How Benchmark Capital finds EXCEPTIONAL startups in the age of AI — A convo w/ Eric Vishria

00:00:00 - Eric Vishria

AI companies that we're working with that have gone like 0 to 10 plus in a year.

00:00:04 - Tyler Hogge

And contrast that with you. Never seen that before?

00:00:07 - Eric Vishria

Never saw that before. We had 0 to 30, 0 to 40, 0 to 100 in like 15 months. These are insane growth. Customers are like, they see these products and are like, holy shit, this is magic.

00:00:24 - Tyler Hogge

Thanks for joining us, Eric.

00:00:25 - Eric Vishria

Thank you for having me.

00:00:26 - Tyler Hogge

We've known each other on Twitter for many years. First time we've actually met in person. Thanks for having us. At the Bench Benchmark office here in sf, I thought I'd kick it off by telling a quick story. I hope you don't mind. Yeah, so I'm pulling up an email from February of 2019, so I guess six years ago almost exactly. And again we knew each other from Twitter, but I sent you this cold email. Hey Eric, I'm Tyler Hogue. Here's who I am. Quick background. We haven't met in person. I admire Benchmark because of Andy Ratcliffe. I'm reaching out because a few weeks ago I had lunch with Matt Miller at Sequoia and I asked Matt which investor he admires most. All in Silicon Valley. He immediately said your name. And then I saw your head shave tweet about Confluent and it was pretty clear why Matt mentioned you. Anyways, I went on to ask you a couple questions and I would wondered if you'd be willing to tell the story here. Basically how did you pick Confluent early on and why did the founders end up going with Benchmark? And we have a couple follow ups there, but I'd love to start it off with a story if you're open to.

00:01:32 - Eric Vishria

Totally. So a friend of mine who was actually cousins or second cousins with Neha, one of the Confluent founders is the one who introduced me. J.P. and J.P. introduced me. I was two weeks into my investing career.

00:01:53 - Tyler Hogge

You just barely started. And you were a founder before, right?

00:01:55 - Eric Vishria

I was a founder before. And so I was like literally two weeks into Benchmark and there's always the advice like don't make an investment too fast or whatever else, but you're meeting all these companies and I had some experience with Kafka from my startup Rocknell. And so we had used Kafka and it was like this great piece of technology. And so we had some familiarity with the space or at least with what it did. And I kind of thought going into the meeting like, hey, this is kind of the snitchy thing. It's a pipeline, it's a Pipeline, it's a mess messaging bus that puts data into a data warehouse or into at that time, Hadoop. And the thing that happened was Jay and Neha and June. But Jay led the conversation. He articulated a vision of why, yeah, it looks like this pipeline thing, but it's actually much, much more than that. And there's going to be this big real time data hub. And they still worked at LinkedIn when we first met. So it was the initial pitch and.

00:03:03 - Tyler Hogge

It was developed internally at LinkedIn, right? The technology.

00:03:05 - Eric Vishria

Yeah, it was developed and open sourced while they were at LinkedIn. You're sitting there and you're listening to this and you're like, huh, I never thought of it that way. Nobody really has talked about it that way that I've talked to or that I've talked to at least in the investor community. And, and, and yet it seems totally credible.

00:03:30 - Tyler Hogge

Yeah.

00:03:31 - Eric Vishria

And, and like it's a cogent view. And, and then you kind of like dig into it and you're like, you ask questions and everything else and you're like, you know, the, the idea, Chris Dixon's idea maze concept is so good. And you're like asking them questions and you're like, wow, these guys know everything about this space and they know everything, including the things that they don't know. Right. It's like we don't know how fast stream processing will happen. We don't know how this is. We think this is our theory of how it monetizes. It's not even a company yet. I walked out and I sent a note to my partners.

00:04:08 - Tyler Hogge

By the way, I have that email in here. I won't read the whole thing, but I would love. Can I share one or two sentences from it? So this was really cool because by the way, you're just engaging with me over a cold email and you said, thanks for giving me the trip down memory lane. I also forwarded you the email I sent to Peter, Peter Fenton after that meeting. And here's what's cool about this. You said, Peter, Zach and I met with the three Kafka founders today and we both walked away thinking we have to do this deal in bold. So you got to conviction pretty quick it seems would really value your thoughts and help on this one. It will go fast. So can we meet as soon as you're back? Then you go on. It's a much longer email, but what stuck out to me and this we'll get into the benchmark model is like you're immediately reaching out to your partner.

00:04:50 - Eric Vishria

Yeah.

00:04:50 - Tyler Hogge

To help on this deal. And, and, and that feels very, I don't know if that's super common in venture or not, but at Benchmark, it's like second nature. You guys are equal partners. You're doing it as a team. Can you talk about that and what you did here with Kafka and why you reached out to Peter?

00:05:05 - Eric Vishria

Yeah. Keep in mind, I'm two weeks in. This is like, you know, like a lot of this is like just better lucky than good, right? Like, it's just better lucky than good. Peter's one of the great, great investors, great venture capitalists in the history of the business, but, but certainly amongst the top, I don't know, two greatest open source. Open source investors. And so he was like a perfect person to reach out to. And he replied and they set up a meeting right away. And he actually said, I can't remember the exact timeline, but it was like a Wednesday or something. He's like, hey, we should just get everybody, get everybody to meet together. So four other people besides me at that time. And, and so like, let's just everyone go meet. And, and so it's just like you get the benefit of everyone's experience on it and, and their assessments.

00:05:59 - Tyler Hogge

No competition between the partnerships? No, like, like, I own this deal, you don't.

00:06:04 - Eric Vishria

Yeah, nobody cares. I mean, I think this is just like not a, not a, nobody cares about that. The economic model set up that way so we should, we shouldn't care. And you know, and you kind of like. And through that. I still serve on Confluence Board and it's been like an amazing thing to partner with Jay and the team. From three people to, I don't know, 3,000 or whatever, from zero to 10 to, you know, a billion in revenue and more to go. And like, I think it's just like when you get to go on those journeys is so special.

00:06:40 - Tyler Hogge

It's a perfect segue, by the way, because I think at the time you can fact check me here. Confluent was one of, if not the fastest growing tech startup Silicon Valley had ever seen. I think Sequoia said that's the fastest growing company in their portfolio. Then you tweeted just two, three weeks ago, this tweet, which I think should be the bulk of unconvo here. You said, hey, do you remember when triple, triple, double, double, double was the gold standard for annual growth SaaS companies and Kafka maybe isn't a SaaS company, but I think the point stands. And then you said, that was cute. All right, so let's have this discussion. This is what I would love to. What are you seeing? You say it's cute. I assume you mean that's a remnant of the past and things are different now. What's different? What are you seeing?

00:07:28 - Eric Vishria

So I don't know how many AI companies that we're working with that have gone like 0 to 10 plus in a year, but it's like 8 or not. Like, it's, it's some meaningful number. Like, it's really like a lot.

00:07:44 - Tyler Hogge

And contrast that with. You'd never seen that before.

00:07:47 - Eric Vishria

Never saw that before. Like zero to, like you'd see zero to two maybe. Like you see like those kinds. But like this, this is like 0:10. We have 0 to 30, 0 to 40. Like, you know, 0 to 100 in like 15 months. Like, I mean, these are insane, insane growth. And we should just be really clear that it's not the same. And it's not the same in good ways and bad ways. It's not the same in good ways in the sense that there's a lot of experimental revenue. A lot of it is MRR that's run rated. And so it's not like ARR. It's not what I think of as ARR and what anybody should think of as ARR, really. So it's like, it's not that necessarily. In a bunch of cases there's going to be more churn. There's like, people are figuring out value and like all these things. So like that's, that's the bad side, right? The good side is like, it's like real customers. Like, it's not like hokey. A bunch of it isn't, you know, and each of these companies is different. And I think at the end of the day, customers are like, they see these products and are like, holy shit, this is magic. I think that's really what's happening.

00:09:05 - Tyler Hogge

So you do think it's driven by actual product magic, not some experimental AI budgets just to test it out. There's real product value.

00:09:13 - Eric Vishria

I think there's real perceived value. And some of it will get realized and some of it won't, but there's real perceived value for sure. And it feels magical. And the products feel magical to the customers. And so they're spending money. And I think this idea of magic and a magical experience is just like where people are like, whoa, here's my money. And like, that could be, whoa, here's my money. And then three months later, like, it didn't quite work for me.

00:09:42 - Tyler Hogge

And there's the churn.

00:09:43 - Eric Vishria

You're talking and then there's a churn and everything else. But I was talking to an investor about this and I was like, look, okay, take 30% off it, 40%, whatever. Like it's still insane. And so like there's still something happening and we shouldn't be dismissive of it. And the irony is to me that we also have some AI companies that are like zero, that are still like zero in revenue and they're a year, two years, three years into development. And I'm not actually bearish on those either part of me. I can make the case both ways.

00:10:21 - Tyler Hogge

That old phrase of lemons ripen early, right? You find success to child star syndrome. You don't grow into it. Is this all?

00:10:28 - Eric Vishria

I think that's real and I think there's a defensibility question that's really important here, which is some of these companies that are ripping are based, are riding on top of the billions of dollars of investment going into LLMs. And I think that's one of the things you're saying. You don't want to be fighting that. That's for sure. You don't want to be fighting the billions of investments. Great, if you're writing it. But like you do have to make sure, like in most of these spaces, it's not like one company working and so many spaces, it's like four, five. Now, like generally speaking, as we all know through as students of history, like that doesn't end well. Like even though four or five are initially working.

00:11:06 - Tyler Hogge

And that's because the market usually has one big winner, generally speaking. Is that what you're saying?

00:11:11 - Eric Vishria

Yeah. And you just get the gorilla.

00:11:13 - Sterling Snow

So this is what's interesting to me because Tyler and I were actually talking about this before. We're like this year we were saying 0 to 10, how many? We put the over under at 100. Benchmark has 8 or 9 that, you know, okay, maybe 100. That's probably a 10x over what it was, you know, ever before. It's all time high. So here's the question, because that is, it's a really cool thing. It's real, it's going to be around. It should change how founders think about things, change how investors think about things. But does that mean you're like not a venture scale business if you're not doing that, like going forward?

00:11:49 - Eric Vishria

I don't think so.

00:11:50 - Sterling Snow

I don't think so because I don't either. But I think a lot of people are saying that's T2D3 was the formula and now it's you know, speed of 0 to 10 or 0 to 100. And that's like where I kind of, like that kind of rubs me wrong.

00:12:02 - Eric Vishria

That's stupid. I think that's stupid too. I think that's dumb. And I've never like the D2 or whatever that was like the D2T3, like, like just to be clear, like people will talk about and everything else was never, never ever how we looked and like it just never look at things that way. We talked about confluent, I think about Cerebras or fireworks or some of these others that, that I work on or you know, Sierra, which, which Peter works on. And, and, and like those are all. Those were all zero. Like there were founders in a deck. Like there was nothing there. And, and like that's, you know, and those were like founders in a deck. And we just did them and we did them with conviction. Like we took a bunch of pre revenue, generally speaking. These are, yeah, all those are pre revenue. They're. They're all pre revenue. They're pre company.

00:12:48 - Tyler Hogge

Yeah.

00:12:48 - Eric Vishria

And so my, my. So I don't, I don't think that is, is it. I think there are different dynamics in each of these companies that have to be like torn apart. But you know, ultimately for these, in competitive, like in competitive spaces where they're riding the LLM thing and they have momentum, some of those will work. But you need to make sure, double and triple sure that the founder is an absolute assassin and that they are shipping fast and they have some theory of how the quick sugar high turns into something durable. For some of the others, you know that where they're like developing maybe their own AI and it's not in conflict with the LLM stuff, but it is also not necessarily benefiting in the same way from the LLM stuff and the billions of dollars investment there, it's going to take time and that's okay. But I think what you end up with on the other side of that, if the market works and the AI works and everything else is like, I think you might end up with something that's much more durable and there's not going to be like five of them. There's going to be like one in most cases.

00:14:10 - Tyler Hogge

You brought up something twice there and maybe I'm reading too much into it, but you use the phrase fighting against the LLM or working with the LLM feels like, how do you determine that? And one thought I've had is the more vertical you are, the more insulated you are from competing with the LLM. And so potentially vertical applications might be a place to benefit from the LLM as opposed to fighting it. How do you think about that?

00:14:36 - Eric Vishria

Yeah, I think this is. I think it's the right question. I kind of just think of it as like, okay, can I imagine if I fast forward to, I don't know, GPT6, GPT7, like, if you start thinking in that context, like, you know, or deep seq R4, like, is that going to do this? Is it going to do a lot of what this product does? Is it just going to eat it? You know, and we saw a lot of this with the marketing copywriting stuff early. Right? Like, it's just like, it was like, amazing. Yeah, it was, and it was amazing. And then it was like, just cannibalized by the thing it was built on. And, you know, and I think some of them are continuing to do all right. But like, like, but it's tough, like, it's tough in that space. So I think there's things like, just to be concrete, like, I work with the company Quilter AI that does printed circuit board layout, and they're building their own AI for it. And it's been a work in progress and its capability is kind of 10x over the last year. And I think there's another maybe order of magnitude to go before you start getting to real. Oh, my God. And I think that's coming soon because we have a clear path for it, but it's not related to the LLM stuff. And I'm really confident that, like, GPT7 isn't going to do, like PCB layout. Like, you're just like, it doesn't. That's not part of the training set. It's not something that it can do, I think. And so, like, you know, that feels like it's like once you cross over, you get to something really defensible. And so those are like, maybe concrete examples.

00:16:11 - Tyler Hogge

It's super helpful. So if the triple, triple, double, double.

00:16:14 - Sterling Snow

Double things, not, like my question too, what is, what do you get excited about?

00:16:18 - Tyler Hogge

Yeah, what is the new one? What, what, what is the standard?

00:16:20 - Eric Vishria

You know, I.

00:16:21 - Sterling Snow

And let's take, let's take those. Like, you know, when you're at zero and you're building for a long time, it's just take it off the table. When you are scaling.

00:16:27 - Eric Vishria

Yeah. What should you be saying?

00:16:28 - Sterling Snow

Yeah, what should. Like when you sit down and you're doing an AOP in a board meeting, it's like, when do you say, hey, guys, like, we gotta go we gotta be more aggressive, we gotta be faster.

00:16:36 - Eric Vishria

What's in the AOP annual operating? Oh, yeah. Okay. So I think this is like very company specific. And I think one of the things that happened in the SaaS world is it became a little formulaic. And so the investor, bankery type investors, like the banker type finance investors, like, they figured it out and they have.

00:17:02 - Tyler Hogge

Sucked the alpha out of the whole market.

00:17:03 - Eric Vishria

And it's like, oh, the magic number and like blah, blah, blah. And I don't even like, it's just like, they're like pencil. And then therefore it should trade at like 13.2 times. And it's just like, okay. And you know what? They were right. And they made a ton of money investing in those companies because there was like an, there was an arbitrage between people who understood this business model and how like the really power of the business wasn't reflected in the income statement and like the durability and all these things and like different gross retention, net retention, all these things. So there was like, there was an arbitrage from like, I don't know, 2012-2018 that just like these, and these growth funds and like everybody, they just exploited it and they're all like bankery types and they crushed it and they crushed it and that ARB is gone. Like it, you know, everyone figured it out and like, whatever. So it's over. As arbs tend to, tend to do. And I think this new. And this new AI one, maybe there is like, maybe there's just an ARB on AI generally because like, it's just like so powerful and if you just project it, like, it's just so incredible. But I don't, but I don't think it's like, but it's not formulaic in that way. And so I just, I have trouble, more trouble with the plan and just kind of saying like, this is the standard on them.

00:18:25 - Sterling Snow

Fair to say, like, benchmark class is classic, but like game on the field. So it's like a little dependent on like, which wave you're riding. And so you're like, hey, this plan and how we're thinking about growth, how do we think about it in terms of how does it position us to win and be one of the, you know, so more like that that makes sense.

00:18:42 - Eric Vishria

Yeah. And it's just. And you kind of, kind of think about it and you can look around and you can say like, well, are there competitors dominating? Are there adjacencies that are there that are crushing? Like, how are we cannibalizing what are the different things? I was talking to a really smart investor yesterday and you know, one of the things that he made the point on which I thought was like, which I never thought about, was one of the reasons that cursor, which is obviously doing incredibly well, one of the reasons he thinks the adoption was so quick on it was that for the three years prior, Microsoft was like carpet bombing the market with copilot. And so then this thing came along that was like actually like really worked well for this thing. And so like everybody was prepped. And I thought it was just like an amazing insight that you just said. I was like, oh, I hadn't thought about that. And so like, you know, these are things that we don't. You just have to like, really look at them.

00:19:40 - Sterling Snow

Tyler and I were talking about this on the way over, but that's like, there's a big difference between cursor and like Devon, for example. Right. And one of the, one of the things that you're talking about is the entry point and how prepped is the market. And they tend to move, you know, an inch or two at a time, sometimes a foot at a time. They don't move like 10ft at one time.

00:19:59 - Tyler Hogge

You actually have a tweet. Oh, finish your thought. No, no, that's.

00:20:02 - Sterling Snow

And so I'm just like that. That to me is.

00:20:04 - Eric Vishria

Is your.

00:20:04 - Sterling Snow

The point that you're making.

00:20:05 - Tyler Hogge

You have a tweet on this that I think similar. Eric, you said while the co pilot approach is all the rage, I think we're going to see a bunch of areas where the AI just does like completely does tedious work. So let's talk about that for a second. Copilot versus maybe pilot or like it just, it's just doesn't.

00:20:22 - Sterling Snow

Do you think they graduate or can you in many cases, are we going to see them skip to kind of the final version?

00:20:28 - Eric Vishria

I think there's this. I have this idea in my head which is there's a copilot. I think there's a set of areas where copilot is the right approach and there's a set of areas where we're going to be AI and done and maybe some crossover as like the AI becomes more capable. The AI and done thing is like this PCB layout company and where it's just like, you know what you don't really want, like, you don't want to do that. Like you just don't want to do it. Like it's just better like for a computer go do that and. And Come back and just be done with it. But there are other things where, you know, the human, like guiding it or getting kind of superpowered on it is like, is really powerful or getting comfortable.

00:21:09 - Sterling Snow

With it and then being able to put it.

00:21:11 - Eric Vishria

You know, I think that's another important part of this enterprise adoption thing that's going to happen in a bunch of cases where it's going to take, you know, the human will be in the loop and then yeah, this is typical for automation. It's like, oh, I'm going to check it, I'm going to check it, I'm going to check it. And it's like, you know, it takes about 30 days before people are like, I didn't really check it anymore. Like, you know. And so, so I think both models will be there. I think for code we're going to get to a place. Dario made some comments, I think today or yesterday about how much code generated is going to be actually by AI versus people. I think that is clearly working and it's working really well. On the other hand, you do have these cases. Like there's one company I was talking to had hired a relatively junior Engineer and like 90% of the code was written by AI and it was garbage. It was just like garbage. And so there's this other kind of irony of this which is like the great engineer is going to actually be more valuable like the truly great engineer.

00:22:19 - Tyler Hogge

It's an amplifier.

00:22:20 - Eric Vishria

It's an amplifier for them in the future. And there are other areas like accounting or which we have company digits or you know, legal work, like I think a lay of law and like other things where it's like in that stack, like constructing a brilliant agreement and a legal contract. I just, I think that's like, at least for the time being, like that's a, that's a task for a human first. But there's a lot of underlying execution and rote legal work and paperwork and whatever that is. Like clearly AI can just do. Those are the dynamics to me.

00:22:58 - Tyler Hogge

You mentioned something earlier. Basically these companies that have scaled so well, a lot of them you funded just a deck and a team. Pre product, pre revenue. What is Benchmark looking for in order to fund somebody? Pre product, pre revenue are these second time founders only. How does it work at Benchmark for the partnership to get excited about a deck, an idea and a founder?

00:23:23 - Eric Vishria

You know, my former partner, Mitch Laska, he's described it to me, he's like teaching me in the, you know, whatever 10 years ago and started, he's like, look it's not. There's no bar. It's not objective. He's like, the better analogy is it's falling in love.

00:23:38 - Tyler Hogge

Yeah, it's falling in love. I call it spiritual conversion.

00:23:41 - Eric Vishria

Yeah, it's spiritual conversion. You, like, you're baptized by these days, you're just. You feel a connection. Each of us will articulate it a bit different, and I think each of us has different tastes and whatever, but for me, there's obviously this big market thing. What's happening in the market that is going to allow this thing that really the world doesn't want to have to succeed to break through. That's just a big market thing. And what's shifting and is there a seam and all this stuff? Then you're looking at the founder, and I just am like, is this the founder that is going to grow and scale and grow with this company? And I think that's actually a really important thing to me is like, is the founder a hyper learner? Because I find the job at three people is really different than 30, than 300, than 3,000. It's different at different scales. These are really dynamic jobs and they're changing and it's really tough. It's like I said this before, in some ways it would be better if there was CEO1 and then CEO2, and then you graduated as CEO3, because it's the same title and same thing the whole time, but it's a totally different job, like every six months. And then the third thing really can't be overstated is an insight. We talked about the J example with Kafka in the Real Time Data Hub and like, hey, this is going to be a thing. I think of that almost for every investment, probably for every investment, there was an insight. There was somebody who the founder came in, had seen stuff, and they were just like, no, but this. And you're sitting here and like, we meet companies. All of us meet companies every week, right? We're meeting companies every week. And you're talking to smart people all the time and you're like reading all this content on Twitter and everything else. And then like, someone comes in, in a domain that you know a little bit about at least, and says something you've never heard. And you're like, wait a minute. And then you think about it and then you ask questions about it and you're like, that's totally cogent. I don't know if it's right. I don't know if it's right, but.

00:25:53 - Tyler Hogge

It'S at least logical.

00:25:54 - Eric Vishria

But it's logical. It's well thought through. There's like, there's like. And you're like, if that's right and this person has an insight and they're a killer and this market is big. That's the formula. That's the formula. And on those kinds of things, we've written really big checks just like that. And I think that, to me, it's rare. It doesn't happen that often when you fall in love and you have those three things and all this stuff. But when it happens, it's magic.

00:26:29 - Tyler Hogge

Do you know, pretty quick when you meet it, like first meeting, you fall in love or do you buy that? Or does it take a while to get to the conviction again?

00:26:36 - Eric Vishria

Each of us is different. For me, I feel like I just am. Like I'm a romantic.

00:26:41 - Tyler Hogge

Yeah.

00:26:42 - Eric Vishria

So I'm there and I think about, you know, Lynn and fireworks. So they made.

00:26:50 - Tyler Hogge

They made the list two years in a row, right? The exceptional startups list, gentlemen.

00:26:53 - Eric Vishria

It's an exceptional company and hypergrowth and, you know, one of these crazy, like, revenue scale growth. But she ran the Pytorch team inside of Facebook, Pytorch engineering team. And the founding team kind of came from the Pytorch team. She came in and I generally don't like people from these oil state companies. I just find, well, you did LinkedIn.

00:27:21 - Tyler Hogge

And I did Facebook. So I think.

00:27:24 - Eric Vishria

I would say LinkedIn to me was not a real estate company. Well, it wasn't an oil state company in the sense that they were commercial and they grounded out like, you know, like Google monopolies.

00:27:37 - Sterling Snow

They were really duking it out.

00:27:38 - Tyler Hogge

No, I actually agree. Yeah. LinkedIn had to do some hard stuff. Google just collected money so much, so much hard stuff.

00:27:45 - Eric Vishria

You know, these other companies just like, they poke a hole in the ground and oil starts coming out and it's like, okay, so I generally don't like them. And so, you know, she comes in and I tell her that in like the first 10 minutes of the meeting.

00:27:56 - Tyler Hogge

That you don't like Facebook people basically just don't.

00:27:59 - Eric Vishria

It's not. They're incredibly smart and very talented, but not great founders.

00:28:03 - Sterling Snow

And the zero to one thing's the difference.

00:28:05 - Eric Vishria

Zero to one is a different skill set. Yeah, yeah. And that's. That's a much better PC way, a very euphemistic way to say it. And so like, I. And just like the way she reacted everything else, and then she pushed back me. Wait, why, why do you say that? No, this is what we're doing. This is how we did it in Pytorch. And this is how Pytorch came from behind and like beat TensorFlow and everything else. And I was like, 10 minutes in, I walked out and told the receptionist, I was like, please call Chloe, my assistant and push my next meeting, push my next meeting because I need all the time I can because I'm doing this investment. And then it took six more weeks and she still worked at Facebook and the team was leaving.

00:28:49 - Tyler Hogge

She hadn't even left Facebook.

00:28:50 - Eric Vishria

She hadn't even left Facebook yet.

00:28:51 - Sterling Snow

That's the other part of your playbook. They're still employed and they work at oil state companies.

00:28:56 - Eric Vishria

And so I feel like that doesn't always happen, but when it happens, you feel like this. And she subsequently pivoted. The companies pivoted.

00:29:07 - Tyler Hogge

So was the insight wrong?

00:29:10 - Eric Vishria

The insight changed in this AI world. It was like a Pytorch cloud idea. And then she was like, well, Genai is happening. And really what people need help on is not this base layer, but one layer abstraction up. And they kind of moved to that.

00:29:24 - Tyler Hogge

So was it the fact that she pushed back on you and was inquisitive and like stood her ground, like, what was it that she did well there that caused you to be like, man, I'm kind of in love.

00:29:33 - Sterling Snow

And part two to that is like, is it the insight or is it that they have the ability to have an insight? And you're like, even if this isn't the one, the way you got to this one will lead you to the next one.

00:29:44 - Eric Vishria

You know, they're all, you know, they're all different. Like, this is, this is a law of small numbers, like nothing statistically significant. In that case there was an insight. Like, I always never understood why PyTorch, like TensorFlow came to, I guess for your audience, like, he didn't know. Like, these are AI development frameworks. And TensorFlow came out of Google and it was totally dominant. And if you look at like the Neurips papers from, I don't know, like when TensorFlow it was like 99% of the NeurIPS papers were like built on TensorFlow, like things. And then like three or four years later it's like 90% PyTorch and these are big projects that are relevant to really good companies. And so how is it that a new framework came along and just beat it? I understand Cafe and Tiano and some of the previous ones before TensorFlow because they didn't have that kind of backing, but this is a totally different thing. And she explained why and she just articulated why. So that's part of the insight. Yep. And, and, and then why that insight would turn into something else. So I think that was like a really important part of it. And, and you're just like learning it is the inquisitiveness part of it. It's, it's the, it's the back and forth. Like one of the most important things is like, why do we do this? You know, and each of us has our own things. But for me, I want to work with entrepreneurs. Like, that's the part that gets me out of bed. Like, the investing part is like, whatever. Like, I kind of am like that, that's a means to an end for me. But I want to work with entrepreneurs. So like, one of my other things is like, if this person calls me at 9pm on a Saturday, like, am I going to look at my phone and be like, or am I going to pick it up? And I just. Like that to me is like, that's such a good test, you know. Another kind of question I always ask myself on these investments is we've all worked with these amazing people in our lives that you trust. And I feel a lot of loyalty to all the people at Rock Melt, for example, who stuck with me through thick and thin. And I think they're excellent and I want the best for them. And I was unable to deliver or lead us to an amazing company and I want them to have that opportunity. And so one of the things I think about is like, would I, would I, would I talk Rock Melt people into like working here?

00:32:13 - Tyler Hogge

Would you send a friend to this?

00:32:14 - Eric Vishria

Send a friend to this?

00:32:15 - Tyler Hogge

Or would you work for them? Maybe age adjusted?

00:32:17 - Eric Vishria

Would you go there? Yeah, would I work for them or would I? And would I do I believe that, like, I could very authentically convince people or sell people that this could be their life's work. And like, there's a lot of businesses, like, good businesses, which I'm totally fine passing on and not working with, even though they're good businesses and they'll be good returns and they'll generate like venture returns because they, like, I wouldn't want to work with that person maybe. Or like, I don't have good chemistry with that person is probably a better way to say it. Or I just find like, it's just like, I. Just not a business that I get excited about.

00:32:57 - Tyler Hogge

Yeah. For whatever reason.

00:32:58 - Eric Vishria

For whatever reason.

00:33:00 - Tyler Hogge

I'm actually very curious too. This. What's the founder of Fireworks? What's her name? Lynn. How did you Meet Lynn, because the sourcing part of this job is tricky because was she meeting with five other firms that day or was it just you? She's still at Facebook. So how did you source this meeting?

00:33:18 - Eric Vishria

So in that case, another founder introduced.

00:33:20 - Tyler Hogge

Me, which is generally the best.

00:33:22 - Eric Vishria

Which is the best? I think I get a lot of introductions from other founders.

00:33:26 - Tyler Hogge

Was the other founder someone you had invested in?

00:33:28 - Eric Vishria

Jay Kreps? Yeah. So that is really special. I think a lot of stuff comes from founders, like, other founders, and it's founders that I've invested in and founders I haven't invested in. And that's so nice when they come and you get that. It's the highest compliment that a founder can pay you. And so it's really special. I do cold outreach, too. I like doing that. I don't do it as much as I should anymore. But you'll see things like, there was a company called OctantBio, and it's outside of my domain, but I really respected the founders, followed them on Twitter, and he said, like, hey, one of his early employees was going off to start a company, and he was so excited about it, and he thinks it was going to be amazing. And I just, like, DM'd him right away. And I was like, hey, I'd love an intro. Like, that sounds amazing. And I got to meet Nicholas Laura Stone through that. And he came in as EIR and he started a company, and, like, you know, it's a pleasure to serve on his board. Like, I just. And so, like, that's a really. That's a really special thing that happened.

00:34:50 - Tyler Hogge

That's awesome. How often do you do the EIR play? Is that a common thing here?

00:34:56 - Eric Vishria

You know, it goes in fits and spurts, I think. Like, right now, I don't know if we have any. I don't think we have any EIRs, but in different periods. Yeah, we'll have them. I've done it three or four times.

00:35:06 - Tyler Hogge

Cool. Any other questions? We should dig in on AI or this other stuff before we switch topics.

00:35:12 - Sterling Snow

Oh, you know, just the classic, you know, you've no other ones.

00:35:17 - Tyler Hogge

We have a lot of debates on how this stuff's going to play out.

00:35:21 - Eric Vishria

It's hard to know.

00:35:22 - Tyler Hogge

It is very hard, actually. I will ask one. Venture capital. These founders are famously scaling much more efficiently. Fewer people at least. Maybe they're still raising big rounds, but do they need to? The direct question, is venture capital even needed in a lot of this case? Will there be fewer firms in the future? Is there? How does the landscape change and Sterling's point usually is like, won't it be the case that almost there's an adverse selection effect of the worst founders will raise venture capital now because the best ones can just get so far without it because you can create something much easier than you ever could before. Now it's the stupid ones who need to raise venture capital.

00:36:04 - Sterling Snow

It's also to your point earlier about. I love this, the investment bankification of like that doesn't exist right now.

00:36:13 - Eric Vishria

No, it does not.

00:36:14 - Sterling Snow

And so a lot of people aren't gonna know how to deal with that. Like a lot of firms aren't gonna know how to deal with that. So at the same time is they're gonna be like struggling to adapt. You're having founders that there's a totally new way of building this stuff. And yeah, I love, love that question.

00:36:33 - Eric Vishria

I hope not maybe is one way to say it. I think it varies. Like, I think there's gonna be some amazing bootstrapped companies, like amazing that will get very big and very large and be able to leverage AI to just rip. I think there'll be lots of things. But to me there's something that's lost in that, in the question, which is venture capital is two things. It's capital and it's partnership. And I put a lot of value in the partnership part. It's both a part that I personally love, but I think I believe in it. I believe in that value proposition. And there are other ways to get that. There are other ways to get that for sure. And most of the great companies, if you talk to those founders, they had partners, what we think of as partners around who helped them and helped them make the business better and pushed them and asked questions and, and we're sounding boards, which is my favorite analogy for it. But I think that's like a really important part of it. In some ways the whole. The business of venture capital kind of artificially tied these two things together.

00:37:48 - Tyler Hogge

Yeah, they're bundled.

00:37:49 - Eric Vishria

They're bundled and they don't necessarily have to be. And so maybe there's some future evolution that is where there's.

00:37:56 - Tyler Hogge

Well, you answer another question we debate, which is like what are the good reasons to raise venture capital?

00:38:01 - Sterling Snow

And do you need and is the money a pro or a con or a neutral part of the money?

00:38:05 - Tyler Hogge

And what I'm hearing you say is one good reason that apparently some really, you know, obviously some fantastic founders have believed is that the value is in the partnership because they can get money from anywhere. But they choose to have this non executive partner called a venture capitalist on the journey with them. And so to believe that doesn't exist in the future would mean that you don't think that partnership's valuable or that.

00:38:27 - Sterling Snow

You can get it another way or.

00:38:28 - Tyler Hogge

You can get it another way without the money, perhaps. But I think the partnership component is pretty like, yeah, if that didn't exist, then it's just money. But if you have that, you can see why founders prefer that.

00:38:40 - Eric Vishria

Yeah, I think it's a very special part of the job and it's a privilege to get to do that.

00:38:46 - Tyler Hogge

So we've probably got like 10, 15 minutes left is all. I would love to. We've got a bunch of early stage founders that listen to this. Some may pitch benchmark at some point, some may not. But for those who don't know much about how the firm works and some of the unique cultural aspects. Can you talk about a couple of things? So one, one, for example, I talked with Chathan at Sundance a couple years ago and he, he mentions the famous Monday partner meeting. All day, free flowing, unstructured. Is this, is this right? Talk about why. And it's a little different than other firms, right? How do you guys do Monday partner meetings?

00:39:18 - Eric Vishria

We do like five or six hours of, of just us in a room and we're just partners. Just partners. And that's all that's here. And, and we're just talking like there'll be a company pitch, you know, maybe every other Monday or something. There'll be. Sometimes a company comes in to update, sometimes there's a guest, lunch guest or something. But, but it's really just. And there's no agenda.

00:39:46 - Tyler Hogge

No one, there's never an agenda. You just show up there.

00:39:48 - Eric Vishria

You show up. You show up and you're talking about companies. What happened in the week? What did you see? You know, things that are going on in your portfolio, companies like executive searches that you're working on.

00:40:01 - Sterling Snow

Just so why not structure it? Why not have five topics and go through, you know, like, what's the reason to keep it?

00:40:07 - Eric Vishria

One of the advantages of it is there's five of us, right? There are five GPs and our operating partner or lawyer in the room. And so there's no, like, the nice thing about that is like, you don't need to, like, you can, you can just like talk about what is most important.

00:40:27 - Tyler Hogge

I'll tell you what Jaden said at Sundance. He said people have proposed or talked about changing things, but then the fear is that you'll break something that's working and so no one will Actually go through with it and you just kind of keep doing it.

00:40:40 - Eric Vishria

Yeah, I don't like, you know, and if we're like, yesterday, I think we were done, like, 30 or 40 minutes early, and we're just like. It was like, fine, okay, we're done. Like, just move on. So I don't know that there's any. And I think that part of what happens is, like, these firms aren't companies. Like, we're not a company, actually. And you want a loose and wandering exchange of ideas. Like, that's what our job is to do. It's to see the present very clearly. And to see the present very clearly, you have to just wander and, like, you have to, like, understand, and you have to debate points, and you have to, like, do that. And. And so that's kind of what we do. And then we go. And we go do some work, and then we typically have a dinner guest or have a dinner with a guest here around this table or a similar one, Woodside. And. Yeah, and it's like, just a really. Just another opportunity to learn, exchange ideas.

00:41:35 - Tyler Hogge

You brought up that quote, the job is to not predict the future, but to see the present clearly. I think it's Peter Fenn.

00:41:41 - Eric Vishria

It's Kohler's.

00:41:41 - Tyler Hogge

Oh, it's Kohler's. Talk about that, because a lot of people would say you're actually. You're trying to predict future markets and invest for markets that don't exist yet. What does he mean by that?

00:41:51 - Eric Vishria

Well, I think we should say, like, I think they're different. Different venture capital models work. Like, there's not just one model that works. A few weeks ago, I was talking to Mike Spizer from Snowflake and Pure Storage.

00:42:06 - Tyler Hogge

We're trying to get him on the podcast.

00:42:07 - Eric Vishria

For two years now, he's on, like, in just unbelievable track record and unbelievable investor. One of the things he's like, he likes to start companies, and he likes to be the initial CEO. He was the initial CEO of Snowflake. He likes to start them and be the initial CEO of the companies and everything else. And, you know, I think he'd say, like, he doesn't like investing in other people's companies. That is a capability. And here, which, I mean, like, what something you aspire to. But, like, I can't do that.

00:42:36 - Tyler Hogge

Yeah.

00:42:37 - Eric Vishria

And. And. And so, like, it's amazing that. That he does that. I find it amazing to partner with. With founders in their earliest stages of development, but I, you know, I can't help them, like, figure out the product. Like, I. I Can't do that. I can't help them figure out the technology. I can't do that either. Like, and so, like, you know, that's. That's a different element of it. I think I can say at times, like, that's not right, that's not going to work, or there's something busted here. You can say that and have that pushback, but I can't actually help them figure it out. That part of it. But then there are other parts where I think we can help a lot. That's the system. And so I think there's different models at work.

00:43:28 - Tyler Hogge

My mind was going somewhere on this. Oh, oh, I would love it. Eric, would you mind sharing one thing you've learned from your other four general partners? If we go through them all, like, what have you learned from Peter? What have you learned from Sarah? What have you learned from Chathan? And then the fifth partner is Victor. He's the newest, right?

00:43:45 - Eric Vishria

Victor's the newest.

00:43:47 - Tyler Hogge

Anything you can say for each of them?

00:43:49 - Eric Vishria

Sure. So I'll go in reverse chronological order. So Victor is our newest partner. He's the founder of Wildlife Studios, which is a game company, and with his brother who now runs it, and he scaled it to hundreds of millions of revenue, bootstrapped to your earlier point, and then partnered with us actually as well. And one of the things I think Victor, he's pushed me on so much is just like the job is to work with excellent people and period, full stop. He's like, that's the beginning and end of it. And he's also. And I just think that the clarity of that articulation is very useful. Like, I intuitively knew that do that, but it's just like the clarity of it. And so I love that. And he has really pushed and continues to push me on, like, the risk taking. Am I taking enough risk? And I appreciate that Chetan is. He pushes in a lot of ways, but he is. I think he characterized me by his resourcefulness on figuring things out. We cover a lot of the same stuff. And so his ability to see what is moving early and what has actually started to break out and what's interesting, what's getting developer, mindshare, everything else. He's maybe two or three levels more technical than I'm in. Like, it's so powerful. I think Sarah is kind of a. She's been a venture capitalist. She started as an associate at Bessemer, found Pinterest there.

00:45:31 - Tyler Hogge

Right.

00:45:32 - Eric Vishria

And yeah, she found Pinterest there. And, and. And then she joined Pinterest and You know, I think the thing that she has through that training is, like, coverage, like, meet companies, see a lot of stuff. And when you see a lot of stuff, like, you know, great things happen. Like, these connections happen. One of the conversations Sarah and I have all the time is like, if I have free time, I tend to call a CEO that I work with. But the right thing to do, which is, like, nice. I think it's nice, but, like, part of what it should be doing is like, just like casting a wide net and spending time on that. And then Peter, who's been here the longest, there are so many things to have learned for him. But I think the most valuable from an investing perspective is we don't do memos and we don't do this. And Peter always jokes, if you have a data room, we probably wouldn't open it. And so. So the question is why? And I think that the key thing is for most of these companies, there's really only one or two questions that matter. Like, after you get through your founder thing, there's really only one or two questions that matter. And I think his superpower is just like, figuring out what those questions are. That's the whole game. And everything else is bullshit. And so you go through these long memos and you go through the data rooms and all this stuff, and it's just a bunch of. It's just a bunch of pollution in your mind of really what you need to figure out, which is what are the one or two questions that matter?

00:47:10 - Sterling Snow

You know, it's an interesting insight from. You know, Keith was saying the same thing. He's like, I like to invest early because anybody can see and read the numbers. And that actually, like, makes me worse than if I am because I'm not focused on what actually matters. It's the same point you're making.

00:47:25 - Eric Vishria

It makes me. It makes me worse.

00:47:27 - Sterling Snow

And again, I think probably worth clarifying that this is for early stage investing. Right? Like, that's. Data rooms start to matter a whole hell of a lot when you're in your ced, IPO kind of stuff. But sometimes the initial momentum or lack thereof is pollution in your brain. I think that's amazing.

00:47:46 - Tyler Hogge

And I think you're also saying the one or two things that matter after you've set aside the founder, like the founders, like, table stakes. What are the key things that matter of them? Being a big company in addition.

00:47:55 - Eric Vishria

Right, absolutely. Yeah, that's a great. That's a great point. Is just like, what. What we care about is being part of the handful of companies that can turn into giants, and that can be, you know, multi billion, multi tens of billion, you know, maybe multi hundreds of billion public companies. Like, that's what we. That's what we're here to do. And like, be part of those at the earliest stages that we can. And, you know, thinking through that's like a very difficult, difficult task. And each one of them is different. I joke. It's like you're looking at Kindergarten playground and trying to pick out LeBron. And it's like you're just looking at the playground. You're like, that one. That one's gonna be like, put up 50,000 points.

00:48:42 - Sterling Snow

That's funny because the analogy holds because you'd probably go for the tallest one and that would probably be wrong. You want to look at other things.

00:48:50 - Eric Vishria

Too, and there's elements of it, but it's, you know, there's a lot of. A lot of luck involved and a lot of, you know, but. But there's some really cool things that you can. You can pick up on.

00:49:00 - Sterling Snow

1. One question I have because, you know, don't do memos, don't like data rooms. Got it. How do you keep yourself honest about, you know, if your reason for investing, if that proved out and regardless of the outcome. So about the process and how do you go and check yourself against what made you excited to invest versus whatever ended up happening again?

00:49:21 - Eric Vishria

It's the right question. So Sarah actually writes notes on her, on the meaning she has so she can keep herself intellectually honest on it. I think she does it and she has a whole, like, system around it so she can go back and back check and everything else. I understand that I am telling backstories when I reflect on things, and I think about them all the time. So I don't know. There has to be an element of intellectual honesty. I sent you that. I think on our initial exchange with Confluent. Part of the reason that was fun for me to dig up that old email is because it was like, what did I really think then? And I ask myself that all the time. For the ones that work and kind of go off to the moon, I ask myself that. And for the ones that don't, I also ask myself that what did I see and what did I get wrong in the reading and would I do it again like one company? So Alex from Scale AI, I met him at the A and I spent time on it and I, like, I loved him. And it was just so clear that he was like. And I think he was like 20 or 21. Like, he was so young and he was such a killer. And. And he had this, like, autonomous driving, like, labeling revenue at the time. Like, you know, and it's like, people in the Philippines and like, all this stuff. And I was like, that revenue is not here for this. Like, I just did not feel like that revenue was long for this world. And we kind of talked about it and everything else. So dumb. And like. And so I didn't pursue it. And I think I was like, I think I should have said yes, obviously. Obviously I should have said yes. But I think if I had said yes, he would have gone with me, I think. And like, idiot. Like, I'm such an idiot. And like, I know better. Like you.

00:51:21 - Tyler Hogge

So what'd you miss?

00:51:23 - Eric Vishria

You know what I missed is that.

00:51:24 - Sterling Snow

Like, was the pollution you're talking about guy.

00:51:26 - Eric Vishria

Yeah. Like, it's like, you had him, he was such a winner and he was going to figure it out.

00:51:31 - Sterling Snow

You had Lee San Al Gaib at the table and you said, I don't like your business model.

00:51:35 - Tyler Hogge

So dumb.

00:51:36 - Eric Vishria

It was so dumb. And just like, so dumb. And I. And I. And like, I know better. I know better. I know better than that. And I know I. And so you're. You're sitting there with someone at that age and that sophistication and talent level, like, their curve is like this. There's no chance. And. And you know what? In. Even to go one step further, even if it didn't work, even if it didn't work, which obviously it has, but even if it didn't work, there's no chance I wouldn't have learned a ton.

00:52:08 - Tyler Hogge

Yeah.

00:52:08 - Eric Vishria

And like, because of him, because of him, I would have learned a ton from him. And so just so dumb.

00:52:15 - Sterling Snow

Can I ask this question?

00:52:16 - Tyler Hogge

And then I know the answer. We gotta wrap up soon. You're out of time.

00:52:19 - Sterling Snow

I know.

00:52:19 - Eric Vishria

This is awesome.

00:52:20 - Sterling Snow

I'll miss a flight for this. Do you regret the ones you didn't do? Like the Alex ones that in hindsight you feel like process independent of the outcome you should have? Or do you regret the ones you did do, and you're like, oh, I ignored X, Y and Z and I did it and I don't like which one. Which one hurts the worst?

00:52:37 - Eric Vishria

Definitely hurt the worst for sure.

00:52:40 - Tyler Hogge

Because you only miss out. You only lose 1x.

00:52:42 - Eric Vishria

You only lose 1x on the ones you do. You know, I like, like I said, I've been very lucky in that the people I've worked with, I'm happy to work with whether it works or it doesn't work. Campbell said this to me. Bill Campbell is one of my mentors a long time ago, before he passed, and is a role model for me. That's what I want to be. I think in time, 20 years from now, if people talk about me, like, 1/6 or 1/10 the way they talk about Bill, I'll be like, fuck, I did. My career was successful. And he said this to me. And he was part of Apple and he was part of Google, and everyone talks about those stories. But you know, what is forgotten when people talk about it is he worked with schmucks like me also. And he gave us time, and he gave us time and he gave us guidance, and. And I don't think it didn't matter to him that it, like, you know, that, like, I mean, did it matter? It mattered, of course, but, like, it didn't. Like, it wasn't like his. His, like, North Star. His North Star was like, the people, do I want to work with that person or not? And, like, that was his North Star on it. And to me, like, I just. That's how I'm oriented. Like, I just want to work with. And so I don't. I don't feel bad about that. Love it.

00:54:06 - Sterling Snow

So we have three questions that we ask everybody, and you've actually talked about this throughout, so I think I could answer this one for you. But we call it the Golden Spur question. And it's like, what makes you the way you are? What motivates you? Why are you doing this?

00:54:22 - Eric Vishria

I do it to work with the people. I do it to work with entrepreneurs. That's what I do. This is a vehicle to do that and just like to be part of Benchmark. I think that's the ethos of Benchmark from the. The very beginning is partnering with entrepreneurs and working with them. And I just get so much joy out of that. And, you know, and I think my partners directly push back, like, hey, you know, you want to be partnered with companies that don't need your help? I don't know. I think that you spend a lot of time on the companies that aren't working and a lot of time on the companies that are really working, because, like, small improvements or small enhancements on those make a big difference. And so, like, I really love that model.

00:55:05 - Tyler Hogge

I could have guessed you were going to say that. All right, the last two are pretty easy. I think the IO podcast, that's what we call it. Investor Operator. So who is an investor you admire most outside of Benchmark, and then who is an operator you admire most outside your portfolio?

00:55:22 - Eric Vishria

Well, the investor, I have to say, Jim Goetz from Sequoia and Excel previously, but he. For a few things. One, I'm hugely grateful to him because he told me to be a venture capitalist, and he told me that in 2008, and it took me six years to figure out he was right and all this stuff, but I just am super grateful for him for that. And then two, there are very, very few people who had successful enterprise companies and successful consumer companies like WhatsApp and Palo Alto, I guess. And so just an absolute winner and does it with class.

00:56:01 - Tyler Hogge

Love it. What about operator, a founder that you just love?

00:56:05 - Eric Vishria

You know, I mean, Alex, there's. There's so. There's so many founders, but it would be, you know, like, Mark and Ben gave me my career, and they gave me my start in my career, and Mark sat on my board at Rockmount, and, you know, I was Ben's assistant. And they're operators, they're entrepreneurs as investors, and so I love that. I have a ton of respect and gratefulness to those guys.

00:56:38 - Tyler Hogge

Eric, this has been a fun convo, man. Thanks for taking an hour with us. We owe you. We appreciate it.

00:56:43 - Eric Vishria

Thanks. Thank you.