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Intro: Every entrepreneur comes in and they pitch their boat. The most important thing isn't actually the boat. It's the wind. In a strong wind, even the shittiest dinghy will fly. And if there's no wind in America's Cup boat, it's going to sit there. Welcome to the Logan Bartlett show.
On this episode, what you're going to hear is a conversation I had with Eric Dishria.
Eric is a general partner at Benchmark, where we've been fortunate enough to share two investments together over the years. Eric and I both got into venture in 2014 and both focus on enterprise software.
Intro: And so we had a discussion about how he views investments and what he looks for in founders as well as companies, which It's vastly different than the way I think about the world.
Entrepreneurs have the thesis. It's our job to assess whether we believe the thesis or not. If we have the thesis, then like a lot of people have it. If a lot of people have it, that probably is not going to be that big an outcome. Fun conversation kind of going back and forth on his model versus mine, as well as Eric's background, having grown up in Memphis and graduating Stanford at 19 years old before joining Loud Cloud, which became Opsware with Ben Horowitz and Mark Andreessen.
[00:01:00] Really fun conversation with one of the more thoughtful investors in venture capital that I've really enjoyed getting to know over the last couple of years. You'll hear that conversation with Eric here now.
All right, Eric. Thanks for doing this.
Eric: Thanks for having me.
Logan: Right above your office. We've never recorded here in our, uh, Woodside office.
Eric: Oh, is that? Well, I appreciate you coming
Logan: Yeah. Yeah. Yeah. So, uh, you and I are both venture capitalists. I think we got into the industry around the same time. When did you start a
Eric: 2014.
Logan: 2014. I was 2014 as well. We invest broadly in similar stuff.
We have two shared investments at amplitude and acuity. I think they would be remiss if we didn't shout it out. But I think how we think about things is vastly different. And I enjoyed picking your brain. I, part of that's probably a function of stage. You're. Earlier, definitely a little later, but I always enjoy asking like how you think about things.
And so one of the, I guess, just to start with, what are [00:02:00] you looking for when you're taking meetings with entrepreneurs or meeting with businesses?
Eric: That's the right question. I don't know if I have the right answer.
Logan: me a couple of months ago that like within the first five minutes you met a CEO and you were like, we're going to, I'm going to make this
Eric: That happens to me a lot.
Logan: Yeah. So I don't really know what that, you know,
Eric: That happens to me a lot. Um, I, I would say that like if I look at the investments that I've made over the course of my time at Benchmark over the last nine years or nine and a half years. I think all of them actually have that element where it was like you had this feeling very, very quickly that this is the kind of person you want to work with, that it's an idea, um, that is really special, um, and it could be something big.
I think those are all, those are characteristics of the three things that I would like say, and I think part of what manifests for me. Is when [00:03:00] the entrepreneur makes you see the world differently, like they say something typically very early on that, like, you haven't heard before. You haven't read about before, like no one else has articulated, like it's just a unique View of the market, you know, like, huh, that's plausible.
And then they go on to explain the intricacies of it. And you're like, wait a minute, maybe there's something there. Um, you know, and then the question becomes like, well, okay, let's say everything they said was true. Like, if it worked, could it be a big, valuable business? That's, that's like a very, very important question.
You know, and then like, do they have an angle of attack on the market, not just the insight, but also an angle that is defensible, not replicable and blah, blah, blah. And so like, I, I think those are kind of the things that they put out there, which is like, it is [00:04:00] unique.
Eric: It relates to this whole, do venture capitalists have a thesis or not actually is a, is a very interesting question.
Logan: you're preempting some of my questions. So you were a non thesis guy.
Eric: realized on it, and maybe a better articulation of saying whether it's thesis or non thesis, maybe it's false categories, is like, who comes up with the thesis? And it's, it's, I think it's my view that entrepreneurs have the thesis. It's our job to assess whether we believe the thesis or not. Right. And so like, they have the thesis and, and because if we have a thesis, then like a lot of people have it.
If an investor has it, then like a lot of people have it. Right. And. Um, and if a lot of people have it like that, probably is not going to be that big an outcome. Like it's just a, you know, that's the piece. No, I think like to be fair, you know, one of the things that's weird about our business in venture capital is there's a lot of models of success.
There's not one model. There's not one path. There's many paths and there are probably venture capitalists out [00:05:00] there who are smart enough. To have a thesis and be futurists and like, see the world and see where it's going and everything else. I'm not one of those people. Um, and so I love it when I'm like sitting in a meeting and someone's like, wait a minute, like, this is how this is going to go.
And everybody thinks this, but it's really going to be this way. And you're like, huh, and it makes you think, and then you're like, well, one, I've never heard that before to like, it's cogent, right? And three, if that happens, it could actually be really, really big. And then they have a path to kind of get there.
And then that gets then that gets you really excited. And and so I think that that tends to happen to me. Um, on the investments, you know, that I've
Logan: You mentioned person, idea, and big was what I took down, and so I, I want to deconstruct each of those, but so on the person [00:06:00] side, obviously there's the articulation, there's the viewpoint, the thesis that that person is able to articulate, um, and then you mentioned cogent, so that's also kind of tying into that, but are there characteristics of, I mean, you've backed very young people, I don't know, how old was Saji when you invested in him?
23, 24.
Eric: Yeah. Something like that. Young. They're
Logan: You get back to older people, you get back to experienced people. So there's not one heuristic across that type, but is there a personality characteristic or
Eric: all learners. They just learn. And so like, I just, one of my big conclusions is it just doesn't matter where you start. The only thing that matters is the slope. And so you have these people who are just like, they're just learning and you're like, you know what? Like our business is long term, right? We're gonna work on these companies and working on Confluent and working with the Amplitude and Confluent teams for 10 years now, almost 10 years.
Nine and a half years since I got there and It's a long long time. So you have a lot of time for that [00:07:00] for that rate of learning to compound and You know you have to have luck and you have to have the right market and like all those other things have to line up but If someone's learning at those rates, you're just like, wow, I had this, uh, the, the, my first meeting with Saji eventually, it, it felt like he hooked a hose up to my head and just like sucked out everything he could.
Um, and now that's, that's the only real series B that I've done, um, that I've led for us and I knew nothing about the market. It's, it's vertical SAS for biotech. So I knew nothing about the market, you know, vertical sass is very in vogue now You and I are working on one together, but but at the time it wasn't like nobody thought it is just like yeah It's kind of whatever and then so It was kind of vertical sass in a market I didn't really understand and like everything else But I think two things occurred to me in that meeting [00:08:00] one is like wow, that is a special individual And then two, it's a SaaS business.
Like I, I kind of know SaaS a little bit, so like I can kind of work with it. So like, those were like my two takeaways. And then the second meeting. Um, I met his co founder, Ashu, and we met together at their office, the three of us. And I had some questions and everything else, and I was like, Hey, they, they made a claim that they had never seen a customer turn, you know, at the time it had 50 or 60 customers, which is pretty unusual.
Like, you know, we look at SAS companies all the time. To 60 and never have a churn, like it is very, very rare. And so you're like, Oh, that's interesting. Like, that's worth it. And so I was like, I want to go through every customer. So they pulled up a spreadsheet cause it wasn't no CRM at the time. And I remember very distinctly, the floor was sloped in the office.
So you like had to hold on to the table so that your chair wouldn't drift. Which is also a good sign that they had shitty office and we just like went line by line through the spreadsheet and like one or the [00:09:00] other of them would talk about every account and what was happening at every account and then, you know, we would ask, I would ask questions about different things and they ask questions back to me and like, why are you asking that question?
Why? And then I realized I was like, shit, there's not one of them. There's two of them. There are two of them at the company like this. Um, so that was, uh, that was, that was pretty special, but I think they're all
Logan: that level of like understanding, like when you're,
Eric: And that level of curiosity and you just can't, and you know, we work with Spencer at Amplitude and, uh, Mike at Acuity and, and obviously Jay at Confluent and, and a whole bunch of other, and they're all like, all, all the ones that I work with are like that.
Logan: do you have like a single thing that to figure out that learning slope, uh, or is it just a feeling when you sort of drill in and the questions they ask,
Eric: think it's a feeling. I think a lot of entrepreneurs are trained to sell. And like, we all have to sell. Like at the end of the day, [00:10:00] you and I are glorified
Logan: you know, the fucking podcast,
Eric: exactly. And so, like, we're all selling all the time and like a CEO has to sell a lot. Like, that's part of their job. It's a huge part of their job, whether it's to investors or customers or employees.
And, um, as part of that process in a fundraise. You want to feel like they're engaging authentically, like they're, they're selling, but they're also listening, like they're, they're hearing, they're engaging, um, and, and maybe a good way to say that, uh, which, which my partner Sarah uses it is like they're truth seeking, like they're seeking truth, like they're trying to get to fundamental ground of like, what is it and what the right way to build a company is.
And the reality is, if you mess with software, it's just like, yeah. None of us are investing in your idea, your million in ARR, your three million in ARR, like, you know, sometimes you get these decks and it's like a company's at a million ARR and [00:11:00] they're showing their NRR and all these metrics and you're like, Who cares?
Like, maybe, like none of that is extract, extrapolatable, uh, or most of the time it isn't extrapolatable. And so you're, you're investing in what could be and what the potential could be. And the reality is because the future is unknown, you are going to encounter as an entrepreneur and as someone who's building and leading a company, you're going to encounter all kinds of things that you can't imagine.
You can't foresee. And so what you're really betting on is someone's ability to navigate that obstacle course and those unknown obstacles in the future. And so I think that's why it like it shows up and you can and I think you can tell through the interactions. A lot of times you can tell it's not perfect, but I think you can tell a lot of times in the interactions just like how they think about things.
And are they are they truth seeking in that way? And are they trying to like, Learning it better.[00:12:00]
Logan: there any commonalities in investments that you haven't done that you wished you would have?
Eric: Um, yeah, actually, I think, uh, the, the mistake is underestimating the trend because you have questions about the person.
Logan: Got it.
Eric: So, so trend just overwhelmed. Yeah, it just worked out. And then, you know, maybe person under us, you underestimate the person too. But like,
Logan: It, that's a hard one because ultimately, especially when you're investing, you don't know the other companies that are to come down that are identified the same trend. And so we were a battery, we're invested in blue jeans and then zoom came in or envision and then Sigma came in. Right. And there's these trends that are very true.
And if you look, you can get false precision about like, Oh, well, it's the best. Totally [00:13:00] company out there. Right. Which is true. Both. Those companies were the best companies until they weren't in time. Yeah. Yeah.
Eric: I think, I think it's just like one of these dynamics where You know, like I, we saw the snowflake series C, right, which was this, I think it was a series C
Logan: Y'all tend to drive around. Yeah. I think he's out. Yeah. And everyone saw that around. No one did. No one. Did it. There's like 2 million. They are awesome. But like small customers, burning a lot.
Eric: and I was like, okay, so the, the bet is like, they're going to out AWS on AWS
Logan: It's so that was the exact thing I said internally, a battery. I was like, come on, they're going to this is AWS. And this was AWS at its sleep.
Eric: and, uh, you know, it's like
Logan: Yeah,
Eric: that, that, that really, uh, that was a bad, bad read, um, you know, on it and, and maybe, um, Not [00:14:00] understanding or believing enough the technological advantage or whatever else that ended up being very real and durable
Logan: I don't think I've said this here, uh, before, but one of the analogies I've started to use more and more is like the best CEOs see, uh, a flame. And they're like, that looks hot. And then they see a stove, but they're like, that looks hot. And then they see a bonfire and they're like, that looks hot. And they ask for help before they touch any of them.
Right. Now the very good CEOs touch the flame and they're like, Oh gosh, that was fucking hot. And then they see the bonfire and they're like, reminds me of that stove there, that flame thing. And it's like, that's very good. The best ones like notice that there's smoke emanating from it and touching it probably isn't a good thing.
But it is nice when there's that iterative learning loop, uh,
Eric: so my encapsulation of that very same idea, which I said is like The best CEOs are making all new mistakes You're always making mistakes
Logan: Of course.
Eric: But [00:15:00] they're all new
Logan: That's funny. As you think about something being big, there's kind of the motes and the defensibility. There's the, the size of the market as what it could be versus the rate of growth versus what it is today. How do you sort of think about, uh, what the big element of it is?
Eric: I think there's a lot of different ways and this is one that we can get wrong and because like a lot of companies That start out Nichey end up being really, really
Logan: That was a knock on Benchling.
Eric: Yeah. It's a knock on benchling and, and like, and, and a lot of the vertical companies. Um, but it's a knock. It, it's been a knock on a, on a bunch of things.
Totally like it, it was a knock on Shopify really early and
Logan: Just a knock on Viva. Yeah,
Eric: And so like, there's so many where it's just like, well, okay, so like, what is what is big mean? And actually, just one other point about this is like, you actually want to be kind of tight to start because like, then you have a chance to like, dominate and build value and get the word out and so forth.
You know, the big thing that I kind of think [00:16:00] about is, is there something changing in the world? Transcribed That the company has nothing to do with, but such that the future state of the world would yield a bigger outcome for that company. If that makes sense. That's poorly articulated. So let me try it in a different way, which is, I use this analogy sometimes, which is there's, there's the boat.
So every entrepreneur comes in and they pitch their boat and they're like, Hey, we have a, a better hull design and we have a better reading system and we have a. A better crew and, and like so forth, new materials, whatever it is. Um, and the most important thing isn't actually the boat, it's the wind. Um, now the boat designer has nothing to do with the wind, the wind is the wind.
Um, at least at first, but in a strong wind, like even the shittiest dinghy will fly. And if there's no [00:17:00] wind and America's Cup boat is going to sit there. And so like the wind is like, what is changing in the world or in the market that is enabling this new thing to be and can allow it a chance to exist?
And so I think that is like a really important question of like, what, you know, what can be big? And so I think if you kind of go back, um, and you kind of like take a look at a Shopify or you look at something like that, it's just like, well, like is. E commerce going to be enormous and like, is that going to be the way of the future?
Then you can, you might, you might come to a different conclusion than you would have initially, right?
Logan: What's your perspective on artificial intelligence right now?
Eric: Um, I, look, I, I think it's a, it's an incredibly important technology, um, I think that The how it is going to impact things and, you know, what benefit is going to go to incumbents versus not like all these are all things that are out there.
Like, what's my original thought on it? I don't know. I don't think I have an original thought on it [00:18:00] on where it's going to go. Um, for for what it could be. Um, but I do have conviction that there's a lot of value to be built, um,
Logan: Like a GDP layer?
Eric: at a GDP
Logan: Yeah, I agree
Eric: at a GDP at a GDP layer. And, you know, figuring out like where it's going to go and how it's going to be, um, attributed is really hard.
I think, you know, my partner Sarah had had this, uh, post about like basically you can sell the work now. Like, you know, we used to sell software. Now you can sell the work like you can sell the work that the A. I. Is doing, um, which is potentially a much, much larger market.
Logan: Like the output.
Eric: The output. Yeah, exactly. Like one of the recent investments that we've led, which is not announced, but it's basically They're like, yeah, everyone's going after these like software tools, dollars, but like the labor dollars are 10 times that, that are being, um, that are being spent there and like, that's what the AI can do.
And that's, that's a very powerful [00:19:00] idea and, um, and very expanding in terms of what it could be.
Logan: You guys haven't done any like model layer, uh,
Eric: foundation will, yeah, we have a
Logan: model, which is a little different. I mean, the funding and the, the structure is a little different than I think you guys are typically play this. Yeah, we typically,
Eric: do. Yeah. Yeah. Thanks to what we've inherited and, um, and the success of the founders and prior partners and everything else. We have a lot of flexibility in terms of what we can do. Um, and so we try not to be religious about, you know, Hey, it's like people will ask you what check size are you in?
Or sometimes entrepreneurs ask you, I'm sure that they asked me, Like, where are you in your fun cycle? And I'm like, don't worry about that. Um, you know, that's not like an important question. Um,
Logan: if any entrepreneur wants to know, I think they're fairly evergreen.
Eric: we're, we're, we're, we're fun, like, yeah, and we're, we're going to be fine. And so we try not to be constrained about that.
So I think if, if there's an opportunity, um, you know, that we really believe [00:20:00] in, we'll do something weird. Like, we're not, we're not unwilling to do that. Um, the core of the model is partnering. With early stage companies in a high engagement way and, you know, which is typically less than 10 people. It's often no, no revenue, you know, sometimes a million or two like it's and that's what partnering with.
And we're partnering with them on a journey that hopefully last a really long time.
Logan: do you have any views? You said, said no, no specific insights on the artificial intelligence. Uh, but there's, it's hard not to sort of think about the implications of it for software where we both spend a fair amount of time in the. Dislocation that could occur. I think probably the vast majority goes to some of the incumbents much in the same way.
Mobile Salesforce was Salesforce, right? It's probably, you know, a I Salesforce is probably Salesforce. I don't know, but maybe not. Maybe Salesforce trips up in some that you [00:21:00] text. Cushion, anything that you're thinking about, uh, with regard to new attack vectors or dislocation or opportunity sets that the outcome one is interesting or the output one, but
Eric: Yeah, I think, I think, you know, if I kind of say this, call it three categories of stuff right now.
Eric: So there's a foundational model stuff, which is. I think, um, it's very expensive. It's very quickly depreciating. Um, it's, it's maybe the fastest depreciating thing in human history. And, um, so like that's the foundational models game, but obviously if you have one and it ends up being really defensible, you're in a very powerful position.
Um, you know, we can argue about whether we'll be defensible or not, you know, it doesn't, it doesn't matter, but
Logan: they seem to get commoditized.
Eric: they get commodity very quick. That's what I mean by the fastest depreciating thing in human history. Like just, it's just like you spend, you know. 250 million building one and six months later, people build them for 2.
5 million. Like that's just like we have never seen that ever like buying a [00:22:00] Bentley is a better investment. Um, and like driving off a lot. Um, and so, you know, to you have, there's a lot of like ML infrastructure, like kind of companies. And, um, You know, that are basically make it easier to manage this stuff, making these whatever.
And, you know, there's been fits and starts in that area. Um, and there have been things that are working and not working there. Um, I think, you know, there's a question on those is really like, hey, how much of it do the cloud providers take? How much is there room for an individual, uh, new provider? You know, are you just like, Bundling and unbundling maybe, but maybe that's all business.
So, you know, that's kind of that piece. And the third one is part of the stuff, which is like, okay, it's like an application, like we're going after it. Um, and, and you're kind of delivering value to the customers. And I think that's where we've seen tremendous revenue fraction, right? Like all of these companies.
Um, like if [00:23:00] you look at the Jaspers of the world and, um, you know, copy AI and, and writer and, um, you know, the, those types of companies have just even up, like they've had tremendous revenue traction, like amazing. And, um, they've grown. And I think the question for them is just like, well, what's defensible?
Like, there's also, they've had many, many copycats also. And, um, and the rappers have been thin. And so, like, each one of these areas has a different. Yeah. Um, that you have to kind of have a point of view or conviction on, um, and, you know, it's been, it's been interesting for us to kind of go through that. Um,
Logan: Those are kind of the B2B ones. The ones that I don't even know how to think about are the, the net new sort of weird AI stuff. Sure. And the character AI journeys or the runways are the ones that are just like, this is different. It's more consumer, prosumer or whatever. But like, I don't even, that's the one where you [00:24:00] could end up being really wrong to not participate in them.
Right. Uh, some of those other ones, like we know what. The foundation model, I don't know, but the infrastructure tooling stuff, we sort of know what those businesses look like and we know what Mongo looks like and Confluent looks like and. And we sort of know what vertical software companies look like, right?
These other ones, people talking to bots, uh, all day. I don't, yeah.
Eric: Yeah. We, we, we have no idea. You know, what do you do? You keep looking at them, um, and try to see what you believe,
Logan: does price fit? You guys are almost entirely series a, some series B with some exceptions, I guess, but, uh, how does price fit into that?
Eric: like price of the company.
Logan: yeah, like valuation you're willing to pay versus not.
Eric: It's funny. It matters, but it doesn't.
Logan: Yeah, totally. I mean, everything you just said would lead me to be like, ah, I mean, if we want to do it, we'll do it.
Eric: I think that's the reality. There's there's a problem on it, which is price isn't the right indicator of it. So [00:25:00] like price doesn't matter. Ownership matters. And like, you know, we're kind of traditionalist and you can poopoo us for being traditionalist in that way. Um, but, but we're traditionalist in that sense.
And the reason is, is because of the level of engagement, right? We work on boards for a decade plus. That means that you're kind of constrained by the number of opportunities you could have that you can work on. Um, and, and we're high engagement with those CEOs like today, before this, what it's one o'clock in the afternoon, one 30, I've talked to four CEOs that I work with today.
So like, if you're in that kind of place. And you're having that level of engagement with people, um, then you're time constrained. And so you just have to get return on that in order for our business model to work. And so our business model is kind of dependent on ownership in that way. You know, Peter said this to me like very early on, um, right after I joined and I was like looking at a company and I was like, Oh, well maybe I would do it here, but I wouldn't do it [00:26:00] here.
And he was like, that's like sloppy venture capital thinking like, stop. Um, at the round, he was like, look, either like, you think it can be like a multibillion dollar company and you believe that or you don't, and if you do, it doesn't matter. And if you don't, it doesn't matter. And so like, it kind of doesn't matter.
Um, and so like, there's an element of that, which is true. But of course, like the complexity is, you do have to believe you can generate enough return. On it, you know, to, to make the business model work and the opportunity cost justified, basically,
Logan: And so then when you're thinking about that, is there an underwriting, like, are you thinking, Hey, can this position be worth a billion dollars when you dream the dream, or is it, is there anything, or is it just a gut feeling?
Eric: I, um, every, every one, I would say every one of us, but it's probably a little bit different in this regard. In terms of how we think about it. People say things like we underwrite it to a certain return or we construct this probability curve or like whatever. I don't do any of that. I mean, I think the [00:27:00] reality is, yeah.
Like, you know, if it's successful, it's going to be successful beyond our wildest dreams and like, so it just doesn't matter. And I want to be part of companies. And I think we want to work with companies and we aspire to work with companies that have that, that have that, like, you could have never imagined.
Um, and you know, they won't all be that way. And like, not everything works and like. And, and that's okay. Like, I'm fine. I'm fine with trying and it not working like it sucks, but like, I'm fine with that. But you want them to have that kind of special feeling where it's like it could be, you know, enormous.
Eric: And any probability curve I construct is just BS.
Logan: So you've had a fairly serendipitous run in 10 years. Your first investment was Confluent, which is now a. Whatever, five, six, eight, 10, but whatever the given the
Eric: Whatever it is today.
Logan: billion dollar valuation. Uh, we talked about amplitude public [00:28:00] company. So your first two were public, right? Uh, also eventually, and we mentioned, uh, Contentful's doing quite well.
Kind of your first cohort of businesses, Cerebris, you talked about a Q and AMD, a bunch of, uh, interesting companies along the way, how much of, of. This success, do you think, was guided by the structure of Benchmark and some of the mentorship you got from Peter and, uh, Gurley and whoever, whoever else in the early days of you joining, um, versus your own kind of instincts on some of these, some of these things?
Eric: I think a tremendous amount was just the structure and the model and a tremendous amount was just luck, like right time, right place. Like, you know, it turns out it was like good to be an enterprise SAS investor, infrastructure investor
Logan: gotten lucky. You're more than most. I will say. Yeah.
Eric: joining in 2014. It's like, yeah, it's pretty helpful.
Logan: Yeah. Yeah. Yeah. [00:29:00] You know, that's multiple appreciations and all that. Yeah. What would you attribute to bill?
Logan: Like a learning from bill that was helpful versus Peter? Maybe they're very
Eric: you know, they're, they're very different. Um, they're, they're all very different. And Mitch and Matt were all, all like, those were the four, those the four I joined was, was. You know, Mitch, who, you know, had Riot and Snap and Discord, um, and, and, and many others as, as his, um, big companies. And then, you know, Matt Koehler, who's had a, just an unbelievable track record, both as an operator and not, and then, and then Peter and Bill.
Each of them is actually, like, different in, in terms of, like, what they, they view. And I, you know, if you kind of, and it just goes to this whole idea that, Um, there's no one model of success in venture capital, right? Um, you know, Bill thinks a lot about like markets and value, where value is going to be attributed, how it could trade, you know, if it, if it were to grow up, he thinks a lot about like [00:30:00] what the future state of the world is.
He does think he does think more about thesis, like, like, what's the thesis for this, um, ahead of time? And, you know, I think that's, that's been talked about a lot. So, like, he, he thinks forward a lot and kind of tries to imagine future states and like, and then goes to look for all the companies in the category and stuff like that.
Um, you know, I think Peter's more founder driven and like he's more oriented around is who's the individual and, um, what makes that person tick and, you know, and so forth. Yeah, exactly. Um, you know, I think Matt is very trend driven, um, in, in terms of how he is and, um, Mitch, Mitch and Matt, but Mitch in particular has an artistic, uh, view of things that is impossible to replicate, like you just can't.
It's like taste, you know, which is like impossible to describe and, um, and everything else, but in some ways that's really unfair to all of them because they're all [00:31:00] they're all extraordinary. And, you know, it's not that Peter doesn't think about markets because he obviously does not like Bill doesn't think about people.
He obviously does and like and so forth. So it's kind of like.
Logan: that's where the spike may
Eric: where the spike is. Maybe is a way to think about it or where they kind of retreat in terms of their consideration. And so one of the beauties of the model is like you, you know, for for a few years, it was five of us. And so and like all four of them are obviously probably accomplished.
And so you're sitting in there and you're looking at every company. And I would just if I would go to lots and lots of meetings with them, like initial pitches. You'll, we'll have two or three partners in initial pitches all the time. And, and you're like looking at it and you're seeing what questions they ask and you're like learning what they learn.
And, and, and, and you're kind of trying to debrief from them afterwards, like quickly, um, in that. And like, it's just, you're just absorbing as much as you possibly can in terms of how do you [00:32:00] evaluate these things and, and everything else. And some of it does actually like sector actually does matter, and it impacts these things, right?
One of the reasons like, yeah, software companies, SaaS companies, they kind of at the end of the day. At some level of scale, they all kind of look the same, right, right. In terms of like what their P and L's look like and everything else. And so to some extent, like Peter doesn't have to think about how as much about like how they would trade or what it would be worth because of like, yeah, it's a software company.
And like, and so like that piece is, is there, and obviously I'm talking about his enterprise portfolio, not his, not the Twitters and Yelps and amazing consumer successes. And then, you know, for Bill, like, but. If you think about like marketplaces and other things, they actually trade radically differently and they like can be valued very, very differently basically.
So he does have to think about some of those elements, um, as you're, as you're kind of going through it. And so it does matter like, um, in those cases, the way our process works to the extent we have a [00:33:00] process is like, you know, you haven't. You meet someone and you get excited about it and then you pass the ball like I, you know, you, you, you get another partner to engage on it to take a look while you're going off and doing your work and diligence on idea and opportunity and so forth and you're spending time with the entrepreneur, but you're having your other partners look at it and raise questions and you want them to raise questions and like ask questions and push back on you.
Um, and Um, and get excited and, and like, and so forth. And so it's an advocacy model. Um, and then ultimately, you know, as, as most venture capital firms, you, you get them in front of everybody and then we like, look at it and, and then when you get feedback, you're kind of calibrating on this and, and there's like lots of really good examples of, of this.
For me, the Cerebris one really stands out because I think it, it was. And who knows what will happen with the company, right? It's, it's, it's, there've been periods of time where it was like, holy shit. And then there were [00:34:00] periods of time where it was like, holy shit. And so I, I don't know, but it's been a really fun one for me to work on.
But I think the story of how we came to invest most typifies the benchmark. Approach and, um, and I think it's one of the reasons that a whole bunch of other firms wouldn't have done it. Um, so I meet Andrew on a Wednesday and I'm walking into the meeting. I tell my assistant, I'm like, why the fuck did I take this meeting?
Like, I'm looking at a hardware company. This is 2016. Okay, this is before NVIDIA ran. It's before Google launched the tensor, uh, tensor processing unit, TPU. It's before any of that. So it's just like,
Logan: We, we looked at this round, uh, battery. Yeah, yeah, yeah. I think you might be, I forget where it ended up landing, but I remember everyone being like, hang on, we have this software thing going on and we want to go to a chip. Yeah. a lot of people that got fired
Eric: Yeah. There's a lot of people like it. Right. And so I go into the meeting and I'm like, why? Why did [00:35:00] I take this meeting? Right? I didn't know Henry before or the team. It's a slide. One's cover slide. Slide two is the team. I was like, wow, that's a really credible team. Like they built, they built semiconductors, they built systems, um, they've done them at startups, which actually turns out to matter a lot and, um, and, and really successful.
And then slide three is, yeah. Is the GPU sucks for deep learning, it just happens to be 100 times better than the CPU. And it was one of those like, fucking of course, like, but to the whole insight point that we were talking about earlier, it was just like, like, nobody said that before. Like, nobody had said that before that I heard at that point in time, you know, and then he goes on and then the details matter.
He goes on to articulate like, well, why? Like, well, this is why it's better than a CPU, but this is why it's less suboptimal. Like, and he had like four or five things that, that were like very specific. Like you start to get very specific. And he's like, so what we propose to do is like [00:36:00] build something that is, that is for deep learning.
And, um, and then like the rest of the deck didn't understand, didn't understand. Like I probably got to slide four and a half. Before I had no competency on it. So I come out of the meeting and I was like, wow, this is like really interesting. It's a really interesting idea. It's a really credible team. And like, if it worked, it could be like really big.
And so I go out and I talked to, um, I talked to Mitch and Bill, I think about it. And, um, and they're like, you know, just like this. And, and, and Bill, Bill gave me the really good advice. He was like, hey, we need the founders for this. We need the founders for this one.
Logan: Benchmark
Eric: The benchmark founders. Yeah, because none of the group had done hardware.
Like, we had no idea. So I called Bruce, um, and Bruce joined us, and so we met again on Thursday with, I don't know who all, Mitch, Bruce, Bill, me, whoever else, and he [00:37:00] goes through it, and I remember debriefing with Bruce afterwards, right, and he's like, look, he's like, as far as teams go, and like, the approach totally makes sense.
He's like, but there's no market for this. And I was like, well, the one thing that I have a lot of confidence in is there's a market for this deep learning like deep Learning there will be a market for this right and so this and and you know And we kind of continued on and so forth and and Peter in the end actually like really I think I wanted to do it I had the hardware concern and Peter really encouraged me After actually spending the night before before he met it trying to talk me out of it Um, but after they pitched, he, you know, and I think he'd say, like, our job is to help enhance each other's instincts and your instinct was to go do it.
So, but I think my point on it was, you know, it was a whole bunch of people coming together with different views of the market. And it was the [00:38:00] collective whole that gave us a conviction to, to invest
Logan: How do you think you've changed most as an investor since you joined Benchmark? I know you had, I've read, I don't know where this was from, but after your first year you said I've seen about 180 companies the first few weeks. I was like, Oh my God, these are
Eric: everyone. Yeah. Yeah.
Logan: so clearly not that anymore. But if you look back to 2014 versus now, what do you think?
Eric: Lots of changes. I, I'd say I project forward a lot more. Like I think about the possibilities of what each company could be, not next year or the year after, but I, I try to project forward three or five or seven years, like, um, much, much more than I did, um, before and try to think about like what those possibilities are.
Which both closes me off from some opportunities that I probably would have, um, previously pursued and opens me up for new possibilities, um, that I didn't, so it's kind of both good and bad, maybe, [00:39:00] um, in terms of what I'm, like, looking for. I have a, I really, even more than before, prioritize. And think about like the learning aspect of the entrepreneur, it's not I think it took me a while to figure out that that's what I gravitate towards.
Like, that is the characteristic that I gravitate towards. Um, you had a feeling initially, but it wasn't articulated. Now it turns out it matters. And part of the reason is because if you then project forward a bunch of years, you're like, wait, like there's all going to be a bazillion challenges. And you need someone who is going to be able to navigate them.
Um, and so like that, that's also been a big, big change.
Logan: Do you think being a founder, uh, and an executive at a, you know, big sized, uh, business benefits you more as a investor or a board member?
Eric: Um, definitely as a board member, not, not, not as an investor. The career investors are all better. Like, they're, they're better.
Logan: How [00:40:00] do you think the rock melt experience did benefit you as an investor?
Eric: I mean, I think I really learned the value and power of storytelling and, um, and narrative in that, you know, and just like what the, the pieces are. And I, I think I also actually learned a lot about the flute, you know, how ephemeral success can be because with rock melt, like we came out of the gate so hot and it was just like the list and we like flew to 100, 000 daily actives, which at that time was like a pretty good sized number in like six weeks from launch, like it was, it was like insane.
Logan: year is this?
Eric: Um, this would have been 2010, um, and it was like zero to 100, 000 daily active with insane engagement, you know, and then we got stuck and we really got stuck at like 200, 000 to 250, 000 DAUs. And it just got stuck, like stuck in the [00:41:00] mud, like couldn't go anywhere on it. And it just, it all happened so fast, like the, the, the, both the success of it.
And the failure of it, um, so that, that's what I would say is
Logan: What about, um, I mean, the fleeting of success could apply to being a founder as well, but having gone through the journey of being a founder, do you, do you, do you think at point of investment about anything from that experience?
Eric: not normally, I mean, I think you're empathetic towards the founder journey and you're just like, you just like, I empathize, like, I understand how hard it is. I understand, like, I understand the improbability of it. I also understand there's a whole bunch of stuff that's in your control and there's a whole bunch of stuff that isn't in your control.
And so I think that, you know, I think there's this, like, we tend to portray, we as in the collective, we portray the successes as, like, based on that individual and the failures based on that individual or that team. Um, but I, I'm much more fluid in my, like, view of it. Um, you know, I think a lot of [00:42:00] the, the failed, Companies have remarkably fabulous people who had a totally reasonable thesis and, you know, it, these are all whatever, 51, 49 probabilities of any outcome and it's just like, you know, the coin landed wrong.
Logan: So backing up, you grew up in Memphis,
Eric: It did.
Logan: your dad was a financial advisor. Financial planner.
Logan: Can you take me through the story arc of a kid from Memphis, Stanford, Opsware, like how did that whole path happen?
Eric: So out of my junior year in high school, I left my junior year in high school and went to USC, University of Southern California. Um, they had this program to take juniors out of high school and kind of combine your senior year in high school and your freshman year in college, so to speak. So I did that for a year.
Um, and then I had, uh, I had driven down Palm Drive at Stanford and, um, [00:43:00] obviously I was like into math, computer science and whatever. And so it was, uh, I knew Stanford from that, but driving down Palm Drive, I remember just simply is like, I want to go here. So I only applied to transfer to one place and transferred Stanford and transferred coming out.
I actually, like, didn't, you know, I studied mathematical and computational science and human biology. Like, I wasn't a, uh, I didn't know anything about business. Like, I didn't study anything about business. Um, and so I actually took a tech M and a banking job, um, out of school at, at, uh, Broadview. Um, and. Uh, it's funny because you think you're gonna learn about business and banking, but you're, you're obviously learning about banking, not business.
And so I, I did that for six months. It was actually an incredibly valuable experience because Uh, you learn how to model. You learn basic accounting. You learn like a whole bunch of stuff in six months that, you know, it's like years worth of stuff. And, uh, this is 1999. Um,
Logan: And you're, you're, you graduated [00:44:00] early.
Eric: I graduated early. Yeah, it was 19.
It's 19. I graduated and then I turned 20 whenever that's so. Um, and you're like, it's hard to describe because that time to some extent, maybe this AI craze right now is similar to what it was like here in 99 because, you know, in the Bay Area and it was just like, everything's happening. And, One on one was jam packed traffic, like, non stop, and, and there were tech companies everywhere.
And so I was like, I got to get in, fight, like, I got to get in there.
Eric: Um, and, uh, you know, there was this new company, LoudCloud, uh, started by, uh, Marc Andreessen and Ben Horowitz, and, um, and Tim Housen, and so, and they, uh, it was still in stealth, um, and my cousin was friends with, uh, a marketing guy there, and, uh, You know, whatever submitted my resume, they were, Ben was looking for an assistant.
Um, and so I got an interview with Ben and [00:45:00] Mark to be, uh, assistant to the CEO. And, um, and we hit it off and they hired me and I joined LoudCloud as Ben's assistant.
Logan: How big was the company at the time?
Eric: 50, 60, something, 50 or 60. He was growing really fast. I was like three months old.
Logan: Did you know, like, did you have other options, uh, that you were going to go or are you sort of single threaded through this one? Yeah.
Eric: single threaded actually USC, single threaded to Stanford, single threaded to Um, and then, you know, it was always meant to be like a kind of training position. I worked with them on a bunch of cool stuff, um, and got exposure, you know, I'm 20 and I got exposure to them. I got exposure to all of the company running fundraising, like lots of different pieces.
Uh, and then became a product manager, product marketing, ran product management, ran product marketing, um, and then ultimately ran most of marketing over eight and a half years. LabCloud went public, became Opsware, got bought by [00:46:00] HP, um, so it was a long journey. 7,
Logan: in 2008, seven, seven.
Eric: uh, yeah, 2007,
Logan: Oh, what, what, what was the unique, uh, the business pivoted? It was worth X then fell down. I mean, people can read hard things about hard things. Hey, you're a good job documenting it, but what was unique about. The culture or the group of people or yeah. Did that come from
Eric: Ben?
Eric: Fucking grit. Yeah. Just like
Logan: Chewing
Eric: determination to last, keep moving, keep pounding out. Some very loyal team, um, and grindy, like willing to just keep going. Um, and I think that, I think it made a big difference.
Logan: you think you're going to be a founder after that?
Eric: absolutely. I wanted to be, I always like, I wanted to be a CEO actually.
And I think, and, um, and I didn't want to just be a CEO. I wanted to be a [00:47:00] great CEO, uh, which I obviously fell short of, but I, that was my aspiration. And so my mental model the whole time was like, learn as much as I can, see as much of the business as I can. Um, so that when it is my shot. I have a job.
Logan: Rockville had, we talked about big run and then kind of the plateau and then ultimately sold to Yahoo. Yeah. All right. Did you think after that journey about running it back or going to be a CEO somewhere else?
Eric: That's a great question. I, to be honest, I was tired. Like I didn't have the energy to found another company. Um, I definitely bore the, like, I failed, um, piece. Um, and so I just didn't, I just, I felt like I failed and, and I didn't have energy. We had, uh, my wife and I had twins, [00:48:00] like baby twins. And so I was just destroyed, um, at that point in time.
So I was like, and I did not like being a big company junior executive at all. So I didn't like that. I didn't, so I didn't know what I was going to do. It was a little crisis of confidence, to be honest with you.
Eric: Um, but a few years earlier in 2008, before, before founded RockMelt, um, you know, someone had planted, actually Jim Gueth planted this like seed in my head that I should be a venture capitalist and.
Um, and so in 2013, when RockMill got bought by Yahoo, uh, Bill and Peter had emailed me and like, Hey, you know, chat and, uh,
Logan: never, you didn't have any money from Benchmark.
Eric: not have any money from benchmark through the course of the next year. Um, I spent a bunch of time with benchmark team and also spent, uh, a lot of time with early stage companies.
And I really liked it. Like, I just spent time with early stage companies trying to be [00:49:00] helpful. And, um, and evaluate. I, I really liked it. It's fun. And so, yeah. So then I was like, Hey, I think this can be cool.
Logan: I asked both Spencer and Mike for questions and they both wondered why you aren't a CEO, like they both, that was both
Eric: if they're independent questions? They, uh,
Logan: they're like, I think you should be a CEO. And I was like, Oh, that seems like he's happy doing what he's
Eric: Never gonna happen.
Logan: They, they both asked the same question.
Uh, what drew you, I mean, there's, there's, uh, your former boss also started a firm as well, uh, that you had raised money from Andrew said Horowitz too.
Logan: What was the thing that drew you to Benchmark?
Eric: I, like, I think the model fits my personality very well. I think it's quiet. Um, and we kind of do what we do. Um, it's, it's a, we operate at a certain scale and, and, um, and you're just like striving for absolute excellence in that individual craft. I think the [00:50:00] appeal of not managing anyone at that point in time and not like running to just like, this is my job.
I'm like, I'm an individual contributor and, uh, it's just like, was like incredibly appealing. Um, you know, like the industry has done amazingly well, they've been really successful at that point in time. Their model was like very successful CEOs were the people that they're recruiting, which I was not one.
Um, so we, we've honestly never talked about it. We never have talked about me joining them.
Logan: Oh, interesting.
Logan: Uh, I read it something, I don't know where I dug this up from that, uh, you find most management advice worthless, but there were a few things that spout from your time at rock melt.
Eric: Oh gosh.
Logan: I want to ask you about each one.
Logan: Start building your management team now and don't stop. Was that something that you wish you had done or that you
Eric: I wish I stretched more at different points in time because it never ends, [00:51:00] um, and in companies. And like, if you think about where we spend our time, you know, with founders, so much of it's around building the team around them and management team around them. Um, so I think that that part like is really, it matters a ton
Logan: really clear on what you need and what you don't need in a role. Hire for world class strength on the most important one, two, three
Eric: Yeah, I think, I think one of the big things that we have a tendency to grade people like this person is great, this person is good, this person is not good, this person is like whatever. And I guess that just really hasn't been my experience. My experience hasn't been that, um, black and white.
My experience is like oftentimes there are people who are just bad, but for a lot of good people, um, they can be great if the conditions are right and they can be good or great at certain things and not in bad or okay or average at other things. And so I think one of the mistakes that [00:52:00] CEOs. Make is especially early on, because, um, it's not having enough fidelity on what they're looking for in the role.
Like, what do they actually need out of that role in that job? And then. Testing candidates on that on exactly what they need and and then understanding kind of what that like skill matrix or whatever of that individual is and like what they're going to be great out where they spiked where they're average, where they maybe are below average and so forth and then putting that together.
And so I think that's like a really important thing that, um That CEOs and founders have to learn, like they have to learn how to, to kind of gradate that. And it's really hard because you have to learn it in areas that you're not an expert.
Logan: Well, that was the next one. Actually find domain experts that help you
Eric: Yeah, that's one of my big lessons is just like, sometimes someone said this recently, it's just like, oh, they're way better than me. It's like, well, you suck. So [00:53:00] like, you know, it doesn't say much.
Logan: when you're stepping outside of your competency as a CEO, everyone should be better
Eric: Everyone should be better than you. Not a high bar. So like you got to find people who help you evaluate in those, in those
Logan: Uh, the last one was the best CEO is every person they add to the management team raises the bar. The new hires should be better at their domain than anyone else's at theirs because that's what
Eric: Yeah. It kind of makes sense. Yeah.
Logan: How do you think about bringing new people into Benchmark? Uh, you've now, I guess since you've been there, Miles has come on board, Sarah, Chetan, and now
Eric: And Victor.
Logan: Yeah. Um, how do you think about interjecting? It's so small, right? And every person back to the, the points we were just talking about, like every incremental person changes the DNA.
Eric: Did you ever teach, um, we, we think of it as like a refounding moment. Like it's an opportunity to refound the firm and rethink things. And, um, you know, Bruce said this to me like really early on, I was like, wow, we have like really big shoes to fill and it feels, and he was like, I wouldn't think about that at all.
It's your firm. Like, don't worry about it. Be great. Um, and I, [00:54:00] it was like so freeing to like hear that and, and, and see that, um, and, and for World at War, it definitely didn't work in the sense that I wake up every morning with this like, yeah, paranoid and, and like, and thinking about like, I, you know, you don't want to be the beginning of the end.
You want to be like, you want to have taken it to new heights.
Logan: But you have to be willing to burn it down
Eric: Absolutely.
Logan: to get to where you're going.
Eric: Totally. You have to.
Logan: a lot easier if you're the founder of the firm to have that confidence. It's like, well, it came from nothing. I can bring it back to nothing.
Eric: Yeah. Yeah. It does.
Logan: it's when you're inheriting, I feel the same thing. When you're inheriting something that someone else started, you feel like a gravitas.
You feel like John Scully.
Eric: Totally. Yeah. You feel that responsibility and, and. Um, and I think that's why we think of it as a re founding moment, right? Because it's like every new partner is re founding the firm. And like, and when they're re founding it, they have that freedom. They have the freedom to go do that. And I think it's really important.
Um, and it's, and the, the, the founder's benchmark were very, very thoughtful [00:55:00] about building it that way. You know, we, I mean the an, the answer is we spend a lot of time with everybody and, and we spend a lot of time with the, the people and so that we kind of know what it's gonna feel like, um, when they come in.
And, um, and we spend time as individuals like one-on-ones and two on ones. We do four ones. That's why I did process takes forever. Um, like, like I said, I I, my process took of like almost a full year, um, and.
Logan: How long was, I mean, Vicar, I guess is different. Here's a portfolio.
Eric: Portfolio companies you knew him like, but like they were all like long, longish and you're, you're spending a lot of time with them. Um, and so that's part of why it has been helpful with, you know, miles and chafing, um, as examples where we had. Overlapping boards. So you got to see them over the course of years working.
Um, and that, that's part of why that ended up being so, so fruitful.
Logan: Do you think about, I mean, there's obviously different domains or industries that you probably need to, Oh, do we have someone that can do internet or consumer or whatever it is, right? Is what, do you think about the [00:56:00] augmentation of, Hey, we really need someone that's cynical about X, Y, Z thing, or bill was really our public markets sort of thinking through business model thing.
And so we, we need someone to slide into that or is it.
Eric: No, not really. It's not a, it's not a role team. Like it's not a, we don't have roles. Um, you know, it's, it's much more fluid than that. I would say, um, you're kind of. You're looking for excellence and you're looking for the possibility of excellence and you're looking for someone who's going to make it their life's work to be an excellent venture capitalist and, and he's going to raise the bar for all of us.
And, um, and that can come in a lot of different forms. Like, of course, are you sensitive to like sector coverage or sector, you know? Uh, sensitive to experienced investor versus, you know, an entrepreneur like Victor or, or, or whatever, like, sure. But like, but those are all like second and third order [00:57:00] things.
Um, and, and I think you, I think we tend to justify those things like after the fact that the real thing is like excellence.
Logan: Here's a funny thing that I've thought about recently where you mentioned the life's work thing, which has made me think of it is if I don't succeed as a venture capitalist, like that's sort of what my identity, my professional identity is tied to, I can't go do anything else. Like, I don't know.
I'm my last time I did real finance was 11 years ago. Maybe I can go do that. I don't know. But like I need to succeed in this for my own fulfillment. And I've thought about like people that are successful. CEO's that then step into being a VC in their identities, probably pretty comfortable with their first act of being a successful CEO.
And so that that yearning of like life's work and the desire to not mess something up, there's something to that pressure. I think that I'm sure you feel as like,
Eric: Every single
Logan: proclaimed failed entrepreneur, but like, I'm sure you feel this chip on your [00:58:00] shoulder desire to prove that out that, yeah.
Eric: And look, everyone's different. Like people are motivated by different things. And, um, you know, aspiration of greatness versus fear of failure and like all these other things. And, uh, like lots of different things can work. Um, there are people who like you, you think about these CEOs who, who go from like, who do it over and over again.
And it's just like, it's made or the entrepreneurs who do it over and over again. It's amazing. Um, and, and I stand in all of them, um, but yeah, I think there is an element of the pressure and the responsibility that's really valuable because it's one of these. Jobs where it's a little bit like getting into a Stanford or something like that, which is like getting in is really hard.
And if you want to be like a B plus student, not hard, like once you're there, getting in really hard, B plus, not hard, A, A plus, fucking hard. [00:59:00] And, um, and so you're in this place where. And venture capitals like that, getting into venture capital and getting is like, it's really hard. Um, if you want to be a mediocre venture capitalist, not hard and, and you can do very little, like very little
Logan: feedback loops are very long. It's hard to know how hard you're working, right?
Eric: Narrative. Meeting. Yeah.
Logan: you know, whatever. I'm on vacation.
Eric: Yeah. And so like, it's easy. It can be easy to coast, but being great and finding people and working with people who want to be great. Like, truly great, um, that's really hard, and it takes everything, and, um. And I think the greats in the industry have been that
Logan: Do you think we're getting long in the tooth in software investing?
Eric: in, in what sense? Sure,
Logan: Do you think the trends that you and I both benefited from, from 2014 Even we can't go back to 2007 if we really, or whatever, 2099 [01:00:00] Salesforce. Do you think, uh, those are getting long in the tooth in terms of, Hey, we saw, um, vertical software, we're, we're, we're going to smaller and smaller markets. It's no longer construction or healthcare or whatever.
We're seeing nature more niche markets popping up or. Some of the things that we discussed are just similar ish to the things we talked about 10 years ago. Like open source business models seem figured out a little bit more by the public. So, are we at some like asymptote where it's the 7th or 8th inning of that?
Eric: I mean, sure. Like, you know, every, every kind of thesis has its, has its duration, but this is the, this is the best thing about the market, the industry that we work in is like, there's a new thesis. And so like, there's always something new. Right. And, um, and, and, and so like, yeah, I think for like SAS or enterprise SAS or whatever, like, yeah, it's kind of like, but now we have.
A new like AI thing, [01:01:00] and we have some of the same questions that we had before, which is like, how is it going to monetize? And where's the value getting delivered? And like, how big is it going to be? And is it really impactful? Is it not really impactful? And so on and so forth. And so. Like, I, I guess I feel like there's always something new and it's just one of the amazing things about the industry that we work in and people are always coming up with new ideas and there's just optimistic about it.
And um, and so I actually am really bullish and optimistic,
Logan: How has investing in early stage changed, uh, over time?
Eric: you know, it's always, it's, it's like, it's more expensive and there's more competition and, and there's more seed rounds and, um, and there's more people willing to write these checks and like all those things like that. Okay. Sure. Like all that stuff's
Logan: People have been bitching about that for the last 10 years to 10, since I've been
Eric: Yeah, right. Like, it's just like everyone, like always, right?
Like, it's just like, it's just like, sure. Like, great. Um, on the other hand, like. You know, look, this magical, like, [01:02:00] alchemy of a founder who, like, knows some market and has a compelling idea and a unique insight and the drive and ambition to go do something that on the surface is, is irrational, like, that's what we're looking for.
And like, has that changed? Not really. Like, you know, people keep coming up with stuff and, um. And, and they are excited about it and they want to, they want to make it their life's work and it's important. And, and so I think in some ways, look at that, that really hasn't changed. And, and like, and in the end, the vehicle that is, is used is a company and they help building the company and like, and building a company is hard.
Um, and so like, I think none of that stuff has changed.
Logan: Do you have the element of FOMO of things that are going on that I'm sure you guys have pretty good fidelity into seeing early stage opportunities, but inevitably [01:03:00] there's only what five of you now, six, six of you. Uh, you don't have a team of associates, uh, you don't need, you don't have a CRM as we've joked about in the past, but, uh, uh, do you have a paranoid element of like, Hey, there's a whole team of that Andreessen or Sequoia
Eric: All the time. All the time. I mean, like, you know, what's the downside of our model is like, is it doesn't scale. Uh, coverage is really hard. Um, seeing everything is really, really difficult. Um, and You know, it's, it's six people, but six people who probably average, I don't know, eight boards each. So it's like, it's eight boards too.
And you're trying to be, you know, if we, if we're doing our job, we're setting the standard for what the board member engagement is. And so like, um, yeah, the coverage thing is hard. It's a challenge of the model, you know, but there's some advantages to it too, which is, it makes you very focused on what are the important questions for evaluating Like there's so much stuff that [01:04:00] Venture capitalists ask, investors ask, it's just, it's just a waste of time, like it just doesn't matter in terms of the outcome, um, and what could be, and so it, you have to get really focused on that.
Logan: How do you view your role as a board member? Talked about like earning the first call or like that relationship, but
Eric: The thing is doing everything you can to help the company succeed, and what I mean by succeed is realize its maximal potential. Not every company's maximal potential is the same, and we don't know, that's indeterminate at the beginning. Whatever its potential is, let's maximize that, let's maximize that, that potential of that, of that company and that's super high level and like whatever.
So what does it mean in practice? Well, like, you know, sometimes it means, um, like helping lift the entrepreneur up when they're down. Sometimes it means bringing the entrepreneur down when they're too high. Sometimes it means, [01:05:00] um, you know, sometimes it means. Like asking a hard question. Sometimes it means being supportive through a tough time.
Like it can mean all of those different things and You know the job and the emotions and the heart rate of an entrepreneur are like like this Like it's just it's manic. And so and most people just aren't super Productive like they can't think as clearly through those very highs and very lows And so to the extent we can help, like, mediate that, then you're helping the entrepreneur think clearer through that process and ultimately maximize their potential.
I think the, you know, the downside case is the board members who amplify that, uh, and we've all worked with them, uh, who amplify that, that manicness. So you want to be [01:06:00] really careful not to be that. Um, but the form of, of, it's interesting, it's like the form of. Support that you offer is really varied through time.
Like sometimes it's strategic, sometimes it's very tactical, sometimes it's emotional. Um, you know, it's, it's all of it.
Logan: I heard you say, uh, the value of a partnership with an entrepreneur is. Only two to three times a year helping with the consequential decisions, which is something I agree with. You need to earn the right to have the credibility to help at that point in time, which is a daily task.
Eric: Yeah, that's exactly right. That's the part that gets lost in it. It's actually, there's another one of these that we can come back to, which is a power law thing with venture capital, which is like, it's people looking at the data. So it's like, yes, the. Two or three times a year, there's some inflection directional bending opportunity for a company like it's not, you know, it's not [01:07:00] every day, it's not every week, it's whatever, it's some handful of times.
And if you can be an amazing sounding board for the entrepreneur in that moment to help them make a better decision that maximizes the probability of success and bends the trajectory of the company, that's everything. Like all the value comes from that. The problem is in order to be valuable in those two or three things, you have to both.
Have enough context on the company and enough space outside the company to be useful, right? Like these entrepreneurs we've talked about, they're hyper learners, like everybody's learning. So they're consuming all the podcasts. They're consuming all the books. They're reading all the blog posts like they, they have all.
That stuff, the kind of things that they're ultimately grappling with are very close calls that, that reasonable people could disagree on. And so it's trying to be a sounding board in that moment. And to be a sounding board in that moment, you kind of have to understand to some extent, like, [01:08:00] what's the team they're working with?
What's the nature of the business? Like, what are the customers saying? What are those people's motivations? And in order to do that, you have to do some day to day work. If you're mired in that and you're in the trench. Then you don't have the value of the perspective, um, and so it's kind of, it's a fine balance of, of combination of perspective and knowledge of the detail that, um, I think allows you to be most useful and help navigate those moments.
Um, but I think all the value comes from, um, so that's interesting.
Logan: We've had discussions over the years at different points in time about, uh, constraints as benefits for companies. Uh, how do you, how do you think about that?
Eric: I, you know, I, I think every time we've seen a company that is unconstrained, whether it's like capital or headcount or, or growth even, or like whatever, it, It's just [01:09:00] like on the one hand, it can be really good, but it also yields a lot of badness, right? And um, I just think constraints are good. Like I've had, they force clarity of thinking, they force hard decision making, they force these kind of calls.
And so you have to know when you want to have kind of an abundance mentality. And just like do everything and be fruitful and like go, go forward and when you want to be really like disciplined and controlled, most of the time you're in between, you know, and I think we've like learned a lot of hard ways and I guess maybe one other learning on this is it's so much harder to reform after the fact, like it's so much harder, it's so much easier to kind of You know, it's kind of the person who you like, whatever, like packs on a lot of pounds and then has to like trim and, and cut, right?
Like build and cut. It's like, you want to be on [01:10:00] whatever six week cycles for that. You don't want to be on six year cycles for that.
Logan: There's a, I feel like we've talked about this before, but the two by two graph of equity value created by capital consumed, have you seen that chart? It's a fascinating one of just like it's both, I think it's all software companies basically, but it sort of shows that with the exception of Snowflake, almost every company that has created a ton of value in the last 20 years and software, which is a little bit of a fool's like sample bias thing didn't consume a lot of capital to get there.
If you're like a diva or service now, or. Uh, Atlassian or Salesforce, or you just kind of go down the list. It's sort of, it's an interesting
Eric: And, and, and, and, and VMware would be in that category too, but I would say this is the problem with, with some of these analyses, which is like true, but
Logan: Capital wasn't available to them. Well, and also like, was it
Eric: are we kind of like, is it, is it kind of, they've created a lot of equity value [01:11:00] and done so very efficiently, but like those aren't unrelated concepts, right? Right. Like there is just like, yes, because they were very efficient and grew very fast, they created a lot of equity values. So it's.
Logan: and, and the dollars that you were raising in 2004, uh, is different than the dollars you were raising in 2020 and a company that's very big was more likely to have been started in 2004 just because time is a vector of, it definitely
Eric: So it's just interesting.
Logan: It's interesting when you look at especially the outlier ones like the Atlassians or the Mivas that like really didn't take in outside capital.
Eric: And you know, if you take it, if you look at. Um, Atlassian is an example like it has grown very steadily between what 30 and 50 percent for 20 years. It's value compounded like it's just like and and so, um, you know, it's it's really amazing kind of story. But it actually didn't have these like 100 percent 200 percent growths that we are, you know, we often see in the early stages.
So. Yeah, there's different dynamics on it. I kind of think of it. Um, [01:12:00] I, I, I mentioned this venture capital thing, which is, you know, you hear this, this is like, oh, venture capital is a grand slam business. And it's like all about these. And like, it's like, yes, it is. But I think one of the things that's really interesting is if you look at all the greats in the business, Okay.
They're remarkably consistent, remarkably consistent, and they have lots of little wins in addition to a few big wins. And, and I think it just, again, it's kind of like a dumb thing to say because it's like, well, it turns out if you like, make contact with the ball a lot,
Logan: It's the best way to hit home runs.
Eric: it's the best way to hit home runs.
And, you know, and so it's kind of like this other thing, but I think that type of retroactive analysis actually yields bad behavior because it. Um, it kind of like says like, Oh, wow, like all that matters is getting these like really, really big ones. Um, which is like, yes, true, but [01:13:00] like what's the best way to get the really big one?
Yeah,
Logan: Yeah. Um, about incentives. Uh, yeah, I consider myself top 1 percent of understanding incentives and I underestimate it every day. Why, why, why do you like that quote?
Eric: I think that, uh, founders don't think about it enough, um, as it relates to. Um, both for their customers, but also their team and how they think about their team and what their team incentives are and how to manage it. And the reason is, is you tend to project yourself and think everyone works like things like you and has your mental modeling your piece, and it just isn't that isn't true.
Like they don't. Most of the employees are employees or not. They're not founders. They don't have the same equity thing. They don't have the same desire. They don't have the same ambition, um, and or they're motivated by different things. And so. You just like really have to kind of think about that, and then how to incentivize the behavior that you want, um, on it, [01:14:00] and it is, it just matters.
Logan: Pretty get peppered with questions like career advice or people that are asking, do you have anything that you go back to or that, uh, people trying to get break into venture or whatever, whatever version of this question you think is, is
Eric: I think, I think there's no model of success. I think that, that's, there's no one model of success. Like, you look at Moritz, and he was a writer, and like what writers do, they ask questions. And, um, you know, you, you look at Dorn, he's a career venture capitalist, Intel sales guy or whatever, and, and so.
Logan: was a salesperson. Peter was the son of a BC, right?
Eric: and Bill, Bill was a Wall Street analyst. Yeah, and so. Like there are lots of models of success, um, on it, but I think there is a common characteristic amongst there are a couple of common characteristics amongst, uh, the venture capitalists, which is they're hyper curious and they're hyper competitive, um, competitive with themselves, competitive with industry, whatever, it doesn't really matter, but competitive driven [01:15:00] and, um, and hyper curious.
And so, you know, it's kind of like, you're always like looking over, you're turning over, you're kicking over the next rock and you're trying to figure out what's going on and trying to understand it and trying to listen to what motivates that person. You're trying to figure that out. Why are all these great people going to this company?
You gotta figure that out. Like, you just, you can't, it bothers you that there's something that you don't have a explanation for, um, a view of, and so I think that's a common characteristic amongst, um, amongst the people who have been really, really successful in the business. And, um, and so maybe that's, that's a view of, of what it is.
Um, but, and, and I think. I, I wouldn't, I think it's popular to say like it's an easy job or whatever. I have not found that to be true. I've not found that it's an easy job.
Logan: it can be,
Eric: Um, yeah, I think it can be, but I just, I think, but I've just not in general, I found it to be a very, like it is a all out challenging, you know, you're running [01:16:00] every day kind of job.
Yeah.
Logan: it's humbling to,
Eric: Yeah. It's super humbling and it's full of regrets and everything else. Um, so it's not, it's not easy in that way. It's an extraordinarily rewarding job in the sense that you're just, you get to meet these entrepreneurs every day who inspire and excite and are building new stuff and trying new things and are rethinking fundamentals and reasoning from first principles and whatever.
And so you're just like that part of it's just awesome and you're perpetually learning. Um, so I think. It's very, very rewarding in that way, but to, to reap the benefits of that, you, to reap the benefits of that, you, you, it takes a lot of work.
Logan: uh, one of the things I thought was interesting that you had said was, um, about, and I think it's reflective of, I mean, you're kind of talking your own book here, but a platform team being built and junior team being built to help the GP scale more [01:17:00] than helping the companies themselves. How do you think about that?
And are there elements of the. VC's job that you think can be well carved off and where you don't need to own the totality of the role.
Eric: I mean, I think, I think, I just think the, the idea of platform teams is to help the firm scale. Yeah. And, um, you do that in order to help the firm scale and so the GPs can scale and they can take more board seats and they can, or not take more board seats, but make more investments and, and, and so forth.
Um, and. That doesn't mean there's no value in that. There's value in that. Um, and those models work great on like and, and, um, and they've had a ton of success. And so I think that, that part's there. Our model is, is different. And, um, our model is dependent on a relationship, a very tight relationship between the investor and entrepreneur.[01:18:00]
And, um, it's a partnership. And that model, And we talked about incentives, and incentives, it means, you know, it means high ownership, it means, like, these things, it means high commitment and high skin in the game. And so, um, that's the model that, like, I think more than anything, it's the model we like. Like, that's the rewarding part of the job, and that's the part that, that we love.
Um, and so, that, I just, that's how I think about it. It's going to be different than, than prior framing, but yeah, it's just the rewarding part of the job is that engagement. That's what we're dependent on.
Logan: There's kind of the predictable revenue ish side of, of things that, uh, if I think about where we get benefit from having people that help. Talent,
Eric: Totally.
Logan: intros as well, and having someone that wakes up every day with [01:19:00] that as their number one job. That everyone sort of funnels stuff through, there's like an accumulation of knowledge that and maybe it's, maybe your response would be, well, we get that from, you know, the integration of our partnership or something.
And uh, but I've sort of found that having one person that wakes up with it, number one on their list, rather than, yeah, it
Eric: It matters. Like, like, no question. It matters. But I think my, my thoughts would actually more go back to. The two or three times a year. Yeah, if all of you need to contact, yeah, you need to have the content. It's interesting. And so that's, that would be my, like my view of it isn't that, you know, it, it isn't incrementally valuable.
It's just, is it. Um, trajectory bending and trajectory bending is kind of the name of the game and to some degree, or to a large degree, in my view.
Logan: People have sort of become, uh, fascinated, I think, with your [01:20:00] dinners and you guys did the one with the Acquired guys and, um, on Invest Like the Best, uh, I think Peter referenced one with Jeff Bezos, you guys did recently, uh, what, what do you find the biggest benefit from
Eric: The demos?
Logan: to be?
Eric: They're so fun. We get to do,
Logan: Do you do them here?
Eric: we do, we do them in Watada and in San Francisco. We'll also travel for them. We traveled, we went to New York for, for one recently, uh, with a CEO. You know, whatever public, I don't know, 10 ish billion dollar company, um, that just that we didn't invest in and didn't know, but just remarkable story and individual and like, you learn, like, what did we miss?
What did we get wrong? What didn't we think about at that point in time? Um, what motivates them and how are they driving? There's, there's so many things to learn. We, we did another one with the CEO of, uh, 80 billion public company. Um, recently. And, you [01:21:00] know, and he talked about, uh, like how this is a non founder CEO and it's just like how he expanded the product portfolio and like how he drove that and whatever.
And so everyone is just an opportunity to, to learn more. Um, and. Um, and obviously like build connections and network, just like you're talking about for your podcast. Um, but everyone's just an opportunity to learn more. And, uh, and, and that, that part's really, really
Logan: Do you outbound to these people?
Eric: Yeah. We outbound all the time. And
Logan: what's, what's the pitch? Uh, just like, hey, we'll come and pick your brain and
Eric: have great wine,
Logan: we'll pay for your
Eric: some nice food.
Logan: Yeah, we'll talk about what we're seeing in the
Eric: Yeah. And just, and just have, and, and just have fun. Um, and, and we're pretty high hit rate on it. And it's like, it's a good.
Logan: Listen, if people are saying yes to this podcast or me, I assume they're saying yes to dinner with you. Right.
Eric: And, and, um, [01:22:00] and, and so like that, that part of it's really special. I would also say like, it's good for our group, like it's good for the six of us to spend that time. Yeah, the social dynamic and just like that we spend all Mondays together, we spend our dinners together and, um, and just like having that.
Um, Spree to Core is, is, is valuable too. Um, you get a lot of stories on that.
Logan: Yeah.
Eric: Um, so it's, it's, it's a really special and fun part of the partnership.
Logan: Yeah. This is fun. Thanks for doing it.
Eric: for that. Yeah, thank you.