture capital industry.
40:14
Benchmark Capital faced backlash from LPs for charging a premium carry of 30% in their first fund, but still managed to secure investments and went on to become one of the best-performing venture funds in history.
50:29
Benchmark Capital recruits David Burn, the number one executive recruiter in Silicon Valley, to join the firm and bring a new level of aggression and swagger to help turn things around.
01:00:29
Benchmark Capital makes a risky bet by investing in Webvan, an ambitious e-commerce company that aimed to deliver anything you want, starting with groceries, to your doorstep, and the investment pays off with a significant increase in valuation.
01:10:25
Benchmark Capital invests $6.7 million in eBay, with the potential for a $50 million acquisition offer from Knight Ridder, but ultimately the investment is successful and the founders receive a nice return.
01:20:18
Benchmark Capital was the only VC firm willing to structure a deal that allowed eBay's founders to take some money off the table, which ultimately resulted in a $6.7 million investment turning into $4 billion in just 18 months.
01:30:28
eBay's market cap is currently around $23 billion, which is approximately 150th of Amazon's market cap.
01:41:03
The success of the benchmark firm model is dependent on every partner bringing equal value and effort, and maintaining a cultural norm of giving 100% every day.
01:50:55
After their initial success, Benchmark faced the challenge of deciding whether to expand their partnership, pursue corporate partnerships, or stick to their current model.
02:00:12
Benchmark faced the challenge of finding partners who were already experienced venture capitalists but still had a significant amount of time left in their careers, leading them to recruit Bill Gurley, who fit the criteria and had a successful track record in the industry.
02:09:21
Benchmark shifted its investment strategy to focus on investing at the point of traction or product-market fit for consumer startups, rather than taking on the pre-launch risk, and Bill Gurley's first deal at Benchmark was with opinions, which did not end well for the CEO, Neval Ravikant.
02:18:55
Benchmark missed out on investing in Google, Skype, and Facebook, which were all generational defining companies, due to conflicts, wrong architecture decisions, and changing strategies.
02:29:00
Benchmark refocuses the firm by bringing on new partners, including Peter Fenton, Mitzlasky, and Matt Coller, who have impressive track records in venture capital and social media.
02:39:31
Benchmark Fund Seven, raised in 2011, was one of the best venture capital funds of its size and scale ever, with a reported 25x return on the $550 million investment.
02:49:02
Benchmark Fund Seven had a successful era with investments in marketplaces, consumer social, and games, including Uber, which ended up being the bulk of the fund's returns.
02:58:12
Benchmark Fund Seven's decision to sue Uber's founder, Travis Kalanick, along with a group of others, marked the end of the fab four era and had a significant impact on the company's reputation and future.
03:07:44
Benchmark Fund has brought on several new general partners, including Eric Vishria, Sarah Tavel, Jaythan Kudugunta, and Miles Grimshaw, expanding and diversifying the firm's expertise and portfolio.
03:18:04
Cruzo Cloud provides better performance per dollar than traditional cloud providers by using wasted or stranded energy to run AI workloads, resulting in lower energy costs for customers.
03:27:09
Benchmark is a firm that values lower valuations in exchange for the same amount of dollars and focuses on the value they can bring to entrepreneurs, including their network and expertise, while also de-risking the next round of capital for companies that partner with them.
03:35:42
Benchmark is known for being good at understanding the intrinsic value of investments and breaking rules when it makes sense to do so.
Categories:
Technology
Business
