Benchmark Capital. We tell the tale of the legendary equal partnership that accomplished something no other venture firm can claim: twice it has produced the highest returning fund of its cycle, each time with a 100% different GP lineup. If ever there were a playbook for successful generational transfer of a generational-defining venture firm, this is it. We spend 3.5+ hours digging into how the dotcom “eBay eBoys” transformed into the rockstar Fab Four of the Uber, Instagram and Snap mobile gold rush (spoiler: not by a straight line!), and what the future holds for Benchmark’s next GP generation. If you’re a student of the venture game from any angle — founder, GP, LP, etc — this is a story you need to tune in for! Sponsors:WorkOS: https://bit.ly/workos25Sentry: https://bit.ly/acquiredsentryServiceNow: https://bit.ly/acquiredsnMore Acquired!:Get email updates with hints on next episode and follow-ups from recent episodesJoin the SlackSubscribe to ACQ2Merch Store!© Copyright 2015-2025 ACQ, LLCLinks: Benchmark’s website circa 1997 Benchmark’s website circa 2000Benchmark’s website today Episode sourcesCarve Outs:Bill Gurley’s Runnin’ Down a Dream talkSmartless Podcast Mitch Lasky on Invest like the BestUrsula Le Guin’s Earthsea CycleNote: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
Chapter 1: What is discussed at the start of this section?
All right. Let's try and do it as one. And we're going to hustle. Okay. Let's try and do it as just one. But I don't think we should hustle. Because especially those early days, that's what people don't know. All right. No trade-offs. And we'll let the chips fall where they do.
It's a very anti-benchmark approach we're taking to this episode. Trade off nothing. Go full depth into Gen 1 and Gen 2. Fine. Yeah.
All right. We'll see how this goes.
Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Who got the truth?
Welcome to Season 11, Episode 4 of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.
And I'm David Rosenthal, and I am an angel investor based in San Francisco.
And we are your hosts. The hardest thing to do in venture capital is create those massive outsized returns that only come from investing in one of the five or so truly important companies each decade. Then, once you've done that, the next hardest thing is to keep doing it with an entirely different generation of partners.
Today, we are going to talk about a firm who built one of the top franchises in venture capital, Benchmark, that has incredibly managed to do both. Our Sequoia and Andreessen episode were about the empires that those firms chose to build. And this episode is about the empire they chose not to. Or maybe.
Well, there was a flirtation with an empire in there, as we'll get into.
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Chapter 2: How does Benchmark Capital maintain its unique partnership structure?
Yeah.
There was. Benchmark famously believes that venture capital doesn't scale. They have zigged when others have zagged. They have not grown their fund size. They haven't tried junior partners. They don't have a platform team. They are not multi-stage. And I've heard they don't even have a CRM. And yet, they are the big early backer of so many of the world's most important companies.
There were early e-commerce companies in the 90s like eBay, eShop, 1-800-Flowers, or Ariba. Semiconductor and networking companies like Synopsys and Juniper Networks. And of course, in the next generation, OpenTable, Zillow, Twitter, Instagram, Uber, WeWork, Snap, Riot Games, Asana, Discord, New Relic. and our friends of the show at Modern Treasury.
We are at the moment of the changing of the guard. Bill Gurley is not a general partner in the next benchmark fund, and the majority of the current partners joined in the last five years. They clearly transitioned from the eBay generation to the Uber generation, and the question is, can they do it again?
Will this third generation of benchmark continue to set the benchmark for all-time greatest venture capital funds in history?
I like what you did there.
I like what you did there. That was good.
That was good. Ben teed this up before we started recording of like, I really like my intro on this one. If you don't like it, stop me. But I like that. That was good. Well done.
Thank you. Well, listeners, we did a very different thing in preparing for this episode. We're trying to embrace raising the bar in different ways as the show grows. So for this episode, we talked to several current partners at the firm and
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Chapter 3: What challenges did Benchmark face in its early years?
You have to put yourself in the context of the 1990s, a proto-internet ecosystem, really.
Yeah.
This was the AOL days leading into the Netscape days. Biz dev deals and distribution was a lot more important and different than it is now. It wasn't like you could just have an idea for a company, spin something up on AWS, put it on the internet, get distribution for free on social. It didn't work that way.
You needed deals in place. Product market fit was a lot less organic and quite frankly, a lot less real because you didn't get this immediate signal of users finding your product and paying for it in this sort of high fidelity organic way. You had few products available to you and they were whatever products got done in these deals.
And so true product market fit ended up being like an equal peer to your biz dev prowess, unlike today.
A core part of this Coretsu model at Kleiner was we help facilitate, and some would argue they would do more than help facilitate, they would force these partnerships, biz dev relationships together. upon their portfolio companies and when your portfolio companies include netscape and amazon and excite these would be quite valuable deals both for excite and for the young startups
Which, of course, sounds great. If you are funded by Kleiner, you're sort of joining this cabal where Kleiner will sort of pull some strings behind the scenes and orchestrate what deals make sense for them as a shareholder across all of these companies. And theoretically, everyone will benefit from it by being a part of the cabal.
So, of course, KP was unquestioned the best venture firm at the time, but they weren't the only top tier firm in the sort of bulge bracket, quote unquote, of proto VC firms at that point in time. There was, of course, Sequoia and Don had done Cisco. They were about to do Yahoo. It was up and coming, but they weren't yet the dominant Sequoia that we think of today.
It's amazing. They were almost a 20-year-old firm, but they weren't Sequoia as we know them.
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Chapter 4: What were the key terms of eBay's initial investment deal?
They give Pierre and Jeff a term sheet to invest $6.7 million total in the company in a series A financing at a $20 million pre-money valuation. Pierre and Jeff have one other term sheet, a competing term sheet, shall we say, but the terms they offer are a little different. The other term sheet is from Knight Ritter, the large newspaper conglomerate. It was basically an acquisition, right?
It was an acquisition.
Chapter 5: Why did eBay consider acquisition despite its rapid growth?
At which... Jeff Skoll had worked very briefly after graduating from Stanford GSB for a few months before Pierre recruited him to come help open the mail at eBay.
Which kind of makes sense, right? This is a classified thing on the internet. We do the classified things for newspapers.
Chapter 6: How did Benchmark's partnership model influence their investment strategy?
We can do this too.
Oh, how the world would have been different if one of the nation's leading newspaper companies had acquired the leading online classified business.
And an interesting thing to note is at this point, eBay is growing 10% a month. So check, fast growth company. It's profitable. All of these checks that are getting mailed in, like it is generating cash and growing. So why would you get acquired? Why would you not keep running this thing?
Well, it was actually a pretty compelling offer. The reason you would get acquired is they offer Pierre and Jeff $50 million. Five zero. Million dollars.
And that's a thing you would think about taking.
That is a thing you would think about taking, especially at this moment in time. I mean, that's like a lot of money. Right. You know, exits, quote unquote, didn't often happen for that size, let alone exits of like a two-person company that like was barely a company. Right. So there's some debate about what happens here.
And there's debate among people who were there. This is a truly unknown truth, but we will give you everything we know.
Yeah. It's like the AWS episode and like multiple origins of AWS. Yeah. There is a version of the story where none of the money that Benchmark invested in eBay was actually used by the company. That actually is probably true. They probably didn't actually burn any of the money because they were profitable. They were always profitable.
They were never not profitable. I think of the portion of the $6.7 million Benchmark investment that went to the company's balance sheet, I don't think any of it ever left the balance sheet.
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Chapter 7: What qualities make a successful General Partner at Benchmark?
But he fits the bill. Just like Bill, when Bill joined, he was early 30s. He had an established track record. He was young. He was hungry. He was up and coming. He was a baby GP in Excel, but he was not a full GP. Is that a formal title? Yeah, baby GP. That's the formal title. Here's what I would love. If acquired can have some influence on our industry, this is what I'd love.
I want transparent titling on LinkedIn or whatever. Just be clear about what you are. So does every founder. Yeah, right. Exactly. I'm a baby GP. I'm an old, crusty senior GP. I've hung around too long.
Chapter 8: How does Benchmark's approach to partnerships differ from other firms?
I have a lot of economics, but I'm not currently doing deals.
Exactly. Exactly. So Peter's a baby GP. He's had a bunch of early wins. at Excel and he's clearly out there hustling. He's clearly smart. They make the pitch to him to join. And again, it's, you know, on the one hand, it's an intelligence test, like it was an intelligence test for Bill to join. On the other hand, there's some questions about Benchmark right now.
Yep. Oh, it's the first generational transfer. It's like, oh, this is a firm that had one big win and some other wins in that fund. I mean, look, if you 90x a fund or whatever and only 40x of it comes from one company, clearly you had multiple winners.
But like one fund that was really great and it's been a tough several years and a bunch of those people from the big successful fund are stepping away. Bill Gurley hasn't become Bill Gurley yet. And so what am I joining? And how certain is it?
So those are the questions on the benchmark side. There's a massive question for Peter on the Excel side. Let's take off the table whether Excel made a counteroffer for him to be a grown-up GP or not. Whether they did or didn't is irrelevant. He had GP economics, even if they were baby GP economics, in the Facebook fund. And he's walking away from that to join Benchmark.
Wow. Yeah, that's not an intelligence test. That's an emotional decision. That's a gut check.
Do I really, really believe in this sort of refounding of Benchmark, this refocusing on this model? Do I think it can work? Do I think... Bill and I and other people we recruit can bet on the future here and it'll be worth me walking away from Facebook fund economics. Yep. So he does. So he takes it. He takes it. I think he's probably pretty glad he did.
It becomes a great decision for everybody involved. In short order, Peter goes on to do Twitter, Docker, Zora, Hortonworks, New Relic, Elastic. He brings Brett Taylor of Google Maps and then Facebook fame into Benchmark as an EIR. They do Quip together.
Yeah. And Peter Fenton had been an investor in FriendFeed when Brett Taylor started that before Brett sold that to Facebook.
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